What Sank Nova Scotia’s Economy? A Forensic Look at the Turning Points

Nova Scotia was once an economic powerhouse—a global shipping hub, a center of finance, and a gateway to North America. WTF Happened?

THIS IS THE SECOND IN A SERIES OF POSTS ABOUT WHY NATIONS (AND PROVINCES) FAIL

Warden of the North is a great overview of the history of Halifax, Nova Scotia. Each chapter contains the important events and context for Nova Scotia’s formative years from 1710 to 1970. It is a well-written and well-organized book. It’s really the story of the Maritimes and Canada too.

The book reads like Bridgerton, but with more sex and seediness. It’s a soap opera, personal diary, and newspaper of record. It is also the best place to get a sense of how amazing Nova Scotia once was and how it lost its place in history.

Nova Scotia was an economic powerhouse—a global shipping hub, a center of finance, and a gateway to North America.

Halifax had local newspapers, notions of representative government, well-organized charitable institutions, a stock exchange, banks, international trade, even an electric commuter rail system, and a grand central station, long before those things were even imagined by the modern age.

During a visit in 1842 Charles Dickens described Halifax’s Legislature as “looking at Westminster through the wrong end of the telescope.” Halifax was a perfect vision of the charms and politics of London in miniature.

---

So how did we go from that to ranking as the poorest province, state, or territory in North America? It wasn’t one event but a series of structural shifts that chipped away at our economic standing. Let’s break down the major turning points and estimate their impact on where we stand today.

1. The End of Shipbuilding (Late 19th Century)

For much of the 1800s, Nova Scotia was a leader in global shipbuilding, producing some of the finest wooden vessels the world had ever seen. Halifax, Lunenburg, Shelburne, Yarmouth, Windsor, Maitland, Pictou, Liverpool, Digby, Guysborough, and Canso, built the ships that sailed the world. But when iron and steam overtook wood and wind, our shipyards fell behind. The industry that had made places like Lunenburg and Halifax thrive collapsed, leaving thousands unemployed and forcing workers into other trades or out of the province altogether.

Estimated Impact: HIGH – The decline of shipbuilding removed Nova Scotia’s main competitive edge in global trade. We lost an industry that had defined our economy for two centuries.

2. Confederation (1867) – A Bad Deal for Nova Scotia?

Nova Scotia was a reluctant member of Canada. We had a thriving trade relationship with New England, and many felt that Confederation shackled us to central Canadian interests. Tariff barriers cut off free trade with the U.S., and federal decision-making prioritized Ontario and Quebec. Local leaders like Joseph Howe resisted Confederation, fearing economic decline. But they didn’t want to join the US either. Turns out, they weren’t wrong. The new national policies favored inland industrialization over coastal trade.

Estimated Impact: HIGH – Confederation redirected trade, stifled growth, and made Nova Scotia dependent on federal transfers instead of international commerce.

3. The Move of Banks and Stock Exchange to Toronto & Montreal (Late 19th–Early 20th Century)

Halifax was once a financial hub, home to banks that financed Atlantic trade and industries. Nova Scotia was an early player in Canadian banking, thanks to its maritime trade economy.

1825: The first bank, The Halifax Banking Company, was founded by local merchants to support trade and shipping.

1832: The Bank of Nova Scotia was established, quickly expanding beyond the province.

Early 1900s: Mergers and consolidations reduced the number of local banks, centralizing financial power in Montreal and Toronto.

1935: The Bank of Canada was created, diminishing the influence of private banks in issuing currency.

But as Canada’s economic focus shifted westward, financial institutions followed.

The Bank of Nova Scotia (1832–present) – Founded in Halifax, quickly grew into a national and international powerhouse, now known as Scotiabank.

The Merchants' Bank of Halifax (1864–1901) – Was later renamed The Royal Bank of Canada (RBC) and moved its headquarters to Montreal.

The consolidation of major banks and the relocation of the Halifax Stock Exchange to Toronto and Montreal drained the province of capital and investment power. This left us without a strong financial sector to fund new industries. The capital wealth we created, and still create, followed the banks to Montreal and Toronto.

Estimated Impact: MEDIUM-HIGH – Losing financial institutions limited investment in local businesses and forced entrepreneurs to seek capital elsewhere. - mostly from government.

4. The Halifax Explosion (1917)

The 1917 Halifax Explosion was the largest non-nuclear explosion in history, flattening the city’s economic heart. Thousands of businesses, warehouses, and shipping operations were obliterated. The port eventually rebounded, but the disaster disrupted economic momentum and left scars that lasted for decades. Many of the amenities, the charms, and much of the original planning structure of Halifax have still not been reconstructed over 100 years, and an endless cycle of city plans later.

Estimated Impact: MEDIUM – While a devastating blow, Halifax eventually recovered. However, the economic inertia lost during reconstruction likely delayed growth for years.

5. The End of the War Economy (1945)

Both World Wars brought prosperity to Nova Scotia. Halifax was a key military hub, and industries boomed with shipbuilding, manufacturing, and resource extraction. But after 1945, the war economy disappeared. The military downsized, demand for goods plummeted, and Nova Scotia lacked a diversified industrial base to sustain peacetime prosperity. When the Trudeau government of the 1970’s amalgamated and emasculated the Canadian Armed Forces, few places suffered more loss than Halifax and maritime Canada

Estimated Impact: MEDIUM-HIGH – The war economy inflated Nova Scotia’s economy, as a naval centre and the greatest harbour on the North Atlantic trade routes it was second to none, but we failed to pivot to peacetime industries fast enough.

6. The Opening of the Saint Lawrence Seaway (1959)

If there was a final nail in the coffin for Nova Scotia’s role as Canada’s gateway to the world, it was the opening of the Saint Lawrence Seaway. Suddenly, ocean-going ships could bypass Halifax and sail straight into the heart of Canada. Toronto, Montreal, and even Thunder Bay became major inland ports. Halifax, once the main entry point for trade, was now just another Atlantic stop.

Estimated Impact: EXTREMELY HIGH – The Seaway permanently shifted Canada’s trade routes away from Nova Scotia, reinforcing our economic decline.

7. The Lack of a Vast Northern Resource Base

Nova Scotia is the only province (other than PEI) without a vast northern expanse filled with natural resources. Provinces like Alberta, Saskatchewan, and Newfoundland have been able to leverage oil, mining, and forestry to sustain economic growth. Even Ontario and Quebec, with their hydroelectric power and mineral-rich north, have vast economic buffers. Nova Scotia, geopolitically positioned to be a trade powerhouse, had no such resource base to fall back on when trade connections were severed. Instead, we became reliant on federal equalization payments and service-based industries rather than primary resource extraction.

Estimated Impact: HIGH – Without significant natural resource wealth, Nova Scotia was at a geopolitical disadvantage when traditional trade routes dried up.

8. The Grand Boondoggles of Nova Scotia

Nova Scotia is a small province, but it has punched well above its weight when it comes to massive economic blunders. Our history is littered with big swings that didn’t just fail, but failed spectacularly, chaining the region to debts and liabilities that echo through generations. From failed mega-projects to overhyped industries that never materialized, Nova Scotia has spent billions on grand schemes that never delivered.

From coal mines to pulp mills that account for unknown billions and untold death and disease. From Muskrat Falls Energy to the Yarmouth Ferry. Selling off our Power company, to buying rail lines to use as hiking trails. Convention Centres to clearcutting to burn wood for power. The hucksters and pitchmen imagining our boondoggles seem to know no creative boundaries.

Each of these projects had a seductive premise: jobs, growth, and a new economic identity for the region. They were always ‘world-class’. Yet over and over, these ventures sank under the weight of political mismanagement, unrealistic expectations, and a complete failure to understand market realities.

Nova Scotia’s greatest economic challenge isn’t a lack of money—it’s a failure to invest wisely. Instead of chasing grand, high-risk visions, we should be asking: Why do we keep making the same mistakes? And more importantly, how do we finally break the cycle?

Estimated Impact: HIGH – These repeated mistakes have drained capital that could have been used for sustainable development, spread out across hundreds or thousands of small bets, or simply just not been spent, reducing the debt and taxes substantially.

The Verdict: What Hurt the Most?

While all these factors contributed, maybe Confederation, the decline of shipbuilding, the end of local banking, and the Saint Lawrence Seaway were the most damaging. Each event stripped away a pillar of Nova Scotia’s economy—maritime trade, political self-determination, financial power, and geographic advantage.

Nova Scotia is not poor because of any single catastrophe, but rather because its economic foundation was eroded piece by piece. And yet, despite all this, we are still here. The challenge now is more modest than any notion of being world-class or competing with the economic powerhouses of the planet. Our great challenge, like an AA meeting’s first steps, is simply admitting we have a problem, believing change is possible, and finding some way to stop doing the dumb things that make us the poorest place in North America.

If we could do this - just stop doing the dumb things - I believe we could move out of the bottom ten in the North American league.

The present is the fruit of the past and the seed of our future. We shouldn’t hold on to our mistakes just because they cost a lot of money and we spent a long time making them. The choices we make today—what we reward, what we tolerate, what we build—will determine whether Nova Scotia stays stuck or starts climbing.