Federal responsibility for the territories was originally established in the Constitution Act of 1871, Section 4, which made the federal government responsible for the “administration, peace, order and good government of any territory not for the time being included in any Province.”[15] In contrast to the provinces, this provided the Government of Canada with direct legislative control and governance in the territories.

The initial vision for economic development in Canada was embodied in what came to be called the National Policy of 1879, designed to support the development of an industrial base in central Canada, an agricultural hinterland in the West, and an internal trading system in the country as a whole. The construction of a transcontinental railway opened the western plains to both policing and settlement. Federal policy in the northern regions of the West applied mining development principles similar to that applied to agriculture—i.e. the Crown granted rights to private development on the condition that the land be developed.

Although the National Policy was the first strategy developed by the federal government in support of economic development in Canada, focusing on settlement of the West in general, there was also more specific interest in determining the economic development potential of Canada’s North. In 1888, the Senate Committee on the Resources of the Great Mackenzie Basin initiated an investigation into the economic potential of the Northwest Territories, later publishing a “highly enthusiastic report on the potential for agriculture, fisheries, forestry, mining, and petroleum.”[16] Although widespread interest was expressed in developing the northern territories at the time, no coordinated policy was pursued.

Significant economic development activity in the northern territories began with the discovery of gold near what is now Dawson City, Yukon in 1896. Economic activity associated with the Klondike Gold Rush was so great that by 1898 the population of Dawson City had reached 40,000. In response, the Canadian government officially established the Yukon Territory in 1898, and Treaty 8 was signed with the Dene in that same year. The North West Mounted Police were sent in to ensure Canadian jurisdiction and The Yukon Act provided for a Commissioner in Council to administer the territory; further amendments to the Yukon Act in 1908 transformed the council into an elected body. In addition to many persons from southern Canada temporarily moving to Yukon to work in the mining industry, Aboriginal peoples were also hired to conduct support work and act as guides during mining expeditions.

Economic development in the northern territories cooled somewhat following the end of the Klondike Gold Rush at the turn of the century. Then, as is the case today, mining production in Yukon grew along with the global price of minerals. Meanwhile, economic activity in Northwest Territories continued through traditional means with the Hudson’s Bay Company and the fur trade. In 1921, at the time of the discovery of oil at Norman Wells in NWT, the federal government negotiated Treaty 11 with the Dene of the central and lower Mackenzie Valley, and an oil production facility was established at Norman Wells, along with gold mining around Yellowknife in the 1930s.

With the advent of World War II, focus on economic development in the North expanded as a result of sovereignty and security concerns. Due to the threat of invasion through the Pacific theatre, the American and Canadian governments developed the Northwest Staging Route, which consisted of a chain of airfields extending from the south through the northern territories and ending in Fairbanks, Alaska. The Alaska Highway was also constructed to create an inland supply route for military operations through to Alaska. As well, the Canol pipeline was constructed to bring oil from Norman Wells through Whitehorse to the Alaskan Pacific front, which led to the construction of a series of all-weather and winter roads along the Mackenzie Valley, providing employment for Aboriginal peoples’ along the way. Following World War II, during the Cold War period, the military presence in the North was maintained, with defence-related research programs, the construction of the Distant Early Warning (DEW) radar line, and additional airfields and communications sites.

Along with this development, Aboriginal peoples were engaged through employment, but were also being affected by health and social problems due to the greater contact with southerners and a separation from their traditional lifestyles. In response to a greater awareness from the South as to the deteriorating health and social conditions for northern Aboriginal peoples, the federal government introduced settlement and resettlement strategies to provide social housing, health care and social assistance; and tragically, with severe negative and long-term consequences, often moved children into residential schools.

In 1957, Prime Minster John Diefenbaker presented a northern development concept called the Northern Vision, in which the North was to be opened by means of a “new National Policy.”[17] Northern minerals, like western wheat during the original National Policy era, would fuel the engine of the national economy by providing export credits, jobs, and investment opportunities. The role of the federal government would be to facilitate resource development: The Territorial Roads program and the Roads to Resources policy were announced, a railway was constructed to the Pine Point mine in the Northwest Territories, and new oil and gas regulations and tax incentives were created to promote exploration.[18]

In 1965, following consultations across the territories, the federal Carrothers Commission recommended a gradual increase in territorial responsibility through a working territorial government. In 1967, Yellowknife was made the capital of NWT and the first Commissioner to be permanently based in the NWT was appointed. Following the report, many federal government responsibilities were transferred to the territories, including health care, education, small business, public works, social services, local government, administration of airports and forestry management.

As the transformation towards greater political control by territorial public governments and increased economic development in the North was occurring, Aboriginal northerners began to organize themselves into political organizations to assert their citizenship and land rights. This was demonstrated most significantly in the 1970s with Aboriginal resistance to federal government consideration being made to expand access to northern natural gas resources through the Mackenzie Valley in NWT. Continued resistance to development in the North by Aboriginal peoples eventually led to the establishment of modern treaties, entrenchment of Aboriginal rights within the Constitution, and a redesign of northern political boundaries and institutions.

As a result of these new systems of governance, current efforts on northern territories economic development, as guided through the federal government’s 2007 Northern Strategy, are largely dependent on collaborative efforts among federal, territorial and Aboriginal governments, as well as with private-sector developers.