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In the 1860s the British colonies were facing many different kinds of problems. One solution for all of these was for the colonies to come together to form one country. These are the problems that led to Confederation:
The Province of Canada contained the most people and was later made into the provinces of Ontario and Quebec. The government of the Province of Canada did not run smoothly because the English-speaking and French-speaking halves had different ideas about how things should be run. Leaders from both parts of the province decided that joining the other colonies might help solve their own political problems.
In order for their economies to do well, the colonies needed to be able to sell their goods to other markets. At this time there were very few places that they could sell to. One solution was to bring all the colonies together. In this way they could more easily sell their goods to each other.
Volunteer regiment of Elora, Ontario, May 1862. By 1870, the active militia numbered over 30 000 to defend against threats from the United States.
Since America had fought Britain to gain its independence the relationship between British North America and the United States had never been stable. The relationship became even worse when Britain supported the South in the American Civil War. The North won the war and was angry at Britain for helping the South. Many Americans wanted to take over all of what is now Canada.
Meanwhile, Britain didn't want to have to pay for the cost of defending its colonies. It decided to encourage the colonies to join together, because the United States would be less likely to attack Canada if it were a self-governing country rather than separate colonies of Britain. The fear of the United States helped to strengthen the call for Confederation.