In 1812, the Hudson's Bay Company's handed over a huge tract of land to the Earl of Selkirk. The Scottish nobleman wanted the 187,000 square kilometre area to become an agricultural colony for Scottish and Irish settlers.

The settlement, called the Red River Colony, was accepted by Chief Peguis of the Saulteaux. Chief Peguis was in favour of the settlement because it would strengthen his alliance with the Hudson Bay Company against the Métis hunters. The Métis were displacing the Saulteaux as suppliers of bison meat and hides to the European fur traders.

For the Hudson's Bay Company, it was an opportunity to increase its influence at the expense of its bitter rival, the North West Company. The Hudson's Bay Company believed that a permanent settlement, dependent on the company for supplies and jobs, would strengthen its control over the whole territory.

For Thomas Douglas, the Earl of Selkirk, it was a way to save Scottish and Irish peasants from poverty. The peasants were being pushed off their farms back home by landowners converting their hillsides from food production to sheep pasture. Lord Selkirk's motives were not entirely unselfish. He was a major shareholder in the Hudson's Bay Company and wanted it to prosper at the expense of the North West Company.

But the North West Company fought back. Raiding parties forced settlers to flee their land. Their houses were burned and their crops trampled. In one battle, 21 people were killed.

Lord Selkirk then hired a force of 100 Swiss mercenary soldiers to protect the settlers. Selkirk gave land to the soldiers who were veterans of the War of 1812 between Canada and the United States. Their permanent presence brought security to the colony.

However, crop failures, plagues of grasshoppers, and devastating floods continued to torment the Red River Colony.

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The eventual takeover of the North West Company by the Hudson's Bay Company in 1821 meant the loss of jobs for hundreds of Métis hunters, boatsmen and cart drivers. Many unemployed Métis workers and their families collected in the colony and became the majority, but a majority without political power.

Slightly fewer in number, but favoured by the Hudson's Bay Company, were the so-called "Country-born" who were descendants of the British, Protestant fur traders and aboriginals. The Country-born would continue to side with the Company and, later, the government of Canada in disputes with the Métis.

The Red River Colony was never an agricultural or social success. In 1836, the few remaining Selkirk settlers gave up and handed the huge land tract back to the Hudson's Bay Company.

The company had a legal monopoly over business granted by the British government. Only the company was allowed to buy furs and sell goods within a huge territory covering much of what is now the Canadian West. To survive, the Métis, who had been allied to the defunct North West Company, started their own businesses and transportation services in an illegal competition with the Hudson's Bay Company.

By 1850, the Métis had established their own business network, independent of the Hudson's Bay Company's legal monopoly. Métis trains of Red River carts bypassed company stores entirely, exchanging goods directly with merchants in the United States.

The Red River Colony became part of the new province of Manitoba in 1870. The town site itself was officially incorporated as the City of Winnipeg in 1873.

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