The Grand Trunk was complete from Lake Huron to the Atlantic in 1860. In the ten years that followed, working expenses varied from fifty-eight to eighty-five per cent of the gross receipts, instead of the forty per cent which the prospectus had foreshadowed; not a cent of dividend was paid on ordinary shares—nor has been to this day.

What were the reasons for this disappointing result? The root of the trouble was that the road was not built solely or even mainly with a view to operating efficiency and earning power. It was the politicians' road, the promoters' road, the contractors' road, at least as much as the shareholders' road. The government had encouraged the building of {83} unprofitable sections, such as that east of Quebec, for local or patriotic reasons. Promoters had unloaded the Portland road and later the Detroit and Port Huron road at excessive prices. The contractors, east of Toronto, had had an eye mainly to construction profits in planning the route, and heavy grades, bad rails, and poor ballast increased maintenance charges beyond all expectations. The prophecy that operating expenses would not exceed forty per cent of earnings, based on English experience, failed partly because earnings were lower, but more because operating expenses were higher, than anticipated. The company had more than its share of hard luck from commercial depression, and from loss on American paper money in the Civil War. Water competition proved serious in the east, while other railways waged traffic wars in Upper Canada. The trade of the far west, which had been the most attractive lure, did not come in any great amount for the first twenty years. Differences of gauge, lack of permanent connections at Chicago, lack of return freight, rate wars with the American roads which had been built west at the same time or later, the inferiority of Montreal to New York as of old in harbour facilities and {84} ocean service, the failure of Portland to become a great commercial centre—all meant hope and dividends deferred. Finally, the management was working at long range: the road did not enjoy the vigilant inspection or the public support that would have attended control by Canadian interests.

The Grand Trunk did Canada good service, well worth all the public aid that was given. It would probably have given better service, and its shareholders could not have fared worse, had the plans of Galt and his associates not been interfered with, and the line been built gradually under local control.

While the building of the Grand Trunk was the main achievement of the period, it was by no means the only one. The fifties were the busiest years in the railway annals of older Canada. In 1850 there were only 66 miles of road in all the provinces. In 1860 there were 2065, of which over 1700 had been added in the Canadas alone. The Great Western and the Northern were pushed forward under the provisions of the earlier Guarantee Act; roads of more local interest were fostered by municipal rivalry. Their building brought unwonted activity in every {85} branch of commerce. A speculative fever ran through the whole community; fortunes were made and lost in the provision trade, and land prices soared to heights undreamed of. This mood was the promoter's happy chance, and still more charters were sought. The pace quickened till exhaustion, contagious American panics, poor harvests, and the Crimean War—which first raised the price of the wheat Canada had to sell, but later raised the price of the money she had to borrow—brought collapse in 1857.

In this boom period jobbery and lobbying reigned to an extent which we rarely realize in our memory of the good old times. Railway contractors were all-powerful in the legislature, and levied toll at will. The most notable 'contractor-boss' of the day was able, dealing with the Great Western, to hold up a bill for double-tracking until assured of the contract himself; dealing with the Grand Trunk, to force from the English contractors a share in the enterprise before consenting to help their schemes through; with the Northern, to collect $100,000 as a condition of securing from the government the guarantee bonds before they had been rightly earned. Municipal officials were bribed to help bonuses {86} through. Existing roads were blackmailed by pedlars of rival charters. Glaringly fraudulent prospectuses were issued. On a smaller scale, the excitement and the rascality which had marked the beginning of the great railway eras in the United Kingdom and the United States were reproduced in Canada.

Of the other roads completed in this period, the two which had been aided by Hincks's first Guarantee Act were most important.

The Great Western had a promising outlook. It ran through a rich country and had assured prospects of through western traffic. The road was completed from Suspension Bridge to Windsor in January 1854. An extension from Hamilton to Toronto was built in 1856, and a semi-independent line from Galt to Guelph absorbed in 1860. The Great Western came nearest of any early road to being a financial success; alone of the guaranteed roads it repaid the government loan, nearly in full. But after a brief burst of prosperity, from 1854 to 1856, it, too, was continually in difficulties. In 1856 it paid a dividend of 8 1/2 per cent, but three years later it paid nothing, and in the next decade averaged less than three per cent.

The troubles of the Great Western came {87} chiefly from competition, actual and threatened, and uncertain traffic connections. To the north, the chartering of the Toronto, Guelph and Sarnia, amalgamated later with the Grand Trunk, cut into its best territory. An endeavour was made in 1854 to divide the remaining area, but two years later the battle was renewed, the Great Western building to Sarnia and the Grand Trunk tapping London and Detroit. Between the Great Western and Lake Erie a rival road direct from Buffalo to Detroit was threatened time and again, but was not built until after Confederation. South of Lake Erie the Lake Shore and Michigan Southern was built shortly afterwards by interests connected with the New York Central, thus threatening the traffic connections of the Great Western both east and west. To avert loss of its western trade, the Great Western sunk large sums in aiding the construction of a road from Detroit to Grand Haven, with ferry connections to Milwaukee; but this experiment did not prove a success and caused serious embarrassment.

The Northern Railway, whose promoters, as we have seen, naively recognized that railways and lotteries were close akin, was opened as far as Allandale in 1853, and to Collingwood {88} in 1855. It was scamped by the contractors, poorly built, and overloaded with debt. The sanguine policy of building up a through traffic from the American West, by water to Collingwood and rail to Toronto, proved a will-o'-the-wisp. In turn the company relied on independent steamers, and set up a fleet of its own, but equally in vain so far as profit went. By 1859 the road was bankrupt. A new general manager, Frederick Cumberland, brought in a change of policy. Local traffic was sedulously cultivated, and a fair degree of prosperity followed.

Most of the lesser roads constructed looked to the municipalities rather than to the provinces for aid. The Municipal Loan Fund of 1854 was the third and last phase of Hincks's railway policy. This was an ingenious attempt to give the municipalities the prestige of provincial connection without accepting any legal responsibility. Municipalities had previously been permitted to bonus or take stock in railways and toll-roads, but their securities were unknown in the world's markets. Hincks now provided that municipalities which wished money to aid railways or other local improvements might practically pool their credit and share in the credit of the province. Provincial {89} debentures were issued against the municipal obligations pooled in the Fund, and the proceeds of their sale given to the municipalities. A sinking fund was to be maintained, and, if need be, the province could levy through the sheriff on any defaulting town.

The municipalities made full use of their privileges. It was believed that railway investments would yield high dividends, and the more optimistic expected to see all taxes made unnecessary by the profits earned. Town vied with town in extravagant enterprises.[3] Not a cent brought a dividend; instead, the municipalities found themselves saddled with heavy interest payments. One after another declined to pay; Port Hope was $312,000 in arrears by 1861 and Cobourg $313,000. The provincial government had {90} not the political courage to send in the sheriff, and accordingly it was forced at last to assume the whole burden. Prudent municipalities which had declined to borrow at eight per cent found themselves compelled to share the burdens of their reckless neighbours. Demoralization was widespread.

The railways constructed by such aid may be briefly noted. The Buffalo and Lake Huron, extending from Fort Erie to Goderich, was completed in 1858. It had its origin in the ambition of Buffalo to have more immediate connection with the rich western peninsula of Upper Canada and the Lake trade beyond than was afforded by the Great Western. The London and Port Stanley, built in 1854-56, mainly by the city of London, with smaller contributions from Middlesex and Elgin counties and the city of St Thomas, failed to realize the expectations that it would become the main artery of trade between Canada and the states across the lake, but it developed a fair excursion trade and coal traffic, and indirectly justified its construction. The Erie and Ontario portage road, rebuilt in 1854, has already been noted. Another portage road round Niagara Falls was the Welland Railway, planned by W. Hamilton Merritt, {91} the projector of the Welland Canal. It ran from Port Colborne on Lake Erie to Port Dalhousie on Lake Ontario, twenty-five miles, and was completed in 1859, only to add one more to the list of unprofitable roads, and eventually to be absorbed by the Great Western.

Farther east the rivalry of Port Hope and Cobourg led to the construction of two roads, the Cobourg and Peterborough and the Port Hope, Lindsay and Beaverton. Both relied chiefly on timber traffic and aimed to develop the farming country in the rear. The Cobourg line, begun in 1853, suffered disaster from the start: the contractor's extras absorbed all the cash available; the three-mile bridge built on piles across Rice Lake gave way, and after $1,000,000 had been expended the road was sold for $100,000. The Port Hope line, which absorbed a branch from Millbrook to Peterborough in 1867, fared somewhat better. The Brockville and Ottawa was a lumber road, carrying supplies up and timber down. It was chartered to run from Brockville to Pembroke, with a branch from Smith's Falls on the Rideau Canal to Perth. By 1859 it had reached Almonte, and six years later struggled as far as Sand Point on the Ottawa, when it {92} halted, till the Canadian Pacific project gave it new life. After failing to make ends meet for some years the company went through repeated reorganizations in the early sixties. The Bytown and Prescott, later the St Lawrence and Ottawa, built in 1854, was also a lumber road, promoted by interests connected with the Ogdensburg Railway, whose terminus was opposite Prescott. It suffered the same financial fate, and was sold to the English company which had supplied the rails, at a total sacrifice of municipal and other creditors' interests. Around the Long Sault rapids in the Ottawa there was built in 1854 the thirteen-mile Carillon and Grenville, a summer portage road, an early enterprise which retained its independence and its old five-foot-six-inch gauge until 1912, when it was absorbed by the Canadian Northern. In Lower Canada the only minor road built which has not been referred to was the Stanstead, Shefford and Chambly, opened in 1859 from St Johns to Granby, and forming practically an extension of the Champlain and St Lawrence from the former point.



[1] As a matter of fact, discussion of this scheme began in St Andrews in 1827, and in 1828 John Wilson convened a meeting of the citizens to further it.

[2] The Brassey firm were paid about L9000 sterling a mile for the line from Toronto to Montreal, L8000 for the section from Quebec to Riviere du Loup, L6500 for the Quebec and Richmond road, and L1,400,000 for the Victoria Bridge. Gzowski and Co., consisting of Messrs Gzowski, Holton, Macpherson, and Galt, secured the Toronto to Sarnia contract at L8000 a mile. In both cases these prices included equipment. The English contractors were required to take a large portion of their pay in depreciated bonds and stock, whereas the Canadian contractors were given cash; on the other hand, Brassey had a higher price and less difficult country to work in. The English firm, with all their experience, were not familiar with building roads in countries where labour was dear, and the plant they sent out was antiquated compared with the labour-saving equipment familiar to American and Canadian contractors. They claimed to have lost a million pounds on their enterprise, while Galt, Holton, Macpherson, and Gzowski all made fortunes.

[3] Port Hope borrowed for railway investment $740,000, Cobourg and Brantford $500,000 each, and Brockville $400,000—all towns of less than 5000 people. The counties of Lanark and Renfrew borrowed $800,000, and villages borrowed in proportion. In all some $6,500,000 was borrowed through the Loan Fund for railway purposes alone, the bulk of it in Upper Canada, while another three million was invested by towns that borrowed on their own responsibility. To aid the Brockville and Ottawa Railway, for example, Lanark and Renfrew advanced $800,000, Brockville $415,000, and the township of Elizabethtown $150,000, or over half the cost of the road. Huron and Bruce invested $300,000 in the Buffalo and Lake Huron, and other municipalities $578,000, and so on throughout the province.



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CHAPTER VI

THE INTERCOLONIAL

The Battle of the Gauges—Expansion and Competition—Local Bonusing—The Intercolonial

The first 'age of iron—and of brass' came to an end before 1860. Between 1850 and 1860, it has been seen, the mileage of all the provinces grew from 66 to 2065. By 1867 it had increased only 213 miles. In two of the intervening years not a mile was built. A halt had come, for stock-taking and heart-searching.

This first era of activity had given as its most obvious result over two thousand miles of railway. In Nova Scotia, Halifax was linked with the Bay of Fundy and the Gulf of St Lawrence; in New Brunswick, St John was connected with the Gulf, and a road was struggling Canadaward from St Andrews. In the Canadas a 'Grant Trunk,' so nicknamed, ran from Riviere du Loup the whole length of the province to Sarnia, while lesser roads opened up new districts to the north or gave connection with the grain-fields and the ocean {94} ports of the United States. The western province, at all events, was well served for a pioneer country, and the shipper and consumer had no great cause for complaint.

To the taxpayer it seemed otherwise. He had been induced to embark on a lavish policy of financial aid on the assurance that the roads would at worst be no burden, and at best might yield large profits to the state. As a matter of fact, nine out of every ten dollars advanced might be written off as lost. The Grand Trunk, Great Western, and Northern roads were indebted to the old province of Canada on July 1, 1867, in over twenty million dollars for principal advanced and in over thirteen millions for interest. Other roads were indebted to Canadian municipalities in nearly ten millions for principal alone. Yet the taxpayer was not wholly justified in his grumbling. There had been waste and mismanagement, it is true, but the railways had brought indirect gain that more than offset the direct loss. Farming districts were opened up rapidly, freights were reduced in many sections, intercourse was facilitated, and land values were raised. The contribution to the railways was bread well cast upon the waters. It would have been better, if foresight had {95} equalled hindsight, to have given the money out and out.

For the shareholder, English or Canadian, there was little but disappointment. Grand Trunk ordinary stock in 1865 was selling at 22, and even Great Western at 65. The securities of several of the minor roads had been almost entirely wiped out by reorganizations. In 1866 some $4,180,000 was paid in dividends and leases, representing only 2.7 per cent on the $158,000,000 which the roads had cost or were alleged to have cost. Premature extension into unremunerative territory, for political or contracting reasons, excessive competition in the fertile areas, heavy fixed charges on inflated capital or leased roads, water competition, absentee proprietorship, all played their part. Whatever the causes, the results were clear, and capitalists long fought shy of Canadian railway projects.

In the first thirty years of Canadian railway development no question aroused more interest than that of the gauge to be adopted. The cows of the good Dutch burghers of New Amsterdam fixed the windings of Broadway as they remain to this day. The width of the carts used in English coal-mines centuries ago {96} still determines the gauge of railway track and railway cars over nearly all the world. 'Before every engine,' declares Mr H. G. Wells, 'trots the ghost of a superseded horse.' When the steam locomotive was invented, and used upon the coal-mine tramways, it was made of the same four-foot-eight-and-a-half-inch gauge. In England, in spite of the preferences of Brunel, Stephenson's great rival, for a seven-foot gauge, the narrower width soon triumphed, though the Great Western did not entirely abandon its wider track until 1892. In Canada the struggle was longer and more complicated.

It was a question on which engineers differed. Speed, steadiness, cost of track construction, and cost of maintenance were all to be considered, and were all diversely estimated. In early years, before the need of standardizing equipment was felt, many experiments were made, especially in the United States. In the southern states five feet was the usual width, and the Erie was built on a gauge of six feet, to fit an engine bought at a bargain. But in the United States, as in England, the four-foot-eight-and-a-half-inch width was dominant, and would have been adopted in Canada without question, had not local {97} interests, appealing, as often, to patriotic prejudice, succeeded in clouding the issue.

When the road from Portland to Montreal was being planned, the astute Portland promoters insisted upon a gauge of five feet six inches, to prevent the switching of traffic to Boston. Montreal, in its turn, insisted on the same gauge for the Grand Trunk line, to ensure that all east-bound traffic should be brought through Canada to Montreal. It carried its point, and the wider or 'provincial' gauge became the standard in the Canadas, and later in the Maritime Provinces.

Experience proved that it was impossible to maintain different gauges in countries so closely connected as Canada and the United States. As roads became consolidated into larger systems, the inconvenience of transhipping at break of gauge became more intolerable. The expedients of lifting cars bodily to other trucks, of making axles adjustable, and even of laying a third rail, proved unsatisfactory. Late in the sixties and early in the seventies the Great Western and the Grand Trunk had to adopt the four-foot-eight-and-a-half-inch gauge solely, and other lines gradually followed.

Meanwhile, the cry was going up for a still {98} narrower gauge. In pioneer districts, at least, it was contended, a road three feet six inches wide, such as had recently been adopted in Norway, would suffice, and would be much cheaper both to build and to operate. Between 1868 and 1873 two experimental narrow-gauge lines were built running north from Toronto—the Toronto and Nipissing, and the Toronto, Grey and Bruce. This proved only a temporary diversion, however, and the decision of the Dominion government in 1874 to change the gauge of the Intercolonial to four feet eight and a half inches, and the adoption of the same standard by the Ontario government, ended the controversy.

Memory is short and hope eternal. Soon after Confederation another burst of activity began in all the provinces of the new Dominion. It was distinctly the period of local development.

In Ontario the opportunity which the fertile western peninsula, jutting down between New York and Michigan, offered for both local and through traffic, led to many projects, much parliamentary jockeying, and at last construction. The Canada Southern was built in 1873, running between Fort Erie, opposite {99} Buffalo, and Amherstburg on the Detroit river. It was controlled by the Vanderbilt interests and operated in close co-operation with their other roads, the Michigan Southern, Michigan Central, and New York Central. The Great Western met this attack upon its preserves by building in the same year the Canada Air Line, from Glencoe near St Thomas, to Fort Erie, giving more direct connection with Buffalo. Both roads made use of the magnificent International Bridge, built across the Niagara in 1873, under Grand Trunk control.

The marked feature of this period, so far as Ontario was concerned, was the rivalry of the cities along the lake and river front in building new roads to tap the north country. From London there was built in 1875 the London, Huron and Bruce, halting at Wingham. From Hamilton, or rather from Guelph, with connections to Hamilton, the Wellington, Grey and Bruce reached Southampton on Lake Huron in 1873 and Kincardine in 1874. Both roads were virtually branches of the Great Western, and were expected to bring to London and to Hamilton respectively the trade of the rich northwestern counties. The Ambitious City, as Hamilton came to be {100} called at this period, a few years later invaded the Northern Railway's territory by a line from Hamilton to Collingwood, also extended southerly to Port Dover, but control of this road was immediately acquired by the Northern interests. From still more ambitious Toronto two narrow-gauge routes were built between 1869 and 1874—the Toronto, Grey and Bruce running northwest to Owen Sound and Teeswater, and the Toronto and Nipissing northeast to Coboconk and Sutton. Whitby also had its visions of terminal greatness, when the Whitby and Port Perry was built in the later seventies. The Port Hope, Beaverton and Lindsay, renamed the Midland, was pushed northeast to Orillia in 1872 and to Midland in 1875. Cobourg's unfortunate northern line was continued to the iron mines of Marmora. Belleville was linked with Peterborough in 1878-79 by the Grand Junction. Kingston, with the co-operation of interests in New York state, planned the Kingston and Pembroke, which reached Mississippi in 1878, and five years later compromised on Renfrew as a terminus. The bankruptcy of the Brockville and Ottawa did not prevent its extension through an allied company, the Canada Central, to Pembroke in 1869 and to {101} Ottawa, by a branch from Carleton Place, in 1876.

In Quebec the chief developments were the building of a line connecting Quebec, Montreal, and Ottawa along the north shore of the St Lawrence, and of further connections between Montreal and Quebec and United States roads. The North Shore route had been projected early in the fifties, but, in spite of lavish cash and land bonuses, it was not until the Quebec government took it up as a provincial road, in the seventies, that it was pushed to completion. On the south shore the Eastern Townships triangle was interlaced by a series of smaller roads. From Levis, opposite Quebec, the Levis and Kennebec ran south to the Maine border, and the Quebec Central to Sherbrooke. From Sherbrooke and Lennoxville the Massawappi Valley gave connection with the Connecticut and Passumpsic, to which it was leased for 999 years, while branches of the Central Vermont and minor roads opened up new sections and gave further connection with Montreal.

An interesting experiment, motived by the same desire for cheap pioneer construction which in Ontario brought in the narrow gauge, was the wooden railway built in 1870 from {102} Quebec to Gosford. The rails were simply strips of seasoned maple, 14'x7"x4", notched into the sleepers and wedged in without the use of a single iron spike. The engine and car wheels were made wide to fit the rail. In spite of its cheap construction the road did not pay, and the hope of extending it as far as Lake St John was deferred for a generation. A similar wooden railway was built from Drummondville to L'Avenir.

In Nova Scotia the chief local development was the opening in 1869 of a road through the Annapolis Valley, the Windsor and Annapolis. This formed an extension of the government road from Halifax to Windsor, but the province preferred to entrust it to a private company, giving a liberal bonus. In New Brunswick there was much activity, all by private companies. The western section of the European and North American, from St John to the Maine boundary, was completed in 1869, though it was not until 1871 that the road was opened through to Portland—by a more circuitous route than Poor had originally planned. From Fredericton a branch was built to meet this road, and a line to Woodstock, which in turn was connected with the old New Brunswick and Canada, still {103} pushing slowly north. In the meantime Prince Edward Island was building a narrow-gauge railway nearly two hundred miles long; in 1873 she was forced into Confederation to find aid in paying for it.

All this varied activity was made possible by a revival of the policy of provincial and municipal assistance. Whether from reasoned conviction as to the indirect benefits of more roads, or because of the log-rolling activities of rival towns and wily promoters, a systematic and generous policy of aid was adopted. This aid came chiefly from the provinces and municipalities, the Dominion as yet confining itself to works of inter-provincial concern. Outright gifts for the most part took the place of loans, since experience had proved that direct returns upon the money invested were not to be looked for. Curiously meandering were the routes which promoters mapped out in the endeavour to follow the shortest line between two bonuses.[1]

{104}

Governments could help to build roads, but could not ensure for them traffic. It took very few years to show that the interests of the public were not best served by scores of petty isolated roads, and that the interests of shareholders were not secured by the cut-throat competition which prevailed in certain areas. This competition was keenest between the roads which were intimately connected with the lines in the United States and dependent upon through traffic. The Grand Trunk had cut into the territory of the Great Western by acquiring the Buffalo and Lake Huron line, and the Canada Southern and the Great Western were disputing for every ton of freight between the Niagara and the Detroit. All were involved in the rate wars which marked this period in {105} the United States. In 1867 the Grand Trunk and the Great Western agreed to maintain rates, pool certain traffic receipts, refrain from competitive building, and co-operate in service. The agreement broke down; another was made in 1876, only to fail in turn. More effective measures had to be adopted.

The outstanding achievement of the period, however, was the building of the Intercolonial. It had been projected largely in order to make closer union between the provinces possible, but, as it turned out, it was Confederation that brought the Intercolonial, not the Intercolonial that brought Confederation.

After the breakdown of the negotiations in London in 1852, each province had turned to its own tasks. But each in building its own roads had provided possible links in the future Intercolonial chain. In Canada the Grand Trunk ran to a point 120 miles east of Quebec; in New Brunswick, St John was connected with both the east and west boundaries of the province; in Nova Scotia, a road ran north from Halifax as far as Truro. A gap of nearly five hundred miles between Riviere du Loup and Truro remained. To bridge this wilderness seemed beyond the {106} private or public resources of the divided provinces. Unanimous on one point only, they once more turned to the British government. In 1857 and 1858 dispatches and deputations sought aid, but sought it in vain. When the Civil War broke out in the United States, official British sympathy was given to the South, and the Trent affair showed how near Britain and the North were to war, a war which would at once have exposed the isolated colonies to American attack. The military argument for closer connection then took on new weight with the British government, and it proposed, to a joint delegation in 1861, to revert to its offer of ten years earlier—to guarantee a colonial loan for a railway by an approved route. The colonies opposed the demand for a sinking fund, and again agreement was postponed. In 1863 Canada suggested that, as the British government had made an approved route an essential condition, a definite survey and selection should be undertaken forthwith. It was agreed that a commission of three engineers should be selected, one nominated by Canada, one by New Brunswick and Nova Scotia, and one by Great Britain. Canada nominated Sandford Fleming, a distinguished Scottish-Canadian {107} engineer, who had been connected with the Northern and other Upper Canada enterprises. The other authorities paid him the compliment of naming him as their representative also, to facilitate the work. During the progress of the survey negotiations for the union of the provinces had begun, and when Confederation came about in 1867, the building of the Intercolonial at the common expense of the Dominion, with an imperial guarantee to the extent of L3,000,000, was one of the conditions of union. The old difficulty as to the route through New Brunswick was still to be settled. Again western and southern New Brunswick struggled against the north and against far east Quebec; again Halifax and St John found plausible arguments to uphold their respective interests. Finally, the views of Sir George Cartier and Peter Mitchell triumphed in the Cabinet councils, and in March 1868 the engineer-in-chief advised the selection of the roundabout Bay of Chaleurs route—roughly 'Major Robinson's line'—ostensibly because safer from American attack, nearer possible steamship connection with Europe, and no worse, if no better, than the other routes in potentialities of local traffic.

The construction was entrusted in December {108} 1868 to a commission of four; six years later the minister of Public Works took over direct control. Sandford Fleming remained engineer-in-chief for the building as well as for the survey. Tenders were submitted for the construction of the whole road, but the government decided to award the contract in small sections. The road was not completed as speedily as had been expected. Difficulties arose, expected and unexpected—cuttings in heavy rock, sliding clay banks, extensive swamps, lack of rock bottom for heavy bridges. Contractor after contractor found that he had underestimated the task, and went bankrupt or threw up the contract. Sometimes the contract was relet, sometimes the government completed it by day work. At last, on July 1, 1876, nine years after Confederation, the five hundred miles between Truro and Riviere du Loup were opened for traffic throughout. In the meantime the Dominion had taken over the Nova Scotia, New Brunswick, and Prince Edward Island government roads. In 1876 there were in all 950 miles of railway under the control of the Dominion government, as against 4268 miles of private lines.



[1] Ontario in 1871 offered subsidies ranging from two to four thousand dollars a mile for colonization roads to the north; Quebec in 1869 offered money and later land; New Brunswick in 1864 gave $10,000 a mile to various roads, besides taking $300,000 in stock in the European; while Nova Scotia aided the Annapolis extension. Municipal aid was even more lavish in proportion: Toronto gave $350,000 to the Toronto, Grey and Bruce, $150,000 to the Nipissing road, $100,000 to the Northern, and $350,000 to the Credit Valley. Hamilton backed the Hamilton and North-Western by $200,000, London gave the London, Huron and Bruce $150,000, and generous Kingston gave to the Kingston and Pembroke over $300,000. Counties like Elgin and Simcoe, Grey, and Frontenac offered from $150,000 to $300,000, while from townships alone the Wellington, Grey and Bruce received $680,000. Montreal and Quebec each helped the North Shore by a gift of a million dollars; Ottawa county's $200,000 and the parish of Canrobert's $1000 were equally sought; while to a lesser degree the Maritime Provinces showed the same tendency.



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CHAPTER VII

THE CANADIAN PACIFIC—BEGINNINGS

Across Continent in 1841—Early Stages—The Survey—The Allan Project—Mackenzie's Policy—Macdonald's Policy

On March 3, 1841, Sir George Simpson, governor-in-chief of the Hudson's Bay Company's domains, left London on a journey round the world. All the resources of a powerful and well-organized corporation were at his disposal, and his own reputation for rapid travelling gave assurance that on the actual journey not an hour would be lost. A fortnight's sail brought him from Liverpool to Halifax, and thence he journeyed by steamer to Boston, by rail to Nashua, by coach to Concord, and by sleigh to Montreal. The portage railway from St John to Laprairie was on his route, but it was not open in winter.

From Montreal Sir George and his party set out on May 4 in two light thirty-foot canoes, each carrying a crew of twelve or fourteen men. At top speed they worked their way up the Ottawa and the Mattawa out to Lake Nipissing, {110} and down the French River into Georgian Bay. They camped every night at sunset, and rose each morning at one. Their tireless Canadian and Iroquois voyageurs worked eighteen hours a day, paddling swiftly through smooth water, wading through shallows, or towing the canoes through the lesser rapids, or portaging once to a dozen times a day round the more difficult ones. Each voyageur was ready to shoulder his 180 pounds, strapped to his forehead, or to ferry passengers ashore on his back. They reached Sault Ste Marie on May 16, only to find Lake Superior still frozen. They picked their way very slowly through the opening rifts along the shore, made the Company's post at Fort William in eleven days, exchanged their large canoes for smaller craft, and paddled and portaged through the endless network of river and lake to Fort Garry, which they reached on June 10, thirty-eight days out from Montreal.



From Fort Garry a fresh start was made on July 3, on horseback, with baggage sent ahead in lumbering Red River carts. Past Fort Ellice and Fort Carlton, they pushed on with fresh supplies of horses at the topmost speed that the limitations of their convoy of carts would permit. Band after band of Plains {111} Indians, adorned with war-paint and scalp-locks, crossed their trail, but mosquito and sand-fly proved more troublesome. The travellers passed a band of emigrants making slowly for the Columbia, and everywhere found countless herds of buffalo. In three weeks from Fort Garry they reached Fort Edmonton. Here forty-five fresh horses were in readiness for riding, pack-horses took the place of carts, and the journey was continued to the south-west. The Rockies were crossed through Kootenay Pass, and at last—after many a halt to find straying horses, and after continuous annoyance from mosquitoes and venomous insects 'which in size and appearance might have been mistaken for a cross between the bulldog and the house-fly'—Fort Colville on the Columbia was reached on August 18. Their long horseback ride was over. Favoured by wonderfully fine weather, in the saddle eleven to twelve hours a day, they had made their way through open prairie and rolling plain, tangled thicket and burning forest and rushing river, and had covered the two thousand miles from Fort Garry in six weeks and five days. From Fort Colville they reached the waters of the Pacific at Fort Vancouver (Washington) in another six days. The {112} continent had been crossed in twelve weeks of actual travelling.

Sir George Simpson's journey stood as the record for many a year. For a generation after his day the scattered travellers from Red River westward were compelled to rely on saddle-horse and plains cart and canoe. From Montreal and Toronto the railway could be utilized as far as Collingwood, and thence the steamer to Port Arthur. Then for a time the government opened up a summer route to the Red River, beginning it in 1869 and maintaining it until 1876. The Dawson route, as it was called, included forty-five miles of wagon-road from Port Arthur to Lake Shebandowan, then over three hundred miles of water travel, with a dozen portages, and again ninety-five miles of wagon-road from the Lake of the Woods to Fort Garry.[1] In 1870 it took ninety-five days to transport troops from Toronto to Fort Garry over this route. Such makeshifts could not serve for long. South of the {113} border the railway was rapidly pushing westward, and in the new nation of the north, as well, its time had come.

Ever after the coming of the locomotive, it needed only imagination and a map to see all British North America clamped by an iron band. Engineers like Bonnycastle and Synge and Carmichael-Smyth wrote of the possibility in the forties. Politicians found in the theme matter for admirable after-dinner perorations—colonial governors like Harvey in 1847, colonial secretaries like Lytton and Carnarvon in the fifties, and colonial premiers like Joseph Howe, who declared in Halifax in 1851: 'I believe that many in this room will live to hear the whistle of the steam-engine in the passes of the Rocky Mountains, and to make the journey from Halifax to the Pacific in five or six days.' Promoters were not lacking. In 1851 Allan Macdonnell of Toronto sought a charter and a subsidy for a road to the Pacific, and the Canadian authorities, in {114} declining, expressed their opinion that the scheme was not visionary and their hope that some day Great Britain and the United States might undertake it jointly. Seven years later the same promoter secured a charter for the Northwest Transportation, Navigation, and Railway Company, to operate between Lake Superior and the Fraser river, but could get no backing; four years previously John Young, A. N. Morin, A. T. Galt, and John A. Poor had petitioned in vain for a similar charter. Then in 1862, on behalf of the Red River Settlement, Sandford Fleming prepared an elaborate memorial on the subject. Edwin Watkin, of the Grand Trunk, negotiated with the Hudson's Bay Company for right of way and other facilities, but the project proved too vast for his resources.



Two things were needed before dreams on paper could become facts in steel—national unity and international rivalry. Years before Confederation, such far-seeing Canadians as William M'Dougall and George Brown had pressed for the annexation of the British territories beyond the Lakes. After Confederation, all speed was made to buy out the sovereign rights of the Hudson's Bay Company. Then came the first Riel Rebellion, to {115} bring home the need of a western road, as the Trent affair had brought home the need of the Intercolonial. The decisive political factor came into play in 1870, when British Columbia entered the federation. Its less than ten thousand white inhabitants—deeming themselves citizens of no mean country, and kept to their demands by the urging of an indefatigable Englishman, Alfred Waddington—made the construction of an overland railway an indispensable condition of union, and Sir John Macdonald courageously accepted their terms.

The other factor, international rivalry, exercised its influence about the same time. In the United States the railway had rapidly pushed westward, but had halted before the deserts and the mountains lying between the Mississippi and the Pacific. The rivalry of pro-slavery and anti-slavery parties in Congress long brought to deadlock all plans of public aid to either southern or northern route. Then the Civil War broke the deadlock: the need of binding the West to the side of the North created a strong public demand for a Pacific road, and Congress, so stimulated, and further lubricated by the payment, as is proven, of at least $476,000 in bribes, gave lavish loans {116} and grants of land. The Central Pacific, working from Sacramento, and the Union Pacific, starting from Omaha, met near Ogden in Utah in 1869—or rather here the rails met, for the rival companies, eager to earn the high subsidy given for mountain construction, had actually graded two hundred superfluous miles in parallel lines. In 1871 the Southern Pacific and the Texas Pacific were fighting for subsidies, and Jay Cooke was promoting the Northern Pacific. The young Dominion was stirred by ambition to emulate its powerful neighbour.

These factors, then, brought the question of a railway to the Pacific on Canadian soil within the range of practical politics. Important questions remained to be settled. During the parliamentary session of 1871 the government of Sir John Macdonald decided that the road should be built by a company, not by the state, that it should be aided by liberal subsidies in cash and in land, and, to meet British Columbia's insistent terms, that it should be begun within two, and completed within ten, years. The Opposition protested that this latter provision was uncalled for and would bankrupt the Dominion, but the government carried its point, though it was forced to hedge {117} later by a stipulation—not included in the formal resolutions—that the annual expenditure should be such as not to press unduly upon the Dominion's resources.

The first task was to survey the vast wilderness between the Ottawa valley and the Pacific, and to find, if possible, a feasible route. So able an explorer and engineer as Captain Palliser, appointed by the British government to report upon the country west of the Lakes, had declared in 1863, after four years of careful labour in the field, that, thanks to the choice of the 49th parallel as Canada's boundary, there was no possibility of ever building a transcontinental railway exclusively through British territory. The man chosen for the task of achieving this impossibility was Sandford Fleming. Appointed engineer-in-chief in 1871, he was for nine years in charge of the surveys, though for half that time his duties on the Intercolonial absorbed much of his energy. Mr Fleming possessed an unusual gift of literary style, and his reports upon the work of his staff gave the people of Canada a very clear idea of the difficulties to be encountered. His friend, the Rev. George M. Grant, who accompanied him in a rapid reconnaissance in 1872, gave, in his book {118} Ocean to Ocean, a vivid and heartening record of the realities and the promise that he saw.

It had been decided, in order to hold the balance even between Montreal and Toronto, to make the proposed Pacific road begin at some angle of Lake Nipissing. From that point nearly to the Red River there stretched a thousand miles of woodland, rugged and rock-strewn, covered by a network of countless lakes and rivers, interspersed with seemingly bottomless swamps or muskegs—a wilderness which no white man had ever passed through from end to end. Then came the level prairie and a great rolling plain rising to the south-west in three successive steppes, and cut by deep watercourses. But it was the third or mountain section which presented the most serious engineering difficulties. Four hundred miles from the Pacific coast, and roughly parallel, ran the towering Rocky Mountains, some of whose peaks rose fifteen thousand feet. Beyond stretched a vast plateau, three or four thousand feet above sea-level, intersected by rivers which had cut deep chasms or, to the northward, wide sheltered valleys. Between this plateau and the coast the Cascades interposed, rivalling the Rockies in height and {119} rising sheer from the ocean, which thrust in deep fiord channels. At the head of some one of these fiords must be found the western terminus.



Early in the survey a practicable route was found throughout. Striking across the wilderness from Lake Nipissing to Lake Superior at the river Pic, the line might skirt the shore of the lake to Fort William, or it might run northerly through what is now known as the clay belt, with Fort William and the lake made accessible by a branch. Continuing westward to the Red River at Selkirk, with Winnipeg on a branch line to the south, the projected line crossed Lake Manitoba at the Narrows, and then struck out northwesterly, through what was then termed the 'Fertile Belt,' till the Yellowhead Pass was reached. Here the Rockies could be easily pierced; but once through the engineer was faced by the huge flanking range of the Cariboo Mountains, in which repeated explorations failed to find a gap. But at the foot of the towering barrier lay a remarkable deep-set valley four hundred miles in length, in which northwestward ran the Fraser and southeastward the Canoe and the Columbia. By following the Fraser to its great southward bend, and then striking {120} west, a terminus on Bute or Dean Inlet might be reached, while the valley of the Canoe and the Albreda would give access to the North Thompson as far as Kamloops, whence the road might run down the Thompson and the lower Fraser to Burrard Inlet. The latter route, on the whole, was preferred.

While this route was feasible, the mountain portion promised to be extremely expensive. This factor, together with the uncertainty of government policy and the desire of Victoria to have the road built to Bute Inlet and thence, by a bridge across Valdes Strait, carried down to Esquimalt, made it necessary to seek untiringly, year after year, for alternative routes. The only important change made, however, until after 1880, was the deflection of the line south of Lake Manitoba to serve existing settlements.

Who was to build the road? It would be a tremendous task for either the government or the private capitalists of a nation of four million people. The United States had not begun its Pacific roads till it had over thirty millions of people, and wealth and experience to correspond. It was estimated that the Canadian road would cost $100,000,000, and it was certain that the engineering difficulties {121} would be staggering. In Canada few roads had paid the shareholders, and though some had profited the contractors, the new enterprise meant such a plunge in the dark that contractors and promoters alike hesitated. In the United States, however, the Pacific roads had proved gold-mines for their promoters. The land-grants were valuable, and the privilege of granting contracts to dummy construction companies controlled by themselves and thus reaping larger profits was still greater.

It was not to be wondered at, therefore, that the first offer came from American capitalists. Alfred Waddington, enthusiast rather than practical promoter, sought at Ottawa a charter for the road he had done so much to secure, but his bill went no further than a first reading. At Ottawa he was met by G. W. M'Mullen, a Canadian residing in Chicago, who was visiting the Dominion on a canal deputation. M'Mullen became interested, and with his Chicago partners endeavoured to enlist the aid of the men behind the Northern Pacific—Jay Cooke, General Cass, W. B. Ogden, T. A. Scott, and others.[2] {122} M'Mullen soon found that Waddington had exaggerated his influence, and that the government was not yet prepared to discuss terms. Sir Francis Hincks, stormy petrel of railway building, whom Sir John Macdonald had just made his finance minister, suggested to Sir Hugh Allan of Montreal that he should get into touch with these Americans and provide the substantial Canadian interest which was essential.

Sir Hugh Allan was then the foremost business man in Canada. He was head of the great Allan steamship line, and had become interested in railways shortly before, when rumours of the intention of the Grand Trunk to establish a rival steamship line to Great {123} Britain had led him to assist in promoting the North Shore from Quebec westward, to compete with the Grand Trunk and ensure traffic for his steamers. He now opened negotiations with the American capitalists through M'Mullen, came to terms, and then sought associates in Canada. Here difficulties arose: Ontario objected that Allan's control would mean a Quebec rather than an Ontario terminus, and that the Northern Pacific directors with whom he was associated were simply conspiring to get control of the Canadian road, in order to delay its construction and prevent it becoming a rival to their own northerly route. Sir George Cartier, too, powerful in the Cabinet and salaried solicitor of the Grand Trunk, was a stumbling-block; he declared himself emphatically opposed to control by any 'sacree compagnie americaine.' But Sir Hugh, believing much in money and little in men, resolved to buy his way through. He soon started a backfire in Quebec which brought Cartier to terms. Ontario rivalry was harder to control: D. L. Macpherson and other Toronto men organized the Interoceanic Railway Company to oppose Allan's Canada Pacific Company. Both companies sought charters and aid. Allan {124} pretended to drop his American associates; Macpherson charged that the connection still existed. The government endeavoured to bring about an amalgamation, with Allan as president, and, failing this, to organize a new company. In the meantime Allan was spending money so freely that even his New York associates were astounded. The Dominion elections were held in August 1872, and Macdonald, Cartier, and Langevin drew heavily on Allan's funds, $162,500 in all, with a promise from Cartier that 'any amount which you or your Company shall advance for that purpose shall be re-couped to you.' After the election a new company, the Canadian Pacific, was organized, with representative men from each province as directors; and the new board, of its own motion, it was declared, elected Allan president. To this company the government granted a charter, promised a subsidy of thirty million dollars and fifty million acres of land, but insisted upon excluding the American interests. Allan acquiesced, and, repaying the advances made, informed New York that negotiations were ended. M'Mullen and his associates, angry at this treatment, conveyed rumours to Opposition leaders, and finally Allan's confidential {125} correspondence, stolen by a clerk in the office of J. J. C. Abbott, Allan's solicitor, was made public.[3] The fat was in the fire.

With the political controversy which followed we are not here concerned. In Sir John Macdonald's defence it could be said, that though Allan's money was taken no {126} special favours were shown in the contract made; and that all that Allan secured by the government's victory was the certainty that the railway project would not be postponed or dropped altogether, and that he would be given control. Sir Hugh Allan had said with much force: 'The plans I propose are in themselves the best for the interests of the Dominion, and in urging them on the public I am really doing a most patriotic action.' Undoubtedly Sir John Macdonald sincerely held a similar opinion.

{127}

The Allan Company gave up its charter, unable to raise capital in face of financial depression and political upheaval. The Liberal party, led by Alexander Mackenzie, and swept into power by a wave of popular indignation, first endeavoured to induce other capitalists to take up the work. But the government's offers of $10,000 in cash and of 20,000 acres of land for each mile, plus an undetermined guarantee, had no takers in the years of depression that followed. Mackenzie then decided that the government should {128} itself build the road. He planned to build at first only the indispensable sections, using the waterways wherever possible, and hoped, but in vain, to secure British Columbia's consent to an extension of the time set for completion. His first step was to subsidize the Canada Central, which ran from Ottawa via Carleton Place to Pembroke, to extend its line as far as Lake Nipissing, in order to connect with the proposed eastern terminus of the Pacific road, and to award a contract (it was afterwards cancelled) for a branch from this junction point to Georgian Bay. Passing by for the time the country north of Lake Superior, he next let contracts for the greater part of the distance between Fort William and Selkirk and for a road from Selkirk to Emerson, on the Manitoba border. Here connection was to be made with an American line, the St Paul and Pacific, of which more will be heard presently.

When Mackenzie left office in 1878 the work of location or construction was well advanced in all three sections. For two years the new administration of Sir John Macdonald carried on the same policy of government construction at a moderate pace. The work in hand was continued and the gaps in the road {129} between Port Arthur and Selkirk were put under contract. The line was made to pass through Winnipeg—instead of striking west from Selkirk, as the engineers had previously advised, and thus side-tracking the ambitious city growing up around old Fort Garry. Contracts were let for two hundred miles of the extension westward from Winnipeg. Two seasons passed before the new government could make up its mind as to the British Columbia section. Late in 1879 it decided to adhere to the route chosen under the Mackenzie administration, through the Yellowhead Pass, down the Thompson and the Fraser to Port Moody on Burrard Inlet. The difficult section from Yale, the head of navigation on the Fraser, to Savona's Ferry, near Kamloops, was shortly afterwards placed under contract.

The ten years' time allotted for the construction of the Canadian Pacific was nearly gone and there was little completed work to show. Hard times, depression in the railway world, changes of government and political upheavals, disputes as to route and terminus, had delayed construction. The building of the link north of Lake Superior, necessary for all-rail connection between East and West on Canadian territory, had been indefinitely postponed. {130} Something had been done, it is true. Manitoba was being linked up with the East by a road south to Minnesota and by another line to the head of Lake Superior, and a start had been made in British Columbia. Some day, under some administration, the gaps would be filled up and the promise to British Columbia would be redeemed.

Suddenly, in June 1880, Sir John Macdonald, speaking at Bath, made the announcement that a group of capitalists had offered to build the road, on terms which would ensure that in the end it would not cost Canada a single farthing. Four months later a contract was signed in Ottawa by which the Canadian Pacific Syndicate undertook to build and operate the whole road. An entirely new turn had been given to the situation, and the most important chapter in Canada's railway annals, if not in her national life, had been begun.



[1] 'Lord Strathcona may still remember the man who came into his office at Winnipeg and said: "Look at me; ain't I a healthy sight? I've come by the government water route from Thunder Bay, and it's taken me twenty-five days to do it. During that time I've been half-starved on victuals I wouldn't give a swampy Indian. The water used to pour into my bunk at nights, and the boat was so leaky that every bit of baggage I've got is water-logged and ruined. I've broke my arm and sprained my ankle helping to carry half a dozen trunks over a dozen portages, and when I refused to take a paddle on one of the boats, an Ottawa Irishman told me to go to hell, and said that if I gave him any more of my damned chat he'd let me get off and walk to Winnipeg."'—W. L. Grant in Geographical Journal, October 1911, p. 365.

[2] The Northern Pacific was at many stages in its history closely connected with Canadian affairs. It had originally been projected in New England: the first proposal was to use the Central Vermont and a Canadian road to be built or acquired as the eastern links, then, crossing into Michigan, the railway was to strike northwestward to the Pacific. When control fell into the hands of New York and Philadelphia interests, these plans were dropped, but later the new management negotiated with Governor Archibald of Manitoba, as well as with Sir John Macdonald, to endeavour to put through an international road, the first section running through Canada to Sault Ste Marie, the second through Michigan and Minnesota, the third through the Canadian plains, and the fourth through the Rockies to the sea on American territory. Nothing came of the negotiations, though it may be noted that the Canadian Pacific to-day has carried out precisely this plan, in addition to its all-Canadian line.

[3] This correspondence will be found in the Journals of the House of Commons, vol. vii, 1873. In no other documents available to the public has the connection between politics and railway promoting in Canada been made so evident. The following are a few brief extracts from letters addressed by Sir Hugh Allan to various American associates during 1872:

Thinking that as I had taken up the project there must be something very good in it, a very formidable opposition was organized in Toronto, which for want of a better took as their cry 'No foreign influence; no Yankee dictation; no Northern Pacific to choke off our Canadian Pacific,' and others equally sensible.... I was forced to drop ostensibly from our organization every American name, and put in reliable people on this side in place of them.... Mr M'Mullen was desirous of securing the inferior members of the Government, and entered into engagements of which I did not approve, as I thought it was only a waste of powder and shot. On a calm view of the situation I satisfied myself that the decision of the question must ultimately be in the hands of one man, and that man was Sir George E. Cartier, the leader of the French party, which held the balance of power between the other factions.... It was evident that some means must be adopted to bring the influence of this compact body of men to bear in our favour, and as soon as I made up my mind what to do, I did not lose a moment in following it up. A railroad from Montreal to Ottawa, through the French country, north of the Ottawa river, has long been desired by the French inhabitants; but Cartier, who is a salaried solicitor of the Grand Trunk road, to which this would be an opposition, has interposed difficulties, and by his influence prevented it being built.... The plans I propose are in themselves the best for the interests of the Dominion, and in urging them on the public I am really doing a most patriotic action. But even in that view, means must be used to influence the public, and I employed several young French lawyers to write it up in their own newspapers. I subscribed a controlling influence in the stock, and proceeded to subsidize the newspapers themselves, both editors and proprietors. I went to the country through which the road would pass, and called on many of the inhabitants. I visited the priests and made friends of them, and I employed agents to go among the principal people and talk it up. I then began to hold public meetings, and attended to them myself, making frequent speeches in French to them, showing them where their true interests lay ... and I formed a committee to influence the members of the Legislature. This succeeded so well that in a short time it had 27 out of 45 on whom I could rely, and the electors of the ward in this city, which Cartier himself represents, notified him that unless the contract for the Pacific Railway was given in the interests of Lower Canada he need not present himself for re-election....

The policy adopted has been quite successful, the strong French influence I succeeded in obtaining has proved sufficient to control the elections, and as soon as the Government realized this fact, which they were unwilling to admit and slow to see, they opened negotiations with me.... Yesterday we entered into an agreement, by which the Government bound itself to form a Company of Canadians, only according to my wishes. That this Company will make me President, and that I and my friends will get a majority of the stock, and that the contract for building the railroad will be given to this Company, in terms of the Act of Parliament. Americans are to be carefully excluded in the fear that they will sell it to the Union [sic] Pacific, but I fancy we can get over that some way or other. This position has not been attained without large payments of money. I have already paid over $200,000, and will have at least $100,000 more to pay.



{131}

CHAPTER VIII

BUILDING THE CANADIAN PACIFIC

The Minnesota Venture—Canadian Pacific Syndicate—The Contract—Political Opposition—Terms of the Contract—Organizing the Company—Financing—Construction

In the months and years that followed, no men were so much in the mind and speech of the Canadian public as the members of the new syndicate. The leading members were a remarkable group of men. Probably never in the history of railway building, not even in the case of the 'Big Four' who built the Central Pacific—Huntingdon, Stanford, Crocker, and Hopkins—had the call of the railway brought together in a single enterprise men of such outstanding individuality, of such ability and persistence, and destined for success so notable.

The Canadian Pacific was not their first joint enterprise. It was the direct outcome of a daring venture in connection with a bankrupt Minnesota railway, which had brought them wealth beyond their wildest dreams, and had definitely turned their thoughts to railway work.

Early in the settlement of the northwestern {132} states the need of railways, and of state aid to railways, was widely realized. In 1857 Congress gave the territory of Minnesota a large grant of public lands to use in bonusing railway building, and in the same year the legislature of the territory incorporated a company, the Minnesota and Pacific, to build from Stillwater through St Paul and St Anthony's Falls (Minneapolis) to Red River points. The state gave the new company millions of acres of land and a cash subsidy, municipalities offered bonuses, and a small amount of stock was subscribed locally. Five years passed, and not a mile had been completed. The company, looted into insolvency by fraudulent construction company contracts, was reorganized as the St Paul and Pacific, heir to the old company's assets but not to its liabilities, and a beginning was made once more. Trusting Dutch bondholders lent over twenty millions, and by 1871 the road reached Breckenridge on the Red River, two hundred and seventeen miles from St Paul. Again a halt came. Russell Sage and his associates in control had once more looted the treasury. The Dutch bondholders, through their agent, John S. Kennedy, a New York banker, applied for a receiver, and in 1873 one Jesse P. Farley was {133} appointed by the court. It seemed that the angry settlers might whistle in vain for their road.

In St Paul at that time there lived two Canadians who saw the opportunity. The elder, Norman W. Kittson, had been Hudson Bay agent and head of a transportation company on the Red River. The younger, James J. Hill, an Ontario farm-boy who had gone west while still in his teens, owned a coal and wood yard in St Paul, and had a share in the transportation company. Neither had the capital or the financial connection required to take hold of the bankrupt company, but they kept on thinking of it day and night. Soon a third man joined their ranks, Donald A. Smith. A Highland lad who had come to Canada at eighteen, Donald Smith had spent a generation in the service of the Hudson's Bay Company, mainly in the dreary wilds of Labrador and on the shores of Hudson Bay. When in 1871 he became chief commissioner of the organization he had served so long and so well, it seemed to most men that he was definitely settled in his life work and probably near the height of his career. But Fate knew, and Donald Smith knew, that his career was only beginning. Coming down from the north {134} each year by the Red River to St Paul, on his way east, he talked over the railway situation with Hill and Kittson. The more they talked the greater grew their faith in the country and the railroad. It was a faith, however, that few in the moneyed East shared with them. It had been the smashing of the rival road, the Northern Pacific, in 1873, that had given the signal for the brief panic and the long depression of the seventies. The Minnesota road itself had twice become bankrupt. The legislature would undoubtedly soon declare the land-grant forfeited, unless the construction promised was completed. To fill the cup, in the middle seventies Minnesota and the neighbouring lands were visited by unprecedented swarms of grasshoppers or Rocky Mountain locusts. Swarming down from the plateau lands of the Rockies in columns miles high, covering the ground from horizon to horizon, they swept resistlessly forward, devouring every green thing in their way. When they had passed, hundreds of deserted shacks stood silent witnesses to the settlers' despair.



It was in 1876 that the further allies needed came from the East. Thirty years earlier George Stephen, a younger cousin of Donald Smith, had left his Highland hills to seek his {135} fortune in London, and after a short apprenticeship there had gone still farther afield, joining an uncle in Montreal. He rose rapidly to a foremost place in the wholesale trade of Montreal; selling led him into manufacturing, and manufacturing into financial activities. In 1876 he became president of the Bank of Montreal. Associated with him in the same bank was still another shrewd, forth-faring Scot, Richard B. Angus, who had risen steadily in its service until appointed to succeed E. H. King as general manager in 1869.

A lawsuit in connection with the bank's affairs took both Stephen and Angus to Chicago in 1876. A week's adjournment left them with unwonted leisure. A toss of a coin sent them to St Paul rather than to St Louis to spend the week. Smith had already spoken of the project while in Montreal, but at that distance caution had prevailed. Now Stephen, who had never before seen the prairie, was immensely taken with the rich, deep soil he saw before him. He knew from reading and experience that grasshopper plagues did not last for ever. He decided, therefore, to join in the attempt to get control of the Minnesota road and its land-grant, and the famous group was complete. {136}

Once George Stephen had made up his mind, little time was ever lost. He sailed for Europe and interviewed the Amsterdam committee in charge of the Dutch bondholders' interests, Messrs Chouet, Weetjin and Kirkhoven. They despaired of ever seeing their money back, and were weary of being assessed by the receiver for funds to keep the road together. Stephen left Amsterdam with an option in his pocket, given for the sum of one guilder, agreeing to sell him the Dutch bonds for something like the amount of the unpaid interest, and agreeing, further, to wait until six months after reorganization for part of the payment. The next step was to provide the cash required for immediate necessities. About $300,000 was put up by the members of the group.[1] Money was borrowed from the Bank of Montreal, $280,000 in the first advance, and something under $700,000 in all, as Stephen stated to inquiring shareholders at the bank's annual meeting in 1880. Money was advanced to the receiver to complete the most necessary extensions, those required to save the land-grant and that necessary to reach the Canadian {137} border to join the government road being built south from Winnipeg. The threatened forfeiture of the land-grant was thus averted for a time. Then the bonds were purchased for $6,780,000, the floating obligations and part of the stock were bought up, and the mortgage which secured the bonds was foreclosed. The assets were bought by the new company organized for the purpose, the St Paul, Minneapolis and Manitoba, of which George Stephen was president, R. B. Angus vice-president, and James J. Hill general manager. Thus in June 1879 the whole system, comprising six hundred and sixty-seven miles of railway, of which five hundred and sixty-five were completed, and the land-grant of two and a half million acres, came into the possession of the little group.[2]

The after fortunes of the road, which ten years later expanded into the Great Northern of to-day, do not concern us here. It is only necessary to recount that the harvest reaped {138} by the adventurers[3] put the tales of El Dorado to shame. A few days after control of the railway had been assured, the grasshoppers had risen in flight, and Minnesota knew them no more. Settlers swarmed in, the railroad platforms were jammed with land-seekers, and between the land-buyers of to-day and the wheat-shippers of to-morrow the owners of the once discredited railway saw their coffers fill to overflowing. In 1879 they divided among themselves the whole fifteen millions of stock issued, floating sixteen millions of bonds for extension and equipment. For three years they took no dividends, letting the profits go to further building. Then in 1882 another $2,000,000 stock was issued, and in 1883 a deferred dividend came in the shape of a $9,000,000 issue of bonds, or, rather, the stockholders sold to themselves a $10,000,000 issue for ten cents on the dollar. Aside entirely from interest and dividends, the stockholders of the Great Northern in the seventeen years following 1889 were presented with over $300,000,000 of interest-bearing securities. {139} All the railway annals of the United States cannot present a duplicate of the startling success attained by these four or five Canadians and their associates.[4]

These were the men to whom the Canadian government turned when the minister of Railways, Sir Charles Tupper, urged them to unload upon a private company the burden of completing the road to the Pacific. 'Catch them before they invest their profits,' was the advice of Sir John's most intimate adviser, that shrewd Eastern Townships politician, John Henry Pope. Probably they came half-way. They knew the West as well as any men, and with their road built to the Canadian boundary and with a traffic arrangement beyond to Winnipeg, they were already in the field. Of all the group Stephen was most reluctant to undertake the new enterprise, but he was assured by his associates that the burdens of management would be shared by all. The government had also approached Duncan M'Intyre, a Montreal capitalist who controlled the Canada Central, running from Brockville by way of Ottawa to Pembroke, {140} and under construction from that point to Callender, the eastern end of the Canadian Pacific main line. He was more than willing to link up this railway with the larger project, and the group was formed.



They debated the question with the government early in 1880. It was felt, however, that negotiations could not be concluded in Canada. More capital would be needed than even these new-fledged millionaires could or would furnish, and nowhere was capital so abundant as in London. In July, therefore, Sir John Macdonald, Sir Charles Tupper, and John Henry Pope sailed for London, accompanied by George Stephen and Duncan M'Intyre. London capitalists did not bite as freely as anticipated. Barings and Rothschilds alike were chary about the enterprise. Sir Henry Tyler, president of the Grand Trunk, was approached, and agreed to build if the link north of Lake Superior were omitted in favour of a line through the United States, south of the lake, a condition which Sir John, strongly urged on by Tupper, would not accept. An arrangement might have been made with a London group, but only on condition of a four per cent guarantee for twelve years, another condition which, less wisely, was also rejected. In the {141} end the quest proved unavailing. It is true that the Paris firm of Cohen, Reinach and Co. entered the syndicate, and that the London house of Morton, Rose and Co. also joined. It was really, however, the New York end of that firm, Morton, Bliss and Co., which was interested. Contrary to the general impression, the fact is, that though most of the shares when issued eventually drifted into English hands, no English financiers shared in the building of the Canadian Pacific until it was within one hundred days of completion. Perhaps, in view of the Grand Trunk's record, it was as well that the men on this side of the Atlantic were to be thrown on their own resources from the start, and given the chance for bigness which responsibility brings.

Back to Ottawa the pilgrims came, and there on October 21, 1880, the contract was signed by Charles Tupper for the government and by George Stephen, Duncan M'Intyre, James J. Hill, John S. Kennedy, Morton, Rose and Co. of London, and Cohen, Reinach and Co. of Paris. Donald A. Smith's name was not there. It was only two years since he and Sir John, on the floor of the House of Commons, had called each other 'liar' and 'coward' and any other sufficiently strong epithet they {142} could put their tongues to, and it was to be a few years more before the two Highlanders could cover their private feud with a coating of elaborate cordiality. So, to preserve appearances, Smith's interest was kept a secret—but a very open one.

When parliament met in December 1880 the contract was laid before it. The terms were princely. For constructing some nineteen hundred miles the syndicate were to be given free and complete the seven hundred and ten miles under construction by the government,[5] $25,000,000 in cash, and 25,000,000 acres of selected land in the Fertile Belt. They were promised exemptions from import duties on construction materials, from taxes on land for twenty years after the patents were issued and on stock and other property for ever, and exemption from regulation of rates until ten per cent per annum was earned on the capital. Assurance was given that for twenty years no competitive roads connecting with the western states would be chartered: 'no line of railway south of the Canadian Pacific, except such line as shall run southwest or to the westward of southwest, nor to be within fifteen miles {143} of latitude 49 deg..' Ten years were given to complete the task, and a million dollars were deposited as security.

The contract was received by Blake, then leader of the Opposition, and his followers with a unanimous shout of disapproval. During the Christmas recess Blake endeavoured to raise the country against it. A rival syndicate was hastily organized, with Sir William Howland, A. R. M'Master, William Hendrie, A. T. Wood, Allan Gilmour, George A. Cox, P. Larkin, James M'Laren, Alexander Gibson, and other well-known capitalists at its head. After depositing $1,400,000 in chartered banks as evidence of good faith, they offered to build the road for $3,000,000 and 3,000,000 acres less, to pay duty on all supplies imported, and to abandon the monopoly clause, the exemptions from taxation, and the exemption from rate regulation. With this weapon to brandish Blake gave the government proposal no respite, but on a straight party vote the contract was ratified by parliament and received the formal royal assent in February 1881.

It was in many ways unfortunate that from the outset the Canadian Pacific project was made the football of party politics, but it was {144} perhaps inevitable. The first duty of an Opposition is to oppose, and even if some good measures are factitiously resisted, many a 'job' is prevented by this relentless criticism. The government proposal, it would now seem, was on the whole in the country's interest, but it had weak points. In attacking these the Opposition was led on to take up a position of hostility to the whole project, while the government was equally indiscriminate in defending every jot and tittle of the bargain. In any event, with the bitter rivalry of the Grand Trunk and the Canadian Pacific looming up, it is doubtful if it could have been possible to prevent this antagonism being reflected in the politics of a country where the issues are so largely economic issues.

That the government was right in deciding for private construction and operation, there has since been little question. To build and operate a pioneer road, to make the inevitable United States connections or extensions, to undertake the subsidiary enterprises and to enter into the flexible, intimate relations with producers and shippers necessary for success, were tasks for which government departments were not well fitted. With the traditions which has unfortunately become established {145} in Canadian politics, there would probably be campaign contributions in the one case and graft in the other, but in the one case, also, there would probably be efficiency, and in the other red tape and stagnation.

As to what private company should be given the contract, there seemed more room for discussion. The members of the Howland syndicate were successful and substantial business men, and their offer appeared to be much better than the offer accepted. It was, however, denounced as a sham by the government forces, on the ground that its signers knew that there was not the faintest likelihood of the ministry failing to carry through the contract it had signed. How successful the Howland group would have proved we can only conjecture; it is certainly not likely that they would have developed more courage, persistence, or enterprise than the men who actually carried out the project; nor could they have fulfilled their obligations more fully and more honourably.

The parties differed, again, on the question of the Lake Superior link. The government urged the necessity of building at once an all-Canadian route, regardless of the added expense. The Opposition favoured such a route eventually, but urged that it was better for the {146} present to make use of a road running from the Sault through Northern Michigan and Minnesota. Such a road would bring to Montreal the traffic of the American as well as the Canadian West. Then, when our West had been settled and traffic warranted, the task of cutting a road through the wilderness north of the lake could be faced, and meantime it would not be necessary to offer any company the extravagant terms necessary to induce it to assume this burden from the start. There was much weight in this argument, which Sir Charles Tupper himself had strongly urged only a few months before, and in the light of the later Canadian Pacific extension through precisely this American territory as well as through Maine, there was much buncombe in the flag-waving answer made. Yet, on the whole, so necessary to national unity was an unbroken road, so hard a country was this to make into one, that it was best to err on the side of safety. The political interests at stake warranted some risk of money loss.

It was, however, on the question of the form and amount of the aid offered that most controversy arose. Sir John Macdonald had lightly prophesied that in the end the road would not cost Canada a single farthing. He {147} doubtless meant that land sales would repay the expenditure; even this did not prove true, and the statement awoke unreasonable expectations as to the bargain to be made. When the contract was made public it was denounced as meaning nothing more or less than that the country was to build the road and present it gratis to the company. To anticipate a few years, we may note the actual results at the end of 1885, when the last rail had been laid. The cost of the main line only, including the government sections, and of equipment, to that date, was approximately $150,000,000. From private sources some $50,000,000 net had been secured: the $65,000,000 stock had been sold at varying prices, realizing slightly over $30,000,000 for the treasury, and first mortgage bonds, land-grant bonds less amount redeemed, and outstanding accounts made up the balance. The government, on its part, had given, by the final arrangements, $35,000,000 cash, and completed road costing another $35,000,000; three and a half million acres of the land-grant had been sold for about $11,000,000, and at only two dollars per acre the fourteen odd million acres left were worth over $29,000,000.

On the other hand, it was urged that the aid {148} given was not so great as it seemed. The value of the government sections was particularly questioned.[6] Whatever its value, it was not more than enough to induce capitalists to run the great risks involved. The road had to be operated as well as built, and few believed that for years to come there would be sufficient traffic to make ends meet. Its future depended on the future of the West, and it needed a robust optimism at times to believe that the West would overcome frost and drought and other plagues. The fact that in 1885 Canadian Pacific stock sold as low as 33 3/4 in London, and a shade lower on this side of the water, shows the estimate the world of finance put upon the bargain it had made. Nor was the road completed in 1886. It was then only begun. Grades had to be bettered, trestle-work filled up, extensions flung out, terminals secured, and a new road built every few years.

{149}

Looking back now, after the lapse of thirty years, it would seem that the government would have done better if it had given less of the land which was to prove so valuable, and had, instead, guaranteed the dividend on the stock for a term of years. In the eighties, however, western acres were held in little esteem and money guarantees, with Grand Trunk memories fresh, looked dangerous—and it was in the eighties that the decision had to be made.