[1] One such company, the Caraquet, which was given $400,000 in subsidies, declared, in floating $500,000 in bonds in England, that the capacity of the road was taxed to its utmost, and that an immense traffic was in sight. At that time its entire rolling-stock consisted of two locomotives, one passenger car, two box and fifteen flat cars, and a snow-plough.
[2] The earliest intercolonial project, a railroad from St Andrews north, was brought to completion in 1889 when a short road, the Temiscouata, was built, linking the Intercolonial at Rivière du Loup with the New Brunswick Railway at Edmundston.
Railways of Canada, 1896Railways of Canada, 1896
Railways of Canada, 1896Railways of Canada, 1896
The Opportunity—The Canadian Northern
The first quarter-century of Confederation failed to redeem the glowing promises and high hopes of the founders of the new nation. Much had been done: the half-continent from ocean to ocean had been brought into the fold of one union; national consciousness was slowly growing; great efforts had been spent in linking the scattered parts by railways and waterways. But still political unity and economic prosperity both lagged. The country was torn by racial and religious bickerings. In the East, the exodus to the United States bled the country white; in the West, drought, frost, and the low prices of grain kept settlers away. Canadian Pacific stock, selling in the middle nineties at 35, registered the market's estimate of the future of the Canadian West.
Then, slowly at first, and soon with cumulative momentum, came a transformation.World-wide causes worked with local factors to change the whole face of affairs. New discoveries of gold and rising prices gave everywhere a fillip to trade. In the United States the disappearance of free land set its farmers looking elsewhere. In Canada change of methods, or the favourable turn of a climatic cycle, enabled the lands of the North-West to prove their abounding fertility. The discovery of gold in the Klondike afforded good advertising for Canada if little more of permanence. In the government and in the financial, the railway and the industrial worlds there were men who rose to the opportunity: no longer was Canada's light hid under a bushel. The most was made of the alluring gifts she had to offer to men the world over who strove to better themselves, and the flood of immigration began.
The first result of the swarming of thousands to the West was a demand for new railways, to open up plain and prairie and mineral range, and to make connection with East and West. The building of the railways in its turn gave a stimulus to every industry. As in the early fifties and early eighties, this period of rapid railway expansion—much longer, however, than previous periods—wasan era of optimistic planning and feverish speculation.
First to seize the golden opportunities were the group of men who built the Canadian Northern. Railway history offers no more remarkable record than the achievement of these few men, who, beginning in 1895 with a charter for a railway one hundred miles long in Manitoba, leading nowhere in particular, succeeded in building in twenty years a road from ocean to ocean, and in keeping it in their own hands through all difficulties and vicissitudes.
Yet it is not exactly correct to say that they began in 1895. A long apprenticeship had been served before that time. William Mackenzie and Donald Mann, the leaders in this group, had both been trained in railway construction. Both were Canadian-born; and had fared forth as youths to make their way in the world. William Mackenzie, born at Kirkfield, Ontario, in 1849, had been in turn school-teacher, country-store keeper, and lumberman before a contract on the Victoria Railway—part of the Midland—revealed his destiny. Donald Mann, born four years later at Acton, Ontario, near James J. Hill's old home, had been brought up for the Christian ministry, but bytwenty-one he was foreman in a lumber camp. At twenty-five he joined in the first rush to Winnipeg, and next year he undertook the first of many contracts on the Canadian Pacific. William Mackenzie had also carried through much work for this company. In 1886 the notable partnership of Mackenzie and Mann was formed. The firm built the Calgary and Edmonton, the Qu'Appelle, Long Lake and Saskatchewan, the Canadian Pacific short line through Maine, and many minor railways. They developed capacities which made each the complement of the other—Mackenzie a master of finance, and Mann as successful in extracting a subsidy from a politician as in driving ahead the work of construction. Later Z. A. Lash, a shrewd and experienced corporation lawyer, joined them, and the three, with able lieutenants, carried through their ambitious plans without more than momentary pause, until within sight of the goal.
It was in 1895 that William Mackenzie and Donald Mann, along with two fellow-contractors, James Ross and H. S. Holt—it is noteworthy how many Canadians eminent in finance and industry found their start in the building of the Canadian Pacific—decided to buy some of the charters of projected westernroads then going a-begging, and to build on their own account. They secured the charter of the Lake Manitoba Railroad and Canal Company, carrying a Dominion subsidy of 6000 acres a mile for a line from Portage la Prairie to Lake Manitoba and Lake Winnipegosis, and induced the Manitoba government to add a valuable guarantee of bonds and exemption from taxes. In 1896 running rights were secured over the track of the Manitoba and Northwestern from Portage to Gladstone, and construction was pushed a hundred miles northwest from Gladstone to Dauphin. Next year Lake Winnipegosis was reached. Then the partners looked eastward. The coming need of the West was an outlet from Winnipeg to Lake Superior, to supplement the Canadian Pacific. Accordingly in 1898, under powers given by Dominion, Ontario, and Minnesota charters, construction was begun both at Winnipeg and near Port Arthur. Three years later the line was completed. Meantime the earlier road had branched westerly at Sifton, and by 1900 had crossed the border into Saskatchewan at Erwood; while in 1899, in amalgamation with the Winnipeg Great Northern, chartered and subsidized to Hudson Bay, the name of thecombined roads was changed to the Canadian Northern.
Then came the coup which first made the public and rival railways realize the ambitious reach of the plans of the new railway. It will be recalled that when, in 1888, the ban upon competition southward with the Canadian Pacific had been lifted, the Northern Pacific had entered Manitoba. It had gradually built up a system of three hundred and twenty miles, but had not given the competition looked for, dividing traffic with the Canadian Pacific rather than cutting rates. Now the parent line was in the receiver's hands, and its straits gave the Manitoba government its opportunity. It leased for 999 years all the Manitoba lines of the Northern Pacific, but decided it could not profitably operate them itself without connection with the lakes. The only question was whether to re-lease them to the Canadian Pacific or to the Canadian Northern. After a lively contest the younger road secured the prize. At a stroke it thus obtained extensive terminals in Winnipeg, a line south to the American border, branches westward through fertile territory, and a link which practically closed the gap between its eastern and its western roads.
The Canadian Northern had now become the third largest system in the Dominion, stretching from Lake Superior to Saskatchewan, with nearly thirteen hundred miles in operation in 1902. The feeders were extending through the rich farming lands of the West; the line to Port Arthur supplemented the Canadian Pacific, providing a second spout to the funnel. But this merely local success did not long content its promoters. They announced their intention to build from sea to sea. Transcontinental railways were then much in the air: the Grand Trunk, the Trans-Canada, the Great Northern all planned extensive projects. Reviving prosperity and new-found confidence were making a dollar look as small to government and public alike as a dime had seemed some years before. Aid might confidently be looked for—but by which aspirant?
In 1902 and 1903 a junction of forces between the Grand Trunk and the Canadian Northern was proposed, and would have had much in its favour. The negotiators could not come to terms, however, and each road continued on its independent plan. Nothing daunted by the Dominion government's decision to recognize and aid the Grand Trunk,the Canadian Northern turned to a policy of piecemeal construction, seeking aid from the provinces as well as from the Dominion.
Making hay while the subsidy sun shone and the prosperity of the Laurier regime was at its height, the Canadian Northern pressed forward extensions, flung out branches, filled in gaps on every side. The main line was pushed westward to Edmonton in 1905. Branch lines were thrown out freely in all the prairie provinces. In Ontario the gap north of Lake Superior was bridged by a line from Port Arthur to Sudbury, not completed until 1914. Toronto and Ottawa were linked with the western lines, and several feeders were acquired which gave connection with Kingston and Brockville. In Quebec the Great Northern, running from Hawkesbury on the Ottawa to Quebec City, was absorbed in 1902, and the Quebec and Lake St John five years later. By building a tunnel three miles long under Mount Royal, an entrance was secured into the heart of Montreal. Nova Scotia did its part by lending money to another Mackenzie and Mann enterprise, the Halifax and South-western. The Inverness Railway in Cape Breton and the Nova Scotia Central with minor lines were built or acquired, giving theCanadian Northern first place in mileage in the province.
The most difficult task still remained—building a third railway through the mountains to the Pacific. Surveys for a road from Yellowhead Pass to Vancouver by Sandford Fleming's old route were begun in 1908. By the aid of lavish guarantees and subsidies this last link in the transcontinental system was pushed to completion in 1915.
The financial and political aspects of this great enterprise were as striking as was the construction. Governments have many a time given lavish aid, promoters have often built roads entirely out of the proceeds of bond issues, financiers have dominated great railway systems by a majority or controlling interest in the stock. But never before did a group of men plan to unite, on such a scale, all three arrangements—to build ten thousand miles of railway without themselves investing a dollar and still retain control. The men behind the Canadian Northern not only planned such a project, but carried it through, displaying in the process, and at every stage of the undertaking, a mastery of political diplomacy, an untiring persistence, and great financial resourcefulness. They are,therefore, entitled to a special place among the world's railway builders.
Their plan was simple in principle, if wondrously complicated in working out. It was to build the road by government subsidies and the proceeds of the bonds guaranteed by government, and to control the road by issuing to themselves, for their services of promotion and management, practically all the common stock. To carry out this audacious plan, political influence, public enthusiasm, and the confidence of outside investors in Canada's future were all required and were all forthcoming.
Dominion and province vied in aid. This aid took many forms. The Dominion had abandoned in 1894 its policy of giving land-grants, but the original companies which combined to form the Canadian Northern had previously been promised and later received over four million acres: up to 1914 about eighteen million dollars had been realized from the sale of parts of this land, and the grants unsold were worth at least ten millions more. In addition, Ontario gave two million acres and Quebec one-third as much. Cash subsidies were not wanting. The Liberal government of Sir Wilfrid Laurier voted somethingless than two millions in cash to aid in building the link between Winnipeg and Lake Superior. It declined to recognize or aid the extension to the Pacific coast; but in 1912 the Conservative government of Sir Robert Borden gave over six millions for this work, and in the following year fifteen millions more for the Ontario and western Alberta sections of the main line. The provinces were less lavish, Quebec, Ontario, and Manitoba offering all told six millions.
But it was neither to land-grants nor to cash subsidies that the Canadian Northern looked for its chief aid, but to government guarantees. This device, the main form of state aid given in our first railway era, had long been discredited by the unlucky fate of the Grand Trunk and the Northern guarantees, and had been sparingly used since. To the Canadian Northern its revival was chiefly due. It was a seductive form of aid: provided that the railway thus helped had good traffic prospects, the government stood little chance of loss and the railway greatly gained by the certainty of the sale of its bonds and the higher price secured. But, like other forms of the extension of public credit, such as the issue of paper money, state guarantees aredifficult to keep within bounds, and compel ever-fresh extensions to save the old liability. So Dominion and province alike found. From 1903 to 1911, under Sir Wilfrid Laurier, the Dominion guaranteed bonds of the Canadian Northern system to the extent of fifty-six millions; from 1912 to 1914, under Sir Robert Borden, it endorsed the Canadian Northern's notes for forty-nine millions more. Nor were the provinces behindhand. Mainly in the seven years from 1908, the five westernmost provinces pledged their credit on behalf of the same system to the astounding amount of over one hundred and thirty millions, British Columbia leading; Nova Scotia made a loan of another five millions. Thus endorsed, usually as to both principal and interest, the bonds of the Canadian Northern were floated with little difficulty, so long as money was to be had at all by any seeker.
In the meantime, while the road was being built by state gifts and bondholders' lendings, the great bulk of the stock of the parent road and of the chief subsidiaries was conveyed to Messrs Mackenzie and Mann for their services in promoting and managing the system. This method of financing had its dangers. It meant that there was no large commitmentof shareholders' capital, to secure support in difficulty and compel responsibility in management. It meant that the control of the vast enterprise was in the hands of a few men, unchecked by public inquiry or the criticism of independent shareholders—whatever that might be worth. It meant that with all the cash capital taking the form of bonds, any failure to make ends meet, any lengthened depression, would bring risk of the mortgage-holders' foreclosure and receivership—not merely the shareholders' waiting for a turn of the tide—except in so far as the burden could be shifted to the governments that had endorsed the notes.
In the early years, thanks to general prosperity and to the strategic location and careful management of the system, ends always met, and a little over, and funds were always forthcoming for fresh expansion. But early in 1914 a crisis arrived in the company's affairs. The mountain section particularly, what with the higher cost of labour and the unexpected engineering difficulties, was calling for tens of millions more; the stringency in the world's money markets, following the Balkan Wars, made investors chary of even gilt-edged offerings. There were manymillions of subsidies and guarantees still to come from the state, but they would come only as the road was completed, and meantime construction had to be financed. The partner-owners could not provide the ready cash needed for completing the gigantic task. The bondholders had no inducement to do so unless further guaranteed by the state. The western provinces were at last becoming frightened of the load they had already assumed. There was only one resource, the Dominion government. True, it had only in 1913 made a gift of $15,000,000 on solemn assurances that not a cent more would be needed. But, it was urged, the emergency was real. The road could not be left hanging half finished, after all the millions already spent. Canada's credit must be protected, and so the government, after a lively struggle, put through a positively last guarantee of forty-five millions. In return it was given forty out of the hundred millions stock to which the capital was reduced, and took the right to appoint one government director. Whether this step meant that the government was now going to share the control and the profits of the company, or whether it meant that it was henceforth to be saddled with theresponsibility for any deficits, was a point much in dispute. Later, the outbreak of war in Europe delayed, but did not altogether halt, the floating of the loan and the completion of the remaining links.
Meanwhile, the many subsidiary enterprises, which the example of the Canadian Pacific has caused us to think appropriate to the transcontinental railway, had been undertaken by its youngest rival. Fast steamers between Montreal and Bristol, grain elevators, hotels, express and telegraph companies, all brought grist to the mill. Hardly to be distinguished were the allied interests of the partner-owners—iron-mines in the Lake Superior district, coal-mines in Alberta and Vancouver Island, whaling and halibut fisheries on the Pacific, and lumber-mills on the British Columbia coast—all bearing some relation to the development of the railway system.
Canadian Northern Railway, 1914Canadian Northern Railway, 1914
Canadian Northern Railway, 1914Canadian Northern Railway, 1914
In 1896, a railway a hundred miles long, beginning and ending nowhere, operated by thirteen men and a boy! In 1914, a great transcontinental system practically completed, over ten thousand miles in length, and covering seven of Canada's nine provinces! The impossible had been achieved.
The Darkest Days—New Men at the Helm—Expansion in the East—The Grand Trunk
In the eighties, it will be recalled, the activity of the Canadian Pacific in the eastern province had stirred the Grand Trunk to an aggressive counter-campaign. Line after line had been absorbed, extension after extension had been built. New life seemed to have been injected into the old system. Holders of even ordinary shares began to dream of dividends.
The activity was brief and prosperity briefer. Only in the golden days from 1881 to 1883, when the West was enjoying its first 'boom' and railway construction was at its height, did the policy of expansion justify itself from the shareholder's point of view. The year 1883 saw the high-water mark of prosperity for the Grand Trunk; for in that year dividends were paid not only on guaranteed but on first, second, and third preference stock. Not again until 1902 was even apartial payment made on the third preference; not until 1900, save for a fraction in 1887, was anything paid on second preference; first preference dividends were fractional and occasional, and even the guaranteed stock dividends were passed time and again. The financial position of this great system in the middle nineties may be briefly summed up in the statement that securities of the par value of £16,000,000, which in 1883 had a market value of £12,000,000, were worth in 1894 only £3,500,000. The junior securities had become only gambling counters on the stock exchange.
Where did the cause lie? There was not one; there were several. The first was in capitalization. The line had been hopelessly over-capitalized to begin with, and the new acquisitions doubled fixed charges, while net receipts increased only ten per cent; feeders had proved suckers.[1] Secondly, in the general commercial situation. The whole continent was undergoing a trying test of panic and depression, of low prices and industrial stagnation. For a quarter of a century after1873 the gloom had been broken only at brief intervals—from 1880 to 1883, and from 1887 to 1889. In 1893 the price of wheat fell to the lowest point in a century. The great Mississippi valley had been flooded with settlers, railway and steamship threw their millions of bushels on the world's markets, while the gold basis of prices failed to expand in proportion. Western farms were, it was said, 'plastered with mortgages'; one-sixth of the railways in the United States went into receivers' hands in 1893 alone. Free-silver agitators denounced the 'gold bugs' of the east; Coxey armies marched to Washington. Another cause was in excessive competition. The St Lawrence was more accessible to shippers than ever, while the Canadian Pacific had cut into the best paying territory in Ontario. In the Chicago traffic absolute demoralization ruled—reckless rate wars were waged, agreement after agreement was broken, line was played against line by grain-shipper or by dressed-beef magnate. A final cause was in management. The attempt was still being made to manage a great railway from London, three thousand miles away. The Canadian officials had little independent discretion; interminable delays, lack of initiative, redtape, nepotism, followed inevitably. Here and there officials strove strenuously to better conditions, but the odds were against them. Practically no Grand Trunk stock was held in Canada; it was not even quoted on Canadian exchanges; Canadians regarded the road entirely from the user's point of view.
The traveller and shipper had less to complain of than the shareholder. The service of the road had been greatly increased. The mileage was large in proportion to population. Rates were low. True, it was a rare event for a Grand Trunk train to arrive on time, but it usually arrived.
For these various ills corresponding remedies were sought in turn. Drastic capital reorganization was discussed, but nothing was done. Commercial prosperity could not be revived by the efforts of a single railway. Competition was met by agreement after agreement, 'gentleman's' and otherwise, but in vain. The most hopeful resource lay in the only remaining direction, change of management.
In 1895 Sir Henry Tyler resigned from the presidency after twenty-three years of faithful service. His place was taken by Sir Charles Rivers-Wilson, who had a record of efficientservice on the borders of politics and finance. The new president and a committee of directors made a thorough investigation of the Grand Trunk, and recommended some immediate improvements. Their chief contribution to its success, however, was the discovery of Charles M. Hays.
Charles Melville Hays. From a photograph by NotmanCharles Melville Hays.From a photograph by Notman
Charles Melville Hays. From a photograph by NotmanCharles Melville Hays.From a photograph by Notman
The great rival of the Grand Trunk had pressed forward to prosperity under the driving power of an American general manager. The new administration decided that it, too, would look to the United States for a chief executive of the ruthless efficiency and modern methods which the crisis demanded. They found him in the man who had pulled the Wabash out of a similar slough of despond. Mr Hays was not quite forty when, in 1895, he was appointed general manager of the Grand Trunk. He had risen rapidly since the days when, a boy of seventeen, he had entered the office of the Atlantic and Pacific. At twenty-nine he had been secretary to the general manager, and three years later manager himself, of the Wabash.
His presence was soon felt. The staff realized, some with relief, some with consternation, that the good old leisurely days, the days of vested interests, were gone.Many were pensioned, some were dismissed. In some cases American officials were imported to fill the vacant posts, to the patriotic discontent of the old guard. Equipment was overhauled, larger freight cars were ordered, and new terminals acquired. The main bridges on the road—the Suspension at Niagara Falls, the International at Fort Erie, and the Victoria at Montreal—were all rebuilt on a larger scale between 1896 and 1901. The double tracking of the main line from Montreal westward was continued, and many of the sharp curves and heavy grades of the original construction were revised. Elevators at Portland, Montreal, Midland, Tiffin, Goderich, Point Edward, and Fort William were built or acquired. Trains came in on time. The whole system was 'speeded up.'
Later changes in the administration may be briefly summarized here. In 1900 Mr Hays's five-year contract as general manager expired. At the same juncture a vacancy occurred in the presidency of the Southern Pacific, which had fallen on evil days, and Hays was offered and accepted the post at four times his salary with the Grand Trunk of $25,000 a year. A year later he was back again in Canada. There was not room in theSouthern Pacific for both Hays and Harriman, then in financial control, and the Grand Trunk directors seized the opportunity which the breach afforded. In 1909 the wide recognition of Mr Hays's great services led to long overdue increase of the authority of the Canadian officials of the road by his appointment as president, on the retirement of Sir Charles Rivers-Wilson. Three years later, with his projects for expansion still incomplete, he met a tragic death in the sinking of theTitanic. Mr Edson J. Chamberlin, who had increased his reputation for efficiency by his management for four years of the Grand Trunk Pacific, was chosen as successor in the presidency.
Fortune favoured the new administration from the start. The tide in the continent's business affairs turned soon after the new men took the helm. The long depression ended, prices rose, farmers met mortgage payments, factory chimneys smoked once more, traffic multiplied.
The first result of the improved conditions was the easing of the tension in railway relations. There was no longer a life-and-death necessity for rate-cutting and traffic-stealing. Rate wars between the trunk lines in the United States came to an end. On theCanadian side peace was longer in coming. The rush to the Klondike in 1897 started a rate war between the Canadian Pacific and the Grand Trunk, with its American connections, which lasted nearly a year. In its course rates were cut in the east as well as in the west, and the Canadian Pacific sent its west-bound freight from Toronto by Smith's Falls rather than use any longer the direct line of the Grand Trunk to North Bay. Peace was patched up, but the Canadian Pacific shortly afterwards set about building a road of its own from Toronto north to its main line, thus threatening the Grand Trunk with permanent loss of western business, and providing it with one incentive toward the great westward expansion it was soon to undertake.
Along with prudent retrenchments went increasingly aggressive expansion, both east and west. It was one of the main objects of Mr Hays's policy to secure a hold on the rich traffic possibilities of New York and the New England states. Portland, the original New England terminus of the Grand Trunk, had not become the great commercial centre it once expected to be. The first further step was taken in 1899, when the Grand Trunk secured control of the five hundred miles ofthe Central Vermont, with which relations had been close for some years past. With running rights over a gap controlled by the Boston and Maine, this gave a line from St Johns, Quebec, to the port of New London, Connecticut; from this point connection was made by boat to New York, where valuable terminal docks were owned.
New London was not the final goal, however—Providence and Boston offered greater possibilities. But to seize them it was first necessary to break through the monopoly of New England land and water transport, which the New York and New Haven line had acquired, or to come to terms with the interests in control. At first the word was to fight. The Grand Trunk was received with open arms by the business men of Massachusetts and Connecticut, eager for competition in railways, and in spite of all the political influence of the New Haven, Hays secured a charter for his Southern New England Railroad, to run from Palmer, on the Central Vermont system, to Providence; a branch from Bellows Falls to Boston was also planned. Construction was begun on the Providence line in May 1912, but suddenly halted. The Grand Trunk management declared thehalt due to financial conditions, but New England suspected a compromise with the New Haven. Probably the change in policy was mainly due to the change in management, the new administration setting less store on the extension than the Hays-Fitzhugh executive had done.
All these eastern activities, however, were overshadowed by the Grand Trunk Pacific scheme. It was not the first plan the Grand Trunk had formed for westward expansion. In the embryo days of the Canadian Pacific, it may be recalled, the government had offered to the old line the opportunity of carrying through the new one. Later, a connection with the Northern Pacific through Sault Ste Marie had been discussed, but Van Horne had forestalled this move. Still later an extension of the Grand Trunk from Chicago northwesterly, possibly through control of the Wisconsin Central, had been under consideration. Nothing came of these plans until the proved fertility and rapid settlement of the Canadian North-West, the improved position of the Grand Trunk in the money markets, and the threatened loss of traffic between Toronto and North Bay, lured and urged the new administration forward.
In 1902 Mr Hays announced that the directors were considering building a line from North Bay, through New Ontario westward, to a terminus on the Pacific at Port Simpson or Bute Inlet. It would be a line of the highest standards. Government aid, the announcement continued, would certainly be sought and expected.
Once more railways became Canadian politics. There was little doubt that the government would aid either this or some rival transcontinental scheme. Opposition to the lavish subsidy policy of the past had developed, indeed, but it was overwhelmed by the demands from every quarter for a vigorous forward policy. It was Canada's growing time, and new-born confidence spurred country and government on. But if the line was to be not merely a private enterprise, but in part a policy of state, then considerations of high politics and low politics alike came in, and compelled material changes in the Grand Trunk's scheme before it could secure government acceptance.
A road from North Bay west would satisfy the local demands of the western provinces, but would not satisfy the local demands of the East, or meet certain common nationalaspirations. Eastern, and particularly Quebec, interests, demanded that any new trans-continental should be built far to the north, opening up the wilderness between Hudson Bay and the Laurentian highlands bordering the St Lawrence. A Quebec company, the Trans-Canada, was in fact urgently seeking support for such a line, endeavouring, since patriotism is in Canada the last refuge of the promoter, to stimulate investors by stressing the military advantages of the remote route. Again, the Maritime Provinces protested against aid to a company to carry the traffic of the West to Boston and Portland instead of to St John and Halifax.
Sir Wilfrid Laurier, the prime minister, endeavoured to combine all these ends. His plan provided for a road 3550 miles in length, beginning at Moncton—a neutral point between the politically inconvenient rivalries of St John and Halifax—crossing New Brunswick northwesterly, skirting the Maine border, and on to Quebec City, where the St Lawrence was to be crossed by a great bridge. Thence it would strike westerly far to the north of existing settlements. From Winnipeg the previously proposed route was followed. The West would have the development andcompetition demanded, the hinterland of Quebec and Ontario would be opened, and the ports of the Maritime Provinces put on an equality with their American rivals. And since this vast project was much beyond the power of the Grand Trunk to finance, it was arranged that the road should be divided into two sections. The eastern, from Moncton to Winnipeg, was to be built and owned by the government and leased to the Grand Trunk Pacific, free for seven years and at a rental of three per cent of the cost for forty-three years following. The western, from Winnipeg to the coast, was to be built and operated by the company, aided by a government guarantee of principal and interest on the greater part of the bond issue.
The announcement of this plan in July 1903 led to a storm of controversy as fierce as that which followed the launching of the Canadian Pacific. The Opposition brought forward various policies, looking to a greater measure of government ownership; the minister of Railways, Andrew G. Blair, resigned in protest; rival railways opposed openly and sometimes by secret plot; two general elections were fought on the issue. But rarely is a government in Canada defeated on aproposal, sound or unsound, to spend untold millions, if the money is to be had at all. The agreement went through, with modifications, in the following year, and the building of the great northern road began.
The railway policy of the past twenty years is still on its trial, but some tentative conclusions may be ventured.
In the first place, it seems clear that a new transcontinental was needed, not only to open the West, but to develop the hinterland of eastern Canada. The rediscovery of a vast clay belt north of the height-of-land between Hudson Bay and the Great Lakes, its known resources in timber and pulp and its probable mineral wealth, as well as the farming areas of the western plains, and the forest, mine, and fishery wealth of northern British Columbia, all gave some economic justification for the adventure. Perhaps even stronger were the political considerations. Here, again, if railways were Canada's politics, it was not only because Canadians were materialists, but because they were idealists. They were determined that, in spite of geography and diplomacy, in spite of Rocky Mountains and Lake Superior wildernesses, Laurentian plateaus and Maine intrusions,Canada should be made one and independent. Often this national spirit has been manipulated to serve sordid ends in railway as in tariff matters; the flag has covered a multitude of sinners. Yet whether it was the Grand Trunk or the Intercolonial, the Canadian Pacific or the Grand Trunk Pacific, the national purpose has been strong, and must fairly be set on the assets side of the sheet. Sir Wilfrid Laurier and Sir John Macdonald both worked with high courage and enduring faith for a greater and more united Canada. Any one who looked at a map of the Dominion and realized how incredibly narrow a fringe of population was strung out on the southern border, could not but feel that some attempt to add a second storey to the structure, to give breadth as well as length, was a national necessity. Perhaps least defensible was the Quebec-Moncton section; true, it was essential, if freight was to reach the Maritime ports, that a shorter line with better grades than those of the Intercolonial should be secured if possible. Grades were bettered in the lines secured, but the saving in distance was not as great as old and incorrect surveys had led the government to anticipate.
How should the road be built, granted itsneed? Government ownership had its advocates, but experience of political 'machines' and a recognition of the difficulties of a government line in carrying on steamship or irrigation or other subsidiary activities, or in making international extensions, told heavily against such a policy. The real choice lay between the two private companies, the Grand Trunk and the Canadian Northern, which were seeking to rival the Canadian Pacific. Undoubtedly the best solution would have been to amalgamate these companies, and thus to save the eventual outlay on a line north of Lake Superior, on closely parallel lines in the prairies, and on the enormously costly rival lines to be built through the Rockies. True, competition even in railway matters has still its merits, but one strong competitor of the Canadian Pacific would have better served the country than two in financial straits. This solution appeared for a time possible. As has been seen, negotiations were carried on in 1902 and 1903 looking to such a union, but unfortunately without result. Forced to choose, the government had no alternative but to give its aid to the older and better known system.
What standards were to be set for thenew road? The continent's pioneer traditions were plain: build the road in the cheapest way it could be made to hold together, with sharp curves and steep grades if need be, with scanty ballast, wooden bridges, and light rails, since traffic would be light and capital hard to get. Then, if the country developed, and perhaps after a reorganization or two, rebuild the road on a permanent basis. But 1903 was not 1873, and Mr Hays had learned on the Wabash and on the Grand Trunk how difficult it was for a second-class road to compete, and how costly was the process of rebuilding with the line in operation. He knew that with high and rising wages for trainmen, and with frequency of service a minor matter on the long stretches, it was essential to concentrate loads in as few trains as possible, and that a locomotive could haul almost twice as great a load on a four-tenths grade as on a one per cent grade. So he determined to build from the outset up to the highest standard, securing a lower ruling grade than any other transcontinental enjoyed. The policy meant high fixed charges and low operating costs.
What outlay would be involved and what state aid was needed? Given the route and the standard set, the outlay could not but bevast. It proved, in fact, much greater than the estimates, as is the way with most big enterprises. The government section cost about a hundred and sixty instead of sixty millions, and the Grand Trunk Pacific section about a hundred and forty, or three hundred millions in all—twice the estimate for the Panama Canal and nearly its actual cost.[2] The standard set was high, and proved difficult to attain; labour was scarce and expensive, and prices of all materials were soaring constantly. The large expenditure lent colour to charges of corruption in the construction of the government section. Investigation after investigation was held, however, without revealing any gross betrayal of trust. One contractor had been handled too tenderly for repeated delays, possibly engineers sometimes stretched classification on a losing contract, and doubtless contractors were as usual given the privilege of contributing to party campaign funds. But, fortunately for the good name of Canada, the serious charges of corruption were not sustained.
Of this great outlay the country bore the lion's share. The Grand Trunk Pacific was organized as a subsidiary company of the old Grand Trunk, which secured control of ownership of all but a nominal share of the $25,000,000 common stock, given it in return for guaranteeing part of the Pacific bonds. Only $20,000,000 preference capital stock was provided for, and this was not issued. The interest of the independent shareholder was thus negligible. The money required was secured by the issue of bonds and debenture loans guaranteed by the government or the Grand Trunk. Up to 1914, in connection with the western section, the government had guaranteed the company's bonds to the amount of over eighty millions, had lent twenty-five millions for ten years at four per cent, and had made or promised a cash gift of twenty-three millions. On the eastern section, the company was subsidized by the use for seven years of the road, rent free, equivalent to thirty-four millions. It was a vast outlay, though not as difficult for the country to bear as one-third the amount would have been a generation earlier. The unique and consoling feature, so far as posterity was concerned, was that the bulkof the government expenditure was provided out of surplus current revenue, so that for the future the net income to be received from rental would much more than balance interest on borrowings.
Once the contract was ratified by parliament and by the Grand Trunk, and the new company had been formally organized with Mr Hays as president and Mr Frank Morse, and later Mr Chamberlin, formerly of the Canada Atlantic, as general manager, the work of surveying and determining the route began. On the government section political difficulties were met in New Brunswick, from the advocates of a route down the St John to the city at its mouth, and engineering difficulties of many forms in the long trail through the northern wilderness. The bridge which was being constructed by an independent company across the St Lawrence at Quebec collapsed in 1907, with great loss of life, and the delay in completing the second bridge made it necessary to depend upon car-ferries for some time. On the western section a good route through the prairies was decided upon, not without vigorous protest from the Canadian Pacific because of the close paralleling of its line. After repeated surveys of thePeace, Pine, Wapiti, and Yellowhead Passes, the last was chosen, and a line was settled upon down the Fraser and Skeena valleys, passing through two million acres of fertile land. Remarkably low grades were secured; in fact, as favourable as on the prairie section. Kaien Island, 550 miles north of Vancouver, was chosen as the terminus, rather than Port Simpson as originally designed, and soon on its magnificent harbour and most unpromising site of rock and muskeg the new and scientifically planned city of Prince Rupert began to rise.
As the main line ran far to the north of the St Lawrence lake and river system, the original plan provided for the construction of branch lines to Fort William, to North Bay, and to Montreal. Of these only the first, aided by the Dominion and also by the Ontario government, was built. For the connection with North Bay running rights over the provincial road, the Timiskaming and Northern Ontario, sufficed. Later, in 1914, the Dominion government itself decided to build the Montreal branch. In Alberta and Saskatchewan over 1200 miles of branch lines were begun, under guarantees of bonds by the provincial governments. In British Columbia an independentroad, projected by the contracting firm of Foley, Welch and Stewart—the Vancouver, Pacific and Great Eastern—promised when completed to give the Grand Trunk Pacific, by a traffic agreement, entrance into Vancouver.
The first contracts on the main line were let in 1905. For ten years construction went on, at the rate of a mile a day, with occasional slackening from scarcity of labour or financial stringency, but with no complete halt. Last to be completed were the section to be built by the company in the Central plateau of British Columbia and the section built by the government west of Cochrane. Meanwhile, the prairie lines had been in operation through to Edmonton since 1910, and grain reached Fort William over the Lake Superior branch in the same year.
From the beginning it had been questioned whether the Grand Trunk Pacific would carry out its bargain to operate the government section. The management professed its intention to perform every promise, but fulfilment was delayed. In 1915 the company demurred to assuming the lease, on the double ground that the road was not definitely completed, and that, since the change of government in 1911, the standardof construction agreed upon had not been maintained. Accordingly the government took power to operate the road from Winnipeg to Moncton, and to expropriate the company's branch from Superior to Fort William, pending further negotiations.
The great Canadian railway companies are much more than railways. The Grand Trunk system, in its new expansion, branched into every neighbouring field which could be made to increase the traffic. Fleets of steamers, on the Pacific coast, on the Great Lakes, and on the New England route, filled in gaps in its lines. Modern car-ferries crossed Lake Ontario and Lake Michigan, as well as the river Detroit. Elevators, it has been noted, were built at strategic points on the way from the wheat-field to the sea. Magnificent hotels were opened at Ottawa, Winnipeg, and Edmonton, with more rustic resorts in the parks along the route. Tourist traffic was stimulated by lowered fares and alluring advertising.