CHAPTER VIIIToC

[40]Prowse, p. 473.

In 1869[41]took place a General Election, in which great Imperial interests were involved. Governor Musgrave, in 1866, had advised Federal union with the Canadian provinces—then about to federate among themselves—and the election three years later was fought upon this issue. The result was a complete rout for the Federal party; a rout so complete that the question has hardly since reappeared within the field of practical politics. The causes of this defeat were, in the first place, economic considerations; secondly, Irish national feeling and hostility to the union; and thirdly, a certain distrust and dread of Canada. Judge Prowse, whose intimate knowledge of Newfoundland entitles his opinion to special respect, thinks that even in recent years there lingered some rankling memory of the days when French Canadian raids terrified the colonists in the seventeenth and eighteenth centuries.[42]However this may be, it iscertain that the outlying portions of the Empire hardly as yet felt the same community with and loyalty to one another as they did with regard to the home country. The relation of Newfoundland to the Dominion of Canada resembles in many ways that of New Zealand to the new Australian Federal system, and in each group of colonies there is a noticeable drift towards centralization. Judge Prowse, who was a strong believer in North American union both from an Imperial and from a Colonial point of view, has fully indicated the difficulties. The Canadian protectionist tariff, the greater attractions of the United States market (inasmuch as the Dominion is a fish producer rather than a fish consumer), the opposition which wide political changes unavoidably excite—all these obstacles were formidable for the moment. It is uncertain even now whether they will be strong enough to prevent, indefinitely, the realization of the Confederate scheme. It is possible that such a union would be followed by some disadvantages to Newfoundland; but, on the other hand, the gain would be very great. The politics of the colony would be braced by the ampler atmosphere of the Dominion, and the tendency towards parochialism finally arrested. The geographical difficulty ceased to exist when the United States taught us how vast are the areas over which successful political unions are possible. No one can fairly ask that Newfoundland shouldtake the step in the teeth of her own material interests; but, assuming that union with Canada can be reconciled with those interests, the Imperial issue holds the field. Its importance can hardly be overstated. So soon as the several communities, which together form the Empire, realize not merely their ties with the Mother Country, but also their own organic interconnection, from that moment the whole Imperial idea receives an immense accession of strength.[43]But it is now elementary that Newfoundland, and Newfoundland alone, can take this decision. She is the mistress of her own destinies.

It is unfortunate that the Blaine-Bond incident in 1890 should have excited ill-feeling against Canada in the older colony. In September of that year a treaty of trade regulating the purchase of bait, etc., the shipping of crews, and transhipment of cargo (called, from the delegates employed on each side,[44]the Blaine-Bond Treaty) was informally negotiated between Newfoundland and the United States, and a draft of a convention was prepared. In the following December this draft was modified, but in January 1891, Mr Blaine submitted a counter-proposal, which the United States were disposed to accept, though they were not really anxious to effect the arrangement. The treaty had beensubmitted to the Colonial Office, and approved by it; but the ratification of the Imperial Government was refused at the last moment. Probably the refusal would have caused less irritation in the colony if it had sprung from Imperial considerations; as a fact, it was procured by Canadian remonstrances against Newfoundland's separate action in a matter concerning Canada also, and it was felt in Newfoundland that the island had been sacrificed to the exigencies of Canadian party politics. It may be added here that in 1902, another separate agreement—the Hay-Bond Treaty—similar to the preceding, was entered into, but was rejected by the United States Senate. Accordingly the Newfoundland Government secured in 1905 the passing of the Foreign Fishing Vessels Act which deprived the American fishermen (more particularly those of Gloucester, Mass.) of the special privileges hitherto conceded, leaving them the right under the Convention of 1818. Disputes arose. The question was discussed at the Imperial Conference in 1907. After temporary alleviation of the difficulties by amodus vivendi, the British and American Governments came to the conclusion that the best remedy lay in a submission to the Hague Court of Arbitration: in 1909 the terms of reference were agreed to, and on September 1910 the award was given.[45]Newfoundland wasthereby placed in a very favourable position for dealing with the discrimination exercised against fish exported to America by Newfoundlanders. The points decided were: (1) The right to make regulations as to the exercise of the liberty to take fish, under the Treaty of 1818, is inherent to the sovereignty of Great Britain; (2) The United States has the right to employ non-Americans in the fisheries, but they are not entitled to benefit or immunity from the said Treaty; (3) While American fishing vessels may be required to report at colonial ports when convenient, such vessels should not be subject to the purely commercial formalities of report, entry, and clearance at a Custom House, nor to light, harbour, or other dues not imposed upon Newfoundland fishermen; (4) American fishing vessels entering certain colonial bays, for shelter, repairs, wood and water, should not be subject to dues or other demands for doing so, but they might be required to report to any reasonably convenient Custom House or official; (5) In the case of bays, mentioned in the Treaty of 1818, three marine miles are to be measured from a straight line drawn across the body of water at the place where it ceases to bear the configuration and characteristics of a bay. At all other places the three marine miles are to be measured following the sinuosities of the coast.

To return to the period now under consideration. It saw a bold attempt to deal with the Poor-lawscandal. Relief to able-bodied persons was discontinued in 1868. A succession of good fishing seasons, and the development of the mining industry, lessened the difficulty of the step. Seven years later came a still more momentous proposal. "The period appears to have arrived," said Governor Hill, in his opening speech to the Legislature, "when a question which has for some time engaged public discussion, viz., the construction of a railway across the island to St. George's Bay, should receive a practical solution.... There is a well-founded expectation that the line of railway would attract to our shores the mail and passenger traffic of the Atlantic ... and thus would be secured those vast commercial advantages which our geographical position manifestly entitles us to command. As a preliminary to this object a proposition will be submitted to you for a thorough survey, to ascertain the most eligible line, and with a view to the further inquiry whether the colony does not possess within itself the means of inducing capitalists to undertake this great enterprise of progress."

It is easy to forget, in speaking of Newfoundland until 1875, how very little was known of the interior. The Newfoundland with which we are concerned consisted in fact of a few towns on the coast, with a great and imperfectly explored interior behind them. Even down to the beginning of the twentieth century very little was known ofmuch of the island. It is difficult to assign limits to the developments which are probable when a thorough system of internal communication shall have given free play to each latent industry.

The first proposal was that a railway should be constructed from St. John's to St. George's Bay, but objections were made from England on the ground that the line would end on the French shore. Then came the proposal that it should run from St. John's to Hall's Bay, with branches to Brigus and Harbour Grace, covering in all a distance of about 340 miles. A joint committee of both Houses prepared a report, which became the basis of the Bill (1880). One sentence is worth quoting, because it states very clearly the difficulties which have played so large a part in the history of Newfoundland:

"The question of the future of our growing population has for some time enjoyed the earnest attention of all thoughtful men in this country, and has been the subject of serious solicitude. The fisheries being our main resource, and to a large extent the only dependence of the people, those periodic partial failures which are incident to such pursuits continue to be attended with recurring visitations of pauperism, and there seems no remedy to be found for this condition of things but that which may lie in varied and extensive pursuits.... Our fisheries have no doubt increased, but not in a measure correspondingto our measure of population; and even though they were capable of being expanded, that object would be largely neutralized by the decline in price which follows from a large catch, as no increase of markets can be found to give remunerative returns for an augmented supply."

The Act was passed, which empowered the raising of a loan of £1,000,000 for the purpose of constructing the proposed railway. By November, 1884, the line was completed as far as Harbour Grace; by 1888 a further instalment of some twenty-seven miles was ready between Whitbourne and Placentia; soon afterwards it was decided to recommence building the line northwards from St. John's to Hall's Bay, which has been discontinued through the failure of the contractors, and to carry out the scheme the Reid Contract was entered into.

We are now reaching a period when the leading parts are played by persons still or recently living, and the story must therefore be continued with the reserve proper to one who is not himself an inhabitant of Newfoundland. Particularly is this true of the much discussed Reid Contract, the circumstances of which are reserved, from their great importance, for a separate chapter.[46]

It is unfortunate that the ensuing stage of this short narrative should be marred by so much trouble, but, in fact, the last ten years of thenineteenth century have been among the most disastrous in the history of the island. In 1892 came the most destructive of all the fires with which St. John's has been afflicted. The fire broke out in a stable at five o'clock on the afternoon of Friday, July 8th, and lasted until nine o'clock on Saturday morning. It came at the end of a month's draught, was helped by a powerful wind, and found the town with a depleted water supply. Arising in an eastern suburb, the flames were carried right into the business centre of the town, and finally reached the rich warehouses of Water Street. Eye witnesses describe the heat as so intense that brick and stone offered little more resistance than wood. A mile of wharfage was destroyed, and Water Street completely gutted. "Over a vast area," wrote one who noted the effects, "nothing is now to be seen but tottering walls and chimneys." It was computed that 10,000 persons were left homeless, and that the total damage exceeded 20,000,000 dollars, of which less than 5,000,000 dollars were covered by insurance. The Savings Bank, the Hospital, the Masonic Hall, and the Anglican Cathedral, alike perished. To complete the misery of the sufferers, it soon became known that the food supply remaining was only sufficient for ten days. As in 1846, the sympathy of Canada was promptly and warmly shown. The day after the fire 4,000 dollars' worth of provisions were sent over, and military tents sufficient toshelter 1,200 people. In England, a Mansion House fund was immediately opened by the Lord Mayor of London, and its final amount fell little short of £20,000. Sir Terence O'Brien, the Governor, and Lady O'Brien, happened to be in England at the time, and they threw themselves warmly into the cause of the colony.

In 1894, a misfortune of a different kind happened. On Monday, December 10th, the Commercial Bank, the Union Bank, and the Savings Bank, which had all been long established, were compelled to suspend payment. A widespread panic followed, and all business was paralysed. Workmen were dismissed wholesale, no money being available for the payment of their wages. To make the crisis graver still, the Union Bank was to have provided the interest on the Public Debt, which was payable in London on January 1st. The population feared that the crash would bring about riots and other dread occurrences. In aggravation of the risk the rumour spread that Newfoundland was about to be incorporated into the Dominion of Canada as a mere province. The Government telegraphed to the authorities in London for an immediate loan of £200,000, and requested that a warship should be despatched in view of imminent disturbances. The causes which led immediately to the failure were well stated in a Dalziel telegram toThe Times:[47]

"The immediate cause of the financial crisis which has overwhelmed Newfoundland was the death of Mr Hall, a partner in the firm of Messrs Prowse, Hall & Morris, the London agents of the firms exporting fish to European markets. On his death the firm declined to meet further exchanges until an investigation of their affairs had been made. Their bills were protested, and the banks made demands on the Commercial Bank of St. John's, which was the drawer of the bills, and which, being unable to meet the demands made upon it, fell back upon its mercantile customers. These could not respond, and the bank had to suspend operations. The customers were compelled to make assignments, and nearly every business house in the colony was crippled, so interwoven are the affairs of one establishment with those of another.

"The situation was only possible under the peculiar business customs of the colony. The fishing industry here is pursued under a system of advances for vessels and equipments made by the merchants to the fishermen, who gave the catch at the end of the season in exchange. The merchants receive large advances from the only two banks doing business here, the Union Bank of Newfoundland and the Commercial Bank. By backing each other's bills the banks are enabled to carry on operations, and then at the close of the year, when the produce of the fisheriesis realized, they are able to settle their overdrafts.

"The disaster happened at a most unfortunate time. If it had been postponed for another month the merchants would have realized on most of the fish, and the assets would have been far more valuable. At present, 2,000,000 dollars' worth of fishery products are stored in St. John's awaiting the means of shipment. Until financial aid from the outside world is obtained, it is impossible to place the fish on the market."

At this time the financial position of the colony was thoroughly unsound. Its population numbered roughly 200,000 persons, and its Public Debt amounted to 14,000,000 dollars, or nearly three million pounds sterling. The Ministry of the day resigned, after an unsuccessful attempt to form a coalition Government, and its successors applied for Imperial help, an application which logically involved the surrender of the Constitution. In fact, the unassisted credit of the colony seemed hopeless, for in a year or two the railway reckonings had to be met. The Government had issued bonds whereof yearly interest was to become payable on completion, amounting to almost a third of the total revenue of the colony.[48]

Such temporary measures as the nature of the crisis admitted were taken locally. TheLegislature passed two Bills guaranteeing a portion of the note issue of both the Union Bank and the Commercial Bank; while a loan of 400,000 dollars was procured from the Bank of Montreal, and additional loans from the Bank of Nova Scotia and the Royal Bank of Canada: thus "the financial sceptre passed to Canada."[49]At the same time the manager and directors of the Commercial Bank were arrested on a charge of having presented a fraudulent balance sheet. Reuter's correspondent at St. John's noted that in this time of trouble the idea of union with Canada gained ground rapidly. How hopeless the position seemed to calm observers on the spot may be gathered from the following vivid extracts from a letter byThe Timescorrespondent at St. John's:[50]

"Twelve large firms controlled the whole export trade of the colony—fish oils and fish products, valued at about 7,000,000 dollars. Of these twelve only two remain ... and these are sorely stricken. These firms occupied the whole waterside premises of St. John's, gave employment to hundreds of storekeepers, coopers, stevedores, and others, beside some thousands of unskilled labourers occupied in the handling of the fish. All these men are now without a day's work, or any means of obtaining it. The isolation of the colony, away out in the Atlantic with no neighbour, is its greatest curse. People unemployed cannotemigrate, but must swell an army of industrials depending on the Government for relief. The city is a veritable aggregation of unemployed; it is a city to let. Every business, factory, wharf, store, or shop employing labour has either suspended business or has curtailed the number of its employees to the lowest possible limit. It is not unreasonable to estimate the number unemployed here to-day at 6,000, every one of whom must be without work until spring opens."

It is not surprising to find that in this difficulty the minds of the colonists turned towards the Imperial Exchequer. But the distinction is vital between an Imperial grant in relief of a visitation of nature and a grant in relief of financial disasters which may be the result of improvidence or extravagance. The Imperial Exchequer is drawn from complex sources, and cannot be diverted to irregular purposes without injustice to large numbers of poor people. These facts were not unnaturally overlooked in Newfoundland, for in trouble the sense of proportion is apt to disappear. Thus on March 2nd, 1895, Sir W. Whiteway, the Newfoundland Premier, in a letter toThe Times, said:

"We have approached Her Majesty's Government, and solicited a mere guarantee of interest to the amount of a few thousand pounds per annum for a limited period, in order to enable the colony to float its loans and tide it over thepresent temporary difficulties. Up to date the people of this old, loyal colony have received no response. They have been struggling against difficulties in the past, and if they still have to trust to their own inherent pluck, and to the resources of the country, they must only passively submit, although they may the more bitterly feel the heartless treatment of the Imperial Government towards them."

The touch of bitterness in Sir William Whiteway's letter was, perhaps, unreasonable. Mr Goodridge was Premier at the time of the crash, and his Government at once appealed for help to England, on the ground that if it were not forthcoming the colony would be unable to meet its obligations. A proposal was added that a Royal Commission should be appointed to inquire into the whole political and commercial position of the colony. Mr Goodridge was unable to keep his place, and his Government was followed by that of Mr Greene. The new Government at once inquired whether, if the Newfoundland Legislature acquiesced in the appointment of a Commission, financial help would be immediately forthcoming. They desired information also as to the scope of the Commission and the terms on which assistance would be given. To this the answer was inevitable, that all these points must depend upon the findings of the Commission. In fact, the Colonial Government wished for an unconditional loan and anassurrance that the Constitution of the island would not be interfered with. Mr Greene, in turn, proved unable to hold his ground, and was succeeded by Sir William Whiteway. The latter substituted for the earlier proposals a request that the Newfoundland bonds should be guaranteed by the Imperial Government; the suggested Commission being ignored. This was the request referred to in Sir William's letter. Now it is very clear that although the amount involved was relatively small, a very important principle was raised. Responsible government has its privileges and its obligations, the latter of which flow logically from the former. The Imperial Government charges itself with responsibility for the finances of a Crown colony because it directs the policy and determines the establishment on which the finances so largely depend. It is not reasonable to ask that the British taxpayer should assume responsibility for liabilities incurred by a colony with responsible government. Thetoga virilishas responsibilities. The case might, perhaps, be different if there were no danger that the concession of help might be drawn into a precedent. But it must never be forgotten that the aggregate public debts of the self-governing colonies at about that time exceeded £300,000,000.

The crisis of 1895 has been dealt with at some little length, because it would be impossible otherwise to understand the occasion of the great ReidContract, which will form the subject of the next chapter. It so happens that the last ten years of the nineteenth century have been more momentous than any equal period in the history of the colony.

[41]The census of this year showed that the population had increased to 146,536.

[42]Op. cit., p. 495.

[43]This question of union was frequently raised—notably in 1906, and during the Great War in 1916 and 1917 (see end of chap. ix.).

[44]Sir Robert Bond, the ex-Premier of Newfoundland; Mr J.G. Blaine, the American Secretary of State.

[45]House of Commons Papers, Miscellaneous, No. 3, 1910, Cd. 5396.

[46]See chap. ix.

[47]December 14th, 1894.

[48]See General Dashwood's letter toThe Times, December 18th, 1894.

[49]Rogers, p. 189.

[50]January 17th, 1895.

The next few years may be dismissed briefly, for they were years of unrelieved melancholy, from the point of view of the public financial policy and the political development of the colony. Nor did the disease admit of a readily applicable remedy. The experience of each decade had shown more and more clearly that the colony had nothing in reserve—no variety of pursuits to support the general balance of prosperity by alternations of success. Potentially its resources were almost incalculably great, but their development was impossible without capital or credit. The colony had neither. Under these circumstances took place the General Election of October, 1897. The assets of the colony were not before the electorate, and there was no reason to suppose that financial proposals of an extraordinary kind were in contemplation. The result of the election placed Sir James Winter in power. In six months the famous "Reid Contract" had been entered into—a contract which must be described at somelength in these pages, partly because it throws a vivid light upon the constitutional relations between the Mother Country and a self-governing colony, partly because it appears to be incomparably the most important event in the recent history of Newfoundland.

On February 22nd, 1898, Mr Chamberlain received a telegram from the Governor, Sir Herbert Murray, advising him that a novel resolution had been submitted to the Houses of Legislature by his responsible advisers. A fuller telegram six days later, and a letter intervening, explained the proposals in detail. To put the matter as shortly as possible, the Government advised the sale to a well-known Canadian contractor, Mr R.G. Reid, of certain valuable colonial assets. In the first place, Mr Reid was to purchase all lines of railway from the Government for 1,000,000 dollars; this amount was the price of the ultimate reversion, the contractor undertaking to operate the lines for fifty years on agreed terms, and to re-ballast them. If he failed in this operation his reversionary rights became forfeit. For carrying the Government mails he was to receive an annual subsidy of 42,000 dollars. Minute covenants by the contractor were inserted in the draft contract, "in consideration whereof," it continued, "the Government hereby covenant and agree to and with the contractor, to grant to him in fee simple ... 5,000 acres of land for each one mile of main lineor branch railway throughout the entire length of the lines to be operated: the expression 'in fee simple' to include with the land all mines, ores, precious metals, minerals, stones, and mineral oils of every kind." Besides these general concessions a particular grant of mineral land was made. The areas of land near Grand Lake, in which coal had been discovered, were transferred to Mr Reid, on condition that he should so work the coal mines as to produce not less than 50,000 tons of coal per annum.

The contract then passed on to deal with the service of mail steamers. Under this head eight steamers for various services were to be provided by the contractor, and by him manned and equipped. In consideration therefor the Government undertook to pay subsidies upon an agreed scale. The docks were next disposed of. Under this head the Government agreed to sell to the contractor the St. John's Dry Dock for 325,000 dollars. The next available asset was the telegraph service. Here the agreement provided that the contractor should assume responsibility for all telegraph lines until 1904, in return for an annual subsidy of 10,000 dollars, and after 1904, until the period of fifty years was completed, should maintain them free of any charge to the colony by way of subsidy or otherwise.

By a later section of the draft contract it was provided that the contractor should not assignor sublet the contract, or any part or portion thereof, to any person or corporation whomsoever without the consent of the Government. The language of this prohibition is curiously general, and is indeed sufficient in its terms to prohibit assignmentsmortis causa, as well as thoseinter vivos. Such a result can hardly have been contemplated.

By the last section it was recorded that "the Government undertake to enact all such legislation as may be necessary to give full effect to the contract and the several clauses and provisions thereof, according to the spirit and intent thereof, and also such as may be necessary to facilitate and enforce the collection and payment of fares and rates, the preservation of order and discipline in the trains and stations, and generally to give to the contractor all such powers, rights, and privileges as are usually conferred upon or granted to railways and railway companies for the purposes of their business."

Such, in barest outline, was the proposal of which Mr Chamberlain was informed by Governor Murray. It certainly involved a sacrifice incalculably grave of the colony's prospects, but those who brought it forward no doubt reflected on the truism that he who has expectations, but neither assets nor credit, must reinforce the latter by drawing in some degree upon the former. In fact, it seems to have been doubtful whether, at the time, thecolony could by any device meet its obligations as they became due. The force of these observations must be frankly conceded; but it may still be doubted whether a less desperate remedy was not within the grasp of resourceful statesmanship. In his first telegram, sent on March 2nd, 1898, Mr Chamberlain called attention to the more apparent objections:

"The future of the colony will be placed entirely in the hands of the contractor by the railway contract, which appears highly improvident. As there seems to be no penalty provided for failure to operate the railways, the contract is essentially the sale of a million and a quarter acres for a million dollars."

From the legal point of view the contract was a very singular one. The Government of Newfoundland, in fact, assumed to bind its successors by a partial abdication of sovereign power. Yet the same capacity which enabled the then Government to bind itself would equally and evidently inhere in its successors to revoke the obligation. Those who are struck by the conscientious obligation which the then Government could no doubt bequeath, may ask themselves how long a democratically governed country would tolerate corruption or ineptitude in the public service on the ground that the monopolist worker of them had inherited a franchise from an ancestor who had known how to exploit the public necessities. Thevirtual expropriation of the Irish landlords, which was in progress in the United Kingdom, may have been right or it may have been wrong; it is at least a far more startling interference with vested interest than would be the resumption by a State of control over heedlessly aliened public services.

Whatever be the force of these observations, the disadvantages of the Newfoundland Government's specific proposals were patent enough. Nor were they unperceived in the colony, and in particular by the enemies of the Ministry. The islanders stopped fishing and took to petitions. These were numerous and lengthy, and it is only proposed to consider here the petition which was sent by dissentient members of the House of Assembly, containing a formidable indictment of the proposed agreement. The objections brought forward may be briefly summarized:

1. The electors were never consulted.2. The Bill was an absolute conveyance in fee simple of all the railways, the docks, telegraph lines, mineral, timber, and agricultural lands of the colony, and virtually disposed of all the assets, representing a funded debt of 17,000,000 dollars, for £280,000.3. While the Bill conveyed large and valuable mineral, agricultural, and timber areas, amounting, with former concessions, to four million acres, it made no provision for the development of these lands.4. The conveyance embraced the whole Government telegraph system of the colony.5. It included a monopoly for the next thirty years of the coastal carrying trade.6. It included the sale of the dry dock, and the granting, without consideration, of valuable waterside property belonging to the Municipal Council of St. John's.

1. The electors were never consulted.

2. The Bill was an absolute conveyance in fee simple of all the railways, the docks, telegraph lines, mineral, timber, and agricultural lands of the colony, and virtually disposed of all the assets, representing a funded debt of 17,000,000 dollars, for £280,000.

3. While the Bill conveyed large and valuable mineral, agricultural, and timber areas, amounting, with former concessions, to four million acres, it made no provision for the development of these lands.

4. The conveyance embraced the whole Government telegraph system of the colony.

5. It included a monopoly for the next thirty years of the coastal carrying trade.

6. It included the sale of the dry dock, and the granting, without consideration, of valuable waterside property belonging to the Municipal Council of St. John's.

On March 23rd Mr Chamberlain answered the representation of Governor Murray, and the profuse petitions which the latter had forwarded. Both from the general constitutional significance of the reply, and its particular importance in the history of Newfoundland, it is convenient to reproduce the letter in full:

Mr Chamberlain to Governor Sir H.H. Murray.Downing Street,March 23rd, 1898.Sir,—In my telegram of the 2nd instant I informed you that if your Ministers, after fully considering the objections urged to the proposed contract with Mr R.G. Reid for the sale and operation of the Government railways and other purposes, still pressed for your signature to that instrument, you would not be constitutionally justified in refusing to follow their advice, as the responsibility for the measure rested entirely with them.2. Whatever views I may hold as to thepropriety of the contract, it is essentially a question of local finance, and as Her Majesty's Government have no responsibility for the finance of self-governing colonies, it would be improper for them to interfere in such a case unless Imperial interests were directly involved. On these constitutional grounds I was unable to advise you to withhold your assent to the Bill confirming the contract.3. I have now received your despatches as noted in the margin, giving full information as to the terms of the contract, and the grounds upon which your Government have supported it, as well as the reasons for which it was opposed by the Leader and some members of the Opposition.4. I do not propose to enter upon a discussion of the details of the contract, or of the various arguments for and against it, but I cannot refrain from expressing my views as to the serious consequences which may result from this extraordinary measure.5. Under this contract, and the earlier one of 1893, for the construction of the railway, practically all the Crown lands of any value become, with full rights to all minerals, the freehold property of a single individual: the whole of the railways are transferred to him, the telegraphs, the postal service, and the local sea communications, as well as the property in the dock at St. John's. Such an abdication by a Government of some of its most important functions is without parallel.6. The colony is divested for ever of any control over or power of influencing its own development, and of any direct interest in or direct benefit from that development. It will not even have the guarantee for efficiency and improvement afforded by competition, which would tend to minimize the danger of leaving such services in the hands of private individuals.7. Of the energy, capacity, and character of Mr Reid, in whose hands the future of the colony is thus placed, both yourself and your predecessor have always spoken in the highest terms, and his interests in the colony are already so enormous that he has every motive to work for and to stimulate its development; but he is already, I believe, advanced in years, and though the contract requires that he shall not assign or sublet it to any person or corporation without the consent of the Government, the risk of its passing into the hands of people less capable and possessing less interest in the development of the colony is by no means remote.8. All this has been fully pointed out to your Ministers and the Legislature, and I can only conclude that they have satisfied themselves that the danger and evils resulting from the corruption which, according to the statement of the Receiver-General, has attended the administration of these services by the Government, are more serious than any evils that can result from those services being transferred unreservedly to the hands of a privateindividual or corporation; and that, in fact, they consider that it is beyond the means and capacity of the colony to provide for the honest and efficient maintenance of these services, and that they must, therefore, be got rid of at whatever cost.9. That they have acted thus in what they believe to be the best interests of the colony I have no reason to doubt; but, whether or not it is the case, as they allege, that the intolerable burden of the Public Debt, and the position in which the colony was left by the contract of 1893, rendered this sacrifice inevitable, the fact that the colony, after more than forty years of self-government, should have to resort to such a step is greatly to be regretted.10. I have to request that in communicating this despatch to your Ministers you will inform them that it is my wish that it may be published in theGazette.I have, etc.,J. Chamberlain.

Mr Chamberlain to Governor Sir H.H. Murray.

Downing Street,March 23rd, 1898.

Sir,—In my telegram of the 2nd instant I informed you that if your Ministers, after fully considering the objections urged to the proposed contract with Mr R.G. Reid for the sale and operation of the Government railways and other purposes, still pressed for your signature to that instrument, you would not be constitutionally justified in refusing to follow their advice, as the responsibility for the measure rested entirely with them.

2. Whatever views I may hold as to thepropriety of the contract, it is essentially a question of local finance, and as Her Majesty's Government have no responsibility for the finance of self-governing colonies, it would be improper for them to interfere in such a case unless Imperial interests were directly involved. On these constitutional grounds I was unable to advise you to withhold your assent to the Bill confirming the contract.

3. I have now received your despatches as noted in the margin, giving full information as to the terms of the contract, and the grounds upon which your Government have supported it, as well as the reasons for which it was opposed by the Leader and some members of the Opposition.

4. I do not propose to enter upon a discussion of the details of the contract, or of the various arguments for and against it, but I cannot refrain from expressing my views as to the serious consequences which may result from this extraordinary measure.

5. Under this contract, and the earlier one of 1893, for the construction of the railway, practically all the Crown lands of any value become, with full rights to all minerals, the freehold property of a single individual: the whole of the railways are transferred to him, the telegraphs, the postal service, and the local sea communications, as well as the property in the dock at St. John's. Such an abdication by a Government of some of its most important functions is without parallel.

6. The colony is divested for ever of any control over or power of influencing its own development, and of any direct interest in or direct benefit from that development. It will not even have the guarantee for efficiency and improvement afforded by competition, which would tend to minimize the danger of leaving such services in the hands of private individuals.

7. Of the energy, capacity, and character of Mr Reid, in whose hands the future of the colony is thus placed, both yourself and your predecessor have always spoken in the highest terms, and his interests in the colony are already so enormous that he has every motive to work for and to stimulate its development; but he is already, I believe, advanced in years, and though the contract requires that he shall not assign or sublet it to any person or corporation without the consent of the Government, the risk of its passing into the hands of people less capable and possessing less interest in the development of the colony is by no means remote.

8. All this has been fully pointed out to your Ministers and the Legislature, and I can only conclude that they have satisfied themselves that the danger and evils resulting from the corruption which, according to the statement of the Receiver-General, has attended the administration of these services by the Government, are more serious than any evils that can result from those services being transferred unreservedly to the hands of a privateindividual or corporation; and that, in fact, they consider that it is beyond the means and capacity of the colony to provide for the honest and efficient maintenance of these services, and that they must, therefore, be got rid of at whatever cost.

9. That they have acted thus in what they believe to be the best interests of the colony I have no reason to doubt; but, whether or not it is the case, as they allege, that the intolerable burden of the Public Debt, and the position in which the colony was left by the contract of 1893, rendered this sacrifice inevitable, the fact that the colony, after more than forty years of self-government, should have to resort to such a step is greatly to be regretted.

10. I have to request that in communicating this despatch to your Ministers you will inform them that it is my wish that it may be published in theGazette.

I have, etc.,J. Chamberlain.

Some of the inferences set forth in the Colonial Secretary's lucid letter were questioned by the Newfoundland Government, but substantially his conclusions were not assailed. The decision of the Imperial Government by no means stayed the voice of local agitation, and the stream of petitions continued to grow. In a further letter to Governor Murray, dated December 5th, 1898, Mr Chamberlainlaid down the great constitutional doctrine which is the Magna Charta of Greater Britain. Every student of colonial politics should be familiar with these passages:

"The right to complete and unfettered control over financial policy and arrangements is essential to self-government, and has been invariably acknowledged and respected by Her Majesty's Government, and jealously guarded by the colonies. The Colonial Government and Legislature are solely responsible for the management of its finances to the people of the colony, and unless Imperial interests of grave importance were imperilled, the intervention of Her Majesty's Government in such matters would be an unwarrantable intrusion and a breach of the charter of the colony.

"It is nowhere alleged that the interests of any other part of the Empire are involved, or that the Act is any way repugnant to Imperial legislation. It is asserted, indeed, that the contract disposes of assets of the colony over which its creditors in this country have an equitable, if not a legal claim; but, apart from the fact that the assets in question are mainly potential, and that the security of the colonial debt is its general revenue and not any particular property or assets, I cannot admit that the creditors of the colony have any right to claim the interference of Her Majesty's Government in this matter. It is on the faith of the Colonial Government and Legislature that theyhave advanced their money, and it is to them that they must appeal if they consider themselves damnified.

"No doubt, if it was seriously alleged that the Act involved a breach of faith or a confiscation of the rights of absent persons, Her Majesty's Government would have to consider it carefully, and consider whether the discredit which such action on the part of a colony would entail on the rest of the Empire rendered it necessary for them to intervene. But no such charge is made, and if Her Majesty's Government were to intervene whenever the domestic legislation of a colony was alleged to affect the rights of residents, the right of self-government would be restricted to very narrow limits....

"The fact that the constituencies were not consulted on a measure of such importance might have furnished a reason for its rejection by the Upper Chamber, but would scarcely justify the Secretary of State in advising its disallowance even if it were admitted as a general principle of constitutional government in Newfoundland that the Legislature has no right to entertain any measure of first importance without an immediate mandate from the electors."

The passing of the particular Bill by no means brought the Reid controversy to an end. In fact, the General Election in Newfoundland, of which the result was announced in November 1900,was fought entirely upon this absorbing question. The issue arose in the following way. The contract contained a clause providing that Mr Reid should not assign his rights over the railway without the consent of the Government. Mr Reid applied to the Government of Sir James Winter for such consent, but when that Government was defeated in February 1900, no answer had been received. Mr Reid wished to turn all his holdings in the colony over to a corporation capitalized at 25,000,000 dollars, he and his three sons forming the company. On the properties included he proposed to raise 5,000,000 dollars by debenture bonds, this sum to be expended in development.[51]

A Liberal Ministry under Mr Bond, who had consistently opposed the Reid arrangements, displaced Sir James Winter. Finding himself unable to hold his own in the Assembly, Mr Bond formed a coalition with Mr Morris, the leader of a section of Liberals who had not associated themselves with the party opposition to the contract. The terms of accommodation were simple: "The contract was to be treated as afait accompli, but no voluntary concessions were to be made to Mr Reid except for a consideration." Consistently with this view, Mr Reid was informed by the Government that the permission he requested would be given upon the following terms:

(1) He should agree to resign his proprietary rights in the railway.

(2) He should restore the telegraphs to the ownership of the Government.

(3) He should consent to various modifications of his land grants in the interest of squatters able to establish theirde factopossession.

To these terms the contractor was not prepared to accede. It is difficult not to feel sympathy with his refusal. I had the advantage of hearing the contention on this point of a well-known Newfoundland Liberal, who brought forward intelligible, but not, I think, convincing arguments. The clause against assignment without the consent of Government ought surely to be qualified by the implied condition that such consent must not be unreasonably withheld. In the private law of England equity has long since grafted this implication upon prohibitions against assignment. If, however, the Government had been content with a bluntnon possumus, a case could no doubt have been made out for insisting upon their pound of flesh. They chose, however, to do the one thing which was neither dignified nor defensible: they offered to assent to an assignment on condition that Mr Reid surrendered his most valuable privileges. It is no answer to say, as many Newfoundland Liberals did say: We opposed the contract from the start, and it is therefore impossible for us to assent to any extension of the contractor'sprivileges. In fact, such an argument seems to betray an inability to understand the ground principle on which party government depends. That principle, of course, is the loyal acceptance by each party on entering office of the completed legislation of its predecessors. To borrow a metaphor from the Roman lawyers, thehereditasmay bedamnosa, but the party succeeds thereto as ahæres necessarius. Any other rule would substitute anarchy for order, and an endless process of reversing the past for a salutary attention to the present.

It must, on the other hand, be admitted that Mr Reid's conduct was not very well chosen to reassure his critics. He threw himself heart and soul into the General Election which became imminent, and displayed little judiciousness in his selection of nominees to fight seats in his interests. It is hard to suppose that independent men were not discoverable to lay stress on the immediate relief to the colony which the contract secured, and the inexorable necessity of which it might plausibly be represented to be the outcome. Mr Morine was Mr Reid's solicitor. He was a prominent Conservative and Minister of Finance, and his influence in the Assembly (where his connection with Mr Reid was apparently unknown) had been exerted in favour of the contract. When challenged on the point, Mr Morine asserted that he advised Mr Reid only on private matters,in which his interests would not come into conflict with those of the colony. Compelled to resign, however, by Governor Murray on account of the apparently incompatible duality of his position, he was reinstated (April, 1899) by Governor M'Callum, on an undertaking that his connection with Mr Reid should be suspended during office. Mr Morine became leader of the Conservative party on the retirement of Sir James Winter, reassuming at the same time his business relations with Mr Reid. In concert with the latter he began a political campaign in opposition to the Liberal party. His partner, Mr Gibbs, fought another seat in the same interest.The Timescorrespondent above referred to gives an amusing account of other candidates:

"One of Mr Reid's sons has been accompanying him through his constituency, and is mooted as a candidate. Two captains of Reid's bay steamers are running for other seats. The clothier who supplies the uniforms for Reid's officials is another, and a shipmaster, who until recently was ship's husband for the Reid steamers, is another. His successor, who is a member of the Upper House, has issued a letter warmly endorsing Mr Morine's policy, and it is now said that one of Reid's surveying staff will be nominated for another constituency."

It may easily be imagined that to the ordinary voter the Conservativepersonnelproved somewhatdisquieting. Success at the polls would have enabled Mr Reid to say, with Louis XIV.—"L'Etat, c'est moi." Amid extraordinary excitement the election was fought in the autumn of 1900 on the sole issue of the Reid contract, and resulted in a sweeping victory for the Liberal party, supporting Mr Bond in his policy as to Mr Reid's monopolies.

The Reid Contract has been dealt with at this length at a sacrifice of proportion which the writer believes to be apparent rather than real. Newfoundland is newly emerged from infancy. The story of its childhood is relatively uneventful, but the political experiments of its adolescence must be of absorbing interest to all students of politics.

In 1901 an Act was passed giving sanction to a new agreement with Mr Reid in regard to the railways, and incorporating the Reid Newfoundland Company. Under the agreement the sum of one million dollars was to be paid to him in consideration of the surrender by him of the right to own the railway at the end of 1938; and 850,000 dollars instead of 2½ million acres of land to which he had become entitled as a bonus for undertaking to operate the railway until 1938. He still had, however, claims in respect of certain rolling-stock and equipment that had been provided under earlier contracts; and also claims arising through the surrender of the telegraphs. All these were submitted to arbitration, resulting in awards to Mr Reid of 894,000 dollars and 1½ million dollarsrespectively. However, under the new arrangement, Mr Reid ceased to be the virtual owner of the railway system; and became merely a contractor for its operation. The Reid Newfoundland Company, by agreement with Mr Reid, and with a capital of 25 million dollars, came into possession of over 2½ million acres of land, with timber, mineral, and other rights thereon, and took over all existing contracts for working the railway, and mail and steamboat services of the colony, including St. John's Dry Dock and the St. John's tramways, as well as powers for electric lighting in the capital. The new Company commenced operations on September 1st, 1901.

With the beginning of the twentieth century was inaugurated an epoch of political as well as economic progress in the history of the island. The numerous and widespread activities of the new enterprise gave a great impetus to the colony: it ensured the efficient working of the railway, and gave employment at a good wage to an army of working men in the various branches, and also in connection with the flotilla of steamers that were run. Other spheres of activity were gradually opened up,e.g.the establishment of a sawmill to furnish the timber necessary for the various needs of the scheme, the opening of a granite quarry to supply material for bridge building and paving the streets of the capital, the development of a slate area and oil boring, coal mining,the construction of a hotel in St. John's, etc. The expansion of the undertaking increased from year to year, and included such projects as the establishment of flour mills, pulp and paper mills, etc. Next to the Government itself, the Reid Company became the largest paymaster in the island.[52]

Other factors contributing to the material advancement of the country were the development of the iron mines at Belle Island, and the production of pulp and paper by the "Anglo-Newfoundland Development Company," the initiators and controllers of which were Messrs Harmsworth, the well-known newspaper proprietors. This company was followed soon afterwards by the Albert Reed Company of London.

A few of the main events in the recent history of the colony may now be referred to; these, taking us down to the Great War, will suitably conclude the present chapter. First may be mentioned a curious development in the political arena. In 1902 the Ministerial candidates suffered a complete defeat in a by-election; and this result was attributed to two causes—in the first place, deficient fishing returns, and secondly, popular dissatisfaction at the monetary gains secured by Mr Reid. The contest of 1904 was further complicated by the formation of a number of factions in the ranks of the Opposition. The latter eventually joined their forces under five leaders, and,including all elements hostile to the party in power, took the field against the Bond-Morris Government. But the sympathies of the people were alienated from such an unusual combination, composed as it was of antithetical constituents, and when it was in addition rumoured that their aim was to effect a union with Canada, they suffered a severe reverse at the elections. Only Mr Morine was returned for his constituency; and he had no more than five followers in the Assembly. In these circumstances it was thought that Sir Robert Bond's administration was ensured a long term of office. But in July 1907 Sir Edward Morris, then Minister of Justice, resigned through a disagreement with the Premier on a question of the amount of wages to be paid to the employees in the Public Works. The Opposition under Mr Morison (succeeding Mr Morine, who had shortly before left Newfoundland for Canada) co-operated with leading supporters of Sir Edward Morris and invited him to become the leader of a united party. He accepted the offer, and issued a manifesto in March 1908, indicating his policy. The number of his adherents increased, as a result of his efforts in the Assembly. In the following November the quadrennial general election took place, which was vigorously—indeed bitterly—contested; and the result was a tie, eighteen supporters having been returned for Sir Robert Bond, and eighteen for the Opposition—a unique occurrence apparentlyin the history of self-governing colonies. The success of Sir Edward Morris was regarded as remarkable, in view of several disadvantages from which he suffered in the eyes of large sections of the population,e.g.his being a Roman Catholic (every Premier during the preceding half century had been a Protestant), his alleged sympathy with Mr Reid, and his alleged support of union with Canada. The Governor, Sir William MacGregor, having been requested by Sir Robert Bond to summon the Legislature, was then required by him, on the very eve of the session, to dissolve it, without giving it an opportunity to meet. The Governor refusing to do this, Sir Robert Bond, conformably to usage, resigned along with his cabinet. Sir Edward Morris was accordingly called upon to form a ministry; but at the meeting of the Assembly the attempt to elect a Speaker failed, owing to the opposition of the Bond party. The Governor next endeavoured to obtain a coalition Ministry, but failed, and a dissolution was granted (April, 1909). At the election in May the Morris administration was returned with a substantial majority—the new ministry for the first time in the history of the island consisting entirely of natural-born Newfoundlanders. The course adopted by the Governor, who had been charged by followers of Sir Robert Bond with partisanship and unconstitutional conduct, was thus vindicated by the election, and also approved by the Imperial authorities.In a despatch from the Colonial Office, November 14th, Lord Crewe observed:

"... It will be learned from my previous despatches and telegrams that your action throughout the difficult political situation, which was created in the colony by the indecisive result of the last general election, has met with my approval, but I desire to place publicly on record my high appreciation of the manner in which you have handled a situation practically unprecedented in the history of responsible Government in the Dominions. I may add that I consider your decision to grant a dissolution to Sir Edward Morris—which has, I observe, been adversely criticized in a section of the Newfoundland press—to have been fully in accordance with the principles of responsible Government."

In 1913 the growing prosperity of the fish trade was still further increased by the passing of the new United States tariff law, which admitted fish to the United States free of duty. Further, the opening of the Panama Canal made possible the establishment of new markets.

Now we come to the next momentous event in the history of modern Newfoundland, as it is in that of the modern world generally—namely, the outbreak of the Great War in August 1914. The colony, like all the other British dominions and possessions, was fully alive to the justice of the British cause, and, like the others, was resolvedas a faithful and dutiful daughter to contribute to the military, naval, and material resources of the Mother Country. This manifestation of colonial association and unity was a remarkable feature throughout the war, and will ever be memorable as a token of the undying bonds that unite the scattered constituents of the British Empire, and of the common feelings and ideals that inspire the various sections of the British family. Despite doubt and solicitude as to the effect on trade, especially on the fish markets, on which Newfoundland is so much dependent, the colony devoted itself wholeheartedly to the prosecution of the war.

In September 1914 a special war session of the Legislature was held, and several measures were passed, making provision for the raising of a volunteer force of 1,000 men, for increasing the number of Naval Reserve from 600 to 1,000 men, and for raising a loan (which was subsequently furnished by the Imperial Government) for equipping and maintaining the projected contingents. It may be pointed out here that about the end of the nineteenth century the colony, desiring to participate in the obligations—and indeed privileges—of Imperial defence, took steps to establish a Royal Naval Reserve. From 1900 a number of men volunteered as reservists, and entered for six months' training on one of the vessels of the North American and West Indian squadron. In 1902 a training ship, H.M.S.Calypso, was stationed in St. John'sharbour, where the 600 men—the number proposed—might duly complete their training. Before the war the Naval Reserve establishment amounted to 580. There were besides local Boys' Brigades, but no military force whatever.

In 1915 considerable efforts were made. By the end of the year a military contingent of 2,000 men was raised, and the Naval Reserve was enlarged to 1,200. In November a plebiscite was taken in regard to the question of total prohibition, and a majority decided in its favour; so that from January 1st, 1917, the manufacture, importation, and sale of intoxicating liquors were prohibited.

In 1916 a battalion of the Newfoundland regiment took part in a good deal of severe fighting in France; and it was maintained to full strength by regular drafts from home.

In the meantime an Act was passed imposing restrictions on the killing of seals in Newfoundland waters, the object being to prevent their extermination.

A political question that especially engaged the attention of the colony at this time was its relation to the Canadian Federation, but no progress was made towards the solution of the long standing problem. The following year it became again the chief concern (apart from the war) of the island's electorate. In June the question was raised in the Federal House of Commons at Ottawa; and members spoke in favour of union, declaring that from informationreceived it appeared that the disposition of Newfoundland was becoming more and more in favour of it.[53]In July a coalition Ministry was established, and a Bill was passed prolonging the life of the Parliament for twelve months, as it would normally have expired in October. In the early part of this year, Sir Edward Morris, the Premier, was in London and represented Newfoundland at the Imperial War Conference.

During the last year of the war the population found itself much more affected by the world conflict than it had been in the preceding years. Additions to the Newfoundland contingent under the voluntary system were becoming inadequate: accordingly, the new Government, of which Mr W.F. Lloyd was Premier, decided to introduce a Bill for the purpose of establishing conscription. This was of a selective character, that is, applying to all unmarried men and widowers without children, between the ages of 19 and 39. The conscripts were to be divided into four classes according to age, the youngest being called up first. The Bill was passed, and the measure proved to be a successful one.

After the conclusion of the Armistice in November, the Prime Minister, the Right Hon.Sir William F. Lloyd, K.C.M.G., acted as the representative of Newfoundland at the Paris Peace Conference (1919).

In concluding this chapter it will be of interest to give a few facts and figures showing Newfoundland's effort and record in the war.[54]

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