Part 3 (1/2)
But this was for the future to disclose. At once construction began in Canada. A. M. Ross was appointed chief engineer, and S. P. Bidder general manager, both on the nomination of the English bankers and contractors. Plant was a.s.sembled in Canada, orders for rails and equipment were placed in England, and navvies came out by the thousand.
At one time 14,000 men were directly employed upon the railways in Upper Canada alone. In July 1853 the last gaps in the St Lawrence and Atlantic had been filled up, though not {80} in permanent fas.h.i.+on. In 1854 the Quebec and Richmond section was opened; in 1855, the road from Montreal to Brockville and from Levis to St Thomas, Quebec; in 1856, the Brockville to Toronto and Toronto to Stratford sections. Not until 1858 was the western road completed as far as London. The year 1859 saw the completion of the Victoria Bridge, the extension from St Mary's to Sarnia, and a new road in Michigan, running from Port Huron to Detroit. By 1860 the eastern section extended to Riviere du Loup, where a halt was made.
From the outset difficulties undreamed of had developed. Money was hard to get and early traffic returns were disappointing, so that the company found it almost impossible to secure the balance of the capital required. The road from Montreal to Portland was found to require heavy expenditure to bring it up to the standard. The contractors, for their part, were embarra.s.sed by the company's shortage of funds and by the great rise in the prices of land, materials, and labour. Their own activities, the Reciprocity Treaty of 1854 with the United States, the Crimean War, had combined to bring on a period of inflated prices such as Canada was not to experience {81} again for half a century. With wheat at two dollars a bushel, and 'land selling by the inch,' even liberal margins of profit on contracts vanished.[2]
In these straits the company turned to the government for aid. It had many supporters in the House. No one could deny the benefits which its operations had conferred upon the province. The government guarantee of interest and the government nomination of a part of the board of directors were plausibly held to involve responsibility for the solvency of the company. It was not surprising, therefore, that for a decade after 1855 scarcely a year pa.s.sed without a bill to amend the terms {82} of the Grand Trunk agreement. One year it was an additional guarantee, another a temporary loan, again a postponement, and again a still further postponement of the government's lien. It soon came to be recognized that the money which had been advanced under the guarantee provisions must be considered a gift, not a loan, though to this day the amount nominally due still figures as an a.s.set on the Dominion government's books. Incidentally, the embarra.s.sing government directors were dispensed with in 1857.
The Grand Trunk was complete from Lake Huron to the Atlantic in 1860.
In the ten years that followed, working expenses varied from fifty-eight to eighty-five per cent of the gross receipts, instead of the forty per cent which the prospectus had foreshadowed; not a cent of dividend was paid on ordinary shares--nor has been to this day.
What were the reasons for this disappointing result? The root of the trouble was that the road was not built solely or even mainly with a view to operating efficiency and earning power. It was the politicians' road, the promoters' road, the contractors' road, at least as much as the shareholders' road. The government had encouraged the building of {83} unprofitable sections, such as that east of Quebec, for local or patriotic reasons. Promoters had unloaded the Portland road and later the Detroit and Port Huron road at excessive prices.
The contractors, east of Toronto, had had an eye mainly to construction profits in planning the route, and heavy grades, bad rails, and poor ballast increased maintenance charges beyond all expectations. The prophecy that operating expenses would not exceed forty per cent of earnings, based on English experience, failed partly because earnings were lower, but more because operating expenses were higher, than antic.i.p.ated. The company had more than its share of hard luck from commercial depression, and from loss on American paper money in the Civil War. Water compet.i.tion proved serious in the east, while other railways waged traffic wars in Upper Canada. The trade of the far west, which had been the most attractive lure, did not come in any great amount for the first twenty years. Differences of gauge, lack of permanent connections at Chicago, lack of return freight, rate wars with the American roads which had been built west at the same time or later, the inferiority of Montreal to New York as of old in harbour facilities and {84} ocean service, the failure of Portland to become a great commercial centre--all meant hope and dividends deferred.
Finally, the management was working at long range: the road did not enjoy the vigilant inspection or the public support that would have attended control by Canadian interests.
The Grand Trunk did Canada good service, well worth all the public aid that was given. It would probably have given better service, and its shareholders could not have fared worse, had the plans of Galt and his a.s.sociates not been interfered with, and the line been built gradually under local control.
While the building of the Grand Trunk was the main achievement of the period, it was by no means the only one. The fifties were the busiest years in the railway annals of older Canada. In 1850 there were only 66 miles of road in all the provinces. In 1860 there were 2065, of which over 1700 had been added in the Canadas alone. The Great Western and the Northern were pushed forward under the provisions of the earlier Guarantee Act; roads of more local interest were fostered by munic.i.p.al rivalry. Their building brought unwonted activity in every {85} branch of commerce. A speculative fever ran through the whole community; fortunes were made and lost in the provision trade, and land prices soared to heights undreamed of. This mood was the promoter's happy chance, and still more charters were sought. The pace quickened till exhaustion, contagious American panics, poor harvests, and the Crimean War--which first raised the price of the wheat Canada had to sell, but later raised the price of the money she had to borrow--brought collapse in 1857.
In this boom period jobbery and lobbying reigned to an extent which we rarely realize in our memory of the good old times. Railway contractors were all-powerful in the legislature, and levied toll at will. The most notable 'contractor-boss' of the day was able, dealing with the Great Western, to hold up a bill for double-tracking until a.s.sured of the contract himself; dealing with the Grand Trunk, to force from the English contractors a share in the enterprise before consenting to help their schemes through; with the Northern, to collect $100,000 as a condition of securing from the government the guarantee bonds before they had been rightly earned. Munic.i.p.al officials were bribed to help bonuses {86} through. Existing roads were blackmailed by pedlars of rival charters. Glaringly fraudulent prospectuses were issued. On a smaller scale, the excitement and the rascality which had marked the beginning of the great railway eras in the United Kingdom and the United States were reproduced in Canada.
Of the other roads completed in this period, the two which had been aided by Hincks's first Guarantee Act were most important.
The Great Western had a promising outlook. It ran through a rich country and had a.s.sured prospects of through western traffic. The road was completed from Suspension Bridge to Windsor in January 1854. An extension from Hamilton to Toronto was built in 1856, and a semi-independent line from Galt to Guelph absorbed in 1860. The Great Western came nearest of any early road to being a financial success; alone of the guaranteed roads it repaid the government loan, nearly in full. But after a brief burst of prosperity, from 1854 to 1856, it, too, was continually in difficulties. In 1856 it paid a dividend of 8 1/2 per cent, but three years later it paid nothing, and in the next decade averaged less than three per cent.
The troubles of the Great Western came {87} chiefly from compet.i.tion, actual and threatened, and uncertain traffic connections. To the north, the chartering of the Toronto, Guelph and Sarnia, amalgamated later with the Grand Trunk, cut into its best territory. An endeavour was made in 1854 to divide the remaining area, but two years later the battle was renewed, the Great Western building to Sarnia and the Grand Trunk tapping London and Detroit. Between the Great Western and Lake Erie a rival road direct from Buffalo to Detroit was threatened time and again, but was not built until after Confederation. South of Lake Erie the Lake Sh.o.r.e and Michigan Southern was built shortly afterwards by interests connected with the New York Central, thus threatening the traffic connections of the Great Western both east and west. To avert loss of its western trade, the Great Western sunk large sums in aiding the construction of a road from Detroit to Grand Haven, with ferry connections to Milwaukee; but this experiment did not prove a success and caused serious embarra.s.sment.
The Northern Railway, whose promoters, as we have seen, navely recognized that railways and lotteries were close akin, was opened as far as Allandale in 1853, and to Collingwood {88} in 1855. It was scamped by the contractors, poorly built, and overloaded with debt.
The sanguine policy of building up a through traffic from the American West, by water to Collingwood and rail to Toronto, proved a will-o'-the-wisp. In turn the company relied on independent steamers, and set up a fleet of its own, but equally in vain so far as profit went. By 1859 the road was bankrupt. A new general manager, Frederick c.u.mberland, brought in a change of policy. Local traffic was sedulously cultivated, and a fair degree of prosperity followed.
Most of the lesser roads constructed looked to the munic.i.p.alities rather than to the provinces for aid. The Munic.i.p.al Loan Fund of 1854 was the third and last phase of Hincks's railway policy. This was an ingenious attempt to give the munic.i.p.alities the prestige of provincial connection without accepting any legal responsibility. Munic.i.p.alities had previously been permitted to bonus or take stock in railways and toll-roads, but their securities were unknown in the world's markets.
Hincks now provided that munic.i.p.alities which wished money to aid railways or other local improvements might practically pool their credit and share in the credit of the province. Provincial {89} debentures were issued against the munic.i.p.al obligations pooled in the Fund, and the proceeds of their sale given to the munic.i.p.alities. A sinking fund was to be maintained, and, if need be, the province could levy through the sheriff on any defaulting town.
The munic.i.p.alities made full use of their privileges. It was believed that railway investments would yield high dividends, and the more optimistic expected to see all taxes made unnecessary by the profits earned. Town vied with town in extravagant enterprises.[3] Not a cent brought a dividend; instead, the munic.i.p.alities found themselves saddled with heavy interest payments. One after another declined to pay; Port Hope was $312,000 in arrears by 1861 and Cobourg $313,000.
The provincial government had {90} not the political courage to send in the sheriff, and accordingly it was forced at last to a.s.sume the whole burden. Prudent munic.i.p.alities which had declined to borrow at eight per cent found themselves compelled to share the burdens of their reckless neighbours. Demoralization was widespread.
The railways constructed by such aid may be briefly noted. The Buffalo and Lake Huron, extending from Fort Erie to G.o.derich, was completed in 1858. It had its origin in the ambition of Buffalo to have more immediate connection with the rich western peninsula of Upper Canada and the Lake trade beyond than was afforded by the Great Western. The London and Port Stanley, built in 1854-56, mainly by the city of London, with smaller contributions from Middles.e.x and Elgin counties and the city of St Thomas, failed to realize the expectations that it would become the main artery of trade between Canada and the states across the lake, but it developed a fair excursion trade and coal traffic, and indirectly justified its construction. The Erie and Ontario portage road, rebuilt in 1854, has already been noted. Another portage road round Niagara Falls was the Welland Railway, planned by W.
Hamilton Merritt, {91} the projector of the Welland Ca.n.a.l. It ran from Port Colborne on Lake Erie to Port Dalhousie on Lake Ontario, twenty-five miles, and was completed in 1859, only to add one more to the list of unprofitable roads, and eventually to be absorbed by the Great Western.
Farther east the rivalry of Port Hope and Cobourg led to the construction of two roads, the Cobourg and Peterborough and the Port Hope, Lindsay and Beaverton. Both relied chiefly on timber traffic and aimed to develop the farming country in the rear. The Cobourg line, begun in 1853, suffered disaster from the start: the contractor's extras absorbed all the cash available; the three-mile bridge built on piles across Rice Lake gave way, and after $1,000,000 had been expended the road was sold for $100,000. The Port Hope line, which absorbed a branch from Millbrook to Peterborough in 1867, fared somewhat better.
The Brockville and Ottawa was a lumber road, carrying supplies up and timber down. It was chartered to run from Brockville to Pembroke, with a branch from Smith's Falls on the Rideau Ca.n.a.l to Perth. By 1859 it had reached Almonte, and six years later struggled as far as Sand Point on the Ottawa, when it {92} halted, till the Canadian Pacific project gave it new life. After failing to make ends meet for some years the company went through repeated reorganizations in the early sixties.
The Bytown and Prescott, later the St Lawrence and Ottawa, built in 1854, was also a lumber road, promoted by interests connected with the Ogdensburg Railway, whose terminus was opposite Prescott. It suffered the same financial fate, and was sold to the English company which had supplied the rails, at a total sacrifice of munic.i.p.al and other creditors' interests. Around the Long Sault rapids in the Ottawa there was built in 1854 the thirteen-mile Carillon and Grenville, a summer portage road, an early enterprise which retained its independence and its old five-foot-six-inch gauge until 1912, when it was absorbed by the Canadian Northern. In Lower Canada the only minor road built which has not been referred to was the Stanstead, Shefford and Chambly, opened in 1859 from St Johns to Granby, and forming practically an extension of the Champlain and St Lawrence from the former point.
[1] As a matter of fact, discussion of this scheme began in St Andrews in 1827, and in 1828 John Wilson convened a meeting of the citizens to further it.