Part 5 (1/2)
[2] The Northern Pacific was at many stages in its history closely connected with Canadian affairs. It had originally been projected in New England: the first proposal was to use the Central Vermont and a Canadian road to be built or acquired as the eastern links, then, crossing into Michigan, the railway was to strike northwestward to the Pacific. When control fell into the hands of New York and Philadelphia interests, these plans were dropped, but later the new management negotiated with Governor Archibald of Manitoba, as well as with Sir John Macdonald, to endeavour to put through an international road, the first section running through Canada to Sault Ste Marie, the second through Michigan and Minnesota, the third through the Canadian plains, and the fourth through the Rockies to the sea on American territory.
Nothing came of the negotiations, though it may be noted that the Canadian Pacific to-day has carried out precisely this plan, in addition to its all-Canadian line.
[3] This correspondence will be found in the Journals of the House of Commons, vol. vii, 1873. In no other doc.u.ments available to the public has the connection between politics and railway promoting in Canada been made so evident. The following are a few brief extracts from letters addressed by Sir Hugh Allan to various American a.s.sociates during 1872:
Thinking that as I had taken up the project there must be something very good in it, a very formidable opposition was organized in Toronto, which for want of a better took as their cry 'No foreign influence; no Yankee dictation; no Northern Pacific to choke off our Canadian Pacific,' and others equally sensible.... I was forced to drop ostensibly from our organization every American name, and put in reliable people on this side in place of them.... Mr M'Mullen was desirous of securing the inferior members of the Government, and entered into engagements of which I did not approve, as I thought it was only a waste of powder and shot. On a calm view of the situation I satisfied myself that the decision of the question must ultimately be in the hands of one man, and that man was Sir George E. Cartier, the leader of the French party, which held the balance of power between the other factions.... It was evident that some means must be adopted to bring the influence of this compact body of men to bear in our favour, and as soon as I made up my mind what to do, I did not lose a moment in following it up. A railroad from Montreal to Ottawa, through the French country, north of the Ottawa river, has long been desired by the French inhabitants; but Cartier, who is a salaried solicitor of the Grand Trunk road, to which this would be an opposition, has interposed difficulties, and by his influence prevented it being built.... The plans I propose are in themselves the best for the interests of the Dominion, and in urging them on the public I am really doing a most patriotic action. But even in that view, means must be used to influence the public, and I employed several young French lawyers to write it up in their own newspapers. I subscribed a controlling influence in the stock, and proceeded to subsidize the newspapers themselves, both editors and proprietors. I went to the country through which the road would pa.s.s, and called on many of the inhabitants. I visited the priests and made friends of them, and I employed agents to go among the princ.i.p.al people and talk it up. I then began to hold public meetings, and attended to them myself, making frequent speeches in French to them, showing them where their true interests lay ... and I formed a committee to influence the members of the Legislature. This succeeded so well that in a short time it had 27 out of 45 on whom I could rely, and the electors of the ward in this city, which Cartier himself represents, notified him that unless the contract for the Pacific Railway was given in the interests of Lower Canada he need not present himself for re-election....
The policy adopted has been quite successful, the strong French influence I succeeded in obtaining has proved sufficient to control the elections, and as soon as the Government realized this fact, which they were unwilling to admit and slow to see, they opened negotiations with me.... Yesterday we entered into an agreement, by which the Government bound itself to form a Company of Canadians, only according to my wishes. That this Company will make me President, and that I and my friends will get a majority of the stock, and that the contract for building the railroad will be given to this Company, in terms of the Act of Parliament. Americans are to be carefully excluded in the fear that they will sell it to the Union [_sic_] Pacific, but I fancy we can get over that some way or other. This position has not been attained without large payments of money. I have already paid over $200,000, and will have at least $100,000 more to pay.
[Ill.u.s.tration: Railways of Canada, 1880]
{131}
CHAPTER VIII
BUILDING THE CANADIAN PACIFIC
The Minnesota Venture--Canadian Pacific Syndicate--The Contract--Political Opposition--Terms of the Contract--Organizing the Company--Financing--Construction
In the months and years that followed, no men were so much in the mind and speech of the Canadian public as the members of the new syndicate.
The leading members were a remarkable group of men. Probably never in the history of railway building, not even in the case of the 'Big Four'
who built the Central Pacific--Huntingdon, Stanford, Crocker, and Hopkins--had the call of the railway brought together in a single enterprise men of such outstanding individuality, of such ability and persistence, and destined for success so notable.
The Canadian Pacific was not their first joint enterprise. It was the direct outcome of a daring venture in connection with a bankrupt Minnesota railway, which had brought them wealth beyond their wildest dreams, and had definitely turned their thoughts to railway work.
Early in the settlement of the northwestern {132} states the need of railways, and of state aid to railways, was widely realized. In 1857 Congress gave the territory of Minnesota a large grant of public lands to use in bonusing railway building, and in the same year the legislature of the territory incorporated a company, the Minnesota and Pacific, to build from Stillwater through St Paul and St Anthony's Falls (Minneapolis) to Red River points. The state gave the new company millions of acres of land and a cash subsidy, munic.i.p.alities offered bonuses, and a small amount of stock was subscribed locally.
Five years pa.s.sed, and not a mile had been completed. The company, looted into insolvency by fraudulent construction company contracts, was reorganized as the St Paul and Pacific, heir to the old company's a.s.sets but not to its liabilities, and a beginning was made once more.
Trusting Dutch bondholders lent over twenty millions, and by 1871 the road reached Breckenridge on the Red River, two hundred and seventeen miles from St Paul. Again a halt came. Russell Sage and his a.s.sociates in control had once more looted the treasury. The Dutch bondholders, through their agent, John S. Kennedy, a New York banker, applied for a receiver, and in 1873 one Jesse P. Farley was {133} appointed by the court. It seemed that the angry settlers might whistle in vain for their road.
In St Paul at that time there lived two Canadians who saw the opportunity. The elder, Norman W. Kittson, had been Hudson Bay agent and head of a transportation company on the Red River. The younger, James J. Hill, an Ontario farm-boy who had gone west while still in his teens, owned a coal and wood yard in St Paul, and had a share in the transportation company. Neither had the capital or the financial connection required to take hold of the bankrupt company, but they kept on thinking of it day and night. Soon a third man joined their ranks, Donald A. Smith. A Highland lad who had come to Canada at eighteen, Donald Smith had spent a generation in the service of the Hudson's Bay Company, mainly in the dreary wilds of Labrador and on the sh.o.r.es of Hudson Bay. When in 1871 he became chief commissioner of the organization he had served so long and so well, it seemed to most men that he was definitely settled in his life work and probably near the height of his career. But Fate knew, and Donald Smith knew, that his career was only beginning. Coming down from the north {134} each year by the Red River to St Paul, on his way east, he talked over the railway situation with Hill and Kittson. The more they talked the greater grew their faith in the country and the railroad. It was a faith, however, that few in the moneyed East shared with them. It had been the smas.h.i.+ng of the rival road, the Northern Pacific, in 1873, that had given the signal for the brief panic and the long depression of the seventies. The Minnesota road itself had twice become bankrupt.
The legislature would undoubtedly soon declare the land-grant forfeited, unless the construction promised was completed. To fill the cup, in the middle seventies Minnesota and the neighbouring lands were visited by unprecedented swarms of gra.s.shoppers or Rocky Mountain locusts. Swarming down from the plateau lands of the Rockies in columns miles high, covering the ground from horizon to horizon, they swept resistlessly forward, devouring every green thing in their way.
When they had pa.s.sed, hundreds of deserted shacks stood silent witnesses to the settlers' despair.
[Ill.u.s.tration: Lord Strathcona. From a photograph by Lafayette, London]
It was in 1876 that the further allies needed came from the East.
Thirty years earlier George Stephen, a younger cousin of Donald Smith, had left his Highland hills to seek his {135} fortune in London, and after a short apprentices.h.i.+p there had gone still farther afield, joining an uncle in Montreal. He rose rapidly to a foremost place in the wholesale trade of Montreal; selling led him into manufacturing, and manufacturing into financial activities. In 1876 he became president of the Bank of Montreal. a.s.sociated with him in the same bank was still another shrewd, forth-faring Scot, Richard B. Angus, who had risen steadily in its service until appointed to succeed E. H. King as general manager in 1869.
A lawsuit in connection with the bank's affairs took both Stephen and Angus to Chicago in 1876. A week's adjournment left them with unwonted leisure. A toss of a coin sent them to St Paul rather than to St Louis to spend the week. Smith had already spoken of the project while in Montreal, but at that distance caution had prevailed. Now Stephen, who had never before seen the prairie, was immensely taken with the rich, deep soil he saw before him. He knew from reading and experience that gra.s.shopper plagues did not last for ever. He decided, therefore, to join in the attempt to get control of the Minnesota road and its land-grant, and the famous group was complete. {136}
Once George Stephen had made up his mind, little time was ever lost.
He sailed for Europe and interviewed the Amsterdam committee in charge of the Dutch bondholders' interests, Messrs Chouet, Weetjin and Kirkhoven. They despaired of ever seeing their money back, and were weary of being a.s.sessed by the receiver for funds to keep the road together. Stephen left Amsterdam with an option in his pocket, given for the sum of one guilder, agreeing to sell him the Dutch bonds for something like the amount of the unpaid interest, and agreeing, further, to wait until six months after reorganization for part of the payment. The next step was to provide the cash required for immediate necessities. About $300,000 was put up by the members of the group.[1]
Money was borrowed from the Bank of Montreal, $280,000 in the first advance, and something under $700,000 in all, as Stephen stated to inquiring shareholders at the bank's annual meeting in 1880. Money was advanced to the receiver to complete the most necessary extensions, those required to save the land-grant and that necessary to reach the Canadian {137} border to join the government road being built south from Winnipeg. The threatened forfeiture of the land-grant was thus averted for a time. Then the bonds were purchased for $6,780,000, the floating obligations and part of the stock were bought up, and the mortgage which secured the bonds was foreclosed. The a.s.sets were bought by the new company organized for the purpose, the St Paul, Minneapolis and Manitoba, of which George Stephen was president, R. B.
Angus vice-president, and James J. Hill general manager. Thus in June 1879 the whole system, comprising six hundred and sixty-seven miles of railway, of which five hundred and sixty-five were completed, and the land-grant of two and a half million acres, came into the possession of the little group.[2]
The after fortunes of the road, which ten years later expanded into the Great Northern of to-day, do not concern us here. It is only necessary to recount that the harvest reaped {138} by the adventurers[3] put the tales of El Dorado to shame. A few days after control of the railway had been a.s.sured, the gra.s.shoppers had risen in flight, and Minnesota knew them no more. Settlers swarmed in, the railroad platforms were jammed with land-seekers, and between the land-buyers of to-day and the wheat-s.h.i.+ppers of to-morrow the owners of the once discredited railway saw their coffers fill to overflowing. In 1879 they divided among themselves the whole fifteen millions of stock issued, floating sixteen millions of bonds for extension and equipment. For three years they took no dividends, letting the profits go to further building. Then in 1882 another $2,000,000 stock was issued, and in 1883 a deferred dividend came in the shape of a $9,000,000 issue of bonds, or, rather, the stockholders sold to themselves a $10,000,000 issue for ten cents on the dollar. Aside entirely from interest and dividends, the stockholders of the Great Northern in the seventeen years following 1889 were presented with over $300,000,000 of interest-bearing securities. {139} All the railway annals of the United States cannot present a duplicate of the startling success attained by these four or five Canadians and their a.s.sociates.[4]