Part 5 (2/2)
These were the men to whom the Canadian government turned when the minister of Railways, Sir Charles Tupper, urged them to unload upon a private company the burden of completing the road to the Pacific.
'Catch them before they invest their profits,' was the advice of Sir John's most intimate adviser, that shrewd Eastern Towns.h.i.+ps politician, John Henry Pope. Probably they came half-way. They knew the West as well as any men, and with their road built to the Canadian boundary and with a traffic arrangement beyond to Winnipeg, they were already in the field. Of all the group Stephen was most reluctant to undertake the new enterprise, but he was a.s.sured by his a.s.sociates that the burdens of management would be shared by all. The government had also approached Duncan M'Intyre, a Montreal capitalist who controlled the Canada Central, running from Brockville by way of Ottawa to Pembroke, {140} and under construction from that point to Callender, the eastern end of the Canadian Pacific main line. He was more than willing to link up this railway with the larger project, and the group was formed.
[Ill.u.s.tration: Lord Mount Stephen. From a photograph by Wood and Henry, Dufftown. By courtesy of Sir William Van Horne]
They debated the question with the government early in 1880. It was felt, however, that negotiations could not be concluded in Canada.
More capital would be needed than even these new-fledged millionaires could or would furnish, and nowhere was capital so abundant as in London. In July, therefore, Sir John Macdonald, Sir Charles Tupper, and John Henry Pope sailed for London, accompanied by George Stephen and Duncan M'Intyre. London capitalists did not bite as freely as antic.i.p.ated. Barings and Rothschilds alike were chary about the enterprise. Sir Henry Tyler, president of the Grand Trunk, was approached, and agreed to build if the link north of Lake Superior were omitted in favour of a line through the United States, south of the lake, a condition which Sir John, strongly urged on by Tupper, would not accept. An arrangement might have been made with a London group, but only on condition of a four per cent guarantee for twelve years, another condition which, less wisely, was also rejected. In the {141} end the quest proved unavailing. It is true that the Paris firm of Cohen, Reinach and Co. entered the syndicate, and that the London house of Morton, Rose and Co. also joined. It was really, however, the New York end of that firm, Morton, Bliss and Co., which was interested.
Contrary to the general impression, the fact is, that though most of the shares when issued eventually drifted into English hands, no English financiers shared in the building of the Canadian Pacific until it was within one hundred days of completion. Perhaps, in view of the Grand Trunk's record, it was as well that the men on this side of the Atlantic were to be thrown on their own resources from the start, and given the chance for bigness which responsibility brings.
Back to Ottawa the pilgrims came, and there on October 21, 1880, the contract was signed by Charles Tupper for the government and by George Stephen, Duncan M'Intyre, James J. Hill, John S. Kennedy, Morton, Rose and Co. of London, and Cohen, Reinach and Co. of Paris. Donald A.
Smith's name was not there. It was only two years since he and Sir John, on the floor of the House of Commons, had called each other 'liar' and 'coward' and any other sufficiently strong epithet they {142} could put their tongues to, and it was to be a few years more before the two Highlanders could cover their private feud with a coating of elaborate cordiality. So, to preserve appearances, Smith's interest was kept a secret--but a very open one.
When parliament met in December 1880 the contract was laid before it.
The terms were princely. For constructing some nineteen hundred miles the syndicate were to be given free and complete the seven hundred and ten miles under construction by the government,[5] $25,000,000 in cash, and 25,000,000 acres of selected land in the Fertile Belt. They were promised exemptions from import duties on construction materials, from taxes on land for twenty years after the patents were issued and on stock and other property for ever, and exemption from regulation of rates until ten per cent per annum was earned on the capital.
a.s.surance was given that for twenty years no compet.i.tive roads connecting with the western states would be chartered: 'no line of railway south of the Canadian Pacific, except such line as shall run southwest or to the westward of southwest, nor to be within fifteen miles {143} of lat.i.tude 49.' Ten years were given to complete the task, and a million dollars were deposited as security.
The contract was received by Blake, then leader of the Opposition, and his followers with a unanimous shout of disapproval. During the Christmas recess Blake endeavoured to raise the country against it. A rival syndicate was hastily organized, with Sir William Howland, A. R.
M'Master, William Hendrie, A. T. Wood, Allan Gilmour, George A. c.o.x, P.
Larkin, James M'Laren, Alexander Gibson, and other well-known capitalists at its head. After depositing $1,400,000 in chartered banks as evidence of good faith, they offered to build the road for $3,000,000 and 3,000,000 acres less, to pay duty on all supplies imported, and to abandon the monopoly clause, the exemptions from taxation, and the exemption from rate regulation. With this weapon to brandish Blake gave the government proposal no respite, but on a straight party vote the contract was ratified by parliament and received the formal royal a.s.sent in February 1881.
It was in many ways unfortunate that from the outset the Canadian Pacific project was made the football of party politics, but it was {144} perhaps inevitable. The first duty of an Opposition is to oppose, and even if some good measures are fact.i.tiously resisted, many a 'job' is prevented by this relentless criticism. The government proposal, it would now seem, was on the whole in the country's interest, but it had weak points. In attacking these the Opposition was led on to take up a position of hostility to the whole project, while the government was equally indiscriminate in defending every jot and t.i.ttle of the bargain. In any event, with the bitter rivalry of the Grand Trunk and the Canadian Pacific looming up, it is doubtful if it could have been possible to prevent this antagonism being reflected in the politics of a country where the issues are so largely economic issues.
That the government was right in deciding for private construction and operation, there has since been little question. To build and operate a pioneer road, to make the inevitable United States connections or extensions, to undertake the subsidiary enterprises and to enter into the flexible, intimate relations with producers and s.h.i.+ppers necessary for success, were tasks for which government departments were not well fitted. With the traditions which has unfortunately become established {145} in Canadian politics, there would probably be campaign contributions in the one case and graft in the other, but in the one case, also, there would probably be efficiency, and in the other red tape and stagnation.
As to what private company should be given the contract, there seemed more room for discussion. The members of the Howland syndicate were successful and substantial business men, and their offer appeared to be much better than the offer accepted. It was, however, denounced as a sham by the government forces, on the ground that its signers knew that there was not the faintest likelihood of the ministry failing to carry through the contract it had signed. How successful the Howland group would have proved we can only conjecture; it is certainly not likely that they would have developed more courage, persistence, or enterprise than the men who actually carried out the project; nor could they have fulfilled their obligations more fully and more honourably.
The parties differed, again, on the question of the Lake Superior link.
The government urged the necessity of building at once an all-Canadian route, regardless of the added expense. The Opposition favoured such a route eventually, but urged that it was better for the {146} present to make use of a road running from the Sault through Northern Michigan and Minnesota. Such a road would bring to Montreal the traffic of the American as well as the Canadian West. Then, when our West had been settled and traffic warranted, the task of cutting a road through the wilderness north of the lake could be faced, and meantime it would not be necessary to offer any company the extravagant terms necessary to induce it to a.s.sume this burden from the start. There was much weight in this argument, which Sir Charles Tupper himself had strongly urged only a few months before, and in the light of the later Canadian Pacific extension through precisely this American territory as well as through Maine, there was much buncombe in the flag-waving answer made.
Yet, on the whole, so necessary to national unity was an unbroken road, so hard a country was this to make into one, that it was best to err on the side of safety. The political interests at stake warranted some risk of money loss.
It was, however, on the question of the form and amount of the aid offered that most controversy arose. Sir John Macdonald had lightly prophesied that in the end the road would not cost Canada a single farthing. He {147} doubtless meant that land sales would repay the expenditure; even this did not prove true, and the statement awoke unreasonable expectations as to the bargain to be made. When the contract was made public it was denounced as meaning nothing more or less than that the country was to build the road and present it gratis to the company. To antic.i.p.ate a few years, we may note the actual results at the end of 1885, when the last rail had been laid. The cost of the main line only, including the government sections, and of equipment, to that date, was approximately $150,000,000. From private sources some $50,000,000 net had been secured: the $65,000,000 stock had been sold at varying prices, realizing slightly over $30,000,000 for the treasury, and first mortgage bonds, land-grant bonds less amount redeemed, and outstanding accounts made up the balance. The government, on its part, had given, by the final arrangements, $35,000,000 cash, and completed road costing another $35,000,000; three and a half million acres of the land-grant had been sold for about $11,000,000, and at only two dollars per acre the fourteen odd million acres left were worth over $29,000,000.
On the other hand, it was urged that the aid {148} given was not so great as it seemed. The value of the government sections was particularly questioned.[6] Whatever its value, it was not more than enough to induce capitalists to run the great risks involved. The road had to be operated as well as built, and few believed that for years to come there would be sufficient traffic to make ends meet. Its future depended on the future of the West, and it needed a robust optimism at times to believe that the West would overcome frost and drought and other plagues. The fact that in 1885 Canadian Pacific stock sold as low as 33 3/4 in London, and a shade lower on this side of the water, shows the estimate the world of finance put upon the bargain it had made. Nor was the road completed in 1886. It was then only begun.
Grades had to be bettered, trestle-work filled up, extensions flung out, terminals secured, and a new road built every few years.
{149}
Looking back now, after the lapse of thirty years, it would seem that the government would have done better if it had given less of the land which was to prove so valuable, and had, instead, guaranteed the dividend on the stock for a term of years. In the eighties, however, western acres were held in little esteem and money guarantees, with Grand Trunk memories fresh, looked dangerous--and it was in the eighties that the decision had to be made.
[Ill.u.s.tration: Sir William Cornelius Van Horne. From a photograph by Notman]
More valid was the criticism of the remaining terms. The exemption from duties was wise, if inconsistent in a protectionist government, and the exemption from regulation of rates until ten per cent was earned had a precedent in a clause in the General Railway Act, not repealed until 1888, exempting all roads from such regulation until fifteen per cent on the capital invested had been earned. The exemption from taxation, however, was an unwarranted privilege, throwing undue burdens on homesteading settlers; and the interpretation afterwards given that the exemption on lands extended until twenty years after the patent had been issued still further increased the difficulty. Objectionable, also, was the monopoly clause, barring United States {150} connections for ten years. It was claimed that this exemption was essential if traffic was to be secured for the Lake Superior link, and essential also if capital was to be secured from England. The Englishman, one of the heads of the road declared, hated a monopoly at home as he hated the devil, but he looked with favour on monopolies abroad. The monopoly clause, as will be seen later, for a time did more to split East and West than the Lake Superior link did to bind them together in spirit.
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