The Railway Builders Part 6

But enough of discussion. Action came quick. Not a day was lost in organizing and beginning work.

George Stephen was chosen president, and held the post until 1888. To him more than to any other man the ultimate success of the Canadian Pacific was due. Indomitable persistence, unquenchable faith, unyielding honour stamped his character. He was one of the greatest of Empire builders. He never despaired in the tightest corner, and never rested while a single expedient remained untried. Duncan M'Intyre became one of the two vice-presidents, and took an active part in the company's affairs until he dropped out {151} in 1884. Richard B. Angus came back from St Paul to become vice-president and a member of the executive committee. His long banking experience and his shrewd, straightforward judgment proved a tower of strength in days of trial.

Donald A. Smith, while after 1883 a director and a member of the executive committee, took little part in the railway's affairs, though at Stephen's urging he more than once joined in going security when help was most needed. James J. Hill left the directorate and unloaded his stock at the close of 1882, because the company refused to accept his advice to omit the Lake Superior section, and because of the growing divergence of interests between the St Paul, Minneapolis and Manitoba and the Canadian Pacific. With him retired John S. Kennedy.

The Baron de Reinach also withdrew at an early stage. The English directors, representing Morton, Rose and Co. of London, retired as soon as the road was completed, being replaced by representatives of Morton, Bliss and Co. of New York. E. B. Osler came in with the Ontario and Quebec in 1884. The board became more and more distinctively Canadian.

One of the first steps taken by the directors {152} was to open offices in Winnipeg, and put two men with United States experience in charge--A. B. Stickney, later president of the Chicago Great Western, as general superintendent, and General Rosser as chief engineer. The rate of progress was not satisfactory, and early in 1882 a fortunate change was made. William C. Van Horne, at that time general superintendent of the Chicago, Milwaukee and St Paul, and still under forty, was appointed general manager with wide powers. Some years earlier, when he was president of the Southern Minnesota, the leading members of the St Paul syndicate had had an opportunity of learning his skill. He had been in railroading since fourteen, beginning as a telegraph operator on the Illinois Central, and had risen rapidly in the service of one Middle West road after another. His tireless driving force was precisely the a.s.set the company now most needed.

The first task was to find the money necessary to build the nineteen hundred miles remaining of the main line, to build or acquire necessary branches and extensions, and to provide equipment.

The government subsidies were the first {153} resource. The $25,000,000 cash and the 25,000,000-acre land-grant were to be paid as construction advanced. If the land-grant were put on the market at once, for sale to settlers, it would bring relatively little, in face of the compet.i.tion of the free homestead land in adjoining sections.

Three expedients were devised to make it available as soon as possible.

An extensive campaign was begun to advertise the government free land and thus exhaust the supply along the railway line, and at the same time provide producers of freight. Bonds based on the security of the land-grant were issued to the amount of $25,000,000; $10,000,000 of this issue was sold in 1881 at 92, and varying proportions of the remainder were used as pledge for the government loans or execution of the contract. These bonds were redeemed and cancelled as the lands on which they were based were sold. Further, the Canada North-West Land Company was organized to buy five million acres for a long hold. The company included several members of the syndicate as well as some English investors to whom land appealed more than railway stocks. It found itself unable to handle this amount and the purchase was reduced to 2,200,000 acres. Sales to other companies {154} and to individuals brought the total amount received or due from land by the end of 1885 up to $11,000,000.

Next came the contributions of the members of the syndicate and other private investors. The capital stock authorized was $100,000,000. In 1881 the members of the syndicate subscribed $5,000,000 at par. In May 1882 they allotted themselves $10,000,000 at 25. In December of the same year $30,000,000 was issued at 52 1/2 to a syndicate of New York bankers organized by W. L. Scott; this stock was eventually sold largely in Holland and in England. A final ten millions were pledged in New York and Montreal for a loan of half that sum, and later sold for about the amount of the loan. All told, sixty-five millions of stock had been issued and some thirty-one million dollars had been brought into the treasury.

Then the flow ceased. The brief gleam of prosperity which had shone over North America after the gloom of the later seventies vanished.

Never had railway building been carried on so vigorously in the United States as in the years 1881-83, and the reaction was correspondingly severe. The collapse of the boom which had accompanied the first {155} operations in Manitoba, the failure of harvest after harvest, the fading away of settlers and speculators alike, robbed all but a persistent few of faith in the Canadian North-West and in the railway whose fortunes rose or fell with it. The way of the Canadian Pacific was made particularly hard by the manoeuvres of rival companies. Some of the United States Pacific roads, awake to the seriousness of the compet.i.tion threatened, attacked it in the New York market. The Grand Trunk, naturally alarmed by the incursion of the new road into its best paying territory in the East, used all the power of its influential directors and its army of shareholders in England to bar the London market.

The financial policy adopted by the Canadian Pacific was unique in the records of great railway enterprises on this continent. It was simply to rely entirely on stock issues, to endeavour to build the road without incurring any bonded debt. Not until the last year of construction, 1885, were bonds based upon the security of the road itself issued for sale. It was doubtless desirable, if possible, to avoid the reckless methods by which so many American roads had been hopelessly waterlogged by excessive bond issues. The memory of the {156} St Paul and Pacific's six-million share capital as against its twenty-eight-million bonded indebtedness was fresh in the minds of the members of the syndicate. By keeping fixed charges low, while earning power was still uncertain, they lessened the risk of having the road pa.s.s out of the stockholders' control into a receiver's hands. Yet as bonds could have been sold more easily than stock, it increased the difficulty of finding the necessary capital. Even so, it came within an ace of succeeding.

In pursuance of this policy the management, faced with a hesitating market, decided upon a bold step. Late in 1883, acting in accordance with the advice of New York and London financiers, they decided to endeavour to make a market for the unissued stock by giving a.s.surance of a dividend for a term of years. They offered to deposit with the government as trustees a sum sufficient to provide for ten years a dividend of three per cent on the $65,000,000 stock already issued, to be supplemented, if possible, by a further dividend out of current revenues, and they arranged to make similar provision for the remaining $35,000,000 as it was sold. Over half the $16,000,000 necessary to purchase this {157} annuity was deposited with the government at once and security given for the early payment of the balance. Only success could have justified such a locking up of the funds urgently needed for construction, and success did not come, though for a time it seemed probable. The sudden smash of the Northern Pacific, just completed by Villard, brought the stock down lower than before the fillip had been given. With sixteen millions locked up or pledged the company was in a worse state than before.[7]

In this emergency Stephen and Smith and M'Intyre pledged their St Paul or other stock for loans in New York and Montreal, but still the gap was unfilled. They turned to the {158} government, requesting a loan of $22,500,000, to be secured by a first charge on the main line. In return, they agreed to complete the road by May 1886, five years earlier than the contract required. The request at first was scouted by Sir John Macdonald. Parliament would not consent, and if parliament consented the country would revolt. Bankruptcy stared the company in the face when John Henry Pope came to the rescue. He soon convinced Sir John that if the Canadian Pacific smashed, the Conservative party would smash the day after, and the aid was promised. The Cabinet was won over, and Sir Charles Tupper, hastily summoned by cable from London, stormed it through caucus, and the loan was made.

The funds thus secured were soon exhausted in rapid and costly construction in the mountain and Lake Superior sections. The government's blanket mortgage on the road made it impossible to borrow elsewhere. So, after the Riel episode, to be noted later, a new arrangement was made with the government by which the $35,000,000 stock unsold was cancelled and an equal amount of first mortgage bonds issued. Twenty millions of this issue and the unsold lands were subst.i.tuted for the government's security, and the remainder of the bonds {159} sold at 95. This put the company once more in funds. The relief came none too soon. In one fateful day in July, when the final pa.s.sing of the bill was being tensely awaited, the Canadian Pacific, which now borrows fifty millions any day before breakfast, was within three hours of bankruptcy for lack of a few hundred thousand dollars.

But by March 1886 every cent of the company's obligations to the government was paid off, twenty millions in cash and the remainder in land at $1.50 an acre.

The men behind the Canadian Pacific proved themselves possessed of courage and determination such as will always win them honour. At more than one critical stage they staked their all to keep the work going.

But the fact remains that the bulk of the resources utilized in the original building of the road were provided or advanced by the people of Canada. The Canadian Pacific is as truly a monument of public as of private faith.

Meanwhile, the work of construction had been going ahead. Under William Van Horne's masterful methods the leisurely pace of government construction quickened into the most rapid achievement on record. A time-schedule, {160} carefully made out in advance, was adhered to with remarkably little variation.

Work was begun at the east end of the line, from the point of junction with the Canada Central, but at first energy was devoted chiefly to the portion crossing the plains. Important changes in route were made.

The main line had already been deflected to pa.s.s through Winnipeg. Now a much more southerly line across the plains was adopted, making for Calgary rather than Edmonton. The new route was shorter by a hundred miles, and more likely to prevent the construction of a rival road south of it later. For many years after the Palliser-Dawson-Hinds reports of the late fifties, it had been a.s.sumed that the tillable lands of the West lay in a 'Fertile Belt' or rainbow, following roughly the Saskatchewan valley and curving round a big wedge of the American desert projecting north. Certainly the short, withered, russet-coloured gra.s.s lands of the border country looked forbidding beside the green herbage of the North Saskatchewan. But in 1879 Professor Macoun's investigations had shown that the southern lands had been belied by rumour, and that only a very small section was hopelessly arid. With this objection removed, the only drawback to the {161} southern route was the difficulty of finding as good a route through the mountains as the northerly Yellowhead Pa.s.s route afforded, but on this the company decided to take its chances.

Work on the plains was begun in May 1881, and by the end of the year 161 miles had been completed. This progress was counted too slow, and under Van Horne's management a contract was made in 1882, with Langdon and Shepard of St Paul, to complete the line to Calgary. Later in the year a construction company was organized, the North American Railway Contracting Company, to build all the uncompleted sections of the main line for $32,000,000 cash and $45,000,000 common stock. This was really a financing rather than a construction expedient, and was abandoned within a year.

In this section the engineering difficulties were not serious, but the pace of construction which was demanded, and the fact that every stick of timber and every pound of food, as well as every rail and spike, had to be brought a great distance, required remarkable organization.

Three hundred sub-contractors were employed on the portion of the line crossing the plains. Bridge-gangs and track-layers {162} followed close on the graders' heels. In 1882 over two and a half miles of track a day were laid. In the following year, for weeks in succession, the average ran three and a half miles a day, and in one record-smas.h.i.+ng three days twenty miles were covered. By the end of this year the track was within four miles of the summit of the Rockies.

The change of route across the plains had made it essential to pierce the Rockies by a more southerly pa.s.s than the Yellowhead. The Kicking Horse or Hector Pa.s.s, short but steep, was finally chosen, but here, as at the Yellowhead, to cross the first range did not mean victory. The towering Selkirk range faced the pa.s.s, as the Cariboo Mountains flanked the Rockies farther north. Until the rails reached the hills the engineers had found no way through them, and had contemplated a long detour to the north, following the winding Columbia. Then Major Rogers, the engineer whom James J. Hill had suggested to take charge of the location of the mountain section, following up a hint of Moberly, an earlier explorer, found a route, steep but practicable, across the Selkirks, following the Beaver river valley and Bear Creek, and then through Rogers Pa.s.s into the valley of the Illecillewaet, {163} and so through Eagle Pa.s.s to the settled location at Kamloops. Both in the Kicking Horse and in the Rogers Pa.s.s gradients of 116 feet to the mile were found necessary, but these difficult stretches were concentrated within one operating section of a hundred and twenty miles, and could easily be overcome by the use of additional engines. Unique provision was made against the mountain avalanches by erecting diverting timbers near the summits and building mile upon mile of snow-sheds, over which the avalanches pa.s.sed harmless. As a result of these expedients and of raising the road-bed across the prairies unusually high, the Canadian Pacific lost less time through snow blockades than the great railways of the eastern United States.

It was not until 1884 that the wilderness north of Lake Superior was attacked in strong force. Nine thousand men were employed here alone.

Rock and muskeg, hill and hollow, made this section more difficult to face than even the Fraser Canyon. In one muskeg area to-day seven layers of Canadian Pacific rails are buried, one below the other. The stretch along the sh.o.r.e of the lake was particularly difficult. The Laurentian rocks were the oldest known to geologists, and, what was {164} more to the purpose, the toughest known to engineers. A dynamite factory was built on the spot and a road blasted through. One mile cost $700,000 to build and several cost half a million. The time required and the total expenditure would have been prohibitive had not the management decided to make extensive use of trestle-work. It would have cost over two dollars a cubic yard to cut through the hills and fill up the hollows by team-haul; it cost only one-tenth of that to build timber trestles, carrying the line high, and to fill up later by train-haul.

An unexpected test of the need of this section came before it was completed. Early in 1885 the government realized too late that serious trouble was brewing among the half-breeds and Indians of the North-West. Unless troops could be sent in before the gra.s.s grew, Riel would have thousands of Indians on the war-path, and a long and b.l.o.o.d.y contest and a serious setback to the West would be inevitable. The railway was far from complete, with a hundred and twenty miles of gaps unfilled, and the government considered it impossible to get the troops in in time. But Van Horne, who had had much experience in handling troops in the Civil War, did not have {165} that word in his vocabulary, and astonished the authorities by offering to take men from Kingston or Quebec to Qu'Appelle in ten days. Part of the gaps were bridged by temporary rails laid on ice and snow, only ninety miles being uncompleted by spring. In one stretch the men were marched across the ice to save a long detour. Through the rest they were carried, covered with furs and straw, in contractors' sleighs along the tote-roads from one camp to the next. In four days from leaving Kingston the first troops landed at Winnipeg; and though the revolt was not prevented, it was speedily crushed. There was no longer any question about the value of the north sh.o.r.e link, and the opposition to the Canadian Pacific fell from that hour. It was even suggested that the company should build a statue to Louis Riel. As for the government, it could well claim that its persistence in pus.h.i.+ng through this part of the road nearly offset its red-tape carelessness in permitting the rebellion to come to a head.

Meanwhile, the government section between Port Arthur, or rather Fort William, and Winnipeg had been taken over by the company in 1883, though not entirely completed. Two years later the thousands of Chinese {166} navvies working on the difficult Kamloops-Port Moody section finished their task, and the government work was done. The only gap remaining lay in the Gold Range, and here in the Eagle Pa.s.s, at Craigellachie, on November 7, 1885, the eastward and westward track-layers met. It was only a year or so before that the Northern Pacific had celebrated the driving of the last golden spike by an excursion which cost the company a third of a million, and heralded the bankruptcy of the road. There was no banquet and no golden spike for the last rail in the Canadian Pacific. William Van Horne had announced that 'the last spike would be just as good an iron spike as any on the road,' and had it not been that Donald A. Smith happened along in time to drive the spike home, it would have been hammered in by the navvy on the job. Six months later the first pa.s.senger train went through from Montreal to Vancouver. The longest railway in the world was open from coast to coast, five years before the end of the time required by the original contract.

To realize how great a work had been accomplished requires to-day some effort of the imagination. The Canada the present {167} generation knows is a united Canada, an optimistic, self-confident Canada, with rapidly rounding-out industries and occupations which give scope for the most ambitious of her sons as well as for tens of thousands from overseas. It is a Canada whose nine provinces stretch almost unbroken from ocean to ocean. But the Canada of a generation earlier was far other. On the map it covered half a continent, but in reality it stopped at the Great Lakes. There was little national spirit, little diversity of commercial enterprise. Hundreds of thousands of our best-born had been drawn by the greater attraction of United States cities and farms, until one-fourth of the whole Canadian people were living in the Republic.

It was the opening up of the West that changed the whole face of Canadian life, that gave a basis for industrial expansion, that quickened national sentiment and created business optimism. And it was the building of the Canadian Pacific that opened up the West and bound it fast to the distant East. Certainly not least among the makers of Canada were the men who undertook that doubtful enterprise and carried it through every obstacle to success; and not least {168} among the generations whose toil and faith have made possible the nation of to-day were the four millions of the Canada of the eighties who flung a great railway across the vast unpeopled s.p.a.ces of a continent to the far Pacific.

[1] Stephen, Smith, Hill, and Kennedy each took one share, and Kittson half a share; and later Angus, after leaving the service of the bank to go with the railway, took the remaining half-share.

[2] Not all were willing to attribute to courage and luck alone the full success of this stroke. Some Dutch bondholders, independently of the committee, a.s.serted that Kennedy had not played fair, and Farley, the receiver of the road, sued Hill for a share of the profits which he alleged had been promised for his collusion. In repeated trials Farley was unable to produce evidence satisfactory to the courts, which held that in any case his claim must be rejected because 'based on inherent turpitude.'

[3] 'Most men who have really lived have had, in some shape, their great adventure. This railway is mine' (James J. Hill, in Valedictory to the Shareholders of the Great Northern, July 1, 1912).

[4] It was from their St Paul investment that the leading men in the group secured the basis and the bulk of their great fortunes; the Canadian Pacific added little to their coffers.

[5] Including the Yale-Port Moody section, not yet formally under contract.

[6] Giving evidence before the Senate Committee on Interstate Commerce in New York in 1889, President Van Horne stated that the company was obliged to abandon part of the surveys on which the government had spent millions, and make new ones; that the government sections were unwisely located, especially in British Columbia; that the cost of the remainder was increased by having to join it to the unwisely located sections, and that, allowing for the saving which could have been made in location, he could have duplicated the latter for twelve or fifteen millions.

[7] 'The payment to the government of $8,710,240, in advance, of secured dividends, has deprived the company for the moment of the means for continuous, vigorous exertion in construction, without enabling it to recoup itself by the sale of its stock, as was confidently and reasonably expected' (Letter of George Stephen to the government, January 15,1884).

Speaking in parliament in 1885, Edward Blake declared that, omitting the last ten millions issued, the company had raised on stock $24,500,000, and, counting the next two dividend payments, they would have paid or provided for dividends $24,875,000. Already $7,000,000 had been paid out in dividends, members of the syndicate receiving $3,610,000 on their $10,000,000 investment. In other words, before the road was opened for traffic, every cent paid in by the shareholders would have been paid back or set aside for dividends, leaving not a dollar for building the road.

{169}

CHAPTER IX

THE ERA OF AMALGAMATION

Subsidy and Control--Canadian Pacific Expansion--The Monopoly Clause--The Grand Trunk

With the building of the Intercolonial, the Grand Trunk, and the Canadian Pacific, the main lines of communication from ocean to ocean were completed. In the decade which followed, the marked features were: the adoption by the Dominion government of a policy of aid to purely local roads, and the expansion of the two great private companies, partly by new construction and partly by acquisition of the smaller lines.

It has been seen that the policy of Canada after 1851 and of the Dominion after Confederation was to give a.s.sistance only to lines of more than local and usually more than provincial importance. During the first ten or fifteen years after Confederation promoters looked to province and munic.i.p.ality for aid, and did not look in vain. Soon the provinces outran their resources, and began to {170} clamour for increased federal subsidies to meet the pressing charges. But the Dominion government concluded that, if it had to provide the money needed, it might as well give it direct, and secure whatever political credit the grants would entail. In 1882 it decided to embark on a new subsidy policy.

In that year Sir Charles Tupper, minister of Railways, introduced a resolution to grant a subsidy of $3200 per mile--sufficient to provide the hundred tons of steel rails required for each mile at the existing price of $32 a ton--to each of four carefully selected roads, one in each of the four original provinces. During the next year eleven subsidies were voted, chiefly to Quebec and New Brunswick roads; in 1885 twenty-five were voted, and fresh votes were made every year thereafter. Many of the subsidies lapsed through failure to begin construction, but usually they were revoted. The payments made averaged a million dollars a year. The practice did not make for pure politics, and it often led to the construction of lines for which there was no economic justification whatever. Trusting shareholders were induced to invest on the unfortunately wrong a.s.sumption that the government had a.s.sured itself of the need {171} and the potential profit of the line before endorsing it by a subsidy.[1] In the western provinces a parallel policy of aiding local lines was adopted in 1884, except that land instead of cash was offered, a policy maintained until 1894.

He who paid the piper then stood on his rights to call the tune.

Acting upon the wide power conferred by the British North America Act, the Dominion government in 1883 sweepingly designated as 'works for the general advantage of Canada,' and therefore subject to federal control, not only the main lines of railways, but the branch lines then or thereafter connecting with or crossing these lines or any of them. The power thus claimed was not effectively exercised for some time.

D'Alton M'Carthy repeatedly urged in parliament from 1880 onward the creation of a Dominion Railway Commission, but the opposition of the railways proved too strong for him. When in 1886 the United States set up its Interstate Commerce Commission, the {172} government moved and appointed a royal commission, with Sir A. T. Galt as chairman, to consider the general question. Their report noted the existence of many grievances and suggested specific remedies, but considered that until further experience of the workings of the English and American commissions was available, Canada's needs could best be met by an extension of the powers of the Railway Committee of the Cabinet.

It may be noted that in 1882 the selling of railway tickets by private persons, a practice known as 'ticket scalping,' was prohibited in Canada, though the railways were forced to buy the exclusive privilege of selling their own tickets by agreeing to redeem unused portions.