All the restless activity upon the part of its older and its younger rival did not rob the Canadian Pacific of the place it had held in the life and interest of the Canadian people. With a confident assurance based on the extent and the strategic location of its lines, the imperial richness of its endowment, and the proved efficiency of its management, it pressed steadily forward until it became the world's foremost transportation system.
The unbroken success and the magnitude of the operations of the Canadian Pacific in this period are almost without precedent in railway annals. By 1914 it had under its control more than eighteen thousand miles of railway, or more than six times the length of the original transcontinental line. It gave employment directly to ninety thousand men, whose monthly pay-roll reached five million dollars, and indirectly maintained many more, justifying the boast of its president in 1907 that directly or indirectly one-twelfth of the people of Canada received their income from the Canadian Pacific. In 1913 alone, the supreme year of Canadian railway expansion, the Canadian Pacific appropriated for new construction and betterments, equipment, terminal facilities, steamships and hotels, shops and elevators, nearly one hundred million dollars, or more than the original cost of the road. It touched the life of the nation at every conceivable point. From Atlantic to Pacific there was scarcely a town of any importance that was not reached by its lines. But its position was not merely national. It controlled over five thousand miles of railways in the United States, taking rank amongst the foremost systems of the Republic. Its steamship lines stretched more than half-way round the world, and in Liverpool and Trieste, Hong-Kong and Yokohama and Sidney, the red-and-white house flag of the Canadian Pacific made the company and the country known.
The management of the Canadian Pacific showed stability and continuity. It trained up in its own ranks the men for its highest posts. Sir George Stephen, later Lord Mount Stephen, on resigning the presidency in 1888, had been succeeded by Mr, afterwards Sir, William C. Van Horne. As general manager, and then for eleven years as president, Van Horne carried the road through its most difficult period. In spite of failure of crops, low prices, and the slow trickling in of settlers, he kept aglow his own faith in the West and communicated it to others. Indomitable courage, tenacity of purpose, breadth of vision, mastery of organization and detail marked him as one of the great railroad builders of the century. Even when he retired from the presidency, becoming for another twelve years chairman of the board of directors, it was only to find new outlets for his energy in building pulp and paper mills in Quebec and railways in Cuba; for though, unlike many millionaires, he had not narrowed into his own business groove, and could paint a picture as well as buy one, the call to action never failed to stir him.
When Van Horne came to the Canadian Pacific in 1882, he brought with him the man destined to be his successor, Thomas G. Shaughnessy, a young Irish-American still under thirty, who had been engaged in railway work since he was sixteen. Appointed general purchasing agent, he rose rapidly, becoming president in 1899 and chairman of the board in 1911. Sir Thomas Shaughnessy maintained the progressive policy and the honourable record of straightforward management which as distinguished the Canadian Pacific—a railway singularly free from the questionable manipulations which have brought so many great American systems to bankruptcy. Other men left their impress on the road: men like Sir William Whyte, for over twenty years in charge over the western lines, David M'Nicoll, and George M. Bosworth and many others, gave most effective service.
After the first hurried staking out of the claim was over, by 1890, the Canadian Pacific refrained from further expansion until about 1898: between these years only three hundred miles were added to the system. Then reviving prosperity and the activity of rival roads led to a new period of expansion. The additions made in this time can best be realized by a glance at the map (opposite next page). The most important may be noted briefly, beginning at the Pacific coast.
On Vancouver Island, the Esquimalt and Nanaimo Railway, which had been projected originally when it was hoped that Canada's first transcontinental would find its terminus at Victoria by crossing the straits from Bute Inlet, was acquired from the Dunsmuir interests. On the mainland of British Columbia, activity was concentrated in the southern section. The rich mineral discoveries in the Boundary country led to the extension of the Canadian Pacific westward from Lethbridge, through the Crow's Nest Pass. The company was given a Dominion subsidy, and in return a general reduction of rates was secured. After years of contention with the Hill roads which were crowding into the same territory, and in face of immense engineering difficulties, a continuation of this line by way of Pentiction gave promise of a second through route. Meanwhile, entrance was secured to Spokane and Portland in the United States. In the plains and prairie section a close network of lines developed. The narrow-gauge line of the Alberta Railway and Irrigation Company, which had done good pioneer service, under the guidance of Elliott Galt, in developing Alberta's possibilities in coal and irrigated land, was absorbed in 1911. The northern country was traversed by two new east and west lines. The Qu'Appelle, Long Lake and Saskatchewan, extending from Regina to Prince Albert, lost to the Canadian Northern in 1906, was replaced by a new line and 'cutoffs' and extensions built in every quarter. South of the border equal activity was displayed in throwing out feeders for the Soo and Duluth lines. The acquisition of the Wisconsin Central in 1909 gave the Canadian Pacific entrance into Chicago, while an agreement with the Wabash made it possible to link up its western United States lines with its southern Ontario road at Detroit. In Ontario, a branch from Toronto to Sudbury made the Canadian Pacific independent of the Grand Trunk's North Bay link, an extension from Guelph to Goderich tapped a fertile country, a line from Port M'Nicoll on Georgian Bay to Bethany near Peterborough gave a short through route for grain, a lake shore route eastward from Toronto provided access to the towns which the Grand Trunk, in its promoters' concern for through traffic or in its contractors' desire for low land charges, had side-tracked, while stock purchase and later a lease of the Kingston and Pembroke gave entrance into Kingston. In Quebec, short tentacles were pushed up into the Laurentian hills north of Ottawa; south of the St Lawrence the chief step taken was the 999-year lease of the Quebec Central, sanctioned in 1912. In the Maritime Provinces the New Brunswick Southern or Shore line and the Dominion Atlantic, successor to the Windsor and Annapolis, were leased in 1911, and running rights secured of the Intercolonial into Halifax.
A marked feature of the Canadian Pacific policy from the beginning was the endeavour to control subsidiary or allied activities, and thus gain well-rounded independence. Its steamship lines came to girdle the world. On the Pacific, service to Hong-Kong and Yokohama had begun in 1892 and to Australia in 1893, while a service on the coast from Seattle to the far north, and on the lakes of central British Columbia, followed. The Great Lakes fleet was still earlier in being. In 1903 the purchase of fourteen Elder-Dempster vessels ranging from five to eight thousand tons gave a whole North Atlantic fleet for seven millions, or the cost of a single Lusitania. It was soon increased by larger and faster boats. A line to Trieste, to secure a share of the immigration traffic from Eastern Europe, led to prolonged complications with the Austrian government early in 1914, on account of the hostility of German rivals. Hotels followed steamships, some eight or ten being erected at strategic points from St Andrews to Victoria. Departing from the usual American practice, the company owned and operated its own sleeping-cars, and maintained its own express and telegraph companies. Its car-shops provided much of its rolling stock. Grain elevators were built at terminal points. In the later years a systematic policy of developing its western lands was adopted. A special department of Natural Resources was established, irrigation works were begun on a huge scale in the tract of three million acres between Calgary and Medicine Hat, and ready-made farms were provided or loans made to selected settlers.
The method of financing these countless enterprises was equally striking. Instead of increasing the proportion of bonded indebtedness, as was customary, the company sought additional capital chiefly by the sale of common stock. This procedure was possible because of the speculative value of the stock, based primarily on the growth of traffic, and of the value of the western lands still unsold: the dividend rose steadily to ten per cent in 1912, and the practice which prevailed until 1909 of issuing the stock at par gave holders valuable rights. In the latter year 125 was charged for the shares allotted, in 1912 150, and in 1913 175. As a result of the earlier policy an unnecessarily high price was paid for new capital, but fixed charges were kept low, and no great system was safe from foreclosure. In 1914 the total assets of the company were valued at over $800,000,000.
Fifth in mileage among the railway systems of Canada is the group of fragments connected with the Great Northern Railway of the United States. James J. Hill had not been least among the members of the original Canadian Pacific Syndicate, but differences with his colleagues led to his retirement in 1883. Thenceforward he devoted himself entirely to the building up of the St Paul, Minneapolis and Manitoba, the railway acquired from the Dutch bondholders. Under the name of the Great Northern it had been extended by 1893 from Lake Superior to Puget Sound, and continued to grow steadily until, twenty years later, it controlled nearly eight thousand miles. The Great Northern was remarkable in at least three respects. Except for the original grants for the Minnesota lines, it was built through to the coast without a dollar or an acre of subsidy from the state. Its capitalization was kept close to the actual cost of the road and its fixed charges were low. It took the lead among American roads in an aggressive and enlightened endeavour to build up the country through which it ran, not only by flexible rate charges, but by a direct campaign of education among the farmers and other shippers on its route.
The mineral wealth of southern British Columbia and the farming wealth of the western plains turned Hill's attention toward Canada once more about the beginning of the twentieth century. In British Columbia the progress of the Great Northern invasion was slow. The character of the country made construction difficult, and the Canadian Pacific, appealing to national prejudices, fought every inch of the way. But Mr Hill pressed on. The coal-fields of the Crow's Nest Pass, in which he acquired a controlling interest, were made accessible by a road from the south, and a series of lines branching from Spokane entered the Boundary mining region. Winding in and out across the border the road continued westward to Vancouver. Fortunately duplication was in large part avoided; by arrangements with the Canadian Pacific, the Canadian Northern, and the Northern Pacific, the difficult country south of the Fraser was pierced by common lines, and common terminal facilities were secured. Meanwhile, in 1906 and 1907, more ambitious schemes were announced—the building of north and south lines through Brandon and Regina, and the construction of an east and west line from Winnipeg to the Pacific. In ten years, it was officially forecasted, the Great Northern would have as extensive a system in Canada as in the United States. What was more startling, Mr Hill denounced 'spoon-feeding,' and did not ask for a cent of subsidy. The building of the Grand Trunk Pacific and the Canadian Northern postponed indefinitely these larger plans. Actual operations were confined to the construction of branches running northward in Manitoba, to Brandon, Morden and Portage la Prairie, and the acquisition, jointly with the Northern Pacific, of a lease of the Canadian Northern line from Pembina to Winnipeg, under the name of the Midland, and of terminals in Winnipeg. Meanwhile, as the map shows, branches from the main Great Northern line nosed up to the border at nearly a dozen other places.
The activities, real and projected, of the Great Northern in Canada brought up acutely the question of the interrelations of Canadian and American roads. To some these activities appeared evidence of an infamous plot to drain Canadian traffic southward to United States ports and roads: to others they seemed to be philanthropic endeavours to rescue Western Canada from the clutches of monopoly. They were not, however, due to either political intrigue or knight-errantry, but to the same desire for profit which had led the Canadian Pacific to build up its great system in the western states. Other things being at all equal, it was of course desirable that Canadian traffic should follow Canadian territory to Canadian ports; it was to this end that uncounted millions had been spent. Yet patriotism had a seamy reverse side of political buncombe. Every hint of outside competition in the preserves of railway or industrial corporations in Canada was denounced in interested quarters as dangerous and empire-smashing, while the counter-incursions into the territory of the United States were ignored or regarded as merely normal business enterprise.
As a matter of fact, in 1914 Canadian railways controlled four miles in the United States for every mile in Canada controlled by railways of the United States. The Canadian Pacific alone owned or leased over five thousand miles in the United States, chiefly in the northwest, while it had close working agreements with the Wabash and the New York, New Haven and Hartford. The Grand Trunk controlled over seventeen hundred miles, two-thirds in the Michigan peninsula and the remainder in New England, while the Canadian Northern ran for some forty miles through the United States, south of the Lake of the Woods. The American interests in Canada were more scattered, but the Great Northern, the Michigan Central, the Père Marquette, and the New York Central all developed important Canadian connections.
In short, the interrelations were certainly no more extensive than would have been expected in the case of two friendly nations lying side by side for three thousand miles, connected by ties of speech and by common commercial and social customs. The only difficulty which arose out of the situation was the division of jurisdiction between the Railway Commission of Canada and the Interstate Commerce Commission of the United States. The heads of the two commissions, Mr Justice Mabee for Canada and Mr Knapp for the United States, endeavoured in 1910 to work out a plan for joint control, but without final success.
In the past half-century government ownership of railways has been much discussed in Canada, dividing attention with the allied question of railway ownership of the government. It cannot be said that any decisive public opinion or policy has resulted. Important steps toward government ownership have been taken in the last twenty years. The Intercolonial and Prince Edward Island Railways have been retained by the government and extended, a federal line has been built in Manitoba and a provincial one in Northern Ontario, and the National Transcontinental has been constructed by the government for lease to a private company. Yet, at the same time, the main railway projects continued to be entrusted to private companies, and the proportion of the whole mileage under private operation increased.
The most important incident in the Intercolonial's later history was its extension from Quebec to Montreal in 1898 by the purchase of the Drummond County Railway and the lease of a stretch of forty miles in length from the Grand Trunk. Six years later the Canada Eastern, running from Gibson to Loggieville, was purchased. Many bankrupt lines in the Maritime Provinces and Quebec were offered to the Intercolonial as valuable feeders. In the later years of the government of Sir Wilfrid Laurier and in the first years of Sir Robert Borden's administration, authority was sought to acquire such of these roads as might be desired, but restrictions due to the action of the Canadian Senate or the political difficulty of discriminating between the railways prevented any rapid acquisition. Changes in administration were tried. As a half-concession to the demand that the Intercolonial should be operated by an independent commission, a board of management was established in 1909, consisting of the chief officials of the road. In 1913 this board was dissolved and the management vested in a single commissioner, F. P. Gutelius, formerly of the Canadian Pacific.
Financial returns shoed little improvement. True, the record, unbroken since 1873, of annual failure to meet even operating expenses, was varied after 1898 by small surpluses in two years out of three, but the net deficits since Confederation rose to over eleven millions by 1913; and while there was no question that the administration had been improved, there was room for belief that the surpluses had been in part book-keeping ones, obtained by including in the large capital expenditure items properly chargeable to revenue.
At first sight this failure to meet operating expenses, much less to pay interest on the investment, together with constantly increasing capital outlay, seemed to warrant strong condemnation of government methods. And, in truth, a serious indictment could be framed. Efficient government ownership is more difficult in a democratic country where shippers, employees, would-be employees, supply dealers, all have influence over the administration, than it is in a bureaucratic state. Intercolonial employees were given their posts and kept in them by political influence, and their members were often as excessive as energy was lacking. Supplies of coal and new lands required were usually purchased from political friends, with additional margin for campaign contributions;1 at election times the road became a vast political machine. Under the administration of the governments of Laurier and Borden the grosser scandals ceased, but in one form or other political influence continued to be exerted.
Yet this was not the whole story. If the Intercolonial did not earn dividends, there were other reasons at work than government inefficiency. The road ran for long stretches through barren country where little local traffic originated. In competing for through traffic it was handicapped by the roundabout length of its route: it ran along two sides of a triangle, while the Canadian Pacific, subsidized by one political party, was built along the base, and the National Transcontinental, built by the other party, came in between; in summer it had to face the competition of the St Lawrence route as well. Nor was dividend-earning the sole standard of success to be applied. The Intercolonial was built originally for political and military ends, not merely for commercial gain. It had given shippers the lowest rates in the world: 'the surplus is in the pockets of the people,' one of the political heads declared. If it was often urged, the canals of Ontario and Quebec were operated by the government at a dead loss, without a cent of tolls, why grudge the Maritime Provinces, to whom Confederation had been less kind, the benefit of operating at bare cost the government railways! The Intercolonial had undoubtedly done much to weld the eastern and central provinces together, and this was worth more than a million dollars or two in interest charges.
The desire for rates at cost, or lower, which had made the people in Eastern Canada oppose all suggestions to turn over the Intercolonial to the Canadian Pacific or Canadian Northern, led those of Western Canada to urge government ownership of the other federal venture, the Hudson Bay Railway. Owing to its far northern position, Manitoba possesses ocean ports, Nelson and Churchill, which are nearer Liverpool than New York is. Why, then, carry the grain of the prairie fifteen hundred or two thousand miles to an Atlantic port before loading it on the ocean freighter? Proposals to build a railway to a Hudson Bay port and to establish a steamship line to carry the traffic at sea seemed plausible and won much western support. Investigation soon made the difficulties clear. Hudson Bay was fairly free from ice, but Hudson Straits were studded with icebergs far into the summer. Ships of special construction would be needed for the dangerous passage, and, in any event, grain could not be shipped until the spring after it was harvested and would have to be stored in elevators during the winter. And in the meantime the three transcontinental railways were enlarging the eastern funnels, while the Panama Canal made an outlet by Vancouver feasible. Still, there was a gambling chance that something would come of a railway to Hudson Bay, and if the stroke succeeded, Canada would be given a new coast and would front the sea at the north as well as the east and the west. The territory between Le Pas, a terminus of the Canadian Northern, and Port Nelson, selected as the better port on Hudson Bay, had some mineral and agricultural promise. So, in the prosperous days of 1911, it was decided to attempt the work. As it was largely an experiment, the government's plan of state construction and possibly operation found wide support. The line was still under construction in 1914.
Another exploration road which amply justified the faith of its promoters was the Timiskaming and Northern Ontario. This railway, striking up from North Bay into the mineral region and clay belt beyond the height-of-land, was begun by the Ontario government in 1902 as a colonization road. It was fortunate enough to uncover the riches of Cobalt's silver-camp in its construction; later, mining development at Gowganda and Porcupine brought it traffic; and the building of the Grand Trunk Pacific made it an important connecting line. It was able, then, from the outset to show favourable results, direct as well as indirect. It was built and controlled by a government commission, efficient and more or less free from politics.
- 1The deputy-minister, Mr Collingwood Schreiber, instanced in 1882 an attempt of a farmer, whose claim was nursed by influential politicians, to collect $70,000 for a gravel-pit liberally estimated to be worth $5.