Canadian Transport Sourcebook

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Canadian Transport Sourcebook > All works> The Railway Builders > Chapter 9

Chapter IX

The Era of Amalgamation

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 said that the policy of Canada after 1851 and of the Dominion after Confederation was to give assistance 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 municipality for aid, and did not look in vain. Soon the provinces outran their resources, and began to 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 reach 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 whatsoever. Trusting shareholders were induced to invest on the unfortunately wrong assumption that the government had assured itself of the need and the potential profit of the line by 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 upon the 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 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.

The original contract with the Canadian Pacific had provided for an eastern terminus near Lake Nipissing, in order to show preference neither to Montreal nor Toronto, either of which could make connection by independent roads. Similarly, we shall see, thirty years later, Moncton was chosen as a terminus of the National Transcontinental, to hold the balance even between Halifax and St John. It was, however, impossible for the Canadian Pacific to accept as permanent an arrangement which left it halting in the wilderness, and depending upon possibly rival railways for outlet to the great cities and ports of the east. It had, in fact, been empowered in its charter to acquire the Canada Central and 'to obtain, hold, and operate a line or lines of railway from Ottawa to any point at navigable water on the Atlantic seaboard, or to any intermediate point'—terms sufficiently sweeping. Few were surprised, therefore, when the directors began a policy of eastward expansion, though many were surprised at the boldness and extent of the plans and the speed and masterful strategy of the execution.

The first and most obvious move was to buy out the Canada Central, extending from Ottawa through Carleton Place to Pembroke, and under construction westward to Callender on Lake Nipissing. This was done in 1881, and the road was completed two years later. Again, in 1881, the parent line of the Canada Central, the Brockville and Ottawa, was acquired, and three years later a controlling interest was secured in the stock of the St Lawrence and Ottawa, thus giving connection with the St Lawrence both at Brockville and at Prescott. Still pressing eastward, the Canadian Pacific next sought entrance to Montreal and to Quebec. The North Shore road, built by the province of Quebec, would most easily give the connection sought. The province was induced, in 1882, to sell to the Canadian Pacific the western section, from Montreal to Ottawa. At the same time the eastern section, from St Martin to Montreal, was sold to the North Shore Syndicate. The Grand Trunk, alarmed at this advance, attempted to block further expansion by securing, jointly with the Central Vermont, control of the latter section. But the Canadian Pacific had the ear of both the Dominion and the provincial governments, and threats of aid in building a parallel line forced the Grand Trunk to relinquish control to its great rival. Not yet content, the Canadian Pacific sought winter ports at St John and Halifax. It secured control of the Southern Counties in Quebec, built a short line through Maine to Mattawamkeag with the aid of a large Dominion subsidy, acquired running rights or control by lease over part of the old European and North American, and thus entered St John. In 1890 its eastern development was completed for a time by the lease of the New Brunswick Railway, which had recently absorbed nearly all the small lines in western New Brunswick.2

Meanwhile the management had been equally aggressive in obtaining feeders in central and western Ontario, the very heart of the Grand Trunk's territory. In 1881 the Ontario and Quebec was chartered, by interests friendly to the Canadian Pacific, to build a line from Ottawa to Toronto, by way of Smith's Falls. Two years later this company acquired leases for 999 years of three important lines, and transferred them, along with its own road, to the Canadian Pacific. The first of these lines was the Toronto, Grey and Bruce, the narrow-gauge railway which ran north to Georgian Bay; the second was the Credit Valley, extending from Toronto to St Thomas; the third, the Atlantic and North-West, a road with little mileage but most useful charter powers, used for the seaward extension. Later, a railway was built from St Thomas to Windsor. Thus the Canadian Pacific secured access to Lake Ontario, Georgian Bay, and the Detroit river. Not yet content, it built a branch to Sault Ste Marie. Here connection was made with the 'Soo' lines, giving outlet to St Paul and Minneapolis, and with the several roads later combined to form the Duluth, South Shore and Atlantic. Both of these lines shortly afterwards came definitely under its control.

In the prairie West the Canadian Pacific had been promised in 1880 a monopoly of through traffic for twenty years. The Dominion government, it will be remembered, had agreed not to charter, nor to permit the territories to charter, any lines between the Canadian Pacific and the United States border, running south or southeast. Going beyond these terms, the Dominion endeavoured also to prevent Manitoba from authorizing the construction of any such road, and disallowed one chartering act after another.

From the outset this provision proved a source of bitter and dangerous strife. On the one side it was contended that without this clause the necessary capital could not have been secured and that faith must be kept; that the traffic of the West should go to build up the eastern provinces, which had made a vast outlay on the road, rather than a foreign country; that the rates of the Canadian Pacific were as reasonable as those of American roads; and that other causes than railroad monopoly were responsible for the slow growth of the West. But the West protested that the rates were exorbitant—otherwise American competition would not have been feared—pointed to the exodus of settlers and the discontent of those who stayed, and refused to be sacrificed in the interests of foreign shareholders or even of sister provinces. Undoubtedly immigration was deterred, and relations between East and West were seriously strained. Finally, in 1888, the Dominion government was forced to yield. The company's consent was secured by a bond guarantee for some necessary extensions, and the provision was repealed. The Northern Pacific was brought in by the Manitoba government, and competitive local roads were chartered, but in this period the control of the Canadian Pacific over the western field was not seriously called in question.

The task before the management to secure traffic for the great system thus built up was a difficult one. It was a greater achievement to operate the Canadian Pacific successfully than to build it. When it is realized that when the company began operation the number of white settlers between Portage la Prairie and Kamloops, within twenty miles of the line, could be counted virtually on the fingers of one hand, the difficulty of finding traffic may be appreciated. Sandford Fleming had estimated that the road could not pay until there were two million people in the West. Yet pay it did from the start. The company capitalized its scenery, and built up a paying tourist trade. When wheat was lacking, ends were made to meet by carrying trainload upon trainload of buffalo bones to eastern factories. United States traffic was carefully cultivated at both ends of the line. An active immigration campaign was carried on. Various industries along the line, from coal companies to flour mills, were helped forward for years. A loyal staff was built up, and by grace of efficiency the company pulled through until the lean days of the early nineties were over.

During this decade of extraordinary activity the Grand Trunk had been neither content nor passive. Offended by the incursions into its best paying territory, it fought its younger rival in parliament and on the stock exchange, but with no lasting success in either quarter. It was more successful in its own constructive policy of expansion. In 1879 it had made a good bargain by selling to the Intercolonial the branch from Lévis to Rivière du Loup, which did not earn operating expenses, and by expending the proceeds in buying an extension to Chicago, which enabled it at last to secure the through traffic from the West for which it had been in large part originally designed. Its great coup came, however, in 1882, when the onward march of the Canadian Pacific and the bitter experience of fruitless rate wars led it to purchase its old rival, the Great Western, with its Michigan extensions. The construction of the St Clair tunnel between Port Huron and Sarnia, completed in 1890, marked another forward step in its western territory. Meanwhile it had acquired, in 1884, the Midland Railway, itself a recent amalgamation of the Midland, running from Port Hope to Midland, with the Toronto and Nipissing, the Grand Junction, from Belleville to Peterborough, and the Whitby and Port Perry, effected by two enterprising financiers, George A. Cox and Robert Jaffray. Four years later it absorbed the Northern and Northwestern roads, which had acquired jointly a branch from Gravenhurst to North Bay, so that here at least the older road checkmated its rival, securing the very paying link between Toronto and the western lines of the Canadian Pacific.