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, municipalities
offered bonuses, and a small amount of stock was subscribed locally.
Five years passed, 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
assets 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
associates 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 shores 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 smashing 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 grasshoppers 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 passed, hundreds of deserted shacks stood silent
witnesses to the settlers' despair.
[Illustration: 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 apprenticeship 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. Associated 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
grasshopper 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 assessed 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 assets 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 assured, the grasshoppers 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-shippers 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 associates.[4]
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 Townships 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 assured by his associates 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.
[Illustration: 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
anticipated. 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.
Assurance was given that for twenty years no competitive 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 latitude 49 deg..' 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. Cox, 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 assent 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 factitiously 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 tittle 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 shippers 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 assume 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 anticipate 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.
[Illustration: 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.
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 asset 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 competition 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
competition 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
pass 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 assurance
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
substituted 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
passing 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 pass 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 assumed 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 grass 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 Pass 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-smashing 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 pass than the Yellowhead. The Kicking
Horse or Hector Pass, 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 pass, 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 Pass into the valley of the Illecillewaet, {163} and so
through Eagle Pass to the settled location at Kamloops. Both in the
Kicking Horse and in the Rogers Pass 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 passed 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 shore 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 grass grew, Riel
would have thousands of Indians on the war-path, and a long and bloody
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 shore 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 pushing 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 Pass,
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 passenger 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 spaces 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, asserted 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}