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 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 {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 assumption that the

government had assured 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.

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 connections

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 {173} 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 {174} 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 South-eastern 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

{175} 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 {176}

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 {177} 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 {178} 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, {179} 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 Levis to Riviere 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 {180} 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.

[1] One such company, the Caraquet, which was given $400,000 in

subsidies, declared, in floating $500,000 in bonds in England, that the

capacity of the road was taxed to its utmost, and that an immense

traffic was in sight. At that time its entire rolling-stock consisted

of two locomotives, one passenger car, two box and fifteen flat cars,

and a snow-plough.

[2] The earliest intercolonial project, a railroad from St Andrews

north, was brought to completion in 1889 when a short road, the

Temiscouata, was built, linking the Intercolonial at Riviere du Loup

with the New Brunswick Railway at Edmundston.

[Illustration: Railways of Canada, 1896]

{181}

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