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]
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