Read The National Dream: The Great Railway, 1871-1881 Online
Authors: Pierre Berton
The National Dream: The Great Railway, 1871-1881 (56 page)
From the beginning, the railroad was fabulously successful. The grasshoppers magically disappeared. The soil began to yield bumper crops. Hill had to scramble to find extra freight cars to handle the business. In 1880, the net earnings of the railroad exceeded the interest on the bonded debt by sixty per cent – an increase of one million dollars in a single year. The “Manitoba” road, as it came to be called, formed the nucleus of Jim Hill’s Great Northern, the only transcontinental line in the United States that never went bankrupt or defaulted on a dividend. Within two years its four promoters went from the brink of disaster to a position of almost unlimited wealth.
They had also become controversial figures in Canada. The deal with the Bank of Montreal was looked at askance by press, public and shareholders. There was a flurry at the stockholders’ meeting in June of 1879, when pointed questions were asked about the propriety of directors appropriating bank funds for a private venture. The criticisms increased when R. B. Angus resigned as the bank’s general manager in August to take a job as general manager of the new railway.
Stephen disdained to stoop to any explanation at all. Meanwhile, he and his colleagues were being attacked on another front. The new company, which operated the only trains from St. Paul to the Red River, had also taken over the Kittson Line and thus had a monopoly of all traffic to Winnipeg. That aroused the full ire of the Conservative press, to whom the name of Donald Smith was still a profanity. Railway policy, cried the Montreal
Gazette
, “has already been too long dictated simply by regard for the interests of Mr. Donald A. Smith and his associates.” The pact between the Government and the St. Paul group was suicidal, the paper said; it called for the immediate construction of the Canadian Pacific to remove their pernicious influence. The Winnipeg
Times
was even more caustic. “The wily Jim Hill,” it charged, “had to ‘grease’ other interests, legislative, judicial and private to the tune, it is said, of a million.” The paper went on to ask where the money had come from “to buy up the bonds and meet the scarcely less cost of
controlling
the interests in St. Paul that were necessary? Let the two confiding stockholders of the Bank of Montreal ask the question.” On the other hand, the Manitoba
Free Press
a year later was hailing the coup as “a great triumph of Canadian sagacity.”
This was the climate in which the
CPR
Syndicate was eventually formed. For all the controversy served to illuminate one fact: there was now available a remarkable group of successful men who had experience in both railway building and high finance. In the summer of 1880, the Macdonald government was looking for just such a group. It was John Henry Pope, the homely and straightforward Minister of Agriculture, who had first drawn his prime minister’s attention to the St. Paul associates.
“Catch them,” he said, “before they invest their profits.”
*
The Canadian historian O. D. Skelton, in his book
The Railway Builders
(Toronto, 1916), says that Stephen, Hill, Smith and Kennedy each took one share and that Kittson took half a share, the remaining half share going to Angus after he left the service of the bank and became general manager of the railway. He gives no source for this statement, which does not square with the court testimony of the principals in 1888. Nonetheless it is a plausible suggestion: Kittson’s energies were not really involved in the enterprise to the same extent as the others; Angus
Chapter Nine
1
“Capitalists of undoubted means”
1
“Capitalists of undoubted means”
There is something akin to a sprightly look in the earlier photographs and portraits of George Stephen: the head is tilted upwards, the wide, clear eyes sparkle a little and there is almost to be seen in those unlined features – one hesitates to use the word – a quality approaching innocence. The later famous painting by Sir George Reid, which hangs in the
CPR
board room, portrays a different man. The head is sunk forward on shoulders that have become slightly bowed; the greying moustache droops down, giving the bearded face a morose, hound-like appearance; the eyes, once so wide, are shrewd, knowing and not a little sad. It is perhaps unwise to make too much of Victorian portraits; and yet all the evidence suggests that Reid did not exaggerate the change in his subject.
When the first annual report of the “Manitoba line” electrified the public in 1880, Stephen must have believed that his life’s struggle lay behind him. In reality, it had only begun; the troubles he faced would be far more consuming and far more nerve-racking than anything he had yet experienced. For when Stephen said “yes” to Jim Hill in 1877 he unwittingly catapulted himself into the great project of the Canadian Pacific Railway.
From the moment that Stephen’s success became public property, he was transformed, whether he knew it or not, into a leading candidate to build the great railway. Long before Macdonald took power, Mackenzie had been seeking just such a man – a successful Canadian financier, in league with other Canadians of means, with practical experience in financing and constructing a profitable North American railway. After Mackenzie’s fall, Macdonald took up the vain search. Just when it seemed impossible to find such a man, an entire group of them – Stephen, Hill, Smith, Kittson and Angus – suddenly popped out of nowhere, loaded with credentials.
Macdonald’s fruitless quest had already occupied more than a year. It was clear from Tupper’s speech in the House in May of 1879 (the doctor was hoarse and ill at the time) that the Government intended to prosecute its railway policy with as much energy as it could muster. Tupper on that occasion talked about the future of Manitoba, the necessity of introducing more English immigrants into the North West and the Government’s intention to seek an Imperial guarantee to help build the railway. That fall, Macdonald, Tupper
and Tilley set out for England on just such a mission. The delegation was the most influential to cross the water since Confederation and the country was convinced that it would succeed. One rumour from Ottawa had the Brassey firm of Great Britain, which had built the Grand Trunk, combining with five other contractors to construct the railway without a guarantee. Another said that the Bank of England would supply all the funds necessary to complete the entire line. The Chicago
Tribune
, hailing a rumoured British loan of one hundred million dollars, urged that the government seek more like it, since Canada would eventually become part of the United States anyway and the money would, therefore, ultimately benefit the republic.
It was all premature and overoptimistic. There was no Imperial loan and no guarantee; nor were any contractors willing to gamble on such a lunatic undertaking. One English financier laughed aloud when he first heard of Macdonald’s plan to raise a loan to build a railway across the half-frozen continent. Years later he related to Donald Smith his impressions at the time: “ ‘Good Heavens,’ I thought, ‘somebody will have to hold these Canadians back, or they will go plunging themselves into hopeless bankruptcy before they come of age.’ I felt I would as soon invest in a Yankee ‘wild-cat’ mine.”
Ironically, one of the elements of Macdonald’s National Policy was working against another. The protective tariff was unpopular in England. Macdonald did not receive a turn-down from the Imperial authorities; he was simply asked to wait until the political climate improved. Help at the moment was out of the question.
But by 1880 the Government could no longer wait. Little George Walkem, back again in power in British Columbia, was bluntly threatening secession; he had, in fact, been elected on a “Fight Ottawa” platform. It was clear that the Canadian government would have to go it alone and swiftly if it was to keep the nation whole. The contract for the Yale-Kamloops section had to be let hurriedly as a sop to the British Columbians, and by the spring of 1880, to everyone’s relief, Andrew Onderdonk was on the spot preparing to blast his way through the canyons of the Fraser. In April, Blake made one of his interminable speeches – this one lasted more than the usual five hours – in which he demanded that Onderdonk be stopped and that all construction cease west of the Rockies. The Government, he declared, was risking the ruin of the country for the sake of twelve thousand people. In his resolution Blake urged a policy of prudence:
the prairie section, it said, should be built only as fast as settlement demanded. The resolution was, of course, defeated, but every member of the Opposition voted for it, including the rising young star of the Liberal Party, Wilfrid Laurier.
Blake’s remarks, however, had considerable effect. The Government, while placating British Columbia with the Onderdonk contracts, determined to move slowly on the prairies. Its plan was to build “a cheap railway … incurring no expenditure beyond that absolutely necessary to effect the rapid colonization of the country.” Only two hundred miles would be placed under contract, and the construction would be as flimsy and as cheap as possible. The line would not even be properly ballasted and only enough rolling stock to handle minimum traffic would be ordered. The steel would creep across the plains, year by year, a few miles ahead of advancing settlement. After the House rose, Macdonald told his dubious council that such a local railway was necessary to attract immigrants. He proposed a bonus of land to bring settlers and he spoke of going to England that summer to raise money for the project.
This was anti-climax after all the brave talk of a two-thousand-mile transcontinental line built to Union Pacific standards and it did not sit well with Charles Tupper. The Fighting Doctor was not one to admit defeat and this looked very much like surrender. To Tupper must go much of the credit for pushing through the project in its original form in the face of the hesitancy of his more timid colleagues.
“Sir John,” he said, “I think the time has come when we must take an advance step. I want to submit a proposition for building a through line from Nipissing in Ontario to the Pacific Coast.”
Macdonald remained sceptical. He told Tupper that he was afraid that it was “a very large order.” Nonetheless he added, “I shall be pleased to consider anything you have to submit.”
If the conversation (as reported by Tupper in his memoirs) sounds stilted, it may have been because the two were not speaking to each other except on matters of public necessity. The rift sprang out of Tupper’s elastic political morality. (His private morality was similarly flexible, his propensity for handsome women earning him the nickname of “the Ram of Cumberland.”) The sons of the two men, Charles Hibbert Tupper and Hugh Macdonald, had opened a law practice in Winnipeg. Tupper wanted the Government to throw business their way; Macdonald felt that to be improper. It is said that the two did not communicate in private for two years.
Tupper was more sanguine than his leader on the matter of the railway because he had learned of the incredible success of George Stephen and his colleagues and in his memo of June 15 to the Privy Council he made reference to it. He believed that the entire line from Nipissing to Pacific tidewater, including the sections already commenced by the government, could be completed for a cash expenditure of $45,500,000 and a land subsidy of twenty-five million acres and that, since there would be land left over, the government could recoup all the cash through sales to settlers. He recommended that “authority be given to negotiate with capitalists of undoubted means and who shall be required to give the most ample guarantee for the construction and operation of the line on such terms as will secure at the same time the rapid settlement of the public lands and the construction of the work.” The memo bore the endorsement of Fleming’s successor, Collingwood Schreiber, the former chief engineer of the government’s Intercolonial Railway.
There was no doubt about who the “capitalists of undoubted means” were. Tupper had his eyes clearly focused on the St. Paul Syndicate. But even as the Cabinet met to consider the terms it was prepared to offer – a twenty-million-dollar subsidy and thirty million acres of prairie land – it was obvious that the atmosphere was changing and that other capitalists, some substantial and some shadowy, were sending feelers to Ottawa. The depression was at an end; the harvest of the previous autumn had been a bumper one; the climate for railway building suddenly looked better. There was word that the principals behind Andrew Onderdonk were interested; so was the Brassey firm. And up from New York came a British peer, Lord Dunmore, “a spendthrift and most probably a dupe of some knaves or other,” according to Alexander Campbell. Dunmore was a front man for Puleston, Brown and Company, a British financial house, whose senior partner, Colonel John H. Puleston, had once been the head of Jay Cooke’s office in London. The new governor general, Lord Lorne, was as suspicious of Dunmore as Campbell: “Mr. Brassey has a very good head, and plenty of money,” he wrote to Macdonald. “Ld. Dunmore has a very good heart, no head and no money.… He is very capable of getting up good musical concerts but pray examine his financial concerts … his very name will probably be enough to give the C.P. a bad one. Mr. Brassey now on the other hand wd. be a tower of strength.” Two days later His Excellency had second thoughts about Brassey: “Much as I would
like to have Brassey take over the business of the aid of a company bound to settlements and to complete all the line, I cannot help feeling somewhat nervous as to the possibilities involved in any unqualified tying of the country to a company which might be far stronger than the Hudson’s Bay and as strong as the old East India Company. If the money were got in New York, as I believe it might be, the Yankees cd get such important interests to guard that it cd well be justification of the U.S. to take charge of the whole of our Railway & ‘fertile belt’ in case of difficulty.” The young governor general, who could not resist an opportunity to play with words, added that “my imagination becomes as you see ‘fertile’ in contemplating our possible slavery to any gigantic vested interest.”