Catch them, before they invest their profits.
John Henry Pope, minister of agriculture
As railways went, the St. Paul and Pacific Railroad was quite possibly the most woebegone in North America. It had never earned a profit. Designed to run from St. Paul, Minnesota, to the Canadian border, it had never reached anywhere near that far, so didn’t connect with the line down from Winnipeg. Its rails were of iron rather than steel, and the company was widely derided as being “two streaks of rust and a right of way.” Yet without this little railway to nowhere, there might well never have been a Canadian Pacific Railway to stitch Canada together.
The explanation for this oddity was that although the only attribute the St. Paul and Pacific possessed was a largely unused right of way, such a licence was potentially very valuable, because on both sides of the border above St. Paul, especially on its northern side, there was endless black loam that was widely assumed to be capable of supporting thousands of farms and tens of thousands of settlers. To turn this joke railway into a real one, little more was needed than to use its right of way so the line could stretch all the way up to Winnipeg.
At this time—the late 1870s—there just happened to be a number of entrepreneurs, mostly Canadians, with the smarts to figure this out. One was James Jerome Hill, Canadian-born, though he had spent most of his adult life in the United States doing all kinds of jobs and reading omnivorously. Hill’s dream was to own a transcontinental railroad—a goal he would achieve twice over, in two different systems, as a leading partner with the famed banker J.P. Morgan. Another was Donald Smith, now a political power in the North-West as an MP as well as the chief commissioner of the Hudson’s Bay Company. He was close to an enterprising HBC officer, Norman Kittson, who operated a steamship service along the Red River. This trio—Hill, Smith and Kittson—figured out that a major part of the ramshackle railway company’s bonds was held by some long-suffering Dutch investors. They made a low offer to the Dutch, who rejected it. Smith then turned to his cousin George Stephen for help. Stephen knew so little about the West that he thought Minnesota was “at the North Pole.” But he knew a great deal about money.
Stephen would become the irreplaceable man of the Canadian Pacific Railway. Born in Scotland in 1829, the son of a carpenter, he left school at fourteen and after five years in various jobs in Aberdeen emigrated to Canada. He got employment with a dry-goods merchant in Montreal and soon was promoted to be a junior partner. By the late 1860s, he was one of Montreal’s leading businessmen, and in 1876 was appointed president of the Bank of Montreal—corporate Canada’s top post. Naturally reserved and retiring, he liked to be anonymous. He was obsessive about privacy; he had all his papers burned, avoided talking to the press and banned telephones from his home. He regarded politics with contempt, because it was so public. He didn’t even like Canada much, and in 1886, soon after the CPR was completed, he retired to Britain.
George Stephen, first president of the Canadian Pacific Railway, was a brilliant financier with a fine, subtle mind and a talent for hiring executives with unusual abilities. At the same time, he was quick to be hurt by criticism and to lapse into self-pity. (photo credit 22.1)
Only in his letters to Macdonald (more than eight hundred of them) did Stephen reveal, unintentionally, some of his inner complexities—his self-doubts, his sense of being misunderstood and treated unfairly, and occasionally even a hint of wishing to be liked. Unquestionably, Stephen was the country’s most brilliant financier of the nineteenth century; also, he worked ferociously hard. “It was impressed on me … by one of the best mothers who ever lived,” he said, “that I must aim at being a thorough master of the work by which I had to get my living … to the exclusion of every other thing.”
Events moved quickly once Smith introduced Stephen to Hill. In 1878, the Bank of Montreal advanced the group a loan to buy out the Dutch and American investors in the St. Paul and Pacific Railroad. They paid $6.8 million for it and promptly sold most of its land grant for $13 million. They renamed the company the St. Paul, Minneapolis and Manitoba Railroad, then patched and stretched the track so that it reached the Canadian border and connected with the southwards line from Winnipeg. In December 1878, a train—the Countess of Dufferin—left the Manitoba capital for the first time. The system was so crude that, for lack of a turntable, the engine had to drive backwards on the return trip. For the first time, however, Canada’s North-West was now connected directly to the outside world.
In the late 1870s, it seemed that everything “westophiles” had ever said about the North-West was about to prove true—it was a New Eden, the “garden of the world,” Canada’s answer to the United States’ manifest destiny. The Long Depression lifted, or at least went into remission, and suddenly immigrants came pouring into this vast, unsettled territory—eighteen thousand in 1880, the next year twenty-nine thousand. The 1881 census put Manitoba’s population at sixty-six thousand, not counting Aboriginals.
Not all the newcomers were Anglo-Saxons. There were Mennonites fleeing military service in Germany, Icelanders driven out by a volcanic explosion who settled in a place called Gimli (“Paradise”), several thousand Hungarians who grouped together in “Huns Valley,” and the “rural Jews” brought out of Russia by Lord Rothschild, initially to Saskatchewan. The English-speaking proportion of Manitoba rose swiftly, from less than half before it joined Confederation to close to 90 per cent—a shift quickened by the departure of many Métis to the Far West, especially to Batoche in present-day Saskatchewan.
Winnipeg now grew rapidly. It was rough and rowdy; in one contemporary judgment, “Winnipeg and Barrie are the two most evil places in Canada.” * But it was also go-ahead; by the 1880s, Winnipeg had acquired gas lighting, a telephone system, a street railway, three newspapers and, most remarkable of all, the University of Manitoba. Among those lured westwards by this expansion were two Toronto lawyers, Hugh John Macdonald and Charles Hibbert Tupper, the son of the veteran politician who was now minister of railways. The senior Tupper, whose patronage practices were legendary, urged Macdonald to steer government business to their sons. Macdonald took offence and told Tupper he would never allow it. For the next two years, these two long-term colleagues never spoke except on formal business. Eventually their hurt feelings healed, with neither harbouring a grudge.
In the meantime, the new owners of the St. Paul, Minneapolis and Manitoba Railroad were making a mint. At this juncture, Macdonald received some of the best advice of his entire career. John Henry Pope, his plain-looking and plain-speaking minister of agriculture, told him about the western railway’s owners and advised: “Catch them, before they invest their profits.”
During his five years as prime minister, Alexander Mackenzie had been able to advance the transcontinental railway just a few hundred miles. Edward Blake, who always overshadowed him, never stopped denouncing as “insanity” a project that involved, in his term, crossing “a sea of mountains” to serve a market of about twenty thousand (European) people. The principal reason for the slow progress during Mackenzie’s term, though, was the contraction of government revenues due to the depression. All he could do was to issue small contracts each year and to shrink the grandiose scheme closer to financial reality—as by cancelling Macdonald’s commitment to British Columbia that the line would be extended over to Vancouver Island. Macdonald was back in power now, but he had no clearer idea than Mackenzie how this huge task might actually be done. Moreover, he made things even more difficult by insisting that the line be built entirely in Canada—by running it across the empty, hard-rock expanse above Lake Superior rather than taking the easy and cheap southern route by curling down into the United States at either Sault Ste. Marie or Duluth and returning by way of the St. Paul—Winnipeg line.
Of all Macdonald’s cabinet ministers, Charles Tupper was the most exasperating and the most likeable. A medical doctor who kept his bag under his seat in the Commons, large, blousy, loud and ferociously partisan, he provoked everyone he met to describe him in vivid colours. The MP George Ross wrote, “In repose, even, he looked as if he had a blizzard secreted somewhere about his person.” Yet Tupper got a lot done: he had manoeuvred Nova Scotia into Confederation and had made it almost impossible for Macdonald to resign after the Canadian Pacific Scandal. Now, he badgered Macdonald into doing what had to be done—to find a syndicate capable of building the CPR.
Charles Tupper was more than a bit of a blowhard, but he was also capable of surprises, such as coming up with the formula that sealed the deal between the government and the CPR. His nickname, “The Ram of Cumberland,” was probably unfair, his attentions to the ladies being limited to flirtation. (photo credit 22.2)
The Macdonald government’s 1880 schedule for railway construction was modest: it involved paying for 125 new miles to be built in British Columbia from Kamloops to the coast. Tupper began to nag his leader: “I want to submit a proposition for building a through line from Nipissing to the Pacific Coast.” Macdonald, still harbouring memories of Hugh Allan, warily observed that it would be “a very large order,” but he agreed. Tupper plunged ahead and submitted a lengthy memorandum to the cabinet on June 15 asking for authority to negotiate with a group of capitalists “of undoubted means” who he claimed would guarantee not only to construct the line but to operate it as well.
Here, Tupper was being daringly innovative; not only was the line to be built and managed by a private company rather than the government, but in addition this company would be responsible for “the rapid settlement of the public lands.” In effect, it would be a national development enterprise, one of Imperial dimensions. Cabinet agreed, and Tupper opened negotiations with Stephen and his partners. Prime among the subjects to be discussed was the scale of the government’s assistance in both a cash subsidy and land grants.
At this point, Macdonald decided that he and Tupper should go to England to scout prospects for raising funds for the railway project and to seek out whether any other groups, particularly Canada’s largest railway company, the Grand Trunk, might be interested. They sailed from Quebec City on July 10. A day later, the ship stopped at Rimouski to pick up mail. Included in Macdonald’s package was a letter from Stephen, convoluted and almost standoffish, but with a hint that he really wanted to be asked to take on the project.
He was, Stephen wrote, rather hesitant to commit himself “to the enormous responsibilities involved in this undertaking.” He was sure Macdonald would find others “more or less substantial and with greater courage … because they will adopt measures for their own protection” which he would not use. The usual way of building a railway, he continued, was for a company to issue the largest possible number of bonds, so that the real responsibility for the success of the project was transferred to the bondholders, while the company made big profits at the start. He, however, had figured out a better way of getting the job done, by keeping public borrowing to a minimum, financing the project as much as possible from his group’s own capital and looking to a respectable return through “the growth of the country and the development of the property”—after the railway was actually in business*. Amid all this roundabout musing he tucked a most alluring argument: because the company would earn its money more from land sales than from ticket sales, it would have a powerful incentive to build the railway as quickly as possible. Stephen closed by saying that although he was “off the notion of the thing now,” he might revive his interest if Macdonald and Tupper found that the offers they received in England were not what they expected. The lure worked. In London, Macdonald got no better proposal, so he called Stephen again.
By September, Stephen was writing to Macdonald that both his friends and his enemies had warned him that the railway project would be “the ruin of us all,” but he wanted an agreement that would be “fair and creditable to both the Government and ourselves.” But for the details, and for the politics, the deal was done.
One problem appeared. Among the syndicate’s directors was Donald Smith, the same man whose vote had ensured Macdonald’s defeat in the Commons in 1873. Later, Macdonald and Smith had got into a shouting match in the Commons, with Macdonald calling him “the biggest liar I ever met.” The solution agreed on was to omit Smith’s name from the published list of CPR directors. That caused new problems. “I have had a terrible bother with Don Smith because his name is not printed,” Stephen wrote to John Rose in London, adding, “He has been like a baby over the thing.” On the government’s side, the problem in fact was not so much Macdonald as it was many of the Conservative MPs. Macdonald’s view about political relationships was, as he once told his secretary Joseph Pope, that “a statesman should have no resentments.” His Conservative colleagues, however, could never bring themselves to forgive Smith for his disloyalty, and as payback they managed to get Smith’s most recent election victory annulled for a technical breach of the law.*
A more fundamental problem now appeared. “Rapid development” of the territory was essential if the CPR was to recoup its costs. To accomplish this end, the company had to have a monopoly over railways in the territory—at least for a time. In a succession of letters to Macdonald, Stephen warned that without a monopoly for the CPR all the money spent on building the line “might as well have been thrown into the Lake.” He took a firm position: no monopoly, no contract. Macdonald eventually agreed, but reluctantly, because populist rage against monopolies exploiting their exclusive franchise had become a prime political force all across North America. On October 21, 1880, the contract was signed.
“A stupendous outrage,” screamed the Ottawa Free Press. “One stands aghast … so monstrous are its provisions and so monstrous its omissions,” declared the Montreal Daily Witness. “A ruinous contract,” echoed the Manitoba Free Press. These criticisms weren’t wrong. The scale of the concessions to the CPR syndicate was without precedent, not only in Canada but even in the far more economically advanced United States, where, during the Gilded Age, the giveaways to railway syndicates and mine operators were truly heroic.
The company was to receive a subsidy of $25 million and a grant of 25 million acres of land (in alternative sections of 640 acres each). No duty would be charged on all the construction materials it imported. Its land holdings would be free of taxation for twenty years, and all its structures, such as stations and yards, would be free of tax in perpetuity. The company would be given without charge all the transcontinental line already built—some 710 miles. Most important, the contract included Clause 15, which granted the CPR a twenty-year monopoly over all lines southwards to the border from its own line. The Ottawa Free Press calculated that the syndicate was being handed a gift worth $261 million. Stephen denied it, but his mathematics left a lot out.
In exchange, the CPR syndicate agreed to build, to top-class standards, all the uncompleted portions of the line—some 1,900 miles in all, from Ontario to the Pacific coast. At Macdonald’s insistence, the line, despite Stephen’s strong protests, would be all-Canadian and so would cross the bleak territory above Lake Superior. British Columbia would not get the extension to Vancouver Island it demanded, but it would get a guarantee that the entire project would be completed within ten years—the same time span agreed to when the province entered Confederation (and also, as everyone believed at the time, impossible to meet).
It was horrendously expensive, but it was also magnificently ambitious. As Pierre Berton wrote in The National Dream, this contract was designed to be “the instrument by which the nation broke out of the prison of the St. Lawrence lowlands.” It would turn Canada into a continental nation, a northern mirror-image of its rival to the south. Goldwin Smith came closest to understanding the magnitude of what was being attempted. “What is truly momentous, and makes this a turning-point in our destiny,” he wrote in the Bystander, “is the choice which our people are now called upon to make between the continental and the anti-continental system, between the policy of antagonism to our neighbours to the south and that of partnership.” It was in this vital respect that the transcontinental railway was the foundation of Macdonald’s entire nation-building program. It would make it possible to fully realize his National Policy of tariff protection by creating a national market for Canada’s manufacturers. And it would create a true nation, because its citizens would at last be able to come to know each other and to need each other.
The railway was Canada’s first projet national—the first time, but for Confederation itself, that this fragmented and attenuated nation dared to try to be something grander than the sum of its comparatively small parts. It was a collective aspiration that involved more than merely surviving, or not becoming American by remaining British. This railway would be the first in a series of collective, out-of-the-ordinary undertakings for Canada, including its magnificent participation in the First and Second world wars; its postwar recreation of itself as a welfare state, with universal health care becoming part of the national DNA; Expo 67 and other celebrations of Canada’s centennial year; the commitment to peacekeeping; the implementation of national bilingualism and the Charter of Rights and Freedoms; and, today, the policies of multiculturalism and of continuous immigration on a scale, proportionately, far larger than that of any nation on the globe.
Macdonald’s project was also that most un-Canadian of events—the taking of a great dare. Out of it would come the country’s one major narrative poem, E.J. Pratt’s Towards the Last Spike, and also the country’s most iconic image, of the ceremony (a modest, Canadian affair) that marked the completion of the line. Inevitably, in a nation so divided and thinly stretched, the transcontinental railway project would also produce a great deal of criticism and complaining and carping, both at the time and for decades afterwards. Macdonald could not see into this future; but he could, and did, get the railway built.
The next step was to get Parliament’s approval. Given Macdonald’s majority, the outcome was not in doubt. Far from certain, though, was how long it would take, and how much skepticism about the venture the criticisms of the Opposition would stir up among the citizens. Macdonald underestimated the first challenge and overestimated the scale of the second.
To give the CPR a chance to execute a full construction program for 1881, Macdonald called Parliament into session early, in the middle of December 1880, and immediately tabled the necessary legislation. The debate went on and on and on. To keep it going, Opposition members resorted to reciting everything from “The Charge of the Light Brigade” to “How doth the little busy bee.…” From London, Stephen wrote to Macdonald in anguish: “I did not think it possible for political malignity to go so far as it has done in this discussion.” After the briefest possible recess for Christmas, the MPs immediately resumed their squabbling. Blake and Tupper exchanged five-hour speeches, neither really saying anything new.
The Opposition did score some points, but overreached itself by promoting the cause of an alternative syndicate that just happened to have a number of well-known Liberals as partners. An illness—perhaps stomach trouble or sheer exhaustion—kept Macdonald away on Parliament’s reopening day, and afterwards he let Tupper do all the talking. Then he saw his opportunity. He had to be helped to his feet in the House, and he spoke with long pauses, once saying, “I am not well. But I will be heard.” He ridiculed the alternative syndicate as a “farce … a political engine.” Building a transcontinental railway to connect with the existing American railways, as planned by the supposed second syndicate, would ruin the policy under which the Dominion of Canada had been created and ruin “our hopes of being a great nation … we should become a bundle of sticks as we were before, without a binding cord.” In contrast, an all-Canadian line would “give us a great and united, a rich and improving, developing Canada, instead of making us tributary to American bondage, to American tolls, to American freights.” Blake wasn’t wrong in many of his criticisms about financial improvidence, but he was no match for a national dream.
It still took time. The House often sat until 2 a.m., and once all the way to 8 a.m. The Liberals moved twenty-four amendments. Often weak and pale of face, Macdonald never left the Chamber, and even skipped a fancy-dress ice carnival at Rideau Hall. “I had to betake myself to my bed for a fortnight and am only now beginning to crawl around,” he wrote to Alexander Galt, then in London. On January 31, 1881, the bill was given second reading. The final, third reading came on February 1, just before midnight. “At last the CPR is a fixed fact,” Macdonald wrote to Galt, again from his bed.
Macdonald was too weary to attend the ceremony at which Governor General Lorne gave royal assent to the bill and it became law. The parliamentary session ended on March 31. A few days later, Macdonald collapsed. “There was no ascertainable cause for it, but suddenly I broke down—pulse at forty-nine, and great pain and disturbance in liver and bowels.” For weeks afterwards, he remained fragile and tired.
Some of Macdonald’s troubles were actually caused by his physician, Dr. James A. Grant, who continually make alarmist diagnoses such as stomach cancer. When Macdonald finally went to England at the end of May, he came under the more confident care of a Dr. Clark, who told him he saw no evidence of organic disease and prescribed a simple diet and a great deal of rest. Macdonald’s condition steadily improved, and by the end of July he was able to go out to dinners and the theatre. Not until mid-September did he book passage home.
Macdonald had set in motion the creation of a new Canada. As for himself, as he told Alexander Campbell, “I have no pleasure nowadays but in work, and so it will be to the end of the chapter.”
* Among Winnipeg’s qualifications to be identified as evil was having a saloon for every two hundred residents. The reason for Barrie’s inclusion in the list of the infamous remains opaque.
* The idea wasn’t completely new to Macdonald. Back in 1870, in a debate about the original proposed CPR, he had told MPs one way to finance an intercontinental line was “by means of the lands through which it had to pass.” This was why he was so insistent on Ottawa retaining ownership of the Crown lands of the prairies.
* Smith ran again in the resulting by-election in Manitoba but lost, despite spending a whopping thirty thousand dollars. As one of his aides put it, “The voters have taken your money and voted against you.”