The Last Spike: The Great Railway, 1881-1885 (47 page)

The Winnipeg Board of Trade, in a bitter complaint to Van Horne in the spring of 1883, pointed out that Canadian Pacific freight charges between St. Vincent on the border through Winnipeg to Regina were an average of 65 per cent higher for all classes than comparable Grand Trunk rates in eastern Canada. Moreover, the Grand Trunk carried certain goods such as grain, flour, butter, cheese, and potatoes at substantially lower rates. The
CPR
rates for these commodities were 133 per cent higher in the North West. The
CPR
replied that the cost of operating in the North West was much higher than in eastern Canada, and the government backed it up.

But the farmers believed – and with some reason – that it was the
monopoly clause that kept rates high. In addition, of course, it frustrated the building of rival lines. The building of a railway meant a period of dazzling prosperity, however brief. But in 1883, Macdonald, at Stephen’s prompting, had disallowed the provincial charters of three Manitoba railways because they came too close to the international border. Apart from speculative considerations, the small communities of Manitoba needed more railways. Van Horne was plagued with letters from various towns asking for branch lines. The general manager, who firmly believed that Grand Trunk agents were behind the farmers’ attacks on the
CPR
, replied that the railway could not afford any further construction: stories of the agitation had been blown up in the British press, he said, making it impossible for the railway to raise additional funds in Europe. There was some truth in this. J. G. Colmer, Tupper’s deputy in London, informed the Prime Minister by cable that telegrams from Ottawa in all the London papers reported that the farmers’ agitation was assuming “gigantic proportions” and that if the grievances were not redressed, it was being said that Manitoba would have to look to Washington. “Such telegrams very harmful here,” Colmer cabled.

“It is very extraordinary,” Van Horne told John Egan, his western superintendent, “that people with common sense should, while demanding the construction of branch lines, with the same breath attempt to destroy the credit of the Company and render it powerless to build them.”

But the general manager’s characteristic bluntness with his correspondents did nothing to alleviate the problem. The
Globe
accused him of addressing the people of the North West in a tone which was that “of an autocrat to serfs whose murmurings and grumblings annoyed him.… In his eagerness to apply the lash to the discontented he more than once inflicts severe blows on his associates.”

The farmers also believed that the W. W. Ogilvie Company had conspired with the
CPR
to get a monopoly on all grain elevators in the province, arranging for special rates from the railway. That was not true, but, as Stephen told Macdonald, “W. W. O. is an awful fool both in speech and action, and no saying what he might not do or say to create an impression in the minds of other buyers that it was useless to try and compete with him in wheat buying in the North West.”

The farm agitation did not die down. In March, 1884, the farmers’ union held a second convention greater than the December demonstration – “the most momentous gathering of men ever held in the northwest,” according to the Brandon
Sun
. It meant either emancipation or open rebellion, the paper said. “There can be no middle course now.”

In addition to the disaffected Manitobans, Macdonald had the Quebeckers to contend with. If the
CPR
was to get a loan, then how about French Canada? The province intended to use the situation as a lever to get further federal assistance.

Stephen, meanwhile, was struggling to keep the company afloat. On January 22, 1884, he scribbled a note to Macdonald that he was going back to Montreal to try to “keep things moving … until relief arrives.” There was a note of despair and resignation in this letter: “…  you must not blame me if I fail. I do not, at the moment, see how we are going to get the money to keep the work going.… If I find we cannot go on I suppose the only thing to do will be to put in a Receiver. If that
has
to be done the quicker it is done the better.”

It was the first time that the possibility of bankruptcy had been mentioned, and Stephen sounded almost comforted at the prospect: “I am getting so wearied and worn out with this business that almost any change will be a relief to me.”

When the
CPR
president reached Montreal, he picked up a copy of the
Star
in which, to his fury, he read an editorial which insinuated that he, Smith, McIntyre, Angus, and the others had been robbing the company for their own personal benefit. Since all of them had pledged their own stock in the St. Paul railway – the basis of their personal fortunes – against the
CPR’S
bank loan, the words cut deep. The fact that he had recently completed, at a cost of some three million dollars, a mansion on Drummond Street “fitted up and furnished with regal magnificence,” did not help the company’s image.

There was also the matter of the guaranteed dividend. The
CPR’S
critics were not slow to point out that, in guaranteeing an annual five per cent on the par value of the issued stock, the members of the Syndicate were ensuring a cosy income for themselves since all of them owned large blocks of shares. As Blake put it, later, in the House: “They invest money with one hand for the purpose of taking it out with the other.”

The real interest rate, of course, was far higher than five per cent, since all but the fifty thousand shares had sold at a heavy discount. One block of 200,000 shares had sold for twenty-five cents on the dollar, much of it to insiders. Stephen got most of his stock at that price – about 23,000 shares out of his total of 31,000 odd. A study of his stock holdings during this period indicates that he was enjoying an average return on all of his
CPR
shares of almost twelve per cent – an enormous rate of interest for that or any time.

Stephen’s annual income from his
CPR
stock came to about one hundred
and fifty thousand dollars, all of it guaranteed and none of it taxable. In 1971 that would represent a
net
income of close to three-quarters of a million, something that few men are able to achieve in the 1970’s. No wonder then that the “scribblers,” as Stephen contemptuously called them, were carping. That winter the
CPR
president, at the Prime Minister’s suggestion, apparently made an attempt through Donald A. Smith to silence the
Globe
, the railway’s most persistent critic. Macdonald suggested that the paper was in financial difficulty and thought that Smith could “come to a business arrangement” with George Brown’s widow and thus influence it. The Prime Minister thought the paper should be allowed to keep its character and position as a Liberal journal but should change its attitude to the railway – a situation that already existed with two other Opposition organs, the Montreal
Herald
and the Manitoba
Free Press
(the latter for some years under Smith’s financial influence). Smith did make an attempt to buy the
Globe
, but nothing came of it and the paper continued to attack the railway.

Stephen had to put up with the scribblers as he had to put up with the politicians. Macdonald warned him in mid-January that it would take another six weeks to get the loan through Parliament. Stephen was aghast. Six weeks, when every day counted! “Had I supposed it would take to 1st March before help could reach us I would not have made the attempt to carry on.”

In Montreal, he learned the magnitude of the railroad’s financial dilemma. Every cent coming in from the government subsidy had to go directly to the Bank of Montreal to cover the loan of three and a half millions. Nothing could be diverted to pay wages or meet the bills for supplies that were piling up in Thomas Shaughnessy’s office. He must have an advance of at least three and a half millions by February 8 in order to pay off the bank. “If this cannot be obtained,” he told Tupper, “it is not a bit of use of my trying to carry on any longer.”

But he had to carry on as he had been carrying on all that year, putting off creditors, trimming costs, postponing expenses. In spite of further threats to Ottawa, cries of despair, and attacks of fatigue and nerves, he would continue to carry on. It was not in his nature to give up.

6
The
CPR
goes political

There was trouble north of Lake Superior. On December 15, 1883, John Egan had been forced to cut off the cost-of-living bonuses that Van Horne had instituted in that unprepossessing environment. The men were bluntly asked to sign a new contract agreeing to the reduction or to leave their jobs. Some thirty-five hundred refused, and the work on the line was suspended. In the end, however, most of the men were forced to return to work because at that season of the year it was hard to get employment.

In his brusque interviews with the press, the general manager exuded confidence. In Chicago the previous August, he had announced that the
CPR
was employing twenty-five thousand men and spending one hundred thousand dollars a day.

“How much will it cost per mile through the Rockies?” a reporter asked him.

“We don’t know,” Van Horne replied.

“Have you not estimated the amount beforehand?”

“The Canadian Pacific Railway,” declared Van Horne, “has never estimated the cost of any work; it hasn’t time for that; it’s got a big job on hand, and it’s going to put it through.”

“Well, but if you haven’t estimated the cost of the construction through the mountains how do you know that you have sufficient funds to push the road as you are currently reported to have?”

“Well,” replied Van Horne, airily, “if we haven’t got enough we will get more, that’s all about it.”

The reporter retired, “forcibly impressed with the resolute frankness of character displayed by the man who is the administrative head of this great Canadian enterprise.”

Van Horne was not being frank. He, too, was scrambling for cash and pinching every penny possible. There scarcely seemed to be an expenditure in 1883 that did not come under his personal scrutiny as a constant stream of letters to his staff showed:

“I think this is the second lot of revolvers that has been purchased for the use of the Paymaster. What became of the others? Why were silver mounted revolvers permitted to be purchased when others just as good could be had for half the money? P.S. Referring to item about cab hire at Portage la Prairie. I do not understand why a bill for such an amount was passed without enquiry.”

“I understand that the stock of stationery at Winnipeg amounts to about $40,000. This is about four times the largest stock ever carried on the C.M. & St.P. Please look into the matter at once and put on the brakes firmly. I find also that five men are employed where one man and a boy should be amply sufficient. There is something radically wrong in the manner in which the business is carried on if such an office is necessary.”

“Aside from putting the Thunder Bay Line in order, we must cut our improvement account down to the lowest possible notch leaving any work that may be safely postponed until money is more plenty.”

Van Horne watched every item, large or small. He could berate a man for sending a telegram “containing 35 words and costing this Coy about $2.00 and which could have just as well have been sent by mail,” and he could also give orders for mammoth savings north of Superior, where construction had just got underway. His general superintendent there was another Ross – John, no relation to the James Ross in charge of mountain work. When John Ross asked for sixteen steamshovels in addition to the two he had working, Van Horne turned him down. They cost ten thousand dollars each and the company could not afford to tie up that amount of money. The general manager suggested the number could be reduced by putting in permanent trestles of round timber. The trestles Would last for seven or eight years. This would mean that large earthworks – filling in and replacing the temporary bridging – would not immediately be required. Steel trestles, at that point, were out of the question.

Van Horne’s idea was to get a workable line through – one that would stand up for at least six years – make it pay, and then begin improving it. “We have a long way to go before completing our contract,” he explained to John Ross, “…  and we must therefore cheapen our earlier work as much as we safely can in order to make sure that our money will hold out.… We must in every other way possible reduce the first cost of the road wherever it can be done, but not at the expense of gradients or curvature.”

Masonry could certainly wait. Van Horne gave orders that all rock quarrying, dressing of stone, and installation of masonry should cease except in those places where an iron bridge was absolutely essential. The
CPR
could not afford that kind of luxury. And when John Egan wanted an extra telephone wire installed between Winnipeg and the lakehead, Van Horne turned him down: “…  I think you will be able to get along without difficulty as two wires properly worked under a strict censorship
as to unnecessary telegrams and telegrams of unnecessary length can do an enormous amount of work.… We must not spend one dollar where it can possibly be helped.”

Van Horne was in the House of Commons Visitors’ Gallery on February 1, with Stephen and Donald A. Smith, when Tupper rose to propose the new Canadian Pacific Railway resolutions. The
Globe
was quick to note Smith’s presence; it was less than six years since, in that same setting, both Tupper and Macdonald had called him a liar and a coward and had tried to assault him physically as the House was about to prorogue. Now Smith could lean down “and hear the man who in 1878 denounced him in the most infamous manner in the same chamber labouring hard to show the company of which Mr. Smith is a leading member is composed of men of great wealth, enterprise, unblemished honour and undoubted integrity. Time certainly brings its revenge.”