The Last Spike: The Great Railway, 1881-1885 (58 page)

Outwardly, the general manager maintained his air of bluff confidence. When a Scottish friend of W. B. Scarth’s asked if the
CPR
was a good investment, Van Horne replied: “I have no hesitation in expressing my opinion in the strongest possible terms that it will pay handsomely” – and he went on to say why: its entire debt was only one third that of the Northern Pacific on a mileage basis, and even less in comparison with other United States transcontinental railways. The
CPR’S
advantage as a through line was greater, and the road itself was far better built.

But Van Horne’s real expression of confidence in the railroad went much further than words. He himself had sunk almost every dollar he had in Canadian Pacific stock. If the road failed, he was prepared to go down with it.

7
The edge of the precipice

Once again, the railway was in a critical financial position. “I
feel
like a man walking on the edge of a precipice with less ‘nerve’ than is comfortable or even
safe
in such a case,” George Stephen wrote to the Prime Minister at the end of 1884. “The uncertainty is too much for me with all our other difficulties. On Saturday we got a telegram from Port Arthur that the men had struck and would go off the work if we did not send them their pay. We sent a man upon Saturday and hope to gain time till our next estimate comes. But the ordeal I am going through is not easy to stand.”

The ordeal had begun that summer – only a few months after Parliament reluctantly passed the loan of $22,500,000. By September the credit of the company at home and abroad was gone. Stephen and Donald A. Smith had been dipping lavishly into their private fortunes in an attempt to sustain it. They were close to the bottom of the barrel.

Almost all of the spring loan had been gobbled up by the railway builders on the Shield and in the mountains; what was left was being paid out only as the work was done; often these payments were very late. In addition there was a whole variety of unseen expenses. The grain elevator at the lakehead, for instance, had to be built if the
CPR
was to capture the grain traffic from its United States rivals. The cost came to three hundred thousand dollars. Then there were the terminals, shops, and equipment, spread over more than two thousand miles. Even with costs pared to the limit, the bill for these was five millions. In the first ten months of 1884 the company found it had spent eight million dollars on essential work that had not been contracted for.

The railway was working on a margin that was terrifyingly narrow. A few days delay in the payment of the subsidy could mean that thousands of men would not be paid. Yet for a variety of reasons, all based on the government’s strict arrangement with the company, the payments were often slow or slender.

Part of this was the result of pure governmental vacillation. The Council often did not get around to making a decision on an estimate either
because of procrastination or from a general suspicion that the
CPR
was not entitled to the amount claimed. The Pacific Scandal, which the Liberal press never tired of mentioning, still haunted Macdonald and his colleagues. They were fearful of seeming to show any sign of favouritism to the Canadian Pacific; it was safer to err on the side of caution.

It exasperated Stephen. He made no secret of his feelings on one occasion when the Council failed to come to grips with an estimate before it for work done. He wrote the Prime Minister a letter intended for his cabinet colleagues: “It would be folly for me to conceal from you the discouraging effect which this message has had upon me, making me feel for the time being, as if it were a hopeless task for me to attempt to carry through the work on hand to a successful conclusion.”

Such delays, Stephen pointed out, were damaging the credit and reputation of the company and they “cruelly add to my already questioning anxieties and labours.…” Stephen wondered at the Council’s apparent lack of faith in him. Did they think he intended to pull out altogether and leave the government to clean up the mess? It looked that way. The impression, he said, “weakens me more than I can tell you, denuding me of the power and moral strength which the confidence and hearty cooperation of the government alone can give.” His own exertions and sacrifices, Stephen added, had been unparallelled and, as he often did in moments of high emotion, he underlined the key words.

There were other problems connected with the subsidy payments brought on by the remoteness of the country into which the railroad was probing. Expensive tote roads had to be constructed out of Lake Nipissing and Michipicoten and across the Selkirk Mountains. Vast quantities of construction equipment and supplies had to be brought in, especially before the onset of winter. For all of this the company was forced to lay out funds months in advance; but in Schreiber’s strict interpretation of the contract terms, the subsidy did not apply to these preliminary steps of construction. In the matter of tote roads, Van Horne was finally able to persuade the engineer-in-chief to change his mind.

The government’s method of estimating the subsidy was also a bone of contention. The supervising engineer checked the work done and reckoned in dollars and cents how much remained to be done. Enough money was held back by the government, in each instance, to complete the road; the difference was paid out to the company. The subsidy could not cover all the work done. Stephen wrote to Macdonald at one point that he was flabbergasted to learn that Schreiber’s estimates for one month were half a million dollars less than the railroad had actually spent on
construction. Van Horne finally prevailed on Schreiber to reduce certain standards, especially on steel and masonry bridges, but he was then faced with the problem of making temporary trestles appear permanent, because the government paid no subsidy on temporary construction.

The real fear was that the government would stop payment altogether. This it was empowered to do if its engineers estimated that there were not enough funds left to complete the line. By October, 1884, it was becoming increasingly clear that if the company had to find funds to repay its loan of the previous November, together with interest and dividends, the coffers would be empty and construction must cease.

Wages were suspiciously slow. Van Horne gave Schreiber an ingenious explanation of why thousands of men on the Lake Superior section were facing long delays in pay. For three hundred miles, he pointed out, the area was accessible only by boat or by temporary roads. Since monthly disbursements amounted to a million dollars or more, “it has been no easy matter to distribute and pay the large sums required.” On both the Lake Superior and the mountain sections the cash had to be sent out for a hundred miles or more beyond the end of track through the wildest country over difficult roads and trails, “and we have not felt it safe to send it in large installments and consequently the payments have been slow, and frequently before the payment for one month has been completed, the payment for the next month has been due.”

The truth was that the company was using every possible excuse to stave off creditors and employees. Reports filtered into Calgary of a growing volume of complaints about pay in the mountain section where, by mid-November, the men had received only their September wages. At the end of October, in Thunder Bay, the
CPR
announced that the men in the eastern division would henceforth be paid by cheques drawn on the Bank of Montreal; the reason given was that it was too dangerous to carry around more than a million dollars in cash. The real reason was that Van Horne had decided on a daring though barbarous gambit. He intended to keep nine thousand men at work all winter in the remotest areas with plenty of good food. They would be paid by cheque, which they would be unable to cash. If any man wanted to get away he would find it almost impossible to do so; the isolated conditions would make it difficult to leave before spring, at which time the general manager believed funds must be forthcoming.

The wonder was that there were so few labour disputes as a result of the slow payments. Harry Armstrong, the engineer, recalled that though he had no pay on the Lake Superior section for many months the matter gave
him no concern: “My sole thoughts seemed to be for progress of the work and [I was] satisfied reward would come in time, including back pay.” Ordinary navvies were undoubtedly less charitable, but there was little they could do.

In those desperate months, Van Horne and Stephen leaned heavily on Thomas Shaughnessy, a man apparently able to make one dollar do the work of a hundred. Shaughnessy, who had come to work for the company rather reluctantly, was rising rapidly in the ranks; one day he would be president. He sprang from humble beginnings; both his parents were immigrants; his father, a Limerick Irishman, was a policeman on a beat in Minneapolis. This modest start undoubtedly contributed to Shaughnessy’s later love of ostentation. He was a dapper man, always band-box fresh, immaculately turned out, a pearl in his tie, a grey hat on his head, a goldhandled cane in his gloved hand. For all of his life he was an autocrat who remained aloof from all but his closest intimates. (In his days as president he suffered no employee in the same elevator with him.) He did not endear himself to strangers or chance acquaintances. He was, in a contemporary journalist’s assessment, “a man almost bloodless in the intensity of his devotion to material ends. He does not please, he does not charm, he does not delight; but he interests.… The eyes are small and penetrating with the line of the low hanging upper lid sharply defined, giving the appearance of command and impatience of delay.… When he speaks, he opens his mouth wide, and the voice issues sharply and impatiently, raucous and grating in tone, strident, too, rising above the blur of conversation like the tearing of a saw.”

He was known as a man of cool common sense, and it was remarked by more than one observer that while Van Horne’s favourite game was poker, Shaughnessy preferred solitaire, which he often played night after night while working out details of the business. For he was really all work and no play – a martinet intolerant of frivolity or the slightest sign of debauchery. A strict temperance man, he once ordered an assistant to close a bar in a
CPR
hotel. “Now or at the closing hour of the day?” he was asked. “Close it now,” ordered Shaughnessy, “and do not allow it ever to open again.”

He was a company man through and through. In his view, what was good for the
CPR
was good for Canada; he held no personal or political views save those of the institution he served. That he served it well in the financial crisis of 1884–85 is beyond doubt. He never appeared to show the slightest tremor of panic as he kited cheques, kept creditors at bay, denied funds, made partial payments, and generally held the company
together. In Toronto, the heads of the big wholesale houses, under Van Horne’s and Shaughnessy’s persuasion, extended millions of dollars in credit so that supplies could go forward.

Shaughnessy, apparently, would go to any lengths to keep the
CPR
solvent. There is an illuminating story, still told in the Shaughnessy family, that illustrates his devotion. At a board meeting one day, so the tale has it, George Stephen solemnly read a letter from an American railway supply company complaining that they had tried to do business with the
CPR
without success, even though they had on several occasions in 1884–85 made out large cheques to Thomas Shaughnessy. The implication was clear: Shaughnessy had been taking money under the counter for favours rendered, supposed or real.

The board of directors called Shaughnessy in and demanded an explanation. He excused himself quietly, went to his office, and returned with a sheaf of deposit slips from the Bank of Montreal, all endorsed by him to the account of the Canadian Pacific. The slips tallied to the penny with the total amount the American firm said that it had paid him.

“Would these by any chance have been bribes?” asked Stephen incredulously.

“Of course,” came the cool reply, “but, by God, we needed the money, didn’t we?”

While Shaughnessy was using extraordinary measures to keep the company solvent, Stephen was slowly committing his entire personal fortune and those of his closest colleagues to its further support. The previous winter, he, Donald Smith, Angus, and McIntyre had put up a total of $2.3 million in their own bonds and securities as collateral against
CPR
bank loans. But in May, McIntyre dropped right out of the Canadian Pacific, refusing to stay even as a director or to have anything to do with the management of a company he clearly believed would go to the wall. Baron Reinach, one of the original European members of the Syndicate and a charter investor, went with him. Stephen, who had already bought out Hill and Kennedy, was forced to use more of his fortune to buy out both the Reinach and the McIntyre stock. In the president’s phrase, these men had “deserted”; they were little better than traitors. Contemptuously, he told Macdonald that he could get along without McIntyre. Later he went into more detail about his feelings. The vice-president had been “coarsely selfish & cowardly all through these 5 years. Ruthless in disregarding the interests of others when he could advance his own.… When McIntyre deserted the Coy he made up his mind that it would ‘
burst’
and that Smith & I would lose every dollar we had, in the collapse.”
Stephen in future years was forced occasionally to do business with his erstwhile vice-president but apart from that did his best to avoid him, for, as he said, he could not stand to be in the same room with him. The unkindest cut came a few months after the defection when, in the
CPR’S
darkest days, McIntyre was the first to refuse it credit and threatened to sue immediately unless his firm’s account for dry goods was paid at once.

McIntyre also, apparently, half-convinced R. B. Angus to leave. In the end, Angus stayed, but Stephen did not quite trust him after that. He was, he said, “as facile as clay in the potter’s hands.”