The Last Spike: The Great Railway, 1881-1885 (9 page)

But the gibes from other British newspapers and journals continued. The most memorable, titled “The Canadian Dominion Bubble,” was published in
Truth
on September 1, 1881. The author was Henry Labouchère, a piquant journalist and financial critic whose uncle and namesake had been Colonial Secretary in 1857 when Captain John Palliser made his gloomy report on conditions in the Canadian North West.

Labouchère said flatly that the floating of a Canadian government bond issue in England and ten million dollars worth of
CPR
land grant bonds in New York and Montreal that fall was a fraud. New York investors, he declared, would never be such fools “as to put their money into this mad project. I would as soon credit them with a willingness to subscribe hard cash in support of a scheme for the utilization of icebergs.” As for the Canadians, they were “not such idiots as to part with one dollar of their
own if they can borrow their neighbours’. The Canadians spend money and we provide it.”

“The Canadian Pacific Railway will run, if it is ever finished, through a country frost bound for seven or eight months in the year, and will connect with the eastern part of the Dominion a province which embraces about as forbidding a country as any on the face of the earth.” British Columbia was “a barren, cold, mountain country that is not worth keeping.” It would never have been inhabited at all had it not been for the mining boom: “Ever since that fever died down the place has been going from bad to worse. Fifty railroads would not galvanize it into prosperity.”

Manitoba was equally formidable: “Men and cattle are frozen to death in numbers that would startle the intending settler if he knew; and those who are not killed outright, are often maimed for life by frostbites.”

Canada was “one of the most over-rated colonies we have … poor and crushed with debt.” In the end, the editorial said, the country would have to go into liquidation, and when the load got too heavy Ontario would quit and join the United States. As for the railway, it was “never likely to pay a red cent of interest on the money that may be sunk into it.”

This broadside and others that followed had their effect on the British money market. They were accompanied that fall by the first of the anti-
CPR
pamphlets, said to have been written by the Grand Trunk’s “paid ink-slingers,” as Stephen called them. One pamphlet, entitled
The Canadian Pacific Railway and the Schemes of the Syndicate
, by “Diogenes,” warned investors not to risk their money in what was represented as a reckless enterprise. Another, entitled
Financial Notes
, by “Ishmael,” denied the fertility of the twenty-five million acres of land that the
CPR
was to receive from the government. Ishmael accused
The Times’
s correspondent with the Lorne party of having been bought up by Stephen to pretend that the Great Lone Land was flowing with milk and honey.

At about the same time the
Money Market Review
, a respected British financial journal, devoted four issues to a series of articles warning British investors against putting money into
CPR
bonds. In reply, Alexander Begg, a journalist and
CPR
employee, charged in a pamphlet of his own that the periodical had lent its columns for the purpose of enabling the Grand Trunk “to make a violent attack upon a new corporation, the Canadian Pacific, which it insists upon regarding as its deadly enemy, and dangerous rival.”

There was no doubt in George Stephen’s mind about who was behind the press attack. “The
G.T.R
. is bound to do all the harm they can,” he wrote to Macdonald. “They are now a through line to Chicago and interested
in drawing the traffic of the North West to that city and will do all they can to that end.…” Stephen was seriously contemplating going to England himself to educate English investors regarding the land grant bonds: “I mean to make ‘John Bull’ buy these bonds by sending orders to this side for them at a
premium.”

Stephen, as his letters to the Prime Minister reveal, was a far more complicated man than his outward appearance suggested. To the world he presented the picture of suave good manners – a flawlessly tailored executive, courtly in bearing and rather solemn. But he was also an emotional man, and temperamental to boot; those who were not passionately devoted to the cause of the railway were seen to be enemies, traitors, blackguards, and cowards. Such terms cropped up constantly in his astonishingly garrulous correspondence with Macdonald, almost all of it scrawled in Stephen’s own sloping hand.

Galt, the High Commissioner, who had been angling unsuccessfully that spring for a post with the railway, was in the enemy’s camp as far as Stephen was concerned. “The Diogenes pamphlet has evidently scared him,” the
CPR
president advised Macdonald that winter. “We have had it here in these two weeks and no one cares a cent for it and Galt’s simulated anxiety lest we should find ourselves short is wasted. The disreputable method adopted by the subsidized Grand Trunk scribblers to discredit the country, the Governor General and the
CPR
company, will end in nothing but mischief to the
GTR
. Galt having done his friends, Barings [and] Glyn, a service and placed himself under obligation to them and the
GTR
, it is not to be expected he would be mildly agitated if we get into trouble. As to his judgment in our financial arrangements … it is simply an impertinence for him to write to you and say that
he
forsooth,
thinks
we are
mistaken
if we do not need to come to London for money. What does he know about it? … It makes me mad to have a fellow pretending to advise us for our good who would gladly see us both busted.”

Stephen urged Macdonald to write to the High Commissioner to tell him that “we have seen all that has been written by the tools of his
G.T.R
. friends, and have not thought it worth while noticing any of the attacks that have been made … and that so far as you can learn, we are confident of our ability to carry out the contract of the Government in half the stipulated time, without asking London for a cent.…”

Macdonald, who did not care greatly for Galt, felt it necessary to defend him from these attacks. Stephen, however, would have none of it. “I agree with you in what you say about Galt,” he replied, “but in regard to us, individually, he is controlled by an other element of his character … envy.
 … He would like to see the
C.P.R
. a success for the sake of the venture he has embarked in.” Stephen was referring to Galt’s attempt to raise money to exploit the coal-fields which his son had helped discover in the foothills of the Rockies near the site of the future city of Lethbridge.

Galt was, however, a minor worry. Stephen saw himself beset on all sides by more formidable forces intent on crushing the
CPR
. One of these was the Northern Pacific, whose dynamic new president, Henry Villard, seemed determined to thrust his rapidly expanding railway into the Canadian North West. Villard was one of those phenomenal business successes thrown up by the yeasty society of nineteenth-century America. A Bavarian immigrant, he had arrived in New York at the age of eighteen and eked out a living working as a reporter for German-American newspapers. He had shot up swiftly in both the journalistic and the financial fields. As a reporter for leading United States dailies, he had covered the Lincoln-Douglas debates, the Pike’s Peak gold rush, and the Civil War. Beginning as an agent for German bondholders, he moved into railway finance and helped reorganize an Oregon railroad and steamship line. By 1881, at the age of forty-six, he owned the
Nation
and the New York
Evening Post
and controlled the Northern Pacific, whose construction he was pushing westward with a reckless enthusiasm that took little account of rising costs.

In Manitoba two private railways were being built towards the United States border. The Northern Pacific had bought control of one and was ready to buy control of the other, believing, in Stephen’s words, that “they can force a connection at the boundary and so strangle the Canadian Pacific; which they are determined to do if they can.” With both Macdonald and Tupper absent from Ottawa, Stephen feared the government might yield to pressure from the prairie province and allow the two lines to connect at the border with a spur from the Northern Pacific’s through line. Stephen urged Macdonald to instruct Ottawa at once to hold matters over until he returned; he cabled him that a decision in favour of the Manitoba lines “must effectually destroy Pacific as National through line, rendering Eastern section useless …”

All that fall of 1881, Stephen kept up continual pressure on the Prime Minister to disallow by federal decree any provincially chartered lines that came within fifteen miles of the border. Again and again he made the point that a “Yankee line” into Manitoba would make it impossible to operate or even to build the Lake Superior section of the
CPR
. With such American competition no one could prevent the products of the North West being drawn through the United States to Chicago, whose attraction
as a market for wheat was almost irresistible. Stephen used every argument in his power to convince Macdonald to disallow the Manitoba charters: it would, he told him, mean the disgrace not only of the railway but also of the Conservative government itself, since the country would not stand for the enormous expense of the Lake Superior line if it turned out to be worthless. “It would be a miserable affair to find that the benefit of all our efforts to develop the North West had by our own acts, fallen into Yankee hands.”

Many of Macdonald’s followers, especially those in Manitoba, were eager to subvert the spirit of the contract which protected the railway through its Monopoly Clause. Because of the British North America Act the clause did not prevent the provinces from chartering lines to the border in competition with the transcontinental railway. This was Stephen’s fear. The Liberal press was already crying “Monopoly!” Stephen wanted the Prime Minister to counter this opposition by exerting pressure on friendly newspapers: “Don’t you think it would be well for you to take some steps to prevent the friendly portion of the Press being led astray by the cry of Monopoly? … I think it would be well for you to instruct the Mail and Gazette on these points, and expose the ‘Monopoly humbug.’ ” Stephen also hoped to bring pressure on the Liberal
Free Press
in Winnipeg through the company’s land commissioner, John McTavish, who did considerable advertising, and through Donald A. Smith, who held a mortgage on the
Free Press
property and was believed to own shares in the paper as well.

Stephen even felt it necessary to bolster Macdonald with some of his own arguments, pointing out that disallowance was simply another aspect of the protectionist platform that had won the Conservative Party its smashing victory in 1878. “The policy of the Government in disallowing all extensions into Manitoba of Yankee lines is nothing more or less than the N.P. [National Policy] in Railways, and is defensible on precisely the same grounds.”

There is no doubt that Macdonald intended to back Stephen up but there is also no doubt that the Monopoly Clause was already causing him grave political uneasiness. To ride roughshod over the legitimate desire of Manitoba settlers for more railways to service their communities was to alienate politically an entire province. From the beginning he had seen the railway as a device to unite the nation – to tie the settled East to the new country beyond the Shield. Now in the very first year of its construction the railway had become a divisive force, antagonizing the very people it was supposed to link together. The Prime Minister gave vent to his view
in the presence of some of Stephen’s colleagues on the subject of the “cussed” Manitoba charters and Stephen wrote to him in alarm that “they have all come back more or less full of misgivings and fears lest in some way the 15 mile Yankee barrier will not be maintained.”

There was another threat on the horizon. The ubiquitous Northern Pacific was about to purchase the railway owned by the Quebec government – or so the Premier, J. A. Chapleau, kept insisting. This was the Quebec, Montreal, Ottawa and Occidental and its eastern section, familiarly termed “the North Shore Line.” Quebec had been trying to unload this white elephant – it had eaten up fourteen million dollars and was steadily losing money – ever since the days of Sir George Etienne Cartier, who had promised to make it part of the
CPR
. The previous winter, Chapleau had made the purchase of the partially completed railway a condition of French-Canadian support for the
CPR
contract.

Macdonald had managed to evade such an out-and-out promise. But now he was again facing the same kind of political blackmail. If the aggressive Henry Villard came to the rescue of Quebec by buying up the railway, it would give him a threefold advantage in his drive to tap Canada for the Northern Pacific’s profit. With one stroke he would occupy a key position between the government-owned Intercolonial on the east and the Canadian Pacific on the west. Secondly, it was clear that he meant to link the Quebec line with the Northern Pacific at Sault Ste Marie; thus the country faced the possibility of a Yankee transcontinental railway mainly on Canadian soil. But there was more: By taking the faltering railway off the hands of the Quebec government, Villard would be buying considerable political leverage in that province and, consequently, in Ottawa. Macdonald feared that he would use this new political strength to persuade the Quebec members to vote in a bloc against federal disallowance of the Manitoba railways. If Villard’s gambit succeeded, he would have a through line from Quebec City to Winnipeg by way of Sault Ste Marie and Duluth; and Macdonald’s dream of an all-Canadian route would be shattered, perhaps forever.

The Prime Minister confessed to Stephen that he was “very uneasy.” If the rumours were true, “it means danger ahead.” A Quebec election was coming up. The president of one of the Manitoba lines, the Manitoba and Southwestern, had taken a house in Ottawa and was tactlessly predicting that the Northern Pacific would be a factor in that election. No doubt Chapleau, in his election speeches, would magnify the Villard offer, but if Stephen was to act at all, Macdonald urged, then he must act at once. The
CPR
president had been reluctant to buy the Quebec railway, but now he changed his mind and decided he must make an offer for the section
running west to Ottawa from Montreal in order to head off the American attempt to control Canada’s transcontinental transportation system.