stock-holders as the St. P., M. and M., and the Great Northern system into which it expanded under Hill's direction.

In October, 1880, a formal agreement was reached between the Government and a syndicate consisting of George Stephen, Duncan McIntyre, John S. Kennedy, Richard B. Angus, James J. Hill, Morton, Rose and Company, and Kohn, Reinach and Company. In December the contract was submitted to Parliament and its terms given to the public. In return for the building and operating of a road running through Canadian territory from Lake Nipissing to the Pacific, involving nineteen hundred miles of new construction, the syndicate was to receive a subsidy of $25,000,000 in cash, 25,000,000 acres of selected lands in the fertile belt, mainly in alternate sections within twenty-four miles of the railway, and the seven hundred miles of road then under construction by the Government. They were promised exemption from import duties on construction materials, from taxes on land for twenty years after the patents were issued, and on stock and other property forever, and from regulation of rates until ten per cent. was earned on the capital. They were guaranteed also against competition from United States roads in the West; for twenty years the dominion was to charter "no line of railway south of the Canadian Pacific, except such line as shall run southwest or to the westward of southwest, nor to be within fifteen miles of latitude 49°." The road was to be completed by 1891.

No sooner were the terms of the contract announced than Blake and the opposition launched an attack upon it in full force. That opportunity should have been given for competitive offers from other sources under the new conditions; that the Government was virtually building the road and presenting it free to the syndicate; that the financial expenditure involved would ruin the country; that there was no certainty that the syndicate could or would supply the capital required for immediate expenditure and ultimate operation; that the blanket choice of land and the exemption from taxation, and particularly the monopoly of construction for twenty years, would

hamper and discourage settlement-all these were the main counts in their indictment.

A vigorous press and platform campaign was carried on during the Christmas recess. A rival company was organized by prominent capitalists of Liberal leanings, including Sir William Howland, William Hendrie, A. R. McMaster, A. T. Wood, Allan Gilmour, George A. Cox, P. Larkin, James McLaren, John Walker, John Carruthers, and Alexander Gibson. It submitted an offer to build the road for a smaller subsidy, to waive the exemption and monopoly clauses, and to give the Government the "privilege" of postponing the Lake Superior and mountain sections. When Parliament met in January, Blake moved a six-page omnibus amendment and exposed every weakness of the contract to galling fire, while his followers in turn offered twentyfour specific amendments.

The Government's new policy had many strong features which the passing

energy and fertility of resource, made the necessary extensions and connections not only in eastern Canada, but in the United States, undertaken the many subsidiary enterprises and assumed the initiative in seeking and building traffic which marked the operations of the Canadian Pacific. Probably the Government was right, again, in deciding to give the contract to the Stephen rather than to the Howland syndicate. The offer of the latter group was far from being the sham the government forces charged, and its members were hardheaded and energetic men who had made a success of large enterprises. Yet they were not first in the field, and it is difficult to imagine that they would have shown more courage or persistence or carried out their obligations more honorably than the men to whom the task was given. The public aid granted was large, but large aid was needed to induce investors to face the risks not only of building through unknown wildernesses, but of operating a road for which little assured traffic was in sight. country assumed a heavy burden, but the national issues at stake, the necessity of unifying the far-flung dominion, justified no small sacrifices.

The

Unfortunately, but inevitably, the Canadian Pacific project became a party question. It is the function of an opposition to oppose, a course which often leads to factious quibbling, but usually insures responsible and guarded action. Smarting under electoral defeat, mindful of the earlier overthrow of the Government on a railway issue, honestly convinced of the danger and extravagance of the new proposals, the Liberals launched a strong attack on the whole policy. Not content with assailing the weak points of the contract, they were led into taking a position of hostility to the whole project. The government forces, convinced of the essential soundness of the policy, with equal lack of discrimination felt called upon to defend every line and comma of the bargain. The action of the Canadian Pacific in entering territory in eastern Canada which the Grand Trunk had long considered its private preserve, and the bitter quarrels between the two roads that followed, would in any event have

been reflected in politics. The result was that for three general elections railway issues were always prominent and more than once decisive.

Once the contract was ratified by Parliament, no time was lost in organizing for the task ahead. George Stephen was chosen president. To his indomitable persistence and unfailing faith the ultimate success was largely due. The financial experience and shrewd judgment of R. B. Angus stood the company in good stead in many a tight corner. Duncan McIntyre gave effective service until his retirement in 1884. James J. Hill ceased to be a director and sold his stock in 1882, as a result of growing divergence of interests between the St. P., M. and M. and the C. P. R., and the refusal of the other directors to postpone indefinitely the Lake Superior section as he advised; Kennedy retired with him. To some extent their place was taken by Donald A. Smith. Though financially interested from the beginning, his name had not appeared in the original list of directors. It had been only two years before the formation of the syndicate that Macdonald, who never forgave Smith for casting what proved the deciding vote in turning him out of office on the Pacific scandal, and Tupper, who vigorously backed his chief, had exchanged with Smith hot and bitter words in the closing hours of the session, in a fugue of "coward," "liar," "traitor," which fills six staccato pages of Hansard, and ends with Macdonald's shout, "That fellow Smith is the biggest liar I ever met."

Naturally, time was needed to permit the wrath of the two Highlanders to cool to a point where it could be veneered over with formal politeness. In 1883 Smith became a director and member of the executive board, and more than once pledged his St. Paul securities to aid the road. Yet he took little part in the management, rarely attending meetings; it was not until the road was a success that he took any interest in it, half persuaded by the chance that he drove the last spike into believing, as the public believed, that he had driven most of the earlier spikes.

W. L. Scott and R. V. Martinsen

represented New York banking interests throughout the construction period, and Baron Reinach, P. du P. Grenfell, H. S. Northcote, and C. D. Rose the London and Paris members of the syndicate. The detailed management was first entrusted to two United States railway executives, A. B. Stickney as general superintendent and General Rosser as chief engineer; but slow progress led to a change in 1882, when another American, William C. Van Van Horne, was made general manager with wide powers. Van Horne's tireless driving force, his sleepless energy, his versatility, and freshness of resource made him not only an invaluable support to Stephen and Angus, but one of the greatest railway men of his day.

Into

The building of the prairie section was accompanied by the usual wave of speculation and seeming prosperity. The railway itself called for men, tools, and supplies in endless procession. the West tens of thousands of settlers and speculators poured, first by St. Paul and later through Fort William, staking out homesteads, filing preëmption sections, or buying Winnipeg or Brandon town lots to unload on the tenderfoot following.

It was in this atmosphere that the general election of 1882 was fought. The Liberal leaders found it difficult to get a hearing. It was useless to question the financial strength of a company which was setting new world records for rapidity of construction. It was wasted breath to attack the Government's lavish terms before men who were pocketing real or paper profits from the activities those grants had caused or primed. The Canadian Pacific Railway Company itself was not, so far as was known, a participant in the campaign, but its seemingly assured success was an overwhelming argument in support of the administration. The Liberals had attacked both the N. P. and the C. P. R., and at this stage the success of both appeared to vindicate Macdonald's policy. It was not surprising that the Government was once more returned to power with a majority of almost two to one.

At the same time the promise of rapid settlement and development of the

West faded away. Frost and drought fell on the land, and settlers who had not yet learned the ways of the country reaped little for their pains. The Manitoba boom collapsed, homesteaders abandoned their holdings, mushroom cities fell away again into prairie, colonization companies were wound up, and Eastern speculators saw their profits shrivel to nothing. Later, the Northwest Rebellion, the discontent produced by monopoly railway rates and the high price of farm implements, the counter attractions of Minnesota and Dakota, and the adverse propaganda of rival railways deterred settlement. Not for a score of years was the West to come into its own and justify the faith of those who had urged and those who had shared in its development. With construction tasks ahead which would call for tremendous outlay, and with the West and Western lands condemned by the sudden slackening of settlement, the Canadian Pacific in 1883 faced a series of financial crises which all but brought it to bankruptcy.

The financing of the Canadian Pacific presented several unique features. The country contributed the major part of the funds required for construction. It presented the company with a clear gift of seven hundred miles of road, which cost the Government over $35,000,000 to survey and build, but undoubtedly was worth much less to the company. It granted a cash subsidy of $25,000,000, paid as earned, a larger proportion being assigned per mile to the mountain and Lake Superior sections than to the plains. It granted a land subsidy of 25,000,000 acres of selected land. The land was not immediately available; the competition of the free homestead land alongside, and the campaign of depreciation. carried on by the Grand Trunk, offset the energetic endeavors of the company to find settlers and market for its holdings. Bonds issued on the security of the land grant met little greater response. By 1885, $11,000,000 had been secured from this source.

The amount of private capital invested during construction was less than the promoters expected and less than the interests of both the company and the country required. The millions of

English, French, and German capitalists proved a mirage, and the original nucleus of the syndicate, the St. Paul group, found themselves compelled to shoulder a greater part of the burden than they had foreseen. In seeking capital to an extent unprecedented in railway history they relied upon the sale of shares and avoided the issuing of bonds. This policy was adopted deliberately as a result of close study of the fate of many United States roads which had found themselves hopelessly waterlogged by excessive bond issues, and had been forced by foreclosure out of the original shareholders' hands. If it succeeded, fixed charges would be kept low until earning power was well developed. Whether it could succeed was doubtful.

more

Toward the close of 1883 the company seemed to have reached the end of its tether. Funds were badly needed, and investors were coy. To meet this situation, the executive, fortified by the advice of New York and London financiers,

George Stephen, later Lord Mount-Stephen, first president of the Canadian Pacific

adopted the precarious policy of using current funds to secure future dividends and thus render the stock more attractive to prudent purchasers. They undertook to purchase from the Domin

ion Government a guaranty of a three per cent. dividend for ten years on the stock already issued, by depositing $16,000,000, the cost of such a terminable annuity calculated at four per cent. Over half of this sum was deposited in cash, and security given for the early payment of the balance. A similar provision was to be made on the sale of any part of the remaining $35,000,000 of unissued stock. This dividend might be supplemented from any current surplus available, but for ten years shareholders would be at least assured of their three per cent.

The policy was of doubtful expediency at the best. It meant locking up for dividends funds that were urgently needed for construction. It was not likely to reassure investors as to the earnings of the road once the ten-year guaranty expired. It was open to serious criticism from the point of view of the people who were advancing the main share of the funds. What would have been the outcome of the guaranty policy, had it been persistently followed, is matter for conjecture. Scarcely had the arrangement been made when the smash of the Northern Pacific sent all Western railway stocks down in sympathy, and Canadian Pacific sold lower than before the guaranty. Clearly rescue would not come from the general investing public.

In this emergency the Canadian members of the syndicate gave of their cash and credit to the utmost. Stephen and Smith pledged their St. Paul and other stocks in Montreal and New York to make advances to the road, but to no lasting purpose. There seemed only one recourse left the silent partner who had sunk so much in the road that perchance he could not refuse to advance the remainder. They determined to ask the Government for a loan of $22,500,000. That sum, it must be remembered, meant far more in the frugal eighties than it meant in later years when heady prosperity and particularly unsettling war and rash inflation had changed all standards. In the eighties it meant nearly a whole year's revenue of the Federal Government.

Late in the winter of 1883 Stephen, Angus, McIntyre. Van Horne, and the

C. P. R. solicitor, J. J. C. Abbott, went down to Ottawa to seek to convince Sir John of their and the country's necessity. They drove out at night to Earnscliffe, and put their case before him, making it plain that every other resource had been exhausted and that the sum they asked was the least required to see them through. Macdonald heard them patiently, but gave no comfort. He said:

"Gentlemen, I need not detain you long. You might as well ask for the planet Jupiter. I would not give you the millions you ask; and if I did, the cabinet would not agree; and if they did, it would smash the party. Now, gentlemen, I did not have much sleep last night, and I should like to get to bed. I am sorry, but there is no use discussing the question further."

They tried to argue the matter, but he would not listen. Somewhat apprehensive from the beginning of the greatness of the country's risk, sharing in the reaction that had come with the slackening of settlement and the bankruptcy of Western roads, not convinced that this application would be the last, fully aware of the opening a further loan would give an eager opposition, Macdonald felt the time had come to call a halt. He bowed the petitioners out and went to bed.

Blue and dejected and silent, Stephen and his associates drove back to town to wait for the four o'clock morning train to Montreal. They decided to spend the hours that intervened at the old Bank of Montreal cottage. Here John Henry Pope, who was acting minister of railways during Tupper's absence in England, had rooms. They found him lying on a couch, reading, with a strong habitant cigar in his mouth and a glass of whisky at his side. He turned over, offered cigars, put his feet up on a chair, and asked, "Well, what 's up?"

Stephen told him briefly, while McIntyre danced about excitedly. Pope listened, got up slowly, lighted another cigar, put on his old otter cap and shaggy coat, called a carriage, it was then after one, and departed, saying only, "Wait till I get back." An hour and a half later he returned, entered without a word, kicked off his rubbers, hung up cap and coat, poured out another glass of

"Well, boys," he broke the silence at last, "he 'll do it. Stay over till tomorrow." Pope had roused Macdonald out of bed and put the case before him with the intimacy of an old friend and the effectiveness of a shrewd party counselor. "The day the Canadian Pacific busts," he summed it up, "the Conservative party busts the day after."

The petitioners saw Sir John and his colleagues the next morning. Macdonald was grouchy; Alexander Campbell opposed any further aid; Tilley, the minister of finance, wanted to take the road over. Pope fought it through in council, and the agreement was made.

When the resolution granting the province of Quebec $2,394,000, "in consideration of their having constructed the railway from Quebec to Ottawa . . . a work of national and not merely provincial utility," was before the House, Blake moved and Laurier seconded an amendment deprecating singling out Quebec for such aid when other provinces had equally devoted large sums to building roads of national