Quebec History Marianopolis College

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L’Encyclopédie de l’histoire du Québec / The Quebec History Encyclopedia


Canadian Pacific Railway



[This text was written in 1948 by Harold A. Innis; for the full citation, see the end of the text.]


The Canadian Pacific Railway is the culmination of the efforts to extend control of the St. Lawrence drainage basin to the Pacific. Under the French, control extended westward to lake Winnipeg and the Saskatchewan. With the downfall of New France , and as a result of cooperation between French and English, leading to the formation of the North West Company, control ultimately reached the Pacific. The difficulties of maintaining a transcontinental organization based on the fur-trade, and to a large extent on the Precambrian forested area in the northern part of North America, led to collapse in the face of more effective competition from the shorter Hudson bay route and to amalgamation of the North West Company with the Hudson's Bay Company, in 1821. The efficient field organization of the former company was linked in the system of wintering partners with the centralized London control of the latter.


The decline of the fur-trade from a position of basic importance to the St. Lawrence basin was accompanied by the rise of timber and later wheat as staple exports. The production and export of wheat on a large scale, particularly from Upper Canada, necessitated construction of canals around the Upper St. Lawrence rapids and around Niagara Falls, and in turn the construction of railways as complementary. The Grand Trunk Railway was essentially concerned with traffic developed in relation to centres dominated by water transportation, and was intended to overcome the difficulties of closed seasons of navigation by an extension to Portland, Maine. As a through line with heavy initial capital outlay and as a supplemental and competitive route with water transportation, the company was forced to rely on substantial governmental support. Financial outlay in the construction of canals and railways by the government and competition with trunk routes of the United States brought serious financial problems. The government sought solutions for its revenue problems by raising the tariff, by printing government notes, and finally, with the encouragement of the Grand Trunk, by such arrangements as Confederation, which would provide the necessary credit to extend the railway to an Atlantic terminus in the Maritimes and to western Canada. The Intercolonial and Canadian Pacific Railways were results. Politically, extension westward from Upper Canada served to balance extension eastward from Lower Canada. "No Intercolonial, no transit [C.P.R.]", wrote the Duke of Newcastle in a letter dated May 6, 1863 . The Intercolonial was undertaken by government ownership, with the result that the strain on public finance emphasized the necessity of reliance on private enterprise for extension westward.


Failure of the Grand Trunk to secure control over the North West was thwarted by the resistance of the wintering partners of the Hudson's Bay Company, descendants of North West Company methods, and in particular by Donald A. Smith   (later Lord Strathcona). The problem was solved eventually by the Rupert's Land Act and the purchase of Hudson's Bay Company land by the Dominion government and satisfaction of the demands of the wintering partners.


With the difficulty of control removed, and the agreement with British Columbia in 1871 guaranteeing construction of a railway within ten years, two im­portant groups assumed an active inter­est representing Toronto and the Grand Trunk, and Montreal and Sir Hugh Allan, anxious to develop traffic for his steamship line. The competition of the Grand Trunk and its strength in the London market forced Sir Hugh Allan to join hands with Chicago and New York interests, dominated by Jay Cooke and the Northern Pacific. The disclosure of methods adopted by Sir Hugh Allan to secure control of the charter was responsible for the election of 1873 and defeat of the Macdonald government. The depression precipitated by the collapse of Jay Cooke and Company in September, 1873, and the drain of the Intercolonial [railway], necessitated a policy under the Mackenzie régime of piecemeal construction. Sandford Fletming continued exploratory surveys on prospective routes through the more important mountain passes. Construction on a valuable stretch of the route, from Fort William to Winnipeg, began with the Dawson trail and continued with the laying of track. The slow progress of the work led to difficulties with British Columbia and to threats of secession. Return of the Macdonald government in 1878, gradual improvement from the depression, completion of the Intercolonial, and the National Policy converted a deficit to a Surplus, provided support for a more active prosecution of the railway and solved British Columbia 's problems. Construc­tion was begun in that province, and by 1880 the government was successful in arranging for completion and operation under private enterprise.                                                                                                                            

The interests which eventually succeeded in gaining control of the contract were primarily concerned with the opening of transportation in the western states to the Canadian North West. D. A. Smith and J. J. Hill, with support from the Bank of Montreal, in the president, George Stephen, and the manager, R. B. Angus, had been concerned with the development of transportation to western Canada by the southern Red river route. These men with the co-operation of others, and in spite of difficulties in the London market through hostility of the Grand Trunk, succeeded in enlisting the necessary support from New York, Paris, and Germany. In a large sense the revival of the St. Lawrence route was in direct descent from the organization of the North West Company. The strategic position of D. A. Smith in contrast with the difficulties of the Grand Trunk, of Sir Hugh Allan, and of the government, was an indication of the persistence of early channels.


The difficulties of construction under government supervision and the demand for early completion of the line, combined with the availability of natural resources and the exigencies of the interests concerned to support generous provisions in the contract. These provisions included a subsidy of $25,000,000, a grant of 25,000,000 acres of land to be given in alternate sections of 640 acres in a belt twenty-four miles deep on each side of the railway (deficiencies in fertile land to be made up in other regions), completed sections of government line from Kamloops to Port Moody, and Fort William to Selkirk, together with the cost of surveys, totalling $37,785,320, and other considerations, including exemptions from customs and taxation of material required for construction, and of land for twenty years after the grant from the Crown, and monopoly over transportation south to the United States for twenty years. In spite of attacks and an alternative proposal from Toronto interests, the government consistently supported legislation incorporating the agreement and the company. This support continued during the construction period through co-operation in obtaining loans to prosecute the work.


Under the contract, dated October 21, 1880 , and the Act assented to February 15, 1881 , the company began an aggressive programme of construction. In December, 1881, W. C. Van Horne and T. G. Shaughnessy were appointed respectively general manager and purchasing agent, and construction in the plains area was rapidly pushed. In the attempt to maintain control of Canadian territory, efforts were made to locate a more southerly pass than the Yellowhead, recommended by Sandford Fleming, with the result that the Kicking Horse pass was discovered and agreed upon in September, 1882. Plans were also laid for construction of the connecting link between Callander and Fort William north of lake Superior. The policy of developing the railway in Canadian territory led to the withdrawal of J. J. Hill from the directorate on May 3, 1883 . A through line to the Pacific coast was completed with the driving of the last spike at Craigellachie on November 7, 1885 . The section from Callander to Port Arthur was rushed to facilitate the movement of troops to put down the Riel Rebellion, and was completed on November 2. The first train left Montreal for Vancouver on June 28, 1886 .


In eastern Canada, the main line was extended from Callander by acquisition of the Canada Central to Ottawa and of the Montreal, Ottawa and Occidental Railway to Montreal, and by arrangements over other lines to Quebec and by Lévis to the Intercolonial and the Maritimes. Lines were acquired from Montreal to Toronto and west by the Credit Valley, the Toronto, Grey, and Bruce, and other companies, to St. Thomas and Owen Sound and other points. This invasion of Ontario and Quebec implied the beginnings of a struggle with the Grand Trunk. It accentuated competition between eastern lines and contributed to amalgamation between the Grand Trunk and Great Western in 1882 and the absorption of other lines at later dates. With completion of the main line and extensions in eastern Canada the company was in a position to borrow at more favourable rates and to dispose of bonds in the London market. As a result of government support, common stock occupied a basic position in the financial structure of the company, and fixed charges were reduced to a minimum. A dividend rate of three per cent. was paid as early as 1884, and maintained until the increase to five per cent. in 1890.


After completion of the main line various extensions were made, particularly with the appointment of Van Horne to the presidency, in 1890. Lines were extended in Ontario to Windsor, in 1889, to connect with American roads, and a short line to the seaboard was obtained by acquisition of roads from Montreal across the state of Maine to St. John, New Brunswick, in 1890. Attempts to obtain traffic from the western states were supplemented by construction of a line to Sault Ste. Marie to connect with the Minneapolis, St. Paul and Sault Ste. Marie and the Duluth South Shore and Atlantic , two railways brought under Canadian Pacific control in 1888-9. Finally, the Minneaplis road was connected with the main line by a branch from Hankinson, North Dakota, across the boundary to Pasquia, near Moose Jaw, in 1893, giving alternative routes by Sault Ste. Marie and by St. Paul and Chicago to the seaboard. The effectiveness of this competition became apparent at an early date in complaints of American roads. The importance of the Canadian Pacific Railway as a transcontinental railway was recognized in the development of a steamship line to the Orient, and in a contract dated July 15, 1889, with the British government, granting a subsidy of £45,000 for handling mail by a quicker route than by the Suez canal .


Branch lines were extended, particularly in the West, to develop traffic for the main route. Territory south of the main line in Manitoba was adapted to rapid construction of railway and rapid settlement and was consolidated in a further defence against American roads. More extensive lines were thrown out by construction from Regina to Prince Albert in 1890, from Calgary north to Strathcona ( Edmonton ), in 1891, and south to Macleod, in 1892. In British Columbia, penetration to the Kootenay mining region began with control of steamboat navigation on the Arrow lakes and construction of various branches. A branch from Sicamous tapped the Okanagan lake district. Similar acquisitions were made in eastern Canada, and included the New Brunswick railway system, with a line to Edmundston, and partial control of the Toronto, Hamilton, and Buffalo Railway, in the Niagara district.


Expansion to new territory was responsible for a heavy drain on the resources of the company. With the depression, dividends were cut in half by a reduction to 2 ½ per cent., in 1894, and to 1 ½ per cent., in 1895. The effects were evident in complaints in western Canada against high rates and the monopoly clause. Attempts on the part of the government of Manitoba to secure relief by construction of lines to the boundary were met by disallowance from the Dominion. Finally, the monopoly clause was cancelled by an agreement of April 18, 1888, in consideration of a government guarantee of an issue of Canadian Pacific bonds to $15,000,000. On the other hand, the National Policy, with its substantial tariff, remained an effective check to imports from the United States , and rates in the non-competitive territory of western Canada remained at objectionable levels. The depression increased the burden to the West, and led to renewed attacks on railway rates. Finally, the election of 1896 brought the defeat of the Conservative government.


The Liberal government was committed to the policy of obviating the disadvantages of monopoly control. In 1897 the Crow's Nest pass rate agreement (60-61 Vic. c. 5. 1897) brought a reduction of rates from points east of Fort William to points west of Fort William of 33% per cent. on green and fresh fruits, 20 per cent. on coal oil, 10 per cent. on an itemized list, and 3 cents per 100 lbs. on flour and grain from points west of Fort William to points east of Fort William. A commission was appointed to investigate the rate problem, and reports submitted by S. J. McLean in 1899 and in 1902 were followed by the creation of the Board of Railway Commissioners, in 1903 (3 Edw. VII. c. 58). The relatively weak financial position of the Canadian Pacific Railway and rapid increase in wheat production were responsible for a policy in which concessions with monopolistic privileges were granted to private companies for the rapid construction of elevators. The agitation of western farmers was followed by a royal commission, and grievances were removed by the passing of the Manitoba Grain Act (63-4 Vic. c. 39. 1900). Finally, the existence of the vast stretch of the northern prairies left vacant by the policy of the Canadian Pacific Railway in following a southern route against the advice of Sandford Fleming, and the efforts of the provincial and Dominion governments to stimulate competition, led to the development of the Canadian Northern Railway in northern Manitoba under the direction of Mackenzie and Mann, and to its eventual emergence as a second transcontinental railway. For similar reasons, the Grand Trunk, under pressure of competition in eastern Canada, succeeded in securing arrangements with the Canadian government for the construction of the National Transcontinental, and with the Grand Trunk Pacific a third transcontinental line was built. The emergence of prosperity, accentuated by the discovery of gold in the Klondike in 1896, and the mi­gration of population from the United States, Great Britain, and the continent, contributed to the success of a policy of railway construction designed to check monopoly conditions.


The Canadian Pacific Railway was in a position to reap the full advantages of the boom period. As the first trans­continental, it secured a share of the large traffic to the Klondike after a bitter rate war. With the opening of the West, larger quantities of grain were moved to the head of the lakes, and immigrants and capital equipment moved into territory opened by rival lines as well as by its own branches. The improvements of the period were largely designed to increase the efficiency of the road in handling larger quantities of traffic. Under the Crow's Nest pass agreement, the Dominion government granted a subsidy of $11,000 per mile for a line from Lethbridge to Nelson in consideration of the reduction in rates. With this line completed in 1899 and control of the Trail smelter acquired in 1898, the company was in a position to dominate the Kootenay region. Con­trol was increased over branches in the region, and with completion of the Kettle Valley Railway in 1915, an alternative southern route was avail­able between Lethbridge and Hope, with connecting links on the Okanagan and Arrow lakes, and a line from Golden to Colville (1914). Lines were acquired on Vancouver island. Branches were rapidly extended north and south of the main line in the prairie regions, and the main line steadily improved. In 1909 the Big Hill grade was reduced by spiral tunnels, but the main develop­ments were made in extensions to the Atlantic. In 1909 acquisition of the Wisconsin Central gave more direct access to Chicago. For the handling of increasing quantities of wheat, a double track was completed from Fort William to Winnipeg in 1907, and it was ex­tended later to Regina. Port McNichol was developed as a Georgian bay port, and the lines improved to handle wheat by rail to Montreal. A connection inde­pendent of the Grand Trunk line from North Bay was built between Sudbury and Toronto, in 1908. By acquisition and construction the company continued its policy of penetrating the established network of the Grand Trunk and other lines in Ontario and Quebec and the Maritimes. In 1912 the Dominion Atlantic was acquired, and gave access by steamship connections between St. John and Digby to Halifax. Steamship lines were extended on the Pacific coast and on the Great Lakes. The Pacific fleet was improved, and in 1903 the Beaver line was acquired in the Atlantic service. In 1914-15 the Allan line was added, and the Canadian Pacific Ocean Steamship Services were organized.


The period of expansion coincided roughly with the presidency of T. G. Shaughnessy, from 1899 to 1928. Dur­ing this period, the company was able to finance development chiefly by issues of common stock. Rise in stock prices supported increases in common stock from $65,000,000 in 1902 to $260,000,000 in 1913, and an increase in the dividend rate from 2 per cent. in 1896 to 4 in 1897, 5 in 1899, 6 in 1904, 7 in 1907, 8.5 in 1911, and 10 in 1912 and follow­ing years. Other securities increased much less rapidly: preferred stock, 4 per cent., from $6,424,000 in 1895 to $20,951,000 in 1898 and $80,681,921 in 1915; consolidated debentures, 4 per cent., from $4,380,000 in 1899 to $60,369,082 in 1901 and $176,284,882 in 1915. Fixed charges per mile increased from $763 in 1890 to $1,038 in 1894, and declined to $966 in 1901 and $783 in 1918. Mileage increased from 4,338 in 1885 to 7,000 in 1899 and to 12,993 in 1918. Net earnings increased from $2,371,349 in 1885 to $12,230,165 in 1899 and to $34,502,388 in 1918.


In the last year of the Great War, E. W. Beatty succeeded to the presidency. The Drayton-Acworth report of the previous year had recommended that steps should be taken to place lines in competition with the Canadian Pacific Railway under unified management, and the Canadian National Railways emerged as a rival. With governmental support and the effects of the boom in the New York market, areas which had been opened by the predecessors of the Canadian National Railways were occupied, new territory was opened, particularly in the mining and pulp and paper regions along the edge of the Precambrian formation, and the lines were welded into unity, with supports in steamship lines, hotels, and the appurtenances of a transcontinental railway. The Canadian Pacific Railway was less fortunately situated in this second period of marked expansion, and therefore it was less able to take advantage of the activity of its predecessor. Nevertheless, branch lines were laid into new territory, hotels were built, and steamship lines improved. Expansion of the two systems led to co-operation. Preliminary arrangements in joint terminals and joint ownership of branches, such as the Edmonton, Dunvegan, and British Columbia Railway and the Alberta Great Waterways, were followed in the depression by pooling arrangements; and under the Canadian National Pacific Railway Act, by numerous determined efforts. In 1933 various branch lines were abandoned, and total mileage owned and controlled was reduced to 21,234 from 22,537 in 1932.


The southern location of the railway involved sharp reduction of traffic in the drought areas of southern Alberta and southern Saskatchewan during the depression. The effects were evident in the report for the year ending December 31, 1933. Gross earnings totalled $114,269,688, working expenses, $93,407,582; net earnings, $20,862,106; special income, $6,222,481; fixed charges, $24,388,615 (the largest in the history of the company), and surplus, $2,695,972. Capital included $335,000,000 common stock, $137,256,921 4% preference stock, $291,411,548 4% consolidated, and $200,859,386 bonds and notes. In 1931 dividends on common stock were reduced one-half and, in 1932 and 1933, were passed; and in 1932 dividends on preference stock were reduced onehalf, and in 1933 passed. The financial structure became relatively more rigid, but the basic elasticity has been of crucial importance in the depression.


For an account of the history of the railway, see H. A: Innis, A History of the Canadian Pacific Railway (London, 1923), G. Moore, Investment analysis of the Canadian Pacific Railway (Toronto, 1929); T. E. McDonnell, The story of the Dominion Express and its change of name (n.p., 1926); R. G. MacBeth, Romance of the Canadian Pacific Rail way (Toronto, 1924); K. Morris, Story of the Canadian Pacific Railway (London, 1923); Report of the Royal Commission to inquire into railways and transportation in Canada, 1931-2 (Ottawa, 1932); and H. A. Innis, Problems of staple production in Canada (Toronto, 1933).


Source : Harold A. INNIS, "Canadian Pacific Railway", in W. Stewart WALLACE, ed., The Encyclopedia of Canada, Vol. 1, Toronto, University Associates of Canada, 1948, 398p., pp. 369-374.



© 2004 Claude Bélanger, Marianopolis College