Delphi complete works of.., p.689
Delphi Complete Works of Stephen Leacock, page 689
I asked him, —
“Mr. McKinnon, what do you think of this town-hall question?”
He turned and answered, —
“Mr. Leacock, my time is short. I am not what I was. And when I go I want to go with no animosity, no bitterness, — with gentleness to all. As to this town-hall question, I prefer to say nothing, absolutely nothing, — ex-cept — that there are more damn fools among the Conservatives in Beaverton than would fill an asylum.”
* * * * *
That’s how I feel about our national railways system, — no animosity at all.
So I begin at the beginning. As most people know, there are practically only two railway systems in Canada, the Canadian Pacific Railway Company and the Canadian National Railways. The former is a private corporation, originally incorporated in 1881, generously subsidized with prairie land, and originally, to some extent, with money. By means of it the North West was opened up, the Atlantic joined to the Pacific, and Confederation rendered geographically possible.
The company, after a hard initial struggle, grew and flourished. From the time of its inception the company paid dividends in varying amounts until 1911, when the maximum rate of 10 per cent., which was to be maintained until 1932 without a break, was reached. Its subsidiary enterprises — mines, steamers, hotels — were an added source of revenue. Its shares — nominally $100 par value — sold as low as $33 in 1895, and sold before the War almost up to $300. It had the Western field all to itself; the East it shared with feeble competitors.
One of these was the Intercolonial Railway — from Montreal to Halifax — built as a military necessity with the aid of Imperial finance. Initially it was not expected to make money, and it lived up to the expectation. The poor mostly rode free, and the rich travelled on passes. The conductor sat and smoked with the passengers like a ship’s captain at his exalted table.
Freight rolled along — when there was any — on its own terms. The thing was too good not to pass it around. So when Prince Edward Island was to be coaxed into the Dominion (1873) its bankrupt railway and its ferry service became a part of the Intercolonial. A rich and rising country carried the burden easily enough, just as a strong man can carry a sore finger. But the gangrene was there just the same. It is now working through the whole system.
The other original competitor of the C.P.R. in Eastern Canada was the Grand Trunk Railway, intended to link the Great Lakes to the Atlantic, a company of great opportunities, which it never realized. It had absorbed a group of minor roads in Ontario and Quebec, but it never paid a dividend on its Common stock, being managed or mis-managed, from London. The C.P.R., organized and conducted by a group of men of exceptional talent and enterprise, was soon able to compete successfully with the Grand Trunk on its own ground.
It was this situation which Sir Wilfrid Laurier, whose true function was benevolence and not business, proposed to turn to political account by organizing a second transcontinental system, based on the co-operation of the Government and the Grand Trunk. The Government and the Grand Trunk were to build a railway from tide water in New Brunswick (Moncton) to a northern (ready-made) port on the Pacific, presently called Prince Rupert.
From Moncton to Winnipeg the Government was to build and own the line, as a National Transcontinental spanning the St. Lawrence by a bridge just above Quebec. This was the last word in American railway construction. In England and in Europe railways were built to connect existing cities; in America, to connect cities with others not yet existing — the railway at the start going from somewhere to nowhere. The railway came first and the towns came after.
This new departure went further. It went from nowhere to nowhere, passing nowhere. It was constructed far north of existing settlement. Its construction reaped a rich harvest for contractors; scandals grew like wild oats along its right-of-way. The western part of the line, from Winnipeg to Prince Rupert, was built by a new company, the Grand Trunk Pacific, its bonds guaranteed to 75 per cent. of its cost. The new company was to rent the National section for fifty years at 3 per cent. of the cost, an agreement by which everybody, except the taxpayer, wanted the cost as high as possible. But the taxpayer, as yet, didn’t count. The bridge at Quebec was in the class of the Colossus of Rhodes, equally scenic and about as valuable. The system, operated in conjunction with the Grand Trunk, was a failure from the start, a mill-stone round the neck of Canada.
To make the weight heavier another stone was added. This was the third Transcontinental, the Canadian Northern, built as a private enterprise out of old charters and odd bits, picking up Government and municipal bonuses as a bird picks up crumbs. The Canadian public had lost its head with the boom. The War smashed the whole railway system. But it would have broken anyway of its own weight. By 1916 there were 40,000 miles of railroad in Canada. Here again the frame was too big for the picture.
To save financial disaster the Government took over the Canadian Northern (9,500 miles) in 1917. The Grand Trunk Pacific failed to make its payments. The Dominion took it over. The Grand Trunk collapsed and was taken over in 1920, its shareholders to be paid what their stock was worth. This, in the case of the Common shareholders, turned out to be nothing. Their sobs are not yet hushed. Their fate now stands as a hodie mihi, cras tibi for a new set of Common shareholders.
* * * * *
Out of these elements of historical survival, junk, optimism and extravagance was pretentiously created by Act of Parliament (1923) the Canadian National Railway Company, not a company at all, having neither shares, nor shareholders nor dividends. Its status is that of a little boy given an account book to let him ‘pretend’.
The name National Railway Company, adopted in 1919, was later altered to Canadian National Railways. The same childish make-believe of a separate existence was carried on. The government solemnly lent itself money, chalked up debts against itself, and told itself sternly that it really must pay. One recalls the figure, in Dickens’ Barnaby Rudge, of old John Willett who kept the Maypole Inn and, in his old age, got a knock on the head that made him silly. So he used to stand at his ‘tap’ serving drinks to his old cronies, and then retired with a wink behind a door and chalk up the score (never paid) on a slate. The Canadian Transportation Department is the old John Willett of Ottawa.
Since that date the Canadian National System has dragged the country further and further into the slough of despond. Supposedly the system pays its operating expenses out of revenue and pays also the interest due on its inherited obligations and on the new money borrowed to maintain and expand it. Whether the operating revenue pays the operating cost is a matter that can be known only to an expert having access to the books. Railway expenditure is hard to check and easy to disguise. Maintenance cost can masquerade as capital cost. Thus the system could show a profit on its operation in reality offset by charges carried to capital. During the last ten years the railway receipts have been reported to cover the cost of operation, save in three depression years, at its highest the net income available for interest was $44,000,000 (1928), and the greatest deficit (1931) was $5,000,000. But the essence of the situation lies elsewhere. The net income available for interest does not suffice to meet the annual interest charge on the securities held by the public and assumed or guaranteed by the Dominion when it took over the railways, let alone the interest on money borrowed directly from the Government. In addition to this, continued expenditure, called ‘capital’ expenditure, is made by borrowing more money on which again an interest charge must be created. Hence the cumulative deficit, added up as $264,000,000 when the ‘Company’, — save the mark! — was consolidated in 1923, added up in 1935 to $1,078,000,000.
* * * * *
This is not the debt. This is just the added new deficit by which the original debt is increased. When the constituent lines of the National System were taken over by the Government they owed to the Dominion in return for appropriations, loans, and advances and interest $527,000,000. This by end of 1935 had increased to $1,655,000,000. In addition to that the National Railways owed to the public at the time of their acquisition the sum of $810,000,000. This had increased by the end of last year to $1,155,000,000. This is not counting the $247,000,000 rolled up since the Government decided that ‘cash’ deficits and Eastern lines deficits should not be met by fresh railway borrowings, but by appropriations granted under Act of Parliament.
Meantime in February of the present year the Minister of Transportation presented his report on the operation of the system in 1936. From this it appears that the gross operating revenue was $154,000,000 and the operating income was $145,000,000. This leaves a net revenue after certain other charges of $6,600,000 available towards paying ‘fixed charges’. But as the year’s fixed charges in the form of interest alone on bonded debt amounted to $49,900,000, this leaves a net income cash deficit of $43,300,000. In addition to this, the government is to lend another $9,916,000 to the railway to spend on ‘capital improvement’, and miscellaneous debt requirements, and as no one knows where capital improvement ends and current maintenance begins, without looking at every item, no one can know how great the real deficit is. One can only watch the huge total of debt going steadily up.
But the government doesn’t even want people to watch this: the sight is too painful. They had better forget it. So an Act has been just adopted, the Reduction of Capital Structure Act of 1937, to enable us to forget it. The Act is another gigantic piece of make-believe. It is called “reorganizing the capital structure of the railway”. All it means is blotting out its debts. It is held that if the Railway borrows from the government, and the government borrows from the people to get the money, then the debt adds up twice, and makes one dollar of debt look like two. To avoid this, the minister rolls up the debt in his hand as a conjurer does a billiard ball, then opens his hand and, presto! the debt has vanished.
Consequently from now on, each current addition to the debt is of no consequence. Provided always that we can’t pay it, we agree to wipe it off and forget it.
It’s a great idea. I’ve been thinking of “reorganizing the capital structure” of my account with the University Club on the same plan.
A ‘company’ run on this plan becomes a dangerous prodigal. It has everything to gain and nothing to lose. It has no dividends to pay, nothing to fear, and a fond parent to pay its debts. It can spend what it likes on equipment, on luxury, on ‘service’, and its alma mater, the Dominion of Canada, will pay for it. It can build competing lines, run them at a loss, carry goods below cost — it doesn’t matter. Its finance is that of a spoiled spendthrift — just ducks and drakes.
* * * * *
But why, it is asked, does the country stand for it? Why permit the National System — it has dropped the word ‘company’ as too small, too mean for it — to be a national spoiled darling? The reason lies in its history. It came into the world — its original skeleton of 1903 — just about the time of the clamour for ‘People’s’ railways, of opposition to trusts and monopolies. Someone had called a railway an octopus. The western farmers didn’t want octopi around. They had pests enough. And perhaps, too, at the height of its prestige, the existing railway had treated the West a little bit de haut en bas, wouldn’t build branch lines everywhere the farmers wanted them. At any rate, western agrarian opinion clamoured for a ‘People’s’ railroad, and still want it. For the deficit they don’t care. Let the ‘East’ pay it. They’ve trouble enough without worrying over the railway problem. So the whole transportation structure of Canada drifts like a mass of wreckage, nearer and nearer to the fall. The Canadian National policy is driving the C.P.R. towards the edge. Its dividends have stopped; its shares have fallen. The farmers don’t care — don’t realize the danger that, if the crash comes, it comes to them also.
As a consequence there is very little interest in the West of Canada in the railway problem. A lecture on the subject would be delivered to empty seats. The Western farmer has somehow got it into his head that the railway problem is a ‘good one’ on the East. He is like the Irishman of the anecdote who was carried up ten stories in a hod, for a bet, by a fellow-bricklayer and who said as he paid the money, “At the eighth story I thought I had you.”
So the Western farmer, carried up in the hod of the annual budget, peeps over the edge and chuckles “This time he’ll drop me sure!”
CHAPTER FOURTEEN
IMMIGRATION AND LAND SETTLEMENT
IMMIGRATION SPELLS PROSPERITY — Must be Organized — Company Settlement — Philanthropy and Rapacity, Half and Half — The Valley of Hope — The Company and the Colonists — A Beautiful Dream, that may Come True.
At various points in this book I have spoken of immigration. I have tried to show, in the first place, that Canada is practically an empty country, as compared with its great latent resources. In a book which I wrote some years ago on Economic Prosperity in the British Empire (and which no one ever read except a few prime ministers and some of the older bishops), I placed a map to show our potential population of 250,000,000. It was based on the number of people now living on a similar extent of territory, of no better resources, in Europe. I still think the argument sound. But divide if one will by ten and there will still be room for millions of emigrants.
I have tried elsewhere to show that an immigrant is an asset. Directly or indirectly, he brings to the country a great quantity of ‘capital’. Think of capital as money, bank drafts and documents (the shadow) or as the physical goods, machinery, etc., that follow (the substance). It doesn’t matter which you visualize as capital. That is what the emigrant brings.
But I have tried to show that the days of single-man immigration are over. Even with a free homestead an immigrant can’t come ‘on his own’. He only clogs the labour market. The homestead days are gone by.
Our great need now is organized immigration. I think that it would restore our prosperity — as if we struck the granite rock of hard times and out of it flowed the pure waters of salvation.
I have already discussed the simpler and smaller organization of memorial settlement, — of people who come with money. I now turn to talk of the people who come with none. For these I propose to return to the principle of land company settlement which had such admirable results in old days in Upper Canada, and which was all too lightly laid aside. It would take a whole book to develop properly the subject of Land Settlement as a Company Enterprise. The best that one can hope to do here is to indicate the main purpose, and show the chief difficulties. We learn more by discussing and facing what’s wrong with a plan than by dwelling on what’s right with it.
Company settlement means a plan whereby a group of immigrants, in the course of a few consecutive years, are placed on a tract of land as a sort of going concern. The motive for it has to be found in a mixture of philanthropy and rapacity, the truly human half-and-half tonic. Men are not all greed, nor all goodness. To invite people to subscribe money for Empire Settlement Schemes, from which they get nothing themselves, will never carry far. The sources of such generosity are easily choked by the sands of difficulty and dispute. On the other hand any scheme for ‘making a pile’, for getting the last cent out of the immigrant and chiselling the last dollar of subsidy out of the government will only end in political scandal and disaster. Something in between is needed. Show me a company by which I can get five or six per cent. and also sit in a white robe with a harp, and I’m in on it. Such were the canny motives of old John Galt: and such, in a higher degree and with a greater illumination, the motives of Prince Rupert and his associates in founding that profitable and patriotic enterprise the Hudson’s Bay Company.
Similarly Land Settlement must avoid the two extremes of naked individualism and hug-me-tight communism. The days are gone when you can settle a country by dumping down on it a ‘rugged individual’ with an axe and a dipper of whiskey. The days have not come when you can make a communist settlement with the work all allotted by the bosses, the food divided up by the assessors and the wives distributed by the Matrimonial Bureau. Communism sees no difficulty in Land Settlement; certainly not; if communism would work for society in general, the settlement of new land would be only one particular case. The greater would include the less.
In other words, in a successful company settlement the individual must be as far as possible ‘on his own’: not of necessity at once and in every case the owner of his own house, but at least the owner of his own wages. The company is a kind of frame in which individual fortune is fitted into a composite picture.
The feature of the situation which our generation has learned and which the previous one did not know, is the danger of collapse from falling prices and unsaleable products. To place a settlement of people principally to grow wheat, or to grow fruit, or to catch fish, — any sole or dominant occupation, — would mean inevitable shipwreck in the next price collapse. The bulwark against this lies in self-sufficiency, carried as far as ever it can be. The ideal settlement raises its own food and eats it: catches its own fish and cooks it; cuts its own lumber and builds its houses with it. It cooks, bakes, boils, cans, distills, ferments, sews, stitches, paints; it carpenters, it blacksmiths, — it pushes self-sufficiency as far as ever it can till the points where it meets the need for machine products from outside. These grudgingly it must buy, with things which, grudgingly, it will sell. Thus it can’t print. It must buy books. But, after all, people never die for want of them. It can’t sing: it may listen to a radio: but even Queen Victoria lived and died without one. The basic idea is that hard times will sweep away luxuries. But the rock bottom economic basis of life will still hold.
Thus in Company Settlement one would never make such calculations as that it costs more to can fruit than to buy it canned, more to raise hens than to buy eggs, more to raise hogs than to import hogs. All those fatal pieces of arithmetic have a trick in them. They take for granted something you sell in order to buy the outside stuff, and they take for granted the price you get. By this sin fell the Prairies. The unit size of land settlement is settled by certain obvious needs. It must be big enough for schools, including a high school. It cannot be big enough for a college. It must be big enough for a hospital; not for a medical school. It must have enough people to be able to use the machinery of lower manufacture: big enough for a planing mill, for a tannery, a brick yard (or several of each), not big enough to make paper but big enough to make houses. It must be big enough for farms, fields, pastures, woods, waters, hunting grounds and golf courses. It would work out at something like half the size of an Ontario county, say, 1,000 square miles, — a little over thirty miles each way. It would carry a population, in this stage of development, of two or three thousand people. Closer settlement would involve a different industrial regime only for favoured spots, and would come after.
