In the fall of 1912 signs of an approaching constriction of C.N.R. earnings began to appear. The Superior and Mountain sections were under way. The London money market, partly through conditions caused by wars in the Balkans, was not as responsive as before. Dominion and Provincial Government guarantees did not now ensure the immediate sale of securities, at the most favourable prices. In the spring of 1914 application to Parliament for special assistance became imperative.
We had been able to meet all fixed charges out of revenue every year since 1897. Connection of Toronto with Port Arthur around the north of Lake Superior had been made on the first of January. But, with a diminishing immigration and a slackening of employment in the cities, it would take time to win for this part of the system between older and younger Canada, a traffic commensurate with the proportion of the total trade between East and West which the Canadian Northern had created. Even to-day, the old Canadian Northern originates heavy East-and-West business for other railways.
The British Columbia lines, which were being constructed at a speed and an economy that was possible only because of the long experience of engineers like M. H. MacLeod and T. H. White, were bound to cost more than the amounts of any Government guarantees. It had become necessary to finance some construction by short term notes, at a higher interest than guaranteed securities called for. Application was, therefore, made to the Government at Ottawa for guarantees amounting to forty-five million dollars, to enable the road to be finished between Quebec and Vancouver.
Sir William Mackenzie, who always handled financial business at Ottawa, was turned down flat by the Government. But, as Sir Donald Mann says, a refusal never meant any more to him than a spur to persistence in advocating his cause. After much labour in placing the facts where they could be appreciated, the aid was promised. Against considerable opposition, in the late spring the legislation was passed and Sir William went to England to raise the money.
He succeeded in placing a substantial proportion of the securities with a great financial house. A first issue of three and a half million pounds was taken by the public, less than three weeks before the formal declaration of war against Germany. The financial house did not repudiate its bargain, but there was no prospect of raising money in London for Canadian railway construction in August, 1914, or subsequently, during the war. Indeed, the British Government prohibited any issue of any description from any of the Dominions, while hostilities lasted.
It would have been unwise to stop work in Canada because of a war the duration of which was not foreseen. Though we were restricted in pace, construction went on, the money for which was obtained in New York, through more short term notes, with the securities unsold in London as collateral. Guaranteed as the collateral securities were, they could only realize about sixty per cent. of their face value. This and the higher rate of interest, had the effect of considerably raising the cost of capital required for construction.
When, to inaugurate the linking of Quebec and Vancouver by the Canadian Northern, an excursion of Parliamentarians from the St. Lawrence to Burrard Inlet was arranged in the fall of 1915, it was clear that New York must be permanently drawn upon, if the situation, believed to have been finally saved at midsummer, 1914, were not to descend into disaster.
Sir William Mackenzie, at an age when chiefs of the C.P.R. retire on their highly deserved pensions, faced a heavier task than anything that confronted Stephen, Smith, or Van Horne in the C.P.R.’s most trying period. The Canadian Government, with London still an inexhaustible reservoir, was the C.P.R.’s last and safest resort. Mackenzie saw a world war engrossing every energy of the Dominion, and rendering London financially impotent to him. For sheer tenacity, for courage which attacked the most formidable obstacles without a quail; for capacity to bring things to pass, I think Canada has not yet begotten his equal. The marvel is, not that he and Sir Donald Mann could not finish all that they had begun; but that they carried it so nearly to the triumph, hope of which had been like a pillar of cloud to them in the days whereon the multitude applauded, and a pillar of fire in the night of difficulty such as they had endured when the non-Canadian was preferred before them, and when the panic of the fall of 1907 smote North America.
Beginning as an unknown venturer into Lombard street, Sir William Mackenzie had brought to Canada over three hundred million dollars for Canadian Northern Railways, which had made possible an amount of development of all kinds, the subtraction of which from Canada’s economic content to-day would leave the nation poor indeed. But, while this was happening, the star of Canada had been in the ascendant, and it seemed that British money had at last developed an unchangeable westward impetus.
There seem to be investment flows and ebbs in the affairs of men. They are without the regularity in time, but they have the variability in volume of the Bay of Fundy tides. One recalls periods wherein there was either so little opportunity or inclination to proceed with the development of the earth’s natural resources that, as an old London friend said, a man with a hundred thousand pounds to lend could take it down to the City, and not earn enough with it to buy his lunch. There is, no doubt, a psychological explanation of the accession and diminution of fiscal confidence in times of peaceful commerce undisturbed by the threat of war. There is also a partial accountability for the turning of capital into this or that channel of increase. It is the tendency of investment to overplay its hand when the habit has grown of putting faith and cash into a particular species of enterprise.