In the public apprehension of somewhat complex financial relationships, the uppermost idea no doubt was that the Canadian National Railways were losing millions, hand over fist, on the mere running of trains, and that the money voted by Parliament was swallowed up in hopelessly irrecoverable deficits. The report for 1921 gives the distribution of the total net cash advances to the Canadian Northern:—
| Refunding of loans, including principal of equipment securities | $ 32,306,952.49 |
| New Construction | 29,804,673.62 |
| Betterments | 21,962,955.31 |
| Railway Equipment | 42,339,483.81 |
| Rails, accessories and other material | 19,212,656.94 |
| Capital contracts payable | 1,973,820.00 |
| Fixed charges and operating deficits | 103,487,706.71 |
| ——————— | |
| Total | $251,088,248.88 |
| ——————— |
The good citizen, who always pays his way, and looks upon everything connected with Government as a deadly allurement to wasteful extravagance, is tempted to assume that a first class recklessness and a third-class efficiency have gone into the Canadian National Railways’ management. A reading of the abridged report made to Mr. Kennedy in 1922, of the Operating and Maintenance Department, which is given in the appendix should help to correct this error. Still, a tendency to persist in it may linger, especially among those who regard our great rival, the C.P.R. as being filled with the excellences which public service is believed conspicuously to lack. Saddened owners and candid friends of the Canadian National Railways may not discover unaided a feature of the war and post-war situation which makes the practice of comparison more interesting and less odious than it usually is. It has to do with what has already been noticed—that thirty-five per cent. of the Canadian National mileage was received from the contractors during the war.
Does it ever mean anything to the critical public, I wonder, that Parliament and the Dominion Board of Railway Commissioners recognise no difference between the pioneer railway and its old-established, flourishing senior? The Canadian Northern was not begun until the Canadian Pacific had been operating transcontinental trains for ten years. Its main line was built through practically empty prairie country. But though it was a pioneering system, it had to meet the same conditions as to passenger and freight rates that governed the C.P.R., with the established traffic of the only continuous transcontinental railway in the world. This disparity applies with equal force to the opening up of the northern wildernesses in Quebec and Ontario by the National Transcontinental and the Canadian Northern.
The emergence of the National Railways placed upon us a responsibility for creative, pioneering services the magnitude of which has surely not been fully appreciated by Parliament, public or press. So far as one is aware, the value to the country of a pioneer railway has never been worked out on an actuarial basis. Take, say, a territory three hundred miles long by thirty miles wide into which settlement is introduced by a railway. Thirty towns are established in it through which all the newly-created business of the region passes. That business is represented not only by what is visible in the thirty towns and their sustaining farms. It is in the factories of Ontario, the financial, theological and other institutions of the East, and in all the paraphernalia of transportation, from coast to coast, including the car and engine shops, and the divisional towns.
The common denominator of the whole range and multitude of activities set in motion by the pioneer railway is the Government, the expenses of which, avowedly for the general advantage of Canada, are roughly divisible into two sections—as the expenses of a great bank are. There are the expenses of established business which yields dividends, and those which are chargeable to promotion, expansion, pioneering—which will presently become profit-making. The Government furnishes various administrative services to newly-opened country which do not produce an immediately balancing revenue. No criticism can be offered against this general policy. Banks carry on branches in sparsely populated localities, for similar reasons. They support their children for a while because presently the children will support them.
Railways are expected to furnish services which cost more than they bring. The Canadian National is carrying a larger proportion of these than ought to have been assumed, under a properly controlled programme of original construction. But that does not alter the fact that the pioneering service is being given, under the orders of a Board of Commissioners which, broadly speaking, treats the youthful branch as if it were the matured trunk. The point I wish to suggest is that, to obtain a fair perspective of the Canadian National Railways, as they were between 1918 and 1922, these aspects of a thirty-five per cent. of mileage taken over after the Great War began, should be taken into account; especially in relation to the heavy expenditures necessitated by a continuation of extremely adverse conditions.
Look at one of the financial aspects of these tremendous, but typical necessities for tremendous expenditure. The well-conducted railway, as already said, expects to replace its trestles out of revenue; and to carry its maintenance from the same source. On the Intercolonial it had never been expected that revenue would care for all these charges. The capital account was continually increased, the money being supplied by Parliament from taxes, and not carried as an annual recurring liability, such as the bonded indebtedness of a railway which must live by commercial processes alone. The Intercolonial was always true to this form before 1919.
If the National Railways were to be managed as a business, and not as a makeshift, the Board felt that there should not only be a thorough rehabilitation of the property, but that all possible costs should be charged to revenue so that there could be no mistake about the strictly businesslike character of the whole administration. That meant requests for vast sums of money, and the charging of them against revenue, which in turn meant the declaration of huge and, to the short-sighted, terrifying deficits.
The money could only come from Parliament, on the demand of the Government. My old colleagues of the Board would not thank me for saying that they showed extraordinary courage in putting the situation, in all its formidability, up to the Government. But, to many seasoned business men, in their place, what they did would have required volcanoes of two-o’clock-in-the-morning bravery.