During this year of boom prices and deferred maintenance, the programme of improvements and betterments had to continue, as much of the work could not longer be deferred. But at what a cost! In labour and materials, exclusive of coal, the increase approximated $29,000,000. In our direct transportation account, our coal bill alone showed an increase of $6,200,000.
Though 1920 was bad enough, 1921 excelled it in horror. In reviewing the results of this year, the United States railroad authorities have called it the worst year in the history of the United States. “The decline of both freight and passenger traffic was the greatest, absolutely and relatively, that ever occurred in the country,” the Railway Age said.
The Canadian railways experienced practically similar conditions to those existing in the United States. But the Canadian National System, unlike many other lines, finished the year with its physical property in better condition than ever before. We drastically reduced operating and maintenance forces, because the deferred maintenance work had practically been completed; and because, due to the previous two years’ work, operating conditions were improved. Though our traffic, in common with that of other railways, fell away, the year closed with gross earnings practically the same as in 1920. We were able to effect such economies in every department that we reduced our operating expenses by $21,250,000.
Misery loves company. Sometimes, when you are in trouble, it is a consoling thought that you have not monopolised the chastening rod. Our handicaps considered, we were not as badly off as some American railways which, in dividend-earning power, had been regarded as surest among the sure—the Pennsylvania, for instance.
This line had an operating loss of over $23,000,000 in 1920, or a total loss of $48,250,000, including taxes and fixed charges, as against net earnings of over $89,500,000 only four years before—in effect, and comparatively, a deficit of $112,500,000.
The Canadian Pacific in 1916 had a surplus of $15,500,000, after paying all fixed charges, and dividends. But in 1920 with an increase of $87,000,000 in gross revenue over 1916, the C.P.R. not only lost the advantage of the increased earnings, but advancing expenses exhausted so great a proportion of their gross that the surplus in 1920 was only $450,000, after providing for fixed charges and dividends.
In the spectacular declines of such railways as the Pennsylvania there was no branch-line factor such as affected our situation. It is axiomatic in railway practice that most branch lines, of themselves, do not pay, and that, without the branch lines that do not pay, the main lines can’t pay—at least their prosperity would be heavily reduced. In a sense, of course, if you do not build a line into a prairie region where settlement has already taken place, you will get business, for the remote farmer will haul his grain to the station, and his supplies must be hauled a longer distance than would be the case if he were closer to the steel. But settlement will remain sparse, and farmers will not grow as much grain, if they have to haul it twenty, forty or sixty miles to market.
In the main, promises of railways that were made to vanguard settlements in the old Canadian Northern days had been fulfilled. Sir William Mackenzie and Sir Donald Mann were so saturated with the pioneering spirit that it was more difficult to keep them from getting ahead of traffic than it was to fulfill the promises that were made.
During the war, of course, all branch line construction was at a standstill. Work had been done on twenty-four Canadian Northern branch lines, which the National Board had to take up when the war was over. One Grand Trunk Pacific branch was under construction, so that we had twenty-five extensions to take care of. In this field of general policy our rule was not to ask Parliament for any sort of blanket authority to make changes from the estimates submitted at each session. We proposed a programme which we intended to live up to and not to exceed. We recognized the supremacy of Parliament as to capital expenditure, as we fought for the supremacy of the Board with regard to details of contracts.
These twenty-five expansions were in the West. But there were branch line problems in the East. Indeed, there were portions of main lines, which, for local traffic purposes must be treated as if they were branches. In the farther East were several lines which were built and operated by small companies until, though low wages were paid, their economic impossibility as independent organizations threw them into Government control. Service had to be given, with wages raised to the level of main lines. On one branch line, in Ontario, where the engineer had been paid less than a hundred dollars a month, his earnings under the McAdoo awards were raised to the income of an Ontario Cabinet minister—six thousand dollars in a year.