April 15 1921


April 15 1921


An extraordinarily successful business man, nationally known to all Canadians one of the clearest thinkers and keenest students of railway problems in the Dominion has expressed for the benefit of readers of Mac-

Lean’s his views on the ap-

palling deficit of the Canadian Government Railways and his suggestions for a solution. The interview, however, was given only under the strictest pledge of anonymity. Its substance follows, though no attempt has been made to reproduce the exact words.

DO YOU consider that the Government acted wisely in taking over the Transcontinental, Canadian Northern and Grand Trunk Pacific?”

A. “Certainly not. I did not think so then nor do I think so

Q.—“What alternative existed?”

A.—“Let them go into liquida-

Q.—“But what about the investors?”

A.—“When they made their investments they took risks and should liave known they were not putting their money into what could justly be termed absolutely safe securities. Many instances could he given where one or other of the railways taken over indulged in ventures which certainly could not be classed as conservative. Just to give one example which comes to mind: a good many years ago a well-known property was offered the Canadian Pacific Railway for many millions. A careful investigation of the proposition was made and the offer turned down. What happened? It was not long before the very same property was sold to the CanadianNorthern Railway for a larger sum, and bonds for it for twice the original amount were floated in England. Thus you have the extraordinary fact that the shareholders of the Canadian Northern paid for these collieries more than twice the sum for which they were offered to the Canadian Pacific.”

Q-—“What is your opinion of the value of an investigation by a parliamentary committee into the whole railway situation?”

A. A snort, partly of derision, partly of disgust, was the reply. “Parliamentary probe? Pah! What good would that do? \\ hat could it possibly accomplish except to waste a lot of valuable time and throw a smoke-cloud around the real issue? A parliamentary committee would be composed of nothing but a bunch of amateurs and any investigation made by the members at Ottawa would be worth-

An Impartial Commission of Experts

“What, then, is the solution? With an announced • deficit of $68,000,000 last year—and a deficit which J. L. Payne, former government railway statistician, places actually at $140,000,000—what can be done?”

A.—“There is but one business-like solution: a commission composed of recognized railway experts should be appointed. These men must be absolutely impartial and should proceed to study Canadian Government Railways’ problems strictly and solely from the practical railway man’s viewpoint. No other considerations should be permitted to interfere.”

Q.—“Can the right men be secured?”

A.—“Yes, I think so; but not in Canada. There are, of course, in the Dominion many excellent railway men, masters of the various problems of railway construction, operation and finance, but there would likely be great difficulty in getting hold of men who are without some bias. Men whom I could name would likely be biased in favor of the Canadian Pacific: others would be almost certain to be prejudiced in favor of the Government lines.

“I would go outside Canada altogether for the members of this commission. Absolutely the biggest men in the world should be sought, for we have to-day no problem to compare in importance with that of our railways. In fact, it is more than of paramount importance—it is a menace. The railway problems of Great Britain are not the same as ours, therefore, we should seek the members for our commission in the United States. Only there can we hope to get men who are absolutely independent and definitely qualified.”

fhe Way Out

/. Appoint

an impartial composed of practical railway men — so Hint they will be without bias the members should be selected in the United States.

2. Clothe this commission with authority—so that their recommendations can be vitalized.

■J. Dispose of the Canadian National Railways, after searching investigation, inone of three ways:

(a) Lease certain lines to the C. P. R.

(b) Discontinue, non-paying lines.

(c) Turn over remaining lines to a private corporation,

Q. "What could this commission hope to accomplish?”

A.--“Problems of construction, operation and finance could be approached solely from the railway man’s viewpoint. Every line that won’t pay — stop it. The commis-

sion would he justified in going

even farther than in the case of a

private railway because in so many instances the operating expenses themselves would be found, on government railways, to be in excess of the income. Such nonprofitable lines should not be operated again until changed conditions, such as increased immigration, brought them to the point where they could he profitable:”

Q. “What about condition of the right of way if neglected?”

A.—“There is no doubt that, generally speaking, it would deteriorate, but railway ties usually have to be renewed every five or six years anyway; if unused they should last longer than the average period.

“Overlapping should be definitely eliminated. That is an economic waste for which, especially under such circumstances as exist in Canada to-day and will continue to exist for some years, there is no iota of an excuse. Just to take one glaring example: every night in the year three trains leave Winnipeg for Edmonton. There isn’t enough traffic to justify more than one train.


“There is an inexcusable amount of duplication of railway lines in Western Canada. The Grand Trunk Pacific and Canadian Northern have many examples of stupid duplication, of both their East-and-West lines as well as their North-andSouth lines. I think it is safe to say, in addition, that every North-and-South line of the Canadian Pacific in Western Canada is duplicated.”

What of the Profitable Lines?

—“What should be done with the lines which are needed—particularly with the very profitable lines of the Grand Trunk in Western Ontario and lines in other parts of Canada?”

A.—“They should be turned over to a private corporation to operate—but before they can be turned over, or any intelligent action taken, the Government must initiate an investigation by practical men to ascertain the basis on which they can be turned over. But turned over they must be, because it has been pretty definitely shown that they cannot be operated under government ownership as efficiently as under private ownership—provided it is the right kind of private ownership.

“There are three ways in which the various lines now operated—or which soon will be operated—by the Government should be disposed of :

“1.—Certain lines should he leased to the Canadian Pacific Railway. There is a precedent for this in Alberta where the Edmonton, Dunvegan and Peace River Railway


was leased recently to the C.P.R.. by a provincial government which certainly is more radical (and presumably more sympathetic toward government ownership where possible) in its sphere than the present federal government in its domain.

‘ ‘ 2 — Every non-paying line

should be discontinued, with perhaps certain peculiar and outstanding exceptions. The point would at once be raised that the Government is not playing fair with settlers along these lines. I have studied this question with some care and have come to the conclusion that 95 per cent, of the people in Canada would be adequately served by the Canadian Pacific Railway and those branches of the Canadian Government Railways which pay.

“As for the other five per cent., they may have to get along for a few years and suffer hardship; a tide of immi-

gration would result”!n a gradual re-continuance of the

service on these lines.

Greatest Good to Greatest Number

[T WOULD bo quite natural to expect that immigrants who could not obtain land in reasonable proximity to operated railway linos would next seek to settle as close as possible to those lines where they could at least have visible evidence of grades, rails and ties -with the justifiable hope that it would not he long before they would have the trains, lint i! t hat time the five per cent, would perhaps suffer, but it would be another instance of the greatest good to the greatest number.

“:L The remaining lines paying lines which it was not found in the best interests of the country to lease should be turned over to a private corporation to operate. Under what conditions, or on what terms, I am not prepared to say. The fair and proper basis could only he arrived at after an investigation into all existing conditions, into every influencing factor, had been made by the impartial commission. And I have no doubt whatever hut that a satisfactory pilan could be worked out by which a corporation could be persuaded to undertake the operation of these lines-—on a basis satisfactory both to the country and to the private corporation assuming the undertaking.

“To treat this railway question as a political football is very, very dangerous. When the ordinary citizen really thinks of the size of the deficit, compares it with the total budget in pre-war days, and then considers what this deficit may be next year, or in succeeding years—really, it's appalling!

“We want a solution -and we want it quick.

“But we want the right solution, viz:

“A commission which must he:

“Impartial—and therefore secured in the U.S.; “Efficient—and therefore composed of practical railway

“Clothed with authority—so that their recommendations may be vitalized.

“If there are any objections to my reasoning or my conclusion, let them be named; if there is a better way out of our difficulties I am ready and eager to listen to it.

“What Canada wants at Ottawa is action—not dawdling."

What Daily Papers Say

THAT portion of the Government railway system which runs through the Maritime provinces pays its way— or very nearly does so, declares the St. Jolin.N.B., Standard. which paper thinks that the 15,000 miles of new road built during the past few years in Ontario and Western Canada areoperated solelyfor the benefit of those provinces—adding that it is being operated at a loss of a million dollars a week. After stating that the Maritime provinces have to pay their share of this loss, the Standard insists that the government railways are not being used to encourage inter-provincial trade as they ought to be:

“Very little trade passes between the Maritime provinces and the remainder of the country, and nothing is being done to improve conditions. How is it to be expected that the provinces can progress as they ought to, if they are deliberately handicapped by succeeding governments?"

The Quebec Chronicle in speaking of the railway deficit is inclined to call a spade a spade:

“Now that the Government has taken the roads over as

The Cost—To You

If you are a married man with a wife and three children, you are paying approximately $40 a, year, out of your pocket, to bear the burden of the C. N. R. deficit— WHETHER YOU OR YOUR FAMILY EVER BOARD A TRAIN OR NOT! Deficit $68,000,000—population between eight, or nine million—work it out for yourself. Or, taking -I. L. Payne’s figures, YOU’RE PAYING $80!

urged, the truth is becoming increasingly evi>dent that they cost justsomuch to operate and maintain no matter who owns them; and that the cost has to he met by the Canadian people, no matter which pocket the money is taken out of. The increasing demands made by

the railroads upon the government treasury are staggering, but they cannot be evaded or curtailed, unless by their return to private ownership. There is no good in whimpering or counting the cost at this late date. Canada has tied a millstone round her own neck and must carry it.”

“Wages on the railways will have to come down; the country cannot afford to pay them,” insists the Kingston Standard, “People are traveling less because of the passenContinued on page 41

Continued from page 22

ger rates, and thus those exorbitant wages are ‘killing the goose’.” The Regina, Sask., Daily Post, on the other hand, is inclined to the notion that “if Dr. Reid is sincerely anxious to cut the cost of railway labor in Canada, he might set a good example by having the House of Commons and the Senate reduce the sessional indemnity to the former point—and that, by the way, would save the country half a million dollars.”

La Patrie can seen nothing but a loss to the people of Canada coming from the public-owned roads no matter what is done with them :

“If the government keeps the railways the country will have to face a long series of deficits. If, according to the rumors that are in circulation, it intends to return them to private exploitation, it will have to be resigned to accept an enormous loss on the purchase price. Nobody, as a matter of fact will be willing to acquire the lines unless the conditions of sale are such that it will be possible to carry them on at a profit. Canada has been brought to this deplorable situation by the lack of foresight of previous governments, which allowed themselves to be dazzled by passing prosperity and flight of expansion that the war suddenly interrupted.”

L’Evenement expresses another sharp French-Canadian view:

“It is the abyss created by the administration of our national railways that swallows up the federal budget. Here is a huge white elephant which crushes the taxpayers under its feet! We ought to seek means to reduce the costs of operation, and especially we ought to halt all service in those regions which do not return a sufficient revenue. After all, would it not be the better policy to let the builders of these railways and their backers fall into bankruptcy rather than place such a millstone round the neck of the Canadian nation?”

After quite freely acknowledging that the deficit rolled up by government-owned railways in Canada amounts to approxi-

mately $70,000,000, of which $19,000,000 is chargeable to the Grand Trunk Pacific; $40,000,000 to what was formerly the Mackenzie and Mann system known as the Canadian Northern; and $10,000,000 to that portion known as the Government railway, the Manitoba Free Press points out that public ownership cannot be charged with the blame since these railways would not have been taken over by the people had they not been losing money as private enterprises. The Manitoba Free Press then sets out to attack the view of eastern newspaper opponents to public ownership:

“The problem is not to be solved offhand. No super-man is going suddenly to change the Canadian National railway system from a losing to a paying concern. That it can ever be made to pay a dividend upon its present capitalization is very doubtful. This is the consideration behind the suggestion made by Mr. Crerar—and by the Free Press, too, on various occasions —that the system be revalued so that the management may be given the task of earning a return upon a just valuation.”

The attitude of the minister of railways and canals and parliament in general does not strike the Free Press as forecasting any betterment of government railway affairs:

“There was nothing in Dr. Reid’s statement in parliament to inspire confidence. Plainly he has abandoned all real hope of coping with the problem. He produces his seventy million a year white elephant and says to parliament: ‘This is your property, what do you propose to do about it?’ Nor is there any widespread feeling of confidence in the present management of the system. There is a fairly general belief that it, too, has been infected by a fatalistic acceptance of deficits of incredible size as the inevitable accompaniment of the administration of the system. But parliament cannot afford to be equally complaisant since it has to pay the bills. It is a case for the frank recognition that this is a

question oi very exceptional gravity anu difficulty which requires the best attention that can be given it.”

Before any attempt is made to economize through wage reduction or higher traffic rates are forced on the people, the matter of eliminatingwasteful and unnecessary service should be taken up by the government-owned roads, insists the MontrealGazette, which supports its reflections

“There are dispensable parallel lines and unprofitable trains; why should not both be abandoned? If business practice is to prevail in the management of the National railways the board of directors of the latter should sit down in conference with the executive of the Canadian Pacific to work out means of economy to mutual advantage. That course is a possible solution of the railway problem and is, at least, worth trying in the common interest. When that time comes, in the coming of which we all have faith, when the influx of people necessitates the resurrection of railwaylines temporarily abandoned, those lines will be restored, and if need be supplemented. We can conceive of no better course for the Government to pursue than to invite to conference the Executive officers of the Canadian Pacific for the purpose of ascertaining how business methods can be applied to effect economy in a mutual interest.”

The Toronto Globe can find nothing worth while getting enthusiastic about in the Gazette’s suggestion; in fact the Globe quite boldly hints that the editorial is “AC. P. R. Balloon,” pointing out that:

“Negotiations begun at present would almost inevitably result in the cutting off of Canadian National parallel lines and unprofitable trains, leaving the field entirely to the Canadian Pacific in cases where competing services are unprofitable to both. Canadian National traffic is already beginning to profit by alliance with the Grand Trunk. Complete absorption of that company’s lines in the National system should provide much traffic for both Eastern and Western lines. When the National begins to measure up to the C.P.R. in mileage, in unity of control, and in volume of traffic more favorable results may be obtained from a conference to promote mutual advantage than could possibly attend such a conference at this moment, when the Canaadian Pacific is cock of the walk and knows it.

The gross sum paid out in wages to railway employees in Canada has trebled in the past five years, declares the Sydney, N.S., Post, and the wage-burden, the Post observes, is largely responsible for the high freight rates now putting a check on com-1 merce. The McAdoo award was a huge blunder, in the Post’s opinion, and in its wake followed evils that depressed business and commerce in both Canada and the United States. Two courses must be followed to overcame the trouble here, which the Post deplores in part as follows :

It is under these impossible conditions that the Dominion of Canada is trying to operate sixty per cent, of the railway mileage of the country, as a Governmentcontrolled utility. The record of the two years operation of the C.N.R., is not merely discouraging. It is astounding. If maintained for the next five years it would mean national bankruptcy, in the most definite and literal sense of the term. The whole tangle has to be attacked at once.

It has to be unravelled at any cost. The railway crisis transcends in seriousness and urgency all other public problems combined. The solution of the crisis will have to follow two courses—deflation of wages, al?4 abandonment of unnecessary lines. There will be resistance to both methods of solution, but there is far less reason to dread such resistance than to face the consequences of a continuance of a condition that spells ruin for the country.”