13 March 2010

The Empire Builders - Donald Smith the Financier and
the Damn Yankee Alien Builder

Donald Smith - Lord Strathcona.

Arriving in Canada aged only 17, from Scotland, Donald Alexander Smith, later Lord Strathcona, served the Hudson's Bay Company diligently until he was 76, when he was posted to Britain, where he served as Canada's high commissioner to the Court of St. James in London. In my last column concerning his railway achievements, we left him driving the last spike at Craigellachie, 7 Nov 1885.
 
Smith had been a member of Sir Hugh Allan's first Pacific Railway Syndicate, which ended with the tumbling of Sir John A. Macdonald's government. Smith spent the next seven years quietly assembling the second, this time successful, Canadian Pacific Syndicate, James Coleman tells us in his article titled "The Brass Pounder". While the picture of driving the last spike would seem to support such a dramatic title, whatever else Smith was, he was no brass-pounder, but an uncanny accumulator of unbelievable wealth, all of which he risked, together with that of all his friends and acquaintances, in his bid to build the Canadian Pacific Railway.
 
The foundation of Strathcona's vast fortune he built using the savings of his fellow employees of the Hudson's Bay Company. The factors and traders of the Bay, received their liberal but hard earned percentages of profits annually. Off in their distant posts, it was difficult for them to contact ways to invest that income. Strathcona offered to invest for them guaranteeing a 3% annual return. Strathcona placed these funds through George Stephen (Lord Mount Stephen) a Montreal industrial banker. Strathcona scrupulously paid his factors and traders their 3% and pocketed whatever else he made on the investments, however enormous.
 
"His silent purchases of Hudson's Bay stock actually gave him financial control," Coleman notes. He risked it all and went deeply into debt by the time Van Horne delivered the CPR, completed and on time in November 1885. "The venture was a calculated risk in which one false step could have precipitated the financial ruin of Strathcona and all his friends and associates... but Stathcona had shrewdly computed the odds to be in his favour in the long run," Coleman concludes.
 
 
The Damn Yankee Alien Builder
 

Sir William Cornelius Van Horne.
 
 
Like most Canadians of the time, Sir William Cornelius Van Horne was "foreign born" in Joliet, Illinois, USA. He was "a master railroader of such ability that even his worst enemies acknowledged his superiority," Tommy Tweed writes of this visionary man. Monumental as his job was, building the CPR, the work he did for Canada afterward was even more so. Virtually all early railroads quickly went bankrupt. The CPR did not, primarily due to the foresight of Van Horne.
 
Upon its completion, Van Horne noted "Canada is doing business on a back street! We must put her on a thoroughfare!" Tweed records. Between 1885 and his retirement in 1910, Van Horne created traffic for his railroad. He built branch lines, encouraging settlers to settle by giving them access to shipment for their grain. He started experimental farms for new farmers bringing in new hard Canadian wheat.
 
Van Horne bought mines and encouraged his friends to finance mines across the Canadian Shield. As a consequence, such items as head frames and machinery from Orillia's Dorr-Oliver plant and wagons from Tudhope's plant moved to the mines and the Prairies by the thousands. Grain flowed back from western Canada to Vick's Mill, to be made into flour. His bakeries shipped out bread along with Orillia-made harnesses to the lumber camps, and so Orillia grew prosperous.
 
Van Horne built hotels, sensational hotels to match the sensational scenery. He reasoned:  "We can't export our scenery so let's import our tourists." To bring the tourists from abroad, he built CPR steamships both trans-Atlantic and trans-Pacific. His advice to all and sundry was "Go sell your boots and buy CPR stock." It is still good advice today.
 
Upon his death, on the building of the CPR, "At an appointed hour, all traffic on the gigantic system, which he had created, was braked to a five-minute stop in silent homage."
 
Bud Trivett.