The Pacific Great Eastern Railway and British Columbia
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THE PACIFIC GREAT EASTERN RAILWAY AND BRITISH COLUMBIA by Paul John Stephenson A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in The College of Graduate Studies (Interdisciplinary Studies) [History/Economics] THE UNIVERSITY OF BRITISH COLUMBIA (Okanagan) March 2012 © Paul John Stephenson, 2012 Abstract On February 20, 1912, Premier Richard McBride announced the creation of the Pacific Great Eastern (PGE) railway. The line was to be built from Vancouver, 460 miles northeast to Prince George, passing through Squamish, Lillooet, Williams Lake, and Quesnel. McBride committed government guaranteed bonds of $35,000 per mile or $16,100,000 for construction. The construction contract was awarded, without contest, to Foley, Welch and Stewart (FW&S) with a contractual completion date of July 1, 1915. By November 30, 1915, however, FW&S had exhausted all the bond money but had only completed 164 miles of track between Squamish and Clinton. On February 22, 1918 the BC government assumed control of an insolvent PGE project and immediately became liable for interest charges of more than $900,000 annually plus repayment of the principal. This study examines a wide range of primary documents, including a Legislative Select Committee report, British Columbia statutes, Royal Commissions, financial audits, mortgage documents, reports commissioned by the Legislative Assembly, legal records, political debates and newspapers. Comparative, statistical, deductive and economic methodologies are used to support synthesized analysis establishing the culpability of Premier McBride in the mismanagement of the PGE. Statistical analysis of the private and social values of the railway ii demonstrate that it was not feasible as a private venture and the amount of necessary investment to realize its social value made it an irresponsible project for McBride to initiate given the limited financial capacities of BC in 1912. This study concludes that the failure and ultimate insolvency of the Pacific Great Eastern Railway by 1918 was the result of mismanagement by Premier McBride in letting contracts which were incentive- incompatible with public interests and acted in violation of sections of the Railway Act; opportunistic contractors who, in the interests of maximizing profit, exploited poorly-crafted contracts and provincial government ineptitude; and economic conditions which, prior to 1912, created optimism about the PGE but after 1912 indicated that the project was not viable. iii Table of Contents Abstract ............................................................................................................... ii Table of Contents ............................................................................................... iv List of Tables ....................................................................................................... vi List of Figures ..................................................................................................... vii Abbreviations ................................................................................................... viii Chronology ........................................................................................................ ix Acknowledgements ......................................................................................... xii Dedication ........................................................................................................ xiii Chapter 1: Introduction ...................................................................................... 1 Thesis .................................................................................................................... 2 PGE to BC Rail..................................................................................................... 5 Organization of the Study .............................................................................. 10 Chapter 2: Critical Literature Review .............................................................. 16 Previous Studies of the PGE ............................................................................ 16 Other Secondary Sources .............................................................................. 21 Chapter 3: Canadian Economic Development ............................................ 35 Staples ............................................................................................................... 36 Early Canadian Railways ................................................................................ 40 Industrial Capitalism ........................................................................................ 44 Chapter 4: Railways and British Columbia ..................................................... 54 The Importance of Railways to British Columbia......................................... 55 Axiom of Indispensability ................................................................................ 62 Grand Trunk Pacific (GTP) .............................................................................. 69 Canadian Northern Railway (CNoR) ............................................................ 84 The Canadian Northern Arbitration .............................................................. 94 Chapter 5: Premier Sir Richard McBride ......................................................... 99 The Politics of Richard McBride .................................................................... 103 The Railway Plans of Richard McBride........................................................ 115 The PGE and the CNoR ................................................................................. 122 Chapter 6: Birth of the PGE Railway .............................................................. 136 Other Canadian Provincial Railways .......................................................... 136 Economic Downturn ...................................................................................... 150 Traffic Agreement with GTP ......................................................................... 160 Reaction to the Announcement of the PGE ............................................. 164 Foley, Welch and Stewart (F,W&S) .............................................................. 174 Chapter 7: The Economics of Railway Building ........................................... 178 Constructing in Advance of Demand and Social Value ........................ 179 Government-Guaranteed Bonds ................................................................ 195 Calculation of the Private and Social Value of the PGE ......................... 201 Chapter 8: Failure of the PGE as a Private Venture ..................................... 208 Mortgage and Deed of Trust ....................................................................... 209 iv Harlan Brewster‟s Writ .................................................................................... 224 Auditors‟ Report ............................................................................................. 227 Select Committee of the Legislature on the PGE 1917 ............................ 231 Chapter 9: Aftermath and Conclusions ........................................................ 259 Hinton Report 1922 ........................................................................................ 261 Sullivan Report 1922 ....................................................................................... 264 Royal Commission Investigating the PGE 1924 ......................................... 266 Suggestions for Further Study ....................................................................... 268 Conclusion ...................................................................................................... 271 Bibliography .................................................................................................... 276 Appendices ..................................................................................................... 304 Appendix A PGE Mileage Markers .............................................................. 304 Appendix B Additional Reference Material .............................................. 305 v List of Tables Table 5.1 BC Revenues and Expenditures, 1902-1918 ............................... 107 Table 5.2 BC Election Results, 1871-1920 ...................................................... 112 Table 6.1 Estimated Railway Mileage Per Capita, 1907-1921 .................. 137 Table 6.2 Value of Vancouver Building Permits, 1910-1916 ...................... 150 Table 6.3 Value of Building Permits in Other Major Cities, 1914-1916 ...... 151 Table 6.4 Canadian Bonds Purchased by US, 1909-1915 .......................... 153 Table 6.5 Canada‟s Public Borrowings in London, 1907-1916 .................. 157 Table 6.6 US and British Purchases of Canadian Bonds, 1909-1915 ......... 158 Table 6.7 Canadian Railway Loans in London, 1911-1916 ........................ 159 Table 6.8 Railway Construction in BC, 1908-1915 ....................................... 173 Table 7.1 Net Operating Revenue of the PGE, 1917-1932 ........................ 200 Table 7.2 Private and Social Valuation of the PGE, 1912-1932 ................ 204 Table 7.3 PGE Interest Payments, 1921-1932 ............................................... 205 Table A.1 PGE Mileage Markers,1956 ............................................................ 304 Table B.1 Estimated Population of Canada, 1900-1925 ............................ 305 Table