Historian Michael Bliss's books include Northern Enterprise: Five Centuries of Canadian Business.
Not many merchants, lumbermen, manufacturers or bankers were particularly enthusiastic about the creation of the Dominion of Canada on July 1, 1867. The plan to make a new nation out of squabbling, debt-ridden colonies injected major new notes of instability into British North America's economic climate. Confederation would probably bring more government, more debt, more taxes, more friction with the United States and more wildly visionary schemes by impractical politicians. Why upset the business status quo?
But suppose you were a failing businessman, longing to be bailed out. Suppose the only choice for your enterprise was to go big or go broke. Suppose your best hopes lay in wild visionary schemes for expansion.
The Grand Trunk Railway of Canada was by far the biggest enterprise in all of British North America. By 1861, its main (or trunk) lines ran about 1,800 kilometres from Sarnia in Canada West to Quebec City and Portland, Me., in the east. It claimed to be the greatest railway in the world, and the greatest foreign project ever financed from Britain. The investors who had poured almost $5-billion in today's purchasing power into building the Grand Trunk had vitalized the colonial economy even as they anticipated fabulous returns. In their first golden age, railways were expected to be everybody's gravy train.
The reality was very different. The Grand Trunk's promoters, like most early railway entrepreneurs, had grossly underestimated their costs of construction and overestimated the traffic their line would generate. They had trouble competing with waterways and trouble with the harsh Canadian climate, and had foolishly built their line to a gauge that would not allow for connections with U.S. railways. In an ethically challenged business climate, insider trading, bribery and political chicanery drained off money and credibility.
A committee of the Grand Trunk's debt holders described it in 1861 as "an undertaking which is overwhelmed with debt, wholly destitute of credit and in imminent danger of lapsing into utter insolvency and confusion."
There seemed to be two routes to salvation: Build more track and get more government help. Early in the 1860s, the Grand Trunk Railway of Canada began lobbying for railway expansion eastward to the Maritime colonies, railway expansion westward through "Indian" and fur-trader country to the Pacific, and all the help of any kind it could get from the government of the Province of Canada.
These hopes coincided almost exactly with the grandiose vision of the coalition of Canadian politicians led by John A. Macdonald, George-Étienne Cartier (a solicitor for the Grand Trunk) and George Brown, who wanted to create a new country by uniting with the Maritime provinces, annexing the Hudson's Bay Company lands in the west and tying it all together with an intercolonial railway running to Halifax and a transcontinental line to British Columbia.
The Grand Trunk did everything it could to promote Confederation. We don't know what "everything" involved because so much power and cash circulated in backrooms and under tables in those days. It is known that in 1866 the general manager of the Grand Trunk, C.J. Brydges, was the conduit for supplying what John A. Macdonald called "the needful" (cash worth more than $2-million today) to help overthrow an anti-Confederate government in New Brunswick in 1866. We can assume that pro-Confederate politicians got free rides on the Grand Trunk, while their opponents had to pay their way. And the possibility of serious opposition to Canadian expansion by the Hudson's Bay Company was neutralized when key Grand Trunk shareholders purchased control of the historic enterprise in 1863.
Except in New Brunswick, the Confederation plan was never put to a popular vote. It might have had trouble passing. Its opponents loudly proclaimed the whole idea to be nothing more than a great Grand Trunk railway "job" – a swindle mainly for the benefit of its shareholders and their political henchmen. The muddy waters of Confederation's paternity were not clarified by the later claim of Edward Watkin, Britain's leading spokesman for the Grand Trunk, that he was the true Father of Confederation.
Few historians would go that far. There were political and geopolitical reasons for Confederation in 1867 that far transcended the politics of railways. But it certainly helped that the great railway and all its backers were supportive, greasing the road to the future with money and influence.
The events of 1867 did not, however, spell salvation for the Grand Trunk. After Confederation, the Intercolonial Railway to the Maritimes (so ostensibly important that a commitment to its construction had been written into the British North America Act) became a perpetual sinkhole, of virtually no use to the Grand Trunk. Worse, an economizing regime at the Grand Trunk reversed course and decided not to bid on the contract for a transcontinental line, passing up the opportunity that would brilliantly be seized by the promoters of the Canadian Pacific Railway.
When the Grand Trunk finally did decide to go transcontinental, at the beginning of the 20th century, it had to play catchup. It ran tracks through wilderness to nowhere and had no sooner finished its system during the First World War than it had to declare bankruptcy. Its assets were taken over by the government of Canada and folded into the Canadian National Railway system. Its common shareholders (including Downton Abbey's Earl of Grantham) lost every cent of their investment. Its most dynamic general manager, Charles Melville Hays, had perished on the Titanic.
Canada has had its ups and downs since Confederation, but it has survived pretty well. The politicians built the country in the 1860s far better than hopeful, naive investors built British North America's first big railway.