Comparisons may be odious; but they are sometimes illuminating. To many sincere well-wishers to the experiment of nationalizing about twenty thousand miles of Canadian railways, the clearest remaining impression of the earlier years of that regime is of enormous deficits. Apprehension of the causes of these deficits is not clear. It certainly could not be among those who once advocated turning over this national property to a competitor for a dollar a year, leaving the nation to carry all the fixed charges on a capital obligation four or five times the size of the national debt before the war, and about two-thirds of that interesting burden in this tranquil era. Before discussing the purely Canadian situation it is worth while to look at what happened across the line.

When the United States entered the war, all the railways were taken over by the Government, under the supreme direction of the Secretary of the Treasury, Mr. McAdoo, and with a guarantee of pre-war profits to the owners. The so-called national administration lasted twenty months, and lost one billion, four hundred and forty-three million eight hundred and ten thousand dollars, or more than the total fixed assets of the Canadian National Railways before the inclusion of the Grand Trunk. Besides this loss, the Government advanced, during its control, one billion one hundred and forty-four million dollars for equipment, additions to, and betterments of properties which the nation does not own. The chances for complete recovery of that money are probably nothing more than chances.

That was nationalization in the United States, under the autocratic control and operation of a politician.

Nationalization in Canada began under vitally different conditions, as to the properties taken over, and the character of the management. When in 1920 the effects of the American experiment were being acutely felt in Canada, I happened to speak to the Ottawa Canadian Club. This comparison of conditions on both sides of the border was made; and I think its fairness is still beyond question:

It would be a signal failure of duty here if one did not offer the warmest tribute of gratitude and admiration to the Board of Directors, which the Government appointed in September, 1918, to serve with me, and which administered 17,478 miles of railway, formerly the Canadian Northern, Intercolonial, National Transcontinental and Grand Trunk Pacific. The directors were:

A. J. Mitchell, Toronto.
G. A. Bell, Ottawa.
Robert Hobson, Hamilton.
E. R. Wood, Toronto.
F. P. Jones, Montreal.
Sir Hormisdas Laporte, Montreal.
R. T. Riley, Winnipeg.
C. M. Hamilton, McTaggart, Sask.
Col. Thos. Cantley, New Glasgow, N.S.

Later, Mr. F. P. Jones resigned for business reasons, Mr. C. M. Hamilton retired to become a candidate for provincial honours in Saskatchewan, (he is still in the Government at Regina), and Col. Thomas Cantley resigned when selected as a candidate in the Federal election of December, 1921; thus accentuating the non-political character of the Board.

It is proper to repeat that these gentlemen gave to the work, shortly to be sketched, exactly the kind of supervision which able, conscientious men give to the management of private concerns. Many an anxious discussion did we have about the broad lines of policy, and the measures essential to laying deep and sound the bases of future success of a business which perhaps had heavier handicaps upon it than were hindering any magnitudinous contemporary enterprise.

One of the most precious qualities in the administration of great businesses, including Governments, is what Napoleon called two-o’clock-in-the-morning courage, which is very different from the desperation of battle-heat. A glance at the fundamentals of the Board’s situation, will indicate whether they showed the Napoleonic quality, in the cold, dead hour, when temptations to turn over for a snooze are most potent.

The Board inherited a vast mileage and a traffic volume, which was not likely swiftly to be enlarged, once the troops were returned, and the war shipments, which had taxed the Intercolonial, for instance, almost to its limits, for the first time in its long history, were over. All costs were at a height, which before the war, was unthinkable. Rates had not risen in comparison. The physical property was badly run down, owing to war conditions, in which connection were two especially heavy burdens, the quality and extent of which the general public could not be expected to appreciate.

The life of a tie and of a wooden trestle is from seven to ten years. On the Canadian Northern, the National Transcontinental, and the Grand Trunk Pacific, there were many trestles which must be replaced either by fills or steel bridges. You would be surprised to know how many trestles there were between the Yellowhead and Prince Rupert, where it was popularly assumed that steel bridges had eliminated the old-time feature of pioneer construction.

To those who are not very familiar with an important phase of railway practice, perhaps it may be explained that wooden trestles are built in places where it is intended to make entirely new and costly embankments for roadbed. But it is not done that way in the beginning, because a wooden trestle is quickly and cheaply put up, whereas, to make an embankment with, perhaps, hundreds of thousands of cubic yards of earth or rock, means the employment of innumerable teams at enormous expense, and much delay in laying rails.

Sometimes, indeed, trestles are built because the character of the earth’s foundation makes it uncertain whether the first location is the best, and a trestle is adaptable to whatever slight deflection may be necessary. For several years you can use the trestles, relying on traffic developing sufficiently to pay for the embankment out of revenue. You then build it economically by work train, with the cars loaded by steam shovel and unloaded by a steampower plough, that sweeps the flat cars clean.

The supersession of trestles was a large and expensive element in the Board’s work of putting the National Railways into first class operating efficiency.

There was another costly factor of immense importance which did not enter into the “national” administration of the United States railways. Thirty-five per cent. of all our mileage had been taken over from the contractors during the war. Anybody who has noticed what happens when a gas or water main is disturbed in a street, knows that though the filled earth, when the job is done, is a hump in the road, it becomes a hole as the earth settles. Every motorist has mourned when he hasn’t objurgated, as he comes again, again and again to a piece of new provincial highway where the concrete has not been put down, because the “fill” must have time to settle. Thirty-five per cent. of the National Railway mileage was, to a considerable extent, like the roadway of the disturbed water main, or the disturbed motorist. Besides these factors new roundhouses, section men’s residences, water facilities and many terminal plants had to be provided or improved.

In so general a sketch as this it is impossible to distinguish between expenditures on capital and maintenance accounts. We were compelled to go to Parliament for large sums for ordinary as well as for deferred maintenance, in addition to what was imperative for new equipment, terminals and completion of branch line construction.

In the public apprehension of somewhat complex financial relationships, the uppermost idea no doubt was that the Canadian National Railways were losing millions, hand over fist, on the mere running of trains, and that the money voted by Parliament was swallowed up in hopelessly irrecoverable deficits. The report for 1921 gives the distribution of the total net cash advances to the Canadian Northern:—

The good citizen, who always pays his way, and looks upon everything connected with Government as a deadly allurement to wasteful extravagance, is tempted to assume that a first class recklessness and a third-class efficiency have gone into the Canadian National Railways’ management. A reading of the abridged report made to Mr. Kennedy in 1922, of the Operating and Maintenance Department, which is given in the appendix should help to correct this error. Still, a tendency to persist in it may linger, especially among those who regard our great rival, the C.P.R. as being filled with the excellences which public service is believed conspicuously to lack. Saddened owners and candid friends of the Canadian National Railways may not discover unaided a feature of the war and post-war situation which makes the practice of comparison more interesting and less odious than it usually is. It has to do with what has already been noticed—that thirty-five per cent. of the Canadian National mileage was received from the contractors during the war.

Does it ever mean anything to the critical public, I wonder, that Parliament and the Dominion Board of Railway Commissioners recognise no difference between the pioneer railway and its old-established, flourishing senior? The Canadian Northern was not begun until the Canadian Pacific had been operating transcontinental trains for ten years. Its main line was built through practically empty prairie country. But though it was a pioneering system, it had to meet the same conditions as to passenger and freight rates that governed the C.P.R., with the established traffic of the only continuous transcontinental railway in the world. This disparity applies with equal force to the opening up of the northern wildernesses in Quebec and Ontario by the National Transcontinental and the Canadian Northern.

The emergence of the National Railways placed upon us a responsibility for creative, pioneering services the magnitude of which has surely not been fully appreciated by Parliament, public or press. So far as one is aware, the value to the country of a pioneer railway has never been worked out on an actuarial basis. Take, say, a territory three hundred miles long by thirty miles wide into which settlement is introduced by a railway. Thirty towns are established in it through which all the newly-created business of the region passes. That business is represented not only by what is visible in the thirty towns and their sustaining farms. It is in the factories of Ontario, the financial, theological and other institutions of the East, and in all the paraphernalia of transportation, from coast to coast, including the car and engine shops, and the divisional towns.

The common denominator of the whole range and multitude of activities set in motion by the pioneer railway is the Government, the expenses of which, avowedly for the general advantage of Canada, are roughly divisible into two sections—as the expenses of a great bank are. There are the expenses of established business which yields dividends, and those which are chargeable to promotion, expansion, pioneering—which will presently become profit-making. The Government furnishes various administrative services to newly-opened country which do not produce an immediately balancing revenue. No criticism can be offered against this general policy. Banks carry on branches in sparsely populated localities, for similar reasons. They support their children for a while because presently the children will support them.

Railways are expected to furnish services which cost more than they bring. The Canadian National is carrying a larger proportion of these than ought to have been assumed, under a properly controlled programme of original construction. But that does not alter the fact that the pioneering service is being given, under the orders of a Board of Commissioners which, broadly speaking, treats the youthful branch as if it were the matured trunk. The point I wish to suggest is that, to obtain a fair perspective of the Canadian National Railways, as they were between 1918 and 1922, these aspects of a thirty-five per cent. of mileage taken over after the Great War began, should be taken into account; especially in relation to the heavy expenditures necessitated by a continuation of extremely adverse conditions.

Look at one of the financial aspects of these tremendous, but typical necessities for tremendous expenditure. The well-conducted railway, as already said, expects to replace its trestles out of revenue; and to carry its maintenance from the same source. On the Intercolonial it had never been expected that revenue would care for all these charges. The capital account was continually increased, the money being supplied by Parliament from taxes, and not carried as an annual recurring liability, such as the bonded indebtedness of a railway which must live by commercial processes alone. The Intercolonial was always true to this form before 1919.

If the National Railways were to be managed as a business, and not as a makeshift, the Board felt that there should not only be a thorough rehabilitation of the property, but that all possible costs should be charged to revenue so that there could be no mistake about the strictly businesslike character of the whole administration. That meant requests for vast sums of money, and the charging of them against revenue, which in turn meant the declaration of huge and, to the short-sighted, terrifying deficits.

The money could only come from Parliament, on the demand of the Government. My old colleagues of the Board would not thank me for saying that they showed extraordinary courage in putting the situation, in all its formidability, up to the Government. But, to many seasoned business men, in their place, what they did would have required volcanoes of two-o’clock-in-the-morning bravery.

If there had been anything like the ancient brand of political control, or profit, in the Government’s railway dispositions, what would the Cabinet’s attitude have been? It would have said “Keep your expenditure down to the lowest possible limit, not giving first regard to the foundation for future commercial success. Charge as much of your expenses as possible to capital account, to keep deficits down, so that we may make the best possible immediate showing to the voters.”

The Government did nothing of the kind. The Board went to the Cabinet with a big, hard, forbidding business proposition, which only the lapse of years could justify. To its enduring honor, be it said, the Government courageously faced the situation with a kindred spirit; found the money, and said never a syllable about the political effects of so much courage, and so much danger.

Though the Board exhibited such splendid courage, let it not be supposed that there was anything exhilarating about our job. After all it is a heart-breaking affliction to have to go on month after month with the results of ceaseless endeavour written monotonously in red ink. To any Scotch soul, the continued outlay of more than a dollar to earn a dollar was bound to feel very much like predestinated doom. There was no escape from the experience in the present. Without it there was no hope for the future. Thousands of miles of railway were on the verge of dilapidation. To allow the process to go farther would be to invite the permanent disaster which we were determined, if possible, to avoid.

In trying to give to the general public an intelligible account of a railway administration, there is always the danger of fogging the story with statistics—of making it impossible to see the wood for the trees. I am anxious to make it clear that the Board of Directors, of whom I had the honour to be the head, approached and performed their duty in a fashion which became the dignity of their employer—the Canadian nation—and reflected high distinction upon themselves.

From our first inspection of the property, from Sydney and Halifax to Vancouver and Prince Rupert, and from our study of the economic conditions affecting the expansion of revenue, we evolved a definite, coherent policy. I take the liberty of repeating what I endeavoured to express in a memorandum which I read to the Select Standing Committee on National Railways and Shipping, on April 20th, 1921. Speaking of the general supervision exercised by the Board, and after stating that they were the directing force in the general policy of the railways, I said:

“It has been accepted by them as a definite policy that a national railway system be built up of the various lines owned by the Government, which in all respects will be the equal of the Canadian Pacific Railway in its ability to give the communities it serves good and adequate railway service. To carry out such a guiding policy it has been necessary to assume that ultimately the traffic for which the main lines of the system were laid down would be developed. Where any limiting condition exists which prevents the above-mentioned policy from being carried out it is the aim of the directors to remove such a condition. It has therefore been necessary, in addition to taking up deferred maintenance, to make a start on the progressive programme of improvements to the physical properties of the system. It is a matter of regret that much of this work, which could not further be postponed, had to be undertaken during the last two years under conditions which added largely to the expense. This situation was intensified by the fact that initial tie and bridge renewals for a long section of the main line came due within the period under review. The extra outlay which it has been necessary to make in an effort to put track and equipment in the proper physical condition is largely indicated by the increases in the principal headings of expense already set up in the statements being placed before you.

“This has involved the expenditure of money to improve locomotive terminals; extend sidings and switching yards; to put in double tracking, and improve many other operating conditions, so that a greater efficiency can be secured from the equipment now owned, and so that additional traffic may be handled without congestion. It has also been necessary to undertake some branch line extensions, particularly those on which some work has already been done prior to the war.

“Additional rolling stock and motive power has been required, large additions to the equipment being necessary to put this system in a position properly to handle its proportion of the traffic of the country.”

Because of the enormous amount of work to be done, and of the cost of materials having increased to unprecedented figures, even then—although the later increases added greatly to the burden, and wages were also much higher and labour less efficient—we had to consider carefully the order in which the programme should be carried out. We therefore, placed the works in the following order.

1. Those absolutely necessary to the continued operation of each line.

2. Those absolutely necessary to the reasonably satisfactory handling of traffic.

3. Those not absolutely necessary but which would reduce the cost of operation sufficiently to justify fully the expenditure.

Under such a policy we carried on for over three years. Each year increased the burden of troubles and anxieties due to advancing costs of materials and wages, as you may now see.

Our first year, (and the first post-war year,) 1919, far from seeing any let up to the accumulation of embarrassing labor conditions originating in the McAdoo award and its many supplements, or a reduction in costs of material, brought an aggravation of the situation. The United States Government’s decision to accept the losses of the United States railroad administration as war expenditures, was official recognition of the disproportion between expenses and gross earnings. We carried on without charging any of our difficulties to war account.

Freight and passenger rates in 1919 remained stationary, while wholesale prices, according to the Department of Labour’s index, advanced from 286.5 to 322.7, and the average annual wage of railway employes increased from $1,061.20 to $1,315.93.

In this year, due to the large amount of deferred maintenance which was essential to bringing the property up to normal conditions, the increase in labour cost alone was $19,000,000, and in materials $2,500,000. The increased cost of our labour was more than half of the total annual revenue of the Dominion Government when Sir George Foster became Minister of Finance.

“From bad to worse” describes the situation in 1920, from the operating point of view. The Canadian National, in common with other Canadian railways, was carrying the accumulated burdens of the McAdoo award and its oppressive supplements, etc., as well as still higher costs for coal, materials and supplies. The inadequacy of earnings in this situation was fully recognized; but the rates question was not dealt with in Canada. The continuation of the United States Government guarantee of pre-war profits to the railroads up to September, 1920—twenty-two months after the armistice—prevented increases of charges over there to meet the increased wages. As we were operating under United States wage rates it was felt that the Railway Commission should hold us down to United States freight rate levels.

In this year, too, another crushing blow was dealt the railways by the Chicago award, which was adopted in Canada under strike pressure. The award which was made in September, but was retroactive to May 8th, increased wages by over 25 per cent. This, applying to more than four months’ back pay involved a payment by the Canadian National of almost six million dollars.

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.

The Board, loaded with many lines which, as distinctive features of the system, could never be expected to pay operating expenses out of revenue, introduced an entirely new system of transportation in Canada—the self propelled single car, operated by one driver and one conductor, like an ordinary street car. We placed this sort of service, some of it run by gasoline, and some by electricity, on several branch lines, saving costs in power, in the weight of equipment used, and in wages, at the same time giving greater frequency and efficiency in service. The policy has, I believe, been extended under the substituted management, with considerable success. A light service for example is being given between Toronto and Parry Sound, on the old Canadian Northern.

One is inclined to think that in this kind of service, rather than in the electrification of branch railways, which is far more costly than the general public supposes, the most economical and efficient adjustment of old steam lines to modern conditions will be achieved. The principle of the automobile on rails offers a flexibility which nothing else can; and the possibilities of the electric storage battery are not yet exhausted.

Very inadequately the scope of the Board’s work, from the fall of 1918 to the fall of 1922 has been sketched—although we stepped out in October, our resignations were requested in July. The co-operative spirit was not confined to the directors, or even to the higher branches of the daily service. The esprit de corps that was developed far exceeded the expectations of those who believed that Government ownership meant general slackness. The consolidation of the staffs of the Intercolonial, the Grand Trunk Pacific and the Canadian Northern was accomplished without friction of any kind; and the loyalty of the employes all over the system was admirable.

The justification of the policy laid down in 1918 is contained in the figures of earnings and expenses for the four years of our regime—it is fair to include the whole of 1922 in this survey, since we retired in October and the new chief did not take charge until mid-December. It will not be too wearisome to give, on the next page, the only considerable table of statistics which this work contains.

From the mass of facts embedded in these tables one can only extract a few. The progressive decline in the total loss on operating after the zero year of 1920—a decline which has been accentuated in the figures for 1923—is obvious. But it is not so obvious that the disparity between earnings and expenses in 1922, is due to the revival of the Crow’s Nest Agreement which threw the railways backward, from a business point of view. We had expected to break almost even in 1922; and would have done so, if the revived agreement had not lopped over eight millions from revenue.

CANADIAN NATIONAL RAILWAYS

COMPARATIVE STATEMENT OF EARNINGS AND EXPENSES

(For the Years 1919, 1920, 1921 and 1922)

The most outstanding fact hidden in the statistics is the relation of the Canadian Northern to the Grand Trunk Pacific and National Transcontinental lines. As to this, we will leave out a detailed comparison with the line between Winnipeg and Fort William, which gets its share of the grain traffic to the head of lakes, remarking only that, thanks to the proportion of grain diverted from Canadian Northern lines at Winnipeg and important points west, this section of the great project of twenty years ago is by far the best of the whole line between Winnipeg and Moncton.

Now look at the figures for the C.N.R. and the G.T.P. This is what it cost to earn a hundred cents in each of the four years:

For the gulf between earnings and expenses, 1920 was the worst year in North American railway history. But it was the year in which the Grand Trunk Pacific was first co-ordinated with the Canadian Northern—beginning with the grain movement, in September. Thanks to the diversion of traffic to the Grand Trunk Pacific and National Transcontinental, Canadian Northern gross rose only 24.4 per cent.; while the Grand Trunk Pacific increased 28.4 per cent. But the increase in the cost of earning a dollar on the C.N.R. was 12.2 cents as against 14.1 cents on the G.T.P.

The conditions as to increase of traffic from the country served by these former rivals, are, relatively, what they were before the war. If the two lines were on anything like an equal footing as regards the quality of the territory served, and the amount of business available, for instance, at such competitive points as Saskatoon, Regina and Edmonton, where both compete against the C.P.R., the ratio of operating losses would have been about the same, in 1922, when the return to normal was well on the way, and would have been much nearer attainment but for the Crow’s Nest revival. But, though the G.T.P. total earnings were not one-third of the C.N.R. total earnings, and were an increase of nearly two millions over those of 1921, or 11.1 per cent., the loss on operation was nearly a million and a half more than on the Canadian Northern. If the Canadian Northern loss had been proportionally the same as the Grand Trunk Pacific, it would have been over fourteen million dollars instead of less than three.

These remarkable comparisons, it cannot be too clearly emphasized, are in spite of the turning over of immense quantities of C.N.R. business to the G.T.P. The conviction remains that, if the C.N.R. could have been kept as a separate entity, it would have made a small profit during these four years, with the exception of the abysmal 1920, and its emergence into an entirely self-sustaining system would have been immediately in sight.

One aspect of the co-ordination of the C.N.R. and G.T.P. is specially worthy of remembrance. During the heavy season of grain movement to the Lakes it has been an excellent policy to transfer millions of bushels to the old National Transcontinental at Winnipeg, to relieve the congestion on the old Canadian Northern between Winnipeg and Port Arthur, via Fort Frances. The effect of this sort of double-tracking has been partially offset by the necessity to operate as two separate railways, with two sets of roundhouses, repair shops, etc. There has been a special advantage to the National Transcontinental side of the account, though. During, say, eight months of the year, the Canadian Northern could handle all the business accruing from its own lines at Winnipeg. But the diversion having been made for the grain-congestion period, it is continued for the balance of the year. A facility in movement for the Canadian Northern during the rush season is more than paid for by a loss of traffic for the rest of the year.

Such, then, was the irresistible logic of railway events when the irresistible logic of political events presented to the directors, including the two who had given long and undivided service to the properties, a freedom from responsibility which has been appreciated at its high private value.

The report for the year 1922, the policies for which were laid down under the first President’s chairmanship, was written by another hand. Six months after the old administration ceased, this is what was reported to the Minister of Railways and the Governor-General-in-Council:—

“On behalf of the Board, I would like to state that after inspection of the main arteries of the system, we find that the work undertaken has been well performed, and that the expenditures have been well applied. While the demands for capital expenditure on a system of such extent in a growing country, as the former Board stated, are never-ending, yet it may now be said that the three groups of lines, until recently the Canadian National Railways, enter the consolidation in excellent physical condition and operating at a high mark of efficiency as regards actual performance, or movement of traffic, and other factors controllable by management. Apart from certain well-known cases of duplication, the lines are well located and in exceptional position to successfully perform the transportation demands of the country. The problem, as far as the lines covered by this report is concerned, is how sufficient traffic may be developed to carry the overhead and maintenance expenses. As far as transportation costs go, an economical performance is being made. Under these circumstances the margin for improvement, with the present light volume of traffic, is largely dependent on circumstances beyond the control of the management.

“On some of the older sections there are still improvements that should be undertaken, but in the main the lines are modern in character, and were built or have been brought up to standards which are ahead of actual traffic requirements, except under stress of seasonal movements.”

Finally, touching these early years of nationalization, one may be allowed to indicate the footing on which we parted from our working associates by repeating two paragraphs from the President’s farewell circular:

“It has been our constant aim to keep the National system free from anything that could be used to support a charge that the Government’s railway, steamship, express and telegraph services, were being used for political purposes. I can only say for myself and those directors who retire with me that nothing in the nature of political interference would have been tolerated while we were in charge. It is a necessary policy if efficient administration is to be obtained.

“In sending out this note of farewell, which will reach many of those with whom I have had practically a working lifetime’s association, I desire to express my hearty appreciation of the friendly personal relationships and friendships which have resulted from our joint efforts to do the best in our power for the fine properties in which we were employed, which properties, I know, we have felt are of such potential worth that they can be made great national assets. The way has not always been smooth, and the work has always been hard, but it has always been worth while, because of those with whom I have had the pleasure of sharing the load. For all of you who remain to carry on I wish the best of good luck. I hope that you will be permitted to advance the interests of Canada’s National Railway, Steamship, Express and Telegraph services, to an extent that will demonstrate that public ownership may still be consistent with good management.”