form of state aid given in our first
railway era, had long been discredited by the unlucky fate of the Grand
Trunk and the Northern guarantees, and had been sparingly used since.
To the Canadian Northern its revival was chiefly due. It was a
seductive form of aid: provided that the railway thus helped had good
traffic prospects, the government stood little chance of loss and the
railway greatly gained by the certainty of the sale of its bonds and
the higher price secured. But, like other forms of the extension of
public credit, such as the issue of paper money, state guarantees are
{192} difficult to keep within bounds, and compel ever-fresh extensions
to save the old liability. So Dominion and province alike found. From
1903 to 1911, under Sir Wilfrid Laurier, the Dominion guaranteed bonds
of the Canadian Northern system to the extent of fifty-six millions;
from 1912 to 1914, under Sir Robert Borden, it endorsed the Canadian
Northern's notes for forty-nine millions more. Nor were the provinces
behindhand. Mainly in the seven years from 1908, the five westernmost
provinces pledged their credit on behalf of the same system to the
astounding amount of over one hundred and thirty millions, British
Columbia leading; Nova Scotia made a loan of another five millions.
Thus endorsed, usually as to both principal and interest, the bonds of
the Canadian Northern were floated with little difficulty, so long as
money was to be had at all by any seeker.

In the meantime, while the road was being built by state gifts and
bondholders' lendings, the great bulk of the stock of the parent road
and of the chief subsidiaries was conveyed to Messrs Mackenzie and Mann
for their services in promoting and managing the system. This method
of financing had its dangers. It meant that there was no large
commitment {193} of shareholders' capital, to secure support in
difficulty and compel responsibility in management. It meant that the
control of the vast enterprise was in the hands of a few men, unchecked
by public inquiry or the criticism of independent
shareholders--whatever that might be worth. It meant that with all the
cash capital taking the form of bonds, any failure to make ends meet,
any lengthened depression, would bring risk of the mortgage-holders'
foreclosure and receivership--not merely the shareholders' waiting for
a turn of the tide--except in so far as the burden could be shifted to
the governments that had endorsed the