Chapter XI (1)

_Re-organization of Hudson's Bay Company_.

Thus, after a long and continuous period of inquiry and investigation-- a grave game of chess with the Hudson's Bay Company--many anxieties and a great pecuniary risk, surmounted without the expected help of our Government, the battle was won. What now remained was to take care that the Imperial objects, for which some of us had struggled, were not sacrificed, to indifference in high places at home, or to possible conflicts between the two Provinces in Canada; and to secure an energetic management of the business of the fur trade and of land development by the executive of the Company, whose 144 posts covered the continent from Labrador to Sitka, Vancouver's Island, and San Francisco.

It seemed to me that this latter business was of vital and pressing importance. The Hudson's Bay factors, and traders were, in various grades and degrees, partners in the annual trade or "outfit," under the provisions of the "deed poll." This "deed poll" was the charter under which the hardy officials worked and saved. Their charter had been altered or varied over the long period since the date of the Royal concession, in the twenty-second year of the reign of Charles the Second. The deed poll in existence in 1863 provided that the profits of the fur trade (less interest on capital employed in the trade, which belonged to the stockholders who provided it) were to be divided into 100 parts, of which 60 parts belonged to the stockholders, and 40 to the "wintering partners." The "wintering partners" were the "chief factors" and the "chief traders." These 40 parts were again subdivided into 85 shares; and each "chief factor" was entitled to two of such shares, and each "chief trader" to one share. The clerks were paid by salary, and only a person who had served as a clerk could be promoted to a "chief tradership," and only a "chief trader" to a "chief factorship." Thus all had a direct or remote partnership interest. On retirement, an officer held his full interest for one year and half his interest for the succeeding six years.

I had much apprehension that if the unexpected sale and transfer of the share property, under terms and conditions in every sense unique, were not frankly and explicitly explained, and under authority, alarm and misconception would arise; while the news of the transfer would find its way to distant regions in a distorted fashion, and through unfriendly sources, long before the explanation and answer could arrive. My fear, owing to bad management in London, was somewhat realized, and I found that I had not rushed across the Atlantic, to perform every service in my power to the undertaking, in June, 1863, one moment too soon.

Then, having studied the "deed poll," I felt that, unless we made the factors and traders partners in the whole enterprise--fur trade, banking, telegraphs, lands, navigation of rivers--on generous terms, we could not expect to elicit either their energies or their adhesion to a new order of things.

Further, I saw no way to secure supervision and control over the Fertile belt, and all around it, except by the construction, to begin with, of a main line of telegraph from St. Paul to the Hudson's Bay territory, and thence by Fort Garry to the extreme western post on the east side of the Rocky Mountains. Such main line to be supplemented by other subsidiary lines as rapidly as possible. The "wire," to my mind, was the best "master's eye" under the circumstances. But, apart from business re-organization, it was most essential to explain everything to the Government of Canada; and to ascertain the views of political parties, and of industrial interests, as, also, of religious bodies, as to future government. In dealing with these questions, I had to assume an authority which was to have been confided to a delegation, to consist of Captain Henry Glyn, Colonel Synge, and myself.

On leaving England promptly--the main work being done--Mr. Richard Potter undertook for me all the details which, if at home, I should have managed, and he especially took up the discussions at the Colonial Office, which I had personally carried on, with the Duke, for the previous period.

Thus it was that the new Board was constituted, and the arrangements for taking over were made in England without my taking any, further, part. Sir Edmund Head was appointed Governor at the suggestion--almost the personal request--of the Duke of Newcastle: some members of the old Board were retained for the, expected, value of their experience, and amongst the new members were Mr. Richard Potter and Sir Curtis Miranda Lampson, a rival fur trader of eminence and knowledge, and an American. A seat at the Board was left vacant for me.

It may be interesting here to quote what the Duke of Newcastle said, in explaining, in the House of Lords, the recent transactions with the Hudson's Bay Company.

TIMES, _July_ 3, 1863. [HOUSE OF LORDS.]

"The DUKE OF NEWCASTLE, in moving the second reading of the British Columbia Boundaries Bill, said that he should give some further information as to an extension of the means of communication across that great interval of country between British Columbia and Canada. After referring to the system of government which then existed both in Vancouver's Island and British Columbia, and to the revenues of both colonies for the previous few years--that of British Columbia being most remarkable, having nearly doubled itself in two years (the imports in 1861 being $1,400,000, and in 1862 $2,200,000)--the noble Duke proceeded to say, that the greatest impediment to the future prosperity of the Colony was a want of communication with the outer world. He had stated on a previous occasion that he hoped to be able to state this year to the House that arrangements had been made to complete the communications between the Colony and the east of British North America, and he thought he could now inform their Lordships that such arrangements would be carried out. He had desired a gentleman of great experience, knowledge, and energy, who was constantly travelling between Canada and this country, to inquire whether it would be possible to effect a communication across the Continent. This gentleman--Mr. Watkin--had returned with considerable information, and he had suggested to him to place himself in communication with persons in the commercial world who might be willing to undertake the carrying out of such a communication. He had put himself in communication with Mr. Baring and others, and he believed they had arrived at the conclusion that if arrangements could be made with the Hudson Bay Company the undertaking should have their best attention. In order that these important communications might be made certain, guarantees were to be given by Canada on the one hand, and British Columbia and Vancouver Island on the other. A complete Intercolonial railway system had long been looked forward to by those interested in our North American Provinces, and it would be impossible to overrate the importance to this country of an inter-oceanic railway between the Atlantic and Pacific. By such a communication, and the electric telegraph, so great a revolution would be effected in the commerce of the world as had been brought about by the discovery of the Cape of Good Hope. It was unnecessary to point out to their Lordships of what importance it would be in the case of war on the other side of the Atlantic. There was another matter on which he wished to say a few words. Some eight or nine days ago it was stated in a portion of the press that the Hudson Bay Company had sold their property. That statement was not altogether accurate, and certainly it was premature, for he had been informed within two hours before he came down to the House that the whole arrangement had only been completed that afternoon. He had not received any official communication on the subject, but some of the gentlemen concerned had been kind enough to inform him of the facts. He had stated on a former occasion that the Hudson Bay Company had wished to sell. Certain parties in the City had, in the first instance, entered into communication with them for the purpose either of purchasing or obtaining permission for a transit through the Company's possessions. After some negociation the alternative of permission for a transit was agreed upon. That conclusion having been arrived at he did not know what it was that raised the whole question of sale again, but some fortnight or three weeks ago fresh negociations were opened. Parties in the City proposed to the Hudson Bay Company to give them by way of purchase a sum of 1,500,000_l_. What had taken place was this: The Hudson Bay Company very prudently required that the money should be paid down, and that the whole sum of 1,500,000_l_. should be ready on a given day, which he believed was yesterday. Of course the intending purchasers could not carry out that transaction in the course of a week, and they, therefore, applied to the International Financial Association to assist them. The Association agreed to do so, and the money either had been paid or would be on a day arranged upon. A prospectus would be issued tomorrow morning, and the shares would be thrown upon the market, to be taken up in the ordinary way upon the formation of companies. These shares would not remain in the hands of the Association, but would pass to the Proprietors, as if they had bought their shares direct from the Hudson Bay Company. Of course the Company would only enjoy the rights which those shares carried, and no more. They would, in fact, be a continuation of the Company; but their efforts would be directed to the promotion of the settlement of the country: the development of the postal and transit communication being one of the objects to which they would apply themselves. Of course, the old Governor and his colleagues, having sold their shares, ceased to be the governing body, and a new council, consisting of most respectable persons, had been formed that afternoon. Among them were two of the Committee of the old Company, with one of whom, Mr. Colville, he had had much personal communication, and could speak in the highest terms as a man of business and good sense. There were, also, seven or eight most influential and responsible people, and the name of the Governor, Sir Edmund Head, who had been elected to-day, would be a guarantee of the intentions of the new Company, for no one would believe that he had entered into this undertaking for mere speculative purposes, or that the Company would be conducted solely with a view to screw the last penny out of this territory. While the council, as practical men of business, would be bound to promote the prosperity of their shareholders, he was sure they would be actuated by statesmanlike views. No negociation with the Colonial Office had taken place; and as this was a mere ordinary transfer, no leave on their part was necessary. But arrangements must be entered into with the Colonial Office for the settlement of the country; and at some future time it would be, no doubt, his duty to inform their Lordships what these arrangements were."

The Prospectus, as issued in London, for the new organization, at the end of June, 1863, contained this paragraph:--

"With the view of providing the means of telegraphic and postal communication between Canada and British Columbia, across the Company's territory, and thereby of connecting the Atlantic and Pacific Oceans by an exclusively British route, negociations have been pending for some time past between certain parties and Her Majesty's Government and the representatives of the Government of Canada, and preliminary arrangements for the accomplishment of these objects have been made through Her Majesty's Government (subject to the final sanction of the Colonies), based upon a 5 per cent. guarantee from the Governments of Canada, British Columbia, and Vancouver Island. In further aid of these Imperial objects, Her Majesty's Government have signified their intention to make grants of land in portions of the Crown territory traversed by the proposed telegraphic line.

"One of the first objects of the Company will be to examine the facilities and consider the best means for carrying out this most important work; and there can be little doubt that it will be successfully executed either by the Hudson's Bay Company itself, or with their aid and sanction.

"For this, as well as for the other proposed objects, Mr. Edward Watkin, who is now in Canada, will be commissioned, with other gentlemen specially qualified for the duty, to visit the Red River and southern districts, to consult the officers of the Company there, and to report as to the best and safest means of giving effect to the contemplated operations."

A letter of instructions, from the new Governor, dated London, 6th July, 1863, received by me about the 22nd July, after I had made no small advance in the real business, stated:--

"SIR,

"I am authorized by the Committee of the Hudson's Bay Company to request you to proceed on their behalf to the Red River Settlement, for the purpose of reporting to them on the state and condition of this Settlement, the condition of the adjoining territory, the prospect of settlement therein, and the possibility of commencing operations for an electric telegraph line across the southern district of Rupert's Land.

"The Committee have full confidence in your discretion and judgment, but they have deemed it right to associate with you in this inquiry Governor Dallas, of the Red River Settlement, with whom they request you to communicate at once.

"The Committee are aware that it is now so late in the season as to preclude you from doing more than procure such information as may enable them to commence fresh inquiries at the opening of next season.

"I have the honour to be, Sir,
"Your obedient Servant,
"EDMUND HEAD, Governor.
"EDWARD WATKIN, Esq."

I found soon after my arrival in Canada that Governor Dallas was coming down from Red River, and would meet me at Montreal. He was a very able man; cool, clear, cautious, but when once he had had time to calculate all the consequences, firm and decided. He had been for years on the Pacific coast; and, thanks to his prudence, the landing, in 1859, of General Harney, and a detachment of United States troops on the Island of St. Juan, between Vancouver's Island and the mainland, on the Pacific, had been controlled and checkmated, by the proposal of a joint occupation until negotiations had settled the question of right. This right was, afterwards, given away by our Government under the form of an arbitration before the Emperor of Germany. Governor Dallas' opinion of the transaction will be gathered from his letters to me of the 29th and 30th October, 1872, hereafter copied.

The Governor and I became fast friends, and our friendship, cordial on both sides, continued until his death, a very few years ago. The only fault of Governor Dallas was a want of self-assertion. Brought out by the Mathesons--hardy Scots of the North--as he was, he made a reasonable fortune in China: and coming home, intending to retire, he was persuaded to accept the Governorship of the Hudson's Bay Company on the death of Sir George Simpson. Meeting at Montreal, our first act of "business" was to voyage in the Governor's canoe from Lachine through the rapids to Montreal; a voyage, to me, as almost a novice, save for my New Brunswick canoeing, of rather startling adventure; but the eleven stalwart Indians, almost all six feet high, who manned the boat, made the trip interesting, as it was to me in the nature of a new experience. These men had been with Governor Dallas nearly 4,000 miles by river, lake, and portage; and he told me he never knew them to be late, however early the start had to be made; never unready; always cheerful and obliging; and that a cross word had never, in his hearing, been uttered by any one of them. These men made Caughna Wauga, opposite Lachine, their home, and there were their families.

After the most careful study and discussion of the questions above alluded to, and others, the discussion extending over a month, we agreed to various memoranda. The one affecting the re-organization of management was as follows:--

"The first measure necessary towards the re-organization of the Hudson's Bay service, will be the abolition, or modification of the deed poll, under which the fur trade is at present carried on. The difficulty involved in this proceeding is, an interference in the vested rights of the wintering partners (chief factors and chief traders). That might be overcome by some equitable scheme for the extinction of those rights, which would serve the double purpose of rendering practicable a reorganization of the service, and a reduction in the number of superior officers, at present too large. This reduction would give the opportunity of dispensing with such men as are inefficient, and of retaining those only likely to be useful. The Company are under no covenants in reference to the clerks.

"The arrangements of the deed poll are, in outline, as follows:--The profits of the fur trade (less the interest charge, which goes exclusively to the stockholders) are divided into one hundred parts; of those, sixty are appropriated to the stockholders, and forty to the wintering partners. These last are subdivided into eighty-five shares, of which two are held by each chief factor, and one by each chief trader.

"Clerks are paid by salary. Only a clerk can be promoted to a chief tradership (1-1/85 share), and only a trader to a chief factorship (2- 1/85 shares). The promotions are made by the Company on the nomination of the chief factors, though this rule has not always been adhered to. On retirement an officer holds his full interest for the first year, and half this interest for the succeeding six years. The deed poll authorizes the Company to put an officer on the retired list, without reasons assigned, after he has served four years, but they cannot deprive him of his retired interest except for proved misconduct; but neither of these regulations has ever been put in force. It is possible the wintering partners might raise a question whether, under the existing deed poll, the Company could make any great changes in their business, or embark in new undertakings, if likely to affect injuriously the incomes of the officers on the active list, or the interests of those on retirement.

"One mode of removing this obstacle would be to ascertain the value of a retired interest, and to give a money compensation to each officer on his entering into an agreement to consent to the abrogation of the deed poll. This would involve an outlay of money, but would also be productive of a considerable subsequent annual saving.

"The eighty-five shares belonging to the wintering partners are, at this date, held as follows:--

15 chief factors 30 shares
37 " traders 37 "
10 retired chief factors 13 "
10 " " traders 5 "
---
85 "
===

"As regards the shares held on retirement, some of the interests have nearly run out, and none of the parties have any voice in the business.

"The value of a 1-85th share has been, on the average of the last thirteen outfits, which have been wound up (1846-1858), about 408_l_. At that rate a chief factor's retired interest would amount to 3,264_l_., and a chief trader's to 1,632_l_., less discount, supposing payment to be made at once, instead of its being spread over nine or ten years. On the other hand, the invariable custom of the service has been to allow every officer one or more year's furlough on retiring, which has come to be considered almost a right; when more than one year has been granted, it has been by special favour. Adding one year's furlough, a factor's retired allowance would be 4,080_l_., and a trader's 2,040_l_. The discount being taken off, to render them equal to cash, would make a factor's allowance about 3,000_l_., and a trader's 1,500_l_.

"The cost of commutation, on the above scale, would be--

15 chief factors, at 3,000_l_ L45,000
37 " traders, at 1,500_l_ 55,500
18 shares held on retirement, about 14,000
--------
L114,500
========

"Without allowing a year's furlough, the above amount would be reduced about one-sixth.

"The outlay would only be called for in the case of such officers as are already retired, and of such as under a new agreement might not be re-engaged. The retired interest of the officers who might enter into a new engagement would be provided for in the revised deed poll.

"As a set-off for the outlay on commutations would be a large reduction in the pay of officers, to be hereafter noticed, and the Company would also receive actual value for their money; and on buying out the wintering partners they would become possessed of their 4/10th share of the profits of the trade.

"Under the present organization the pay of officers in the service is about as follows:--

Governor-in-Chief L 2,000
16 chief factors 12,000
35 chief traders 14,000
Clerks, about 10,000
-------
L38,000
=======

"The following would probably prove a more efficient staff:--

Governor-in-Chief L 2,000
Lieutenant-Governor 1,250
4 councillors, at 800_l_ 3,200
25 chief traders, at 300_l_ 7,500
100 clerks, at various salaries, about 10,000
-------
L23,950
=======

"The saving of 14,000_l_. per annum would soon reimburse the Company's outlay in buying up the present interests of the factors and traders.

"The system of making the pay of officers (of the upper grade) dependent on the success of the business, has worked well, and might be advantageously continued, in a modified form, to be hereafter noticed.

"The duties of the officers of the proposed reduced staff would be adapted to the existing distribution of the territory into departments and districts, which are as follows:--

"There are four main divisions--the Northern, Southern, Western, and Montreal Departments, roughly bounded as follows:--the 'Western' embraces all the country west of the Rocky Mountains; the 'Northern' is composed of the country east of the mountains, as far as Lake Winnipeg and Lac la Pluie, and from the American frontier to the Arctic Sea; the 'Southern' embraces the southern and eastern shores of Hudson's Bay; and the 'Montreal' extends from Lake Superior down the Gulf of St. Lawrence to Labrador. These departments are divided into districts, and in each district are several posts. The limits of districts are fixed by local peculiarities; but commonly embrace some large river, on which the various stations are planted--such, for example, as the McKenzie and the Saskatchewan. There are twenty-three districts on the east side of the mountains; to the west such subdivision of the business is now scarcely practicable, and is being abandoned. To proceed to the duties of the officers.

"The Governor-in-Chief would fulfil his present large functions, and be the medium of communication between the Company and their officers in the country.

"Under the present system the Governor is supposed to maintain a personal supervision of the whole service. This is practically impossible, the country being too large to enable him to travel over more than a limited section of it in each season. To relieve him of that heavy duty, and at the same time to maintain a real and close personal inspection, one of the four councillors might be stationed in each department, of which, in the absence of the Governor, he would be the chief officer, and held responsible for all local details, and the various posts in which he should periodically inspect and report upon. Once, or oftener, in each year, a meeting of the Governor and the four councillors should be held, at any time or place most convenient--say, Fort Garry, Montreal, or elsewhere. Aided by such a council, the Governor would be accurately informed as to details in every part of the country, and able to deal satisfactorily with all local questions.

"The duty of the Lieutenant-Governor would be to relieve the Governor- in-Chief of some share of his labours, and to act in his absence as President of Council.

"The chief traders would, as a general rule, be placed at the head of districts, and the clerks in charge of posts.

"The very efficient class of officers known as 'postmasters' would remain as at present. They are usually men who have risen from the ranks from merit; and, being good interpreters, and Indian traders, are commonly placed in charge of small posts. Their scale of pay is rather less than that of clerks, and they are rarely advanced to any higher rank; indeed, their ambition is satisfied when they are made postmasters.

"Reverting to the mode of paying officers, and making their incomes to some extent dependent on the success of the business, it might answer to give them an interest as stockholders. Instead of paying a chief trader 300_l_. per annum, he might have 250_l_., and a sum of 1,000_l_. of stock placed to his credit, of which he would receive the dividends only, the stock itself reverting to the Company when his connection with them terminated.

"A councillor might have 700_l_. pay and the dividends on 2,000_l_. stock. It would also be a great encouragement to the officers, and secure prolonged service, to give them an annual increase of stock--say, 200_l_. to be added for every year's service. Thus, if a man did not get as early promotion as he expected, he would still benefit by length of service.

"The principle of retired interests might be maintained, by allowing the officers to receive the dividends on the stock they held at retirement for--say, seven or ten years, before it reverted to the Company.

"To carry out these arrangements, it would be necessary to set aside in trust about 150,000_l_. stock. But the Company would lose nothing by it, as they would save in salaries what they gave in dividends.

"At the outset only 35,000_l_. of the stock would be called for, with an increase of 5,400_l_. per annum. Even allowing for a considerable retired list, it is doubtful if the whole 150,000_l_. would ever be appropriated; and of course the dividends on whatever portion was not appropriated would revert to the Company.

"In the revision of the deed poll, it would be essential to retain the clauses which secure to the Company the right to place officers on the retired list, and to dismiss them for misconduct.

"The mode of keeping the accounts, both in London and in the country, is one of much importance, requiring early consideration. At present there are no accounts, properly speaking, kept at the posts; and very great delay occurs in ascertaining the results of the business from London. It is essential to introduce some system of analysed post accounts, which should keep the Governor and his Council fully informed of the state of the business at every post, and by which they might judge of the management of the officers in charge. There is now no practical check on extravagance or dishonesty, except that arising from the upright principles of the officers in the service. The adoption of a system of local audit appears the best remedy for many of the existing evils.

"The Company's agent at New York (Mr. Wm. McNaughton), who is a valuable officer, has not at present sufficient employment to make his position worth occupying. As there is a valuable market in New York to which it would, at certain times, be advantageous to send buffalo robes, wolves' and some other furs, which could be done without interference with the market in England, it is important to render the New York agency more efficient.

"(Signed) A. G. DALLAS.
"(Signed) EDWARD W. WATKIN.

"_7th August_, 1863."

This memorandum was sent home to Governor Sir Edmund Head, with other papers.

On the serious questions of the future relations of the vast territory to Canada and the Mother Country; how it could best be settled; how it should be governed; what arrangement as to boundaries, and so on--I had many and serious conferences with public men. And in answer to many questions as to my own views, I drew up the following memorandum, as a _resume_ of the whole subject. It is now nearly twenty-four years old. I have read it again and again. I am not ashamed of it. I see nothing to retract; little to alter:--

"The present state of government in the Red River Settlement is attributable alike to the habitual attempt, encouraged, perhaps very naturally, in England and in Canada, to discredit the traditions, and question the title of the Hudson's Bay Company, and to the false economy which has stripped the Governor of a military force, with which, in the last resort, to support the decisions of the legal tribunals. No other organized Government of white men in the world, since William Penn, has endeavoured to rule any population, still less a promiscuous people composed of whites, half-breeds. Indians, and borderers, without a soldiery of some sort, and the inevitable result of the experiment has, in this case, been an unpunished case of prison- breaking, not sympathised in, it is true, by the majority of the settlers, but still tending to bring law and government into contempt, and greatly to discourage the governing body held responsible for keeping order in the territory.

"At the same time it must be conceded, that, while government by a merchant organization has eminently succeeded, up to an obvious point of time and circumstances, in the cases both of the East India and Hudson's Bay Companies, and is still applicable to the control and management of distant districts, it contains within itself the seeds of its own ultimate dissolution. In fact, the self-interest, however enlightened, which brings a dividend to stockholders, is opposed to the high impartiality and absence of individualism which should characterize a true Government. Individuals and corporations may trade and grow rich,--Government may not; they may embark in constant speculation, while it cannot; they must either insensibly measure their dealings by consequences, as affecting _gain_, or be suspected of doing so, while the interest of Government is not individual, but collective; its duty being, to give facility to the acquirer, security to the possessor, and justice and equal protection to all.

"Therefore, although the Government of Red River has had few faults and many excellences, and has been marked by a generous policy, in many instances it has been, and is, open to suspicion; because the commercial power which buys furs, trades with Indians and whites alike, and is, in fact, the great merchant, storekeeper, and forwarder of the country; appoints a Governor and assistants, places judges upon the bench, selects magistrates, and administers the law, even amongst its possible rivals and trade competitors. Such a state of things is unsound in principle, and ought only to be continued until a stronger and permanent Government can be organized; at the same time it can only be continued in safety, on the opening up of the country, by arming the Governor with a military force of reasonable amount.

"That the Hudson's Bay Company _can_ govern the country efficiently, on this obvious condition of all other Governments, is clear enough; and the peaceable relations between the Indians and the whites, and between the various tribes themselves, throughout the whole of this enormous territory, as well as the general state of health and occupation of the aborigines, prove how perfect and wise has been the management of the country. But government of Indians, who can be employed and traded with, and who at last become more or less dependent upon the Company's organization, as in this case, is one thing,-- government of a large and expanding colony of free white men is quite another.

"It is a question whether the government of the Indians can or ought to be changed, for a long period to come, so completely is the Indian life now associated with the operations of the Company. Of course, the settlement of a new or an extended colony, involves the extinguishment of Indian rights within the area proposed; and while the outside district not set apart, would still be roamed over by the Indians, and be valuable for the fur trade, its limits must, from time to time, be narrowed by further additions to the circle of civilization and free government. Thus, the Hudson's Bay Company, if dispossessed of the government of Red River, and the proposed new Colony, would still manage and govern where it traded, and would still preserve sobriety, order, and peace amongst the Indian tribes of its territory thus limited.

"It may happen that the Hudson's Bay Company may be compelled to govern everywhere, by the refusal of the Home or Canadian Government to encounter the responsibility and expense, which at first might be serious, and which, as regards cost, must be greater in their hands than in those of a Company using portions, of its business organization for purposes of administration. It is well to look these probabilities fairly in the face.

"Such a necessity may arise from the indisposition of certain schools of politicians at home to incur Colonial expense, and the responsibility of defending a new nation flanking the United States; it may happen, owing to the refusal of Lower Canada to widen out the borders, and thus increase the political power of Upper Canada; or it may be objected in Canada generally, that the finances of the country will not, at present, prudently authorize the maintenance of a new Canadian military force; and again, the Indian war in Minnesota, which may spread itself, may raise up fears of Indian wars in the new country to be settled.

"Should the Hudson's Bay Company be compelled, then, to continue to govern the whole territory, the first essential, as before said, is a military force. That force may consist partly of regular troops, partly of mounted irregulars or militia, and it need not, in their hands, be large. The population is suited to military pursuits, and the half- breeds mounted would make an excellent irregular cavalry. And the next essential would be a convention and treaty with the United States, as to boundary and transit through the United States and Hudson's Bay territory respectively, for purposes of travel, and commerce, and of postage, and the telegraph.

"Then the limits of colonization must be defined, and it must be maturely considered at the outset, and decided as to how far, and in what form, and how soon, the principle of self-government shall be introduced. It is assumed that a thriving and expanding colony of white men neither can nor ought to be taxed and governed without their own consent, obtained in some form or other; and that it would be both unwise and unjust to attempt a permanently autocratic government. This is a most serious question, and the Act 31st George III., under which Canada was governed until 1841, would appear to solve the difficulty. The general scheme of government of that Act might operate so soon as the new Colony had a population of (say) 50,000, and its provisions might be elaborated into a constitution, to be voted by the Colony in general assembly, so soon as the population reached (say) 300,000.

"The grand basis of all successful settlement--the land--presents fewer difficulties than might have been imagined, because the admirable model of the land system of the United States is before us, and no better can be devised to enable a country to grow up side by side with the Republic. Reliable surveys and plans, cheap and unclogged titles to the land in fee, a limited upset price of not exceeding $1-25/100 an acre; division of the land saleable into regular sections; the issue of land warrants and regulations as to location, which will prevent, as far as may be, monopolies of land in the hands of speculators--are all essential conditions, and whatever power governs, they must be equally observed.

"Again,--reserves of land, on a liberal scale, must be made to support schools and churches, and to assist roads and other public works conducted by the Government.

"But let it be hoped that this necessity of continued government by the Hudson's Bay Company may be avoided by the wise and far-sighted action of the Home Government and of Canada. No beneficial decision can be arrived at without the concurrence of both powers, for each have rights and ideas in some respects differing, and Canada especially has the deepest concern in the future organization of the North-west. In selecting a governing power for such a country, the strength and influence of that power are the grand essentials. Even with equal enlightenment, these essentials could not be overlooked. A weak Government would invite attack, deter investment, and check general confidence.

"Apart from the government by the Hudson's Bay Company, there appear to be these alternatives:--

"1. Government by Canada annexing to her territory a tract of country extending to the limits of British Columbia, under some reasonable arrangement with the Hudson's Bay Company, fairly protective of their rights, and which arrangement ought not to be difficult to draw out, when once the principle of the settlement of the country, and the land system, and extent of land reserves, are agreed upon.

"2. Government by the Crown, as a separate Crown Colony, totally independent of Canada.

"3. Government by the Crown as a separate Crown Colony, with federation, more or less extensive, with Canada, and the establishment of a customs union between the new and old communities.

"It must always be observed that a decision as to the fate of this territory must be immediately made. It cannot wait political necessities elsewhere, or be postponed to suit individual wishes. The fertile country between Lake Winnipeg and the Rocky Mountains will be now settled, since that is now a fixed policy, and its plan of government must be in advance of, and not lag behind, that settlement. The electric wire, the letter post, and the steamboat, which two years more will see at work, will totally change the face of things; and as Minnesota has now 250,000 inhabitants, where, in 1850 there was hardly a white man, so this vast district may, when once it can be communicated with from without, with reasonable facility, be flooded with emigrants, not forgetting a very probable rush of English, Irish, and Scotch farmers, and settlers from the United States, who here will find a refuge from conscription and civil war.

"The discoveries of gold, and the disturbed state of the border Indians in Minnesota, are both unanswerable reasons of necessity for the immediate establishment of a permanent form of Government, and fixed laws and arrangements for the settlement and development of the country.

"1. The government of the North-west, as an 'annexe' to Canada, possesses advantages of contiguity and similarity of ideas on the part of Canadians and the probable settlers. Canada, it will be said, has a good and responsible Government, and why not now extend its machinery to the 1,300 miles between the height of land and the Rocky Mountains?

"But will Canada accept the expense and responsibility, and, more especially, is it just now politically possible? Were Canada politically and practically one united country, the answer would be perhaps not difficult. But Canada, for the present, is really two countries, or two halves of one country, united under the same form of government, each half jealous of the mutual balance, and neither half disposed to aggrandize the power or exaggerate the size of the other.

"Would Lower Canada, then, submit to see Upper Canada become, at one bound, so immensely her superior? And would Upper Canadian statesmen, however personally anxious to absorb the North-west, risk the consequences of such a discussion as would arise? Would it be possible, in fact, to found a Government based upon the platform of accepting the responsibility of settling, defending, and governing the North-west? If not, then, however desirable, the next best alternative must be chosen.

"Assuming that at some period, near or distant, the British North American Provinces, between the Atlantic and the Pacific, unite in a federal or legislative union, and thus become too great and too strong for attack, that next best alternative would point to such arrangements, as respects the North-west, as would lead on to and promote this union, and not stand in its way. Thus, disputes about race and customs should, if possible, be avoided by anticipation, and the constitution and power of the new Colony should foreshadow its connection with the countries to the east and to the west. Future isolation should be forbidden, while present independence should be accorded.

"2. The above assumption tends to throw doubt upon the desirability of establishing a Crown Colony, separate in all respects from Canada, and able to shut out or let in Canadian produce and manufactures at its pleasure. This is a danger to be foreseen and avoided.

"The new Colony, placed between Canada and the Pacific, must be essentially British, in the sense of its forming one secure link in a chain of British nations, or, in the interests of Canada, it had better never be organized. The power and _prestige_ of the Crown is essential to this end, and a separate Colony, even, would have many advantages _per se_. It would also save Canada the cost of a new Government at a time when financial pressure and political majorities would be in the way. A Crown Colony could not be looked upon with jealousy in Canada, while government by the Hudson's Bay Company would be so regarded.

"3. But a Crown Colony with such a federation as would not alter the political balance of Upper and Lower Canada, and with a system of free trade with Canada, would appear to solve the whole difficulty; and if so, the scope of the federative principle would be matter to be settled between Canadian statesmen and the Colonial Office. The interchange between the North-west and Canada appears to be an absolute necessity in the interest of the latter. As Government, however, would require taxation, the new Colony must, in all probability, have its Custom- house; and it should be considered whether the Custom-house of Canada would not serve, as far as the eastern frontier is concerned, for the new Colony. If so, why should not duties, on a scale to be agreed upon under constitutional powers to agree, be levied on imported foreign goods, by Canada, and the duties be divided between the two powers in agreed proportions? Were this done, at least in the beginning, expense would be saved to the new Colony, a revenue would be easily collected for it, through existing machinery, and Canada would obtain the revenue and trade. Of course the scale of duties must be moderate, so as not to excite dissatisfaction, by establishing dear prices, and it would be the interest of Canada to make them so, for the more she stimulated the growth of the new customer, the better for the trade. On the other hand, the new Colony would be insured a market and an outlet for its own productions, and would be content, therefore, to accept a reasonably high scale of duties, levied for revenue purposes only, on its articles of foreign consumption."

I discussed the question involved at length with the Honorable George Brown and with his brother Gordon, at Toronto. I felt the importance of having the views, and, if possible, the concurrence of the leader of the "Grit" party. He led me to think that he concurred with me; and I sent him a copy of this document. He kept it some time, and then re- directed it to me without remark. Afterwards, I received a verbal message to the effect that "It would not do at all." I became convinced that nothing "would do at all" with a small band of men--who, at that time, had objects of their own--in Upper Canada. Some of them--few in number, I am happy to know, and impecunious--appeared to consider the old corporation of the Hudson's Bay in the light of Blucher, when driving through the streets of London, "Mein Gott! what a plunder." Some of them tried their best to confiscate the property; and once or twice, by weakness and vacillation in London, they almost gained the day.

Governor Dallas and I also carefully considered the telegraph question; the route, the cost, and the best agencies to complete its very early construction.

The two agreements, which, as matter of history, I here copy, were intended to bring about the complete connection of the Hudson's Bay territories direct with England and with the United States.

"Memorandum of Agreement between Mr. Edward W. Watkin and Mr. O. S. Wood (subject to the approval of the Montreal Telegraph Company and the United States Telegraph Companies, affected by this Agreement, and also by the Governor and Committee of the Hudson's Bay Company) for completing telegraphic communication between the Atlantic and Pacific.

"1. The Montreal Telegraph Company to construct a new line of telegraph between Father Point and Halifax, _via_ Dalhousie and Mirimichi, to be completed on or before the 1st October, 1865; and also a line from the telegraph at Arnprior to the Hudson's Bay post at the Sault St. Marie, to be completed on or before the 1st October, 1865, with all necessary instruments, stations, staff, and appliances for a first- class through and local telegraph line.

"2. The Hudson's Bay Company (directly or through parties to be appointed by them, as they may elect) to construct a telegraph line from Fort Langley to Jasper House, thence to Fort Garry, and on to the United States boundary, near Pembina, to be completed on or before the 15th October, 1865; and also a telegraph from Fort Garry to the Hudson's Bay post at Fort William, at the head of Lake Superior; and also to make arrangements with other parties to erect a telegraph from Fort William to the Sault St. Marie, with all necessary instruments, stations, staff, and appliances for a first-class through and local telegraph line: provided always that the construction of the telegraph between Fort Garry and Sault St. Marie is dependent upon arrangements with the Canadian Government, and that it is understood that, failing or pending these arrangements, the route to be adopted shall be _via_ Detroit, St. Paul, and Pembina to Fort Garry.

"3. The telegraph from Fort Langley to Halifax to be worked for all through business as one through system, and the through rates to be divided _pro rata_ the mileage, except that for the lines west of the Sault St. Marie (to be erected by the Hudson's Bay Company as above) an additional mileage proportion of thirty-three per cent. over the actual distance shall be allowed, until those lines pay ten per cent per annum on the outlay, after paying all operating and other expenses, including repairs and renewals, and this allowance shall be a condition with the United States lines between Canada and the Hudson's Bay boundary.

"4. Arrangements to be made by the Montreal Telegraph Company, with parties in the United States, for the construction of a telegraph from St. Paul to the connecting point near Pembina.

"5. The Sault St. Marie and Sarnia to be respectively the boundaries of the Montreal Telegraph Company and of the Hudson's Bay Company and their representatives, for the purposes of this Agreement.

"6. This Agreement to be for twenty-five years.

"(Signed) EDWD. W. WATKIN.
"(Signed) O. S. WOOD.

"Montreal, _August_ 10_th_, 1863."

"Agreement between Mr. Edward W. Watkin and Mr. O. S. Wood, for the construction of the telegraph between Fort Garry and Jasper House, and, if hereafter agreed, between Fort Langley and Jasper House, and Fort Garry and the United States boundary near Pembina (subject to the approval of the Governor and Committee of the Hudson's Bay Company in England).

"1. Mr. Wood to construct a telegraph, and all needful works and stations, from Fort Garry to Jasper House, at the cost of the Hudson's Bay Company, and to put the same in full operating order, and also instruct, and where necessary provide, the staff for the operation and repair of the line.

"2. Mr. Wood to proceed with Governor Dallas to St. Paul, with as little delay as possible, and on to Fort Garry, if necessary; and to make all arrangements required for transporting the telegraph wire, insulators, fittings, instruments, and other materials to Fort Garry; for distributing all materials from Fort Garry; for cutting, preparing, and distributing the poles; and generally for commencing and for completing the work (including a system of posts at proper distances apart) in an efficient manner, and at the earliest period.

"3. Mr. Wood to receive the cordial aid and cooperation of the staff of the Hudson's Bay Company in carrying out this work, under the orders, instructions, and control of Governor Dallas.

"4. Mr. Wood's travelling and other necessary expenses, and the salaries and other necessary expenses of his assistants, to be paid, and, in consideration of his services, he is to receive the sum of ten thousand (10,000) dollars, as a fixed payment; one-third to be paid on the storage of the materials as above at Fort Garry, one-third upon the completion of two hundred (200) miles of the telegraph, and one-third on the completion and operation of the whole line between Fort Garry and Jasper House; and further, should the whole be completed prior to the 15th October, 1864, Mr. Wood is to receive a bonus of two thousand (2,000) dollars, so soon as the line has been one month in operation; and should the whole cost of the work not exceed thirty thousand (30,000) pounds sterling, Mr. Wood to receive a further bonus of fifteen per cent. on all savings upon that sum, payable when the line has been in operation twelve (12) months.

"5. Should the telegraph lines between Fort Langley and Jasper House, and Fort Garry and the United States boundary near Pembina be ordered to be constructed, and the Hudson's Bay Company desire it, Mr. Wood to undertake the construction, on proportionate terms.

"(Signed) EDWD. W. WATKIN.
"(Signed) O. S. WOOD.

"Montreal, _August_ 10_th_, 1863."

"MEMORANDUM _by Mr. Wood as to supply of Materials_.

"MONTREAL,
"_August_ 10_th_, 1863.

"DEAR SIR,

"We shall want 40,000 insulators--they will cost from $6 to $8 per 100; 35,000 red cedar top pins will cost $3 per 100; 40 sets of telegraph instruments at $60 per set; main and local batteries, $500.

"As some of these articles ought immediately to be prepared, since their preparation takes a little time, I will at once, in accordance with our understanding of this morning, order a small quantity, and the remainder when I receive your confirmation of the whole arrangement. In the meantime I shall go to New York personally, to arrange the exact form and description of insulator, it being very desirable to have this article of the most perfect description.

"Yours faithfully,
"(Signed) O. S. WOOD.
"EDWD. W. WATKIN, Esq."

My official letter to Sir Edmund Head from Montreal, 24th July, 1863, summarized all my proceedings up to its date.

"MONTREAL,
"_July_ 24_th_, 1863.

"SIR,

"I have the honour to acknowledge your official letter of the 6th July, requesting me to proceed to the Red River Settlement, for the purpose of reporting upon the state and condition of that Settlement, of the condition of the adjoining territory, the prospects of settlement therein, and the possibility of commencing operations for an electric telegraph line across the southern district of Rupert's Land; and associating with me in this inquiry Governor Dallas, of the Red River Settlement, with whom you request me to communicate at once.

"I observe that the Committee consider the lateness of the season will preclude me from doing more than procure such information as will enable them to commence further inquiries at the opening of the next season.

"In consequence of verbal communications received before leaving England, and suggestions unofficially received from members of the new Committee, I have deemed it my duty, though unofficially, to communicate with the Canadian Government, and with those gentlemen likely to form the Government of Canada, should any change of ministry take place on the opening of Parliament, so as, as far as possible (unauthorized as I was), to prevent antagonism to the operations of the new organization pending official communication and explanations from the Governor and Committee.

"No one can be better aware of the state and views of parties in Canada than yourself. The leader of the present Government expresses a strong opinion in favour of the settlement of a separate Crown Colony in the Hudson's Bay district, and this also is the view taken by Mr. Cartier and Mr. J. A. Macdonald, and is strongly concurred in by Mr. Cazeau, the Vicar-General, who, as you are aware, leads the Catholic party in Lower Canada. On the other hand, the feeling of Mr. Geo. Brown and the 'Grits,' as heretofore expressed, has been in favour of annexing the Hudson's Bay territory to Canada, thereby securing that preponderance which would practically settle the question of the future government of the whole country.