86. A letter from Sir Mackenzie Bowell to the Governor-General of Canada, submitting an account of the proceedings, is reproduced with its enclosure in Appendix E. The total debt of Newfoundland, both funded and floating, was computed at the time at $15,829,834, as compared with Canada's net public Federal debt of $250,000,000.* The population of Canada was 5,000,000; her per capita debt was therefore $50. Applying this basis to Newfoundland, whose population was 207,000, the corresponding indebtedness of the Colony would have been $10,350,000. The terms offered by the Canadian representatives allowed for the assumption by Canada of this amount of Newfoundland's debt, leaving a balance of $5,479,834, the interest on which the Island would have had to provide from its own resources. The terms also provided that Canada would assume various public services, including the revenue-producing services, in the Island; the remainder, including the railway, would be maintained and operated by the Newfoundland Government with the assistance of a subsidy from Canada. It was shown that the Newfoundland Delegates that the subsidy offered was such that the Newfoundland Government, deprived as it would be of its ordinary sources of revenue, would be compelled to raise no less than $700,000 per annum by additional (direct) taxation if the Island was to pay its way. This they maintained was an impossibility; they therefore argued, as the only equitable basis, that the Canadian Government should assume the whole of the public debt and should undertake to operate the railway and telegraph services. The Canadian Delegates, for their part, felt unable to add to their original offer in regard to the public debt, but they indicated that if the Imperial Government would consent to assume the balance of the debt ($5,479,834) they would be prepared to consider the raising of the subsidy. Negotiations were then entered into with the Imperial Government, but these proved abortive and the matter dropped.†

  87. It is a matter for surprise that, at this tragic period in the Island's history, when she was to all intents and purposes "down and out," these negotiations should have been permitted to end in a manner which suggested that her neighbour was indifferent to her fate. Sir Charles Tupper, it is true, raised a voice of protest, but he stood almost alone, though the failure of the Conference came later to be generally regretted in Canada. In the meantime the opportunity of reaching a settlement which would have been to the interests of all parties, had been let slip by lack of statesmanship.

  88. Newfoundland was now in a position of serious difficulty. The half-yearly interest on the public debt was payable on the 1st July, and it was commonly supposed that the credit of the Island had been so injured by the failure of the banks that it would be impossible to borrow money on any terms whatever. When, on the 11th May, the final decision of the Canadian Government was received, Mr. Bond, the Colonial Secretary, offered, as a forlorn hope, to undertake a personal mission to Montreal and New York with a view to enlisting the interest of financial houses in the raising of a loan of $2,500,000. Scarcely had Mr. Bond arrived in Montreal when there was a run on the Newfoundland Government Savings Bank. The Bank of Montreal and the Bank of Nova Scotia, now established in the Colony, declined assistance, and a further disaster seemed inevitable when Mr. Bond succeeded, by pledging his own personal credit to the extent of $100,000 in addition to Newfoundland Government securities, in obtaining a temporary loan of $150,000 from a firm of brokers in Montreal. Finding, however, that it was impossible to raise the larger loan in Canada, Mr. Bond proceeded to New York where he also failed. Finally, he went to England where he arrived on the 15th June. Here his efforts were successful; a long-term loan of $2,775,000 at 4 per cent. was placed on the London market and was over-subscribed. By this time the Savings Bank was again in difficulties, but Mr. Bond was able, by negotiating in London a temporary loan of $850,000 at 3½ per cent., to make its position secure. Thanks to the courage and determination of the Colonial Secretary, Mr. Bond, and to the response accorded to his appeals in London, Newfoundland was thus saved from the imminent peril of financial collapse.

  89. One effect of the bank crisis was to expose the weakness of the credit system on which the fishing industry, the main resource of the country, was conducted. Reference was made to this system in the telegram to "The Times" of 14th December, 1894, quoted above. Most thoughtful observers agreed in regarding the gradual suppression of the credit or barter system, and the reorganisation of the fishing industry on a cash basis, as essential to the future welfare of the Colony. Thus Prowse:--

  "One change was inevitable: the dishonest credit system on which the business of the Colony was transacted had to die out; demoralising to the people and disastrous to the merchant, there could be no genuine prosperity whilst this old truck system existed; recent events have effectually banished it, we may hope, for ever. Terrible misery will be caused before the change can be effectually carried out, but in the end it will be beneficial."‡

And again:

  "All students of history must see that the decease of Mr. Hall was only the proverbial last straw that breaks the camel's back. The true origin and cause of this terrific financial wreck lay much deeper and further back. It was unsound banking and unsound trade that injured Newfoundland on this fatal `Black Monday'. We know now that for several years past the Newfoundland fish trade has been conducted, with some exceptions, wholly on credit. A business whose sole basis rests on such a frail foundation is liable to sudden overthrow."§

Mr. Neilsen, Superintendent of Fisheries, in a striking passage in his Report for the year 1894, similarly declares:--

  "This (i.e., the credit and supplying) system has affected not alone the moral character of a good many of our people, but also the cure of a great deal of our fish and transactions of business: has been the means of excluding such improvements in the products of our fisheries and the trade as should have taken place long ago, in order to enable us to compete fully with other nations producing the same article and not be outdone by them in the foreign markets .... The system has become a take what you can get and get what you can system, with no sound principle at the bottom for the welfare of that industry in the future on the part of those who catch, cure or handle our fish."º

Writing at a later date Sir Wilfred Grenfell comments on--

  "The ubiquitous barter system which always left the poor man the worst end of the bargain, [and] is as subtle a danger as can face a community--subtle because it impoverishes and enslaves the victims, and then makes them love their chains."±

The evils arising from the credit system will be discussed in a later chapter. It remains to record here that the hopes expressed by contemporary writers have not been realised; the system with all its failings is still the central feature of the Island's commercial structure.

  * The actual debt of the Island was $11,247,534. The Government of Newfoundland was under obligation to pay in respect of a portion of the railway an annual subsidy of $45,000 for 22 years, which capitalised at 4% amounted to $650,300. The amount required to complete the railway under contract (see paragraph 96) was $3,932,000. The debt and obligations thus amounted to $15,829,334. Had confederation taken place on this basis, the railway on completion would presumably have become the property of the Federal Government. Journal of House of Assembly, Newfoundland, 1894-95, App. pp. 369-425.
  † Journal of House of Assembly, Newfoundland, 1894-95, p. 126.
  ‡ Prowse, op. cit., pp. 536-7.
  § Ibid., p. 539.
  º Annual Report of the Newfoundland Department of Fisheries for the year 1894, reprinted 1930, pp. 46-47.
  ± Sir Wilfred Grenfell, "The Story of a Labrador Doctor", 10th edition, London, 1932, p. 96.