The Pacific Scandal
The success of political parties has always required financial contributions from supporters. In the 1850s and 1860s political leaders themselves were often short of cash. Business and parties became intertwined with the state. The Montreal businessman Sir Hugh ALLAN was not only a supporter of the Conservative Party but also Sir John A. MACDONALD’s chief creditor:
“Although he was astute in obtaining what he wanted from governments, Allan’s political influence was largely behind the scenes.... A lifelong Conservative, he directed some $400,000 to the party’s federal campaign in 1872 while pursuing the [Canadian] Pacific [Railway] contract; his lawyer noted that Conservative policies were so favourable to Allan’s interests that a contribution three times as large would have been justified. Campaign contributions were only one means of manipulating politicians....
“Controlling Canada’s second largest bank increased his political power. The Merchants’ Bank made loans to the provinces of Manitoba and Quebec, and to the city of Winnipeg. Favoured politicians were named by head office as solicitors for local branches and ex-finance minister John Rose became the bank’s London solicitor. Future prime minister J. J. C. Abbott had a $1,000 annual retainer as the bank’s Montreal lawyer in 1866. Sir Charles Tupper and Sir John A. Macdonald became special solicitors for the Winnipeg branch in 1883.”
In the 1872 election Macdonald’s Conservatives won a narrow majority over the Liberals. The next year, in the House of Commons, Liberal Lucius Seth HUNTINGTON alleged Conservative wrongdoing in the awarding of a huge contract:
“In the House of Commons [Huntington] charged that the government of Sir John A. Macdonald* had granted Sir Hugh Allan’s American-financed company the charter to build the Canadian transcontinental railway in return for contributions toward the Conservatives’ 1872 general election campaign. Macdonald suspected that Huntington’s old partner in the Eastern townships railway, the Conservative Asa Foster, had played a key role in publicizing certain incriminating documents.”
What set the allegations apart from the typical quid pro quo between business and government of the day was the scale, as explained in Macdonald’s biography:
“Macdonald had made only one promise to Allan: the presidency of an amalgamated Canadian Pacific Railway Company, whenever it was formed. But there were commitments of which, as yet, Macdonald knew nothing, notably Cartier’s to Allan in the summer of 1872, that Allan’s group would be guaranteed the charter and a majority of stock in return for additional election funding, totalling more than $350,000. When Allan finally told Macdonald the amount, it seemed so fantastic that he did not believe Allan, and that fall he wrote to Cartier to confirm it. Cartier did, more or less….”
The blow had been severe and the controversy, which became known as the Pacific Scandal, led to the fall of the Conservatives in November 1873. The new Liberal prime minister, Alexander MACKENZIE, saw the scandal as a natural by-product of Conservative politics:
“Mackenzie and the Liberals thus had power dumped into their laps. The scandal precipitated and hardened Liberal suspicions about large concentrations of wealth and the influence of such wealth on government. A Liberal party with ideological leanings towards free trade and individual enterprise naturally pointed out that the scandal involved a rejection of the norms of competition and an assertion of monopoly power. The legislative expression of Liberal hostility towards monopoly and unfair competition was persistent after 1874.”
For more information on Macdonald and the Pacific Scandal, please see Consolidating Confederation: Cartier and the Canadian Economy in our collection of biographies about Sir George-Étienne CARTIER and the biographies in the list below.
