1. Problems

There were two fundamental problems contributing to the predicament in which the region's passenger steamboat proprietors found themselves. The major long term factor, the one most frequently and vehemently accused of impinging on their profits, was railroad competition. The completion of the Grand Trunk Railway between Montreal and Brockville late in 1855 had sent shock waves through the marine trades. Although the lake mail line retained the local traffic of Ontario's north shore one last season, competition for the through traffic quickly intensified. Of the three lines struggling desperately for this trade, one would fail even before the last spike of the Brockville-Toronto section of the Grand Trunk was driven.(1)

Soon thereafter the railway began diverting from its water- borne adversaries some of their traditional sources of revenue. First to be forfeited was one of the original reasons for the lake line, the mail contract.(2) Closely following the lead of the postal authorities were those passengers, chiefly businessmen, for whom speed was a major consideration.

While the Grand Trunk was genuinely competitive on these terms, the region's shipowners became incensed as the Macdonald- Cartier government continued to sustain their arch-rival with a generous range of concessions, subsidies and financial sleights of hand. The entire sum spent up to that time in capital improvements to the St. Lawrence canals was only a small fraction of the provincial resources committed to the Grand Trunk.(3) Irrespective of the Grand Trunk's supposed technological advances over traditional modes of transportation, one fact was crystal clear to its competitors: the railway company was playing with a loaded pair of dice. No matter how poorly the railway fared in the marketplace both the current government and two of London's major banking houses had a vested interest in keeping the line out of receivership.(4) But while the Grand Trunk would not be allowed to go bankrupt the region's shipowners were constantly threatened with just that fate.

With their vulnerability to the general business cycle accentuated by competition with the Grand Trunk, many of those involved in the lake and river trades were devastated by the 'Crash of 1857'. Both immigration and the St. Lawrence canal passenger traffic continued to decline from peaks in 1854.(5) Moreover, the Canadian banks were tightening their loan renewal policies and cutting back on discounts in response to major failures in the United States and England.(6) Such a reaction only served to accentuate the difficulties of those who had expanded in previous years and had not yet met all their obligations.

The distress of the marine trades was thus the result of the juncture of two forces, a major increase in the supply of transportation services, accompanied by a sharp decrease in demand. While in the long term this situation could be eased by growth in the economy, creditors were demanding an immediate solution. Given the inability of Canadians to affect the international level of demand to which the local economy responded, a short run solution could only be found in the supply side. There, however, the government was interfering with the operation of the marketplace. Had they not annually rescued the Grand Trunk from failure, the railway would have temporarily dropped out of the market until demand rose and a new company could take over its assets. But with political futures staked on the survival of the railroad, it was entirely left to the marine trades to adjust the level of transportation services supplied. In this context it would not be a simple matter for any steamboat proprietor to emerge unscathed.

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Chapter 5 appeared in FreshWater.