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Steamboat pirates
Nov 18, 2011

 

During Steamboats on the Red: A Story of Buccaneers and Robber Barons, which aired on November 8 (to be rebroadcast on Prairie Public TV, Channel 3, on Monday, November 21, at 9:30 p.m.), I referred to the trio of Donald Smith. Norman Kittson and J.J. Hill as colluding to keep the highly-profitable steamboat traffic on the Red River firmly in their money-clutching hands.
The tactics they resorted to resulted in my referring to them as being akin to “pirates.” The Red River Transportation Company (RRTC), which they jointly owned, was so intent upon retaining its monopoly that the ship International was used to ram the Manitoba, a steamboat operated by a newly-established rival company, the Merchant’s International Steamboat Line (MISL), comprised of Winnipeg and St. Paul businessmen. The latter were focused on busting the monopoly used by Smith, Kittson and Hill to inflate freight costs on the Red River.
Using a system of scare tactics, as well as favours from and bribes to U.S. border officials, the trio literally sank the new line — physically and financially — to maintain their monopoly. Not only did the trio bring down the rival steamboat line, but they added insult to injury by taking over the only two ships that the company built.
While Smith was the chief officer and largest shareholder in the Hudson’s Bay Company (HBC), Kittson and Hill  were St.Paul-based businessmen originally from Canada. Ironically, Kittson’s earlier career was as an agent and partner in the American Fur Company which was in direct competition with the HBC. In fact, Kittson played a significant role in bringing to an end the HBC’s fur-trade monopoly in Western Canada.
Hill started a rival steamboat company to the HBC, which held the original monopoly on the Red River, in 1871. He uncovered an obscure United States law which stated all goods crossing the international border from American territories into Canadian ports had to be bonded in the U.S. He informed customs officials at Pembina about the law and had the HBC’s International seized. As a result, his bonded vessel, the Selkirk, usurped the monopoly. In turn, Smith reached an agreement to have the HBC steamboat bonded by assigning it to Kittson, who had become the HBC agent in St. Paul. Hill and Smith then engaged in a battle to take over the Red River passenger and freight steamboat business. 
The rivals first met by  chance in 1870 on the Manitoba prairie during a severe blizzard. Hill was on his way to investigate first-hand the situation in Fort Garry, where Louis Riel and the Métis had taken over control of the settlement. Meanwhile, Smith was traveling to Ottawa to report on his negotiations with Riel. Among the accumulating snowdrifts, the two shared a cold meal and came to respect each other.
“I liked him then and I have never had reason to change my opinion,” said Smith years later.
In 1871, Smith and Hill came to a secret agreement. Smith became a behind-the-scenes partner with Hill and Kittson in the RRTC, which became popularly known as the Kittson line. The line gave the HBC one-third discount on all river freight much to the chagrin of commercial competitors from Winnipeg and St. Paul. With their 1875 conquest of the MISL, the trio shared high-paying dividends.
But the trio’s most noted contribution to Canadian history came when they entered the railway business. Through a series of imaginative and somewhat shady dealings, Hill, Kittson and Smith joined with George Stephen, Smith’s cousin and president of the Bank of Montréal, to purchase the St. Paul and Pacific Railway, which was teetering on the brink of bankruptcy. They pushed the tracks to the Manitoba border and negotiated a 10-year lease of the Canadian Pacific Railway’s Pembina branch. They renamed their company,  the St. Paul, Minneapolis and Manitoba Railway, and had a rail line monopoly from St. Paul to Winnipeg. Of course, the railway dealt a death-blow to their shipping business on the Red, but they were chasing bigger dollars, and the railway made them millionaires.
The trio changed “tracks” and set their eyes on one of the biggest prizes of all — the Canadian Pacific Railway. Stephen took up the syndicate’s cause with Canadian Prime Minister Sir John A. Macdonald — Smith had fallen into disfavour with the prime minister due to his earlier role in bringing down the government during the Pacific Scandal — which was enhanced by the addition of Duncan McIntyre of Montréal, John S. Kennedy of New York, Richard B. Angus of St. Paul, as well as a smattering of German and London financiers.
The syndicate promised to build the line with money raised by selling the 30-million acres of land they would be ceded by the government across Western Canada, which would be proceeded by a government-backed bond secured by the acreage. In turn, they expected the government to give them a 20-year monopoly to prevent the construction of any rival line south of the CPR tracks within 15 miles of the U.S.-Canada border. The contract with the government was signed on October 21, 1880.
Immediately, some newspapers railed against the American influence in the “St. Paul Syndicate;” that is the owners of the St. Paul and Manitoba Railway, as well as the “Monopoly Clause.” Kittson and Hill were particularly singled out for criticism as American businessmen.
When the  CPR bill was introduced, it triggered the longest debate to then occur in the House of Commons, but Macdonald’s powers of persuasion came to the forefront and the bill passed in February 1881. It had taken Macdonald a full 10 years to arrive at this point and it would be another four years for his “National Dream” to be built.
The trio of pirates from the West, through skillful manoeuvres, had transformed themselves from steamboat operators to men about to transverse the Canadian Shield, the prairies and the Rockies by rail. Each of them would become fabulously wealthy, but the richest of them all would be Hill, who left the syndicate to build a railroad in the U.S. to the Pacific Coast. In the process, Hill joined the ranks of American “robber barons” such as John Rockefeller, Jay Gould and Andrew Carnegie.
The trio, who started out as rivals and then unlikely partners with a few steamboats on the Red, conquered a continent. From such humble beginnings success stories are born, and that initial partnership is a part of the critically-acclaimed PPTV program, Steamboats on the Red.