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Thin Air and Lots of Money
A Short History of Guelph-Wellington Business, Part 1

by Ken Montague

(published in the Wellington Business Digest, Vol. 1, Issue 4, February 1985)

In 1827, John Galt, Manager of the Canada Company, created Guelph out of thin air.  He wanted to increase the value of the Company land.  Since land near towns and their services was more valuable than land in the back of beyond, Galt invented Guelph for the Company's land to be near.  He was fired for his trouble, but in the end, the Company did things Galt's way and made a fortune.

Those people who came to Guelph faced a unique situation.  The town was here (though only barely) but the farms which were to form its economic base had yet to be settled and cleared.  The problems created by Guelph's artificial existence, and the solutions found for them, determined the future economic possibilities for the area.

Guelph's initial survival and eventual prosperity depended on John Galt and the Company doing everything right.  Galt meant to start the town off with a surveyed townsite, roads to wherever necessary, and a nucleus of Company-owned or supported facilities to meet the first settlers' needs.  All economic activity at the time was generated by Galt's massive capital spending to open up this poor-man's Brasilia.  If something basic, like a grist mill, would not yet be profitable enough to be built by local business, then the Company had to build or underwrite one until the countryside began to fill up.  But unfortunately the Company didn't always do things right.

In 1829, the Company balked at the huge sums John Galt was spending in the middle of nowhere.  So they threw him out and cut off the supply of Company capital.  Guelph promptly collapsed.  Even businesses which could manage by dealing with those settlers already in the area had to watch in horror as their trade went elsewhere.  The cash stopped coming before such things as a grist mill could be built.  If a farmer needed something Guelph didn't have, he had to take his need, along with trade that could have been handled in Guelph, to places like Galt or Dundas.  Even today, Guelph is nervous about remotely controlled industry big enough to do some damage in the town, and the leakage of trade to nearby centres is still a problem.

The Canada Company soon realized its mistake when the land values John Galt had raised looked like sliding back.  They were forced to return to a policy of capital spending and active promotion.  As a result, they were able to leave with pockets full and stocks that had gone blue chip.  However, the pause in headlong development had changed everything for Guelph.  The time had gone within which Guelph could have been created as a centre which was already stronger than the towns around it, and it had to be that strong if it was to take control of its vast proposed trading area.  Guelph was about to lose the very trading area it had been set up to create, and it didn't have the money to stop it..

The first weak point to be exploited was the sorry state of the Guelph-Dundas road.  It was a boggy mess, impassable so much of the time that a lot of Guelph traffic had to be diverted through Galt.  The Galt-Dundas road was in good shape.  During the 1830's, Hamilton, Galt, and businesses located along the road between them were able to use private and provincial money to grade and gravel their road.  By 1840, the improved road was carried on to Berlin (Kitchener) and Waterloo.  Naturally settlers to the south and west of Guelph took their trade to centres on the good road.  Lower transportation costs meant cheaper goods and better prices for farm products.

Worse news for Guelph came in the 1840's. A threat from the east took the form of proposed roads from Bronte to Erin and from Oakville to Fergus.  If Guelph wanted even a share of the trade from its own hinterland, it had to have better transportation.  But who would finance the upgrading of the Guelph-Dundas road?  Shares in a company to rebuild and run the road did sell in Hamilton.  Businessmen there didn't want trade from beyond Guelph to flow away towards Toronto.  But Guelph investors didn't see how such a venture could be profitable given the costs of rebuilding such a ruinous road.  They were right.  Also, there just wasn't enough activity at points along the road to justify any claims to scarce Provincial money.  A private company, using only its own money, would have to charge tolls so high as to remove the advantage that Guelph trade was trying to regain for itself.

In the end, the money came from a source which farming areas usually avoided: public debt.  The Districts of Wellington and Gore bought the shares of the rapidly foundering road company and paid for them by selling bonds.  Investors in Guelph who had feared that the road would lose money could now invest safely.  The bonds were easily sold to the same people who had refused the shares.  The road was finished in 1851, and its administration was taken over by the counties through which it passed.  It lost money from the start

Once the coming of the improved road was assured, Guelph began to boom.  Subdivisions were set up there and in Fergus and Elora.  Land speculators derived the greatest chunk of benefits from the new situation, and a financial elite was created.  Business dependent on shipping to and from Dundas would now survive. Everybody else had to be content with the hope that their share of the general increase in prosperity would offset their share in paying back the public debt and propping up the unprofitable road.  At least the increase in population would spread the load around.

The new road was no bonanza, except for speculators.  It did, however, keep Guelph on the economic map and increase its population by enough to keep its business functions from being taken over elsewhere.  The boom moved on with the road, which could not be ended at Guelph because the competing roads were moving into the northern areas beyond.  Eventually, it had to be taken right to Owen Sound.

A pattern had been set up which was often to be repeated.  To keep its now modest share of any general prosperity, the Guelph area had to come up with innovative ways to meet the well-financed challenges from outside.  Whenever it did so, a modest "catch-up" expansion followed, though never one big enough to allow a return challenge to its neighbours.  When the resulting booms receded, they left behind a higher population, richer speculators, and a few more established businesses.

This pattern was a slow and painful way of surviving and growing.  Still, Guelph did survive, even if it had lost control of the trading area which John Galt had supposed would make it rich.  It had become a smallish centre with a small market area, an only partial involvement with its hinterland, a passion for preserving its autonomy, and a well-founded fear of its neighbours.  Sound familiar yet?

Next time, we'll see how Guelph continued to keep itself in the area economy while trying frantically to develop an economic base of its very own.  The lesson that public ownership could be useful was not lost on the local worthies.  


Part 2 Staying Alive
Part 3 The Price of Independence


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