Thin Air and Lots of Money
by Ken Montague
(published in the Wellington Business Digest, Vol. 1, Issue 4,
A Short History of Guelph-Wellington Business, Part 1
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
Part 3 The
Price of Independence