Should we trust railways the way we trust banks and slaughter plants?

I can’t imagine there are any farmers out there who don’t think Monday’s announcement about railway reporting requirements was a good thing.

(Railways are being required to cough-up far more information about their weekly performance in providing railcars to grain elevators compared to the number that the grain companies requested, and how well they do in getting them to port and back.)

The railways are one of the few middlemen that farmers deal with that virtually none like or appreciate. Each grain company has a group of farmers that loves them, plus lots that don’t. Ditto farm machinery manufacturers and dealers, banks and credit unions, even farm newspapers like this one. All of those middlemen and service providers have a loyal group of farmers that appreciate them, and another group that looks at them with a jaded eye. That’s all very normal.

But the railways never seem to have any friends at all. I don’t think I’ve ever met a farmer who likes or has anything good to say about CN or CP. They are uniquely unloved, in my experience.

And that’s OK.

Really, why should any farmer like or appreciate quasi-monopolies that they are forced to use but which seem to do little to prove to them that they are doing an adequate job or taking their concerns seriously?

No one should trust monopolies, especially of the private interest nature. (I don’t trust government, industrial or professional monopolies either, but at least there’s an inherent internal public interest oversight with those.) They are a combination of commitment to their shareholders – which is right and proper for companies in a truly competitive industry, which railroading arguably isn’t – and vast economic power. That’s dangerous, which is why we regulate them differently. They aren’t just trusted to do the right thing. That’s why there’s a federally-appointed grain transportation monitor – Quorum Corporation – to oversee the overall performance of the system.

Monday’s announcement is all part of that difference, requiring of the railways much more data to show how well they are or are not serving farmers and grain companies. They will absolutely hate providing this information, but if they won’t do it willingly, the government will make them an offer they can’t refuse. That’s what federal agriculture minister Gerry Ritz said Monday.

Like I said at the top, I can’t imagine any farmer not thinking it’s a good idea to force the railways to provide far more proof and evidence to show that they are doing an adequate job fulfilling the monopolistic role they are lucky to have. Why, given that extraordinary power they are allowed to have, shouldn’t they be subject to extraordinary reporting requirements?

But I wonder if monitoring shouldn’t go far beyond that, in the way that governments monitor and regulate banks and slaughter plants. Every substantial slaughter plant has inspectors on the floor and able to walk into any area of production to see that public food safety standards are being met. Banks are always subject to surprise audits and scrutiny. I remember being surprised during the 2008 financial meltdown to learn that U.S. government financial regulators actually work inside some of the biggest banks permanently, constantly trying to monitor what they’re doing.

Why shouldn’t our railways be treated this way, not just subject to special regulations and reporting requirements, but also subject to the regular oversight of inspectors and auditors? It’s great that they’re going to be required to report more about what they’re doing, but there still seems to be a little too much trust left in the system.

Farmers don’t trust railways. Grain companies don’t trust railways. Obviously the government doesn’t trust railways.

So why not treat them like that and monitor and inspect them more directly? Place a few inspectors inside their offices to see what’s going on and to let them know they’re being watched. Shine a little light into those dark corners of the grain industry and you never know what you’ll find there.

 

About the author

Ed White — Ed White has specialized in markets coverage since 2001 and has achieved the Derivatives Market Specialist (DMS) designation with the Canadian Securities Institute.

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  • Terry

    This article should be called should we trust the government?

    It was not the railway that took the crow rate away or the wheat board. It is not the railway legislating away individuals plant breeders rights. It is not the railway promoting “cheap food”.

    The railway is maximizing profits for itself, a common practice in capitalism. Now if the government would only do the same on behalf of the Canadian people. Government cannot compete with the private sector. The corruption is buried in law and legacy. Primary producers that buy into the big C conservative rhetoric might as well just become politicians, that way the rest of us could get down to growing food for a decent price.

    The primary producer will always be left with the crumbs, until we band together , act single mindedly to maintain accountability of first out government and therefore the big corporations . Right now there is a “Free For All” of personal legacy. Most farmers I know their farm is their personal legacy. Hard work and equity building. Not rhetoric, slander and wholesale sell outs .