It can be hard to measure the true efficiency of corporate and public entities when the assets weren’t purchased or could not be purchased.
The railway industry is an example.
The cost of developing Canada’s rail beds from scratch would be so high today that no one would invest in those enterprises, even with record railway profits.
From the start, land was granted as an incentive to build, and government absorbed the costs from the public purse.
There are some projects that private industry doesn’t do, such as a national highway system or infrastructure to rural and remote areas.
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Canadian National Railway was created in 1918 from a number of small, mostly bankrupt, private railways and was publicly operated until 1995. CN was privatized for $2.26 billion, a tiny portion of what it would cost to build.
The private Canadian Pacific Railway was given a line of credit, 25 million acres of land and 1,100 kilo-metres of completed railway through most of the toughest sections of Canada.
These great deals were some of Canada’s first P3s, the public-private partnerships that today’s more conservative governments are using to avoid the appearance of taking on public debt for necessary infrastructure projects such as schools, water treatment plants, medical diagnostic services and prisons.
Railways are special because of their monopolistic design. As a result, rail beds are nationalized in many parts of the world.
The other way to ensure competition on price and service is to create open running rights that allow, for a publicly set price, the ability of competitors to operate on each other’s rail beds. This is done in Australia and Europe.
Canada’s new inter-switching rules, now part of federal legislation, allow, for a fee of $461, a rail car to be shifted to a competitor’s track, provided it was picked up within 160 km of the switch.
CP is suing the government over the fees.
The grain industry admits the process is cumbersome because of the railways’ lack of willingness to accommodate one another’s traffic.
Due to the anti-competitive nature of the current duopoly, would open running rights legislation be the Damoclesian sword held over Canada’s railways that would ensure competitive-like pricing and service?
