Canadian Transport Sourcebook

XII

What Raises the Question of Nationalization Now?

Three things:

First: The financial collapse of the Canadian Northern and the financial difficulties of the Grand Trunk Pacific. The Canadian Northern is now on the Government's hands. The Grand Trunk Pacific may have to be taken over.

Second: The increases in railway rates allowed by the Government in order to meet the extraordinary increases in wages and the cost of supplies.

Third: The example of England and the United States.

What has the C.N.R. to do with the Question of Buying Other Roads?

It appears—nothing.

As the result of rash public sentiment some years ago, and Government stupidity, Ottawa now finds itself compelled to own the C.N.R. in order to save Canada's credit. It is a misfortune which surely cannot be construed into an argument for further purchases! Examine it closely and you will observe that it is in itself the finest possible evidence of a democratic Government's business simplicity. It does not matter what party may then have been in power. The errors of Ottawa Governments do not fall to the exclusive credit of either side.

But—
the Government is Left with Only the Roads that Cannot Succeed?

This is scarcely true. I find, on making thorough enquiry, that if Public Ownership wishes to experiment with a national railway system it has now every physical essential. It taps a better farming area in the west, has easier grades in the Rockies, better curves and grades and richer country along the North Shore of Lake Superior, and exclusive direct connection with Halifax.

The argument that such a system cannot succeed without the old Grand Trunk being added savors of insincerity. Is it possible the Nationalizers are preparing excuses already?

Even if this were not so there would still be no argument for Nationalization. The losing roads would lose no less because they were Nationalized. The paying roads would, I am only too sure, cease to pay and deteriorate.

G.T.R. shareholders now pay the interest on the capital stock—that is to say, they get no dividends, and therefore their money works for no interest. Bought out, it must then be the Canadian people who shall pay that interest. Money must earn a wage. The private shareholders of the G.T.R. is at present pay it; that is, he remits it; he does without it. When his holdings are bought out by a Government that Government must pay interest on the money borrowed for the purchase. (See footnote to page 7.)

But—
Consider the Rate Tangle!

I have considered this carefully, and this is what I find:

Prior to 1904 railway rates were limited only by competitive conditions (where they existed) and by a few vague restrictions in the Railway Act. The railways used and abused their liberty in much the same way that your child or mine, or the Manufacturers' Association or the banks or any live human being will abuse power if improperly controlled. In the west were exhibited all the evils of an unregulated monopoly—precisely the sort of thing that the "Nationalizers" are craving.

In 1904 the Dominion Board of Railway Commissioners was appointed. It provided a special court to hear complaints against railways cheaply and quickly. It was to be, and is, the judge of what is good service and what is bad. Rates are fixed by this court absolutely. They do not merely approve; they set the rates.

In 1918 this body, I find, allowed two rate increases: a first increase nominally described as 15%, and applying to both freight and passenger rates. According to the railways this did not, however, mean an increase of 15% in the gross income of the roads, but rather about 10%, owing to the fact that rates on certain important commodities were protected by fixed "maximums," preventing the roads from collecting a full 15% increase on such commodities. For this reason the new addition to the gross returns of the roads amounted, they say, to about 10%. I am inclined to believe their statement.

In July, 1918, labor unrest led the roads, through the Canadian Railway War Board, to apply the McAdoo scale of wages as applied in the United States. To do this they deemed it necessary to obtain from the Dominion Railway Commission a further rate increase calculated to yield another 25% addition to their gross income.

This application was decided, not by the Railway Commission, but by the Cabinet. The Railway Commission advised granting the increase on the grounds that fuel had doubled in price, ties doubled, and labor doubled since 1914. It urged that without this increase the weaker railways would be driven to the wall. The Cabinet accepted this view.

The Case of the C.P.R.

Here rose the difficulty.

To exempt the C.P.R. from the new rate was impossible, as it would drive business from the C.P.R.'s competitors. The C.P.R. must be given the new rates in such a way as to add nothing to its profits—profits due to its initial endowment in public lands, its economical construction and efficient operation. The order was entered, therefore, that any addition to the normal profit of the C.P.R. should be absorbed by the Government, the percentage left to the C.P.R. being designed to act, like the fragment of carrot in the dragoman's hand, to provide the donkey with incentive.

Is That Not Simple Enough?

"No," says the "Nationalizer," "we cannot trust the Government to carry out the letter of the law. We cannot trust the Government!—any Government! We must 'nationalize' the C.P.R.!"

How, then, is a Government or any body of men to be trusted with the entire railway system of Canada if the same Government cannot be trusted to collect a tax? Or with the disposition of 147,000 "jobs" without fear or favor? With the prudent extension of lines or alterations in train service in the face of popular demands here and there? With millions of dollars and millions of patrons—many in a position to favor the Government?

If the Government cannot be trusted to "regulate," how can it be trusted to operate the roads!