Montreal, December 6, 2003  /  No 134  
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Harry Valentine is a free-marketeer living in Eastern Ontario. He can be reached at
by Harry Valentine
          Traffic volumes along the main highways that pass through Canada's most densely population region, has increased to the level of gridlock. Repeated traffic studies have consistently revealed that as the number of vehicles on the roadways increases, traffic speeds decrease. Canada's most densely populated region stretches from southern Ontario into southern Quebec, a region that also has the highest concentration of manufacturing industries in Canada. This region accounts for the bulk of Canadian exports crossing the border. The quick, efficient and safe movement of both people and goods is essential to the functioning of the region's economy.  
          The acute traffic density problems and frequency of traffic gridlock has attracted political attention. A previous Ontario Transport minister proposed to widen the main east-west highway across Ontario, by adding an extra traffic lane in each direction between Windsor and the Quebec border. The cost of such an undertaking would be monumental. It is a public works project that the financially constrained Ontario government may choose to delay or even avoid. Following the recent Ontario provincial election, the new premier ordered an audit of the provincial finances. A budget deficit of $5.6 billion was revealed despite the previous government having claimed to have operated several consecutive balanced budgets. The new provincial government has since announced its intention to cut costs to reduce Ontario's deficit, including cutting programs. 
          Toll roads are one of the options being considered. The federal government has signalled that it too will avoid operating a deficit. Previously, both levels of government had proposed to enter into a partnership with the railways, to reduce traffic congestion on central Canada's main highways by transferring more freight to the rails. 
Policies from a bygone era 
          Increased traffic congestion along Canada's major roadways are the long-term result of ill-conceived but well-meaning transportation regulations, programs and policies dating from a bygone era. The federal government still enforces many of the railway regulations introduced into Canada in 1924, regulations that were originally devised around the operational characteristics of a wood-burning steam locomotive. Railway regulation was originally introduced in the USA during the late 19th century, to protect the economic interests of the politically influential horse-drawn stagecoach industry. In 1924, Canada adopted similar railway regulatory practices such as regulated freight rates, train staffing and train operating rules. In his book entitled The Railway Game, Carleton University Professor Julius Lukasiewicz revealed that during the mid 1970's, railway freight customers shipping freight from Toronto to Edmonton paid lower rates if they first sent the freight to Vancouver and then to Edmonton. 
          Despite the smokescreen of deregulation, a restrictive regime of economic regulations pertaining to railway operations in Canada is still fully in effect. Keynesian economic theory forms the basis of such regulatory practice. Despite Keynes's theories having been repeatedly debunked and refuted, the federal government has no intention of rescinding or repealing the regime of railway economic regulation that became counter-productive decades ago, achieving the opposite of what had originally been intended. For many years it restricted railway management's ability to respond to changing market conditions, compelled them by force of law into making unproductive business decisions that resulted in the inefficient use or waste of resources. Railway regulations ultimately gave the developing trucking industry the competitive edge it needed, at a time when American railways were still the largest corporations, the largest employers and the most profitable businesses. 
     « Despite the smokescreen of deregulation, a restrictive regime of economic regulations pertaining to railway operations in Canada is still fully in effect. »
          During the FDR era, American railways paid a 93% tax rate on their profits, money that funded a variety of political projects. Such projects included building the first limited access freeways during the late 1930's, the basis of a nationwide highway system. During the post WWII years, the politically-favoured automobile and truck industries benefited greatly from the expanded socialized roadway system. The resulting job creation boom in the road building and automobile manufacturing industries assured politicians of the votes that go along with such job creation schemes. What was unseen at the time, was the irreparable damage such political behaviour was inflicting on the economic future of the railways. Canadian politicians duplicated American precedents when the railways in both countries were undergoing massive layoffs, a result of improving efficiency by replacing labour intensive steam power with diesel power. 
          The political favouritism once shown to the automobile industry has resulted in the gridlocked roadway system. Deregulation of the American trucking industry during the 1980's coincided with manufacturing industries and retail industries switching to a JIT (just-in-time) inventory control system. The rapidly growing number of highway semitrailers became the mobile stockrooms, resulting in a boom in truck transportation and increased traffic congestion on the already crowded highway system. The more heavily regulated railways have expanded their market share in intermodal transportation. As more highway trailers are being transported by rail, most intermodal freight yards are operating at or near capacity, resulting in frequent delays. 
Freeing the railways 
          Government fiscal restraints may restrict both the federal as well as provincial governments from using a public-private partnership (3P) approach with the railways in trying to reduce the gridlock problem. Instead, the railways may have to solve the problem of transferring more semi-trailers on to the rails, on their own. To undertake such a formidable task, the railways would need to operate in a laissez-faire environment, one totally free from any form of economic regulation, exempt from the Canada Competition Act as well as a moratorium on their taxes. This would mean repealing all sections of the Canada Transportation Act pertaining to the economic regulation of railways in Canada. 
          Under such as environment, a regime of property rights would prevail over the railways' rights-of-way. Railway management would operate free from any bureaucratic intrusion or related state intervention, and would be able to enter into long-term business arrangements with interested private sector investors and business partners. Freedom from economic regulation could help the railways attract the new investments they would need to help them increase their market share, initiate new programs and gain a competitive edge in the freight transportation market. The government's bureaucrats would rebel against such a regime of economic freedom, despite every economic regulation pertaining to railway operations in Canada having failed many years ago. 
          In an unregulated operating environment, the railways may be able to improve their transit times moving intermodal highway trailers from points of origin to their final destinations. A regime of unrestrained economic freedom that allows peaceful people to engage in creative and productive activities, could go far in resolving a wide range of society's economic problems and challenges. The problem is that nobody in government is yet prepared to consider such an option. 
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