For Your Information

The Privatization of CN

(This article is the second in a series examining the different ways the Chretien Liberals have been involved in destroying the Canadian nation.)

Every Canadian schoolchild learns that the history of the railways is interwoven with the history of Canada. British Columbia, in fact, was largely convinced to enter into Confederation on the promise that the railway would be built linking B.C. to the rest of Canada. Without an east-west railway, the probability of Canada being absorbed by the United States was high, a reality recognized by the nascent Canadian ruling class. This new ruling class, slavishly loyal to the British Empire, also recognized that building the railway would facilitate opening the west to settlement, vital to establishing sovereignty over the vast lands west of the Red River Valley. And indeed, shortly after its completion, immigrants began to flow to the west in large numbers. Construction of the railway and the facilitation of mass migration out West was also instrumental in crushing the rebellion of the Métis Nation in 1885. Soldiers, police and munitions were sent in by train in sufficient numbers to defeat the forces led by Louis Riel and Gabriel Dumont.

Immensely profitable to a small group of industrialists, the construction of the railway was rife with corruption of every kind and scandals associated with bribery and kickbacks in its construction led to the fall of several provincial governments of the day.

There were also incredible abuses of workers, especially the Chinese immigrants who were brought in for some of the most back breaking labour. Virtual slaves, they had the most dangerous jobs and thousands were killed. Many of those who survived were denied the right to settle in Canada, the promise with which they had been lured. At the same time, tracts of land belonging to First Nations and the Métis were expropriated to build the railway.

The last spike of Canadian Pacific was driven in November, 1885. While a privately held company, construction of the CP was financed from the public treasury, with the railway receiving monies and land for every mile of track that was laid.

By the turn of the century, the monopoly enjoyed by CP was a source of irritation to a new generation of industrialists who wanted their share of the growing profits involved in the transportation of natural resources out of the Canadian west and to the St. Laurence. Encouraged by the Laurier government, a few different groups began construction on what were to be competing trans-Canada railways, but the reality was the population base was not large enough to support more than one transcontinental railway, and even that one couldn't be built without substantial public monies. No other attempts were successful.

In the period following World War I, the Canadian government intervened, assumed the massive debts of the failed companies and created Canadian National Railways as a state-owned competitor to CP. From its inception, CN stood no chance of operating profitably because of the enormous debt assumed by the public treasury to acquire the line.

Its failure to turn a profit was the excuse given by the Mulroney government when they embarked on a plan to privatize it in the late 1980s. Following the sell-off of Air Canada, the Mulroney government saw CN as another national institution that could be privatized at a huge profit for the capitalist class. However, there was widespread opposition to the move, and the Tories, preoccupied with other legislative priorities, set the wheels in motion but never finished the job.

Enter the Chretien Liberals, who came to power in 1993 portraying themselves as champions of Canada and have governed ever since by systematically destroying the Canadian nation. In 1995, then Transportation Minister Doug Young replaced the federal Railway Act with the Canada Transportation Act. The new legislation deregulated the railways, airlines and ports and opened the market on abandoned short-line tracks. CN management, delighted with the changes, moved quickly to reduce its labour force by almost half and abandon less profitable lines which had been maintained on the basis of the need to provide services to isolated communities. Within the year, CN had reduced its costs as a percentage of revenue from 95 per cent to 72 per cent.

It was sold off for $2.2 billion, stock sold at $27 a share. Almost immediately after privatization, the value of the stock trading on the New York Stock Exchange doubled, a clear indication that the company was sold off for less than it was worth. By 1999, the stock was trading at $105 a share. The right-wing Frontier Institute described the sell-off as "one of the most successful privatizations in Canadian history."

Unlike the privatizations of Air Canada, Petro Canada and other Crown corporations, there were no restrictions placed on foreign ownership with the privatization of CN. The only restriction was that no shareholder could own more than 15 per cent of the stock. Today, approximately 80 per cent of CN shares are owned by Americans.

Layoffs and the abandonment of unprofitable railways lines have continued at an accelerated pace since privatization, with over 5,000 jobs eliminated and over 10,000 kilometers of track abandoned.

In 1999, a $4.3 billion merger with the American-based Illinois Central was completed. Coupled with a marketing alliance struck between CN and the Kansas City Southern Railway, CN is now part of a railway network that stretches from Canada to Mexico, one of a growing number of railway multinationals. The newly-merged company is currently in the process of reorienting the company's operations from an east-west to a north-south axis.