Canada and United States.
Canada’s railway industry is dominated by two very powerful companies which form a tight-knit, extremely competitive oligopoly.
Oligopolies prove to be ineffective and unproductive. It appears that the United States doesn’t seem to have this problem. But what exactly is so different between their rail industry and ours?
Capitalism.
United States is a capitalistic nation meaning that the government, for the most part, stays out of the way of businesses. Therefore, it is any wonder, based upon this lack of intervening, that the United States Railway Industry is a monopolistic competitive market. However, in the specific example, it seems the United States government, prior to 1980, placed heavy regulations on the rail industry. This was proving to be dangerous on the industry as it was crippling many of the railways. Therefore, in 1981 the U.S. government passed the Staggers Act, which essentially relieved many of the regulations looming over the industry. Some regulations were kept to ensure that shippers were not treated unfairly due to train companies’ competition.
What the government was allow the industry to fend for themselves, resorting to capitalism. In the subsequent years revenues dropp
ed, due to the influx of companies flooding the industry due to the small barriers to entry. Today, the railway in the U.S., according to their website, is one of the most effective and efficient in the world. It makes sense, when this system is SUCH a monopolistic competitive market almost to the point where it’s ALMOST a perfect competition. The railways in the united states, do not cross the country under a single company, every state has many different railways, that connect to other railways in neighbouring states. It’s a prime example of a monopolistic competition.
Question is, why doesn’t Canada follow this model, if it is so effective?
Canada’s railway industry is dominated by two very powerful companies which form a tight-knit, extremely competitive oligopoly.
Oligopolies prove to be ineffective and unproductive. It appears that the United States doesn’t seem to have this problem. But what exactly is so different between their rail industry and ours?Capitalism.
United States is a capitalistic nation meaning that the government, for the most part, stays out of the way of businesses. Therefore, it is any wonder, based upon this lack of intervening, that the United States Railway Industry is a monopolistic competitive market. However, in the specific example, it seems the United States government, prior to 1980, placed heavy regulations on the rail industry. This was proving to be dangerous on the industry as it was crippling many of the railways. Therefore, in 1981 the U.S. government passed the Staggers Act, which essentially relieved many of the regulations looming over the industry. Some regulations were kept to ensure that shippers were not treated unfairly due to train companies’ competition.
What the government was allow the industry to fend for themselves, resorting to capitalism. In the subsequent years revenues dropp
ed, due to the influx of companies flooding the industry due to the small barriers to entry. Today, the railway in the U.S., according to their website, is one of the most effective and efficient in the world. It makes sense, when this system is SUCH a monopolistic competitive market almost to the point where it’s ALMOST a perfect competition. The railways in the united states, do not cross the country under a single company, every state has many different railways, that connect to other railways in neighbouring states. It’s a prime example of a monopolistic competition.Question is, why doesn’t Canada follow this model, if it is so effective?
Some might argue that it is because we simply do not have the people power to run multiple railways across our vast country and furthermore we simply do not have the ability to create any more railways. This may be true, but it's only half the answer. The government plays an a major roll in why we do not opt for the American way of running the railroad. Our tight-knit oligopoly is a money maker, yet with only two companies the government can easily regulate them. The Railway Association of Canada, a government run regulations board over all the railways in Canada, has many strict rules that are enforced upon the CNR and CPR. With only two railways to have to keep tabs on it is easier to ensure they are doing what they should and the government gets plenty of money from the two large, over-priced firms.
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