Public debt is a euphemism for private railroad debt, at least in pre-Confederation Canada. This story has it all: banker bailouts by the government, no profitability, politicians playing double duty as members of the board of directors, stupid design of the tracks, in other words, another government/business alliance mess: The Grand Trunk Railway, with 1,760 km of track, became the longest railway in the world. This distinction came at great cost to the Canadian public. From the beginning, the company ran into financial trouble, leading its London bankers to approach the provincial government for help. The government bailed it out--6 of the railway companys 12 directors belonged to the Canadian cabinet. By 1859, the Canadian governments debt exceeded $67 million. The Grand Trunk Railway accounted for a large part of that debt. This sum alone was greater than all the money spent on public works--canals, bridges, roads, buildings--by the Province of Canada between the Act of Union in 1841 and Confederation [1867]. To make matters worse, this trunk line, designed to tap American trade for the Canadas, had a 1.65 m track gauge--wider than that used in the United States. This meant American goods shipped via the Grand Trunk had to be reloaded at the border, causing the railway to lose most of the trade that it was built to capture. In the 1850s and 1860s the Grand Trunk never made a profit. --Origins: Canadian History to Confederation, p. 348
Posted on: Mon, 04 Aug 2014 16:47:11 +0000
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