Why Does Canada Have Only Two Major Railways: CN and CP?

Canada is predominantly a long, narrow country, at least in terms of its highly populated areas. This geographical feature means that it doesn't NEED more than two major railways to efficiently connect its major economic hubs. However, the current landscape of Canadian railways is quite different from its historical development. Let us delve into the reasons behind the dominance of two major railways, CN and CP.

Canada: A Vast Country with Sparse Population

The vast expanses of Canada are home to a relatively small population. Despite this, it is often believed that a few major lines would suffice for the majority of rail traffic. However, the dominance of CN and CP has roots in more than just geography. The Canadian rail system has undergone significant transformations over the years, with many smaller companies being absorbed by these two major players.

The Streamlining of the Canadian Rail System

In recent decades, the Canadian rail system has undergone a process of streamlining. This has been driven by technological advancements, policy changes, and market dynamics. Smaller original companies that initially built routes across the country have been consolidated into larger entities, a process that often involves mergers and acquisitions.

CN Railway: A Case in Point

Conduct Development Corporation (CN), the largest railway operator in Canada, was initially a government-owned company. It was formed in 1919 and was privatised in 1995. In the process of becoming a private enterprise, CN acquired control over twelve other companies, including some in the United States. Bill Gates has since become a significant shareholder in CN, highlighting the global nature of its operations and funding.

CP Railway: A Historical Legacy

Canadian Pacific Railway (CP), on the other hand, has a rich history dating back to 1881. The company was incorporated to build one of the country’s earliest transcontinental lines, linking the east coast with the Great Lakes and eventually reaching British Columbia. Over the years, CP expanded its network through the acquisition of sixteen Canadian companies and four in the United States, starting in the early 20th century and continuing through the 20th century.

The Evolution and Impact of Mergers and Acquisitions

The mergers and acquisitions that have shaped CN and CP into the prominent players they are today are a result of various factors, including competition for market share, efficiency gains, and the desire to expand into international markets. These companies have leveraged their size and resources to become the backbone of Canada's rail transportation.

Market Competition and Efficiency

Market competition and the pursuit of efficiency have been crucial drivers behind the mergers and acquisitions. CN and CP have been able to streamline operations, reduce costs, and improve service through consolidation. This has not only benefited the companies but also the broader economy, as it has allowed for more reliable and efficient transportation of goods and materials.

Global Influence and Shareholder Diversity

The global nature of these companies is evident in the diverse shareholder base. CN, for instance, has a significant stake in the hands of Bill Gates, reflecting the international investment landscape in the rail industry. This diversification not only brings in additional financial resources but also a variety of perspectives on global business trends and strategies.

Conclusion

The dominance of CN and CP in the Canadian railway landscape is a result of a combination of geographical necessity, strategic mergers and acquisitions, and the pursuit of market efficiency. While the vision of two major railways might have been sufficient in the past, the complex and evolving nature of the rail industry in Canada has led to the current consolidation. As the global economy continues to grow and evolve, the role of CN and CP in maintaining the backbone of Canada's transportation network will remain critical.