6. The Royal Mail Line and the Grand Trunk Railway

The experience of the Royal Mail Line in direct competition with the railway suggests that in studying the impact of the Grand Trunk most economic and business historians have been approaching the subject from too limited a perspective. The general consensus remains that railways were technologically superior because of locational factors, their year-round operations and speed, and that these factors were essential to the development of a national political economy. One wonders then how the Great Lakes shipping trade ever survived or why the government ever bothered to maintain the region's canals.

The fact remains that for almost every year that the Grand Trunk Railway failed to pay a dividend on its common stock, the Canadian Navigation Company, the Richelieu Company and their corporate successors did. Part of this may have rested on the errors in the location of the Grand Trunk's line, or the continuing seasonality of Canada's export trade, but these seem inadequate explanations. Given these factors, had the Grand Trunk been in a position to compete with the Mail Line on equal terms, that is with its capital expenses confined to way buildings and rolling stock, the annual profits on its operations could have been in the range of 30 to 50%. Even if it had been forced to pay modest tolls over its trackage, as the Mail Line did when passing through the St. Lawrence canals and entering certain harbours, the returns could still have been substantial. The only barrier between the Grand Trunk and profitability was that factor which made railways unique in the transportation business--it controlled its own infrastructure. It was the futile effort of this company to pay investors any return on this massive expenditure that doomed it to continuing failure from an investor's point of view and ultimately made all railroads vulnerable to competition from airlines and trucking companies.

At the same time the railroad effectively constricted the economic base of the passenger steamboat trade. Not only did it take over particular functions but at certain price levels the railway was capable of absorbing all the Mail Line traffic. This lowered the potential levels of profitability for the Mail Line, rendering it even more vulnerable to short and long run fluctuations in consumer demand. The line continued to be profitable because its remaining services were in demand by a maturing economy and it continued to absorb and eliminate excess capacity.

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Chapter 5 appeared in FreshWater.