Yes, there is a better way to run a railroad

By Nicholas Wapshott
December 28, 2012

Before we consign Mitt Romney and the whole of his failed program to the trash, it is worth recycling one of his proposals that has considerable merit: the privatization of Amtrak. Passenger railroads have rarely if ever made money. Even at the peak of the Railroad Age, the ferrying of humans rather than freight was a money-losing enterprise designed to add allure to the more mundane but profitable business of hauling goods. Amid the failure of private enterprise, however, a clear need was exposed for an environmentally friendly passenger service that linked city center to city center.

Human rail transport was considered so desirable, and met such a public need, that when the free market failed it was considered unconscionable to simply abandon the idea as a noble experiment that failed. Out of the ashes of the free enterprise rail system was salvaged a truncated nationalized railroad network, Amtrak – and what an awkward, unloved, poorly run travesty of a public service it has become. The heir to the romantic experiment of the iron horse and railroad barons that opened up the continent and funneled pioneers and investment into sparsely populated spaces has become a faded, complacent, dowdy rail system that would not pass muster in the Third World.

Rescuing the best of the passenger rail service so it will earn at least part of its keep for the rest of the century offers a conundrum that cuts to the heart of the argument about the border between the public good and the free market. Like the provision of universal healthcare, social security and welfare, there is no easy way to match the evident public benefit of a rapid transit rail system to the failure of the free market to provide one. The quandary is made more confused because, while railroads no longer compete with one another, they do compete with airlines, cars and buses.

The easy laissez-faire solution would be to withdraw the federal subsidy – currently at $1.4 billion per annum– forthwith, let Amtrak go bust and sell the assets in land and plant to the highest bidder, who most likely would make no attempt to restore passenger rail services. But that is to throw away a rare public resource that, given the right management and inspiration, could offer a green and convenient alternative to plane and bus travel, delivering vast numbers of passengers in speed, comfort and safety.

Amtrak has had 41 years to establish a high-level service that travelers would be eager to buy. But successive Amtrak boards and managements have miserably failed to live up to their obligations to the American people, who are not only their customers but, as taxpayers, their owners. They have also betrayed those who argue that a publicly owned and administered utility need not be run on Soviet lines, deaf to complaints and contemptuous of its users. In countries like Japan and France, where governments spend freely on railroads, the public is well served. But the reluctance of Congress to spend the vast amounts of money needed on the American system leaves little room for optimism that a system wholly funded by the state will ever come about. Barack Obama’s expansion into high speed rail is a gamble that may well end in an expensive, unfinished line to nowhere.

No one who has witnessed the crush and then stampede for seats at New York’s Penn Station could conclude other than that it has been decided that rail customers are to be treated as if they were cattle heading for the slaughter. The rolling stock is antiquated and uncomfortable, the catering primitive and expensive, the traveling experience unpredictable and depressing. Even belated innovations, such as Wi-Fi, are cumbersome  and routinely unavailable. The stations are barren and unwelcoming with piped classical music administered as an attempted cure-all. If this is socialism, it gives socialism a bad name.

But of course it is nothing of the sort. Like most government-run industries, a poorly run private railroad monopoly was succeeded by an even worse public monopoly. Like state-run industries in communist countries, the clear impression is that Amtrak is run for the people who work for it, not those who travel on it. But if opposition from the labor unions and vested interests ensure that an outright closure and fire sale is not an option, what can be done?

The privatization options are many and varied, from a system where the track is owned by a company that leases routes and time slots to other companies to a vertical integration of track and trains, with many permutations in between. Just as those who enjoy running toy railroads make up a surprisingly large tribe, so those who dream of freeing railroads from incompetence and penury make up an avid group of reformers eager to offer ingenious solutions. An indication of the gains and pitfalls of privatization can be gleaned by looking at the British example, the result of Margaret Thatcher’s program of mass privatization.

To make progress here, all it takes is a decision from Congress to reject the status quo and invite bids from interested parties. Foreign rail operators such as the French company Keolis, which already operates in the United States, and existing domestic transport companies, including airlines and bus companies, should be encouraged to bid. Nothing should be off the table, including adequate regulation to ensure safety and a fair deal for passengers, and the continued role of select subsidies to ensure the public interest is met.

The obvious starting point is the Northeast corridor, the lucrative market between Boston and Washington, via New York and Philadelphia. Once that route has been liberated, other rail routes could be offered in turn. Eventually, even commuter lines such as New York’s rat-ridden MTA, starved of investment and genuine concern for the public’s comfort and convenience, could eventually be freed from state control and ownership.

The main argument in favor of privatization is to improve the service to passengers. There is an added benefit to Hayekians who worry about the creeping expansion of the state sector. And there is a fiscal benefit. At present, the railroads are starved of investment because that would entail increased government borrowing, which Congress is loath to provide. Transferring ownership and control of the railroads to the private sector would instantly increase private investment while diminishing public debt. Everyone wins.

In the early days of automobiles, the comic sage Will Rogers addressed the new problem of traffic jams. “There’s a simple solution to this traffic problem,” he said. “We’ll have business build the roads and government build the cars.” Business built the railroads and the government has had plenty long enough to demonstrate that it has no talent at running them. It’s time for ingenious businesses to step in and save the railroads from oblivion.

Nicholas Wapshott’s Keynes Hayek: The Clash That Defined Modern Economics is published by W.W. Norton. Read extracts here.

PHOTO: Travelers are seen inside of an AMTRAK train at the Harrison station in New Jersey November 17, 2012. REUTERS/Eduardo Munoz

17 comments

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[No one who has witnessed the crush and then stampede for seats at New York’s Penn Station could conclude other than that it has been decided that rail customers are to be treated as if they were cattle heading for the slaughter.]

For a minute there, I thought it was describing flying, where you essentially are on a flying bus. Except rail passengers don’t get pawed by TSA, and can use electronic devices.

In Congress, it seems some are determined to make sure rail transit will be a terrible experience, by starving the system. And there certainly are valid complaints on how the dollars are used by management and unions.

Get rid of AMTRAK, and the NE corridor will be the only service that will survive.

Time to compare the taxpayer subsidies air travel gets versus that for rail.

Posted by pavoter1946 | Report as abusive

Privatization will mean another private corporation will get the subsidies. The subsidies will always be needed because passenger service doesn’t pay.

No matter how poorly run the rails may be (it always seemed good to me actually, but I haven’t been on a train in the USA for 25 years), they are far more efficient than the private automobile.

Posted by paintcan | Report as abusive

For ones who lived through both “perestroika” and “privatization” there’s few phrases scarier than “eventually be freed from state control and ownership” said about public SERVICE.

So, before discussing merits and downsides of state-vs-private transportation, just ask yourself some questions
1) “will it hurt economics and population if AmTrak vanishes, presumably next week?”
2) then ask “if AT vanishes, will (in long run) feds/states be forced spending sums on par with AmTrak’s subsidies to support other transportation methods/infrastructure?”
3) then “if AT vanishes,will the government REGULATE providers of aforementioned transportation methods more (than if it still exists)?”

If even one of answers is “YES”, then i see only religious reasons for privatization.

Posted by chyron | Report as abusive

Privatization of rail passenger service is a ridiculous pipe dream. It has failed miserably in the UK and would fail elsewhere (Europe, Japan) without huge subsidies. Aside from a very few high-density corridors in the US, rail passenger service would vanish under privatization. The root of the Amtrak problem is two fold:

First, Amtrak has been starved of capital funding since its inception. While China spends tens of billions on passenger rail, the US can’t manage to spend a few hundred million. The results are predictable. Today, the Amtrak passenger car fleet is OLDER that the one it inherited in 1971 when it began operations. Long distance cars are anywhere between 16 and 30 years old. Much of the short distance fleet, with the exception of the Acela, dates to the 1980s and even mid-1970s. No passenger rail car builder is willing to invest in facilities in the US if only a few dozen cars per year are being built.

Second, outside of the northeast corridor almost all Amtrak passenger trains operate on private freight railroads. Two mile long 15,000 ton freight trains and passenger trains don’t mix. Freight railroads often delay Amtrak trains in preference to their freight trains. They refuse to allow additional trains, or even adding cars to existing trains. Here in upstate NY, CSX has refused to allow NYS to build additional tracks for passenger trains. Private railroads were chartered as common carriers to haul passengers and freight; they all violate their charters. If government had any guts, it would seize the railroad rights of way under eminent domain.

There is an ideological component to having a failed national passenger rail system. It discredits government. The two political parties serve their benefactors (i.e., big-money interests not their constituents, the traveling public).

Witness the stupidity of Scott Walker in Wisconsin — turning down $800M in federal money to establish modern trains between Madison, Milwaukee and Chicago. The Spanish railcar builder Talgo established a plant to build and maintain trains in Milwaukee. Two brand new trains sit unused, the plant has been shut down, the taxpayers of Wisconsin are on the hook for $70M for the trains and services that Walker killed. The last thing ideologues like Walker want is successful, government sponsored passenger trains. They want more sprawl, more highways, more airports — all funded by taxpayers.

Government run passenger trains work fine — go to Switzerland or Germany to see it in action. The problem isn’t government — it is “free market” ideology.

Posted by upstater | Report as abusive

So, the obvious answer going back years, even decades was and is to close Amtrak. Shut it down. Bury it. Convert the right-of-ways to more productive use.

Amtrak is the perfect example of programs that failed a long, long time ago, but a favored few keep trying to resurrect it, failing over and over and over…

Posted by ptiffany | Report as abusive

I wonder how profitable will be the high-speed/high-cost tract from LA to San Francisco.

Posted by robb1 | Report as abusive

The real problem with Amtrak is the need to share tracks with freight trains. When this issue is mitigated, or resolved, such as on the Northeast Corridor, there is no problem with providing quality service. The Acela is wonderful, thought it could be faster with track upgrades. And even on non “high-speed” routes like NYC to Albany the service is pretty fast and reliable.
Time to get serious on high-speed rail, and time to drive the stake through the heart of “privatization” arguments. Read the despairing articles in the British press–which bemoan the idiotic management of the private RR and look with envy on efficient state-owned Euro services. Give me the high speed rail experience of France or Japan, which I have experienced, over the dreary experience of flying on “private” (though extremely subsidized U.S. airlines or driving on also heavily subsidized, crowded highways.

Posted by bluepanther | Report as abusive

Mr. Wapshott’s lamentation of the “horrors” faced by Amtrak’s customers would seem to indicate that he hasn’t recently been subject to the indignities of air travel–at least by most of us who aren’t important enough to enjoy flashing their million-mile cards, going past the lines and sitting “up front”…or perhaps being schlepped around in the private jets of the corporations whose virtues he proclaims.

Posted by Art_In_Seattle | Report as abusive

Turn Amtrak into an employee-owned cooperative. Employees earn shares of the company, and their wages depend on profits. (But the problem of sharing rail lines with freight carriers must also be resolved.)

Posted by blueberryhound | Report as abusive

“…by looking at the British example, the result of Margaret Thatcher’s program of mass privatization.”
Thought it was worth pointing out that although you could say that the privatisation of the UK railroads was done as an extension of the Thatcher privatisation programs, the railroads were actually privatised by her successor, John Major. Margaret Thatcher herself, as you mentioned someone who was already privatising large swathes of British industry, was actually against privatising the railways and felt it was going too far.

Posted by K.MacKenzie | Report as abusive

> “The main argument in favor of privatization is to improve the service to passengers.”

> “Transferring ownership and control of the railroads to the private sector would instantly increase private investment while diminishing public debt.”

— MOST British commuters recognise that the re-privatisation of the railways was the worst managed decision Thatcher’s or Major’s government ever made.

> “It’s time for ingenious businesses to step in and save the railroads from oblivion.”

It’s an ingenious way for cronies to make a killing on an inherently valuable asset (or, a cherry-picked portion of such an asset — the NE corridor). And an ingenious way for shareholders to make fortunes while the profit-making machine:
• Cuts corners or maintenance (corporate manslaughter)
http://en.wikipedia.org/wiki/Hatfield_ra il_crash
http://en.wikipedia.org/wiki/Grayrigg_de railment
• Ignores thousands of passenger complaints over decades, cramming undersized rush-hour trains to 2× passenger capacity so as to avoid paying for surplus rolling stock to move around at other times of day.
http://www.bbc.co.uk/news/uk-england-207 83986

Several times, I’ve been amongst over 400 (sometimes over 800) people waiting on the platform at Leeds City Station for the West-bound Transpennine Express between 5pm and 6pm, waiting for train after train that only has two carriages (max. capacity 180 people) and remaining on the platform as others packed in vertically, standing like sardines; because it would have been extremely unsafe for me to board the train. But try sending a complaint to the current or previous operator of that line, on issues like these. Good luck getting an answer! They just pretend never to have received your letter, and then there’s no punishment for that.

> “They have also betrayed those who argue that a publicly owned and administered utility need not be run on Soviet lines, deaf to complaints and contemptuous of its users.”

In Britain, the rail companies are still contemptuous of their passengers. They know that the roads are so congested on some routes that the rail passengers have almost no alternative to rail. So they carry on forcing the passengers to risk their lives standing shoulder-to-shoulder, chest-to-chest whilst paying for a seat. When trains are five minutes late, they are counted as “on time”. They announce the approach of a train to the station, when the system already knows that the train won’t arrive for another ten or fifteen minutes — you’re standing on the edge of the platform ready — an then the display boards start “updating” at the very moment when the train was supposed to arrive. They dodge the reliability monitoring system completely, when they pretend that there are “the wrong sort of leaves on the line”, or “the wrong kind of snowflakes” etc. — so that those schedule slots are simply not counted toward missing reliability targets (I can’t even count on all my fingers and toes, the number of times trains have been cancelled,e when the REAL reason for this — as I’ve been informed by the staff at the station — is because the train driver couldn’t be bothered to get up on time for the first train of the day! But the train companies don’t solve this mess by training enough new drivers — instead they all prefer to poach “experienced” drivers from each other, leaving the system with a chronic shortage that is never fixed. So the existing train drivers effectively know that they cannot be fired.)

I have a strong suspicion that in the largely Anglo-Saxon free-market North Eastern USA (New England etc.); you would end up with the same results as we are getting in the old England from the same experiment…

If the main argument in favour of privatisation is to improve customer service, then I’m sorry, but that’s a tired old argument that has been proven to be a lie.

Posted by matthewslyman | Report as abusive

Perhaps instead of privatizing AmTrak the government should raise the prices of it to reflect the actual costs. Perhaps the people that use the service should be paying for the service instead of people hundreds, or even thousands of miles away.

Or maybe we should think even further outside the box and push for more telecommuting so the wasteful, polluting, travel is no longer needed. I live two miles from where I work, I drive a fuel efficient car. If you live 2 hours from where you work, perhaps you should move closer to your job, or find a job closer to where you live. I would be all for a program that helps incentivise employers to allow for telecommuting when feasable.

Passenger rail = wasteful spending.

Posted by TheNewWorld | Report as abusive

Make the MTA Commuter Railroads More Efficent.

The MTA seems only to implement small changes. They have not made more aggressive changes in order to get more support of all modes of public transportation. The public transport must be accessible, convenient, reliable and frequent. Public transport must also be simple and direct so that a person can get to their final destination. Here on Long Island, the LIRR however seems to have two classes service for their commuters. One type service is at electrified stations. These stations in most cases offer the criteria of convenient, reliable and frequent service. This type also offers simple and direct so that a person can get to their final destination. The second type is train service from non- electrified stations. This train service from these maybe reliable, but is sometimes not convenient because it is not frequent as electrified stations.
To bring better train service to non- electrified rail lines access to Penn Station for the LIRR. Better access to Penn Station means the start of train service from Metro-North Upper Hudson Division to Penn Station and continues onto the Long Island Railroads Upper Port Jefferson Branch after a change of crews. This type of train service is similar to Amtrak Baseball Special which operated between Albany and Shea Stadium Station, on the LIRR Port Washington Branch.
This would give the Long Island Railroads Upper Port Jefferson Branch more direct through train service to a Manhattan Railroad Terminal. At present the LIRR Upper Port Jefferson Branch, only offers two peak round trips and some holiday service through service to Penn Station. This year they have modified their direct train service to Penn by offering one round trip on a modified weekend schedule during bad weather on Monday –Friday.
All commuters have to remember that the Eastside Access to Grand Central is for electric trains; the Long Island Railroads’ non-electric lines commuters who live near the Upper Port Jefferson Branch, would have to ether drive and park their car at an electrified station or change trains probably at Jamaica to get the same destination. This defeats the purpose of having fewer cars on the road and not making the MTA’s two commuter railroads more efficient.

If you want more detailed information please read about proposal by Metro-North, to operate beach trains to Long Island using dual mode train sets. See New York Times Articles 1991-1993. One such article is entitled “‘back To the Beach”. Metro-North did not go through with this at the time, because they said it not generate enough passengers to cover the fare. Also See Newsday July 1991 article for more info on Albany and Port Jefferson Station train.
This interstate train service between Metro-North and the LIRR, would give Long Islands sport fans better access to trains to Yankee Stadium at Metro-North’s Yonkers Station.
Let’s find and spend public dollars wisely for all commuters who use our railroads and improve service.

Posted by christrain1 | Report as abusive

Wapshot says: “Business built the railroads [....]” Doesn’t he know about the government’s role in obtaining the land for right-of-way? Here is the typical blindness–or is it a con–of the privatization boys, advocating transferring public resources and publicly-created properties at little or no cost to private ownership, which then can strip out the profitable components and sell-off or dump the rest. It is essentially more vulture capitalism applied to publicly-owned holdings.

Posted by bcrawf | Report as abusive

My experience years ago with the “Friendly Southern Pacific” rail line soured my commuting experience from Redwood City to San Francisco. Just a 26-mile trip, but fraught with delayed trains, early evening closing, and often a cattle car crowding. It prompted my move into the city. The railroads have so declined in service and its offerings that I despair that this country will ever put together a system that could rival the European rails. Too much politics, too little concern for the American traveler.

Posted by act1 | Report as abusive

I was going to comment at length but “upstater” said it all perfectly. Privatization of what should be a nationwide infrastructure issue is idiotic in the extreme. We’ve got to overcome the influence of the road building lobby and do what is best for a country that is continuing to grow exponentially in terms of population.

Posted by explorer08 | Report as abusive

I will leave the debate over privatization to others. However, many of the problems AMTRAK faces seems to be independent of whether it is public or private:
1) AMTRAK lacks critical mass. The system is incomplete and runs most routes with too sparse a schedule for a large enough customer base to develop.
2) Unions in quasi-public subsidized entities like AMTRAK and the Post Office are a guarantee of high costs, inefficiency, and total abuse of the customers.
3) AMTRAK subsidies are out in the open – the much larger government subsidies to alternate forms of transportation are much less transparent to the public.
4) Many in government WANT AMTRAK TO FAIL on ideological grounds and do everything they can to make that happen.
5) Freight railroads continue to refuse to work with AMTRAK.

Posted by QuietThinker | Report as abusive