Yes, there is a better way to run a railroad
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