Saturday, January 29, 2011

The Trains in Spain Fail Mainly in the Plains

Let's hear no more nonsense about how high-speed trains will have a major positive impact on unemployment and be a benefit to the economy.  Spain has a now famous high-speed train which can claim, among its achievements, a major reduction in air traffic. Environmentalists will claim that's a big benefit.  However, reduced air services also means increased unemployment for the air carriers as well as decreasing revenues.  The growth in one industry that competes with another means that the other will experience the opposite of growth; stagnation or decline. Indeed, the HSR promoters cite such data with pride.

I know, you will say that if it wasn't for the HSR miracle in Spain, things would be even worse.  That is, as always, a specious argument.  And I really don't want to hear this same tiresome claim from train advocates in California.  Here is the case made by these rail promoters.  We must spend multi-billions to build a train that will employ millions of construction and permanent employees, thereby both reducing unemployment, and pumping all those billions into the struggling California economy.  This is the Democratic Party mantra.

Let's just say, don't be so sure.

William Grindley's extensive documentation has made it clear that the assumed net benefits of high-speed rail will be negative.  All the inflated promises about employment gains are grossly exaggerated and the economic impact has yet to be demonstrated, and is, in fact extremely difficult to demonstrate.

We are now reading about cities on high-speed rail lines who experience financial growth vs. cities that don't have the trains or the growth. Take that information with a grain of salt. Correlation does not prove causality.  

While we won't prove that the Spanish HSR line has done nothing to improve the economic picture in Spain, the rail supporters can't prove that it has, or at least that it prevented it from being worse.  Rail advocates have often drawn parallels between California and Spain.  They may be more correct than I have given them credit for. 

Spain jobless rate surges to 20.33 percent

by Katell Abiven
Fri Jan 28, 12:29 pm ET

MADRID (AFP) – Spain announced Friday its jobless rate surged to a 13-year record above 20 percent at the end of 2010, the highest level in the industrialised world, as the economy gasped for air.

It was more bad news for an economy fighting to regain the trust of financial markets and avoid being trapped in a debt quagmire that has engulfed Greece and Ireland and now menaces Portugal.

Another 121,900 people joined Spain's unemployment queues in the final quarter of the year, pushing the total to 4.697 million people, said the national statistics institute INE.

The resulting unemployment rate was 20.33 percent for the end of the year -- easily exceeding Prime Minister Jose Luis Rodriguez Zapatero's target of 19.4 percent.

Spain appears to be stuck in a rut of staggeringly high levels of unemployment.

After posting a jobless rate of 18.83 percent in 2009 and now 20.33 percent in 2010, the government is forecasting 19.3 percent for 2011 and 17.5 percent in 2012.

The Spanish economy, the European Union's fifth biggest, slumped into recession during the second half of 2008 as the global financial meltdown compounded the collapse of a labour-intensive construction boom.

It emerged with tepid growth of just 0.1 percent in the first quarter of 2010 and 0.2 percent in the second but then stalled with zero growth in the third.

Zapatero has said the fourth quarter will show positive growth which would pick up steam in 2011 but he warned that job creation would be "far from what we need and desire. It will be slow and progressive."

Labour Minister Valeriano Gomez said Friday that the latest jobs figures were typical for the period and did not interrupt "a path of progressive improvement" from the depths of economic crisis.

Last month the government announced it was scrapping a 426-euro ($568) monthly subsidy for the long-term unemployed as it cuts spending to slash the public deficit and ease fears that it will need an EU bailout.

The government forecasts a 0.3-percent drop in growth this year will be followed by an expansion of 1.3 percent in 2011.

Madrid estimates 70 percent of the two million jobs which were lost in Spain since the start of the economic downturn were directly or indirectly related to the construction sector.

Last year the government introduced a hotly contested labour market reform that cut the country's high cost of firing workers and gave companies more flexibility to reduce working hours and staff levels in economic downturns -- changes that it argued would boost job creation.

Spaniards see unemployment as Spain's biggest problem and one in two, 49.8 percent, fear the jobless situation will get worse, a poll published by the CIS research firm this month showed.

The Workers' Union (USO), a medium-sized union, called on the government to focus on employment instead of pushing through reforms raising the retirement age from 65 to 67.

"There is no point guaranteeing the future of pensions if there is no work," it said in a statement.

Eight policemen were slightly injured in Madrid late Thursday in clashes with demonstrators protesting the planned pension reforms.

Several people were also arrested after the clashes, which began after protesters set fire to three rubbish containers in the central Puerta del Sol area of the city, the centre-right newspaper El Mundo said on its website.

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