Thursday, April 28, 2011

The FORBES view on high-speed rail; just as you would expect.

Here's today's HSR article from FORBES.  Yes, it's conservative.  And, this article, frankly, leaves a lot to be desired.  There are hostilities that go well beyond high-speed rail and weaken Warren Meyer's case.  (I'll do the wild-eyed ranting and raving around here!)

On the other hand, he has some salient things to say about high-speed rail and it behooves us to read and think about these points.  Let's see if we can edit his article to more reasonable length and greater focus on the key issue, HSR.

Perhaps I like what he says about HSR here because it's what you have been reading in these blogs for many months.  Freight rail good; passenger rail, not so much. 

Public transit (urban or inter-city) was at its most efficient in the days of private ownership.  In the hands of local, regional or national government, not so much.  

It's important to say here that in this blog there is no ideological intent to say that private management is universally good, while all public government management is bad.  That's far too simplistic. And, it is the conservative Republican mantra.

However, it is the case that this high-speed rail program has lacked private interests or investments because it is perceived as lacking a solid economic base. And, the government's role in promoting high-speed rail has obviously not been one of confronting vast transit and transportation deficiencies well understood.  

Although there have been rail mavens who've discussed  and promoted high-speed trains ever since the Japanese Shinkansen trains took to the rails, HSR only became a government "vision" with the stimulus fund backing from the Obama Administration.  And that was intended to be a quick fix for the Recession, not a strategic plan to propel passenger transit into the future, the Administration's rhetoric to the contrary notwithstanding.

Without those stimulus funds, most of the $10 billion high-speed rail bond issue in California would be still sitting idly, waiting for matching financial support that will never arrive.  In short, HSR is a political, not a transportation policy; a sleight of hand magic trick.

The bottom line in Meyer's reasoning is that passenger rail, government owned and operated, is not a good public investment. (in FORBES, that's a biblical truism, of course.) I'm not as certain about that as Mayer appears to be.  I still believe that local, urban and regional rail has a place and it can and should be government supported, like any public service utility. 

But, high-speed rail in government hands has the same future as Amtrak, an ever inadequate, subsidy supported inter-city transit provider with fractional use by the traveling public. If you think Amtrak is a poor investment, wait 'till you see high-speed rail start laying tracks.

Shifting Capital From the Productive to the Sexy
Apr. 28 2011 - 1:17 pm 

Warren Meyer


In particular, both Friedman and Epstein think we need to build more high speed passenger trains.  

This is exactly the kind of gauzy non-fact-based wishful thinking that makes me extremely pleased that these folks do not have the dictatorial powers they long for.   High speed rail is a terrible investment, a black hole for pouring away money, that has little net impact on efficiency or pollution.   But rail is a powerful example because it demonstrates exactly how this bias for high-profile triumphal projects causes people to miss the obvious.

Which is this:  The US rail system, unlike nearly every other system in the world, was built (mostly) by private individuals with private capital.  It is operated privately, and runs without taxpayer subsidies.    And, it is by far the greatest rail system in the world.  It has by far the cheapest rates in the world (1/2 of China’s, 1/8 of Germany’s).  But here is the real key:  it is almost all freight.

As a percentage, far more freight moves in the US by rail (vs. truck) than almost any other country in the world.  Europe and Japan are not even close.  Specifically, about 40% of US freight moves by rail, vs. just 10% or so in Europe and less than 5% in Japan.   As a result, far more of European and Japanese freight jams up the highways in trucks than in the United States.  For example, the percentage of freight that hits the roads in Japan is nearly double that of the US.

You see, passenger rail is sexy and pretty and visible.  You can build grand stations and entertain visiting dignitaries on your high-speed trains.  This is why statist governments have invested so much in passenger rail — not to be more efficient, but to awe their citizens and foreign observers.

But there is little efficiency improvement in moving passengers by rail vs. other modes.   Most of the energy consumed goes into hauling not the passengers themselves, but the weight of increasingly plush rail cars.  Trains have to be really, really full all the time to make an energy savings for high-speed rail vs. cars or even planes, and they seldom are full.  I had a lovely trip on the high speed rail last summer between London and Paris and back through the Chunnel — especially nice because my son and I had the rail car entirely to ourselves both ways.

The real rail efficiency comes from moving freight.  As compared to passenger rail, more of the total energy budget is used moving the actual freight rather than the cars themselves.  Freight is far more efficient to move by rail than by road, but only the US moves a substantial amount of its freight by rail.    One reason for this is that freight and high-speed passenger traffic have a variety of problems sharing the same rails, so systems that are optimized for one tend to struggle serving the other.

Freight is boring and un-sexy.  Its not a government function in the US.  So intellectuals tend to ignore it, even though it is the far more important, from and energy and environmental standpoint, portion of transport to put on the rails.  In fact, the US would actually probably have even a higher rail modal percentage if the US government had not enforced a regulatory regime (until the Staggers Act) that favored trucks over rail.   If the government really had been asleep the last century, we would be further along.

The US has not been “asleep”  — at least the private individuals who drive progress have not.  We have had huge revolutions in transportation over the last decades during the same period that European nations were sinking billions of dollars into pretty high-speed passenger rails systems for wealthy business travelers.   One such revolution has been containerization, invented here in the US and quickly spread around the world.  Containerization has revolutionized shipping, speeding schedules and reducing costs (and all the while every improvement step was fought by the US and certain local governments).  To the extent American businesses are not investing today, it has more to do with regime uncertainty, not knowing what new taxes or restrictions are coming next from Congress, than any lack of vision.


Oh, and by the way, that Chinese rail system so admired by American intellectuals?   It is $271 billion in debt, and has been forced into radical austerity moves to try to avoid financial disaster.
The Japanese MITI-managed boom of the 80’s, the American housing boom of the last decade, the Spanish green energy program, and now the Chinese rail boom all share this in common:  When governments take steps to divert capital from its most productive uses to sexy, high-profile, politically populist uses, busts always follow.