Saturday, January 28, 2012

We're practical and productive regarding freight rail. By building high-speed passenger rail, Europe and Asia are not.

I love it when smart writers make points that agree with those I've made, since I'm not that smart.  Several times in the past we've discussed the fundamental inefficiencies of passenger rail compared to freight rail.  Even full passenger cars are only partially loaded and therefore partially efficient by freight standards. 

The much vaunted efficiencies of freight, for which the US is world leader, disappear when it comes to passenger rail.  No wonder passenger rail can't make money. It's expensive to build and run any trains. Even more so if those trains are intended to go 200 mph. So weight ratios become critical variables of efficiency. HSR fails that test miserably.

Here's an interesting article from FORBES by Warren Meyer, whose articles we have presented here previously. As before, Meyer says a number of things to which I object, even as I agree with his criticism of high-speed rai.

Contrary to his contention, intellectuals are not enamored of totalitarian regimes. To the contrary. The Founding Fathers were intellectuals, followers of Voltaire, David Hume and John Locke.  They carved out this Nation at the risk of charges of treason from the totalitarian regime -- the monarchy -- of the UK.  

However, it is true that intellectuals do see government as a potential vehicle for the common good and the power to make Democracy functional. We are not inherently a self-governing species. Left to our own devices, as the free-market Conservatives would wish, we become Hobbesian brutes and financial savages.

Conservatives oppose government on principle.  Yet their political choices invariably govern with a very heavy hand. But, that's not what concerns us here on this blog.

I don't think that the Left eulogizes China as a paragon of governmental virtue. Indeed, Warren Meyer, himself an intellectual, really knows better than setting up such a simple-minded "straw man" to shoot arrows into. Yet, it is the Obama Administration that has become enormored of China's rage to build as much infrastructure as quickly as they can, including high-speed rail, one of their key vehicles for projecting their prestige around the world.

Said another way, the purpose of high-speed rail in China, as elsewhere, is not primarily transit; it's marketing.

Meyer has it right in his discussion of private enterprise's creative role in increasing the cost efficiency of freight, particularly through the use of containerization. The economic power of containers is their efficiency across modalities, such as ships, trains and trucks.  Once goods are packed, the large, interlocking, easily stacked boxes are easily moved, loaded and unloaded, through technologies which greatly reduce the need for manual labor (like the stevedores and dock workers of yore) and thereby increase productivity at lower labor costs. (As one of my favorite books tells us, Mechanization Takes Command.)

The downside; more permanent unemployment due to reduced jobs numbers required, while profits increase. We can really thank the Industrial Revolution in the past, and the Information Revolution in the present for this awesome increase of per-capita productivity and declining labor needs through technology.  

Meyer's basic contention is one with which I have no disagreement. He says,  "I would argue that the US has the world’s largest commitment to rail where it really matters."  That is, freight. Passenger rail, on the other hand, is Romantic ("The Romance of Rail") which lingers among some old timers, adult model train enthusiasts, and that geekish population that prides itself on the knowledge of all railroad-related trivia. It's vestigial and as it has diminished, it has gained in glamor. High-Speed Rail capitalizes on this dressed up and futuristic -- Back to the Future -- romance.

To be fair, I exclude all the commuters everywhere who do take rail service to get to and from work daily. That's a whole different story. And a totally different cost/benefit equation. I strongly advocate the upgrading of those services in the population centers around the country.

Those of us who have travelled to Europe or Asia and used their high-speed trains usually come back with enthusiastically told stories of enjoyable experiences. Of course.  No one is saying that a high-speed train ride is not a wonderful experience. So is staying at a five-star, first-class, luxury hotel, or flying first-class in a 777.  However, these are experiences for only those who can afford it.  We all know that there are less expensive ways to ride the train, stay in hotels, and fly commercial air.  

First, therefore, before we commence to spend billions we don't have, shouldn't there be a careful and objective analysis, not driven and paid for by industrial vested interests, about what modality upgrades we need to accommodate transportation demands in the future?  We haven't done that.  

Second, should we begin to expand our transit capacity by building the most expensive rail system ever devised, knowing full well that only a very limited number of the total population can avail themselves of this luxury service?  Is that what a Democracy ought to be doing?

You know the answers to those questions as well as I do. 
Warren Meyer, Contributor
1/28/2011 @ 1:17PM
Shifting Capital From the Productive to the Sexy
What is it about intellectuals that seem to, generation after generation, fall in love with totalitarian regimes because of their grand and triumphal projects?  Whether it was the trains running on time in Italy, or the Moscow subways, or now high-speed rail lines in China, western dupes constantly fall for the lure of the great pyramid without seeing the diversion of resources and loss of liberty that went into building it.

Writers like Thomas Friedman and Joel Epstein in the Huffington Post have eulogized China and its monumental spending projects.    These are the same folks who, generations ago, tried disastrously to emulate Mussolini’s “forward-thinking” economic regime in the National Industrial Recovery Act.    

These are the same folks who wanted to emulate MITI’s management of the Japanese economy (which drove them right into a 20-year recession).  These are the same folks who oohed and ahhed over the multi-billion dollar Beijing Olympics venues while ignoring the air that was un-breathable.  

These are the same folks who actually believed the one Cuban health clinic in Sicko actually represented the standard of care received by average citizens.  To outsiders, the costs of these triumphal programs are often not visible, at least not until years or decades later when the rubes have moved on to new man crushes.

These writers worry that the US is somehow being left behind by China because its government builds more stuff than we do.  We are “asleep.”  Well, here is my retort: Most of the great progress in this country occurred when the government was asleep.  The railroads, the steel industry, the auto industry, the computer industry  -  all were built by individuals when the government was at best uninvolved and at worst fighting their progress at every step.

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 for a net 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.

I would argue that the US has the world’s largest commitment to rail where it really matters.  But that is what private actors do, make investments that actually make sense rather than just gain one prestige (anyone know the most recent company Warren Buffet has bought?)  The greens should be demanding that the world emulate us, rather than the other way around.  But the lure of shiny bullet trains and grand passenger concourses will always cause some intellectuals to swoon.

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 80s, 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.

Postscript: This is an update of an article I originally wrote several years ago.   In that original article, Joel Epstein sent me a response by email I feel honor-bound to print in its entirety.  He wrote, “You should get out of the country more often.”  Note that I previously wrote on triumphalism on these pages here.

This article is available online at: 

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