Shifting Capital from the Productive to the Sexy

My Forbes column this week focuses on the US rail system, and argues that despite all the angst that we are somehow missing the boat in emulating Europe, Japan and China in building expensive bullet trains, we actually have the best rail system in the world.

These writers worry that the US is somehow being left behind by China because its government builds more stuff.  We are “asleep.”  Well, here is my retort: Most of the great progress in this country occured 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.

  • sch

    Freight trains do not get along at all well with passenger trains, which is why when the scheduling
    gets a bit out of synch, Amtrak can be 6 to 12 hrs
    delayed, because Amtrak is run 10-30mph faster than
    the freight trains the delicate dance shuffling freights
    onto side lines out of Amtraks way, once out of synch
    takes a long time to re arrange. European and Japanese
    rail are high speed passenger rail with freight a
    secondary consideration, not allowed to interfere. Best
    setup is parallel system, but this is horrendously
    expensive, even in places (like US) where land is
    relatively cheap compared to Japan/Europe and pop density makes new tracks much more complex. Another
    poster noted that China may rue the day it dumped $250B
    into high speed rail, which competes with short hop
    airlines, another growing business in China, where
    new airplanes competing in the 90-200 passenger range
    are being developed and may encroach on Boeing/Eads/
    Embraer/Bombardier cash cows at least in Asia/Africa.

  • Paul

    Interesting. I coincidentally made some of the same points reviewing a book on China which described the US rail system as "decrepit". http://edagraffiti.com/?p=950

  • Sameer Parekh

    you are so wrong. freight trains are so sexy. it's passenger trains that are lame and boring.

  • Don

    A funny story: There used to be a train called "the Hill Country Flier" operating in the Austin, TX area. They were a non-profit that gave train rides on some tracks around Central Texas to pay for restoring and maintaining the old Steam locomotives, club and diner cars they used. They were sued for ADA compliance and lost, so they had to shut down (there's no way to make the aisles wide enough without completely tearing the cars apart).

    So one of the few instances in the country where passenger rail is sustainable gets shut down by the big monopolistic owner of their biggest competitor (the Federal Government).

    And Sameer, Steam Locomotives are sexier :^).

  • http://stfuretard.blogspot.com Retardo

    As you imply, the Federal government subsidized rail out west in the 1800s with cheap land etc. Much has been made of that fact recently in some quarters on the left. In their minds it proves that government deserves sole credit for the entire history of American railroads (which is true in roughly the same sense that the late Barack Obama Sr. is the president of the United States).

  • Doug

    Retardo: I love it. I must remember that analogy.

  • http://www.spotonpolitics.com/blog Rich

    Don: The Hill Country Flier is still in operation. They are using a 1960's diesel engine right now while the old steam engine is being restored but they definitely have not shut down and are still a non-profit group. http://www.austinsteamtrain.org/

  • Smock Puppet

    > 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.

    Funny, this is exactly the kind of gauzy non-fact-based wishful thinking that makes me extremely unhappy that *I* do not have the dictatorial powers *I* long for...

    :^D

    Two words: "Fool killed".

  • IgotBupkis

    >> Freight trains do not get along at all well with passenger trains, which is why when the scheduling gets a bit out of synch, Amtrak can be 6 to 12 hrs delayed, because Amtrak is run 10-30mph faster than the freight trains the delicate dance shuffling freights onto side lines out of Amtraks way, once out of synch takes a long time to re arrange.

    Actually, there is a much more critical key factor which makes freight trains incompatible with passenger trains, and that is the speed-vs-weight issue.

    The higher speeds at which passenger rail needs to have to compete -- and we're not talking bullet trains, just "can we keep up with an auto?" speeds -- require finer tolerances in the rails and less variance in rail-to-rail.

    Anyone who has watched a passing freight train from a car has or should have noted how much the tremendous weight of many of the cars causes the rail bed, and hence the rails, to flex and shift. This doesn't have a great effect on the freight train, but it's a damned sure bet it does have a tremendous effect on the fine tolerances that higher-speed passenger rail requires.

    I've not done the math but I'll lay odds that tolerance jolts go up on the order of the square of the speed dx... That not only affects passenger comfort substantially, but, again, my guess is it will also cause issues with serious mechanical shock failures in the undercarriages over time, both from direct metal fatigue and from general deformation of smooth rolling surfaces.

  • IgotBupkis

    BTW, I distinctly recall that Japan (and presumably, by extension France), has crews out nightly tweaking their bullet train rail system to deal with shifts during the day from usage.

    Such a labor-intensive activity almost certainly does a nasty tap dance on the Bottom Line.

  • Pat O'Connor

    I recall a quote from one of the guys who helped set up the US rail system (don't know the name) along the lines of that "you cannot make money carrying anything with legs". By that he meant that humans and livestock were a money loser. Nothing's changed.

  • sch

    I thought my post long enough to not mention the speed
    factor of passenger versus freight trains. The present
    US rail system is a freight only system laid out for
    trains in the 50-90mph range but freight rarely goes
    over 60mph and passenger trains run 50-70mph. There are
    very few tracks that allow a consistent above 80mph
    train to run for any distance. This limitation and the
    need to interleave passenger trains with freights severely
    limit the attraction of Amtrak where the average speed
    is in the sub 50mph range, barely reaching 52mph on the
    fastest train (Acela in New England).

  • Sean

    In today's NY Timies, there is an article on moving freight in China. http://www.nytimes.com/2011/04/29/business/global/29truckers.html?_r=1&ref=business it goes mostly by independent truckers and sounds like most folks are not happy with the situation.

  • marco73

    Intellectuals and elites cannot be bothered to respond to your arguments with counter facts or data. That's why
    I love the intellectual retort at the end of the article: "You should get out of the country more."
    There is a program for American citizens to see the rest of the world. You get to see the hellholes hiding behind the shiny new rail stations, usually while serving to protect people of every color while their totalitarian leaders try to kill them. It's called the United States Military. Maybe some intellectuals should try on a pair of boots sometimes.

  • bobby b

    "Actually, there is a much more critical key factor which makes freight trains incompatible with passenger trains, and that is the speed-vs-weight issue"

    Not a problem.

    By the time high speed passenger rail is ready to launch in its new metro areas, BO will have wisely tripled the cost of shipping via train by having the Shadow Government in the EPA administratively impose a cap-and-trade system on rail freight, and so, as freight shippers move away from shipping via the expensive rail system and rail companies react by shutting off capacity, the track conflicts simply won't be more than a minor issue.

    Look, He's already told us clearly that he WANTS high speed rail all over the country, (and soon, dammit!) as a mighty symbol of our love for Him and his Hope\Change Branding Theme, and we can either make it happen, or he'll step in and do it himself, again, but either way it's damn well gonna get done. And if he needs to bankrupt and shut down the country's freight shipping industry to do it, well, some eggs are gonna get scrambled, ya' know, and maybe the truckers shoulda bought Prius electric cargo carts or something instead of those huge gawdawful gas-guzzling behemoth Monster trucks . . .

  • Don

    Rich,

    Great news! I just remember that I was going to take my Wife for a trip on her birthday one year and when I called the office to make a reservation, they told me they were shutting down because of the legal problems. Glad they found a way around that lunacy.

  • Hasdrubal

    I like to respond to the comments about government subsidies to the early rail system, especially the transcontinentals, with the Great Northern Railroad: It was built with 0 subsidies and was one of the first three transcontinental railroads, and was entirely profitable and competitive with the subsidized lines.

    The railroads would have been built regardless of the subsidies. But they sure weren't going to turn down free money when offered, so naturally they took advantage of it when it was there.

  • Douglas2

    I'd like to say a hearty "Hear, hear!" to this.

    But then point out that in the comparison of freight percentages by transport mode between Europe and the USA, there is a missing puzzle piece which is "cargo ship"

    Port-to-port shipping makes more sense than rail for much of the shipping in Europe, and would also make more sense for much of the shipping in the US if protectionist laws and regulations did not make it uncompetitive.

    I suppose that counts as a subsidy too...

  • Bill

    please keep beating this drum.

    eventually some politicos will listen.

  • ElamBend

    Great article in the NyTimes today about all the decrepit trucks that make up the backbone of Chinese freight hauling:
    http://www.nytimes.com/2011/04/29/business/global/29truckers.html

    Maybe if China had invested that high speed rail money into just updating and expanding its freight rail system

  • Chris Brooks

    The fact that one transcontinental RR was built entirely with private capital does not square with the claim that the US rail system "was built (mostly) by private individuals with private capital", because all the other transcontinental RRs and many regional RRs were built because of the government subsidies that were provided - mostly free land (not "cheap land," FREE land), millions of acres of it, some of it prime real estate, much of it still owned by those railroads, who are among the largest private landowners in the west. Those subsidies meant that much more track was laid than was actually economically efficient, resulting in thousands of miles of abandoned track, currently, and the best routes remaining to become "by far the greatest rail system in the world." Also lets not forget the hey-day of the American RRs when they drove competitors out of business by ruthlessly undercutting prices and taking losses on certain routes and colluding to raise rates on other routes. sure this rail system is currently something we should take pride in as Americans, but don't make up fantasies to support your view of how it got that way.

  • Husker

    Warren, right now I'm in Germany, and I took a very nice train trip from Regensburg over to Frankfurt for my flight tomorrow. It was still 40 minutes late, though. However, yesterday I had to drive over to a different city nearby Regensburg for a meeting, and was going 50 KPH on a 100 KPH road because about six large freight trucks were poking their way down the highway, when it would be been far more efficient to ship that stuff by rail. And, unfortunately, there was no place to pass.

  • chuck martel

    "mostly free land" So what? The "might makes right" theory that the US government used to acquire the property of native Americans gives it some sort of ownership that enables it to give away "free" land? Seward shipping $7 million to the czar gives the US title to Alaska? It's a pathetic joke. All federal land should have been disbursed to the private sector, preferably its former owners, decades ago.

  • me

    So, as someone who *loves* taking the trains in Europe... the idea of adopting passenger transportation in the same manner in the US is ludicruous - the distance between urban centers is much greater, the population density even in the most settled places is nowhere close and there is a perfectly good system of highways and airports. Also, the risk of natural catastrophes damaging the installed rails is way higher here.

    If at all, some European countries ought to look into shifting more freight onto rails.

  • Not Sure

    "So, as someone who *loves* taking the trains in Europe… the idea of adopting passenger transportation in the same manner in the US is ludicruous – the distance between urban centers is much greater, the population density even in the most settled places is nowhere close and there is a perfectly good system of highways and airports. Also, the risk of natural catastrophes damaging the installed rails is way higher here."

    Yeah, but... trains!

  • Allen

    Chris Brooks, I'm not sure where you get your information that railroads are among the largest land owners in the west today. I couldn't find anything to collaborate that. It definitely doesn't look that way from the last BNSF annual report nor UP's.

    As for the Transcontinental, it wasn't just one. There was also the Western Pacific and the Milwaukee Road. In fact the Western Pacific's line paralleled the CC / SP's line to the point of often running on the other side of the river from each other. If the WP could build a 2nd line without massive gov't. dollars, surely the 1st line on that route could've done without.

    The rule of thumb I've ran across in history books is that less than 10% of total track mileage was built in the US was built with subsidies (direct payments, land grants, et al.). I wouldn't say that was a huge contributor to track being overbuilt. In fact, I'm not sure what is meant by overbuilt. Sure, there were railroads like the Colorado Midland that should've been put out of their misery early on. But they didn't get land grants. It was built by investors betting that being the first standard gauge railroad through the area would give them the competitive edge they needed to overcome their very costly ongoing maintenance costs. More so, much track was made redundant not because it was never needed but because of technology. CTC allowed double tracked lines to revert to single track. Large grain elevators, spurred on by unit trains (or was it the other way around?) meant that there were less elevators on lines to be serviced making many lines surplus.