NATIONALIZATION OF THE RAILROADS

[joesap1]

Did you read the Railway Post Office in the latest edition of TRAINS?

There is a letter there from a gentleman in Georgia who is commenting on Don Phillips' column about the British railway system. Phillips expounds at great length that the British government has turned a once ineffective rail system into one to be admired.

The gentleman from Georgia concludes his letter with a statement to the effect that if we unite and push for nationization of the railroads, we, too, can reach the pinnacle that Britain achieved.

Has Great Britain really achieved success or is this just one man's opinion?
Consider that Britain has a national health care system that is paid for by the 17% Value Added Tax that is applied to every purchase. Their healthcare system is also one of the worst in the world. Without any incentive, very little research is done in Britain and they have very few new medical machines.

In the seventies Jaguar was turning out poor quality automobiles as they were part of the conglomerate British Leyland. Jaguar bought itself out from under British Leyland and began building cars people wanted. They got too popular, I suppose, since Ford snatched them up.

Bigger is not always better. The last thing we need is our corrupt, incompetent government taking over our free enterprise railway system!

What do you think?

[Anonymous]

Good comments Joe. Only an economic illiterate would promote nationalization. We saw communism collapse because, among other things, it was economically inefficient. We saw Canadian National privitize in order to compete with private Canadian Pacific. We have Amtrack excel at nothing except losing money. We need more privitization such as the post office and social security, not more nationalization. Larry

[DSchmitt]

The US tried nationalized railroads once. The result was some standardization of equipment which was good and a physical plant in such bad shape that it took years to rebuild.

No matter how bad they screw thing up the Socialists always claim they will do better next time. They just weren't given enough time and allowed to spend enough money.

[andrewjonathon]

I haven't read the article but if they are talking about recent times wasn't a key change privatizing the operations of a system that was already nationalized system?

[eastside]

QUOTE: Originally posted by DSchmitt

The US tried nationalized railroads once. The result was some standardization of equipment which was good and a physical plant in such bad shape that it took years to rebuild.

I believe your speaking of the time during WWI, when the Government "leased" the railroads, invested almost nothing, ran the equipment into the ground, and left them in a shambles. During WWII the Government, having learned its lessons in the previous conflict, effectively ran the railroads instead by fiat by decreeing loads, investment policies, etc. This time, however, most made nice profits.

[Anonymous]

QUOTE: Originally posted by joesap1

Did you read the Railway Post Office in the latest edition of TRAINS?

There is a letter there from a gentleman in Georgia who is commenting on Don Phillips' column about the British railway system. Phillips expounds at great length that the British government has turned a once ineffective rail system into one to be admired.

The gentleman from Georgia concludes his letter with a statement to the effect that if we unite and push for nationization of the railroads, we, too, can reach the pinnacle that Britain achieved.

Has Great Britain really achieved success or is this just one man's opinion?
Consider that Britain has a national health care system that is paid for by the 17% Value Added Tax that is applied to every purchase. Their healthcare system is also one of the worst in the world. Without any incentive, very little research is done in Britain and they have very few new medical machines.

In the seventies Jaguar was turning out poor quality automobiles as they were part of the conglomerate British Leyland. Jaguar bought itself out from under British Leyland and began building cars people wanted. They got too popular, I suppose, since Ford snatched them up.

Bigger is not always better. The last thing we need is our corrupt, incompetent government taking over our free enterprise railway system!

What do you think?

Joe,

Both Don Phillips and the Georgia Gentleman are about 50 years behind the times. Great Britian nationalized their rail system around WWII. They de-nationalized their rail system a few years ago into a privately held open access system, albeit by a not-for-profit entity. So basically they took a private closed access system, nationalized for 5 decades, then returned it to the private sector as a private open access system. The rail service providers are now a mix of private and public entities.

Therefore, I will agree with your last statement that nationalization of the railroads is a bad idea, unless they nationalize temporarily to consolidate the system, then de-nationalize it into separate private infrastructure and private rail service providers, although it would be a shame to have to go to those lengths to reap the open access benefits. Just convert to open access already and be done with it.

The idea of a nationalized rail network is an anachronism, but then again the same can be argued for the proprietary closed access system we have now. The former is a socialist relic, the latter an example of monopolistic fascism. Neither can claim the macro-economic benefits of true head to head competition among rail service providers that acrue under open access systems. The rest of the world is discovering the economic benefits of open access systems, although they had to stumble into it unwittingly after they scrapped their failed nationalized systems. I guess it is true in some instances - you have to go through hell before you get to heaven.

[daveklepper]

Except for passenger service, which all over the world is becoming a Government responsibility, I think the present system, with its flaws, is still best. What is needed is fairer treatment taxwise for rail freight in general, and more private-public local partnerships to solve specific problems. And more shipper owned railroads. Certain railroad properties are really public service properties and taxes should be waved. I certainly hope that CSX doesn't have to pay real estate taxes on the Baltimore museum!

[CSSHEGEWISCH]

Hemphill had a good rebuttal to the nationalization argument in his column in the same issue. Most people think that railroads are a public service provider who should provide "necessary" services without regard to profit while the investors reasonably expect the railroad to operate in a way to maximize profit.

Nationalization would lead to politicization and stagnation of the railroads. Australians are very familiar with the former and the British Rail experience prior to Beeching demonstrates the latter.

[Anonymous]

What I was pointing out was the irony of those overseas systems having to devolve into a nationalized system before they finally evolved into the private open access system. We Americans are supposed to be the most advanced nation, so if that's so then we should be able to evolved into a functional open access system without going through the strangulation of nationalization or continuing down the dead end path of proprietary closed access. I'm all for waving taxes on railroads if it can be proven they are competing head to head with no captive shippers. The fact is, the railroads have chosen to remain proprietary closed access systems, and by default choose to be taxed in that vein.

[BaltACD]

QUOTE: Originally posted by daveklepper

Except for passenger service, which all over the world is becoming a Government responsibility, I think the present system, with its flaws, is still best. What is needed is fairer treatment taxwise for rail freight in general, and more private-public local partnerships to solve specific problems. And more shipper owned railroads. Certain railroad properties are really public service properties and taxes should be waved. I certainly hope that CSX doesn't have to pay real estate taxes on the Baltimore museum!

The B&O Museum is not a part of CSX....it is it's own entity.

[CSSHEGEWISCH]

QUOTE: Originally posted by futuremodal
The fact is, the railroads have chosen to remain proprietary closed access systems, and by default choose to be taxed in that vein.

So what's so bad about that.

[Anonymous]

QUOTE: Originally posted by CSSHEGEWISCH

QUOTE: Originally posted by futuremodal
The fact is, the railroads have chosen to remain proprietary closed access systems, and by default choose to be taxed in that vein.

So what's so bad about that.

Depends on your POV. If you're a captive shipper, it means higher transportation rates relative to non-captive shippers. If you're a U.S. exporter, it means you're paying higher costs to get your goods from point of origin to the nearest port, relative to what your foreign competitors are paying to move the same product the same distance.

If you're a Class I, it means you have to average 180% of revenues above variable costs to achieve revenue adequacy, and if your non-captive shippers only pay 108% above costs (similar to profit margins of transport modes who use public ROW's), then you have to charge your captive shippers 237% above costs to "break even", but of course no one in their right mind would want to remain a captive shipper, so as their plant comes to a replacement age they either move overseas or find a spot in the U.S. with some semblence of head to head rail competition, so eventually your pool of captive shippers shrinks and you're stuck with this expensive ROW that you can't sustain due to the loss of your "cream" customers who've left the country or your captured territory, and as this triggers the next big recession the federales are going to scapegoat you and either re-regulate or nationalize you with only minimal compensation.

Eventually, shippers will start to question why they are paying premiums for transportation while their overseas competitors are not. Since industries that ship by rail make up a larger portion of the tax base (and have more lobbying influence) than does the rail industry, it won't be long until something draconian is forced upon the Class I's, unless they pre-empt such actions by taking the necessary action themselves.

[daveklepper]

It would appear that a smart railroad management would not adopt the stratergy mentioned because they would want to retain the business of the "captive shipper" long term.

[CSSHEGEWISCH]

Geography is also a factor. Few foreign competitors are as far from tidewater as American manufacturers.

I wonder how much of a contribution UPS (one of railroading's largest customers) makes to the tax base. Since most UPS traffic is high-rated, the railroads are more willing to provide the service that UPS is willing to PAY for. If you prefer a less than premium rate, you will get appropriate service.

A small "captive" shipper does have an alternative if he doesn't like railroad rates or service. It's called the truck.

[Anonymous]

QUOTE: Originally posted by CSSHEGEWISCH

Geography is also a factor. Few foreign competitors are as far from tidewater as American manufacturers.

I wonder how much of a contribution UPS (one of railroading's largest customers) makes to the tax base. Since most UPS traffic is high-rated, the railroads are more willing to provide the service that UPS is willing to PAY for. If you prefer a less than premium rate, you will get appropriate service.

A small "captive" shipper does have an alternative if he doesn't like railroad rates or service. It's called the truck.

Your comment on geography is a sweeping generalization. Last time I looked at an atlas, Australia is rather large, the Asian continent is rather large, and there is no reason to believe their shippers are closer to tidewater than U.S.shippers.

Regarding UPS, remember that UP kicked them off their lines because they couldn't handle their business. UPS is willing to pay a rate for rail service if it is less expensive than going over the road. When a Class I muffs it, it doesn't matter how much the customer is willing to pay.

So the captive shipper can just switch to trucks?!? To deliver chemicals? Autos? Or maybe they should start up a truck based TOFC service when the railroads can't handle it! Imagine it, a trailer riding piggyback on another trailer! If in this global economy a U.S. based manufacturer or producer can't get expedient rail service, it is more likely they will switch countries or shut down and reinvest elsewhere rather than switch to trucks, because otherwise they cannot compete with overseas firms. "Let switch to trucks" is the railroad version of "Let them eat cake" and is just as based on arrogant ignorance. I say "Off with their heads"!

[joesap1]

All of your comments have merit, but I think the suggestion that we should move toward open access amongst the railroads is worthy of consideration. Is it possible to work out the details, as to MOW etc, and still keep the railroads separate and competitive?
Open access sure sounds good, but it probably only a pipe dream at best. Human greed always creeps in and wrecks a share and share alike plan.
What do you think?

[Anonymous]

Come to think of it, the feds could nationalize just the infrastructure and leave the rail service provisions in the hands of private operators.

[Anonymous]

Nationalization will not happen.

[selector]

I keep telling people that the more often you look to government to solve all of your problems, the more power you give them to regulate your life!!!

"No, can't marry Jill S. WE have determined that your genetics are a better match with Sally F. Don't like her? Pray, how is this relevant? Go register for the marriage by next Monday or face sanction."

Does that sort of regulation make you feel all warm and fuzzy? Start with nationalization and see what follows.

[Anonymous]

As far as I can tell, no one on either side of the open access argument wants de facto wholesale railroad nationalization to take place. But if you think nationalization is impossible in a representative republic, don't forget that most of the WWII Allies were democracies. The economic devastation of WWII was the driving force that resulted in the nationalization of those countries' rail systems. If a similar economic hit takes place in the U.S., there will be plenty of voices on the left who will suggest nationalization as a way to revive the economy.

What I have pointed out is that nationalization of the rail infrastructure wouldn't be all that bad, because ROW ownership tends to be a nominal function of government anyway (highways, waterways, etc.) It wouldn't be nearly as beneficial as having infrastructure operated as private regulated utilities, because then you still have a profit motive to improve services. HOWEVER, if the entire railroad industry was nationalized (including rail services), that would be a complete economic disaster, if Amtrak is any indication of how the federal government would run things.

[METRO]

A main problem with the railroads is an infastructure gap against their compeditors:

Trucking companies need only own their terminals, shops and fleet, the roads are public domain. The same is true to a lesser extent with most other forms of transit, except for rail.

The railroad network is largely a closed system of private corporations. They own the tracks, facilities, rolling stock and in some cases a great amount more (some of the nation's strongest fincancial entities and funds were started for and by the railroads to name one instance) The effect of this is seen in the United States and Canada: The gradual elbowing out of smaller regional players and short lines by unbelivably large class-1s.

Government reorganization has worked before, we called it Conrail. Now I know I'm going to catch flack for that one, yes Conrail was horribly disorganized and bleeding funds while still a government entity, but eventually it was made profitable by private venture, which was the original intent.

The main lesson of Conrail, in my mind, was that the government can do a great thing by temporarily nationalizing failing railroads, rebuilding them (the difference between PennCentral tracks and Conrail track was night and day) and then re-privatizing them.

America is too large, and not of the right culture to accept a federal rail system like those in France or Germany, we are a for-profit people with a non-profit government, and that does not lend well to nationalization.

Regulation and corporate bail-outs are a different story and the ICC has a vital role in providing a stable rail system in America, as has been proven time and time again. What I believe we should strive for, after twenty years of mega-mergers and trackage that changes hands like ground in a battlefield, is balance in the national system. Let us design a North American rail plan that will be solid for years to come.

The future of rail in America is assured thought bulk shipments and the advent of intermodal, but the key to keeping it stable is understanding that rail in North America is different from anywhere else in the world. Certain elements may be shared with other nations' systems but nowhere has a network or setup quite like ours. As such while it is possible to look at what the Japan or France does on smaller issues such as a signal system, it's fooli***o look at something as complex as nationalization and just apply another nation's system.

My final point is one of geography, North America is a big big place. Two of the three largest nations on earth by landmass are contained within and that makes thigs very different from a nation like Japan or the UK with their shorter distances. Even a nation like the European Union is only now starting to feel out how distance rail works in their country. Until now Europe consisted of separate nations, each with their own distict and (what we Americans would term) regional rail systems. Now that Europe is united, it's faced with integrating that system of regional rail lines, shaped by wars and very different economies, into a national long distance transportation network. In America we have far fewer players and a functioning network in place, nothing as radical as nationalization is needed to "fix" our rail system. Instead careful and wise regulations and guidance by the government along with willing private enterprise will win the day.

~METRO

[daveklepper]

I agree completely with the previous posting. But I also believe that a National Railway Passenger network is a NECESSITY for a really great USA so that every citizen can have access to the entire country, and both the capital investment and the subsidies should be both recognized and provided.

[spbed]

I gave this more thought & I wonder if the pols in Montana realize that we are a capitalist country where the laws of supply & demand govern our economy. [:o)]

QUOTE: Originally posted by daveklepper

I agree completely with the previous posting. But I also believe that a National Railway Passenger network is a NECESSITY for a really great USA so that every citizen can have access to the entire country, and both the capital investment and the subsidies should be both recognized and provided.

[Anonymous]

QUOTE: Originally posted by joesap1

Did you read the Railway Post Office in the latest edition of TRAINS?

There is a letter there from a gentleman in Georgia who is commenting on Don Phillips' column about the British railway system. Phillips expounds at great length that the British government has turned a once ineffective rail system into one to be admired.

The gentleman from Georgia concludes his letter with a statement to the effect that if we unite and push for nationization of the railroads, we, too, can reach the pinnacle that Britain achieved.

Has Great Britain really achieved success or is this just one man's opinion?
Consider that Britain has a national health care system that is paid for by the 17% Value Added Tax that is applied to every purchase. Their healthcare system is also one of the worst in the world. Without any incentive, very little research is done in Britain and they have very few new medical machines.

In the seventies Jaguar was turning out poor quality automobiles as they were part of the conglomerate British Leyland. Jaguar bought itself out from under British Leyland and began building cars people wanted. They got too popular, I suppose, since Ford snatched them up.

Bigger is not always better. The last thing we need is our corrupt, incompetent government taking over our free enterprise railway system!

What do you think?

british rail was put into private hands ,and has been a disaster the only benefit has been that the train drivers union (aslef)has regained its power and can dictate who does what.The NHS is not funded by vat but by national insurance contributions. The NHS is a very modern organisation and your comments regarding machines are laughable. We are very lucky in the uk that going to the doctors,dentists ,hosptial is free .We dont have doctors trying to screw us for money.

[METRO]

daveklepper, yes I totally agree that government has a place in passenger rail travel. Amtrak in the USA and Via in Canada provide an much needed link across the country that only a government could provide.

I believe, Amtrak in particular provides three major needed services:

First, regions such as the Northeast would grind to a gridlocked halt without Amtrak. In dense urban conditons the capacity and reliablity of railroads are the only way to ease congestion of airports and highways that would otherwise shut the area down.

Second, Amtrak provides transportation to areas that otherwise would not have it. La Crosse Wisconsin lost bus service in the past few years. Many college students, including my roomate, take the Empire Builder home for holidays, especially students from Chicago and Milwaukee where it's not economical to own a car. While routes such as this may not be profitable, they greatly increase the quality of life for thier residents and those who have reason to travel there.

Third, rail offers an affordable (usually) alternative to air travel for those who do not have cars, such as those living in major cities. With gas prices what they are, it's cheaper for me to take the train to see friends and family in other cities than it is to rent a car and drive.

I also believe that there is little argument that government controled regional and local commuter transit systems are greatly sucessful. Systems like the NYC MTA, Chicago CTA and Toronto GO Transit are great examples of how a system can be run.

~METRO