Thursday, June 15, 2006

Privatization a Trend?

Around these parts, government has almost always built roads. Government has rarely built railroads, although it financed the early transcons.

The trend for 60 years of the last century (1910s to 1970s) has always been for government to take over and/or subsidize more and more in the way of railroads. The granddaddy being Conrail, formed from Penn Central (itself a merger of New York Central and Pennsylvania Railroad) and multiple bankrupt eastern railroads, and the grandmama being Amtrak.

All the little siblings in the subsidy or takeover family were the middling to large commuter rail and transit companies that grew together under government sponsorship starting post-WWII.

Nonetheless, the trand was to governmental subsidy, control and/or operation.

Until now.

The harbinger may have been the public sale of stock in Conrail circa 1987. The public got to buy what the public had already bought through taxes. In any case, this was followed by a period of prosperity for Conrail so great that major solvent railroads fought over control of it.

It's a pity that Conrail wasn't formed before Amtrak. If it were, there could now exist a major eastern network of solvent Passenger Rail operations. But we can't change history.

When government agencies get too big for government to successfully control their budgets, one of today's pat solutions is to privatize. We therefore predict a spate of such things as we are seeing with the sale of the Illinois Tollway system to private investors.

With government as big and bloated as it is today, it is almost a given that private enterprise can find a way to do the same job more efficiently. We predict that Amtrak will not be the first target of such bids from private enterprise. The commuter railroads of the west coast or the largely successful small commuter operations of mid-sized cities will be first. If that turns a profit for investors, look to see several of them team up for a run at Amtrak. And don't be surprised if some of them are railroads.

The government subsidies will always remain, of course. The efficient privatized passenger operations of the future will be operating companies (like the original Amtrak). The government will still provide subsidies in the form of rights-of-way or cash to maintain them. That's the only way it will work, because, remember our mantra, passenger rail never has been profitable without a subsidy.

Does anybody but us want to form a company and buy Amtrak?

Please read our sister blog, The Railroad.

© 2006 - C. A. Turek -
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