14.1.06

THE IRON OCEAN. Britain has embarked on, and then backed away from, an extreme experiment in selling a government-owned railroad. The idea of separating ownership of the train service from ownership of the rights-of-way is not new. In March 1967, an aviator named R. Jay wrote an article in Trains proposing that the terminals and stations be owned by local and state governments, and the rights-of-way, signalling and dispatching, and associated maintenance and staff be owned by the national government, with private business owning the rolling stock and associated maintenance and hiring the train crews. He argued that to do so would put the railroads in a similar position with respect to their air and bus competitors for the passenger trade (at this date the notion of a commuter rail authority was still rather daring, and Amtrak some years off) and with respect to their truck and barge competitors for the freight traffic. His article offers an interesting twist on the ad popularum fallacy.
If we the electorate are perfectly happy to fly, float, and roll our persons and commerce in corporate vehicles on Government rights of way, why not allow railroads to run trains on Government tracks?
Forty years later we have a slightly different twist on this. Freight railroads are able to pass market tests. The air carriers, barge lines, and truckers get at best an Incomplete.

The British took the argument one step further, unbundling the operating companies from the rights of way, but at the same time selling the rights of way. What came afterward was not very pleasant. Christian Wolmar documents and interprets the results in On the Wrong Line: How Ideology and Incompetence Wrecked Britain's Railways, which will be this year's Book Review No. 3.

Mr Wolmar, who works with former Western Region signalman Adrian Vaughan on this book, is very open about his preference for an integrated nationalized rail system, arguing that a railway network is best planned and managed at the national level. The failures of state-supported railroad investments in Europe that I learned about at the Semmering Pass conference suggested that such planning and managing might have fewer opportunities to make mistakes, but the mistakes would be more damaging.

But that the British introduced competition in the most extreme way is beyond debate. Rather than have suburban train authorities pay for the use of tracks with the track-owning railroad's train crews and dispatchers shepherding the trains, or allowing trackage and haulage rights or setting up terminal districts, the British separated track ownership from rolling stock ownership from responsibility for meeting the schedules. The intent was to allow for all sorts of creative destruction. The effect was confusion, in that a passenger with a ticket for an 8 am service from one carrier might discover that the 9 am service to the same destination was operated by another carrier that did not honor the ticket. (Here, Mr Jay's analogy to the air carriers breaks down. Airplane boarding is primitive compared to loading trains, but that very primitiveness means there is no chance of a passenger holding an American Airlines ticket to Boston getting anywhere near the United Airlines service. A train passenger expects to wait at trackside, climb aboard, and go.) The confusion was further confounded as the owner of the tracks had to work with other subcontractors to maintain the tracks, and any decision to take a track out of service for work would inconvenience some operating companies more than others. That problem might not be something laid at privatization per se, but a vertically integrated railroad has an easier time identifying the opportunity cost of a track closure. (If the British had our Form B protection of track crews and reverse-signalling, some of the difficulties Mr Wolmar details might have been less severe.)

The operating companies were supposed to be given greater freedom to compete, as well as a greater threat of having a franchise put up for bid, by not being tied to the ownership of particular rolling stock. The privatization set up a number of companies that owned rolling stock and leased it, often after a repaint, to the operating company of the month. The book is a bit skimpy on why that approach was the choice. In the United States, much rolling stock is leased. Even during the worst days of the 1960s and 1970s, weak railroads were able to obtain reliable diesels, as banks, insurance companies, and other conservative investors understood that locomotives and freight cars could be repainted and leased to other railroads, including the stronger lines that would sometimes have to upgrade their fleets. There were specialist leasing companies to be sure, but there was an active market in locomotive trust certificates. Why did the British limit the rolling stock market to a few specialist firms whose primary function was to put yet another coat of paint on an overpriced nodding donkey?

The great difference between the British railway system and the railroads of North America is in the nature of the service. Visualize the commuter rail authorities along Amtrak's Northeast Corridor as the dominant service country-wide. As is the case in North America, these passenger services receive subsidies. There is a freight service, including dedicated intermodal and unit coal trains, although not on the same scale. Mr Wolmar's thesis is that this service is best offered as a nationalized network with one carrier. He does not contemplate the possibility of an integrated privatization, say, by setting up a Norfolk Southern in place of the North Eastern and Southern region, a Great Western, a London and North Western competing with a Great Northern, with what we would understand as a regional short line for Scotland, and the passenger transport executives cooperating with an inter-city passenger authority and the private railroad to share the tracks among the subsidized passenger trains and the owning railroad's freight trains. There are certainly people with the CNR (successor to Wisconsin Central) with some understanding of that cooperation.

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