(Less) High Speed Rail
by Alex Tabarrok on April 26, 2011 at 7:25 am in Current Affairs, Economics | Permalink
The Chinese government has reduced speed on its high speed rail line over concerns about safety, the rail ministry is in debt to the tune of $271 billion dollars, its charismatic leader, Liu Zhijun, was fired for embezzlement, and cheaper buses are turning out to be more appealing to typical travelers. Charles Lane at the Washington Post has the story.
Liu exploited the communist leadership’s fascination with bigness and national prestige….
In 2004, the State Council signed off on Liu’s plan to build the world’s largest high-speed-rail network by 2020. The first leg, a 72-mile stretch between Beijing and Tianjin, would open in time for the 2008 Olympics.
Word went forth that state-owned banks and local governments were to give Liu all the money, land and labor he required. When Chinese journalists found that Liu’s ministry was using cheap, low-quality concrete, creating a safety hazard, the Communist Party’s propaganda department quashed the reports, according to a January piece in the South China Morning Post.
Students and other humble citizens greeted the first fast trains with complaints about high ticket prices. They crowded aboard buses instead.
Oh well, at least the train didn’t go to Ordos.
By simple virtue of its size, China’s government can spend huge amounts on monuments but monuments don’t pay the bills. Communism set China back so far relative to its capabilities that catch-up growth can still drive it forward, even with a poor allocation of capital, but a cutting-edge economy requires more efficient (even if imperfect!), capitalist allocation.
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From the comments to that blog post
curmudgeonly troll April 26, 2011 at 8:02 am
They should have built Pets.com and McMansions. Then they could have been as globally competitive as the US.
Tom April 26, 2011 at 9:27 am
The McMansions are still nice to live in, and Pets.com died a quick death. No one is riding the train and it’ll be around for years operating at a loss. Much like what the trains Obama proposed would have if the Governors (of Ohio and a couple of other states) hadn’t stepped in and acted like grownups.
Back to Pets.com, most people don’t realize that capitalism’s best feature is the swift death of unproductive ventures.
curmudgeonly troll April 26, 2011 at 9:52 am
China has no oil, and the east coast is densely populated… people will be riding trains for a long time too.
Boils down to whether you think a better response to financial crisis was dropping rates to zero and re-inflating bubbles, or running a fiscal deficit to build infrastructure. I suspect both will result in capital misallocation.
This article seems to assume much which is not yet in evidence (mostly due to China’s opaqueness), for instance that a major part of the money was embezzled, the construction is shoddy, trains are running empty (they’ve been sold out when I wanted to travel on them) and it is running a vast operational deficit.
One man’s market discipline is another’s short-term focus.
Sbard April 26, 2011 at 5:58 pm
They’ll be riding trains, but many of them would rather ride the old, slow trains than the modern, high-speed ones that have fares over seven times higher.
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Scott Sumner April 26, 2011 at 10:35 am
1. High speed rail probably would not work in America.
2. China’s high speed rail program was probably a mistake, at this stage of its development. Lots of money was wasted.
But . . . the article also hints at why it might be seen as a success in 20 years. Beijing to Tianjin (a train I’ve taken) is 30 very comfortable minutes by train and 2 miserable hours by bus. The prices are $9 by train and $5.40 by bus. The poor Chinese quite naturally prefer the bus. But what about in 20 years, when Beijing and Tianjin are prosperous cities. Which form of transport will look more appealing when China’s a developed country with the sort of wages paid in Japan, or even Korea/Taiwan?
The article mentions that in France only the Paris-Lyon line is profitable. Imagine a country with 20 Paris-sized cities, each a few hundred miles apart.
Too soon, too fancy for China’s stage of development, but in the end something like this system might have made sense.
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