High-Speed Rail: If You Build It They Will Come

High-speed rail (HSR) is viewed as an expensive boondoggle in the United States. This is in spite of the fact that HSR is now an established technology and systems have been built in much of the developed world. The French built the first European high-speed line in 1981. It has been expanding its high-speed-system ever since. HSR was immediately popular with the public and viewed by governments as economically beneficial. Why is the United States so different?

An example of the arguments made against HSR can be found in an article in the Washington Post by Robert J. Samuelson: High-speed rail is a fast track to government waste.

Samuelson tells us that his argument is based on history.

"Passenger rail service inspires wishful thinking. In 1970, when Congress created Amtrak to preserve intercity passenger trains, the idea was that the system would become profitable and self-sustaining after an initial infusion of federal money. This never happened. Amtrak has swallowed $35 billion in subsidies, and they're increasing by more than $1 billion annually."

"High-speed rail would transform Amtrak's small drain into a much larger drain. Once built, high-speed-rail systems would face a dilemma. To recoup initial capital costs - construction and train purchases - ticket prices would have to be set so high that few people would choose rail. But lower prices, even with favorable passenger loads, might not cover costs. Government would be stuck with huge subsidies. Even without recovering capital costs, high-speed-rail systems would probably run in the red. Most mass-transit systems, despite high ridership, routinely have deficits."

Yes, Amtrak fails to support itself on the revenue from the fares it charges. The expectation that Amtrak be self-supporting forces it to charge large fares and make itself less competitive with other modes and less able to modernize and compete for traffic.

But why in the world should Amtrak be expected to break even in revenue? Amtrak, like the railway systems in Europe, provides a needed service—a service without which societies and economies would suffer. The value of that service never shows up in Amtrak’s balance sheet. The benefits that accrue are secondary in nature and difficult to quantify, but the Europeans, the Japanese, and now the Chinese are capable of understanding this logic.

Samuelson complains that even highly utilized mass transit systems tend to require subsidies to operate. Has he ever tried to live in a city without a mass transit system? It is impossible. Even Los Angeles recognizes the need. Mass transit allows people to get to work and to go shopping throughout the city. Those simple functions alone justify subsidized transport priced at a level that will allow and encourage people to use it.

There are several arguments made in favor of HSR. An article in the New York Times provides an example of one that is based on secondary benefits. It discusses a report issued by the U.S. Conference of Mayors that looked at benefits that are expected to accrue to cities that serve as hubs for HSR traffic.

"The benefits of traveling between 110 and 220 miles per hour will mean better connectivity, shorter travel times and new development around train stations, according to the report. The changes will create 150,000 new jobs and some $19 billion in new businesses by 2035."

"The rail network will spur tourism, give businesses a wider pool of workers to choose from and help grow technology clusters in cities, said Steve Fitzroy, director of operations for the Economic Development Research Group, which conducted the study, during a phone interview."

Albany, New York is expected to become a rail hub one day.

"Albany, which is a political center in New York but not well-connected to the metropolitan area, will be pulled into New York City's economic core, said Fitzroy. A high-speed rail link connecting Albany to New York City, Syracuse and places as far off as Montreal have been proposed at various points by state legislators."

"If the network does goes up, the report states that it would create $2.5 billion in new business in Albany and would add 21,000 jobs. It would increase gross regional product, a measure of the size of the local economy, by $1.4 billion. The train station would spur development, with new additions, hotels and other mixed-use projects coming up in the area, said Fitzroy."

Some of that might sound like wishful thinking to doubters such as Samuelson. Fortunately, there is a recent example of HSR entering into operation that provides some support. An article by Keith Bradsher in the New York Times carries this catchy title: Speedy Trains Transform China.

"Just five years after China’s high-speed rail system opened, it is carrying nearly twice as many passengers each month as the country’s domestic airline industry. With traffic growing 28 percent a year for the last several years, China’s high-speed rail network will handle more passengers by early next year than the 54 million people a month who board domestic flights in the United States."

"Li Xiaohung, a shoe factory worker, rides the 430-mile route from Guangzhou home to Changsha once a month to visit her daughter. Ms. Li used to see her daughter just once a year because the trip took a full day. Now she comes back in 2 hours 19 minutes."

"Business executives like Zhen Qinan, a founder of the stock market in coastal Shenzhen, ride bullet trains to meetings all over China to avoid airport delays. The trains hurtle along at 186 miles an hour and are smooth, well-lighted, comfortable and almost invariably punctual, if not early. ‘I did not think it would change so quickly. High-speed trains seemed like a strange thing, but now it’s just part of our lives,’ Mr. Zhen said."

China purposely maintained HSR fares low enough to encourage people to use the system. It seems they are capable of understanding the importance of secondary benefits from a public service.

"Chinese workers are now more productive. A paper for the World Bank by three consultants this year found that Chinese cities connected to the high-speed rail network, as more than 100 are already, are likely to experience broad growth in worker productivity. The productivity gains occur when companies find themselves within a couple of hours’ train ride of tens of millions of potential customers, employees and rivals."

"’What we see very clearly is a change in the way a lot of companies are doing business,’ said Gerald Ollivier, a World Bank senior transport specialist in Beijing."

"Companies are opening research and development centers in more glamorous cities like Beijing and Shenzhen with abundant supplies of young, highly educated workers, and having them take frequent day trips to factories in cities with lower wages and land costs, like Tianjin and Changsha. Businesses are also customizing their products more through frequent meetings with clients in other cities, part of a broader move up the ladder toward higher value-added products."

These changes taking place in China look a lot like those anticipated by the writers of the report issued by the U.S. Conference of Mayors.

California seems to be the only state willing to put up its own money to initiate an HSR system. It provides a rather compelling explanation for why such a move was necessary. Steve Falk elaborates on California’s transportation needs and why HSR is the best option for meeting them.

"Over the next two decades, California’s population will grow by more than 10 million people....By the year 2050, the state’s population is expected to reach 60 million people. California’s current transportation infrastructure simply cannot accommodate this level of growth. Doing nothing is simply not an option. Major investments are needed to serve the future of our state."

"Building high-speed rail will not be cheap. The revised business plan puts the total construction cost for the 800-mile-long project at $98.1 billion spread over 20 years. That’s a big number that is bound to leave some amount of sticker shock. But this cost must be measured against the second alternative, creating the equivalent capacity within our existing transportation infrastructure."

"To achieve the same level of mobility delivered by the high-speed rail system, the state would need to add 2,300 miles of new highways, 115 new airport gates and four new runways — all at a combined cost of $170 billion. That’s $71 billion more than building high-speed rail."

Yes costs are high, but let’s at least try to consider all costs—and all benefits.