Week in Review
There are few more costly ways to move people than by train. Running a passenger train is incredibly expensive. With the biggest cost in maintaining all the infrastructure before point A and point B. Track, signals, rights-of-way and people. Lots and lots of people. To build this infrastructure. To maintain this infrastructure. With electric trains requiring the most costly infrastructure of all. Especially high-speed trains. These costs are so great that they are greater than their fuel costs. Unlike the airlines. That provide a much more cost-efficient way to move people.
Trains are slower than planes. And they make a lot of stops. So they appeal to a small group of users. So few travel by train that it is impossible to charge a ticket price that can pay for this infrastructure that people can afford. Which is why governments have to subsidize all passenger rail except for maybe two lines. One Bullet line in Japan. And one high-speed line in France. Governments pay for or subsidize pretty much every other passenger train line in the world. Which they are only more willing to do because those ‘lots and lots of people’ are union workers. Who support their friends in government.
So governments build passenger rail lines more for political reasons than economic. For passenger rail is bad economics. In a highly dense city, though, they may be the only option to move so many people. But even then the ridership can’t pay for everything. So it requires massive subsidies. Worse, by relying on electrified trains so much these rail lines are subject to mass outages. Unlike diesel electric trains. Trains that don’t need such a costly infrastructure as electric trains do. And with a full tank of diesel they can move people even during a large-scale power outage. Like that currently happening with Con Edison (see Stranded NYC Commuters Ask Why Metro-North’s Power Failed by Mark Chediak & Priya Anand posted 9/27/2013 on Bloomberg).
Less than a year after Consolidated Edison Inc. (ED) left 900,000 customers in the dark during Hurricane Sandy, the utility faces the wrath of stranded commuters over a power failure that has crippled trains from New York to Boston.
Con Edison, based in New York, has warned it may take weeks to restore electricity to the Metro-North Railroad’s busiest line, which serves Connecticut and parts of suburban Westchester County. An electrical fault cut power on a feeder cable while an alternate was out of service for improvements…
The latest high-profile power failure for Con Edison follows Sandy, the worst storm in the company’s history, which brought flooding that left lower Manhattan without power for days. A few months before Sandy, New York Governor Andrew Cuomo, a Democrat, stepped in to resolve an employee lockout by the company that led to protests outside the Upper East Side home of Kevin Burke, the chairman and chief executive officer…
The rail operator is running buses and diesel-powered trains to accommodate no more than a third of the New Haven route’s regular ridership…
The power failure also affected Northeast Corridor passenger-rail service, as Amtrak canceled its Acela Express trains between New York and Boston through Sept. 29.
How about that. Dirty, filthy, stinky diesel comes to the rescue. Refined from petroleum oil. As much as people hate it they can’t live without it. No matter how hard they try.
This is what you can expect when you wage a war on reliable and inexpensive coal. Pushing our power provides to become green only raises the cost of electric power generation. Disconnecting coal-fired power plants from the grid removes more reliable power while replacing it with less reliable power. And forcing power companies to invest in renewable power reduces their margins. As they have to maintain their entire electric distribution system even if everyone has a solar power at home. Because solar power won’t turn on your lights once the sun goes down. And windmills won’t spin on a calm days. So while power companies have to maintain their systems as if there is no solar or wind power they can’t bill for that capacity when the people get their power from renewable sources. So they have little choice but to cut costs. Leading to conflict with the unions. And making an aging infrastructure go longer without maintenance.
You can’t have it both ways. You can’t wage a war on coal and oil without getting costlier and less reliable power. If you want lower-cost and more reliable power than you use coal and oil. If you want to pay more for less reliable power then you can’t bitch when the trains stop running. And the more we move away from coal the more our train will stop running.
Tags: Coal, Con Edison, diesel, diesel-power, electric power, electric train, infrastructure, oil, passenger rail, passenger train, power companies, power outage, rail lines, solar power, subsidies, train, war on coal
Week in Review
India had an explosion of economic growth as they unleashed free market activity. So much that their infrastructure is struggling to keep up with it. Especially their railways (see Union Cabinet okays private sector investment in railways by Mahendra Kumar Singh posted 11/23/2012 on The Times of India).
Desperate to attract private investment in the cash-strapped railways, the Cabinet on Thursday cleared the state-run transporter’s plan to rope in the private sector for building new rail lines and plants, and augment capacity, a move that was red-flagged by the unions.
With the policy in place, the railways will be able to get the private sector to connect ports, mines and industrial plants with the rail network by allowing them to invest in laying the tracks for last-mile connectivity. The move is expected to lower the transportation cost and help evacuate minerals, coal and finished products from the production centres…
The move comes as the railways, in the absence of fare increase, has failed to generate resources for funding modernization, leave alone capacity addition despite successive rail ministers adding new trains to appease their constituency. In fact, it has repeatedly failed to meet the targets…
Even this time, the unions are opposing any attempt to hand over operation and maintenance to private players, which could deter investors looking to enter the BOT space for building new lines.
That’s a pity. For it’s those operation and maintenance costs that consume the capital that they otherwise could use to fund modernization and capacity addition.
In the US there are two types of railways. Those that make money. And those that lose money. Those that make money are privately owned. Those that lose money are publicly owned. Every subway, commuter train and Amtrak train loses money because of high operating and maintenance costs. For the usual reasons. High pay, pensions and health care costs for active workers and retirees. While the heavy freight railways make money. Despite their high operating and maintenance (all union) costs. For there is no better alternative to moving heavy freight across land. While every other way to move people (bicycle, motorcycle, car, bus, ship, plane, etc.) is a more cost efficient way to move people than by train.
The freight railways in the US are a modern marvel. Moving so much freight that main line rails are like polished chrome. While the best passenger train still pulls onto a siding to let a money making freight train pass. Clearly showing who makes money. And who doesn’t. As well as the difference between a private sector union and a public sector union. One has accountability. The other doesn’t. Customers moving freight have choice between rail shippers. While people traveling by train have no choice. The freight railroads have to be able to stay in business by being competitive. While the passenger railways just keep raising fares. Or beg for more taxpayer subsidies. Which is why public sector workers don’t want to privatize their industries. Because they don’t want to be accountable. Or work within budgets. Like everyone in the private sector does. Including their union brethren in the private sector. Who often don’t live as comfortably as their public sector brethren live.
If India is to continue her move into a free market economy she needs to privatize her freight railways. Which could easily become and stay state of the art. While biting the bullet on her passenger rail that probably will never make enough money to fund modernization or capacity addition. But at least the money-making private railways can help bolster the economy. Producing greater tax revenue for investment in the black hole that is passenger rail.
Tags: freight railroads, heavy freight, modernization and capacity addition, operation and maintenance costs, passenger rail, passenger railways, rail lines, railways, unions
Rent-Seeking Captains of Industry and Commerce give Capitalism a Bad Name
Once upon a time you lived, worked and died all within a short walk from each other. In feudalism people owned land and lived well. The landed aristocracy. And other people (the peasants) worked the land. But did not live as well as those who owned it. For it was back-breaking work for long hours with no respite except in death. For those who worked the land belonged to the land. Just as the trees and fields and rivers did. Peasants belonged to the land and the land belonged to the landowner. The peasants couldn’t leave. And they couldn’t work hard to provide a better life for their children. For they were bond to the land as their patents were. With no choice but to work the land like their parents did.
This was how life was before we started to use power to make our work easier. We had long been using animal power to do things we didn’t have the strength or the endurance to do. Such as pulling a plow. Or a wagon full of goods. Or to travel great distances more quickly than we could by walking. Harnessing the power of moving water changed all of that. For a river moves constantly. And when you place a waterwheel in moving water you can convert the linear motion of the water into rotational motion. This rotational motion could turn a main shaft running though a factory. Belts and pulleys could transfer this power to workstations throughout the factory floor. And these powered workstations could do far more work than a person could. Lumberjacks could transport logs down a river to a lumber mill. Where a waterwheel could spin a saw that made lumber out of those logs at such a rate that great cities could arise around these mills. Cities with other factories powered by waterwheels. And homes.
So it’s no surprise that our early cities grew up on rivers. Both for water power. And the ability to use them to ship bulk goods. Ship transport. Something even animals weren’t good at. It is in these cities that wealth and political power grew. Centers of industry and commerce. Creating great wealth for those who controlled the resources that made all of that possible. So another aristocracy grew. Rent-seeking captains of industry and commerce. Who give capitalism a bad name. Who use their political power to maximize their profits. And buy favors from those in power to protect their particular interests. Such as using the power of government to create monopolies for themselves. But advancing technology made that harder to do. Especially the steam engine. And the railroad.
The Steel and Heavy Manufacturing Industries required a Massive Infrastructure and Regionally Located Raw Materials
Control of rivers, ports and harbors provided a great opportunity to amass wealth at other people’s expense. For when economic activity centered on water it made land around that water very valuable. Which concentrated wealth and power on the rivers. Until the steam engine replaced the waterwheel. And the railroad provided a way to transport people and goods inland. So not only did cities grow up along the waterways they grew up along the rail lines. Those controlling these resources still had great wealth and power. But they also offered competition. And more economic liberty. For while there can only be one Tennessee River flowing through Chattanooga, Tennessee, there can be more than one railroad running through Chattanooga. Which made Chattanooga an important city to hold during the American Civil War. For there was a great rail junction in that city. Giving anyone who controlled the city access to any part of the Confederacy.
While the steam engine and railroad allowed industries to grow anywhere in the country some industries still clustered in regional areas. Such as the steel industry. It required three ingredients to make steel. Iron ore, coke (coal cooked into hard charcoal briquettes) and limestone. To make steel you use 6 parts iron ore, 2 parts coke and 1 part limestone. Iron ore was plentiful around Lake Superior. Because it takes a lot of iron ore and a lot of iron ore is located around Lake Superior the steel makers built their mills long the Great Lakes. In Milwaukee. Chicago. Gary. Detroit. Toledo. Cleveland. Or in places like Pittsburgh where coal and iron ore deposits surround the city. These cities made up the Manufacturing Belt. Places with access to bulk ore shipping (on Great Lakes freighter or river barge). And where the steel mills arose so did heavy industry that built things from that steel. From structural steel. To automobiles.
For a while these new industries dominated the economic landscape. Big, heavy industries that couldn’t move. Concentrating money and political power. Giving rise to organized labor. Who took advantage of the fact that these heavy industries could not move. Negotiating lucrative union contracts. With generous pay and benefits. Raising the price of steel and the things we made from steel. Like automobiles. Making the rank and file like rent-seekers of old. Looking to personally benefit from their near-monopoly conditions. Like those early captains of industry and commerce. Life was good for awhile for the rank and file. Who lived very well. And better than most American workers. Thanks to those monopoly-like conditions in these steel and heavy manufacturing industries. Allowing them to charge high prices for their goods to pay for those generous pay and benefits. As there was no competition. For the steel and heavy manufacturing industries required a massive infrastructure and an abundant supply of regionally located raw materials, making it very difficult for a new competitor to open for business. At least, in the United States.
High Costs and Low Efficiencies have shuttered most of America’s Steel Making Past
Foreign competition changed all that. And large ocean-going ships. So new industries in other countries with lower labor costs could manufacture these goods and ship them to the United States. And did. Challenging the monopoly-like conditions of the rent-seeking steel and heavy manufacturing industries. So the rent-seekers turned to government for protection. And got it. Import tariffs. Which raised the price of those imported goods to the higher price level of the domestic goods. Which did two things. Insulated the domestic manufacturers from market pressures allowing them to continue with the status quo. And forced the foreign manufacturers to find less costly and more efficient ways to make their goods to counter those import tariffs.
So what happened? Technology advanced in these industries overseas while they stagnated in the US. The US didn’t invest in new technologies like they did in the previous century to find better ways to do things. Because they didn’t have to. While the foreign competitors worked harder to find better ways to do things. Because they had to. As they weren’t insulated from market forces. The Japanese invested in robotics. Transforming their auto industry. Improving quality and lowering costs. Making their cars as good if not better than the Americans did. And selling them at a competitive price even with those import protections. So what did these US actions to protect the domestic manufacturers do? Changed the Manufacturing Belt to the Rust Belt.
The big steel cities in America are no more. High costs and low efficiencies have shuttered most of America’s steel making past. Gone is the era of the sprawling steel mill. Today it’s the minimill and continuous casting. Small and efficient steel mills with small labor forces that can make small batches. Thanks to their electric arc furnaces that are easy to turn on and off. Unlike the big blast furnaces that took a while to reach operating temperatures and when they did they didn’t shut them down for years. Making it difficult to adjust to falling demand. Like the minimills could. Which helped save the steel industry by finally adopted technology that allowed it to sell at market prices. Making it harder for the rent-seekers these days. But better for consumers. Because of this relentless march of technology. That allows us to continuously find better ways to do things.
Tags: animal power, capitalism, captains of industry and commerce, coke, factory, find better ways to do things, generous pay and benefits, Great Lakes, heavy industry, industry and commerce, Iron ore, Lake Superior, Limestone, Manufacturing Belt, monopolies, rail lines, railroad, rent-seeking, rotational motion, Rust Belt, ship transport, steam engine, steel, steel industry, water power, waterwheel, wealth and power