This prompts a question from me then. At what point would we need to invest significantly in our railroads, and based on existing trackage nationally, do we actually *need* new infra anywhere? Freight or passenger? Or can we hyper-optimize our current network for the foreseeable future via signalling etc? From what I can see, as long as the railroads can uphold their contributions to the economy, the government has no incentive to tamper with the system, expanding it or otherwise.
This is a good leadin to that NY Times article.
Parts of PSR - the concept of scheduled railroading (as opposed to the "old way" of running trains when cars accumulate) with much more emphasis on metrics related to velocity and shipment trip timing - are not "bad" as an operating philosphy, and simply represent bringing railroad management into the new millenium of business management.. For all his bad points, Harrison was actually pretty insightful in terms of effort and capital spent versus value gained in railroading.... something that the previous managers couldn't see with the same detachment.
The problems with PSR as I see it are
a) the monster train approach restricts the viability of shipping any non-bulk commodity. That actually includes containerised traffic, in that the efficiency requirements dictate containers be operated out of a small number of hub yards with the assumption of intensive use of the road network for first-mile/last-mile drayage. One wonders when people will ask why their community's roads are being filled with container truck deliveries at taxpayer expense instead of bringing the shipments all the way to the customer by rail.
b) the commercial parameters of PSR suggest that railroads should restrict physical plant in the interest of minimising capitalisation, this leaves railways unable to handle peaks or upticks in demand - especially unforeseens.
c) Similarly, PSR calls on railways to shed low-return traffic and only serve shipments that represent a premium rate of return. This again passes a great deal of traffic over to trucks, passing the whole problem to those who pay for roads (ie the taxpayer). There is a lot of traffic that could deliver utility-grade rate of return but at premium capital roi is priced out of the market. This is a huge constraint on our economy since many industries that could benefit from access to rail for their products have to use trucks instead.
I am not a fan of outright nationalisation of railways, nor of nationalisation of the entire physical network. I'm not that small-c conservative, but even I believe that when public entrerprises reach that size they always become bloated and fail, and overly political. (Today's NY Times is also running
an interesting article about California HSR that speaks to that) But there may be a role for the taxpayer to invest in the network where shareholders can't or won't invest.
I really like the idea that government backstop investment in capacity. For example, suppose a rail line would benefit from double tracking. Let government fund the second track, and let the railway use the added investment on a user-pay formula, with some proviso that as ton-miles grow the railway must buy in or amortise the investment. Kind of a lease-to-own scenario.
So far, railways are using trucking as their crutch and to their self interest. I wonder what it will take for the public to realize that all those trucks on the highway are there in part because railways make more money by exploiting the availability of roads. Maybe the cost of those roads should come out of railroad profits.
And maybe the taxpayer should subsidise traffic where rates can't deliver top of line rate of return.
I own both CN and CP shares, and I find the dividends that I am paid to be quite attractive. Ironically, I bought my shares back before PSR, when railways were a much less attractive investment. I never expected my shares to deliver this much in earnings or in increased market value. It's arguable that railways are utilities and not blue chip industries, and no one should expect blue chip rates of return. That transition would create huge screams on Wall Street - and among pensioners, since railways are in large part held by institutional investors. But the greater good may lie in not letting railways be high-power capitalists as PSR would suggest.
- Paul
