Relax. This blog post is not another commentary detailing Rick Perry’s pain medication fueled rendition of “I’ve Been Working on the Railroad” prior to one of the many GOP debates. According to the Mail Online’s review of Inside the Circus, a new eBook published by Politico reporters Mike Allen and Evan Thomas, this behavior was par for the course for the Governor from Texas. Perhaps as equally shocking as Perry’s behavior was news out of Florida last week that Florida East Coast Industries (FECI) is planning on developing a privately owned, operated and maintained passenger rail service that will eventually service Miami, Orlando, Tampa, and Jacksonville. The passenger rail service, All Aboard Florida, should be providing service from South Florida to Orlando by 2014.
It is a common misconception that passenger railroads cannot be profitable without government subsidies. In fact, the opposite is true. Critics cite the more than 30 billion dollars that Amtrak has siphoned from Congress since 1971. When the government subsidizes a corporation or an industry they distort market conditions. In most cases, the industry will grow larger and the product or service becomes less affordable. We do not have to look any further for examples than higher education, healthcare, or the housing market to find prime examples of well-intentioned government intervention gone awry.
A railroad, or any industry, is not exempt from answering to the forces of the free market. Thomas J. DiLorenzo, in the book How Capitalism Saved America (an excerpt from Chapter 7 can be found here), contrasts James J. Hill’s subsidy free Great Northern (GN) railroad against Jay Cooke’s government-subsidized Northern Pacific (NP) railroad. The following, from How Capitalism Saved America, is quoted from the mises.org link above.
But Cooke and his NP associates built recklessly; the government’s subsidies and land grants were issued on a per-mile-of-track basis, so Cooke and his cohorts had strong incentives to build as quickly as possible, which only encouraged shoddy work. Consequently, by 1873 the NP developers had fallen into bankruptcy. The people of Minnesota and the Dakotas, where the railroad was being built, considered Cooke and his business associates to be “derelicts at best and thieves at worst,” writes Hill biographer Michael P. Malone.
DiLorenzo not only points to the durability and efficiency that separated Hill’s operation from Cooke’s, but also highlights the favorable impact that Hill’s economic cultivation of communities along his railroads had on the profitability of his business. After all, the free market did create the most charitable country in the history of the world.
In building his transcontinental railroad, from 1886 to 1893, Hill applied the same strategy that he had in building the St. Paul, Minneapolis, and Manitoba: careful building of the road combined with the economic cultivation of the nearby communities. He always built for durability and efficiency, not scenery, as was sometimes the case with the government-subsidized railroads. He did not skimp on building materials, having witnessed what harsh Midwest winters could do to his facilities and how foolish it was for the NP to have ignored this lesson.
In today’s economic climate passenger rail travel is an option only if the market conditions allow. In the case of FECI, they have preexisting favorable conditions already in place. They own tracks from Miami to Orlando and are a major owner and developer of real estate throughout the state of Florida. (Can’t you picture them building up the communities along the rail lines in Florida. That’s what I call REAL stimulus.) Additionally, the make-up of their current freight network is fast and light which will allow passenger trains to share the tracks with minimal delays.
Hopefully, Florida East Coast Industries’ foray into passenger rail travel proves to be a profitable venture. It is highly likely that the federal government will try to force FECI into accepting a subsidy. This would allow the Feds to dictate some amount of control over the operation. At a minimum, the Federal government will attempt to monopolize security of the passenger rail.
For now, FECI’s attempt to build a fully private intercity passenger train in Florida is a win for liberty. As always, look for further updates regarding this venture as, no doubt, the government will try to intervene.
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