Privatizing Amtrak Won’t Lead to Better Service
Amtrak ridership is at record highs, so how do Republicans react? By calling for the trains to be privatized. But despite their ideological claims, privatization won’t do much at all to improve service on the trains, a lesson that we should heed as we move ahead with high speed rail.
Amtrak trains carried 31.2 million passengers in the fiscal year ending in September, the highest annual ridership since the railroad was formed in 1971, the nation’s intercity passenger railroad said Wednesday.
Ridership grew 3.5 percent over the past 12 months compared with the previous budget year, and ticket revenue jumped 6.8 percent to a best-ever $2.02 billion, Amtrak said. Ridership has increased every year but one over the past decade, and is up almost 50 percent from 2000….
The GOP platform adopted at the Republican National Convention in August calls for “the federal government to get out of way and allow private ventures to provide passenger service” in the lucrative northeast corridor between Washington and Boston — the heart of Amtrak’s operations.
This is something of a subtle shift in Republican rhetoric. They’re no longer opposing passenger rail on principle; the evidence is clear that Americans love trains and will ride them at every available opportunity. Now they’re trying to argue that trains would be better off – with better service and more profitability – if they were in private hands.
As longtime readers of the blog know, I don’t really care whether a particular method of transportation is profitable. I don’t think it’s an important issue. What matters is whether it serves a lot of people reliably, affordably, and with a high quality on board experience.
As anyone who’s been on the Coast Starlight knows, especially if you’ve been on the sleepers and enjoyed the Pacific Parlour Car, Amtrak actually does a pretty good job with quality, John Mica’s “Soviet-style” attacks on Amtrak notwithstanding. Amtrak trains are more reliable than is often assumed, especially the Amtrak California routes (though the Coast Starlight had a 81% on time performance in September 2012).
Where Amtrak falls short is on the ability to serve a lot of people affordably. A sleeper on the Coast Starlight isn’t cheap, though it can be comparable to a one-way flight purchased a few days before travel. And it doesn’t usually offer a lot of trips per day – one a day on most long-distance routes, with more daily options on the in-state routes but even those could be improved to meet rising demand. Acela trains are often sold out and speed and frequency improvements require new investment, whether it comes from the public or private sector.
Republicans argue that these issues are the result of Amtrak being “subsidized,” though they rarely point out that the Acela is profitable. They argue that privatizing Amtrak would improve matters.
But as Yonah Freemark argues at The Transport Politic, we know that won’t work – in large part because Amtrak is already forced to operate like a privatized service:
Here is the confusing truth about Amtrak, however: The rail agency, fully government-owned, is in many ways already a privatized operation that receives federal subsidies. The organization does not seem to have the larger public’s interests in mind in setting policies: It has some of the highest fares in the world for services in the Northeast Corridor, it provides no discounts for people of lesser means, and it actively promotes the use of intercity buses for people who want to pay less, in effect strategically reducing its market share. These are not the actions of a government enterprise acting in the public interest; these are the actions of a private corporation attempting to maximize profit.
On the Acela, this has met the goal of Amtrak being profitable, but it comes at the expense of other important goals such as being affordable to a wide range of incomes and infrastructure improvements. Privatizing Amtrak would have the effect of ensuring that the service is operated for the benefit of investors rather than riders, which is of course the entire reason why Republicans want to privatize it.
Freemark goes on to explore the details of four types of privatization and finds all of them wanting:
In general, there are four rough frameworks for such privatization:
1. Publicly owned tracks with competition for services. This is being implemented in mainland European countries under E.U. regulations; public sector track owners (such as RFF in France) allow operators — both public and private — to run competing services on the same lines. This allows riders to choose operators on journeys with the same origins and destinations, just as can be done for airline journeys.
2. Publicly owned tracks with competition for contracts. This is the network organization in the United Kingdom; public Network Rail owns the tracks but then leases the rights to operating rail corridors to private companies. In general, contracts last around seven years and give each operator close to monopoly rights over each corridor.
3. Privately owned tracks with competition for contracts. This was the system previously operated in the U.K.; the privately controlled Railtrack owned all tracks in the country between 1994 and 2002. The tracks were moved into the control of a public operator, as described in the second alternative.
4. Privately owned tracks with one private operator. This is how intercity rail operations are managed in Japan.
The California High Speed Rail project will likely function on the second model, with the tracks owned by the state and operations put out to bid. The problem with models 1 through 3 are that there are competing interests at play that cause problems for the successful operation of quality rail service. For model #2, the problem is that the state may not be interested in or able to fund necessary infrastructure upgrades, limiting a private operator’s ability to provide profitable, quality service. (That’s in fact the problem on the Northeast Corridor, although Amtrak is a public operator.)
Free market ideologues like Ed Glaeser and Stephen Smith are arguing for the 4th model, with Glaeser explicitly calling for the California HSR system to be completely privatized and turned over to a monopoly operator. Smith points to the privatization of JR in the 1980s as evidence why this is a good idea.
Freemark’s response is worth quoting in detail:
The problem with this approach is clear: It is a recipe for monopoly control of a railroad by a private enterprise. Conservatives berate Amtrak and other government-owned enterprises for being “Soviet“-like (in the words of John Mica), but private monopoly control of rail services is worse — and market conservatives should agree on that fact. After all, monopolized services can inflate prices, provide poor service, and in general be unresponsive to customer concerns. Unlike Amtrak, which must respond to political demands in our democracy, private monopolies must respond only to their profit-seeking shareholders, who clearly have different demands than the public as a whole.
Some might argue that rail services in the U.S., even if controlled by one company, cannot constitute a “monopoly” since they are competing with air and road services, which are owned and operated by other entities. Yet if it is in the public interest to encourage fast, relatively inexpensive services on intercity rail lines (that is what we want, right?), we are effectively arguing on behalf of massively increasing rail share on specific intercity travel markets — and significant government subsidies dedicated to investments in new tracks would back this approach. Once we have done that, we do not want people to move back to cars or airplanes, and we will have made those alternatives quite unappealing — thus benefiting the monopoly. Japanese rail operators do not have to compete with air or auto travel for most of their services because of the extraordinary advantages of rail along their routes, allowing them to act as transportation monopolies.
Freemark is pointing out issues that the free market ideologues rarely ever consider – what is the quality of service, and who gets served? Glaeser and Smith are so absorbed by the issue of profitability that they’re missing the other important issues, such as how to get rail service to as many people as possible, and to ensure those services are operated in ways that serve the needs of riders and not investors.
This is no academic exercise. Getting electrified passenger rail to as many communities in this country as possible ought to be a top national priority. Transportation is a major contributor to carbon emissions and global warming. Trains are a more energy efficient way to move people than planes or cars – including electric cars. Fighting climate change by reducing carbon emissions is far more important than the issue of whether Amtrak is profitable. In fact, for those concerned primarily about costs, unchecked climate change will cost this country far more money than subsidizing Amtrak and high speed rail service ever could.
Europe’s failed attempts at making the other models of privatization work are reminders that for most transportation systems, operating it as a monopoly is the only realistic approach. The question is whether that monopoly is public or private.
Public transportation monopolies have a proven track record of being able to deliver quality, affordable, reliable service that everyone can use – assuming the politicians allow that public transportation monopoly to generate the capital it needs to invest in the system.
As the United States as learned from history, private railroad monopolies do not work out very well for the public interest. Whether it was the massive corruption of the Robber Barons in the Gilded Age, or Union Pacific’s profit-driven hostility to passenger rail (look again at the causes of Coast Starlight delays), we know that private transportation monopolies do not work out very well for society as a whole.
Glaeser’s article explicitly called for President Obama to follow Abraham Lincoln’s model and have the private sector own high speed rail lines. This is one area where Stanford historian Richard White provided an important public service – he did an excellent job explaining the failure of the private ownership model of the railroads in the 19th century. White has also raised questions about whether private involvement in California high speed rail would lead to similarly flawed political and transportation outcomes. Unfortunately, White chose to focus instead on a quixotic effort to undermine the high speed rail project entirely, arguing it was unnecessary and that it would somehow not generate riders. What we really needed from him was a strong argument for operating California HSR in the public interest, and not for private profit.
There’s still plenty of time to make that case. Freemark’s observations about the pitfalls of privatization must be kept in mind as we look toward the eventual operation of high speed rail in California. And his observations about the ways political pressure on Amtrak to turn a profit are already limiting that system’s usefulness to the public at a time when getting trains to as many people as possible is a top national priority.