Real-Time Information

This might seem really obvious, but railroads are really big. And this has a consequence- the capital base of the railroad is too large to ever return more than 2-3% on the investment, and that’s if the road doesn’t go bankrupt, which almost all of them did with clockwork regularity.

Consequences have actions, and in this case the action is the so-called PPP, or Public Private Partnership. If you’ve been watching the rail mess in England, you might think ‘PPP’ was an acronym for ‘blood-sucking vampire’, and if you were Ken Livingston, you’d be right to think that.

So, be afraid, very afraid, when Arnold Schwartzenegger brings the depth of his economic expertise to building a high-speed rail system in California. If something goes wrong, it would hardly be the first time that a ‘public private partnership’ turned into a feast at the trough for the ‘private’ part and a snafued boondoggle for the public.

There are exceptions to the rule of railroad unprofitability and they are generally exceptions that prove the rule. The exceptions are worth all the study you can muster, as they chronicle a century of adaptation to the challenges to the railroads. In general, though, railroads are too big to be privately financed.