NCPA - National Center for Policy Analysis

Europe's Railroads Not Ideal Models

September 28, 1996

Are high-speed trains like France's TGV proof that Europe's government-owned-and-operated railroads are far ahead of those in the United States and Asia? No, say some observers. Although Europe's rail industry is heavily subsidized by taxpayers, it has fallen well behind American railroads in freight and Asian lines in commuter services.

  • Europe's railways received an average of $31 billion a year in subsidies in the 1990 to 1994 period.
  • But over the past 25 years the use of rail in Europe has grown by only a quarter, while the use of cars has more than doubled.
  • Railways are also losing passengers to discount airlines, and their share of the passenger market has fallen to 6 percent.
  • While the freight market has also grown by 70 percent overall, railways' share has fallen to 16 percent.

It's true that European governments have invested heavily in high-speed lines. But nearly half the cost of passenger service in Britain, France and Germany is for unprofitable routes that could be served by bus, say transportation experts. Meanwhile, freight only travels at an average speed of nine miles an hour.

In the U.S., by contrast, after freight-price deregulation in 1980, rates fell by one-third by 1990. The industry's payroll fell by half, and labor productivity grew by 9 percent a year.

Some European governments are taking steps to end the financial drain of their railroads. The government-owned British Rail was broken into dozens of firms and sold to investors, and Denmark, Germany and the Netherlands are talking about privatization. But SNCF, the French national railway, is still run according to a five-year plan and is receiving a $25 billion bailout from taxpayers.

Source: "Europe's New Model Railways," Economist, September 28, 1996.


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