Capitalism Comes to Railways

For much of this century, railways have been the object of nationalization or heavy regulation or both. No longer

Some announcements in the past few weeks show that the global railway industry is being more and more influenced by the market and not by regulations. Not only is service and pricing becoming more important, but there is emerging a global market for buying and selling railways.

Recently, New Zealand's Tranz Rail announced it is expanding into Australia, and the Mexican government is preparing to choose a new owner for the Southeast railway. The European Commission wants 25% of all rail freight to be carried by new operators.

Buying and selling railways is not an end in itself (psst! Wanna buy a railway?) but it is always best for a railway to have an owner which is interested in the rail business. Many countries, if not all, have at one point forced their railways to turn their attention away from the rail business, and instead used them as repositiories for surplus workers, or to prop up economically backward regions. Letting railways be tradeable is a sure way of making sure the railway's owner is actually interested in running trains and making money.

In the middle of March, vehicle maker Adtranz announced a new line of "modular" vehicles. Each family of vehicles (light rail, locomotives, HSTs, etc), will be built in a modular way, which allows the customer to configure their own unique combination of modules to fit their needs. So there is no need to design a new vehicle for every customer, just a combination of ready-made modules. Cheaper trains made from tried-and-proven parts will lower costs for railways.

It remains to be seen whether Adtranz' new trains will be what the railways need. But at least they have taken a shot at producing things for customers, not governments.