Chinese High Speed Rail and the Interstate Highway System

I’ve been thinking more about the trip to China and especially the high speed rail of it all. I’m also about to dive into a new book I was able to get while I was there published by the Chinese State Railway but wanted to think a bit more on what I wanted to bring with me into the reading.

Recent discussions in the media questioned whether the continued construction of the network, now over 48,000 miles, has gone too far as the newer lines have driven debt levels soaring and ridership hasn’t covered costs on lower tier connections. If those folks got their way, the system is complete as is and now maintenance and freight expansion should be the priority. Others believe the connectivity high speed rail creates is not complete and expansion should continue.

HSR terminating in Beijing by The Overhead Wire

I think there are two ways to think about the value created by the system. One is that high speed rail should be run “like a business” and the value created should pay back the investment. I’m typically skeptical of this way of looking at government investments and appreciate a rethinking of the definition of “like a business” in our recent discussion with Daniel Wortel-London. There is a more progressive way of looking at running public entities that create value for citizens.

The other is that the value created is mostly measurable, but there are many intangibles and the system should be seen as a public good in the sense that it creates connections for residents and creates all sorts of positive externalities. Joel Mokyr just won the Nobel Prize in Economics for thinking outside of the equations so it’s definitely doable though it takes more work to convince people as his work proves.

We argue about transit like this all the time but it’s interesting to see it play out across the pond on a system that has been seen as wildly successful too. So successful that it’s cut the airline industry out of many corridors. We don’t seem to have that same introspection however about the highway system here in the US though we certainly should.

You could, and probably should, argue that the highway system in the United States is completely built out for its intention. We’ve connected major cities and it is used by freight and passengers to connect people and goods with places. There are demonstrable diminishing returns related to the investments we now make in it versus the value that is created. In fact we have an article today from SSTI that shows investments in highway expansion aren’t as valuable as repair.

China has made serious investments in highways, high speed rail, subways, and other infrastructure over the last 20 years. There are probably more to make, particularly in freight movement, but the major obvious ones might be getting into the same territory as our interstate highway system in terms of rates of return.

But here in the United States, there’s an obvious investment in high speed rail staring us in the face that we’re not making as we continue to try and make highway expansion a thing that it no longer is; an economic engine. The economic, personal, and material cases are right there in examples on now two continents. If we do get away from our current madness and high construction costs, the connections we could make with lines between major metros could change the country forever by creating value for all of us, not just individuals.

***

For this intro post and more news in your inbox every morning, sign up for a two week free trial of The Overhead Wire Daily, our popular newsletter established in 2006.