Thursday, January 06, 2011

If You Subsidize It, They Will Come

...not necessarily customers to use what is built, mind you, but companies ravenous to take part in the feeding frenzy on government borrowed dollars slathered upon pie-in-the-sky projects that no private company would ever venture into without a taxpayer footing most of the tab.

Companies from China, France, Korea, Germany and elsewhere are lining up to add their expertise to a high-speed rail project proposed in the Peoples Republic of California.

California expects to spend about $43 billion over the next decade to build the backbone of an 800-mile high-speed system linking the state's major cities.

California voters approved a $9.9 billion bond measure in 2008 to help pay for high-speed rail, and rail officials say they expect the federal government to contribute $17 billion to $19 billion over the coming decade.
(Incidentally, California has approximately $120 billion total bond debt in outstanding general obligation bonds and in authorized but unissued bonds. The US carries about $14 trillion in debt not counting the $100 trillion or so promised in social security and retirement benefits.)

Of course they'll ante up two thirds!
The state must find $14 billion to $16 billion from other sources, both foreign and domestic.

It's too early to know what Chinese or other foreign investment might look like. California is still forming its business plan for high-speed rail, and construction won't begin until mid- to late 2012 in the San Joaquin Valley, between Madera and Bakersfield.

Test runs could begin as early as 2015.

Barker, of the state rail authority, said bidders may put up billions of dollars in either cash or construction of needed technology, or offer to provide trains at no cost in exchange for the long-term rights to operate the system as a business. Or they may find other ways to contribute to the cost.
Why don't Americans have the expertise necessary to pull off this sort of project?

Because, as an industry, it is not viable in this country. This is an industry that can only succeed in a world of mass subsidy where citizens are either duped or forced into footing a huge portion of the bill (Hello, California!) and who will later be forced to ride the rails by benevolent bureaucrats as they systematically cripple the train's competition.

It works great in China where hundreds of millions of people are still mired in poverty while their overlords spend the fruits of economic gains, and it works great in Europe where historical economic growth comes in far below that of the US.

The results of these types of projects cannot be measured solely on whether the trains can be built, whether the trains can run on time, and whether the trains are really, really fast. They must be measured with a true cost in mind that has to include the costs associated with diverting real dollars into areas of the economy that would not stand on the merits of their own profitability, the debt service of such projects, the continuum of subsidies that will remain in effect forever to keep the trains from free-market collapse, and the overall impact such government intrusion has in a free market economy.

The cost of Utopian ideals are best measured, not in billions, but in percentages of GDP and in the human suffering caused by such shenanigans.

As high speed trains flit about China they pass hundreds of millions of peasants still living in poverty. For those who plan train networks it is a price well worth paying.

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