Greek Rail and Amtrak

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Greece’s fiscal meltdown could be a sign of things to come in the U.S. if we don’t get our own fiscal house in order. The images of Greek unions rioting against desperately needed government reforms bring to mind our own problems with public sector unions

We now have another unwelcome parallel between us and the Greeks: government railroads.
 
The New York Times recently reported on Greece’s debt-ridden Hellenic Railways, which is owned by the government and is losing almost $4 million a day.
 
For starters, Hellenic Railways runs unprofitable lines that are staffed by overpaid government employees: 
Some have argued that Hellenic Railways should shut down the majority of its routes, especially in the mountainous Peloponnese region where trains manned by drivers being paid as much as $130,000 a year frequently run empty…[T]he average salary of a rail employee is over $78,000. Employees benefited from politically inspired pay increases over the last decade. Between 2000 and 2009, the cost of the company’s payroll soared by 50 percent even as overall personnel decreased by 30 percent. 
Typical of most government operations, it’s a job program: 
Until now, Greece has been able to use its rail system as a means to support employment while not adding to its official debt number. 
The Greek rail system doesn’t make geographic sense and can’t compete with other forms of transportation:
Greece has a well-developed road network, a relatively short distance separates its main cities and the railway’s shabby reputation makes it an unpopular travel option for most Greeks…Earlier this month, for example, a trip from Athens to Diakopto, a seaside town on the northern coast of the Peloponnese, took more than four hours. The journey required train passengers to complete a second leg by transferring to an overcrowded bus that was delayed for an hour. The result was a near riot as enraged passengers hurled abuse at overwhelmed train officials. The same trip by car would take less than two hours.
The Greek rail union chief knows the system makes no sense, but his job is to make sure employees continue to live comfortably at the public’s expense:
“It is crazy,” said Nikolaos Kioutsoukis, the union chief for the railway. “It’s not surprising that people prefer to go by car.” Even he accepts that train travel in Greece is not financially viable on many routes. He blames low prices, misguided investment and political meddling for the railway’s poor condition, and says the government should make new investments to modernize the network. He opposes privatization and says that if jobs and benefits are threatened, the union will strike.
As a Cato essay shows, Amtrak bears a striking resemblance to Hellenic Railways:
  • Amtrak has been providing second-rate train service for almost four decades, while consuming almost $40 billion in federal subsidies. The system has never earned a profit and most of its routes lose money.
  • Amtrak can’t compete with more efficient and cost-effective modes of transportation like vehicles and airplanes. It’s also the most highly-subsidized form of transportation in the U.S.
  • A recent independent analysis found that the average operational loss per passenger on all 44 of Amtrak’s routes was $32 in 2008. The Sunset Limited, which runs from New Orleans to Los Angeles, lost an astounding $462 per passenger.
  • Amtrak has about 19,000 employees, about 86 percent of whom are covered by collective bargaining. Compensation represents almost half of Amtrak’s total operating costs. The average Amtrak employee earns more than $91,000 a year in wages and benefits.
  • Besides raising compensation costs, Amtrak unions stand in the way of rail efficiency in other ways. Labor unions tend to protect poorly performing workers and push for larger staffing levels than required. Unions generally resist the introduction of new ways of doing things and create a more rule-laden and bureaucratic workplace.
A former Greek transportation minister told the Times he didn’t try to privatize Hellenic Railways “because I knew I couldn’t find an investor silly enough to invest in a company with so much debt.” It’s similarly doubtful any private operator would take over money-losing Amtrak in its current form.
 
But that’s precisely why privatization is needed. The marketplace – not politicians and union officials – should determine if passenger rail is still a viable mode of transportation.