Previously, I wrote about Chinese bubble about to burst? in which I focus on the over-building of housing to the tune of 64 million empty apartments.
I suggest you check out Megan McArdle’s post on Should China Rethink High Speed Rail? Similar to the housing situation, China is building trains that few Chinese can afford and will be under-utilized. In other words, while these high-speed trains will be the marvel of the world by traveling up to 300 miles per hour, most Chinese will decide to ride the slower trains at a lower cost. These trains will only be “successful” if China lowers the cost of ridership, but that will only make the unprofitable train even more unprofitable.
Unfortunately, this economic non-sense infects the United States as well. Countless cities in this country have built or are building fixed mass transportation systems. For example, Phoenix has built the first stage of its light rail system and is expanding it further. Phoenix will lose money on the train project because it cannot charge a rate high enough to cover the costs of operation and amortization of the construction expense. Adding to the silliness, this train runs at street level, competing with traffic. How exactly is this light rail better than running buses. Buses have the advantage of being movable. If one line needs more buses and another fewer, buses can be moved from one to the other. However, once a train is built at a huge expense, it cannot be moved and you are stuck with it.
Phoenix also has the disadvantage of having a very low population density. But even a city like New York with an extremely high population density and millions of tourists riding its public transportation system still loses money on its mass transit. How a relatively poor country like China or a city with a low population density like Phoenix can expect to break even on a train system is beyond me. In reality, neither expect to break even: China’s centralized control of the economy and the United States’ new obsession with social engineering and stealing from the rich to give to the poor makes profitability irrelevant.
When it comes to mass transit, it appears that the United States government is just as dictatorial and wasteful as the Chinese.