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Issue Analysis

    China's Rail to Nowhere

    04/26/2011

    China’s high-speed rail project has just changed from being a model of innovation to a cautionary tale on the limits of central-planning. The new trains have been touted as clean, fast and quiet by China’s Ministry of Railways, but, as Charles Lane and others have recently reported, Chinese consumers are opting out of paying a more expensive ticket and instead choosing to ride dirtier, slower, louder buses to work.  Already, the Ministry of Railways has amassed of debt of nearly $300 billion.

    Even worse, the project has demonstrated the potential for corruption in centrally planned bureaucracies: The project’s chief administrator, Liu Zhijun, was recently fired for possibly embezzling tens of millions of dollars.

    Embezzlement may not be unique to this project. There are plenty of opportunities, in any country, for government officials to use public funds for private benefit.  But this episode demonstrates why the government needs to be limited in its desire to undertake cavalier initiatives.

    America should take note as its government suggests that we should be riding high-speed rail as well.  If there is potential for rail in America to be profitable, it should be created by private industry (which will manage it more efficiently); electronic rail managed by private industry is not an impossibility: Acela, the only high-speed rail in the United States, is a public line, but one of the few that is profitable.

    But the government should have no business in turning projects that might otherwise be profitable into boondoggles. The high-speed rail system in China demonstrates how, too frequently, the government acts in its own self-interest—while only putting taxpayers’ money on the table.