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I have been puzzled for many years. Well developed railroad systems are
seen as key elements of economic infrastructures in majority of
countries with either fast growing economies like China and India or
economic super-powers such as Japan and Europe. Why the railroads seem
to have been abandoned to a great extent in the United
Stated within last several decades?
It is reasonable to believe a properly designed and constructed railroad
network ought to be a great infrastructure that can benefit many sectors
like tourism, retail and particularly manufacturing. We have kept asking
why so many manufacturing businesses have shipped their jobs oversea, there is
no doubt that lack of good railroad transportation systems has something to
do with it. The reason for this argument is very simple: highway
transportations bear much higher costs yet lower efficiencies than
railways.
We are now in the mist of an unprecedented economic downturn. All
government rescue plans so far apparently did not take much effect.
Consumer sentiment remains at its trough, the unemployment rate is
heading to double digits. In article “Trillions Dollars Won't Save US Economy, Data Say”,
I argued it is almost impossible to rescue the US economy merely by
pumping money into the financial system. If that huge amount of money is
diverted to investments in the real economy, a recovery can be rather
quick and consequently we could prevent a depression from happening.
A well planed railroad expansion should be exactly the most effective
"real economy" investment. Here is why.
Firstly, in the short term, a railroad expansion plan can create a large
number of jobs and lift the consumer sentiment. China recently speeded
up its railroad constructions to fight the global economic crisis, which
has greatly contributed to the quick recovery. Obviously, a large scale
railroad expansion will stimulate the growth of a wide range of key
business sectors, including constructions, services, material supplies,
steel manufacturing and information technology industry. Millions of
jobs will be created as a result.
Secondly, in the middle term, a well constructed railroad system will
stimulate the growth of tourism and travel industries. When the broad
economy is in a bad shape, the travel industry suffers a great deal.
Travelers in the United States have been heavily replying on high cost
air transportations in the last decades. Needless to say, if we had a
cost effective transportation alternative in place, the travel industry
would be much more resistant to the economic crisis like the one we are
in now.
Finally, in the long term, a good nationwide railroad network will
provide an improved infrastructure for the expansion of manufacturing
sectors. Granted, the high labor cost is one major cause for many
manufacturers to move their plants oversea. However, an impact of high
transportation costs can not be ignored. If is startling that the cost
for shipping a seventeen-ton container from most parts in China to
California is around $1300, while shipping an one-ton crate from
Michigan to New York would cost as much as $2000. You many argue this is
still due to labor costs. But shipping by rail, though inconveniently
available only in limited destinations within the United States, are
also much less expensive than shipping by the dominated transportation
means - trucking. So I must argue railroad expansions will improve the
competiveness of the US manufacturers.
Related Series Articles on Global Economy and Recession
by Jonathan Wang
Railroad Expansion, Most Effective Way to Rescue US Economy
Consumer Sentiment Lags, Stock Markets Soar - Sign of Depression?
Trillions Dollars Won't Save US Economy, Historical Data Say Everything
Why China is more resistant to the global recession than any western
countries?
Bail Out Banks...Again? Caution, Don't Jail in Economy
What has really caused collapse of the financial market in the United
States?
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