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High Speed Rail, Infrastructure and Job Creation

by ARSHAD KHAN

In our present world of religiously held economic beliefs, agnosticism might be prudent.  On the one side, advocates just want to cut taxes and reduce spending; on the other we have seen a stimulus package of dole-outs and “shovel-ready” projects that has done little to move the unemployment rate.  It remains stubbornly high.

In the meantime, the Fed has been busy pumping money at a rate that has the dollar hitting new lows in the currency markets and gold reaching new highs until very recently — the latter aided by near-zero T-Bill rates thereby negating the opportunity cost of owning it.

It all works to some extent — we are not in a tail-spin — but like Japan for a quarter-century, we can also imagine decades of life in the doldrums. The Keynesian answer to lack of aggregate demand has always been a stimulus package of monetary and fiscal measures.  On the monetary front, the near-zero interest rates are about as far as the Fed can go.  And since the $787 billion stimulus package wound down (late 2010), the economy has not yet picked up fast enough (quarterly growth rate last quarter now revised down to 1.8 percent) for necessary job growth although the Fed is unconvincingly hopeful.

Keynes, however, was particularly keen on investment in infrastructure.  In difficult times with stubborn unemployment, the government becomes an employer of last resort. Government hiring injects income which starts a chain of events where the total effect is multiples of the original investment.  The process is akin to seeding.  Spending by the newly hired injects life into businesses, small and large, and over time propagates hiring in the private sector; all this activity in turn generates additional government revenue.  GDP is over two-thirds consumer expenditures, and we need extensive seeding to create enough jobs and spending to move a stagnant economy.

It so happens, we have before us the possibility of a marriage between vast numbers of unemployed and a disintegrating infrastructure.  The American Society of Civil Engineers (ASCE) has now again issued its quadrennial report card on infrastructure.  Almost everything (aviation, dams, drinking water, roads, schools, transit, waterways, waste water) received a grade of D-, D or D+.  Slightly better were bridges (C+) and rail (C-).  Nothing received a grade of A or even B.

ASCE calls for “bold leadership and a compelling national vision”, reminding us that our greatest infrastructure projects stem from Federal programs like the New Deal, the Interstate Highway System and the Clean Water Act.  It calls for the Federal government to take the lead in developing a strategic vision that can be supported by other levels of government and the private sector.

Looking to the future, modernizing our obsolete passenger railroad system is a unique development opportunity.  High speed rail makes journey times, city center to city center, competitive with airplanes up to a 1000 mile trip.  The railroads are quicker for journeys less than 500 miles.  This is a project that can transform the economic landscape creating a giant suburb of the Eastern Seaboard with expanded job, education and business opportunities.  For the rust belt, connecting to Chicago and New York would take the pressure off urban centers and spur regional development.

Rail travel also has a smaller carbon footprint.  According to the International Energy Agency, transport pumps 6.4 billion metric tons of carbon dioxide into the atmosphere.  Road traffic is among the highest contributors, electric rail substantially less.  Reputable sources like Greengauge 21 seeking to advance high speed rail, claim its carbon emissions are roughly one-third of automobile and one-quarter of air travel.

High speed rail has also been an unqualified commercial success.  Japan’s Shinkansen is one example, the French TGV another.  According to Michel Leboef, the head of major projects at SNCF the French national railroad,  TGV is a victim of its own success with capacity problems on nearly all its routes.  He advises setting aside spare space alongside the tracks for future expansion because, in his experience, usage has always overwhelmed forecasts.

China’s current high speed rail network is already the world’s largest. But it plans to invest a further $500 billion in present valuation.  The goal is to have four north-south and four east-west lines comprising a 1200 km network by 2015.  There is little reason for the U.S. to continue to lag far behind Europe, China and Japan, and suffer the consequences, other than a lack of will and leadership.

 A joint study by Siemens and the U.S. Conference of Mayors highlighted some of the benefits.  The small links planned in California, Illinois, New York and Florida are expected to generate another 150,000 jobs, take 5000 commuters off California roads, and pluck 12.3 million passengers out of the skies by 2035.

Chinese trains have already topped 300 mph though regular running speeds are closer to 200 mph.  But the next generation technology being planned and installed now are maglev trains.  These float on cushions of air, are quieter, quicker, accelerate and decelerate much faster — so can reach optimum speed even on frequent-stop routes — and require much less maintenance.

About 200 years ago George Stephenson’s Rocket pulled the world’s first trains from Manchester to the port of Liverpool.  The purpose?  To speed up the transport of manufactured goods heretofore, carried on barges drawn by draft horses along canals.  The age of steam had begun.  The factories could now run at full speed, and the eventual returns of industry and a new infrastructure transformed the British economy into a world leader.  George Stephenson became the first president of the world’s oldest engineering professional association, The Institution of Mechanical Engineers.

The Manchester-Liverpool line was the brainchild of business leaders who foresaw its economic potential.  This time it will require visionary leadership from the public and private sectors to plan a true high-speed rail network of the latest trains, but it can transform and galvanize the United States much like the age of steam did in the 19th century.

Arshad Khan is a former engineering Professor and a Fellow of the Institution of Mechanical Engineers.

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