♠ Posted by Emmanuel in Credit Crisis,Europe
at 5/13/2012 09:36:00 AM
Wasteful public projects are a staple of rational choice theory: what better way is there to milk the public purse, profit off contractors and milk the public than a nice, big public project? Although you will find no shortage of metaphors for Greek prodigality nowadays, its railroad system is a particularly egregious example of a highly subsidized sinkhole. Some even argue that travelling by taxi intercity is cheaper than going by train (even if the latter is a heavily subsidized money loser). Although it has been the subject of domestic criticism for the longest time, the crisis has brought renewed attention abroad.In particular, Michael Lewis of Moneyball fame wrote about it in his most recent book about developed nations that have fallen under hard times. In a recent BBC article, the journalists ask cabdrivers for their fares and calculate that sharing a cab with another is the threshold of making the cab ride the, ah, rational choice:
In 2007, the last year we have figures for, passengers travelled 1.8 billion kilometres (1.1 billion miles) on the Greek railways. Assuming this figure was the same in 2010, when the Greek rail system was making a loss of just over 1bn euros (£804m or $1.3bn) a year, it's costing the Greek railways 0.60 euros (£0.48 or $0.75) per passenger kilometre. Compare that to the UK, where in 2010 it cost 0.30 euros (£0.24 or $0.37).In any event, the railway system has been subject to massive cash transfers and is debt-ridden besides:
According to Greg Moisiadis, a cab driver in Thessaloniki, a cab from Thessaloniki to Athens would cost 700 euros (£563 or $900) - that's about 1.20 euros (£0.96 or $1.55) a kilometre, double the amount being paid to send people by train, if there is only one person in the taxi.
If four people were to share a taxi, the cost would be 0.30 euros (£0.24 or $0.37) per person per kilometre. Two taxi passengers would cost the same as the train. Further investigation found that Greg's prices were similar to other cabs on other routes in Greece. So Mr Manos is correct if there are more than two passengers in each taxi.
But either way, the Greek railways are in a pretty awful mess, and while train journeys may cost less than cab journeys, they are more expensive than travel on other forms of public transport, including air. "Over $13bn [£8bn or 10bn euros] has been pumped in, in the last 15 or 16 years. In terms of passengers, long-distance rail has 2.7% of the share and in terms of freight it's truly a joke because it's 0.08% of the freight so the costs are staggering..."There are arguably public goods from running a mass transit system, but they are all for naught when the public chooses to largely avoid it. Meanwhile, the government swims in more and more red ink.
In the past, the Greek government acted as guarantor for the money the railway borrowed so this meant although it only had a turnover in the low hundreds of millions, it was able to borrow billions. In 2010, this debt was 8bn euros (£6.4bn or $10bn) and cost 420m euros (£338m or $540m) in interest payments. Of course, even closing down the railways would still leave the government to pay off these debts.
