There is a lot of talk in libertarian circles about how everything would be better if we would privatize everything. Privatize the roads, privatize the railroads, privatize our electric grids, the government is inherently inefficient, and everything will be better.
Then they will inevitably point to Hong Kong (which Milton Friedman personally pointed to as a model for his vision) and Japan’s highly successful Shinkansen.
Let’s start with Japan, where the railroads are truly private. Well, first of all… Shinkansen was built in 1964 and its three most important routes were built before privatization. The lines which have been built by the private companies have been carrying far fewer people than the other lines.
But then there’s another kink in this entire philosophy, which can be found in the Railway Business Act of 1986
Article 7 (1) When the person who was granted a license of Railway Business (hereafter referred to as “Railway Business Operator”) intends to change the Basic Business Plan or the matters listed in item 8 or item 10, paragraph 1 of Article 4, the person shall obtain approval of the Minister of Land, Infrastructure, Transport and Tourism, provided, however, that this shall not apply to the minor changes prescribed by an ordinance of the Ministry of Land, Infrastructure, Transport and Tourism.
So much for economic freedom when a private business can’t even make a single service change without the government rubber-stamping it. But remember, this is the epitome of privatized rail in the world!
The other main case, and Milton Friedman’s favorite, is run by MTR Corporation Limited, which is 75% owned by the Hong Kong government and is able to completely control the decisions of the company. It’s organized more like Amtrak, far less like BNSF.
Pretty much every other country in the world with significant rail operations, with the exception of the US and Canada, has government-owned railroads.
| Country | population | Area | freight in billion tonne-km | passengers in billion passenger-km | tonne-km per capita | passenger-km per capita | tonne-km per km2 | passenger-km per km2 |
| Bangladesh | 172,073,828 | 148460 | 7.3 | 0.00 | 42.42 | 0.00 | 49,171.49 | |
| Nigeria | 211,401,000 | 923768 | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Philippines | 111,383,204 | 300000 | 0.00 | 0.00 | 0.00 | 0.00 | ||
| Pakistan | 225,200,000 | 881913 | 6 | 20.3 | 26.64 | 90.14 | 6,803.39 | 23,018.14 |
| Spain | 47,450,000 | 505,992.00 | 10.30 | 27.50 | 217.07 | 579.56 | 20,356.05 | 54,348.69 |
| Australia | 25,000,000 | 7,692,024.00 | 198.00 | 15.70 | 7,920.00 | 628.00 | 25,740.95 | 2,041.08 |
| Brazil | 214,240,467 | 8,515,767 | 267 | 1,246.26 | 0.00 | 31,353.61 | 0.00 | |
| Romania | 19,186,201 | 238397 | 10 | 5.9 | 521.21 | 307.51 | 41,946.84 | 24,748.63 |
| Japan | 125,000,000 | 377,976.00 | 21.00 | 431.80 | 168.00 | 3,454.40 | 55,559.08 | 1,142,400.58 |
| France | 68,000,000 | 543,940.00 | 31.80 | 110.50 | 467.65 | 1,625.00 | 58,462.33 | 203,147.41 |
| Mexico | 126,014,024 | 1964375 | 126.9 | 1,007.03 | 0.00 | 64,600.70 | 0.00 | |
| Italy | 60,300,000 | 301,339.00 | 21.00 | 52.20 | 348.26 | 865.67 | 69,688.95 | 173,226.83 |
| South Korea | 51,700,000 | 100,210.00 | 10.00 | 77.80 | 193.42 | 1,504.84 | 99,790.44 | 776,369.62 |
| United Kingdom | 67,000,000 | 242,495.00 | 24.40 | 80.20 | 364.18 | 1,197.01 | 100,620.63 | 330,728.47 |
| Russia | 146,000,000 | 17,098,246.00 | 2,596.00 | 129.40 | 17,780.82 | 886.30 | 151,828.44 | 7,568.03 |
| Poland | 38,139,000 | 312696 | 53.8 | 22.1 | 1,410.63 | 579.46 | 172,052.09 | 70,675.67 |
| India | 1,300,000,000 | 3,287,263 | 739 | 1157 | 568.46 | 890.00 | 224,807.08 | 351,964.54 |
| United States | 325,000,000 | 9,833,517.00 | 2,326.00 | 10.60 | 7,156.92 | 32.62 | 236,537.95 | 1,077.95 |
| Switzerland | 8,570,000 | 41,284.00 | 11.00 | 20.80 | 1,283.55 | 2,427.07 | 266,447.05 | 503,827.15 |
| China | 1,400,000,000 | 9,596,961.00 | 3,018.00 | 1,471.00 | 2,155.71 | 1,050.71 | 314,474.55 | 153,277.69 |
| Germany | 80,000,000 | 357,114.00 | 113.00 | 95.50 | 1,412.50 | 1,193.75 | 316,425.57 | 267,421.61 |
| Ukraine | 41,000,000 | 603,500.00 | 237.00 | 37.10 | 5,780.49 | 904.88 | 392,709.20 | 61,474.73 |
Data from Wikipedia
If you graph this data, you will find that the US doesn’t lead the country in either total passengers carried or in terms of total freight carried. Switzerland and Germany both beat the US in terms of total passengers carried, when controlling for population and it looks like a lot of America’s tonne-km is because so much is carried such a long distance through the west I expect which inflates our value.
That dot at the very bottom of the graph? That’s the United States.
It appears from this data that well-run rail systems like what exists in most of the developed world successfully provide both high levels of freight and passenger rail.
Then there’s the small fact that China (fully government-controlled) carries more freight and passengers than the US.
So, in summary, Japan is only a good example of a free market for rail if you think a corporation that needs to get every major business decision cleared by the government counts as a free market, Hong Kong actually has no significant private transport, and every other major rail country in the world which has good passenger and freight rail has 100% public ownership of the tracks. In my opinion, a private company that needs to get every business decision cleared by the government and was originally established by the government mandating how they must spend their money isn’t really a good example of a private company. It’s more like a public corporation (eg MTR, Amtrak, or Deutsche Bahn) that just privatizes the profits. True private companies, like Google, Berkshire Hathaway, Mcdonald’s, and Walmart, don’t need to go get every decision they make cleared by a government committee. I don’t think the companies in JR Group count as truly private companies but are more structured as public companies with privatized profits. There is no denying these essentially government-controlled corporations which just give their profits to private shareholders who have little to no real power over the company do indeed provide one of the highest-quality rail systems in the world.
Private monopolies will indeed under serve and overcharge.