The American is an interesting new business magazine, edited by James K Glassman. In the February issue, there’s an article by John Makin on China’s new Tibetan railway. The article starts with the following comparison: In 2005, Americans spent about $10 billion on women’s intimate apparel. During the period 2001-2006, China spent $4 billion building the 710-mile rail line from Golmud to Lhasa. From this comparison, Makin draws the conclusion that the contrast:
…highlights the difference today between the richest country in the world and the country that is gaining wealth at the fastest pace. One is consuming, the other investing.
Now, I’d think that if someone want to assert that we’re spending too much on luxuries at the expense of infrastructure–railroad infrastructure, in this case–he might want to report on how much the U.S. rail infrastructure spending actually is. But no such numbers appear in the article.
There are four major U.S. railroads: CSX, Norfolk Southern, Burlington Northern, and Union Pacific. These are all public companies, and from the cash flow statements (last 4 quarters) a total capital expenditure of about $7 billion may be derived. This is for a single year, whereas the Tibetan railway capex extended over a period of 5 years. (The US numbers include locomotives and cars as well as track improvements; I’m not sure exactly what is encompassed in the Chinese number.) And there are indeed some substantial capital projects being undertaken by US rails–read here about main line double-tracking being carried out by both BNI and UNP.
There are certainly reasons to be concerned about the level of infrastructure investment in the U.S., including railroad infrastructure. I think substantial additional investments will be needed in order to cope with expanded rail traffic, which is being driven by many factors (one example here.) But the numbers suggest that rail investment in America is, at the present time, by no means insignificant.
It’s also important to remember, when comparing the U.S. with a rapidly-developing economy like that of China, that much of our infrastructure spending was done long ago. There is a strong cumulative factor in economic development. We are still benefiting from the work done by those who built the transcontinental railroad in the 1860s.
I see a lot of articles and blog posts which have the general theme “the U.S. is eating its seed corn.” Again, while there is some truth to this, it is not helpful when exaggerated statements are made. For example, someone in comments on a blog recently made the flat assertion that “we don’t make steel in the U.S anymore.” Actually, Nucor alone made 22 million tons last year (made from scrap in electric arc furnaces.) Mittal Steel made about 20 million tons in the three integrated mills (incorporating blast furnaces) that I added up (Burns Harbor, Indiana Harbor, Sparrows Point–there are more.)
In any event, if you are perchance planning on a trip to Victoria’s Secret this weekend, I think you can go without feeling guilty that you are undercutting America’s railroad infrastructure.