Edited by André de Palma, Robin Lindsey, Emile Quinet and Roger Vickerman
Chapter 33: Competition and Regulation in Rail Transport
Chris Nash INTRODUCTION The railway revolution of the nineteenth century saw railways established as the dominant mode of transport, in many countries built by private profit-seeking companies. Even after the rise of motorized road transport after World War I robbed them of this dominance, railways have remained very important in countries with large volumes of freight moving very long distance, such as North America, Russia, India and China and in countries with large amounts of medium-distance passenger transport in Europe and Japan. Railways also play a key role in commuter transport in large cities worldwide. However with the growth of road transport competition came serious financial problems for the railways, and a need to reconsider how they were provided. For more than a hundred years, it was assumed throughout most of the world that railways were natural monopolies and that they needed tight regulation to make them perform in the public interest. It is true that in some countries, most notably the United States, there was a policy of maintaining competition between parallel privately owned railroads offering a choice of railroad between all major points, but this did not stop the United States from implementing tight control on freight rates and on decisions to abandon track (Winston, 2006). In most other countries, railways were regulated, and by the end of the 1940s they were largely government owned. In the United States, legislation in 1970 separated loss-making long-distance passenger services into a government-owned company operating over the tracks of the freight...
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