Alstom quits industrial valve business

Abstract

Using cross-national comparative analysis, this paper discusses the reasons why France has succeeded in partially privatizing its most recently constructed high speed line, while the U.S. has not reached this stage. The authors argue that France, with an interventionist government, diverged from the U.S. during the Great Depression by nationalizing its private railways and regulating competition with highway-based transport, thereby establishing favorable conditions for the future development of high speed trains. The U.S., because of its strong free market orientation, delayed nationalization until 1971, by which time passenger railways were severely weakened, so the U.S. lagged far behind France. After accruing a large public debt on its high speed rail program in the 1980s and 1990s, the French government recently took steps to privatize construction and operations on its Tours–Bordeaux line. Similarly, in the U.S., the State of California is trying to attract private participation on its planned high speed line between San Francisco and Los Angeles. Based on French high speed rail history, this paper argues that, to succeed, California must commit both a high level of public borrowing as well as public guarantees on private borrowing. Public credit is the sine qua non of financing high speed trains.