Can cutting unprofitable trains lead to decreasing profits on profitable trains?

I heard an interesting economic morality tale the other day. Apparently some time in the past British Rail decided to cut a bunch of unprofitable lines. These lines were often life-lines for the communities they served, but that was ultimately of no consideration to the person wielding the axe.

Applying the rules of modern neo-liberalism the unprofitable lines were promptly cut and then something extraordinary happened. The unprofitable lines turned out to have been feeder lines for the profitable lines and passengers that had travelled the profitable lines now no longer could get to them. Instead they switched to private motor cars, bleeding the troubled rail operator even further.

This is an interesting parable for modern times, especially since it confirms prejudices on both sides of the isle. Both neo-liberals and social-democrats will see a confirmation of their position in it.

Of course, if you look this stuff up, none of it appears to have happened. According to the Wikipedia du jour article on the subject, in the 1960s the Beeching Cuts were thought up by then-chairman of British Railways Dr Richard Beeching. British Railways was losing about 40 million pounds a year, which in those days was a huge amount of money. Dr Beeching proposed to cut 8,000 km of railway line and 55% of all stations, which was calculated to save 18 million pounds a year.

In the end the Beeching Cuts only helped to save a grand total of 30 million pounds and by 1968 British Rail’s losses had accumulated to 100 million pounds a year. Wikipedia also claims that “[although] in some cases closures removed branches that acted as feeders to the main lines and that feeder traffic was lost when the branches closed, the financial significance of this is debatable as over 90 per cent of the railways’ 1960 traffic was carried on lines which remained open ten years later.”

What is lacking in both the urban legend (slash economic morality tale) and the Wikipedia article is the simple but in my opinion true notion that a government should not be run as a capitalist, profit-making business, considering that the goal of a government is for a large part to counter market failures, that is to say to pick up the market’s slack. A railway system haemorrhaging money? That might just be a sign the government is doing it right.

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