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Infrastructure: Back on track

April 11, 2013

Bulky and cheap
EUROPEANS have long pitied Americans for their rotten passenger trains. But when it comes to moving goods America has a well-kept freight network that is the most cost-effective in the world. It is, however, a capital-intensive business. Since the Staggers Act of 1980 deregulated the sector (see chart below), rail companies have invested about 17% of their revenues in their networks. This is about half a trillion dollars of private money over the past three decades. Even the American Society of Civil Engineers, which howls incessantly (and predictably) about the awful state of the nation?s infrastructure, shows grudging respect for goods railways in a recent report.The downturn has actually helped propel capital spending on everything from tracks to IT. Last year $23 billion was spent, a record in real terms. The plan has been to modernise the network while business is relatively quiet and money is cheap. Railway firms thereby hope to find themselves in a better position to handle rising traffic in future. In 2009 Berkshire Hathaway, Warren Buffett?s investment firm, bought Burlington Northern Santa Fe, a railroad company...

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