The Peter Zeihan Podcast Series - Transport: The Economics (and Politics) of Railroads || Peter Zeihan

Episode Date: September 20, 2023

My walk along the railroad tracks inspired some pondering on why rail gets such a bad rap. Yeah, I know it's not as fast as planes OR as versatile as vehicles OR as cheap as water...but that doesn't mean there's no place for it.Full Newsletter: https://mailchi.mp/zeihan/transport-the-economics-and-politics-of-railroads

Hey everyone, Peter Zion here coming to you from the Needle Eye Tunnel on the Rollins Pass Railroad, which was one of the three original transcontinental railroad connections in the United States. Railroads are often considered the red-headed stepchild of the transport world. They're not nearly as fast as planes. They're not as versatile. They can't do first and last mile like vehicles. And they don't have the low operating costs of water. It doesn't mean that they don't have a role.

It just means that their roles have to be very geography. specific. Now, the reason that this rail line was closed down is because it's going through the freaking mountains. And unlike the Cheyenne route or the Retone route where they actually, you know, go to relatively low passes, uh, this one just goes straight up and ultimately peaks out at around 11,000 feet. Uh, that means that it's got a grade of in excess of 2%. And as a rule, every time you increase the, um, the grade by a quarter of a percent, you have to reduce the amount of cargo you can take by half. So the capacity for this line that was started in Denver and then went up and over to places like Salt Lake and Beyond was just horrible. The economics never made sense.

And as a rule, if you live in a flat zone, you know, you're probably going to use simpler methods of transport. But that doesn't mean that rail doesn't have a role. Whenever you're dealing with things that are relatively large in bulk and relatively low in value, they make a lot of sense. And unlike rivers that only go where the rivers go, you can choose where the rail line go. which is that they're constantly going to be competing with other land-based transport like trucks. And so it's got to be some cheap stuff that you need to move a whole lot of. Now, this line was eventually replaced with the Moffat line where they really just dug a six-mile tunnel straight through the mountains. That's where actually where my trailhead is today.

And in doing so, they get the benefits of the transcontinental without having to deal with the sharp slope. And here is the needle eye tunnel from a distance. First thing I thought when I saw this, I was like, really? This is what it was all about. But remember that we're talking about the very early stages of the industrial age. And, you know, this was built by Americans, not Germans, so it's not capable of reaching orbit or anything. Anyway, one of the things to keep amount about rail is if you're looking to move large volumes of stuff at relative speed,

it really is the best for that. That doesn't necessarily always work for commercial stuff like coal or wheat where timing is less of important. But it's really good for people. So give me a good example. When the trains can't some nuzzles open, there were two ways that you could get from the eastern part of the United States to the new territories on the Pacific Coast. You could do the whole Oregon Trail thing of five to eight months in a wagon. You could spend six months sailing from New York around the entirety of South America and ending up on the West Coast. where you get on the rail system and you would be there in nine freaking days.

And now from the other side, let's see, what else can I say about rail? On a level track, you can move cargo for about twice the cost of what you can move it on water. Or about one-sixth the cost of what you can move it by semi-trailer. So if you have the right product in the right place, it makes a big difference. But most people who build rail, especially who do it at scale, don't necessarily do it for economic reasons. they do it for political reasons. Because if a region is getting its supplies, and if a region is sending its exports by rail,

then whoever controls the rail system tends to have control over that entire community. And this is one of the reasons why the Chinese are so gung-ho on rail. It's not that it's the most efficient way to do most of what they want to do, but it gives the CCP direct control of the economic destiny of most of the regions in question.

And before you judge the Chinese too harshly, that is exactly the justification for why the United States built the transcontinent, rail system in the first place, because without it, we would have never controlled California. Was that a wind?