The article was accepted for presentation at the 3rd international conference “Railways in Transition – Eastern Europe Railways Past, Present and Future in the 20th and 21th Centuries” Pressburg, 24th – 26th September 2009 – International Railway History Association, and at the 7th “Conference on the History of Transport, Traffic, and Mobilty” Lucerne, 5th-8th November 2009 – T2M Association.
We can see in history of the Czech railways, that some parts of network were constructed by the order of military authorities. The state recognised the importance of railways for transport of troops and supplies during a war time immediately in 1830s, the importance of railways appeared without doubt after the lost war against Prussia in 1866. That is why the state charged railway companies to build on their own account several lines which had little economic but great strategic importance. Military lines appeared within the Czech network, doubled existing old lines and connected strategic friend-countries – most of them went across hilly areas, had little economic importance, but high operating costs.
At the present time, railway transport in the European Union is going through a renaissance – at the level of plans and goals of transport policy at least (for more detail see e.g. European Conference of Ministers of Transport 1993, European Commission 2001, Seidenglanz 2005, Barrot 2005). An indispensable part of these reforms are liberalisation and privatisation of railway transport services, as well as separation of operation as such from administration and ownership of infrastructure, i.e. from the railway network with its necessary technological facilities (unbundling). This interpretation is the basis for proposals, conceptions and strategies of a reform of railway transport’s institutional structure in EU member countries, i.e. in the Czech Republic as well, including identification of related problems (see Ministerstvo dopravy 2005 or e.g. Kloutvor – Šíp – Vorlíček 2001, Nash – Rivera-Trujillo 2004, and Šíp 2005). An absolutely fundamental complication is posed by an actually automatic assumption that the railway network, formed in the second half of the 19th century, covers the economically relevant destinations and directions, as well as the network covers the economically relevant territory. Thus, it is assumed that the railway network was formed on the basis of economic needs, ensuring profit and providing transport services in regions, in such directions and volumes that were effectively demanded. The railway network is thus automatically regarded as a parallel to the public road network.
The competition is often viewed as an instrument per se – i.e. the ability of competition to promote efficiency of services is generally presupposed (e.g. Campos – Cantos 2000, Estache – Rus 2000). Present strategies of railway reforms (as many studies show – e.g. Nash-Rivera-Trujillo 2004) are based on competition for the market for train-operated-companies (TOC) as the general principle. But what is the framework the TOCs are competing within? The framework of the railway service market is formed (or should be formed – as the EU railway reform’s strategy requires) by the railway network separated from the operations and regulated and (usually) owned by the state. That means, nowadays, that TOCs are about to compete for the market which is created by the railway network established 170 years ago. The core question is whether the network offers something to be competed about. Naturally, there is no question of the technical condition of the infrastructure (even if the infrastructure is generally heavy underinvested as for Eastern Europe), the problem is the network itself – its compactness, its shape, connected points (places), its capacity, lines’ duplicity, etc. The right question is whether the network is suitable for the TOCs’ business plans, as well as for potential customers’ willingness. The bigger the gap is between the network’s possibilities (limits) and TOCs’ / customers’ demand, the higher is the level of the network’s imperfection (i.e. inefficiency). Speaking about the government’s transport policy, the level of this inefficiency correlates to the amount of public subsidy a government will pay to private TOCs to operate non-profit lines.
The hypothesis to be examined in this paper is an empirical evidence of path dependency of the Czech railway network, i.e. the fact, that some lines of the Czech network were established due to others than economic reasons and that is why these lines are odd and inefficient nowadays. The problem is of relevance because the Czech Republic carries out reforms of railways nowadays, attempting to improve efficiency and competitiveness of railway transport. Economic efficiency of railway industry – in principle – does not depend on direct costs only (i.e. on operation costs), but on indirect costs of network as well. Previous studies (for a review see Nash et al. 2002) have suggested that efficiency of railway operations is connected with the shape of a railway network by means of economies of scale, density of transport, and network economies. Many studies report that density of transport is the major factor to make profit from railway operations (first analysed by Keeler 1974), while other factors – economies of scale, network economies – are closely connected or simply based on density of transport (Caves – Christensen – Swanson 1980, Winston 1985, Katz – Shapiro 1985, Walker 1992, Callan – Thomas 1992, Cantos 2000). That means the network, its technical standards and shape, is a limit factor of railway industry’s efficiency and competitiveness.
The study I present here compares the density of transport on the Czech railway network. I analyze the Czech railway network finding several parts of it are odd today: these railway lines were created in different geopolitical situation and mostly due to military reasons. I identify these lines and compare the transport density on these lines with the transport density on the rest of the network. These lines reached considerable lower transport density making parts of the network less efficient and competitive. The study may offer an alternative view of a railway transport’s deficiency and may stimulate the debate on structure and quality of railway networks.
History of railways’ building
The territory of the existing Czech Republic came through several major geopolitical changes. The territory had belonged to the Austrian Empire for centuries when the first Czechoslovak Republic was constituted in 1918; later in 1939 the German protectorate of Bohemia and Moravia was established lasting till 1945; constitution of pro-Soviet Czechoslovak Socialist Republic followed in 1948; finally, in 1990s the democratic Czech Republic was constituted by splitting former Czechoslovakia. Changes of political frontiers went along with changes of economic as well as social relations: (i) during the time of Austria-Hungary radial lines connecting Vienna with peripheries of the Empire prevailed; (ii) Czechoslovakia strongly preferred East-West lines to connect the capital of Prague with eastern provinces; (iii) after Germany annexed 35 per cent of the Czech territory in 1939, new lines had to be built to reintegrate the network; (iv) socialist Czechoslovakia continued in building East-West lines to reinforce connections between the Soviet Union and its East European satellites; (v) finally, after the collapse of the Iron Curtain in 1989, the transport flows covered widespread destinations in Europe. As railways had been built during the 19th and 20th centuries, the railway network reflects all above mentioned military strategies and geopolitical changes.
During these different periods, private railway companies tried to achieve their own business aims, to gain money, to compete and win at a transport market. However, the competition, profit, and efficiency were not always natural within the railway service market. The history of railways all around the world shows, that profitability as well as efficiency of the services were different – on different lines in the same country in the same time. The reason was that only part of railway lines were built to make profit – contrary to many lines built by order of governments to support military strategy plans. Building of railways on the order of the state resulted in a mixed railway network; a part of it was highly profitable, the other part was less profitable or operated in red numbers. The state charged railway companies to build on their own account several lines which had little economic but great strategic importance (e.g. Pratt 1915 or Westwood 1980). Fine example of building of military railways gave Austria-Hungary in 1800s.
Military lines appeared within the Austrian network in 1800s, doubled existing old lines and connected strategic friend-countries – most of them went across hilly areas, gave little or no profit, but operated with high costs. That means these lines were constituted in circumstances which were only in some cases in conformity with the assumption of economically efficient operation.
Analysing various railway networks today, quite interesting questions appear: why a network is not efficient (i.e. perfect)? Was the network perfect at the time of origin? What are the explanations of the defects? The questions above could be answered taking into account the railway network’s history. Generally speaking, railway networks were created in three ways: (i) the state had planned lines and then built tracks on its own account; (ii) or the state gave over concessions to private companies to build tracks according to orders; (iii) or the state gave over privileges to private companies to plan, build and run railways without any restrictions as for route planning. As for continental Europe, the state usually combines all these attitudes towards the network creation, from the middle of the 1800s the first way prevailed. Anyway, all the ways of establishing appeared at the same time. The problem of the network’s imperfection could be shown on the example of the Czech Republic. Czech railways belong to the oldest on the Continent, the density of the Czech network is one of the highest – but the network’s shape and other attributes are inferior. The origin of the problems is – I assume – the way of the network’s creation and development. As for the shape of the Czech railways network, the most important was the period of the Austro-Hungarian Empire as 95 per cent of all railways were built between 1828 and 1914. Nowadays, the Czech Republic’s railway heritage contains significant part of former Austrian military lines.
The principal method here is application of the principle of “path dependence“ on railway transport, following the approach that “history matters“, just like this principle is used in the works by e.g. David (1993), Arthur (1994), Puffert (2002),or Tomeš (2008). The application of methodology of path dependence within the framework of the present text and the resultant conclusions also correspond to the approach adopted by Liebowitz and Margolis (1995), who are otherwise critical to the general use of the historical method. Another idea is also an empirical finding that railway lines built with the use of the biggest subsidies are the least efficient in terms of operation (Gathon – Pastieau 1995 and Campos – Cantos 2000, p. 233).
Private railways were built in Austria at the very beginning of ”the railway age” – i.e. between 1828 and 1841– without any state subsidy. The state licensed the railways without any restrictions or requests as for route planning. This means that the first lines were built clearly with regard to economic criteria and connected the most important cities of the economy. The first railway was built from České Budějovice (Budweis) to Linz in 1828, crossing the Danube-Elbe watershed. The other railway – Kaiser-Ferdinands-Nordbahn (KFNB) – connected Vienna (Wien) with Brno (Brünn) in 1839. This railway became one of the biggest private enterprises on the Continent; finished in 1855, the line connected Vienna (Wien) with Ostrava (Ostrau) and Kraków (Krakau).
The state changed its policy towards the railways completely at the beginning of the 1840s: the empire’s authorities decided to build the railway network on the state’s own account. The first state trunk line was opened in 1841 and connected Praha (Prag) with Vienna (Wien) via Olomouc (Olmütz). The next line, opened in 1849, made this connection shorter via Brno (Brünn). The last state line was opened in 1850, connecting Praha (Prag) with Dresden via Podmokly (Bodenbach). The capital of Austria – Wien – was connected with the Saxon capital – Dresden, and the capital of Prussia – Berlin. As for the Czech network, the lines made a real transport backbone of the economy from the west to the east, connecting the major north-south line from Vienna (Wien) to Kraków (Krakau) and farther to Galicia and Eastern Prussia.
The next stage of building private railways began in 1855 and from this time the state began to influence routing of private lines according to political and strategic concerns. A distinctive order was that a railway passing a royal military stronghold had to call there. The first railway built under such order was the line of Südnord-deutschen Verbindungsbahn (SNDVB) connected Pardubice (Pardubitz) and Liberec (Reichenberg) opened in 1859, which had to go from Pardubice (Pardubitz) to the North to reach the strategic stronghold of Josefov (Josefstadt) and after calling there it was allowed to continue westward to Liberec (Reichenberg) (Schreier 2004). The line did not go along the shortest connection, its construction costs were higher as well as operating costs. In return, the state began to support private railway companies by guarantee of a minimal gain from invested capital (usually 5 per cent), by direct subsidy, and by purchase of railway shares.
The Austrian military authorities recognised the importance of railways for transport of troops and supplies during a war time immediately in 1830s, the importance of railways appeared without doubt after the lost war against Prussia in 1866 (Westwood 1980, Hons 1990). That is why the state charged railway companies to build on their own account several lines which had little economic but great strategic sense. Inefficient lines and/or duplicate lines began to appear within the Czech network. The major problem of these lines began to appear as well – their operational inefficiency, as the lines were built on less convenient grounds.
Several lines had to be built to reinforce connection with strategic friend-countries of the Austrian Empire – the kingdoms of Bavaria and Saxony. The company of Eisenbahn Pilsen – Preisen – Komotau (EPPK) asked for a licence to build a railway from Plzeň (Pilsen) towards North Bohemian coal mines nearby of Chomutov (Komotau) in 1870. Giving the licence, the state compelled the EPPK to build on its own account the other line from Plzeň (Pilsen) via Klatovy (Klattau) to Železná Ruda (Bayerish Eisenstein) on the Bavarian frontier. Even thought nor the EPPK neither any other company was about to build such international line, because only low transport density was expected on the requested line, the Plzeň (Pilsen) and Železná Ruda (Bayerish Eisenstein) line was built in 1877. The same reason led the state to enforce the company Bömische Nordbahn (BNB) to build two quite short lines in Czech-Saxon border region in 1872-73, and the private company Staatseisenbahngesellschaft (StEG) to build a short but strategic line between Znojmo (Znaim) and Hrušovany nad Jevišovkou (Grusbach) in 1870. All of these railways went across hilly areas and had got little economic importance but high operating costs.
The case of the Österreichische Nordwestbahn (ÖNWB) is very similar one. The company of the ÖNWB operated of quite successful and high competitive lines during 1870s. When the company asked for a licence to built an extension of its line from Nymburk (Nimburg) via Litoměřice (Leitmeritz) to Děčín (Tetschen) in 1874, the state forced the ÖNWB to build another line connected Hradec Králové (Königgrätz) via Letohrad (Geiersberg) with Lichkov pass (Lichtenau) on Prussian frontier coupled with a line connected Ústí nad Orlicí (Wildenschwert) on the main state railway line. The line had low economic use, but it was viewed as an important invasion way against Prussia. In relation with the Hradec Králové (Köninggrätz) and Lichkov (Lichtenau) line another construction took place: the Mährische Grenzbahn (MGB) built in 1873. Though the state did not press upon building this line, the construction was heavily affected and supported by the state, because this line together with the other one of ÖNWB created strategic important railway alongside northern frontier doubled and backed up the state main railway line from Olomouc (Olmütz) to Prague (Prag).
One of the longest duplicate strategic lines built according to the political order doubled the old line from Vienna (Wien) to Kraków (Krakau). The licence for the KFNB for Vienna (Wien) and Kraków (Krakau) line expired in 1886 – that is why the company had to ask for renewal of the licence. The state took the occasion again and forced the KFNB to built new strategic railway on its own account: the new line doubled the old KFNB’s line along the section which went too close to the Prussian frontier, i.e. from Kojetín (Kojetein) via Hulín (Hullein) and Valašské Meziříčí (Wallachisch Meseritsch) to Český Těšín (Teschen). Therewithal, the KFNB had to build five other local lines to intensify transport network in this strategic border region, and another line in southern part to connect Hungary in Rohatec (Rohatetz). The KFNB was not interested in building such brunch lines because operational loss rather then profit had been expected (Hons 1990). In that way, the state used private money to build fallback railway lines.
Table 1 Military lines (built by private companies in order from the state) TABLE
Figure 1 Density of passenger transport on the Czech railway network (2002, passenger-kilometres – relatively) CHART
Figure 2 Density of freight transport on the Czech railway network (2002, ton-kilometres – relatively) CHART
Figure 3 Military lines (built by private companies in order from the state) CHART
It is clear that we can easily see a disparity when measuring the density of transport on the Czech railway network (see Figures 1, 2, and 3). The reason why I take into account historical circumstances of particular lines’ origin is the fact that the effect of privatisation and liberalisation of services is often overvalued by governments and other authorities. Naturally, it is a pretty hard work to predict the effect of liberalisation on the service’s efficiency – I do not doubt about the general positive influence of competition on the service’s efficiency, but in the case of the Czech railways this effect will work very differently within the network. The analysis of the lines’ origin can help to understand these differences and to predict potential changes in demand for transport services.
Comparing the density of transport on the Czech railway network we can see the differences among the lines. There is low transport density on all of the identified “military” railways. This finding corresponds to the initial hypothesis: if a given line was built as inefficient for non-economic strategic reasons, the line has got low transport density at the present time. I have presupposed that the deficiency of particular lines was affected by circumstances of their origin. This study does not claim to be able to solve the problem of railway networks by means of historical method. There are obvious limitations to historical method; discussion of them is beyond the scope of this study. However, the questions raised by this study warrant further investigation. The railway problem is a complex one – analysing networks, we should take into account their path dependence. However, the conclusions presented here may have quite important implications for development of railways’ reform strategies.
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