The case for high-speed rail is bigger than business

November 17, 2021

As a federal election draws closer, and the major parties square off with their respective policy platforms, Labor’s spokeswoman for infrastructure, transport and regional development, Catherine King, has vowed to create a High Speed Rail Authority to ‘make the business case’ for a bullet train, like those found in Japan and across Europe, to connect our east coast cities. The proposal states that a 350km per hour bullet train will connect Brisbane to Melbourne, with stops in Sydney, Canberra and key regional centers including the Gold Coast, Newcastle, Wagga Wagga and Shepparton.

If this is sounding familiar, it’s almost certainly because this isn’t the first time that Anthony Albanese has raised this project. High speed rail has been a particular passion for the leader of the opposition, and one that he has been talking about since he was sworn in as Minister for Transport and Infrastructure in the First Rudd Government in 2008. While holding the portfolio in government, Albanese led a three year study into the establishment of an east coast high speed rail with an independent authority to manage it, and has since spent years in opposition calling on the government to deliver on the project.

It’s therefore unsurprising that an Albanese led Labor party will be taking this project to an election. However, while the opposition is careful to couch the proposal in the language of markets, calling for a feasibility study and assuring commentators that they will ‘finish making the business case’ for the project, the real value of the project has nothing to do with the market.

For generations, our political imagination has been hamstrung by a fallacious belief that the only benefit of government spending comes from the value it returns to shareholders, whether they are public or private. However, as the now world famous economist Marianna Mazzucato has repeatedly shown, if this kind of thinking had been applied in the past the world would have be incalculably worse off.

For example, in September of 1962 when then President of the United States, John F. Kennedy, declared that the US Government under his leadership, would attempt ‘the most hazardous and dangerous and greatest adventure on which man has ever embarked’, and would land someone on the moon within a decade, he didn’t cite the tax revenue or make the business case. Indeed, he did the exact opposite. His famous justification for the record investment of US$28bn (or US$283bn in 2020 dollars) in often experimental space age technologies, was a commitment that they would ‘choose to go to the moon and do other things, not because they are easy, but because they are hard.’ While inspiring, this often overshadows the important point he made following it. He said that ‘the goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win’.

The benefits of what Mazzucato terms this ‘mission-oriented approach’ to industry policy led to some of the most critical advancements in technology that the world is still benefiting from. From laptop computers and the technology that allows our smart phones to have cameras, through the aerospace propulsion systems that led to our modern planes to everyday conveniences like scratch resistant lenses, water purification systems, ear thermometers and home insulation, the Kennedy government’s commitment to the space race for its own sake has improved the lives of millions around the world.

However, while the space race might seem like a strange comparator for a train line that connects a few regional centers in Australia to the capital cities, the political opportunity is nearly identical. An investment in creating new industries, regardless of the business case, presents countries the world over with opportunities to produce value, economic and social.

If the cosmic example feels too removed from our contemporary experience, there are many terrestrial examples that show the benefits of this way of thinking.

Take South Korea for example. Now one of the world’s leading producers of a range of specialized goods from electronics to textiles. However, their growth as one of the most innovative and productive economies on the planet wasn’t a result of a natural comparative advantage or prescient application of cost benefit analyses – it was driven by a government that understood the value of modern industry policy.

While there are a number of industries that grew from the government’s Heavy and Chemical Industrialization (HCI) programme, perhaps the most notable example comes from the country’s shipbuilding industry.  Following the proxy war that decimated the Korean peninsula in the 1950s, the country’s main exports were base products like tungsten ore, seaweed and simple textiles, with little to no heavy industry to speak of.

When the government proposed an investment in shipbuilding, the powerful Korean business community led by the Hyundai group was resistant, leaving the state to shoulder the risk and go it alone. The government set up publicly owned companies across the supply chain to kickstart the industry, starting with it’s first shipyard in 1973. When the yard was built, Korea had no presence in the global shipbuilding market. By 1980, it’s market share was 4% and 6 years later that share had grown to nearly a quarter of the market.

Today, South Korea is the world’s largest shipbuilding nation with 63% of the market chosing South Korean ships. However, they aren’t stopping there, and the government is supporting the shipbuilding industry to decarbonize and has set a target to capture 75% of the green sea transport market.

So while many have been quick to criticize the business case for high speed rail, history is littered with evidence that suggests that when governments invest in industry, they have a chance to reap the benefits for generations. While many point to the comparative distances an Australian high speed rail network would have to cover, as opposed to the relatively short trips between Japanese or French cities, it’s important to remember that new challenges present opportunities for innovative solutions.

Yet what advancements could come from this bold new frontier of rail technology? What spill off technologies might come from putting our best and brightest engineers on the case, and allowing our world class train building workforce to solve the problem?

Moreover, what other problems might be alleviated by building this network? How might our emissions profile change if we have a fast and efficient rail network? Australia’s domestic aviation industry contributes about 22m tonnes of carbon emissions, and is growing at an average rate of 3.3% a year. If even 10% of air travel is replaced by a train powered by renewable energy, this could have significant effects on our ability to reach net-zero carbon emissions.

The possibilities are credible and within reach. While high speed rail is an earthbound technology, smart industry policy agenda like those used by the US and South Korea show that the sky is the limit when it comes to investing in big ideas and new industries.

If Mr. Albanese is committed to bringing high speed rail to Australia, he should follow in a brave man’s footsteps and do it not because it is easy, but because it is hard.

Shirley Jackson in The Canberra Times