The High-Speed Rail Truth: Between Politics and Ethics
[Čeština]
In the Czech Republic, the projected high-speed railway project faces significant and increasing scrutiny. The Railway Authority has significantly overestimated passenger numbers and the economic benefits, while underestimating costs, leading to a precarious financial situation for the government. Successive governments, having aggressively promoted the project, now find themselves in a bind. High expectations have been set, making it politically untenable to withdraw support despite recognizing the potential disastrous impact on the nation’s economy. The media’s endorsement has seemingly made it impossible to halt the project in time, seemingly shifting political priorities towards politicians’ self-preservation over public welfare.
The strategy to finance this project involves issuing bonds, with the potential of rolling them over at maturity. This approach, however, raises ethical and practical concerns. Repeatedly refinancing the debt without addressing fiscal imbalances may erode market confidence, inflate borrowing costs, and risk a debt spiral. Moreover, deliberately inflating the economy to reduce the debt’s real value could drastically reduce the purchasing power of citizens, especially impacting retirees and those on fixed incomes, and potentially destabilizing the economy.
Entering into debt to make a loss is widely considered financially imprudent, particularly when the ‘public interest’ factors have been distorted.
The government is also considering Public-Private Partnerships (PPPs) to finance the project. This risks either misleading investors about its viability or committing to cover any future losses, which would strain public resources and breach expected standards of transparency and accountability.
This situation is not merely a financial dilemma but also a profound ethical issue. It seems repeated governments are prioritizing political survival over the economic well-being of the country, neglecting foundational principles of the Czech Constitution such as promoting public interest and ensuring citizen welfare.
Politicians must face the project’s deficiencies. As philosopher Schopenhauer noted, new truths often face ridicule and opposition before acceptance. Acknowledging and rectifying these deficiencies is crucial for the economic health of the country.
This local issue reflects broader fiscal troubles in the European Union, especially with the mismanagement of its €723bn Covid recovery fund [1]https://www.telegraph.co.uk/business/2024/04/13/even-remainers-cannot-deny-this-benefit-of-brexit/. The EU has successfully raised funds through bond issuance for its Covid recovery efforts, but properly utilizing these funds has proven challenging. Recent incidents highlight concerns: Italian police arrested over 20 individuals across the EU for allegedly defrauding more than €600 million, with luxury items like Lamborghinis and Rolexes seized. Additionally, Greek authorities are investigating the allocation of €2.5 billion to a few telecom companies, raising further suspicions of widespread fund misuse. These incidents suggest deeper issues, exemplified by delays in major projects like the Sicily-mainland bridge. The EU now faces the daunting task of thoroughly investigating these cases and dealing with potentially significant unrecoverable financial losses. An inevitable political backlash will follow if the billions borrowed, predominantly by German and Dutch taxpayers, will eventually need to be repaid and widespread corruption is discovered especially as the EU is considering additional taxes to cover these costs.
Whatever the outcome, this jeopardizes further EU initiatives, including high-speed rail projects facing scrutiny over their questionable projected cost-benefit ratios. These are usually around 1:1, with the actual ratios frequently much worse. These projects are often misrepresented as crucial for economic integration, yet they may serve primarily to maximize profit for large civil engineering companies at the taxpayer’s expense.
Entering into debt to make a loss is widely considered financially imprudent, particularly when the ‘public interest’ factors have been distorted.
As Abraham Lincoln said: ‘You cannot escape the responsibility of tomorrow by evading it today.’