This essay establishes the policy context for the liberalisation of public transport in Spain, with specific reference to the recent history of Barcelona’s railways. The text introduces three difficult policy areas for Spanish public transport competition – local system integration, the balance between nation and communities, and the understated role of presence. It questions both the applicability of super-regulatory structures to a state where power is not absolute, and the use of economic analysis to rationalise transport infrastructure that primarily serves a strategic function, instead suggesting a role for the state’s own form of internal competition, here called the art of public competition.
“The Expectations of Competition” is the first in a sequence of four essays titled, “The Art of Public Competition“, which together explore the competitive model underlying Spanish public transport. An anthropological analysis of the tension between this internal model and that of globalised economics, reveals the distortion of external finance on the internal workings of the art of public competition. The second essay in the sequence explores the workings of the art of public competition using the example of interurban buses around Barcelona. The third examines how the art of public competition functions when one of its most important competitors is absent, using the case of post-Independència Catalunya. The final essay ponders the strategic interplay of risk, debt and optimism, using the example of Spain’s high speed railway network.
To integrate transport is surely to promote a human antithesis. Integration implies one optimised model of transport provision akin to a perfectly engineered machine, where all the mechanisms mesh seamlessly. Integration is the thesis of a transport economics for which demand is derived, meaning transport is solely a means to an end. Its rational ideal is to eliminate transport completely, since all such transport activity is economically wasteful. Hence for economists, transport becomes a component of the economy which can be dehumanised without impact on the humans, flattened into one perfect mathematical form that supposedly liberates the wider economy to operate without the inefficiencies of its transport system.
Unfortunately for transport economists, their presumption of the dominance of rationality is too often irrational: Modern behavioural economics is awash with examples of irrational transport decision-making, from the status value of automotive brands, to the role of the daily commute in pacing life. Ergo transport actually encompasses the fluidity of humanity. That fluidity is contemporarily expressed in duality, as a perpetual rebalancing somewhere between one collective perfectly integrated transport system, and the total flexibility of unfettered individual choice. Since neither extreme position can (by our definition of fluidity) be sustained, transport is not to be definitively solved, but to be constantly evolved. And if a perfectly integrated transport system can, logically, only evolve through a process of de-integration, perhaps an ultimate objective of transport integration is misguided?
The underlying pattern goes broader: As transport demands becomes more flexible, the environment is perceived as more complex. To counteract this sense of unknowable complexity, the transport solutions demanded are more stable, where stable is inevitably less flexible. From Personal Rapid Transit to App’-centric goods distribution, technology appears to be skewing transport towards individual choice, and thereby fostering a far more intense competition for physical space than when the issue was just individuals’ cars. Cynically, integrated transport is primarily being promoted not because it can be achieved, but because its promotion simply opposes the prevailing technological tide of individual choice: Such a crude counter-balance reflects a lack of strategy for proactively managing everything from hoverboards to automated flying delivery crates. Proactive management is often at odds with a profession inclined (ironically) to attempt to fix transport systems (in infrastructure and schedules), not to perpetually juggle them. Simply “swimming against the tide” is a pragmatic policy response that may deliver a mathematical balance, but it gradually polarises policy positions toward their extremes. That ultimately makes it very difficult for the polis to find compromises acceptable to all, engendering sudden, dramatic policy changes that half the citizens completely disagree with. Good, living, politics is the ability to accommodate the wills of all the people, not the arbitrary imposition of the will of a majority. Catalunya’s Procés provides ample evidence of how poorly “democratic” structures deal with excessively binary policy positions.
European Union transport policy exemplifies this conflicted balance between the collective and the individual, in promoting transport integration through market competition: For the EU, competition is the agent that will minimise the unwanted economic inefficiencies of the transport system. Yet because active competition requires an element of choice, the transport system cannot be completely integrated. Monopolies, even mere collusion on fares or schedules between commercial enterprises, are typically interpreted as anti-competitive – a pattern exacerbated by the natural tendency of the transport industry toward economies of scale, especially geographical and temporal. Integration requires a degree of regulation, even where transport provision is otherwise highly liberalised.
For example, integrated ticketing between British bus operators (except in London, which was never deregulated) rests on a specific opt-out from European-derived competition legislation, currently regulated by the Competition and Markets Authority (a government agency operating without direct political control). Integrated ticketing is typically delivered through joint companies (often owned by local government and bus operators), that offer multi-operator ticket products at higher fares than those sold by individual operators, so as not to impede commercial competition. In practice the development of integrated ticketing schemes must balance policy aims with commercial aims – and often the administrative complexities of integrated ticketing outweigh the tangible customer demand for it. Of course that formal argument is often underpinned by the long running battles for control of the public transport system – especially in conurbations, where local government typically regards the 1980s privatisation of its local bus operations as an unwelcome imposition by United Kingdom (central) government. UK integrated public transport ticketing may be better understood as a policy battleground in the ongoing conflict for the administrative control of Britain, broadly between centralism and localism – a recurrent theme of the governance of Britain throughout the 20th century.
Regulation is justified in the public interest – for the people the government represent. This role of deus ex machina supposes government an impartial observer, somehow above the fray of the very society that government is constituted by. In practice such a regulator also needs effective regulation, else risks inflating into a form of totalitarianism, especially where that regulator operates outside of the political system. The practical solutions to this dilemma reflect the societies they evolve from. For example, Britain’s mechanised social structure affords clear lines of transactional responsibility – although as the structure becomes more complex power rises inextricably towards the centre, which struggles to process such complexity, even with the numeric quantification of everything. Europe, as exemplified in its competition policies, can operate within pre-defined toolboxes built on economic theory – which theoretically perpetuate without political influence, but are constrained by their inevitably inadequate theory of living society. In contrast, Spain’s traditional “family” (for want of a better term) social model doesn’t scale into a mechanised state, nor is her policymaking inherently predictive. As explored in this sequence of essays, modern Spain’s solution to the need to regulate the regulator is, in effect, to foster a competitive environment between public bodies. This is particularly apparent in the arena of transport. As one of the most important physical manifestation of “the state” in Spain, transport expresses power of greater importance than its utilitarian function might suggest.
Nation and Community
All non-discretionary (scheduled) public transport operations in Barcelona’s travel-to-work hinterland are regulated in the public interest, and almost all the journeys therein use tickets administered by a single agency, L’Autoritat del Transport Metropolità (ATM). Since all operators share a common ticket, competition cannot be on price. Price is typically the dominant criteria in competitive public transport markets – at least where transport is considered a derived demand, and thus rational users seek to minimise some combination of time and cost. Yet there is often competition between operators within the ATM area, where each competing operator is backed by a different public interest. For some observers this represents a pointless duplication of public resources, an abject failure to perfectly integrate the public transport system. But to decry it as a failure of democratic process would seem to misunderstand its role: Surely this duplication is modern Spanish democracy – the very manifestation of a mechanism that regulates the state in Spain against itself?
The counter-balancing duopoly is a recurrent structure in the organisation of Spanish transport, especially apparent during periods of mature political society: For example, towards the end of the 19th century, outwith Andalusia, a duopoly developed between the two historically dominant Spanish railway companies, MZA (Compañía de los Ferrocarriles de Madrid a Zaragoza y Alicante) and Norte (Compañía de los Caminos de Hierro del Norte de España): By the start of the 20th century their networks were of almost identical (kilometre) length, with remarkably similar traffic volumes, yet without directly competing against each other on any one route. Likewise, administrative control of Catalunya’s strategic highways (autopistas) is now almost perfectly split between regional (46%) and central (54%) government, the result of gradual shift away from centralism that started in the 1970s.
Barcelona’s railways provide an introductory example that demonstrates how these control balances emerge: Buoyed by the World Bank, the post-isolationist 1960s period of Francoism was a boom time for railway investment in Spain, and arguably the first time in the history of the national railway company, RENFE, that investment could be directed toward its most-trafficked operations – the Guadalhorce Plans of 1926 and 1949 having instead promoted the construction of railways that achieved little except avoid challenging the interests of the elite. RENFE’s 1967 “Plan de Enlaces Ferroviarios de Barcelona” still defines the structure of the Barcelona’s national railways. It connected north and south with a pair of tunnels (one via Plaça de Catalunya, one via Passeig de Gràcia), established modern terminals on each side of the city (at Sants and Sagrera), and closed the old 19th century termini (Nord and França). Except França still remains open and Sagrera is still under construction. Most of the 1967 plan was completed in the first five years. The remainder then frozen in history, as the oil crisis of 1973 curtailed investment, and by the 1980s RENFE had become focused on route rationalisations to reduce its financial deficits – before reinventing itself, and its budget, in the shape of a high speed network called “Alta Velocidad Española”. AVE did nothing for local services aside from reviving Sagera as grandiose AVE infrastructure. In the intervening forty years basic operational constraints, such a lack of flexibility in the routing of local trains through Sants station, have been left to fester.
In addition to RENFE’s national railway network, there were two Barcelona railways that had not been nationalised after the civil war, Vallès (to Terrassa and Sabadell via Sant Cugat) and Llobregat (to Manresa and Igualada via Martorell). Both were similarly modernised in the late 1960s and early 1970s, before bankruptcy and rescue by FEVE – the state’s official rescuer of failed commercial railways (and belatedly “narrow gauge” partner of RENFE). When modern autonomous regional government – the Generalitat de Catalunya – emerged at the end of the 1970s, the Generalitat’s own railway company, Ferrocarrils de la Generalitat de Catalunya (FGC), acquired both lines from FEVE. In stark contrast to RENFE’s local lines, the FGC network was continually improved and expanded, to the point where it offered a tangibly superior quality of service to Renfe’s local “Rodalies”. Within the ATM area (broadly Barcelona’s travel-to-work hinterland), FGC carried 81 million passenger journeys in 2016, compared to 108 million on Renfe’s Rodalies – in spite of FGC’s physical network being a third of the length of the Rodalies. Over the last two decades FGC’s patronage has grown at a rate four times greater than Rodalies – in 1996 FGC’s patronage was half that of the Rodalies, rising to three-quarters by 2016.
Contemporary analysis of the relationship between central Spain and the autonomous community of Catalunya tends to emphasise Catalans taking power from Spain. However the comparison of the development of the (autonomous) FGC to the relative stasis of the (Spanish) Rodalies shows that an autonomous community can shift the relative balance of power simply by creating (in business terminology) a better product. Herein the art of public competition.
Likewise while the balance of fiscal power between the centre and regions is now broadly equal, that is the result of a gradual evolution over the first three decades of modern (post-1978) Spain. Historical analysis of income tax (IRPF), which the Spanish government gradually yielded to its autonomous communities until those communities took about half, suggests that the government was able to yield because the total amount collected significantly increased through the 1990s and early 2000s – and thus a proportion could be yielded without first reducing Spanish government spending. Like the railway example above, the relative power balance shifted, but not by taking anything away from Spain that it had previously exploited itself.
In the mid-2000s the situation changed: The relentless ambition of the autonomous communities (particularly in Catalunya) for ever more, increasingly implied a net balance that favoured the regions – that is, beyond a half. This coincided with the Crisis of 2008, which cut tax revenues, and meant that anything yielded by the centre would have to be a direct transfer of some activity or spending historically undertaken as Spain – a far more difficult political proposition for the Spanish government. This scenario was played out in Catalunya’s 2006 Statute of Autonomy, in which (among other things) the Generalitat sought control over all of Catalunya’s internal railways, including what is now called the Rodalies. Section 169 of the statute exerted exclusive power (of regulation, planning, management, coordination and inspection) over transport wholly within Catalunya, irrespective of the ownership of the infrastructure. A caveat that unfortunately undermines the very power it claims when ownership predominates: Ownership of the national railway infrastructure remained national, as state-owned company ADIF (Administrador de Infraestructuras Ferroviarias), infrastructure having been split from operations (henceforth lowercase “Renfe”) in 2005, as directed by European policy. The consequences were twofold:
- Administrative control of local passenger railway services (on ADIF tracks) transferred to the Catalan government in 2011 and since 2015 that government has theoretically been able to determine the operator of those services. However until Spanish railway liberalisation, Spanish legislation requires that only the state operator, Renfe, can offer regular passenger services on the national ADIF network. Consequently this first decade of Catalan regional power resulted in exactly the same national operator and infrastructure provider as before, generating a lot of political and management frustration.
- As a properly national state company, ADIF‘s investments reflect national, not necessarily regional, objectives. The ambitious 2006-era railway service and infrastructure plans of the Catalan government (Generalitat de Catalunya) never saw the light of day. Meanwhile, mirroring France to the bitter end, the Spanish national objective of building a far more extensive high speed railway network than the nation can reasonably afford, has shifted investment focus away from the historic railway network – a historic network that continues to convey almost all railway journeys within Catalunya. This grievance with national investment priorities is shared with many regions, not least Madrid, but is particularly pertinent in Catalunya where the most common cause of unreliability is reported to be on the track, which is the responsibility of ADIF.
In the rest of Spain, Renfe’s local public service monopoly has been extended until 2027, nullifying liberalisation in the meantime – it is unclear if this decision, taken in the midst of Catalan rebellion, will also apply to Catalunya. The Spanish government is inclined to go further, to reunify Renfe and ADIF into a single public holding company in order to strengthen its role as a national institution – which will inevitably frustrate any form of on-track competition, be it by Catalan government or private operator. In the meantime, Renfe’s public service monopoly is being very selectively tested by proposals to operate cross-border “international” services which would also be available for journeys within Catalunya. Prior to formal liberalisation in 2020, the Generalitat de Catalunya could even support this as a public service. The competence of the Spanish competition regulator, the CNMC, to adjudicate on such international railway service proposals is now subject to a legal challenge by the Spanish government.
Catalunya had envisaged its own local variant of ADIF, but while Ifercat was established for the task, Ifercat ultimately only served to develop new infrastructure, not to manage the old. As explored in Public Competition in Post-Independència Catalunya through the example of Barcelona Metro Line 9/10, Ifercat’s ambition ultimately exhausted Catalunya’s ability to finance debt. In contrast ADIF continued to enthusiastically accumulate debt: The liabilities of its high speed division, ADIF-Alta Velocidad, are expected to rise to almost 18 billion euros in 2018. The company only earns (before costs) about 500 million euros each year from the access charges (cánones paid by Renfe), so there is no realistic prospect of repaying such debt from current revenues. Fortunately ADIF-AV is a zombie guaranteed by the Spanish nation, half of whose debts are ostensibly transfers from the wider European “state”: As listed in the table below, the European Investment Bank has historically agreed loans totalling 13 billion euros (at current prices) for Spanish high speed railway infrastructure (EIB data on individual loans has been adjusted to 2015 prices using the Spain component of Eurostat’s Harmonised Indices of Consumer Prices index – or before 1997, Spain’s CPI).
|Route||Year (of initial loan)||Total Loan (€ million, 2015 prices)|
|Basque “Y” Extension||2012||1990|
Over 9 billion of the 13 billion euros of debt listed in the table is still outstanding. Since 2014 ADIF-AV has effectively converted around 3 billion euros of conventional borrowing into financial bonds. ADIF-AV’s bonds are considered “green” (environmentally positive) by investors, even though Spain’s “green” political grouping (Equo) campaigns against high speed railways. Go figure. The bonds are traded on the Irish stock exchange (Ireland having a relaxed approach to international transfers), which allows direct commercial investment in what is popularly regarded as public state infrastructure. At least some of these bonds are owned by the same Spanish commercial aristocracy that also own the construction firms that build ADIF-AV’s railways – a logical path that Ifercat was forced much further down than ADIF-AV so far has been. However the very involvement of these commercial financial markets suggests ADIF has reached the limits of the state, even if contemporary Spanish politics is reluctant to admit as much.
Nation states, because of their scale and longevity, can normally raise finance (loans, bonds) at lower rates of interest than commercial entities. So unless the public sector gains another advantage from the private sector – such as risk transfer, technical expertise, labour liberalisation, or operational flexibility – public-private financial structures should be treated with scepticism. Too often the public-private finance of new transport infrastructure in contemporary Spain simply delivers infrastructure that the state couldn’t initially afford to invest in itself, on the assumption that the state then buys it back as a service. Such rationale reeks of optimism – that in the future the state will somehow be able to afford to buy back what it couldn’t afford to buy in the present, plus additional payment for the commercial finance which built the infrastructure. Possibly a rational strategy for infrastructure that generates above (global) average economic growth, but surely not for high speed railways in a country well past its Golden Age (even if Spain still struggles to accept the fall). What is less widely analysed is how this use of public-private finance skews the role of government, from funder of infrastructure, to funder of service. The distinction is unimportant to transport economics, since both mechanisms achieve the presumed objective of passenger utility. However the distinction between infrastructure as “presence”, and service as “utility”, helps understand much of the contemporary Spanish state.
Presence is the physical manifestation of authority, especially emphasising capital and long-term structural stability. Utility is the functional service of transportation, often skewed to revenue and near-immediate action. The evolving balance of presence and utility underpins much contemporary Spanish political discourse, especially between traditional and progressive notions of nation, but also in more practical aspects of how “the state” relates to its citizens. Core elements of Spain’s transport system historically emphasised presence over utility. For example, the lingering emphasis of presence helps explain why national railway operator Renfe suffers from “asset hoarding”: Renfe Viajeros SA, its passenger operation, holds 5.3 billion euros worth of (non-current) operational material (essentially trains, since the track and stations belong to ADIF), from which it generates 2 billion euros of turnover each year – just 40 cents per euro of asset, a rather poor ratio for a business in a sector characterised by rapid turnover. For contrast, Stagecoach’s United Kingdom Rail generates a similar annual turnover of 2.1 billion pounds, from a broadly similar market, but uses non-current assets (which include comparable operational material) of just 105 million pounds. Stagecoach’s figures are indicative of a very different approach to operational assets (rolling stock is leased) and business stability (wedded to the London stock exchange) – differences that the Spanish government’s attempt to internationalise Renfe will surely struggle with.
The rise of utilitarian rationale is apparent in transport policy campaigns such as Tren2020 and #NoPierdasElTren (Don’t Miss the Train), which promote railways as a functional mode of travel, not a physical projection of the nation. More broadly, this shift to utility, away from presence, appears to be a key difference between the modern commercial politics of Ciudadanos and the traditional commercial politics of Aznarism. While the 1996-2004 governments of José María Aznar enacted much liberalisation, their policies were tempered by traditional conservatism. Ciudadanos’ commitment to utility will inevitably also be moderated by traditional societal structures, specifically the espousal of “utility” through the “Simulacres et Simulation” of the higher echelons of Spanish society, where being seen to do is the dominant motivation. A highly internalised form of epistocracy, masquerading as an externally recognisable technocracy: Such expression through a primarily virtualised society, where objects serve as signs and symbols, evolves the concept of utility from that expressed through the causal logic that underpins (Enlightenment) economic theory, where objects merely enable agents to act. Critically it exposes an underlying difference in knowing: Where Anglo-Dutch objective causal logic attempts to conceive a totality in which all objects can interact, the Spanish “family” model is more focused on that which is humanly knowable, fostering a collectively intense understanding of a discrete part of the whole. As this sequence of essays explores, that Spanish model is moderated and balanced by its own form of competition – a competition that does not mimic European competition policy, nor is necessarily aligned to prevailing economic theory, both of which are rooted in an external epistemology. Analysis of Spain’s competitive structures often naively presumes external epistemology, thereby failing to comprehend competition from within its own internal societal context.
In Spain, place is perhaps the strongest association after family. Consider place as knowing within a geographic environment, in contrast to the analytic construction of a place built from transferable objects, and one will start to understand why place is an extension of “family” – the knowable human group morphing into the knowable nature group – the permeable boundary between these humans and their wider world. That boundary of place has become a key intersection between knowable groups of people and the wider state – most obvious in its theological root, where the state manifests god in nature. This makes geographic presence, not least in transport infrastructure, core to the role of state – the delivery of the “ilusión” of the external, albeit now more likely to be called AVE than God. The power exercised is not absolute, rather these structures attempt to convey transactional balances throughout the state – relationships whose scale and complexity exceeds the modus operandi of the knowable groups that society is otherwise inclined to operate within: The physical realm a common ground on which comparisons outwith knowable groups can be understood, and thus core to the framework of the modern political state. This model of presence may lack the finesse of the knowable groups it structures, but while clunky, it fills an inherent void in transactional responsibility that is otherwise occupied by blind hope, corruption, or political instability. Such intangibles, however important, are hard to quantify, let alone justify externally, and thus transport presence is instead argued through tried and trusted variables such as the valuation of time – a Cost-Benefit Analysis that inevitably leads to an econometric expectation of utility. The flawed application of external epistemology to an unfamiliar internal is thereby used to get what the internal actually needs from the external, without challenging the epistemology of the external. Such a mutually beneficial process thus perpetuates, apparently regardless of the rational insanity it propagates: While, for example, Spain’s AVE network is used, it is already among the least trafficked high speed railway networks in the world, and the continuing “economic” (both financial and social) justification of its further expansion to even less trafficked areas of Spain is extremely dubious.
Presence characterises transport more as a societal glue, than a mere means of travel. As this sequence of essays explores, transport provision is consequently moderated by a form of competition that reflects the internal societal structure, not necessarily external economics. Therein emerge two meta-questions that are easily forgotten in the rush toward globalised liberalism:
- How is a super-regulator supposed to function in a state with so little tradition of absolute power? The economic toolbox of the Spanish regulator, CNMC, rarely reflects Spain’s societal model. Counter-policy routinely seeks to divide the CNMC into two (such as the ongoing discussion about separating the regulation of strategic industries from the CNMC’s broader competition and consumer functions), decentralize it, or otherwise stop it wielding sole power (such as the current argument with Brussels that the CNMC should not be the sole arbiter of ADIF‘s track access fees).
- In this state of knowing, how important is the ontology of public-private? Anglo-American liberalisation typically limits the public sector to constraining the excesses of private agency, but when the public sector exhibits as much agency as the private, and thus needs as much regulation, the consequences of the public only regulating the private are inequitable: Such “liberalisation” entrenches the public sector, whose societal stability attracts the most talented of the workforce, in contrast to the institutionalised insecurity associated with the private sector.
In both cases the regulatory structure is largely presumed static, while private commerce is assumed fluid. Yet this pattern is primarily true of liberalised Spain, not the underlying state, suggesting that external liberalisation first seeks to mould the internal structure of state in the image of the external – a far more fundamental sociological and philosophical shift than liberalisation per se. Between Westphalian sovereignty, which requires Spain to present itself according to an international ontology and thus appear compatible with international liberalisation, and the Spanish societal charade of being seen to embrace external notions of utility, it is unclear if anyone understands how liberalisation is altering state in Spain, or consequently why liberalisation encounters such inherent resistance. It also makes it difficult to understand the underlying competitive model in Spain, here called the art of public competition, a model which perhaps offers a more pragmatic approach to the two meta-questions above.
The next essay in this sequence, Interurban Buses in Public Competition, explores the workings of the art of public competition, in search of the reasons for its conflict with liberalisation. It details the interurban bus “market” serving Barcelona’s hinterland, with reference to passenger usage, historical policy, administrative structure, and comparative costs. Analysis suggests a dualistic form of counter-balancing competition on key routes, regulated by the need to maintain equality between operators – albeit an equality bounded by the operators’ focus, which often masks an inequitable distribution of public funding within public transport overall. A pattern conflated by the tendency to emphasise only short run operating costs, and sometimes rely, almost blindly, on higher tiers of the state for fixed assets. Continue reading…