British railways after Grouping
From CroziervisionWiki
| Author: Patrick Crozier |
| Permalink |
Contents |
[edit]
Role of the State
Grouping in the early-1920s saw an extension of state control over the railways which included:
- forcing the hundred or so existing railways to merge into four
- controls on profits
- controls on commerce - particularly the right to run road services
[edit]
The Outturn
[edit]
On the downside
The railway:
- took many years to regain pre-War speeds
- took out soft loans from the Government ie it was subsidised.
- started to contract - though only very slowly and we shouldn't forget that cars and lorries made huge strides forward in this period
- failed to research into diesel traction as done in the US and (I think) Germany
- lost profitability. Some of the new companies never paid a dividend.
[edit]
On the upside
- there were the speed rivalries of the 1930s culminating in Mallard's 1938 126mph steam world record - a record that stands to this day
- this is still the era that attracts the greatest nostalgia
- it was not that much worse than the pre-1914 system but the hidden subsidy and the problems with regaining pre-War speeds pointed to trouble ahead.
[edit]
Questions
But aren't mergers a good thing given that they lead to economies of scale? Were life that simple. The answer is sometimes yes, sometimes no. Scale has diseconomies as well as economies. The best thing is to leave matters to the market, not necesarily because the market will find the optimal solution but that it is more likely to. If a merger leads to larger profits then we can say it is a good thing. This is because profitability is a pretty good guide to whether something should be done or not. If it doesn't then it wasn't.
