The train wreck (this time literal as well as figurative) at Lac-Mégantic hasn’t got much play here, but it is important enough to deserve attention, as it perfectly illustrates the principle of regulatory capture, like the non-incendiary financial meltdown in 2008. Here’s the story.
In 2003 the Canadian Pacific Railway sold off the portion of its line that runs east of Montreal through northern Maine to Portland to a private company headquartered in Chicago known as the Montreal, Maine and Atlantic Railway. The enterprise (like all well-run American enterprises headed by MBA types) was almost completely levered, which meant after paying interest, bribes and executive salaries didn’t have much left over to maintain the tracks. I can testify to this, as the tracks run close to our country house, and we sometimes walk on them. The wood is rotten, the rails in bad shape, and there is grass where there should be gravel in the road bed. They also use inferior equipment. In the particular case in question, they used tank cars for explosive material (it could just as well been something toxic like sulphuric acid) that are no longer permitted because the walls are not at least one inch thick. But they got a variance which allowed the company to ship oil in them until they were replaced, which in the case of this company would have been never. Not surprisingly, when the train derailed in the middle of a small town (which could have been Montreal or Portland, Maine for that matter), they exploded.
The train, composed of 70 tank cars and five engines to draw them, had only one engineer. This is also a variance, which they got from the Canadian regulatory agency last year. I’d like you to imagine a heavily loaded train carrying explosive or toxic materials going through your town with only one person to make sure it gets through safely. At Nantes, QC, the engineer got off the train to take a nap. He would be replaced by an American crew (of one!) to take the train through Maine. The locomotive motors were left running to maintain pressure in the air brake system. While he was napping one of the engines caught on fire. A local noticed, and called the fire department, which put the fire out. The breaks having failed, the train moved out of the station on a grade that fell some 350 feet in 12 kilometers. By the time it reached the town it was going close to 50 miles an hour into a curve that it had to take at 5 miles. The rest is history. It is hardly worth mentioning that the Company President blamed the Nantes fire department.
The whole episode seems to me to sum up what has become of American capitalism. Over-leveraged, shoddy product and performance, milking the enterprise of its capital, and capturing regulators to get away with it. It is the banking disaster writ small. In the mean time the investigators have found only 5 bodies of the 60 to 80 that were incinerated in the center of town when the train exploded.
I am reposting this comment on Fatster’s Roundup on Elliott’s suggestion.
Photo by Simon Villeneuve under Creative Commons license