Transport is one of the most heavily subsidised sectors. This holds for old and declining transport industries, such as the railways in unprofitable market segments, as well as for fast-growing sectors like road haulage or the airline industry. In many cases the original reasons for subsidisation were normatively well founded. But, surprisingly enough, the subsidies continued after the normative reasons for them had vanished. The explanation for this phenomenon is that in the real world the players in the transport market, the politicians, the industrialists, and the customers, all try to maximise their individual profits and benefits, regardless of the consequences for social welfare. From the viewpoint of positive economics it is almost impossible to cut subsidies which were introduced when they were justified normatively. This is because powerful coalitions of politicians, industrialists, associations, and clubs will form to protect the subsidised institutions against any political change. It seems that there are only two time periods in political life in which reductions of transport subsidies are possible: (1) a financial crisis in the public budget, which forces the government to drastically reduce expenditure; and (2) a rising perception of the risk to sustainable development, if the environmentally risky modes of transport continue to be subsidised, directly and indirectly. Regarding the individual fortunes of politicians - e.g. in New Zealand - who have tried such a political change in the past, one can conclude that a new generation of policy-makers supported by a new generation of voters will be needed to break with the traditional rules.
Abstract