Free Report About Argument For Social Enterprise In Rail Economic Activity

Type of paper: Report

Topic: Infrastructure, Vehicles, Transportation, Sociology, Transport, Railway, Rail, Services

Pages: 3

Words: 825

Published: 2023/02/22

Executive summary

The rail transport has come a long way. Rail transport is a capital-intensive project that can only be financed by the government. Even if the private sector has funds they might not be willing to invest in railways. Earlier railways were state owned and they used to operate as social enterprises. However the poor management, lack of funds and availability of other competitive means of transport made them lose popularity. The idea is to currently revive them by either privatizing or operating jointly with private sector as Public Private Partnership projects. This move kills the original spirit of rail transport being a social enterprise.
Railway defined: Railways has been defined as a track which is made of steel rails where trains run on. Railways are also known as railroads. Other definitions of a railway has been described as a track which provides a runaway for equipment with wheels.
History of Railways: The railway technology is over 200 years old with the first steam engine entering service in 1804. Railway technology began with the discovery of steam engine and it evolved into diesel engine to the modern electric trains. However, it was not until 1820s when commercialization of trains began. First underground tunnels were dug in London 1863 and were later replaced with electric trains in 1890. That open way for urban mass transit systems. Diesel engines later retired steam engines. Electric trains are the latest innovations in the railway technology. However, many trains still run on diesel (Train History, n.d)

Impact of the Railways

The development of rail transport influenced social, economic, and political life of people. Railway was key to the spread of economic development in various parts of the world as well as the facilitating the spread of the force of democracy. Still rail transport played a significant role in influencing the social life of the people where it passed. But the deployment of the railway technology in some parts if the world did not consider the contribution of the locals. For example, when railways were first build in India, it was the British builders and not the Indians who had a say in where the rails would pass. The imperial interests superseded the interests of the locals. A study of the global patterns of railways transport shows that it shaped different places in various ways. A case in point is the Brazilian economy which was built by export oriented railway lines. Investment in export oriented railways has been questioned. Critics find that the emphasis on export oriented might have resulted in lost opportunities by failure to incorporate it as part of a multi-modal transport to help create employment and other social benefits. The social benefits of railway transport has been lost with the privatization of the railways which has only served the owners interested in making profits rather than using railways as a social service (Martin, 2010).
Despite the advancement in technological improvements, the modern railway still facing more challenges than the case was some decades back. The initial lack of competition in the rail transport meant that weaknesses created provided opportunities for people to choose other means of transport like air and road (European Commission, 2008).
Rail transport has been seen as one of the ways of advancing social enterprises. From its history, so much has been invested in knowledge including a full understanding of the communities they serve, and the long term experience offering services in the local communities imply that they are in position to offer better services that respond to the needs of the community (Haugh, 2011).
A decision to build railway can result in either a social cost or a social benefit. Walle (1989) content that privatization has resulted in high level of dissatisfaction of services initially provided the government. The railway transport has continued to face various challenges. One of the greatest challenge is sourcing of funds. Initially, railways were financed by governments. However, the increasing weakness on the side of management resulted in the deterioration services to an extent where the initial infrastructure that was meant to offer social services were privatized. This paved way for public private partnership funding. Being a very costly endeavor, the government funds part of the rail and the private investor finance part of it. Eventually the rails belong to the government and the freight belongs to the private companies which can be more than one. Privatization of railway comes with consequences. Studies have shown that even large and unprofitable businesses in third world countries which have been affected by market failures can be privatized with efficiency payoffs (Estache, 2002). However, it has been established that a private-public solution is the best alternative.
Although privatization is not a solution to many problems affecting railway, it has been viewed as the next best approach to reducing subsidies and coping with regulatory control (Ramamurti, 1997). Vernon-Wortzel argued that privatization of the original social services which the public could not afford to provide on their own is not a solution. He argued that the enterprises themselves have turned out to be the problem with poor governance, financing, and high level of inefficient that has made them unable to fulfill the original functions they were created to solve. The further sign of poor governance is the lack of organizational culture and efficient systems that work to support and encourage the fulfillment of the initial goals and objectives.
Environmental impact of rail transport has been compared with air and it has been found that transporting freight by air and road creates more pollution than train. Travelling by train results in minimization of climate change. Rail transport cause les public health issue since it results in minimum pollution. Saving transport saves more energy per passenger per kilometer. They are less visually intrusive and saves on space (FOE, n.d.).

Railway transport for better services.

The challenges experienced in the rail transport sector in the recent past can be solved by various approaches. A number of proposals have been advanced. While some suggest that it continue to remain social service, some critics argue that the poor management, funding, and poor quality services in government run corporations such as railways are better left to the private sector through privatization. However, it has been argued that not all privatizations work (Beisheim et al, 2005. For example, the privatization of the British rail never worked. However, some successful privatization of railways has been successful in some countries like Japan (Profillidis, 2014).
Some public private partnership has been proved to work. This is an arrangement where government pays part of it and the investor contributes the balance. Public private partnership has been tried in countries such as India and Pakistan (Government of India, 2009). PPPs have been analyzed to come with pros and cons. Potential benefits include sharing of risks, advantages associated with costs, speed, and quality. And there is an easier route to accessing capita. However, despite the pros, the cons of the alternative include: high and volatile capita costs, lopsided allocation of risks, monitoring and complexity, loss of control and delays (Dutzik and Schneider, 2011. The authors further pointed out that there ought to be some protection of PPPs. To protect the public interest, governments ought to pursue the concept of PPPs effectively, PPPs must always deliver according to the original value identified, in PPPs contracts, there must be a good alignment of private sector incentives with public sector goals, PPPs must also be pursued in atmosphere of competition, PPPs should be prepared by not only capable but also prepared governments, the parties ought to maintain clear accountability in PPPs project, the need for public to retain control over major decision making in key-transportation sector decisions, PPs contracts should be designed in such a way that they do not impose unreasonable limits on governments. Contracts signed by PPPs must of reasonable length, PPPs must also be subject to extraordinary levels of transparency.

Railways as social enterprises

Railway transport is a capital intensive project. The private sector is either not willing or unable to set up massive infrastructure such as railways. The idea adopted in the past has been for the government to construct and operate the system. However recent developments suggest that government social systems are rapidly disappearing due to poor funding and management. To put back the rails on track the government privatize the services. However it would come a higher costs to the people who might not afford. This results in the collapse of the social enterprise. Even with PPPs the social aspect of the railways factored in so that people have a say in the transport system. Although social enterprises create value in the communities, they also earns income which is just small to sustain the services. Social enterprises are made for people who are at the bottom of the pyramid. The greatest beneficiaries of the social enterprises are te poor who cannot afford most of the basic services accessible by those who have the means. For example, a government owned railway can facilitate transport for the urban poor since it charges a subsidized fee. However, when the same is converted to be a private property, business people are in pursuit of profits. They would increase fare to the levels they get the returns. When railways are turned into social enterprise, they provide an opportunity for local community to be employed in the business. Social enterprises also do not work like other corporate businesses. For example, they are sometimes created to offer employment to the local community. The working conditions might be slightly different than those in a typical corporate firm that is owned by persons who are in pursuit of profits. He social enterprise might go ahead to target a particular section of the society for employment.


Beisheim, M. Veizsacker, E.U. Young, O.R. and Matthias, F. 2005. Limits to Privatization: How to Avoid Too Much of a Good Thing. London: Earthscan
Dutzik, T. and Schneider, J. 2011. High-Speed Rail: Public, Private, or both. [online] Available at: [accessed 23 April 2015]
Estache, A., González, M., & Trujillo, L. 2002. What does “privatization” do for efficiency? Evidence from Argentina’s and Brazil’s railways. World Development, 30(11), pp.1885-1897.
European Commission. 2008. Towards An Integrated European Railway Area. [Online]. Available at: [accessed 24 April 2015]
Friends of Earth (FOE). Why travelling by rail is better for the environment. [online] Available at: [accessed 24 April 2015]
Haugh, H. 2011. Is social enterprise being 'set up to fail'? The Guardian, 6 April 2011, [online] Available at: [accessed 24 April 2015]
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Martin, B. 2010. How the railways transformed the world. [Online] Available at: [accessed 24 April 2015]
Vernon-Wortzel, H., & Wortzel, L. H. 1989. Privatization: Not the only answer. World Development, 17(5), pp.633-641.
Walle, N. 1989. Privatization in developing countries: a review of the issues. World Development, 17(5), pp.601-615

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