Why are French trains on strike this time?

The main Marxist unions are going on strike as a protest against the merger between “Réseau Ferré Français”, the rail operator, and “SNCF”, the train operator. I was not aware of this merger plan, for the simple reason I did not think it would even be possible. The rail operator had been split from the train operator, following guidelines from the European Union, to introduce competition in train services. While the infrastructure per se is considered a natural monopoly, the business of operating trains is not, and therefore the European Commission has tried to introduce competition there, as was done long ago in the U.K.
Indeed, private operators have been allowed in the freight business (the SNCF market share in that sector is around 85 %), but no government has dared to confront the unions by introducing competition in the passenger business. As a result, SNCF has been able to reap substantial rents. According to a report, the price of a train ticket has been rising twice faster than inflation between 2002 and 2009. The celebrated TGV often costs almost as much as an Air France ticket on the same route. In a country obsessed with sustainable development, travelling by car is generally more economical than using the train.[1]
The monopoly power of SNCF (and therefore its unions) is supported not only by restrictions on intramodal competition, but also on intermodal competition. It is illegal to operate a bus route between two places that are served by SNCF. A famous trick to go from Paris to Strasbourg by bus consists in purchasing a Paris/Warsaw bus ticket and ask the driver to drop you while passing through Strasbourg. And of course the Paris/Warsaw bus ticket is cheaper than the Paris/Strasbourg train ticket.
While the French governments’ going along with the Brussels deregulation plans has always been mostly cosmetic, I would not have thought that it could openly go backwards and engineer a merger between the network operator and the national train company. Any future operator who believes it could compete fairly with a publicly funded rival which has captured the network operator has to be a fool (similar considerations explain why Air France has a 96 % market share on domestic flights).
The European Commission does not plan to remain idle in response to this insult, but how many divisions does it have?
Why do those unions oppose the merger? It should make it easier for them to preserve their rents in the long term. It is in particular making sure that any private operator will be bound by the same collective agreements regarding wages and working conditions as SNCF. But the unions fear that the merger could make SNCF more efficient, which would of course destroy some jobs and even allow management to keep labor costs down. So the unions are not against the merger per se but they would have liked further provisions to make sure productivity cannot go up. For example they asked for a plan to “re-humanize” train stations, i.e. replacing ticket vending machines by people, although they are probably content with keeping the machines while having those people sitting idle at some information booth instead of selling tickets.
In any case, it is hard to believe that these fears are sincere. Mergers lead to efficiency gains only in a reasonably competitive environment. As long as the system is rigged to maintain a very high market share for SNCF, the conglomerate will prefer to buy social peace, knowing the taxpayer will eventually foot the bill. In particular, the reform has a provision to involve the regional governments in the management of SNCF. These regional governments generally insist to maintain lines that have very few customers but that they deem essential for “territorial development”. This provision is making it less likely that SNCF will shut those politically sensitive, but inefficient train lines.
It is more likely that the strike is part of the general offensive against the Valls government, which is highly suspected by left-wingers of being a “social-liberal” modernist one, economically aligned with Brussels. Indeed the same unions are also organizing taxi drivers and temporary workers in the cultural industry (who have a specific unemployment benefit regime). Their nightmare is to have to deal with a French variant of Felipe Gonzalez, a deregulating, privatizing and tax-cutting socialist. And where would such a hybrid individual be born, if not slightly south of the Pyrénées?

[1] There are, however, other explanations for the drift in ticket prices. One is that ticket prices were initially too low, for political reasons; they ended up being high because at the end of the day rail transport is not a very efficient technology. The other is that ticket prices simply reflect the upward trend in the fees charged by RFF to SNCF for using its network. This may sound incredible: how can a publicly owned operator charge a markup to its public client, despite that its mandate should be to keep prices close to marginal costs and that double marginalization is highly inefficient? The answer, I believe, lies with the under-researched issue of government schizophrenia. The bureaucrats in charge of RFF do not internalize the wider social welfare or even the wider government budget constraint; some government representative on the board considers it as his job to raise the profits of RFF, independently of the net effect of RFF’s pricing policy on the economy and the general government budget.


One thought on “Why are French trains on strike this time?

  1. Pingback: A Striking Display of Naked Anger Threatens France’s World-Famous Summer Festival Season | FrenchNewsOnline

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