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Broken rails: the privatisation of Estonian railways

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  • Aleksander Lust

Abstract

Based on the experience of Estonian railways, this article argues that the privatisation of monopolistic infrastructure is economically wasteful and politically divisive. In 2000–2001, Estonia sold the passenger carrier and a portion of the track to domestic businessmen posing as a British strategic investor, and the main freight carrier and most of the track to an American-led consortium. The passenger carrier continued to receive government subsidies but closed several rail lines, which led to protests by passengers. The freight carrier earned large profits from the transit of Russian oil to Europe, but invested its money in buying used American locomotives, rather than rebuilding the track. Both companies laid off about half of their workforce, provoking the first private-sector strike in Estonia since the collapse of Communism. In 2006, a new government bought back the freight services and track at more than twice the sale price, an expensive lesson in the perils of privatisation.

Suggested Citation

  • Aleksander Lust, 2017. "Broken rails: the privatisation of Estonian railways," Post-Communist Economies, Taylor & Francis Journals, vol. 29(1), pages 71-89, January.
    • Handle: RePEc:taf:pocoec:v:29:y:2017:i:1:p:71-89
    DOI: 10.1080/14631377.2016.1237041
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    References listed on IDEAS

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    1. John Nellis, 2012. "The International Experience with Privatization: Its Rapid Rise, Partial Fall and Uncertain Future," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 5(3), January.
    2. Paul Amos & Lou Thompson, 2007. "Railways in Development : Global Round-Up 1996-2005," World Bank Publications - Reports 11768, The World Bank Group.
    3. Paul Amos & Lou Thompson, 2007. "Railways in Development : Global Round-Up 1996-2005," World Bank Publications - Reports 11769, The World Bank Group.
    4. Joseph Stiglitz, 1999. "Quis Custodiet Ipsos Custodes?," Challenge, Taylor & Francis Journals, vol. 42(6), pages 26-67, November.
    5. repec:wbk:wbpubs:15124 is not listed on IDEAS
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