From the Associated Press :
President Cristina Fernandez and her late hubby, Nestor Kirchner spent years subsidizing much of Argentina's economy while the country was struggling to overcome its economic crisis a decade ago. Those subsidies are unsustainable with inflation soaring past 25% per year and foreign investment plummeting. The Buenos Aires subway system is in major trouble. The subsidies it received from the national government went for pay increases for a workforce that nearly doubled to 4,500 while under national government control.
The subway system in Buenos Aires is now in its second week of a strike leaving over a million daily commuters to walk, drive, take a bus or just stay home. It started on August 3 with workers demanding a 28% pay raise to match inflation. The national government tried to transfer control of the system to the city of Buenos Aires in January but the mayor, Mauricio Macri said "no thanks" claiming that President Fernandez reneged on her promise to fund operating costs for a year. Fernandez responded by refusing to resume control of the system so now nobody is in charge. Macri and Fernandez are so busy blaming each other that the city has literally ground to a halt. I can't make this stuff up.
The city's six subway lines were "privatized" in 1991 and the workers are supposedly employed by a private concessionaire, Metrovias. Like almost every other subway system around the world , there is no way the system can generate enough profit to defray operating costs. Both fares and salaries are set by the government which also own the lines and subway cars. The system was kept running with huge subsidies but in January Fernandez said it was Macri's responsibility to come up with most of the money. The catch is that Buenos Aires has no way to do so. Not with national control over fares.
This is an object lesson for the U.S. on so many levels. First, it is what is guaranteed to happen with many of Obama's highly touted HSR projects. When the Federal funds run out, the states and cities will be left holding the bag. Likewise with systems that became dependent on Federal operating subsidies. When they were limited to only capital projects and purchases, or cut off altogether, states and cities were stuck. Second it is one of many examples where socialism fails. Too many workers making too much money coupled with inflation. Third, the "privatization" was a joke. What was privatized ? The lines and rolling stock are owned by the government and Metrovias can't cut salaries or raise fares. Similarly to Governor Christie in N.J. and some other U.S. governors , Mayor Macri wisely refused to take responsibility for a system without the power and means to make it work.
As Margaret Thatcher said : "The problem with socialism is that sooner or later you run out of other people's money."



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