Thursday, September 15, 2011

What ever happened to profitable public transportation?



Back in the 19th century, lots of entrepreneurial companies set up public transportation services...mainly rail-based, both on streets and on their own right-of-way. And they made handsome profits.
We still have a few private transportation companies making a profit in the early 21st century, but very few: some airlines (not all!), and just possibly some inter-city bus companies. Megabus? Greyhound? I'm not sure. (Usually I like to check my facts, but today I want to spark comment and discussion, so bear with me...and put in your two-dollars worth! [Inflation.])
I think it's critical to get private business to invest in - and make a profit from - public transportation. Why? Because we need to ramp up our public transportation options pretty quickly to avoid peak-oil problems, and if the private sector could be offered a profit in making that happen, it could get done much sooner.
Today, I want to look at how public passenger transportation used to make money, how it still does in some places, and why it no longer does here in the US.

How did they do it?

In the 19th century, railroads were money-making operations for a number of reasons...
  • At first, roads were terrible and there was no other practical way to get around. (Contrary to what some people may think, Conestoga wagons were never  transportation of choice - only of necessity.)
  • In competition with canals, they were faster and less labor-intensive.
  • When other railroads arose in competition, they either provided needed capacity, or were bought out; we see this happening in the airline industry now.
  • In the west, the government granted lands to the railroads - more than they needed for themselves, but enough to sell as real estate to pay for the cost of their construction. Of course, this land had been stolen from the Native Americans...
  • Monopoly was standard procedure whenever possible; when a railroad was the only one serving a territory, it charged crushing rates, and employed any means possible, including violence, to maintain its monopoly; ask any California historian about the "soulless Southern Pacific".

Why can't we do it anymore?

Several reasons, some connected to abuses of the past...
  • No more stolen Native American lands to give away to the railways.
  • Heavily subsidized options: highways are almost 100% subsidized by taxpayers, and airways are to a large extent also, yet the fact that we have to subsidize public bus and rail service comes as an unwelcome surprise to many Americans.
  • In order to use automobiles on "free" (publicly subsidized) highways, we pay more to foreign countries in gasoline and diesel costs than we do to our own government for the highways.
  • Transportation companies are not allowed to diversify much, because of their history of monopolizing and bullying.

Where does public transit make a profit?

True, there aren't many places where it does...but there are some. Each merits a closer look than I can give it, but here's a quick outline.
  • Latin America, for sure Curitiba, Brazil; and Bogota, Colombia; maybe others too. The government of these two cities built the infrastructure for bus rapid transit (BRT) and loaned money to private operators to purchase appropriate BRT equipment. The operators repay their loans, pay taxes, fuel, drivers, etc., and make a profit beyond that. Labor and fuel costs are relatively low in Latin America, which clearly helps.
  • France with high-speed rail. The French TGVs run on track paid for with government money, but they make enough profit from high-speed service to subsidize normal-speed service operation throughout France.
  • Japan has many private companies that run passenger railways and make a profit. Whether the railways themselves make a profit is not always clear, because the companies are all diversified into retail, real-estate, entertainment, banking, hospitality, and so forth. In many cases, a company's railway and its other holdings operate synergistically. For example, Hankyu owns department stores built over some of its stations, and hotels nearby, each part of the business helping the other.

Now what?

What can we do here in the United States? Are our legal and financial structures too rigid to allow public ground transportation to make a profit ever again? If not, what do we need to change? What legal and financial structures can be modified to permit us to provide lots more public transportation, and fast? Share your ideas here!

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