A month ago, the Columbus Dispatch published pro and con articles about whether mass transit should be privatized. Rather than ask any actual experts on transit, whoever put together the articles asked Kristina Rasmussen from the National Taxpayers Union to take the pro side and left-wing writer Wayne Madsen to take the con side.
Rasmussen did not make many of the important points that transit experts like the infamous Wendell Cox might have made, but she held her own. Madsen, on the other hand, scored some solid hits provided the readers did not know any facts.
About half of Madsen’s article was about the disaster in Santiago, Chile, when the government privatized its transit system. The only problems was, the action the government took was actually the reverse: it centralized a previously private bus system in an attempt to boost ridership on an expensive rail network. The result was cuts in bus service and large losses in ridership.
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Madsen says privatization doesn’t work in “real” cities. But none of the cities in his examples were in the United States (maybe our cities aren’t real?). In fact, the U.S. has one city with a private transit system that provides excellent service and makes a profit: Atlantic City, NJ. (Too bad Rasmussen didn’t know about that one.)
Or maybe Atlantic City isn’t real either.
As UC economist Charles Lave pointed out years ago (4MB pdf), U.S. transit productivity has been declining since the transit industry was taken over by the government. That pretty much remains true today: we spend more and more for a few more passengers a year. As Wendell Cox says, “The current public monopoly provision system in the US serves itself first, consuming nearly all of any new money provided, leaving little for the riders and taxpayers. It is no wonder that, except in a few niche markets, transit has become largely irrelevant.”
Why does Madsen bring up Buenos Aires transit system to compare with the US’? What’s next? Using jeepnies[sic] in the Philipines as an example of why privation won’t work? The real problem in citing England is that it’s a great example of why it should happen. If things in England were really so dire and unsafe, there would’ve been a public backlash by now to have government take things over again. That hasn’t happened. Whatever flaws Madsen sees from this side of the pond, the folks living there don’t seem to see it the same way.
As for Global warming, I’d be curious how transit is doing this. In Denver we recently completed the T-Rex project which widened I-25 from just south of downtown past E470. About half of the project’s $1.7 billion was was used to build a light rail line along I-25. The same stretch of freeway carries @285,000 vehicles a day…. so about 450,000 people (i.e. riders). If SE line has actually made a dent in the growth of this why haven’t they come out in said so? That is, why aren’t these agencies putting forth actual concrete claims with data showing they’ve reduced congestion and reduced greenhouse gas emissions?
prk,
1) They don’t collect this data.
2) If they did, the results would be unflattering. Therefore, loop back to 1).
Though in the UK there is a lot of public private partnerships, with transport policy that helps to make the system work.
As for the rail side, the whole railway network is open access(unlike the private monopoly system that there is in the US). So if any one wants to run a train, you pretty much just pay the track charges and you’re off.
http://www.networkrail.co.uk/
Even with London, their mayor Ken Livingston is some times called “Red Ken”, though he at least has the gumption to charge liberals/motorists for their convenience of using the city’s streets.
http://www.tfl.gov.uk/roadusers/congestioncharging/6710.aspx
I agree that neither of debaters seem a particularly good choice to discuss the merits and demerits of privatization. Rasmussen looks out of her element — this is clearly not an issue she has spent much time on, which is evidenced by her emphasis on competitive tendering arrangements rather than full privatization and deregulation.
For his part, Madsen seems clueless. Begin with the subtitle: “Private operations cut costs…”. Why would they ever want to do that? The article is then filled mostly with union-busting rhetoric and scary stories about greedy capitalists.
The few examples he cites are completely wrong. Transantiago was a failed attempt to consolidate private operations into a much larger “integrated” public operation. The result was that many bus routes were re-routed to serve metro stations. The effects were twofold. First, passengers who formerly had a one-seat ride to their destination now faced a transfer and, in most cases, longer travel times. Second, this force-feeding of metro lines caused severe overcrowding. Disenchanted passengers responded by rioting, then filing a class-action suit against the public operator. Many former patrons went back to driving.
He then points to the crash at Ladbroke Grove as an example of compromised safety due to private rail operations. The focus on one specific newsworthy event does not obviate the fact that train travel in Britian is statistically no less safe now than it was before privatization.
The piece ends with some allusion to the “greenness” of public transit (evidence?) vis-a-vis greenhouse gas emissions, along with this choice quote: “If anything, US commuters need more centralized planning and tighter government oversight.”
MJ, I live in a city that has used competitive tendering for almost 20 years. Transit ridership began increasing almost as soon as the city council lost it’s monopoly. As I see it there are two advantage that this system has over complete deregulation or privatisation.
The first is that it is an effective barrier to any buddy Carnegie from ending up in the same monopoly position that the council was previously had. I haven’t seen any evidence that a private monopoly is any better than a public monopoly.
The second is that as long as tranit is competing with public roads there needs to be a body that can provide the same city-wide perspective that is common for road planning and operations. The most important aspect of that from the customer’s perspective is integrated ticketing and/or arrangements for seamless transfer between services operated by competitors. New Zealander’s may be a lot more aware of that point because a similar arrangement amongst our banks means we have had debit card cashless shopping for three decades. All the different bank computers are connected to one EFT-POS (Electronic Funds Transfer at Point Of Sale) network which makes it cheap and easy for retailers and convenient for customers. Importantly there was no gobernment regulation to make it happen or to stop it happening.
“British Rail privatized in 1997 and the results have been poorer service and horrendous safety problems. Outsourcing safety and maintenance work resulted in a 1999 two-train crash outside London’s Paddington Station that killed 31 passengers.”
That’s news to people like myself who use the service. The train services are better than they used to be, although some services are still pathetic, with overcrowding because the service providers won’t put on enough carriages. Trains crash – so do buses and coaches. The fatality rate today is lower than it ever has been.
“Madsen also criticizes the privatization of British transit. The only problem is that, since privatization, actual ridership on British transit has been growing faster than in any country on the European continent. Some people may complain that their service has been reduced, but that is probably because hardly anyone rode that service.”
The opposite is true of buses, which are more expensive every year. The service, though, is pathetic – outside of London, the bus market is contracting. The bus companies know this, but have a captive (albeit slowly declining market). I would summarise the UK bus market as over-priced and under-specced.
I’m not sure that the ‘pro’ camp is calling for privatisation (the transit companies can do what they like), but rather franchising (the transit companies compete for a contract). Franchising is not popular with transit companies, since they make smaller operating margins, and they don’t like being told what to do.
Well rail operating costs are less than those for buses.
Why do you think people like the O’Toole & Cox with their big oil financiers work so hard to bamboozle the public against having choice regarding transportation?
News flash: Free markets exist just as much as free lunches!
Kevyn,
Your point about banks and electronic funds transfer is quite noteworthy. You mention correctly that no governmental regulation was needed to make it happen or to stop it from happening. To me, this suggests that the banks decided that there was some mutual benefit, both to each of them and their customers, that made voluntary coordination worthwhile.
At least in the US, there is a close analogy with urban transit. I argue that advocates of public monopoly ownership of transit systems greatly overstate the extent to which centralized coordination is needed. With multiple private operators, there would be scope for cooperation, in terms of fare policy, schedule coordination, etc., where it is warranted. We can learn from the experience of Latin American cities, such as Mexico City, which had private “route associations” that regularly met and discussed contractual agreements regarding these types of matters.
In the vast majority of US cities, public transit is a minor player, at best. Hence, there is little need to be concerned about private providers exercising market power. If operators raise fares too high, customers can always respond by abandoning their service. I suspect this is also true of New Zealand, though to a lesser extent. Like most industries, monopoly power is eroded by steady technological improvement.
As regards integrated ticketing arrangements, I believe that the privatization of British Rail involved the creation of an entity that centrally collects fare revenue and allocates it to operators on the basis of service consumed (correct me if I’m wrong, Francis). This seems like a reasonable way to balance the benefits of competition with the benefits of providing a simpler fare structure for travelers.
As to issue of public vs. private monopoly, unless the public sector faces different production technology than the private sector, there is little reason to believe that there is any advantage to maintaining a public monopoly. At the very least, it is not a prima facie argument against privatization. Especially not when the market in question is “contestable”, like the transit/auto situtation I described above.
Highwayman,
Since you continue to log accusations about Randal being a corporate shill for the oil industry (a claim he has repeatedly denied), I thought you might like to read the following editorial by Don Boudreaux of George Mason University:
URL:
http://www.pittsburghlive.com/x/pittsburghtrib/opinion/s_556942.html
Boudreaux talks more about trade issues in his column, since it was on this issue that he was accused of being less than objective. However, many of the claims are by now more standard and generalize to many different issues, including the auto-oil advocacy issue you raise here. The fallacy of much of the thinking behind these claims is dispelled.
“Free markets exist just as much as free lunches.”
This is not a news flash. Students who have taken more than one or two courses in economics (on in some cases, just one) understand that perfectly competitive markets rarely exist outside of economics textbooks. However, it is also true that the degree of market distortion needs in most cases to be rather severe in order for markets to not be the most efficent form of resource allocation (and hence to justify government intervention).
“…rail operating costs are less than those for buses.”
Not when it comes to urban passenger rail. Even if you could show this, you would still need to be able to make the case that any reduction in operating costs offsets the increased capital requirements. As far as I know, no one has been strident enough to make this claim.
“As regards integrated ticketing arrangements, I believe that the privatization of British Rail involved the creation of an entity that centrally collects fare revenue and allocates it to operators on the basis of service consumed (correct me if I’m wrong, Francis). This seems like a reasonable way to balance the benefits of competition with the benefits of providing a simpler fare structure for travelers.”
This is correct, although I don’t know how they handle it internally. The tracks, signalling and most stations are owned by Network Rail, but the stations are maintained by the individual train operators, and these companies therefore handle the ticketing. You can go into a station and buy tickets at the front desk. You can also buy subway and bus tickets at the same time, although this isn’t advertised very well, and most travellers don’t know about it. I use my electronic Oyster card when I go on the London subway, as this is more convenient for me.
Thanks for the update and detail, Francis.
Then MJ why doesn’t the AP get a real job and pay for his journey to Australia with his own money? As appose to getting what amounts to a free vacation by some special interest group?
As for what I was saying about the operating costs, they are less. Hey I’ve seen that in oil industry trade press, even Randal’s partner in crime Stephan Louis has pointed that out. The same goes for the capital costs too.
Highwayman,
The organizations that sponsor his travel are doing so in exchange for his service, which is giving a guest presentation at their conference. This is done in both the public and private sectors, and is not usually considered controversial.
Regarding the argument about rail transit costs, where might I find this evidence?
“Regarding the argument about rail transit costs, where might I find this evidence?”
It’s difficult to find. All three groups – buses, light rail and monorail are fighting their own corners, and are careful with their facts, often comparing different schemes, under different conditions. For example, one scheme might have an expensive bridge, and then the other groups will pick on this as an example of how expensive that type of transport is.
Having said that, the following is about right, I think. Some of these I remember from looking at the topic before. I have my own web-site, and I will add something to it.
http://uk.geocities.com/francisking381@btinternet.com/
Bus Lane:
http://www.cambridgeshire.gov.uk/transport/projects/huntingdonshire/hinchingbrooke_park_junction_bus_lane.htm
250m @£850,000 = £3.4m per km. Expensive paint!
Trolleybus wiring:
£1m per km.
BRT:
http://www.gobrt.org/BTI_Orange_Line_Jan_23_07.pdf slide 22.
$16m per km, or £8m per km.
LRT:
£20-30m per km (dependent on how much existing rail can be incorporated into the scheme). The LRT scheme given in the gobrt presentation works out at $40m per km (£20m per km).
Monorail:
£40-60m per km
Subway:
£100m per km (very dependent on the nature of the ground through which it is cut. St. Petersburg, for example has cheap subways since the ground is easy to cut through).
What I can say is that monorails are still as rare as hen’s teeth. The low costs advertised by the monorail companies haven’t materialised.
The running costs of LRT are lower than BRT if there is enough patronage to get the costs down. The costs are given as $ per passenger mile, so more passengers reduces the running costs. Each LRT takes only one driver to move more passengers, so on a busy route the running costs will be lower than a bus. The comparison needs to be done with care, though, as the bus network will include unprofitable routes for social reasons, whereas LRT is put onto the choicest routes.
““…rail operating costs are less than those for buses.â€Â
Not when it comes to urban passenger rail. Even if you could show this, you would still need to be able to make the case that any reduction in operating costs offsets the increased capital requirements. As far as I know, no one has been strident enough to make this claim. ”
http://www.lightrailnow.org/myths/m_mythlog001.htm#STL_20070531
I make no comment on their presentation.
Francis,
I have seen this argument made before by the same folks.
You are wise to steer clear of their specious presentation of the data and assumptions.
I did once take the time to review their claims, but found it to be little more than an empty advocacy piece.
I was really wondering whether anyone but the lightrailnow folks had made this claim.
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