Academic journal article Journal of Private Enterprise

Generations of Transit Disaster: The New York City Subways

Academic journal article Journal of Private Enterprise

Generations of Transit Disaster: The New York City Subways

Article excerpt

I. Introduction

If ever there were an example of a state enterprise with a protracted history of failure, it is New York's deteriorating subways. Complete government ownership and operation of the subways-this year marks the seventy-fifth anniversary of the ouster of the last private management companies-has turned a once great system into a nightmare. Problems include delayed maintenance, political unaccountability, poor communications systems, angry transit unions threatening to shut down the city-and sometimes doing so, as in the 1966 strike that crippled the city's economy for weeks-and the problem of almost every other business operated by governments: relentless red ink. Delays constantly plague the system, as illustrated by endless stories in New York newspapers (see, e.g., Harshbarger 2015; Soria 2015).

What happened to the subways, which were once regarded as a transportation jewel? And why did the private management companies eventually depart, selling their assets to the city, which eventually transferred control of the system to a state authority?

Government price controls and political tinkering drove the owners of private management companies to destruction as they ran huge deficits in the 1930s after the first fifteen years or so of running in the black (1904-19). The government was "exploiting" private management companies with its price controls, wrote one historian who did a financial review of a private management company (Derrick 2001, p. 236). Yet, private management subway companies were once highly profitable. A subway historian called one of them, the Interborough Rapid Transit Company (IRT), "a goldmine" in its first years (Hood 2004, p. 123). Private managers were economical. They sought to make money by controlling costs and attracting as many riders as possible, something that has not been happening for generations. They built lines in the most profitable areas first and planned the less potentially profitable lines later. This process was similar to how many railroads were built in the United States in the nineteenth century: freight service came first because it was more profitable. Passenger service was secondary because its potential profitability was less.

But the subway system's initial success inevitably led to problems. Politicians-corrupt, as well as well-meaning "good government reformers," or what some would call the "goo-goos"-constantly complained that the private management companies were making too much money. That led to calls for reform against "greedy" companies.

Increased politicization of the subway system followed. Politicians and regulators imposed rules, controlled prices, and eventually killed the private management companies. The politicians and the reformers showed the private management companies the door, taking complete control of the system in 1940. Some seventyfive years later, most people, including many of today's goo-goos, agree the system has many problems.

II. The Good Old Days

The subway system was not always bad. It had a golden era in its first decades. That was when private management companies, responsible to stockholders as well as to riders-the IRT and the Brooklyn Rapid Transit (BRT), which later became the BMT-operated the first subways under the terms of the dual contract between the two companies and the city7 The subway began with 28 stations on October 27, 1904 (MTA 2012). The next fifteen years or so was a period when the system expanded and worked. Remarkable as it may sound to today's embattled riders, the subways were praised by riders, some of whom rode for fun.

The system's success also helped develop the city's economy in the early twentieth century, just as private railroads helped the country prosper in the nineteenth century. The subways changed the nature of work. People no longer needed to live close to work or at work. They could move out of densely populated slums in lower Manhattan. They could live in suburban parts of the city, upper Manhattan, and the then-pastoral Bronx. …

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