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The Motorization and Decline of Urban Public Transit, 1935–1950

Published online by Cambridge University Press:  03 March 2009

David J. St. Clair
David J. St. Clair
Affiliation:
California State University, Hayward, CA94542.
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Extract

Were intracity motor buses economically inferior to electric streetcars and electric buses in the late 1930s and l940s? The contention that they were has recently served as the basis for allegations that the decline of urban public transit was attributable, in large part, to an organized campaign intent on eliminating viable public transit. Aggregate data from trade sources allows a comparative cost and profit analysis of motor buses, electric buses, and electric streetcars for the years 1935–1950. The analysis supports the contention that motor buses were inferior. Questions regarding the applicability of criticisms of market foreclosure theory are also considered.

Type
Articles
Information
The Journal of Economic History , Volume 41 , Issue 3 , September 1981 , pp. 579 - 600
Copyright
Copyright © The Economic History Association 1981

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References

This article is from his Ph.D. dissertation at the University of Utah. He would like to thank Dr. William Carlisle, Dr. Lawrence Nabers, Mr. Ernest Randa, Dr. Peter Lindert, and Dr. Allen Olmstead for their help. Remaining errors are his own. An appendix on data and estimating procedures, as mentioned in the text, is available on request.Google Scholar

1 U.S., Congress, Senate, Committee on the Judiciary, The Industrial Reorganization Act, Hearings before a Subcommittee of the Senate Committee on the Judiciary on S.1167, Part 3, Part 4A, 93rd Cong., 2d sess. (Washington, D.C., 1974). Part 4A contains American Ground Transport by Bradford Snell.Google ScholarHereafter referred to as Snell, American Ground Transport.Google Scholar

2 The term “conspiracy” is Snell's term. I use the term only to refer to Snell's allegations, and in regard to the NCL antitrust case (the connotation is slightly different there).Google Scholar

3 Snell, American Ground Transport, pp. A–28–38.Google Scholar

4 Ibid., pp. A–31, A–89. Snell cites United States v. National City Lines, 1951 Trade Cases, para. 62,757 at 64,237 (No. III.) on the question of these contracts. General Motors denies them. See The Truth about “American Ground Transport,” A Reply by General Motors, reproduced along with Snell's American Ground Transport as Part 4A of Senate hearings on The Industrial Reorganization Act, p. A–114. This contains a denial of all of Snell's charges by General Motors.

5 Snell, American Ground Transport, p. A-32.Google Scholar

6 Toronto Transit, Commission Report No. 5, November 5, 1969; see Snell, American Ground Transport, pp. A-37, A-39.Google Scholar

7 For General Motors' denial of the motor bus inferiority question as well as a denial of all of Snell's allegations, see Motors, General, The Truth about American Ground Transport. General Motors's denials are similar to Snell's allegations in their lack of supporting economic data on this essential point.Google Scholar

8 David, Paul A., “The Mechanization of Reaping in the Ante-Bellum Midwest,” reprinted in Fogel, Robert W. and Engerman, Stanley L., eds., The Reinterpreation of American Economic History (New York, 1971), p. 227.Google Scholar

9 “Financial Atmosphere Clearing,” Transit Journal, 84 (01 1940), 19–21.Google Scholar

10 For an analysis of the evidence supporting the existence of such a campaign, see, Snell, American Ground Transport; General Motors, The Truth about American Ground Transport;Google ScholarClair, David J. St., Entrepreneurship and the American Automobile Industry, Unpublished Ph.D. Dissertation, University of Utah, 06 1979; andGoogle ScholarSolomon, Richard J., et al. , History of Transit and Innovative Systems (Washington, D.C., 1971).Google Scholar

11 United States v. National City Lines, Inc., et al., United States Court of Appeals, Seventh Circuit, January 1951, 186 Federal Reporter, 2d Series, p. 565. Also indicted with National City Lines were General Motors, Standard Oil of California, Firestone Tire, Philips Petroleum, Mack Truck, Pacific City Lines, and American City Lines. The suit alleged two violations of the Sherman Act. Convictions were obtained on one of the charges involving the monopolization of the market for motor buses. Vertical issues were present in the charges, but convictions were not obtained on this count. This is not surpirising considering the time of the suit. The antitrust case did not deal with Snell's allegations, but with monopolization of transit operations and transit vehicle markets.Google Scholar

12 Spengler, Joseph J., “Vertical Integration and Antitrust Policy,” Journal of Political Economy, 58 (08 1950), 347–52.CrossRefGoogle Scholar

13 For example, a Transit Journal article of 1940 claimed that NCL had lowered fares in the late 1930s. See “Selling Transportation Direct,” Transit Journal (Aug. 1940), 227–78. Yet Albert Meier has claimed that NCL fares in 1946 had not changed from the standard 5-cent fare on more than half of NCL properties. In other words, NCL had been able to raise fares on only about half of their properties by 1946.Google ScholarSee Meier, Albert E., “National City Lines,” Motor Coach Age, 26 (02 1974), 4–20.Google Scholar

14 A test of Spengler's argument is difficult for a number of reasons. First, the level of service, routing, frequency of service, and so forth, were often changed after NCL acquired properties. Can fares be compared then? Secondly, even if fares were reduced, can the reduction be attributable to overcoming oligopolistic restrictions? This seems doubtful. Any modernization program that replaced antiquated streetcars should have lowered costs and, conceivably, prices. It is likewise hard to see where in transit operations the oligopolistic restrictions existed. General Motors has been the largest bus producer since the 1920s, and was the largest trolley coach producer in the late 1930s. Its growth does not appear to have been curtailed by oligopoly in transit operations.Google Scholar

15 See Peltzman, Sam, “Issues in Vertical Integration Policy,”Google ScholarBork, Robert H., “Vertical Integration and Competitive Processes,” in Mueller, Willard F., eds., Public Policy toward Mergers (Pacific Palisades, CA, 1969).Google ScholarAlso see Bork, Robert H. and Bowman, Ward S. Jr “The Crisis in Antitrust,” Columbia Law Review, 65 (03 1965), 363–76, and the reply ofCrossRefGoogle ScholarBlake, Harlan M. and Jones, William K., “In Defense of Antritrust,” Columbia Law Review, 65 (03 1965), 377–400.CrossRefGoogle ScholarFor a criticism of the Yellow Cab case, see Kitch, Edmund W., “The Yellow Cab Case,” The Journal of Law and Economics, 15 (10 1972), 327–36.CrossRefGoogle Scholar

16 The costs incurred by the foreclosing firm resulted from: (a) the non-optimal product mix engendered by foreclosure; or (b) the non-optimal production levels engendered by foreclosure; or (c) the price effects from the expansion of market output, again engendered by foreclosure.Google Scholar

17 Snell, American Ground Transport, p. A-38.Google Scholar

18 A growing body of evidence suggests that technology foreclosure was a prime motive in NCL activities. For example, the insignificance and unimportance of the small transit supply market to the NCL suppliers had been an argument that the defendants tried to use in their anti-trust case (the argument was, however, rejected as being irrelevant to the antitrust issues). It should additionally be noted that trolley coaches and streetcars did survive, and are still in operation in a number of cities, including Boston, Philadelphia, and San Francisco. But NCL properties were exclusively motorized on all lines, regardless of traffic (with only one minor exception). Technology foreclosure also helps to explain the alleged (by Snell) prohibitions placed in the sales contracts of NCL properties that prevented the new owners from reintroducing any transit vehicles not powered by petroleum; that is, a prohibition against electric vehicles, If trolley coaches were superior to motor buses, and this certainly had to have been the case on at least some of the lines acquired by NCL, then why didn't NCL introduce or reintroduce, on any lines, trolley coaches made by General Motors? At the time of National City Lines' formation in 1936, General Motors had been the largest producer of trolley coaches. But when NCL was formed, General Motors decided to terminate its trolley coach production. If General Motors' goal had been to monopolize the supplies market and to maximize its profits from transit operations, then it would seem likely that General Motors simply would have continued producing the trolley coach and have allowed NCL properties to purchase either General Motors trolley coaches or motor buses where appropriate. For a discussion of the structure of urban transit, see Solomon, History of Transit and Innovative Systems.Google Scholar

19 For a discussion of the structure of urban transit, see Solomon, History of Transit and Innovative Systems.Google Scholar

20 Finally, regulation and government policy failed in two other areas affecting the success of the NCL campaign. First, the transit industry's experience with jitneys prior to World War I apparently established as the goal of regulation the protection of the transit franchise holder from competition, regardless of circumstances or merit. The regulatory response to jitney competition was virtually to regulate them out of business. Nothing was done to address the transit needs or the regulatory policies that gave rise to the jitney competition. It is ironic, if not unexpected, that the regulatory salvation of the streetcars from the jitneys left urban transit vulnerable to the NCL foreclosures. Second, government policy toward public utility holding companies in the 1930s seems to have left utility firms with an incentive to dispose of their properties. Both factors contributed to the success of the NCL campaign. For a discussion of jitneys and the regulatory suppression of them, see Eckert, Ross D. and Hilton, George W., “The Jitneys,” The Journal of Law and Economics 15 (10. 1972), 293–325.CrossRefGoogle ScholarAlso see Solomon, History of Transit and Innovative Systems, pp. 2–1—2–17.Google ScholarFor a discussion of government policy toward utility holding companies and the effect on urban transit, see Solomon. History of Transit and Innovative Systems, p. 1–13.Google Scholar