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Tuesday, January 15, 2008

A Streetcar Named Politics

Glenn Beck is wrong. I really enjoy Glenn's radio and TV shows and generally find him one of the more sensible conservative commentators around. So, I was disappointed when I read one of his "illustrations" of the power of free markets. The section is called "A Streetcar Named Corruption" (page 104).

The story goes like this. In 1914, electric streetcars were 100% of mass transportation in US cities - even in cities of very modest size. Sensing an opportunity to take over the industry and make money, 3 companies from 3 industries came together - automobiles, oil and rubber. Over the next 40 years, streetcar companies were bought up, dismantled and replaced with buses built by the auto industry on rubber tires burning oil. Once the streetcar and the Interurban electric rail system became extinct by 1950, the consortium that started it all, shut down the new small town bus companies, calling them unneeded and too expensive. By then, the American culture had moved away from reliance on mass transit toward private auto ownership.

In citing the story, Glenn says, "Far better than any government agency, private industry can lead us through another transportation, but it needs the right incentives." Here's where he loses me. Glenn assumes the whole thing happened without government intervention as a result of private industry responding to a transportation crisis in our country.

The truth is more infuriating and he shouldn't have used that story to support a plea for free market competition. Quite the opposite is true.

What happened was this. The three companies in this story faced a nation that had cheap transit and no strong need for private automobiles. Interurbans and streetcars provided cheap transportation virtually anywhere you wanted to go. Even small towns were linked up. How could they sell more cars and oil and tires?


The streetcar companies WERE ALMOST ENTIRELY OWNED BY THE ELECTRIC COMPANIES!!! The electric companies had plenty of low cost electric power and the transmission infrastructure to support it. For them, it was another way to make money off of electric power delivery. The auto, tire and oil industry understood that so long as Americans depended on cheap streetcar travel, their industries would not grow as quickly as they wanted them to. They formed a company called National City Lines (NCL).


The auto/rubber/oil consortium approached Texas Speaker of the House Sam Rayburn, the powerful Democrat Congressman who ran roughshod through the halls of power back in the day. Rayburn with the help of then president, Franklin Roosevelt pushed through a law (The Wheeler/Rayburn Act) that they told everyone was passed in order to "protect consumers from the evil electric company monopoly". The law forced electric companies to divest themselves of their streetcar companies. So, streetcar companies went up for sale at fire sale prices and practically the only buyer who could afford to pick them up was NCL.

Within weeks of purchasing the streetcar companies, NCL began replacing streetcars with rubber tired, gas burning buses built by the auto industry. Operating costs increased dramatically and over the next couple of decades, many of the smaller bus companies folded up. As transit became more unreliable, people began to (guess what) buy more personal cars. Executive of Standard Oil and GM actually went to jail for conspiracy over the deal, but by then, the damage was done.

Without cheap streetcars, in no time, Americans all had bought personal cars and developed a massive appetite for oil. Unable to produce enough to meet the need, oil companies began buying it overseas.

So, thanks to Democrats trying to manipulate the transportation industry through laws that limited competition in favor of one industry over the other, we wound up dependent on foreign oil.

The Moral of the Story:
When the government starts restricitng business competiton for the good of the American Public, everybody grab for your wallet - someone's after your paycheck.

Glenn, give me a call. I can help you with your research for the next book. It's embarrassing to be praising behaviour you obviously disapprove of - even it's by accident.

Just One Man's Opinion

Tom King

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