Here’s a difference between government-run businesses and private businesses: when private businesses face competition, they are forced to innovate to survive. When government-run businesses face competition, they can regulate or tax their competitors out of business.
Blackberry was once the dominant smart phone. Then came the iPhone, which reduced Blackberry subscribers from 85 million to 23 million in just 18 months. In 2016, Blackberry stopped designing phones. But that doesn’t mean it is out of business; instead, it is doing other things like designing driverless-car software.
Now consider the Chicago Transit Authority, which has lost riders in every year since 2012, partly if not mostly because of the growth of Uber and Lyft. Ridesharing has also reduced car rentals (which are taxed by the city) and downtown parking (which is taxes by the city). Although Uber and Lyft also pay taxes to the city, the city estimates it lost a net of $40 million in revenues (including transit fares and vehicle taxes) in 2016. So Chicago Mayor Rahm Emanuel wants to increase taxes on Uber and Lyft to make up the difference.
Meanwhile, in San Francisco, Ford subsidiary Chariot is running buses in competition with publicly subsidized Muni. This has led to demands that the city “regulate Chariot to save public transit.” The term public in public transit doesn’t refer to ownership; it refers to transport that is available to all of the public. So what they really mean is “regulate privately owned transit to save publicly subsidized transit” because, for some reason, subsidized transit deserves to be “saved” from private competition.
The San Francisco Municipal Transportation Agency (MTA) was expected to approve such regulations in October. The new regulations forbid private transit operators from competing directly with Muni. The MTA grandfathered in Chariot’s routes, effectively giving Chariot a competitive advantage over other companies that might want to enter San Francisco’s market. But Chariot won’t be able to add new routes that compete directly with other Muni routes.
This is one more reason why government should get out of the transit business. Some of the few private transit operators in the country, such as New York Waterway, succeeded only because they entered a market that the government transit agencies had ignored. Many others, such as jitneys, were regulated out of business. This slows innovation and rewards bureaucratic bloat.
[This article was originally published on The Antiplanner blog.]
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