Ludwig von Mises Institute

The Mises Institute monthly, free with membership

August 1998
Volume 16, Number 9

No New York City public institution better illustrates the rise and decline of the city than the subways. The subways were primarily built by private-sector entrepreneurs at the turn of the century.

On Oct. 27, 1904, the Interborough Rapid Transit (IRT), the first subway line in the city, began operating from lower Manhattan. It was an immediate success. A journalist wrote the new lines were "architecturally superlative executions." A transit trade journal called the subway stations "dignified and artistic efforts of the highest order." One historian called these private lines "a great public work."

Today, with more than a half century of public ownership and operation of the subways, imagine anyone making those kind of comments about the New York subways!

Private subways-even though highly regulated, even though the fare was held to a nickel by government decree--fueled the expansion of the city. As lines were extended, neighborhoods and shopping centers grew around the stations. But by 1940, through rigorous regulation and through Communist labor unions that sabotaged private ownership, the subways were taken over by the city.

The supporters of city-owned subways promised that new lines would be built. The system, which by 1940 was a mix of private and public lines, would be unified under public control, which would mean economies of scale. The fare would never rise. The system would be run on "a self-sustaining basis," which would mean no tax dollars would have to be poured into it. The riders would no longer be "exploited" by entrepreneurs in search of profits. Unions would be controlled because their members would be governed by civil service regulations. There would be no closed shop. Every one of those promises has been broken.

Union leaders such as the infamous Mike Quill, a transit union leader from the 1930s to the 1960s, knew it would be easier to impose high wage costs on the public sector than on a private-sector operator. Quill, who made alliances with Communists in the 1930s and 40s, was the preeminent labor leader of the city during the period of subway decline. Quill fought and beat many mayors, including the citys most famous and powerful "reform" mayor, Fiorello LaGuardia.

LaGuardia, the patron saint of New York liberals and the mayor most responsible for the subways becoming publicly owned, didnt believe the transit workers should belong to a closed shop. They should be civil servants and have to pass competitive exams, he thought. He also didnt believe the transit workers--or any other municipal workers--should have the right to strike.

All the city's mayors from the 1930s to today--including those with ideas on how to reform the pathetic subways--would ruefully learn that labor power was dominant in the city. The politicians thought they ran the subways. The subways were no more run by the politicians than they were run for the benefit of the general public. After Quill died, a friendly biographer would write about him that he was "The Man Who Ran the Subways."

You and I have to obey the laws. Labor unions, especially in New York City, are above the law. After a 1966 labor victory, the subway rider--the average person for whom the system was supposedly run--would pay through the nose. Special taxes were imposed. Tolls were raised on public bridges to subsidize the subway system. Even with all this extra revenue, fares would rise under public ownership as quickly as ridership levels and service quality would decline.

Under public ownership, which was supposed to avoid "the greed" of entrepreneurs, the fare went from five cents in 1940 to a basic fare today of $1.50, a 2,900 percent increase. Yet the fare hikes produced more deficits. Thats because subways have sloppy management and outrageous expenses. Where are the consumer protection types and the Ralph Naders --always ready to complain about the private sector--to protect riders from high fares and poor service?

Riders have voted with their feet. Subway ridership has declined by some 50 percent in the last half century, even though the city's population has remained about the same (7.4 million by the 1940 census compared to 7.3 million in the last census). Recently, the ridership began to rise slightly (not to nearly the levels of 50 years ago, but a slight increase after years of decline) and that has caused problems. The system is so rundown that more riders means lots of crowding problems and delays.

Today most riders don't think of the subways as "a great public work," but rather as an overpriced antique. Descend into a New York City subway station and youll see how economy and progress have been outlawed in order to protect union jobs. Buy a token or a stored value card from a clerk. Youve basically used the same method of buying a fare that was used 60 years ago.

There are many cost saving proposals that could be explored if the system was run on a for-profit basis. But since the system is run on a political basis and since unions still retain great political power in New York City, any save-the-taxpayers-money, business-approach is not an option.

Privatization of public services is an option in other places. But not in New York City. Every politician of consequence is afraid to do it. Just raising the issue could lead to a strike by the municipal unions, which always implies the threat of violence.

At least Tony Blair, Britains Labor prime minister, felt obliged to mention the possibility that some of the London Underground should be privatized. That puts British socialists far ahead of their counterparts in the Big Apple.

When will New York City join the "free world"? When will its people realize that its bloated public sector, backed by intimidating labor unions, is destroying its transportation hub, the once-private subways? The city is far behind most of the rest of the country in job creation. A reduction in the city's bloated public sector will begin the turnaround. The subways are a good place to start.

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Gregory Bresiger is a journalist living in New York City.

FURTHER READING: Fred Siegel, New York, D.C., L.A., and The Fate of Americas Big Cities: The Future Once Happened Here (New York: The Free Press, 1997); Shirley Quill, Mike Quill Himself: A Memoir (New York: Devi-Adair, 1985); Alexander Gray, The Socialist Tradition from Moses to Lenin (London: Longmans, Green, 1946).

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