Writer: Tanvi Garg
Editor: David Han
You’re in Westerland, Germany, waiting to ride the Deutsche Bahn back to your city. A banner flashes across the screen in big, bold letters.
Der Zug fällt aus. Your train has been canceled for the third consecutive time this week. And as you stand there, you think: Did my train operator forget to wake up? How do they manage in Japan, where the Shinkansen is rumored to be holistically superior? Could the situation be improved if everyone had a car? For a frustrated person stranded at a train station, these are all fair questions. Ultimately, the key factors that affect public transportation boil down to monopolies, investment, and culture.
Graphic By: Meredith Whitcher
Monopolies: How The “Own-It-All” Strategy Doesn’t Benefit Consumers
A monopolist is a single entity or firm that controls the entire supply of a good or service, effectively choking out any competition. Monopolists, to maintain their market power, often spend more to keep their position in the market exclusive. There are different forms of monopolies. For example, private monopolies can be seen in railways, where a single private company owns and operates all the railroads. Additionally, there are “natural” monopolies, where a state, by virtue of its position, controls most of the public transit. In many sectors, monopolies enable dominant firms to raise prices and negotiate quality with minimal limitations—a consequence of the absence of competition. As a result, monopolies generally tend to harm consumers through their anticompetitive measures, cutting costs and corners, unless antitrust legislation prevents them from doing so.
Since it’s difficult to compare all the countries, let’s examine the best and worst subway systems.
Some countries with top-rated train/subway systems, such as Japan, South Korea, and Switzerland, seem to share one thing in common: they might have started as monopolies, natural or private, but since then, they’ve broken down into smaller companies, encouraging competition in the subway sector.
Japan started with the Japanese National Railway, which was then privatized into seven entities: JR East, JR Central, JR West, JR Kyushu, JR Hokkaido, JR Shikoku, and JR Freight. Although they are all a part of the Japan Railways Group, “JR Hokkaido, JR Shikoku, and JR Freight are… overseen by the Japan Railway Construction, Transport, and Technology Agency (JRTT),” while the rest of the companies are publicly traded. This is not to say that oligopolies or regional duopolies don’t exist within regional areas. However, they remain superior to most of the subway systems controlled by a monopoly. A study conducted on Japanese High Speed Rail (HSR) showed that “users’ time cost became significantly higher in the monopolistic segment than in the duopolistic segment.”
The South Korean Subway System is known for being predominantly operated by three companies—Seoul Metro, Korail, and Incheon Metro. Korail is a government-owned public corporation, Seoul Metro is owned by the Seoul Metropolitan Government, leaving Incheon Transit Corporation the only private company in this oligopoly. Out of the 24 lines that run across South Korea, 15 lines are controlled by the three companies listed above, allowing for some competition by private rail operators (DTRO, DJET, GRTC, AREX).
Finally, Switzerland has its railway lines controlled by the Swiss Federal Railways, BLS AG, and Südostbahn, all of which collaborate and encourage competition among the operators.
What about countries that kept their railway system as a monopoly?
Take Vietnam, for example. Many customers have consistently complained about underpaid staff, uncleanliness, and expensive tickets. Furthermore, the only operator of the passenger rail system in Vietnam is a state-owned entity known as Vietnam Railways. In 2018, Vietnam Railways was recognized as a monopoly, buffing out its profit margins at the expense of customers and the integrity of the passenger rail service. This eventually led the government to attempt to open the market to competition from other private companies. Unfortunately, as a consequence of years of neglect and monopolistic abuse, the number of passengers using passenger railways has consistently decreased.
Another country facing customer complaints and constant delays is Canada. The Canadian passenger rail service is dominated by one firm: Via Rail. And the actual railway tracks? Those are held by a single company known as CN Rail. CN Rail, from the time it was privatized in 1995, has owned 97% of the railway tracks in Canada, which Via pays to utilize. In fact, in 2022 alone, Via Rail’s revenue was $335 million, but its expenses were $673 million, after paying CN Rail; the government stepped in to cover this enormous cost differential. Taking that into consideration, Via, which is effectively the only passenger rail service in Canada, is a monopoly that faces consistent delays (due to yielding to freight trains), but also one that suffers financially at the hands of another monopoly.
Investment in Passenger Train Systems by Country
It’s not just about market power. Monopolies can definitely make ticket prices more expensive, and offer less regulation (especially if the company is privatized). However, the defining trait of the worst public transport systems globally is underinvestment.
Note. From “Statistics Brief: Spending on Transport Infrastructure,” International Transport Forum (2022), National Bureau of Economic Research, Working Paper, pg. 2.
Switzerland, South Korea, and Japan are in the top 33 percent of all countries shown above in terms of investing in inland transport infrastructure. Canada is in the bottom quarter of those countries in this metric, which is evident in observing the quality of service of Via Rail. Vietnam isn’t even present on the graph.
Note. From “Statistics Brief: Spending on Transport Infrastructure,” International Transport Forum (2022), National Bureau of Economic Research, Working Paper, pg. 6
Once again, Switzerland, South Korea, and Japan are in the top third for specifically investing in rail infrastructure, and Canada is in the last quarter of countries presented that do so. Vietnam, once again, isn’t even shown.
So what stops countries from investing in public transport? For most, it’s politics and car culture, working its potent magic.
Take the U.S., for example. In densely populated areas, public transportation works the best; more people lead to high demand, and densely packed urban areas mean regular stops. Regular stops plus high demand yield a profitable public transportation system. But the story changes in rural areas. Josh Shapiro, the governor of Pennsylvania, stated that boosting state funding for public transport, such as SEPTA, would be a tough argument to make because “‘It’s hard… to explain to my constituents why… taxpayers should be investing in a transit network that is four hours away…’”. Many others believe that the bus is a form of social welfare, where the issue, once again, gets divisive. But, where did the idea come from that taking the bus signifies your social status? Car culture.
Car Culture: Why Public Transportation Became Less Popular
In 1888, when the first trolley was introduced to America, it dominated the public transit landscape. Gone were the days of horse transit and piles of manure in the street—now Americans could commute together efficiently. Then came the introduction of the automobile. It solved the many problems that public transportation faced: delays, traffic jams, fare revenues, etc. After World War II, “automobile ownership grew rapidly,” alongside housing demand, which led to more people wanting to settle in suburban areas. The automobile offered the convenience of a reliable, timely commute, so owners were free to settle wherever they wanted.
Furthermore, National City Lines, a group comprised of General Motors, Chevron, and Firestone, started to “buy up streetcar systems around the country… stifled public transportation… [and were] found guilty of conspiracy to monopolize public transit…”. The automobile industry was actively working against public transportation, and as demand grew for cars, government investment shifted from public transportation to automobile-oriented infrastructure. In 1956, the Interstate Highway Act was passed, creating more than 41,000 miles of highway, and soon after, more policies that favored automobiles were passed. Cars became a part of the individual, and the automobile became a status symbol. This phenomenon echoed across the globe, and especially in Europe, where the car became a universal symbol of economic footing.
Conclusion
Public transportation can be extremely beneficial in some parts of the world, and utterly useless in others. Monopolies often actively harm the consumer, with price hikes and compromised quality. Therefore, when multiple companies are involved in public transportation, even when it’s an oligopoly, with the introduction of some competition to the market, consumers are consistently satisfied, and passenger rates increase. This interconnects with how much a country invests in its inland transportation infrastructure. Furthermore, the demand for public transport and the lack of investment are tied to the prevalence of a car culture, which typically dominates the European and American frontier.
So, the next time you’re waiting for your train or bus, which is delayed (again), remember it’s not that your train operator pressed snooze on his alarm. It’s the culmination of decades of how your government chose to handle public transportation.
Featured Image by Daniel Abadia on Unsplash
