Great American Streetcar Scandal

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The Great American Streetcar Scandal^[1] was the sequence of events in which General Motors, Firestone Tire, Standard Oil of California and Phillips Petroleum formed the National City Lines (NCL) holding company, which acquired most streetcar systems throughout the United States, dismantled them, and replaced them with buses in the mid 20th century. It is alleged by some historians that NCL's companies had an ulterior motive in their purchase of streetcar systems of forcing mass use of the automobile among the U.S. population.

Convicted of violating the Sherman Antitrust Act, GM was fined $5,000 and each executive was ordered to pay a fine of $1 for a conspiracy to force the streetcar systems to buy GM buses instead of other buses (but not for dismantling the streetcar systems, which were also being dismantled by non-NCL owned systems).

Contents 1 Background 2 Other explanations 2.1 Capital Costs 2.2 Labor Costs 2.3 Congestion 2.4 Jitneys, monopoly, and municipalization 2.5 Public utility divestment 2.6 Road construction 2.7 Suburbanization 3 Results 4 See also 5 References 6 Further reading 7 External links

[edit] Background

Between 1936 and 1950, National City Lines bought out more than 100 electric surface-traction systems in 45 cities, including Detroit, New York, Oakland, Philadelphia, St. Louis, Salt Lake City, Tulsa, Baltimore, Minneapolis, Seattle and Los Angeles, and replaced them with GM buses. The scandal is rehashed in books like Fast Food Nation and the film Who Framed Roger Rabbit; testimony by Government Attorney Bradford Snell to a United States Senate inquiry in 1974 gave the scandal its current prevalence and weight in U.S. popular culture.

The scandal also invokes the Interstate Highway System as an additional culprit, because the system began its initial construction in California after the large-scale dismantling of that state's trolley network.^[2]

[edit] Other explanations

Others however argue that streetcars faded away at the invention of the internal combustion engine and rise of the private automobile, and then the bus. At one time, virtually every city over 10,000 in America had at least one streetcar, before the invention of the automobile and the bus. 95% of all streetcar systems were at one time privately owned. The claim by transit advocates that "General Motors conspired to destroy the nation’s transit systems by replacing "efficient" streetcars with 'dirty' buses...." is not true and "has been debunked by numerous books and articles."^[3]

"General Motors did purchase an interest in various transit companies, but its only goal was to sell its brand of buses to companies that were already converting from streetcars to buses. The simplest evidence of this is that General Motors never controlled more than a small fraction of the nation’s transit lines, and it controlled none after 1949."^[4]

The CATO Institute however, chose its language carefully: stating that General Motors, alone, never controlled more than a "small fraction" of streetcars is misleading. The issue is whether NCL, of which GM was a part in affiliation with Standard Oil of California, Firestone, and Phillips Petroleum, controlled a substantial amount of the streetcar industry between 1936 and 1950 (in this context, this also renders the notion of GM controlling no streetcars after 1949 as somewhat of an aside).

[edit] Capital Costs

Because electric motors are far simpler than internal combustion engines and steel-on-steel vehicles do not need the elaborate sprung suspensions of rubber-tired vehicles traveling on asphalt, streetcars themselves are actually much cheaper to maintain than buses and are far more durable. (1930s-vintage PCC streetcars still operated in Toronto, San Francisco, Philadelphia, and Cleveland well into the 1970s.) However, streetcar companies had to maintain their own rights-of-way, while bus operators traveled on publicly maintained roads. Additionally, maintenance of rails and catenary along a given route required that it be shut down, resulting in a total loss of revenue for the period and defection of riders to buses and private automobiles. During the Great Depression, streetcar companies had poor access to capital markets, making borrowing for costly refurbishment of rails and catenary nearly impossible. Because raising fares was difficult due to low demand and streetcar companies' public unpopularity (see below), switching to buses became that much more desirable.

[edit] Labor Costs

A far greater cost savings offered by buses was the result of the labor laws of the day. In many states, streetcar systems' status as regulated utilities entitled their employees to bargain collectively, long before the Wagner Act. As a result, during the 1910s, 1920s, and 1930s, a streetcar system attempting to eliminate the position of conductor and move to one-man operation would usually find itself on the receiving end of a strike by its transit union (citation needed). Transit unions generally did not require two-man operation on buses, however. Switching to buses thus offered the possibility of enormous cost savings on labor, prompting many transit operators to switch to electric trolley buses or combustion-powered buses.

[edit] Congestion

Beginning in the late 1910s, first in central business districts and later in other areas of cities, automobile congestion became a serious impediment to transit operations in areas where operators did not have private rights-of-way. (Congestion in downtown Los Angeles became so bad by the early 1920s that Pacific Electric Railway built, at its own expense, a mile-long subway for use by routes serving Hollywood and the San Fernando Valley, even though few of these lines were profitable.) Automobile congestion delayed transit vehicles, which reduced their desirability for discretionary riders, who then switched to the automobile; in turn, the increased number of automobiles on the road caused transit performance to deteriorate even further. This impacted buses and streetcars alike, but while buses could divert to less congested routes, rerouting streetcar and electric trolley bus lines was nearly impossible.

[edit] Jitneys, monopoly, and municipalization

Almost as soon as buses became available, jitney services arose as competition to streetcars. Jitneys often traveled the same routes as streetcars, but increasingly moved away from the main roads to pick up passengers. (Economist William Fischel attributes the spread of zoning laws in the 1920s to the increased mobility provided to the poor by buses: because the transit-dependent no longer had to live within walking distance of a streetcar line, the construction of multifamily housing became viable in areas that had previously been inaccessible due to distance alone.^[5]) In response, many streetcar operators sought—and obtained—monopoly power over public transportation on the routes they served. (For example, Pacific Electric successfully lobbied the Los Angeles City Council to ban jitneys from operating within the city.) With competition thus eliminated, many streetcar companies reduced or eliminated service on unprofitable lines and raised fares on others.

Coupled with existing resentment of "traction magnates" such as Samuel Insull and Henry Huntington, these fare hikes and service cuts led many suburban municipalities to start their own jitney companies. For example, during the 1920s and 1930s, Pacific Electric fare hikes and service reductions led to the formation of municipal bus services in the Los Angeles suburbs of Santa Monica, Culver City, Montebello, and Torrance, among others. Movements also began to challenge streetcar monopolies in central cities. In Los Angeles, a labor-led coalition nearly succeeded in passing a referendum to establish a city-owned bus company. In New York, Fiorello La Guardia railed against New York Railways and Brooklyn-Manhattan Transit Corporation, the city's principal streetcar operators, championing municipal operation of buses and expansion of the city-owned IND subway service. Municipalization in Chicago, for which calls began as early as the 1920s and which finally occurred in 1946, also led to the elimination of streetcar service.

[edit] Public utility divestment

The economic populism prevalent during the Great Depression also had a serious negative impact on streetcar companies, in the form of the Public Utility Holding Company Act of 1935. Because streetcar companies were often the biggest single customers of electric utilities, they often were owned partially or wholly by the utilities themselves, which then supplied them with electricity at substantially discounted rates. The passage of the Public Utility Holding Company Act forced utilities to divest themselves of streetcar lines. The newly independent lines then had to purchase electricity at full price from their former parents, shaving their already thin margins that much more.

[edit] Road construction

Federal subsidy of highway construction did not have as large of an impact on streetcars as many assume: prior to the passage of the Federal-Aid Highway Act of 1956 (the "Interstate Highway Act"), federal funding of road-building largely focused on highways between – not within – regions. States and localities funded a great deal of urban road upgrading and construction, often from general funds (rather than the fuel excise taxes that funded federal highways). In some cases, however, a specific tax on street users was imposed; because the most easily identifiable street user was the streetcar company, it often bore the largest share of these specific taxes, even though it would not benefit from the resulting paving and upgrading. For the most part, the desire to alleviate traffic congestion motivated these efforts. However, many legislatures and leaders — heavily lobbied by automakers, to be sure^{[citation needed]} — sought to accelerate mode shift from the detested streetcars and railroads and toward cars and trucks, promoted by the automobile industry as instruments of progress.

[edit] Suburbanization

From the 1880s onward, streetcar companies in the United States were often active agents of suburbanization. In Los Angeles, Henry Huntington, owner of the Los Angeles Railway and the principal shareholder of Pacific Electric's parent Southern Pacific, used the lure of streetcar service to drastically raise the value of undeveloped suburban property owned by his associates, who in turn passed along large portions of their post-subdivision profits to Huntington. However, in most areas, zoning laws—first used in the 1910s and widely enacted following the Supreme Court's 1926 ruling in Euclid v. Ambler (272 U.S. 365)—prevented the development of dwellings other than single-family homes in most suburban areas. Prior to the establishment of the Federal Housing Administration, generally only the relatively well-to-do could obtain a mortgage on a suburban house; these were generally among the first to adopt the automobile. As a result, interurban streetcar lines rarely made money—Pacific Electric, the best-known interurban operator, was unprofitable on virtually all of its routes, particularly the long runs from downtown Los Angeles to Orange County and the San Fernando and San Gabriel Valleys—and streetcar companies converted these lines to buses as early as the 1920s, if they did not abandon them outright.

[edit] Results

Los Angeles had two separate trolley systems, known as the Red Cars and the Yellow Cars. National City Lines owned only the Yellow Cars, yet both ended up being dismantled. It is worth noting that the two systems were often used in conjunction by travelers, and cutting service on one line made the other less convenient as compared to automobiles. Regardless, during this period automobile ownership was rising everywhere in the United States, both in cities where GM had purchased the local streetcar systems and in cities where it hadn't.

On April 9, 1947, nine corporations and seven individuals (constituting officers and directors of certain of the corporate defendants) were indicted in the Federal District Court of Southern California on two counts under the U.S. Sherman Antitrust Act. The charges, in summary, were conspiracy to acquire control of a number of transit companies to form a transportation monopoly, and conspiring to monopolize sales of buses and supplies to companies owned by the City Lines.

The proceedings were against Firestone, Standard Oil of California, Phillips, General Motors, Federal Engineering, and Mack, (the suppliers) and their subsidiary companies: National City Lines, Pacific City Lines, and American City Lines (the City Lines).

In 1948, the United States Supreme Court, in United States v. National City Lines Inc. (334 U.S. 573, 596, "National City I")^[6] reversed lower court rulings and permitted a change in venue from the Federal District Court of Southern California to the Federal District Court in Northern Illinois.

In 1949, the defendants were acquitted on the first count of conspiring to monopolize transportation services, but were found guilty on the second count of conspiring to monopolize the provision of parts and supplies to their subsidiary companies. The companies were each fined $5,000, and the directors were each fined one dollar.

The verdicts were upheld on appeal in 1951.^[7]

[edit] See also

• The Geography of Nowhere
• Rail transport in the United States
• Transportation in Los Angeles
• Who Framed Roger Rabbit, in which the scandal is masked and set in Los Angeles^[8]

[edit] References

[edit] Further reading

• Adler, Sy "The Transformation of the Pacific Electric Railway: Bradford Snell, Roger Rabbit, and the Politics of Transportation in Los Angeles." Urban Affairs Quarterly, Volume 27, Number 1, 1991.
• Bottles, Scott L. Los Angeles and the Automobile, University of California Press, 1987. ISBN 0-520-05795-3.
• Black, Edwin "Internal Combustion: How Corporations and Governments Addicted the World to Oil and Derailed the Alternatives," especially Chapter 10, St. Martins Press 2006
• Cato Institute, "A Desire Named Streetcar: How Federal Subsidies Encourage Wasteful Local Transit Systems." [1]
• Fischel, W.A. (2004). "An Economic History of Zoning and a Cure for its Exclusionary Effects," Urban Studies 41(2), 317-40.
• Goddard, Stephen B. Getting There: The Epic Struggle between Road and Rail in the American Century, Basic Books, 1994
• Hanson, S. and Giuliano, G. editors (2004). The Geography of Urban Transportation, Third Edition. The Guilford Press. ISBN 1-59385-055-7. 
• Kunstler, James Howard (1994). The Geography of Nowhere: The Rise and Decline of America's Man-Made Landscape. Free Press. ISBN 0-671-88825-0. 
• Norton, Peter D. Fighting Traffic: The Dawn of the Motor Age in the American City, MIT Press, 2008. ISBN 0-262-14100-0
• Snell, Bradford C. American Ground Transport: A Proposal for Restructuring the Automobile, Truck, Bus and Rail Industries. Report presented to the Committee of the Judiciary, Subcommittee on Antitrust and Monopoly, United States Senate, February 26, 1974, United States Government Printing Office, Washington, 1974, pp. 16-24.
• Slater, Cliff (1997). "General Motors and the Demise of Streetcars," Transportation Quarterly 51. [2] Puts forth the argument that the streetcar was eliminated by the market.
• Thompson, Gregory Lee (1993). The Passenger Train in the Motor Age: California's Rail and Bus Industries, 1910–1941. Ohio State University Press, Columbus, OH. ISBN 0-814-20609-3. 

[edit] External links

• "The Great GM Conspiracy Legend: GM and the Red Cars", Stan Schwarz
• "Conflict of Transportation Competitors", Akos Szoboszlay
• "The StreetCar Conspiracy: How General Motors Deliberately Destroyed Public Transit", Bradford Snell
• "Paving the Way for Buses – The Great GM Streetcar Conspiracy, Part I – The Villains", Guy Span, baycrossings.com, "Part II - The Plot Clots", Guy Span, baycrossings.com
• "Did General Motors destroy the LA mass transit system?", The Straight Dope, 10-Jan-1986
• "Clang Clang Clang Goes the Trolley, Part II", Tim Hendrix, L.A. Nocturne, June 26, 2003
• "Street Railways: ‘U.S. vs. National City Lines’ Recalled", Paul Matus, The Third Rail, September 1974
• "Taken for a Ride", Jim Klein and Martha Olson - a 55-minute film first shown on PBS in August 1996