Socialist Mamdani Inadvertently Pays Tribute to Capitalism

Socialist Mamdani inadvertently pays tribute to capitalism

by Gregory Bressiger.

Socialist mayor Zoran Mamdani inadvertently

praised one of the great accomplishments of capitalism

as he was sworn in as mayor of New York City.

He took the oath in one of the original subway stations,

a system built and maintained by private management companies

as part of a wildly successful private transportation system

that lasted 36 years.

It was a showcase that people came from around the world

to see.

The no longer used city hall stop.

One of some two dozen stops opened in 1904

was incredible.

So superbly engineered and maintained

had the system previously been that it took years

for the systematic neglect to take its toll.

Robert Carroll wrote in his biography of Robert Moses.

The system was so good that people came from abroad

to experience our subways.

But it was more than beautiful.

The private management system in its first two decades

made money.

That's until it was bankrupted decades later

by government regulation and price controls, which never

allowed the fair to go over a nickel.

These are similar to rent control laws

that make New York City's housing market a horror show

for average workers.

Still, the privately managed subway companies

before being ousted by populous polls

accomplished great things for more than shareholders.

This was detailed in the book, Tunneling to the Future,

the story of the great subway expansion

that saved New York by Peter Derrick,

who worked as an MTA consultant.

He wrote that the first subways,

the subways run by private management companies,

allowed people to move from slums

near their workplaces in Lower Manhattan

to healthier neighborhoods and other burrows.

The private management subway companies did something

that even some defenders of capitalism say is impossible.

An efficient private management transportation

system that made money.

The latter was roughly the first 20 years of the system

from 1904 to roughly the mid-1920s.

Indeed, subway historian, private, stock, transit,

critic, official, Brian Kudai admits

that the construction of these lines

would probably have been impossible without private funding,

because the city was reaching its debt limits.

But the excellence of the privately constructed system

was more than financial.

The first subways were considered an engineering marvel.

New Yorkers had been once enormously

proud of their subways, Cairo wrote.

The government took over in 1940.

Yet so superbly engineered and maintained

had the system previously been that it

took years for the systematic neglect to take its toll.

But state and city government agencies ruined it.

And aided by the media have since insisted

we can never go back to private enterprise

because subway lines can't turn a profit.

The theory has developed that municipal transportation

might not even be expected to pay its way.

This theory is merely the outgrowth

of government ownership, wrote economics journalist Henry Haslet

some 60 years ago in the essay Socialism, US style,

as the tide of more government was rising.

Subways don't make money, Nicole Galinas,

a senior fellow with the Manhattan Institute.

Told me a few years ago.

I have even been told by representatives

of the so-called laissez-faire group

that subway privatization is not an option.

This reminds me of the Austrian economist Ludwig von Meises

his comment.

Even many of the critics of Socialism

sound like Socialists.

But history doesn't support Gelinas.

Indeed, private subway lines made money in their first years.

Private lines lost money later.

Their history is similar to private passenger railroads

once profitable and later forced into bankruptcy

through over-regulation and price controls

from the 1920s to the 1930s.

1960s before a GOP administration gave us Amtrak,

a system that has lost billions according to the book

End of the Line.

Although the New York City subways were never privately owned,

private transportation companies operated

in the first 36 years of the subways

under a franchise contract.

The best was the Interboror Rapid Transit Company, IRT.

It generated strong profits from its beginning in 1904

on into the 1920s.

In the IRT's 1917 annual report,

the transportation company reported net income

of $23.2 million.

That was an increase of about $1.5 million

over the previous year.

The IRT was also good investment.

It paid about some $7 million in dividends

according to the annual financial report,

dated June 30, 1917.

Even into the 1920s, when price controls and rising costs

because of the inflation of World War I,

were squeezing profits with private operators

suing unsuccessfully to raise fares,

the subways still made money.

However, IRT officials warned that without the ability

to raise prices, bad things would happen.

In the US Supreme Court decision of 1929,

Gilchrist versus IRT, a decision that affirmed

that the 5-cent fare couldn't be raised to 7 cents,

court papers documented what the critics have claimed

was impossible.

The IRT still made money.

According to the court papers,

for the current fiscal year and a June 30, 1928,

the figures for the first six months are available

and show a net surplus amounting to $3,687,000,

which exceeds the surplus for the corresponding six months

of the fiscal year before by $1,609,000.

However, after the IRT was repeatedly

blocked from ever raising fares,

the price controlled subways inevitably

started to lose money in the 1930s.

Service quality declined and the city government regulated

the subways into red ink.

The IRT, like any business leaving a hostile business

environment as socialist take charge of a city,

was ready to sell in 1940.

The politicians and their union allies took over.

Disaster followed and remains to the present day.

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