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The news that Greyhound, the primary inter-state bus service has cut its routes in many western American states may not make top headlines in today’s world of terror. Of course, the motivation for Greyhound doing so is purely financial and reasons of streamlining operations by creating more efficient transport networks make it all but undisputable.
But as any textbook on economics will teach you, that exactly is the problem. Market failure has always been the bane of a capitalistic society and hits the poor the hardest.
The U.S. economy has historically been robust enough for a common man to own a vehicle and hence the arterial transport routes have been coated in asphalt. Public transit is virtually non-existent outside of major metropolitan cities. If you have lived in the U.S for more than six months, you will definitely feel the pinch of not having a vehicle that you never felt in all those years in India. The rural hinterland of America is totally disconnected from the cities, unlike the State Transport (ST) network in most parts of rural India. The quality and comforts of traveling in a ST bus may be lead to an agonizing realignment of your skeletal structure but it does get you there in one rattled piece. Although horribly inefficient and unreliable for most parts, the public state transport network is a much-needed utility to link the countless villages.
America does not have a similar state-run transport system and relies exclusively on monopolist private entities like Greyhound or Amtrak to ferry the people who cannot fly by air. I wouldn’t call Greyhound cheap but for lack of better alternatives; it does fulfill a certain need of the society. After the cut back, it has left many people in the lurch. The worst hit segment is the rural poor who can never afford a car or the seriously afflicted health patients who relied on Greyhound to transport them for their monthly medical appointments.
All said and done, who is to blame for the affected people’s condition? Of course, Greyhound has a right to consider its bottom-line and safeguard the company’s well-being. The government can pass the buck by attributing its non-indulgence in certain sectors of the market – which also is true. But where do we draw the line between a pure capitalistic and socialist regime? State control is abhorred by all libertarians. Can anyone enlighten me on the extent of state’s role in maximizing society’s welfare instead of streamlining a single private enterprise’s operations?
by Patrix | on Tuesday, July 20th, 2004 at 4:16 pm | 
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July 20th, 2004 at 5:45 pm reply
i can only point out my experience over the last month…..comparing china to india…….both started off at pretty much the same place - but a strong iron handed government in china forced the people to work within a plan- albeit at a high price- china is today leaps and bounds ahead of india. The difference made me weep for our country……I was never one for socialism or communism but this trip has made me take a second look at these often despised options. On second thoughts when i compare russia- they didnt go anywhere- so perhaps it is the vision of a few that got china to this place…………either which way- i do think that government needs to take a more pro- active role in the welfare of their people………….
July 20th, 2004 at 6:17 pm reply
Tell me about it! it’s like being stranded in the middle of no where without a vehicle and the public transport is painful. I agree, in India too it was bad, but there were atleast autorickshaws around as an alternate means.
July 20th, 2004 at 6:42 pm reply
M - Long time no see, eh? You sure do support a Democratic state-centric regime but don’t you think it makes is difficult to make the case for the level of control. You have to take each case specifically. It make work well in Communist China but we don’t want to go the communist way, do we?
Queer - Somehow I do find public transport within the reach of the poor in India. Maybe because it is subsidized heavily and typically even a middle-class family need not own a car, especially in big cities.
July 21st, 2004 at 12:15 am reply
its a interesting question! the thing is that if there is a section of society that is left without a commodity maybe the state should provide it.
incidentally - what do you think Ayn Rand would have said to this question …
:)
July 21st, 2004 at 10:35 am reply
This makes me think of that recent Jivha post about the railroad book stores (Wheeler, wasn’t it?) They stayed open in locations that weren’t profitable because they were the only provider of educational materials for the villages in the area.
There is something called being a “good corporate citizen.” Many large companies give millions of dollars to charity or provide services to the community that the government can’t. It’s good for their public image and indirectly good for profits. Communism is not necessary. It just seems like Greyhound is not remembering this rule of successful large corporations.
July 21st, 2004 at 12:11 pm reply
Ricercar - Ayn Rand certainly would have let things be as they are. But she does preach extreme individualism, although I am a great fan, it can be merciless at times. But also can be harnessed for good. Individuals have written history, if you recall.
Sabra - Interesting. The only problem with being a good corporate citizen is that it is completing voluntary and unless the company seeks a possible spike in its public image or any consequential spillover (positive), it will not do so. This can only be emphasized with visionary leadership at the helm.
July 21st, 2004 at 12:37 pm reply
I definitely agree about the prerequisite visionary leadership. I guess I’ve just been blessed enough to always work at such corporations.
July 21st, 2004 at 4:09 pm reply
for someone who never visits my side of blogtown you are one to complain about my absence…….theek hai pooch to liya- wo hi kaafi hai…..( eeks that looks awfully funny in english alphabets)
July 21st, 2004 at 5:38 pm reply
Sabra - I had argued earlier in one of my posts on the importance of ethics in business school. Currently, it is merely offered as a prerequisite but never given much importance. But as you have seen by your experience, it is definitely worthwhile having a human touch to the unemotional world of business.
M - I confess that the fault lies with me. I never knew visits to my blog were expected to be reciprocated regularly :)
July 22nd, 2004 at 6:27 am reply
nothing is ever expected- unless you start questioning……….just kidding…….i write for my own pleasure whether or not someone visits is irrelevant……..though feed back is always food for thought…….and always welcome.
July 22nd, 2004 at 11:10 am reply
M - You wouldn’t bring my absence up if it wasn’t expected :) anyways bygones. Will give ya feedback
July 22nd, 2004 at 4:38 pm reply
HI Patrix,
I think you are being a bit prematurely concerned about the Greyhound cutting services, if I understand correctly Amtrak, a monopoly that it is, receives substantial annual subsidies from the government, and maybe greyhound does as well. That does not seem to be able to make these firms anymore profitable, or viable.
More importantly you seem to equate a withdrawl of a monopolist from an unprofitable market with a market failure, when it may infact create the space for many small entrepreneurs with vans, or buses bought from Greyhounds downsizing to start their own private services, which might be viable because they can cater more particularly to the needs of communities, as against having to cater to a broader network. Ofcourse the condition is that the State and Federal government should not have regulations that increase the start up costs so much that these projects are still born.
My conjecture, is just that, a conjecture, but it seems plausible to me. I wouldn’t however consider this an example of market failure, a market creation maybe, but not a market failure. On a broader note maybe it will promote even further urbanisation, the development of more affordable air transport, or even encourage volunteer organisations to help out in the case of the sick and the aged.
Maybe you should look at transport sector regulations that might prevent the market from fulfilling any demand that exists, that would be a Government Policy Failure.
July 23rd, 2004 at 11:03 am reply
Gautam - Point well made. But if you observe the place where Greyhound has made the cutbacks are the places where no other mode of transport exists. They haven’t cut back on the heavily populated East coast region but rather places like Montana, Wyoming, etc. These places have less probability of providing alternatives.
Also reminds me of regulations in the telecom sector that are tempting big companies like AT&T to withdraw from the small consumer market and focus instead on the business sector. This, definitely might lead to more competition since the withdrawal is uniform across the nation.