Back in the 1920s, most American city-dwellers took public transportation to work every day, but then a company called National City Lines, which was controlled by GM, bought up all the streetcars — or so the conspiracy theory goes:
During the 1800s, animal-drawn streetcar lines were built in cities across the United States. Starting in the 1880s, they were replaced by electrified streetcars, which quickly became the dominant mode of transportation in many cities.
Running streetcars was a very profitable business. Cities expanded, and people who found themselves living too far from work to walk depended on them. (Some real-estate developers built nearby suburbs around streetcar lines.) Over time, the businessmen who ran the streetcars, called “traction magnates,” consolidated ownership of multiple lines, establishing powerful, oftentimes corrupt monopolies in many cities.
Eventually, many of them contracted with city governments for the explicit right to operate as a monopoly in that city. In exchange, they agreed to all sorts of conditions. “Eager to receive guarantees on their large up-front investments, streetcar operators agreed to contract provisions that held fares constant at five cents and mandated that rail line owners maintain the pavement around their tracks,” writes Stephen Smith at Market Urbanism.
The real problem was that once cars appeared on the road, they could drive on streetcar tracks — and the streetcars could no longer operate efficiently. “Once just 10 percent or so of people were driving, the tracks were so crowded that [the streetcars] weren’t making their schedules,” Norton says.
In some places, like Chicago, streetcars retained dedicated rights of way, and they survived. Pretty much anywhere else, they were doomed. “With 160,000 cars cramming onto Los Angeles streets in the 1920s, mass-transit riders complained of massive traffic jams and hourlong delays,” writes Cecilia Rasmussen at the Los Angeles Times.
What’s more, in many cities the streetcars’ contracts required them to keep the pavement on the roads surrounding the tracks in good shape. This meant that the companies were effectively subsidizing automobile travel even as it cannibalized their business.
And paying for this maintenance got more and more difficult for one key reason: many contracts had permanently locked companies into a 5-cent fare, which wasn’t indexed to inflation.