How General Motors coerced America’s shift to cars

Young economic diplomats are soon taught to recognise, respect, and to open the way for ‘market forces’. These forces are unassailable—the working of the ‘invisible hand’—and sweep the world toward ever higher efficiency and progress.

I freely admit to having held such views and defended them. I was always aware, however, that such rhetoric may hide special interests and, worse, unseemly manipulation. Behind the screen of invisibility, a real hand might have tangibly pulled strings, and the outcome may not have been ‘efficiency’ at all. I’ve always tried—far from successfully, I’m sure—to see behind the rhetoric to the hidden interests.

Shifting from public transport to cars

I’ve come across an interesting example recently. What could be more emblematic of ‘market forces’ than private transportation based on cars? From the beginning, it was a ‘love affair’ between consumers and cars, as we have been told many times. The car was the ultimate enabler and people took to it like ducks to water. Such was the Whiggish history of increased mobility in the USA.

It turns out that the story is not so uplifting after all. In the late 1920s, General Motors secretly began to purchase trolley systems (more than 100 in all) throughout the USA, using a number of front corporations. Once purchased, these systems and their tracks were completely dismantled and replaced by buses built by GM. Other companies like Mack Truck, Firestone, and Standard of California joined in. In 1947, federal antitrust charges were laid. They were convicted and fined USD 5,000 each (see also Fast Food Nation: The Dark Side of the All-American Meal by Eric Schlosser).

Cars, then, had two ‘forces’ working for them.

1. On the one side, the government took over the cost of creating the highway infrastructure for cars. True, it might have clawed back the investment eventually through gasoline taxes and general revenue. Rail and trolley, on the other hand, had to obtain easements and put the investment up front.
2. On the other, the competition from trolleys was surreptitiously eliminated. With the competition gone, there was no alternative to cars. No wonder the use of cars spread and allowed a car-based culture to emerge.

Cars allowed suburban sprawl. Suburban sprawl worked against public transport, for the latter needs high population density to be economic. We have a neat case of path-dependent outcome, where the (unfair) initial advantage became a self-fulfilling prophecy.

Negotiation tactics and compromise

Diplomats are often called upon to defend interests on ‘national’ grounds. A pinch of muckraking (an unsentimental understanding of how these interests emerged and how they work) is a precondition for achieving workable compromises in negotiations. Compromise does not come readily when one is convinced that one’s cause is ‘just’ to the utmost.

It is also a prudent negotiating tactic. Sooner or later the opponent will come up with the muckraking argument. Better be prepared.

This post was first published on DeepDip.