The Cost of Public Transit: A Tale of Two Markets

The United States and China, two of the world's largest economies, are taking different approaches to address their respective transportation needs. While China's President Xi Jinping is banking on the country's massive market to boost local demand, the US is grappling with the high cost of public transit, particularly when it comes to bus procurement. In the US, the public transit system is essential for millions of Americans, providing a vital lifeline for those who cannot afford or do not have access to personal vehicles. However, the way buses are procured may be limiting the amount of service cities can afford. According to Harvard professor Ed Glaeser, transit agencies often order highly customized buses in a market with shrinking competition, which drives up costs. Additionally, federal funding rules shape how purchases are made, further complicating the process. Transit executives argue that operating realities require flexibility, and customized buses are necessary to meet the specific needs of their cities. However, they also agree that reform is needed to make the procurement process more efficient and cost-effective. Could smarter procurement and more competition help cities get more buses for less money? In contrast, China's approach to transportation is centered around its massive market. President Xi Jinping recently emphasized the importance of domestic demand as the "main driver" of economic growth in a speech delivered at a key policy meeting. Xi's comments suggest that China is focusing on developing its internal market to drive growth, rather than relying on exports. While the US and China are taking different approaches to address their transportation needs, there are lessons to be learned from each other. China's focus on domestic demand could provide insights for US policymakers looking to boost local economies. On the other hand, the US could benefit from China's experience in developing a large-scale public transit system. In the US, reforming the bus procurement process could be a crucial step in making public transit more affordable and efficient. By increasing competition and streamlining the procurement process, cities may be able to get more buses for less money, which could lead to improved services and increased ridership. To achieve this, transit agencies could consider adopting a more standardized approach to bus procurement, rather than ordering highly customized vehicles. This could help reduce costs and increase efficiency, as well as encourage more manufacturers to enter the market. Additionally, policymakers could review federal funding rules to ensure that they are not inadvertently driving up costs. In conclusion, the US and China are taking different approaches to address their transportation needs, but there are lessons to be learned from each other. By reforming the bus procurement process and increasing competition, the US could make public transit more affordable and efficient. As the US and China continue to evolve their transportation systems, it will be interesting to see how their approaches impact their respective economies and citizens. Sources: * Bloomberg: Why US Public Transit Is Overpaying for Buses * Reuters: Xi Touts China’s Super-Large Market as Key to Boost Local Demand