NCPA - National Center for Policy Analysis

The Feds versus the Chinatown Bus

July 19, 2013

The long-distance busing industry was originally dominated by small scrappy companies competing fiercely to win over customers, only to become a government-protected cartel with declining ridership and no competitive spirit. A half-century later, busing returned to its glorious origins, but today it's in danger becoming a ward of the state once more, says Jim Epstein, a producer at Reason TV.

In the 1910s, the very first American bus companies started picking up passengers on main streets all across America. There were few barriers to entry; entrepreneurs without much capital could buy or lease a motorcoach and then start doing regular pick-ups in front of a hotel or on a street corner.

  • Within a few years, local governments intervened to protect established companies from new competition.
  • By 1925, most states required that bus companies apply for permission to service particular routes.
  • The Motor Carrier Act of 1935 put the federal Interstate Commerce Commission (ICC) in charge of regulating bus travel. The ICC did everything from setting ticket prices to granting established companies the exclusive right to operate between certain cities.

Protected from competition, bus companies grew indifferent to the changing tastes of their customers. Americans relocated to the suburbs, while car and air travel exploded in popularity. As inner-city depots became dangerous and decrepit, bus companies failed to alter their business models. After World War II, U.S. bus travel fell by half in just a decade and then it kept declining.

  • The industry languished for the next half century.
  • In 1982, President Reagan deregulated intercity bus travel, which cleared the way for new companies to get into the business and start fighting to win back passengers, but for the next decade and a half not much changed.
  • Then in the late 1990s, a group of immigrants from Fujian Province, China, reinvented the bus industry in New York City's Chinatown.

These entrepreneurs brought busing back to its roots of picking up passengers right off the street instead of from a traditional station.

Today, history is repeating itself. An onslaught of new safety rules is forcing many small bus operations out of business, allowing the corporate carriers to grab more market share. Indeed, on May 31, 2012, the Federal Motor Carrier Safety Administration shutdown 26 bus companies in a single day; since then it has forced an additional 15 closures.

Source: Jim Epstein, "The Feds vs. the Chinatown Bus: The Glorious Rebirth of American Bus Travel and Why the Government May Ruin it Again," Reason Magazine, July 16, 2013.


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