John Singleton with Bob HowardRip Van Australia (Stanmore: Cassell Australia, 1977), pp. 219-224, under the heading “Roads.”

If, for the brief two hundred years of our history, the Australian Government had had a monopoly on the manufacture of shoes, there would exist in the public mind today the belief that only government could produce shoes. If we were to suggest that private enterprise be allowed to manufacture and sell shoes, there would be alarmed cries about the chaos that would result. What about standards it would be asked? Who would provide shoes for the poor? How could private enterprise handle such a large and complex operation as providing shoes for 13 million Australians all with different sized feet? What about the chaos that would result from all the different manufacturers producing different sizes, styles, shapes, colours and brands of shoes? Who would look after odd sizes? Wouldn’t private enterprise only cater for the mass market and ignore the minority who want very small or very large shoes?

It would be said that it is obvious that only government could be trusted to provide such a necessity as shoes. And, if our current experience is any judge, the government would provide shoes, with the same lack of efficiency, lousy service and exorbitant cost as they show in all their other enterprises.

That situation doesn’t exist today in the case of shoes, but it does exist in other areas: public utilities, such as water, electricity, and sewerage; postal and telecommunications services, public transport and of course, roads. Just as private enterprise can handle the manufacture and marketing of shoes, so, too, could it handle all these public utilities. It could do them all at far lower cost, with far better service and a higher quality product. The inherent differences between a competitive free market and a government bureaucratic coercive monopoly ensure that that would be so.

However, while many people might be prepared to admit that private enterprise could make a fair fist of the post office, telephones, electricity and the like, they usually draw the line at roads. That, they say, is going too far. The mind fairly boggles at the thought of it — toll gates at every block, ten roads between Sydney and Melbourne, when only one or two would be sufficient, no roads at all to remote areas, different sets of rules to learn for every road, some greedy person who owns one small section of a road holding everyone to ransom and demanding exorbitant tolls. No, it’s all just too much.

However, the very nature of these sorts of obvious criticisms show that the person who suggests them has not made any attempt to think the concept of private roads through. Rather, it has been abandoned at the first sign of difficulty, and in truth, mainly because of one simple reason: it’s a strange, new idea! New, that is, to them. The idea isn’t new. It’s been around for years. In the late 1700s and through the 1800s private capital was used to build nearly all the major United States turnpikes. The Philadelphia and Lancaster Turnpike Corporation1 was chartered in 1792, and capitalised at $300,000. It arranged to sell 600 of its one thousand $300 shares in Philadelphia, and the remainder in Lancaster. In the Philadelphia terminus, 2276 people turned up to bid for the shares. Eighty-four companies had been incorporated in Pennsylvania by 1821, and had built 2907 kilometres (1807 miles) of turnpike. At the peak of the turnpike era Pennsylvania boasted 3860 kilometres (2400 miles) of turnpike in operation. New York had sixty-seven companies by 1807, 135 by 1811, and 278 by 1812, operating 6450 kilometres (4000 miles) of turnpike. Private capital continued to be mobilised through public turnpike authorities into the 1970s. The Ohio Turnpike Authority’s bonds were over-subscribed by $300 million the first day they were put on sale. Only a relatively few of these turnpikes built in recent times have failed to pay interest on their bonds. As Wooldridge points out, through the 1700s the United States tried many other ways to build roads — lotteries, forced road service from local land owners, grants-in-aid to localities, offers of large acreages to contractors, taxes — but all these measures failed.

The early turnpikes did not return much money directly on the investment, but the investors usually received more than their money’s worth in “neighbourhood effects” — the decreased cost of transportation of goods and the enhanced value of land around the road. The investors were usually the small businessmen and farmers who needed the roads, and almost no one bought large blocks of stock.

In England too the major road systems were built and initially run by private enterprise.

However, because the shareholders did not always receive a direct financial return in those years when they financed these roads, they were happy to turn the operation of roads over to the State — in the belief, perhaps, that then roads would somehow be “free”. At least they knew that if the roads were financed out of taxation revenue, the costs would be spread over more people. That many people who paid for them never used them apparently didn’t bother them too much.

There is no reason whatsoever (or no economic reason anyway — there are, no doubt, legal reasons) why a private or public company should not be formed in Australia to construct, for example, a multi-lane modern turnpike between Sydney and Melbourne. In view of the irresponsibly dangerous state of the existing highways, this would be a tremendous step forward — especially since there is no prospect of the governments involved being able to afford to do it. The money is there — it simply needs to be mobilised.

But more than just turnpikes can be built. Streets in shopping centres could be owned by co-operative companies made up by all the various business and shop-owners in that street. They would have a direct incentive to have the most attractive street possible, with transport, entertainment, and all conceivable facilities, because the more people who used the street, the more customers they would have for their businesses and shops. Residential developments could be designed around a system of money-earning through roads — which would be owned by either a private company or companies, or all the local residents — and a system of quiet, restricted entry, residential roads. The revenue earned by the through-toll-roads could be used to maintain all the roads, and, perhaps, provide other facilities in the development.

Transport companies could own and operate roads. And all sorts of private individuals and private and public companies could as well. The problems of rules and toll collections would not arise because of the simple fact that it would be directly against the financial interests of all road owners. As in any free enterprise business, profits are maximised by attracting as many customers as possible to use the product or service — by making it as attractive and as easy as possible for these people to do so. Prices are optimised, rules are optimised, quality and service are optimised. Toll collection would soon be electronic and computerised. The technology exists already to do this easily. Small roads would lease facilities off central toll monitoring and collection companies, where necessary. All roads would have a direct economic incentive to have high safety records and would thus set driver qualification standards, prohibitions on drink driving, drug-affected drivers, and other dangerous driving practices. Because they owned the roads, they would have a perfect right to set whatever laws they wanted.

The profit motive would also tend to produce the most efficient routes as traffic bottlenecks were progressively removed. Traffic lights on major roads would be replaced by over-and-unders. Facilities would be provided, and as far as possible, scenic beauty, cleanliness and good road services preserved. None of these would depend on politics, on taxing power or government in-fighting. They would all be a direct function of the market.

Users would pay for the roads in proportion to the amount they used them. The government could no longer rationalise its super taxes on cars, petrol, tyres and oil. Roads would exist in open competition with sea, air, and rail services. Local road maintenance and construction works could be taken out of the hands of the notoriously inefficient and extravagant government departments, and sub-contracted to private companies. Equipment would be much more efficiently utilised, and, we would even see an end to the practice of digging up busy streets during peak traffic periods!

Local residents could choose what street surface they wanted — bitumen, dirt, gravel — whether they wanted curbing and guttering, pavements, trees, and so on, rather than have to either submit to council decisions they may not want, or want something they can’t get. In short, they could have, if they wanted it, direct local control over their streets. In any event, the market system would be far more responsible to their needs and wishes than an inflexible government department.

Because the capital value of individual homes and businesses would be increased by good streets and facilities, this would be another direct incentive for all property owners to take an interest in their roads, to ensure their quality and general safety. This would in fact be a symbiotic relationship, because, in the case of private street companies, the capital value of the streets would depend also on quality of the neighbourhood, and the business they generated. Right of access to homes would be built into the purchase contract. Obviously, nobody would buy a home if he or she couldn’t get into or out of it.

Privately owned roads would also provide a force for decentralisation, as new areas were opened up by entrepreneurs. New towns could be built, as road owners tried to induce immigration and industrial development into their areas. Co-operation between rural interests, mining interests and road owners could ensure road development in rural and country areas. The mining companies in Western Australia have already built towns, railways, and roads as they have developed their mines. Private roads would also be very effective in helping to reduce crime, as all road-owners sought to make their roads and the areas they served as safe as possible, so as to attract more customers to their areas.

As with any other commodity, toll prices2 would respond to the supply and demand formula. This would provide a market force to further encourage decentralisation and decongestion of the roads. Tolls, for example, would be higher in peak hours. The traffic congestion on our Sydney Harbour Bridge could easily be solved by a free market pricing system. If it cost fifty cents or a dollar to cross the Bridge in peak hour, and only ten cents at off-peak periods, this would encourage some industries or businesses to move out of the city area, and would encourage people to use public transport, share cars, or travel off-peak. It would also encourage corporations to build another bridge(s) and/or under-harbour tunnels. The high price should be set by the market, to maximise returns. It should not be set by an arbitrary bureaucratic decision.

Similarly, parking would be more expensive in the city than in the suburbs, with the same results. If the demand warranted it, more roads, bridges and parking stations would be built. Public transport, again, if privately operated, would also be optimised by the free competitive market.

These are only a few of the possibilities of a private road system. We believe they offer the chance of a most effective solution to the problems of transportation and road supply that currently plague our governments. The[y] would also ensure a far more rationally planned and run city — a city planned to meet market needs, rather than bureaucratic whims.

The car was only invented at the turn of this century. It is ridiculous that a system of roads that is only a century old should be looked on as the ultimate answer, when we all know that more Australians are dying on these roads than in all wars combined. They can’t be perfect as they are. There has to be a better way. And only the incentive of the free market will find it.

Footnotes
  1. William C. Wooldridge, Uncle Sam, the Monopoly Man, Arlington House, New Rochelle, N.Y., 1970, pp. 129-130.
  2. For more information see Murray N. Rothbard, For a New Liberty, Macmillan, New York, N.Y., 1973, ch. 10.