The battle of the buses

Privatizing the bus lines and breaking the Egged-Dan monopoly should be a social imperative of the highest order.

Israeli buses 390 (photo credit: Marc Israel Sellem)
Israeli buses 390
(photo credit: Marc Israel Sellem)
Israel is in the midst of a new conflict – the battle of the buses. The ultra-Orthodox want to commandeer public buses and impose their norm of gender segregation. Secular Israelis are demanding more access to public transportation on Shabbat. Why is this particular debate over the buses receiving so much public attention? One obvious reason is that it reflects deep and long-standing divisions among different segments of Israeli society. But these divisions also exist in many other areas of public life and are accepted by the majority of Israelis without much fuss. For example, many bars, restaurants and entertainment centers are open on Shabbat. Shopping malls are mixed-gender establishments and one can certainly find ultra-Orthodox shoppers among the crowds. So what makes buses so different?
A compelling answer to this puzzling question is that buses are mostly funded by taxpayers. They are a “public good” that has became a symbol of the state and a reflection of its values at the collective level. The ultra-Orthodox organizing gender-separated public bus rides is understood by the masses as “Israel has become Saudi Arabia.” The secular riding public buses on Shabbat is interpreted by the ultra-Orthodox as “Israel has lost its Jewish character.” Interestingly enough, this type of symbolism does not exist when we consider private goods that are not associated with taxpayer money. Very few would hold that the state should forbid Israelis to drive in their private cars on Shabbat. Ultra- Orthodox women sitting in the back of their private vehicles would hardly raise any public passions.
The bottom line is that if Israelis were not forced to pay taxes for services they abhor, the debate over these controversial bus lines would mostly disappear. In fact, many private goods are indeed controversial, but only very few, such as drugs, are outlawed. For example, many Israelis do not want to financially support or attend a Coldplay concert due to the band’s politics, but very few would want to forbid others to attend. However, if taxpayers’ money were to finance a Coldplay concert many Israelis would be rightly infuriated.
So the way to solve this latest social crisis is simply to transform public transportation into a private commodity. If buses were run by private companies, seeking to maximize profits, the market and not the government would dictate if buses should run on Shabbat, and whether women should sit in the back. Socially, the privatization of buses would allow each Israeli, regardless of their religious beliefs, to “buy” the type of transportation that they prefer, and that is most appropriate for their individual needs. Economically, the privatization of buses would also benefit all members of society through lower taxes, more competition and lower prices, and higher disposable income.
Today, Dan and Egged operate 70 percent of the bus lines in the country. Bus lines represent 86% of all public ground transportation; the other 13% are individual taxis and collective taxis (moniot sherut). Even after the privatization plan of 2000, Dan and Egged are still operating in a quasi-monopolistic environment and are mostly protected from any serious competition. Collective taxis are not allowed to run on most bus lines and when they are allowed, they are strictly regulated. In cities like Jerusalem no collective taxis are allowed at all. Private taxis are also over-regulated through highly priced licenses.
The inefficiency and poor management of Egged and Dan has been widely documented by the State Comptroller’s Office. In a report from 2009, the State Comptroller found irregularities in the use of the subsidies the two main bus companies receive. They failed repeatedly to issue tenders or examine cheaper alternatives that would decrease the cost of their fleet. In some cases, the companies were receiving subsidies for routes they did not operate.
Since 2009, the situation has not improved. The Trajtenberg Commission notes that subsidies given to Egged and Dan (25% more than the subsidies given to smaller companies) just keep going up, while their services continue going down. The same report recommends introducing full competition in the transportation market by accelerating the privatization of bus lines and allowing more collective taxis to operate.
The Trajtenberg recommendations align with a recent report published by the OECD that shows that privatizing public transportation reduces the price and increases the quality of the service. The Managing and Assessing Regulatory Evolution in local public Transport Operations in Europe (MARETOPE) found that after privatization bus services in the UK saw an increase in productivity of 30% and a decrease in operating costs of around 40%. Similar results were achieved in Sweden, in Australia and in New Zealand. Overall, the vast majority of empirical studies on privatization of ground transportation consistently find that the private sector lowers costs, increases efficiency and improves services to commuters in comparison with the public sector.
It is also a delusional myth that public transportation is currently relatively cheaper in Israel compared to other Western countries. In fact, what Israelis pay today, on average, for a single intra-city ticket is almost the same as Parisians, and more than Romans and Barcelonians. Privatizing the bus lines and breaking the Egged-Dan monopoly should be a social imperative of the highest order. It would not only make transportation better and cheaper, it would also reduce social conflict and allow all segments of Israeli society to live side by side in peace.
The writer is the director of the Jerusalem Institute for Market Studies.