Shining a Light on Shadow Transport

What exactly is “shadow transport”? Well lets start with the pejorative term of “shadow banking” which conjures up images of special purpose vehicles (SPVs), money market funds without deposit insurance, and collateral debt obligations (CDOs). In short, shadow banking institutions accept relatively illiquid long-term assets in return for issuing shorter-term assets. It is similar to regular banks which take in relatively safe deposits and invest in riskier and less liquid loans. Yet, much of the pejorative finance occurs offshore in order to remove assets from banks’ balance sheets and is therefore not fully regulated.

By contrast, shadow transport happens in full view of governments, and even sometimes with the tacit consent of governments. They are a means to relieve the pressure from bustling cities. How do they relieve this pressure? By adding liquidity to a city’s transport system. Shadow transport encompasses the motorcycle taxis, tuk-tuks, vans shuttling people along motorways and other major traffic arteries, and the pick-up trucks posing as cheap taxis that are mobilized to move people from the government transport hubs (train and bus stations) to diffuse areas off the main road. Interestingly, the demand for shadow transport arose because there was not a costly transportation method to get from a certain place to another in a sprawling city. In other words, it is an unintended effect of a government’s official transport policy that drives the establishment of institutionalised systems of shadow transport which become implicitly sanctioned by governments.

It is mostly a developing city’s phenomenon, yet it is also not a bad idea for developed cities. Even developed cities’ citizens could do with less costly transportation and the opportunity to save time (perhaps the most valuable commodity). Imagine being able to hop off the tube station at Oxford Circus and hop on one of the many motorcycle taxis next to Topshop that could shuttle you to the Chinese Embassy or to Selfridges....