The construction of the House of Cards began over a hundred years ago. Railroads were the high tech of the era. There were folks who went broke with a startup railroad. There were others who became very rich in the railroad business. Some of those who became rich did so using monopolistic business practices. The same thing has happened with other industries, but being the first, the railroad industry was treated differently.
The Interstate Commerce Commission subjected the railroad industry to punitive regulation for over 90 years. The Commission determined shipping fees, which were generally kept close to the actual cost (minus maintenance) of transportation. The Commission also dictated what service should be provided and what lines should be kept open. When rates allowed by ICC didn’t pay for the maintenance of a lightly used line, railroads would apply for abandonment, which would regularly be denied.
Virtually every railroad company in the US has at least one ICC-related bankruptcy in its history. Two large railroads disappeared entirely because the ICC would not allow measures to rescue them.
The next layer of cards began construction in the 1920s, with the beginning of the Federal Highway network. The US government was restricting railroad revenue to starvation level and started directly competing with railroad corporations
While the US government was building highways during the Great Depression, many railroad companies went bankrupt. Some managed to reorganize and survive.
During World War I, the railroads were nationalized because the network had become so dysfunctional, substantially due to the nature of the regulation to which the industry was subjected. The industry was in about the same condition in 1940, but the government had enough of attempting to run the railroads during the World War I nationalization and left the railroad industry to fend for itself. Within a few months of the beginning of World War II, US railroads handled more war material than during all of WWI. Workers and equipment came out of retirement to serve the cause. Purchase of new equipment was limited to need, which was determined by a the government agency determining need and allocating resources. They placed a really high bar on what would be accepted as need.
The government started supporting air transportation in the 30s, but it was more of a curiosity than major transportation. Airplanes showed their value and sophisticated development during WWII and thus were on the way to conversion to serious transportation, so government support increased. Meanwhile, the railroads were on their own to recover from WWII traffic beating the infrastructure and the people into rubble. Another layer of the House of Cards was complete.
Yet another layer of cards was set up after WWII. The St. Lawrence Seaway, the Interstate Highway system, and vastly increased support for air transport were stacked on the already shaky foundation. Reducing stability even more, the railroad industry that was handling an immense quantity of government shipments at the greatly reduced government rate was taxed, ostensibly to fund the war effort. However, the tax continued well beyond the end of the war, helping to fund the competition: highway, air, and marine transportation.
The railroad industry tried to overcome the strengthened competition by investing huge amounts of money in modernization, to no avail.
After deregulation, merging and abandoning “redundant” lines became much easier, ultimately resulting in a small number of railroads having a monopoly in substantial parts of the country. Deregulation made the monopoly easy for the regulators, such as they are, to justify. Railroads can do whatever they want because if the customers – shippers and passengers – are unhappy, the alternatives of trucks and cars are available to them.
Trucking was deregulated at roughly the same time as railroads. There had always been ‘gypsy truckers’ who preferred living on the road, taking whatever shipments they could find from anywhere to anywhere else. Deregulation removed route restrictions from trucking companies and opened the door to an industry of gypsy truckers, living in the little bunk room behind the driver’s seat. At first, the money was good, and worth the inconvenience and hardship of the new version of trucker life. However, the trucker lifestyle and income have deteriorated to the point of trucking no longer being a popular career. Drivers are becoming increasingly difficult to find. Developing a transportation system dependent upon highways, then developing a wage slave class of truckers created another shaky layer of cards on the house.
Allied success in WWII was substantially due to the vast resource and manufacturing capability of the US. The US had the material and manufacturing capability to produce the needed equipment faster than enemies could destroy it, and had the ability to feed its population and the allies. Interviews with German soldiers who were in the battle for the Normandy beaches said that they knew the war was lost when they saw the seemingly endless streams of supply trucks arriving on the beaches.
The idea of global commerce, moving production to whatever location is cheapest has decimated US production capability. The US is now dependent upon shipments from distant countries. Fifty years ago, imports were from countries that were very good at some product or products. Cameras from Germany, watches from Switzerland, wine from France were a substantial part of international trade. Now, it is virtually everything. Merely finding a product to purchase that is not made somewhere in Asia is a daunting, if not impossible, process. In the US, people compete for jobs that don’t pay enough to pay for a reasonable place to live and food to eat. Employers use the competition they created by moving production to other places to keep pay low and working conditions less than good. With this, the House of Cards is teetering.
It doesn’t take much wind to blow over a highly stacked house of cards. Covid-19 was the breeze.
Production in Asia was stopped by Covid-19. The stopped production included medical equipment and supplies needed to control the pandemic in the US, substantially responsible for shutting down whatever economy was left (excluding the stock market). Production restarted and resulted in a glut of shipments. People in the US have reached the last straw. Years of deteriorating working conditions and pay have resulted in trucking jobs that are hard to fill. Deregulated railroads only want the best-paying shipments: hundreds of containers being shipped thousands of miles. An increasing number of truckers (former truckers, actually) don’t want to handle the rest for a less than minimum wage job that gets them home every night…because they live in the truck, and home is wherever it stops.
Cliff’s Notes version: Containers pile up in the port for lack of drivers. Ships back up for lack of places on land to put the containers. Shipments back up in Asia for lack of containers to load them into because the containers are sitting in US ports or on ships that can’t get into the US ports.
As a result of the Staggers Act deregulation, the railroad corporations are doing quite well, but at the expense of rail transportation. The US has the least utilized rail infrastructure in the developed world. Even Mozambique operates more trains per mile of track than the US.
Three steps that will have a great effect on the situation are
- ensuring that rail transportation is readily available for all shipments that can be moved by rail,
- better pay and working conditions for truckers,
- returning a substantial amount of manufacturing to the US, reducing the dependence on shipments from other countries.
The manager of a rail traffic control center in Germany described his job as maximizing the number of trains operating on his area of the rail network. US managers constantly strive for the goal of minimizing the number of trains they run. The goal in the US would change were the infrastructure a source of revenue instead of expense and sunk cost.
Important to implementing the three steps is separating rail infrastructure from rail transportation and establishing a schedule of fixed conditions and rates for the use of infrastructure, like a toll road for trains. The European Union determined 30 years ago that such an arrangement would be effective in improving rail transportation. With that step in the US, many truckers would be able to move from a life on the road, wandering about the country for weeks on end and occasionally spending a day at whatever place they call home, to spending the day moving shipments between railroads and off-railroad points and returning to their home at the end of the workday instead of retiring to the little room behind the driver’s seat.
Read more about this in The Climate Emergency: Trains-An Effective Response.
TAW