American Railroads: Decline and Renaissance in the 20th Century - Book Report/Review Example

Econ 481 Xiaotian Xu 4/27 Book Review of the American Railroads: Decline and Renaissance in the 20th Century America’s railroads have witnessed good and bad times. There are now making more money as the freight routes are busy. The once slow diesel tracks are now more efficient and powerful. Technology has propelled the railroad industry to the level of remote-controlled locomotives both in the middle and rear. The locomotives’ length limit was a mile, and it is currently 2 miles long. This remarkable turnaround of the railroad industry was in a serious trouble for the better part of the 20th century. The railroad that was once the icon of the American industry plunged into a state of bankruptcies, abandoned tracks, loss in the market share, increased traffic in waterways, and unemployment. The number of employees reduced from 1 million to 245,000. The track miles also reduced by a third and the track conditions worsened. In the 500-page book titled, “Decline and Renaissance of American Railroads in the 20th Century,” was authored by Robert Gallamore and John Meyer. It gives a summary of the history of the railroads in addition to the lessons for future public policy giving an account of both the decline and revival of the railroad industry. The book highlights the situation in 13 chapters. John Meyer died in 2009 and that is why 3 of the book’s 14 chapters were authored by Gallamore. The two authors assert that excessive government regulation of railroad rates led to the decline of the American railway industry. Gallamore and Meyer authored a valuable literature adding to the literature relating to the American railroad of the 20th century. John Meyer and Robert Gallamore were excellently qualified to author about the subject. Meyer, who died in 2009, was an economist and amongst the founders of the cliometrics. He provided majority of the empirical as well as theoretical inspiration to the deregulation. On the other hand, Gallamore, a student of Meyer who acted as his advisor as he wrote his PhD dissertation has years of experience in the railway industry. He actively participated in the formulation of the Stagger Act. Together, they had a unique pool of knowledge and insights. Their views have been critiqued by nearly all students of the railway policy. Chapter one talks about the pain to the ‘Enduring American Railroads.’ The railroad made the United States. As the rail system flourished, it started to experience numerous problems that slowed down its growth. Stiffer regulations were introduced and also faced competition from both the air and road transport. Chapter two highlights the disbenefits of the regulation in the context of economics of the railway industry. In the last four decades, the sunk costs have assumed a major role in the economic theories of competition. However, the term is not cited in the text or end notes considering that this chapter talks about the railroads as natural monopolies. This means that entry into the market is hard where there is an existing player because the incumbent players have already sunk their costs. The second chapter highlights how the Interstate Commerce Act was formed and concludes with a box outlining the 10 principles of transportation economics. Chapter three provides a summary of the history of government control in the first half of the 20th century. Gallamore and Meyer divide the chapter into three sub-sections: the antitrust episode, period of direct government operation, and the period after the Transportation Act of 1920. This makes it easier for the reader to follow. However, among the three, the authors consider the anti-trust episode as ill-visualized because after the 1980 Staggers Act similar systems were developed in new round of mergers and acquisitions. In contrast, the government’s experience in controlling the World War I is analyzed positively. Chapter four discusses the role of competition in the evolution of the railway industry, Even though the authors put forward strong discussion points, the chapter is poorly organized. It shifts to and fro among transport modes, historical eras, and policy recommendations. The points ought to have been arranged as follows: first, before 1950; water transport provided limited competition on the railroads in some parts of America, like Gulf Coasts, Great Lakes, and Atlantic. Second, after 1950, the air and road transport increased competition on the railroad sector. Lastly, the government regulations led to increased subsidized to these alternative methods of transport. The air and road transport were exempted from the tickect unlike the rail ticket tax. This sequence clearly outlines how various interlinked factors led to the collapse of the railway industry. Chapter five proceeds to provide a picture of the increasing pressure from competing alternative modes of transport. Gallamore and Meyer (124) share the view that both the air, road, and rail transport provided passenger service. This demonstrates the increased competition. The improved technical conditions of the air and road transport made most people to prefer these modes of transport. Chapter six examines the dynamics of rail mergers during the 1950s and 1960s; parallel mergers and end-to-end mergers. These mergers enhanced the services available to shippers even though they did not anticipate leading to significant reduction of costs. The authors engage in a comprehensive historical analysis of the two types of the rail mergers. The chapter ends in with a wreck of the Penn Central. Even though the railway industry was saved by deregulation, it took a major crisis such as the failure of the Penn Central failure to get the attention of the Congress. Penn Central was a major railway transport company in the U.S. Its collapse demonstrated the dire problems that were facing the railroad sector. Chapter seven lays out the chaotic public policy response to the crisis, such as the formation of the 3R and 4R bills. These bills can be categorized as muddling attempts by the national government. The 3R bill resulted in the formation of the U.S Railway Association to bail out bankrupt firms like Penn Central. In the same way, the 4R bill sets the stage for a more detailed deregulation of the railway sector. Chapter eight examines the creation of the Conrail by Frankenstain. The formation of the conrail was as a response to the perceived crisis. Chapter nine, which is considered as the turn-around of the crisis discusses the developments that led to the Staggers Act along with the impacts of the deregulation. The balance in this chapter results in the detailed coverage of the struggle between the shippers and railroads over rate. The revival of the freight transport commenced in 1980 by means of the Staggers Act. The statute allowed the rail companies to contract with customers for services in addition to giving them freedom to set the majority of the rates according to the market demand and supply forces. In other words, the Stagger Act of 1980 widened the scope of business decisions which the railroads firms could make devoid of government rules. Chapter ten takes up the story of the post-Staggers Act that consolidated the American railway sector. The authors discuss the different mergers in detail. The end result of these numerous mergers is the repair of duopolies, such as the Norfolk Southern with CSX in the east. The novelists finish off with a report card of the final hour. The eleventh chapter makes a return to the passenger rail as well as the Amtrak experience. There is a dilemma in the passenger service policy. The Congress, one hand, seeks to have Amtrak to be successful on a commercial basis. On the other hand, the authors argue that the transcontinental routes of Amtrak are not economically viable (Gallamore and Meyer 312). Gallamore and Meyer praise Amtrak is because it took over intercity passenger rail service and provided relief to the freight railroads requirement of subsidizing the passenger trains that were losing substantial money. The other strength of the book is that chapter twelve presents the technological advancements in the 20th century. It talks about how technology played a major role both in the decline and revival of the American railway industry in the 20th century. On the negative side, “Technology gave rise to competing service” (Gallamore and Meyer 201), such as cars, planes, pipelines, and buses. These technologies tremendously minimized the role of the locomotive transportation. Therefore, they were crucial in the development of the Staggers Act deregulation acceptable. On the positive side, the post-Stagger Act era illustrated a period of technological change. The railroad firms were able to build fuel-efficient, faster, and longer trains. This not increased revenues, but also raised the standards of the railway transport. Chapter thirteen is excellently organized. The authors conclude it by providing a summary of the ten suggestions in relation to the experience of the railway industry in the 20th century. The first proposition posits that the numerous national regulations significantly damaged the railway industry. Similarly, Gallamore and Meyer conceded in the subsequent pint that the railroads portrayed an industry that was “affected with the public interest” (469). Point three to five addresses financial crises and bankruptcy under the competitive pressure. Proposition six and seven, as well as ten address the chaotic story the railroad in the 1970s, the regulatory reforms including the Stagger Act, together with the revival of the railroads experienced in the final twenty years. Points eight and nine, address the considerable progress of the railroad technology. The last chapter finishes of the book by making certain observations in relation to regulatory reform that might strengthen the current good status of the U.S railway industry. Currently, the trains are more faster, efficient, and longer trains. The increase of double-stack container locomotives has assisted the railroads to be the most sought mode of transporting consumer goods. Studies have demonstrated that the railroads are three to four times more fuel efficient in comparison to trucks. Recently, CSX’s television advert publicizes its capability to move a ton of freight about 500 miles using only one gallon of fuel. In the same way, most of the trucking firms have taken advantage of the lower costs of the railway to move containers. The authors are clearly quite knowledgeable with regard to the economics of the railroad. For instance, the experience of Meyer and Gallamore in the railway industry is evidenced since they both worked for the Union Pacific. Proceeding further, the book does not disappoint. The chapter organization is topical making it easy for the readers to move with the authors in what they are actually discussing. The logical chapter organization makes the subject-to-subject connectivity logic. This enables the reader to keep in mind that the book is based on the railroading economics including the government trying to use regulations to change the economic situation. Moreover, the detailed discussion of the manner in which the Stagger Act came into existence creates special interest to the readers. They manage so by using plenty of fascinating elements such as irony. The writers state that “democratic liberal transportation along with the utility sector advisers got on a level of regulatory reform putting to shame the Republican’s timid and feeble efforts (Gallamore and Meyer 231). The book takes a pure economics approach to the railroad situation of the 20th century. The authors support their claims with various economics tools. Government regulations have an impact on the economic operations. The government regulations catalysed the decline of the railroad industry. Gallamore and Mayer (472) argue that the government regulations distorted the competing modes of transportation and taxed away the profits that were needed for reinvestment together with expansion of capacity. The fact the government controlled the railroads made things worse for the railroad industry. Gallamore and Meyer (435), at the end of the book, sum up why the book should be read. They share the view that the railroads have a great history, interesting operations, fascinating technology and untold opportunity for the future. Therefore, we need to love them since there is no other enterprise that illustrates elegantly the economic principles quite so well like the railroad. The book perfectly fills the need for a detailed historical treatment of the U.S American railroad sector in the last one hundred years. The book has its weaknesses. First, the book is lengthy and dry with too much detail making it to be interest to only a few readers. As a result, this limits its importance and it is more likely to have less readers. Next, economics is a very wide subject. However, in spite of the detailed coverage of the railroad economics the book still left out some details out. For example, Gallamore and Meyer states that, “the economic and legal arguments rapidly became complex and subtle” (26). However, it would have been helpful if both the general readers and experts to have detailed reference list to those ‘complex and subtle’ arguments as well as additional studies of the America railroads pre- and post-Staggers performance. Furthermore, the authors would have provided both a reference list and bibliography. For example, the novelists wrote extensively of the books by Loving, Klein, Martin, and Saunders (Gallamore and Meyer 19). However, they do not provide any titles and index. As a consequence, the reader is forced to look into the 60 pages of end note to search for more information. Proceeding further, the limitation of the book is that it should have been made more accessible to the non-experts. In chapter 2, about the ‘ills of national regulation,’ it would have benefited from a comprehensive evaluation of the ‘Big John’ grain hopper case that is only referred to once (Gallamore and Meyer 391). However, that affair acts as a good example of the manner in which regulation together with exploitation of regulation by the rivals can suppress development. Next, considering that the authors are economists by profession and played a significant role in the deregulation of the railway, they did not give a comprehensive explanation of differential pricing. They shared the view that the period following the Interstate Commerce Act of 1887 “the federal government based the new regulatory system on a harsh set of criteria-differential rates that were discriminatory” (30). On the contrary, this was not a new concept because it had been in existence in the transportation policies for a very long time. The other weakness is that it is regrettable that there is a lack of comparison between the reforms in the American railway to other nations. As they conclude, Gallamore and Meyer (435) note that keeping the railways private and deregulated is more important in contrast to alternative. It is equally important note that only mentioned three: subsidy, nationalization, and comprehensive regulation. However, earlier, Gallamore and Meyer (249) cited that the United Kingdom had forced vertical separation on its railroad sector. Next, the authors further argued that the European Union was also adopting a similar policy (Gallamore and Meyer 250). There is no hint in the passage how well the approach has worked. Lastly, the book also has some editing mistakes. The authors say, “No comparable period in American history had…..railroad consolidations that the forty year-span, 1920-1940” (Gallamore and Meyer 66). It needs to be in a 20-year span. To sum up, the book is engaging and well-structured and focuses on primarily on the economics of the railroad in the United States. Gallamore and Meyer also highlight the futile as well as counterproductive attempts of several administrations to change the economic reality by means of statutes and regulations. They have explored the manner in which the railroad dominated the American freight transportation on land at the start of the 20th century, how it lost its leadership along with most of its domination in the following eight years, and it was reborn in the last 20 years of the same century. The industry was able to turn around itself through various difficult but crucial mergers, while the privately owned railroads invested more in safe, energy-efficient, eco-friendly locomotives. To that effect, the book, American Railroads: Decline and Renaissance in the Twentieth Century tells a riveting story of the manner in which the railroad industry was able to turn itself around. This is a very valuable book that has influence even outside the railroad industry. Therefore, both experts and non-experts in the other sectors of the economy can be encouraged to study the book. Work Cited Gallamore, Robert E., and Meyer R. John. American railroads: Decline and Renaissance in the twentieth century, Cambridge, Massachusetts: Harvard University Press, 2014. Read More