Rail monopolies destroyed the American supply chain

Heads they win, tails we lose.

Cory Doctorow

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A vintage editorial cartoon depicting a giant squid labeled ‘Railroad Monopoly’ with various things being strangled in its tentacles: a ship, a coach, a farmer and his horses, a miner, a telegraph delivery boy, a winemaker, lumberjacks, a produce farmer, etc. The octopus’s eyes are the bearded faces of two forgotten railbarons.

The rail barons were the original monopolists, whose ability to make or break whole industries based on their parochial needs spurred the first American antitrust laws. For generations, railroads were tightly regulated to ensure resiliency, competition and fairness. Today, the monopolists are back, and their greed has shattered American supply-chains.

The pandemic has seen massive failures in rail service — late deliveries, waves of derailments, huge backlogs. But rail profits have soared, as have the prices of carrying freight. No wonder: in 1980, there were 40 US “Class I” railroads. Today, there are seven.

How did this happen? Blame Carter. And Reagan. And every president since. The Carter administration lit the kindling for the bonfire of regulations and Reagan poured gas on it. In 1980, the dismantling of rail regulation picked up a good head of steam and it hasn’t slowed since.

Writing in The American Prospect, Matthew Buck provides an excellent, highly accessible overview of how railroad deregulation made a small number of people — especially the notorious hedge-fund looter Bill Ackman — spectacularly rich, and how those riches were turned into political power to further the removal of the rail industry’s brakes.

https://prospect.org/economy/how-americas-supply-chains-got-railroaded/

The rail industry wasn’t just a pioneer in 19th century corrupt monopoly, it was also the trailblazer for late 20th century tolerance for monopolies. In the 1980s and 1990s, the DoJ and FTC were still occasionally willing to get out of bed and block a merger or two, but rail was governed by the Surface Transportation Board (STB), which basically slept through both decades. “By the 1990s, STB policy blessed nearly all mergers except those that left only one railroad in a market.” You will not be amazed to learn that “a 2018 study of railroad mergers from 1983 to 2008 was unable to find that mergers improved efficiency.”

All this started under Carter (never forget that Carter was a milder version of Reagan, the way GW Bush was a junior-league Trump). In 1980, Carter signed the Staggers Rail Act, which ended the regulation of railroad freight prices by…

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