Throttling the Railroads: 1. The Railroad Problem

Dr. Carson is a frequent contributor to THE FREEMAN and other journals and the author of several books, his latest being The War on the Poor (Arlington House, ¹969).

Ayn Rand put her finger adeptly on the jugular vein when she fo­cused attention on the railroads in her novel about the economic breakdown in the United States, Atlas Shrugged. Surely, the colos­sus of the Western Hemisphere, the United States, rose to emi­nence in the world on the grid-work of steel rails that spanned its length and breadth and reached out like fingers to touch the far­thest corners of a vast half-continent. Before the coming of the railroads, to speak of a United States was to speak in the hyper­bole of politicians and dreamers. These United States were sep­arated by great chains of mountains, by formidable bodies of waters, by natural obstacles which carved the country into regions, sections, isolated valleys, and vast well-nigh untappable hinterlands. Railroad builders sought out the mountain passes, followed the cuts made by streams through the ages, bridged the rivers, and laid the rails across the stretches of flatland. They united the states commercially, politically, and, may-hap, fraternally.

Indeed, the American railroad system is one of the marvels of the modern era. There were 23 miles of track within the United States in 1830; by 1920 there were 252,845 miles. Most of the track age was laid between 1870 and 1910, in one of the most pro­pulsive construction programs ever undertaken in history. By the early twentieth century, virtually every town and hamlet in the country was either on or within a few miles of a railroad, and most towns of any size had service by two or more railroads. Cities were frequently served by a half-dozen or more companies, two or more of these frequently connecting with the same distant points. Peo­ples and goods moved over these lines with speed and safety which a few generations before could hardly have been conceived.

In a recent advertisement, the Association of American Railroads attempted to evoke a sense of the marvelous character of this means of transportation. It read, in part:

Suppose that everybody in the United States were to learn for the first time about a marvelous method of transportation called a railroad.

The idea would be sensational.

High-speed tractors running on steel rails laid on privately-owned rights­of-way, with minimum curves and grades, would be capable of pulling long processions of trailers full of merchandise. Imagine!

Trains of trailers would be kept rolling day in and day out until they reached their destinations. They would be shuttled into and out of mar­shalling yards, where the trailers would be grouped in the right com­binations. Of all things!…

The high-speed tractors on their twin ribbons of steel could even haul human beings, in addition to freight. If necessary, the human being could be bedded down and hauled from one place to another in special cars with comfortable seats and all the com­forts of home.¹

A Waning Romance

Americans have not always been oblivious to the marvels of the railroads, of course. On the con­trary, many have long been fas­cinated with this way of trans­porting people and goods. A good case could be made that many Americans have had a long ro­mance with the rails. The story of the railroads is deeply entangled in American lore, legend, and history: the buffalo hunters, the clashes with the Indians, the rush of the railroad crews to lay rails into the West, the driving of the golden spike at Promontory Point to celebrate the linking of the Union Pacific and Central Pacific, the bigger-than-life gangs of train robbers — epitomized by the James boys —, the ballads such as "Casey Jones" and "Wabash Cannon Ball." The steam engine was itself a thing for wonder and awe: steam spouting from its sides as it stood in the station, its lonely whistle in the night, the huffing and puf­fing as it made a long grade, its long sigh to let off steam as it came to a halt. Even the mighty diesels, while not so romantic as the steam engines (probably be­cause they are still with us), could cause heads to turn and voices perforce to cease or be un­naturally raised as they roared by.

The railroads capitalized on this interest and tried to build excite­ment by the names they gave to their crack passenger trains in the twentieth century, names which suggest that the trains soar, ram­ble, move swiftly, and fly as they rush to make their destination against the clock, names such as Twentieth Century Limited, Silver Star, California Zephyr, Spirit of St. Louis, City of Los Angeles, South Wind, Sunset Limited, Em­pire Builder, Super Chief, and Rocky Mountain Rocket. Even some freight trains have been given special names; the Mil­waukee Road calls a westbound fast freight the XL Special and its eastbound counterpart the Thunderhawk.

Even so, the railroad advertise­ment is probably right in what it implies: the American people are no longer generally enamored of the railroads. They have spurned many of the rail services with alacrity and taken much of their custom elsewhere. Even the men­tion of railroads evokes a faint nostalgia in response. The im­pression grows that they are ob­solete, that their ribbons of steel stretching off into the distance are becoming mute monuments to days gone by, their passenger sta­tions relics of other times, their forms about to be reduced finally to toys in the basement and Sun­day rides on narrow gauge lines to old abandoned mines. At any rate, the railroads are in trouble. As one writer puts it: "There can be no doubt about the severity of the railroad problem facing the nation in the sixties."2 The railroads have had a long-term trend of declining traffic, both passenger and freight, though the decline in freight has sometimes been only in the proportion of to­tal freight hauled. Service has been increasingly curtailed. Rail­road stocks have long failed to re­spond even to proportionally high­er dividend-to-cost ratio than most other stocks. These are the almost invariable signs of a dying in­dustry.

Still Essential for Transport

Yet, the railroads remain an essential method of transport in America. Not only were they once crucial to the commercial unity of America; they still are. It is true these United States are now linked together by highways over which gasoline engines pull trucks and automobiles, that these highways, presently being supplemented by an interstate system, reach more places than the railroads, and that any city of any size has many which form junctions within its borders. But these vehicles which travel on the highways are an in­creasing source of trouble them­selves. They pollute the air; they converge on the cities at certain hours of the day constricting movement and raising tempers; parking places for them become ever more costly and difficult to find. Trucks increase in number and size on the highways, vying with automobiles for travel space and increasing the peril of travel. The carnage on the highways is so great that anyone sensitive to the propaganda about it must set out even on a vacation trip in an auto­mobile with considerable appre­hension.

If that portion of the freight now carried on trains should sud­denly be shifted to the highways, the pace of traffic would be dras­tically slowed and much that now moves that way could hardly find a place. We are already experi­encing the impact on highways of the shift of passenger traffic from trains to private cars, for the most part; what it would be like when freight should be as preponderant­ly shifted to the highways as are the passengers can only be left to the imagination. As things stand, many cities probably could not survive such a shift; many of them are already marginal as plac­es to live, and transport is one of the major reasons. This is why the railroads remain an essential method of transport for America. Yet, the long-term trend in a shift away from them is now well es­tablished.

Deterioration in Quantity and Quality of Service

Why should this be? To the casual observer or unwitting cus­tomer it often appears that the railroads are their own worst enemies, that the management and personnel are directly to blame. Those who use the railroads fre­quently get the impression that the roads are determined to be rid of them. This is most noticeably the case with passengers, but users of freight service of certain kinds may get a similar impression. Anyone who has ridden the trains often in the last decade or so prob­ably has his own list of com­plaints. The list will most likely include such items as reluctant ticket sellers, difficulties in acquir­ing information, late departures of trains, late arrivals, surly em­ployees, inconvenient schedules, dilapidated equipment, long walks to cars past a long line of cars for mail and parcels, lackluster surroundings from beginning to end of journey, and so on.

Stories abound of horrendous treatment of passengers by the railroads. The present writer has seen a restroom in a passenger station to which entry could be gained only by dropping a coin in a slot, has heard a porter utter such streams of profanity about the difficulty of getting a woman’s luggage from one train to another that she offered to carry it her­self to shut him up, has had his rest disturbed by noisy "dead­head" railroad employees on sev­eral occasions, and has seen any number of waiting rooms suff¹­ciently gloomy to discourage all but the most intrepid traveler by rail.

Some of these might be only in­dividual instances of poor service which can happen in any under­taking. But there is much testi­mony that they are of a kind that occurs all too frequently on the railroads. One writer notes that

"except for a few crack transcon­tinental and other trains, the quality of service rendered has deteriorated compared with pre­war [World War II] years…. Trains are frequently late; coach equipment is often old and some­times dirty and poorly ventilated and heated. Many prewar stand­ards of courtesy have gone, even in parlor and sleeping cars….

On some of the best coach routes, the railroads use obsolete passen­ger train cars and treat customers as though the carriers were doing travelers a favor to transport them."3 Another says, "The pub­lic sees the railroads as old fash­ioned…, and as common car­riers who hate passengers."4

Suicidal Practices

It certainly looks as if the rail­roads were trying to commit sui­cide. They have low advertising budgets compared with other busi­nesses; the uniforms of their per­sonnel appear to date back to the beginnings; their passenger sta­tions frequently appear to be a combination of late Victorian grandeur gone squalid and early government housing projects; their freight stations are often a poor imitation of a down-at-the-heels hardware story. The following are instances of how railroads have alienated passengers:

Take, for example, the process of calling on the telephone for some scrap of information about a pas­senger train…. Some railroad clerks are evidently instructed to take their phone from its cradle, or hook, and then to forget it…. Other railroad clerks, themselves impervious to minor irritations, simply ignore a ringing phone, hour after hour….

Another stratagem is the disrup­tion of train schedules…. Suppose you wish to travel overnight by train from Washington to Memphis. There is no through service, but the South­ern Railway has a Birmingham Spe­cial that arrives in Chattanooga at 8:10 A.M. or ten minutes after the train to Memphis has left. The South­ern Pacific’s Sunset Limited has been so rescheduled that, eastbound, it no longer connects at New Orleans with the Gulf Wind…, westbound, the Sunset leaves stranded in New Or­leans for about fifteen hours those passengers coming from the east on the L and N’s Crescent or the South­ern Railway’s Southerner.5

While freight traffic is not so cavalierly treated, many small communities have lost their agents, and many kinds of pack­age freight do not appear to be much wanted.

Not all railroads have been so disdainful even to their passen­ger customers. But even those who have continued to serve long dis­tance and commuter passengers well often say that they are losing money. Lately, a considerable movement has been mounted for governments to subsidize passen­ger trains, and some of this is al­ready being done.

A Puzzling Performance

There are two enigmas here. In the first place, it is not usual for businesses to discourage custom­ers and treat them as if they were not wanted. Private enterprise succeeds by serving customers and by gaining and keeping their good will. Even losses may be sustained to provide certain kinds of service in order to gain profitable custom. When businesses behave other­wise, this behavior requires ex­planation. The second enigma is why any good or service that is widely needed and wanted cannot be profitably provided. Commuter trains, for example, may be filled to overflowing during rush hours, but many railroads no longer wish to operate them. Transportation is not the only area where the pro­vision of vital goods and services has sometimes become unprofit­able (others would include food provided by farmers and rental housing), but it is certainly a crucial one today. This is, to say the least, enigmatic.

There is, of course, an explana­tion. To get at it, it is necessary to look into the history of the rail­roads. Even the most casual stu­dent of American history will re­call certain facts related to rail­road history. Even the most gen­eral history of the United States will probably mention land grants to railroads, the Railway Strike of 1877, the Interstate Commerce Act, the Pullman Strike, the Northern Securities Case, the gov­ernment take-over of the rail­roads in World War I, and the Transportation Act of 1920. In short, what the casual student may discern with a little reflection is that there is a long history of gov­ernment involvement with and in­tervention in the affairs of the railroads. Deeper examination will show the impact of this on the railroads and provide explana­tions for the strange situations that have developed.

A Vital Service in Decline Plagued by Intervention

There are three fundamental reasons, then, why anyone under­taking to write an anti-utopian novel about the United States, as Ayn Rand did, might well focus on the railroads; and they are rea­sons why a historical study of the railroads is warranted. First, the railroads were crucial in provid­ing a means for commercially uniting the states, and are a still vital part of the transportation network of this country. Second, they have been in trouble for a considerable while and have suf­fered a long-term decline. This has brought in its wake a host of other problems already alluded to. And third, there is a long history of government intervention in rail transport with all its ramifying effects.

Indeed, the railroads are the classic example in American his­tory of the impact of government intervention on a business. They have had the longest history of in­tervention by the Federal govern­ment of any modern business. Theirs was one of the earliest in­stances of extensive subsidies to more or less private undertakings. The first strike to have an impact on a goodly portion of the country was against the railroads — the Railway Strike of 1877. The first general act to regulate interstate commerce and the first national regulatory commission was aimed at the railroads — the Interstate Commerce Act and the Interstate Commerce Commission. One of the earliest applications of the Sher­man Antitrust Act by the Supreme Court against a portion of an in­dustry was made against the rail­roads in the Northern Securities Case. The railroads were the first private industry to be taken over and run by the Federal govern­ment for a time — during and after World War I. In short, except for banking and the delivery of the mails, the railroads have probably the longest history of intervention of any major business in the United States. Nor is there any better place to study the debilitat­ing effects of this.

Since some may suppose that government subsidies and aids were helpful in getting the rail­roads underway, and since a new era of subsidies portends, it will be well to begin the account with the building of the railroads and explore some of the varied effects of this before taking up regula­tion and control.

Next: Aiding the Railroads — 1830-1871.



¹ Quoted in John F. Stover, American Railroads (Chicago: University of Chi­cago Press, 1961), p. 248.

2 Ibid., p. 47.



Learning by Doing

Ideas made possible our nation’s growth. We are a venturesome, valorous, risk-taking people who backed ideas with savings.

If the labor unions would back their ideas with the money collected from their dues-paying members and, instead of strik­ing against business, go into a business for themselves and prove that they can operate it — can run full time at all times, pay higher wages than present management, have shorter hours, better working conditions, and make enough money to keep operating and pay their shareowners (dues payers) a fair return on their investment — they would get a better education in the relationship of profits to jobs and job security, to the standard of living, and of productivity to wage increases.

Steel men, automobile men, coal-mining men, mill owners, and hundreds of others have twitted unions to make good their claims to buy a company, run it, and prove they can do so better than those they now criticize and strike against. It’s wide open, and all can step in and try it. But, Mr. Unionman, don’t overlook the 52 per cent Federal tax on profits.

The big unions are reported to have millions of dollars on hand. Why not buy a company, and run it, and prove that wages can be increased without setting the stage for higher inflation?