1913 Chicago railroads (Photo credit: Wikipedia)
This is from The Worden Report. My primary interest here is the report that the railroads are making huge capacity improvements. if you watch their advertising you already know the astounding efficiency of transporting freight via the railroad. The thing is with modern equipment and methods it’s also one of the fastest means.
In the first quarter of 2013, North America’s freight railroads were “in the midst of a building boom,” according to the New York Times, “unlike anything since the industry’s Gilded Age heyday in the 19th century. Meanwhile, trucking languished under high fuel prices, crowded highways, driver shortages, and cost-driving regulations. Meanwhile, freight rates were nearly half what they had been in the early 1980s. This cost advantage was also contributing to making North America competitive again in manufacturing. The railroads were doing their part to take up the slack. In 2013 alone, $14 billion was to be spent on rail yards, refueling stations, and additional track. That was the third year in a row of record capital spending. In 2003, it had been a mere $5.9 billion.The increased capital investment would enable the railroads to take advantage of the “enhanced speed and efficiency of rail transport” that were making it “a dominant player” in the commercial transport system in North America. In this essay, I discuss an ethical implication from the resurgence of railroad freight transport. In particular, I want to dredge up the earlier controversy of “rebates and drawbacks,” for the debate could show its contentious head again in the midst of the railroads’ comeback.
In 2013, the railroads were competing to haul more and different types of freight. “Hot trains,” for example, were dedicated to high-priority customers like UPS. Were that company to come to rely on a particular railroad only to see its capacity taken by other favored customers, one might ask whether the railroad should give that particular big customer a discount, or rebate. In the 19th century, John D. Rockefeller took his Standard Oil company to over 90% of the market. With such dominance in his market power, he could extract not only rebates, but also drawbacks from one of the main railroads. When pipelines became an alternative, he simply had Standard Oil purchase the pipeline company. He could thus keep the pressure on the railroads. The issuance of drawbacks in particular triggered moral condemnation, particularly from Ida Tarbell, whose father had been an oil producer in western New York or Pennsylvania. By the time of the “rebirth” of freight rail in 2013, Tarbell’s debate with Rockefeller on rebates and drawbacks had been all but forgotten.
Continue reading Railroad Boom: On the Ethics of the Drawback « Sago. Do read it, it’s very interesting and fair as well.
Once over quickly on the concerns raised here. Rockefeller’s Standard got rebates for several reasons
- The Standard agreed to level out their shipments so that the railroads wouldn’t have, say 1000 carloads one month and 150 the next. This made for much better utilization of equipment.
- The Standard provided the tanks that were mounted on the cars to hold their oil.
- There are decided economies of scale involved in railroads.
On that last, the thing is it costs a lot of money (and always has) to build a railroad. You need a certain amount of traffic to make it worthwhile (yes, there are lots of variables)but in general, it costs as much to build and maintain a railroad for 5 cars a month as it does for a thousand. The other half is that it doesn’t cost much more to handle say 3000 cars a month. There are maintenance cost which will be marginally higher and you might need more equipment but this is pretty general. This is what’s called a high fixed cost business.
The other thing is that back before the turn of the twentieth century James J. Hill, the famous Empire Builder himself, said that the day would come when it would be cheaper to transship products from Asia to Europe via the American railroad than by ship. That day has come.
And here is a video about the early days of one of the key technologies that has made that happen
Of course over the fifty years since this film was made, improvement have been made. For the most part the trailer chassis are no longer shipped , merely the box, and the other major development is that ocean going vessels have also been designed to take the same containers. This means that essentially a container can be loaded anywhere in the world and shipped by any combination of road, rail, ship, (and even air) to anywhere else in the world without ever breaking bulk with it’s attendant dangers of pilferage, damage and/or loss.
A great success of American ingenuity that has made life better for nearly the entire world.
Related articles
- Railroad Boom: On the Ethics of the Drawback (sago.com)
- Railroad’s Golden Age (blogs.barrons.com)
- Regulations Cause Private Passenger Rail Service to Sell Out (ironcompass.wordpress.com)
- The Sign that Rose to the Challenge: A History of the Crossbuck (roadtrafficsigns.com)
- Rail oil boom creating jobs, driving returns as Keystone approval wait drags on (business.financialpost.com)
