In another thread, it was alleged by TomDiehl that forcing railroads to compete head to head is actually a form of socialism. Take note, this is not to disparage Tom or his statement, and I may be taking his notion out of context, but I am curious as to what others think about that idea.
If the so-far-ignored competitive caveats of the Staggers Act were suddenly enforced, or if the anit-trust legislation proposed by Wisconsin Representative Mark Green becomes law, etc, is that imposing socialism on the railroads, or is it simply using government action to foster a more ideal example of free market forces in railroading?
There isn’t much of an “off-season” for grain hopper cars. Indeed, you would have to tell me when it is, I don’t know.
As a point of information, this weeks’ traffic mix on the BNSF consists of 54% private cars, only 32% owned by the BNSF currently on route on the BNSF system.
BNSF’s grain hopper car fleet consists of approximately 27,000 cars. That represents only 43% of the total 62,740 covered hopper cars currently in transit on the BNSF system.
Union Pacific has a covered hopper car fleet of approximately 30,000, only 30% of the 100,145 covered hopper cars on the line this past week. Of the total 322,954 cars of all types on the UP system last week, 55.6% were private cars. The Union Pacific supplied only 27% of the cars on its lines last week.
The bulk of the costs of maintaining commodity rail shipping capacity has been shifted to the shippers from the railroads.
How do you define “socialism”? Marx/Lenin/Mao would call it government control of the means of production. An example in transportation would be the US Post Office.
How do you define “free market”? Is government dictating what prices a business can charge part of a free market? Is government forcing a business to let a competitor use his assetts a free market? I would not call it a free market if Wal Mart was forced to let Kmart have part of the space in the local Wal Mart.
Somewhat correct. My statement was that forcing another railroad to build into an area of limited revenue, simply for the purpose of providing rail freight competition is a form of Socialism. Railroads in the US are private enterprizes. There has to be a profit motive for one railroad to build into an area that already has rail freight service from another company. This has taken place, the most recent example is the Powder River Basin in Wyoming. Areas where the shippers are claiming that only being served by one railroad (called rail captivity) causes high shipping prices is suspect, simply because they have to pay the bill. They have the option of shipping by truck, but this costs more than the railroad’s rate, adding to the suspicions. One hundred years ago, before the time of interstate trucking, railroads were the only way to ship large quantities of freight unless you were near a major body of water. Nowadays, I find this argument moot.
If only the track of one railroad reaches into and serves a given area or industry, and this railroad were forced to grant access to another railroad, over this same track, for the sake of competition, I fail to see how there is going to be enough savings on the part of either railroad to offer lower rates.
Heady stuff! I would hate to be in the shoes of a business owner who took the calculated risk of building track into an area hoping to earn a good return, and then to pay dividends to the risk-taking shareholders, only to be told by any authority that I had to make space for another non-risk taker who was only too happy to incur on my turf and reap the profits. At the very least, I would go to the Supreme Court and ask it for a ruling on the legality of such an imposition, and for no less than a full and perpetual fee for the use of the right-of-way. I suspect I’d have lots of business backers in all legislatures and in Congress.
It’s one thing to force a property owner to accept access by a competitor at some pre-determined rate, it’s another thing for the government to provide some form of incentive to your competitor to allow that competitor to build his own line into territory that you currently dominate.
When the railroads were rife with excess capacity a decade ago, the idea of allowing another railroad into one’s sole territorial domain via forced access over the current server’s trackage made sense from a public policy perspective even if it violated the private property sanctity argument, since it answered the lack of competition argument while allowing more utilization of that excess capacity. The whole excuse of allowing the Milwaukee line retrenchment west of Miles City MT was that there was more than enough rail capacity via BN’s Northern Tier trackage to serve the area for the forseeable future. Of course, three decades later so-called “foresight” has become an obvious case of shortsightedness.
Now, with rail capacity maxed out, it would make more sense for that potential second competitor with access to government aid to build their own line into the area where profit margins indicate a growth market.
The question is - is that nothing but socialism if a second compe
Gentlemen:
A Short reminder, Railroading as a business is by its nature dynamic and changing on a regular basis. Regulation while important in keeping things fair (what ever that is on any particular day) tends to be static and stolid for a given time. This is one place where I believe that the point goes to the dynamic forses of liberty and freedom rather than the static condition of control and regulation for its own sake. ------My [2c] - PL
Some basic principles of a free market system: 1. If one company can’t provide the product or service that another company needs in the volume they need, other companies will step in and provide it, if they can make a profit doing so and pay back the investment of developing that business. 2. If the company requiring the product or service cannot have their demands met by one company, they will solicit other companies to provide the product or service. 3. The government should only step in, beyond regulation of rate calculation, if abuses from the providing company prevent the competition from gaining access to the business. Such abuses would be as, but not limited to, coersion and threats against the new company, attempted legal blockade to competition, attempted physical blockade, etc.The government should, and in most cases does, consider competition to exist if there is access to more than one transportation provider, be they the same or different mode.
The Sherman Antitrust Act was passed in 1890 and was used effectively beginning around 1904 as a result of Teddy Roosevelt’s “Trust-busting” activities. Undoubtedly many people in those days, and even some today, feel the Act was a form of socialism. The theory behind it, of course, was that competition is good and monopolistic or oligarchic activities are not so good.
Socialism usually involves the government ownership and administration of the means of production and distribution.
The idea of government promoting competition by encouraging, enticing, subsidizing or otherwise aiding in the creation of a competitive rail line where currently only one railroad has access is more consistent with the goals of the Sherman Act than with the principles of Socialism. It could be called meddling, but the proponents would argue that it is for what has generally become considered a worthy cause, fostering competition, and will in the long, or even short, run improve the economy, etc.
The amount of assistance offered by the government is worthy of discussion and rightfully subject to scrutiny. The actual suffering of those afflicted by the current “monopoly” and the potential financial suffering of the railroad currently serving the area would also be important aspects for discussion and consideration.
Various States in this Union have purchased rail lines to keep rail access available to those States’ producers and shippers. In each case, it has been determined, presumably through the appropriate democratic process, that there is sufficient “public purpose” for the investment in these properties. I don’t know how many, if any, of those state or state agency purchases also had the effect of maintaining some competition. For a state, say, to offer to build, or money to build, a railroad to compete with one deemed at the moment to be monopolistic and undertaking unfair monopolistic practices would require a lot of hearings and legislative wringing of hands to meet th
The original topic was a bit different situation than the one you describe. You are stating that a government (at any level) acquires a rail line to preserve rail service, not to build or subsidize building of a new line into an area where one line already is serving.
Back in the early 1900’s that would be a monopoly, unless the industry was located near navagable waters where barge or ship traffic could compete with the railroad. The current highway and road freight industry just didn’t exist at that time.
Thank you for your reply. My mention of state purchases of existing rail lines was only a small part of my comment, inserted to bring up 1) the fact that governments do own railroads in this country and most people don’t call it Socialism; and 2) the governments have to jump through a lot of hoops to successfully show a “public purpose” before they can acquire those rail lines; and 3) for a government to subsidize, etc., the building of a competitive rail line, it would have to jump through a whole lot more hoops.
The fact that the currently monopolized shippers have the option of trucks is just one of the issues the government would have to contend with in the hoops department.
Some would then argue the government is already subsidizing competition with the building and maintaining of the highway system so what’s wrong with doing it with a rail line too. While that’s almost a whole 'nuther subject, it just goes to show that there are a lot of complications in this area of discourse. But I still wouldn’t call it Socialism.
I think we’re talking extremes here, when the reality is most countries are what economists term “Mixed Economies”. You have some government intervention, such as the examples described above, but the aim of this is to promote competition. In Britain we have the Monopolies and Mergers Commission which can not only prevent mergers if it thinks mergers would be against the public interest but it can also order companies to sell off parts of their business if it thinks it is in the public interest to do so. I believe in the US at Federal level the Interstate Commerce Commission performs a similar role.
Of course well intentioned govt. directives can back fire. Many years ago in the Irish Republic their Monopolies Commission ordered all breweries to sell off public houses that they owned. (In the UK a lot of pubs are still owned by breweries and beer campaigners say this helps smaller breweries to have a guaranteed market for their beer). But this led to a lot of small breweries in Ireland going out of business as Guiness undercut them. Now Guiness has a near monopoly (about 80%) of the market for beer in the Irish Republic. So a directive that was intended to promote competition ultimately had the oppostie effect.
Supporters of open access argue that rail-on-rail competition is good. I did not use to support that argument, but having seen the benefits that open access has brought in Britain I’m willing to accept it has brought some improvements.
As I’ve said on open access in this country, it’s one of the things that sounds good in theory, but the logistics of actually putting it into practice would be an operational nightmare.
It most certainly is anti-business if it arbitrarily forces competition where none was previously. This speaks to pioneering, part of your heritage, to land-braking, to resourcing, and all other aspects of seeking and capitalizing on a market. In Canada, until comparatively recently, Air Canada was a Crown Corporation that enjoyed government protection and support in an attempt to keep Canadian Pacific from a monopoly. The Federal Government did the same to CPR in the very early 1900’s by supporting the Grand Trunk and Grand Trunk Western, eventaully forming CN, still the only rival to CPR of any great consequnce.
If CPR had done so well initially, then other interests would have developed, just as they do in any type of business. To have the Government step in to providefoster/encourage/subsidize competition means that you have entities relying on the government for their value, an inherently socialistic premise. No one should have to contend with his own government to run a business. If so, it is a socialistic system.
Do you think another railroad may have built a second Canadian transcon if the government hadn’t propped up the eventual CN system? Did CP receive any land grants or other government financial aid in it’s transcon project?
Yes, and yes. The Grand Trunk and the GT Pacific were doing quite well, and even had better grades to contend with in the Rockies, Selkirks, and on into the Coastal Range. They did fall on hard times later, and that is when they began to amalgamate and when they asked the Feds for some help.
As for the land grants to the CPR, they were substantial…50 million acres, an exemption from property taxes in perpetuity, and a 20-year moratorium on development of any other trunk south of the CP lines. There was also a $30M cash subsidy, but that seemed to sift away, leading to the scandal and eventual fall of the MacDonald government. Later, when MacDonald returned to power, he realized that the Public could not afford to establi***he trans-Canada rail system, so he agreed to subsidized private investment. It must be remembered that MacDonald was very worried about holding the country together, so much that he fear-mongered a bit and warned the populace of American incursions, to the west. British Columbia felt like they were flapping in the breeze, so they lobbied hard, and would only sign on to Confederation in 1881 when the Government and the CPR agreed to begin building a rail system from Victoria, on Vancouver Island, to Nanaimo. Victoria was, and still is, the Capital. It wasn’t unti 1885 that the CPR actually began to build the E&N R, and only then because the Province threatened to secede.
The story cannot be covered here, but the Grand Trunk was also subsidized, and later amalgamated with the Grand Trunk Pacific, became the Grand Trunk Western, and so on. At the close of WW I, according to George Buck (1997), a Royal Commission investigated the Government’s subsidizing of two competing railroads (the GTP and the Canadian Northern) to the point where both were nearing bankruptcy. The Prime Minister at the time, Robert Borden, arranged legislation to rescue both and the GTP was absorbed into the Canadian National Railway in 1923.
I don’t know how could you see it a form of socialism, when competition is the main thing that makes capitalism different from socialism.
In socialism bussines if moderated by the government, and in many firms are owned by the government too (bigger ones) , and there is little competition between private firms.
In capitalism anyone can open any kind of bussiness, which leads to a whole bunch of firms doing the same kind of bussines being opened on the same place, which leads to competition between them and rapid growth.
Your reasoning is partially true. I agree with you that socialism is fairly monopolistic, but capitalism can also be monopolist (think Standard Oil). It is more possible to have competition under a capitalistic form of economy so long as capitalists/corporations don’t kill or buy up their competitors. The only entity that has the power to prevent monopolies are the federal and state governments.
CPR did pay a massive price for its land grants, it was known as the Crows Nest Pass grain rate restriction, which ceased to be compensatory after World War I and was not removed until the 1980’s.