Thursday, May 01, 2014

Stifling regulation: A few history lessons

Written by  William C. Vantuono, Editor-in-Chief
Over the years I have been led to believe that there are only two places where one can find a complete set of Railway Age and all its antecedent publications and accompanying monthlies. One is the Library of Congress. The other is our conference room in our New York City headquarters.

Turns out there is at least one other collection of this publication: In the home of one Keith Robbins, a railroader who is rather well-versed in railroad history and some of the industry’s pre-Staggers Act darker days, because he lived through them. In particular, he’s attuned to the industry’s long-running battles with regulators, and those seeking to lower rates while at the same time demanding improved service (i.e. those who specialize in spouting oxymorons).

Mr. Robbins recently wrote me to comment on my April 2014 “From the Editor” column. I thought I’d share his comments with you, our readers, as there are some valuable lessons to be learned:

“Your April 2014 editorial, “Theme in search of a movie,” struck several chords with me. After working on a bankrupt Northeast railroad in the early 1970s, I find any proposal that even partly gets the railroad business back to those days is scary. I graphically describe to younger people how it was by saying that ‘it used to be an adventure to run a grain train.’ You just never knew where it would rock off and felt relieved when one proceeded without incident. It boggles my mind that anyone could seriously suggest going back to that.

“I’ve got most copies of Railway Age and The Railroad Gazette going back to 1900 and quite a few before then. When I read these, I note the similarity between what the politicians and outside industry representatives were writing in their complaints about rates then and what they write now. Since those old complaints led to many years of ICC ratemaking stupidity and the deplorable 1970s conditions, it’s disheartening to read similar things today.

Senator La Follette“I especially liked three of the adjectives you used to describe what is now going on: ‘Vaudeville, absurdism, and nonsense.’ They just never seem to learn. All one has to do is examine a couple of historical cases and those adjectives could easily be applied to them. One is [Wisconsin Republican] Senator Robert Marion La Follette’s (pictured) drive [in 1916] to enact the Railway Valuation Act. After spending what I imagine was hundreds of millions of dollars (in today’s money) and years doing the valuation, the Progressives were dismayed when the value came in much higher than they expected. And their reaction was they tried to scrap the whole thing and lower the value so they could force the railroads to lower their rates. After you follow the valuation process through the pages of Railway Age and then see the clamor about the results in the 1920s, the words absurdity and nonsense are right on target.

“The other case that epitomizes those three adjectives in the area of ratemaking was the Big John hopper case of the 1960s: ‘What do you mean, evil Southern [Railway]—you want to lower rates? Can't have that!’

“In an old railroad history book, I see that the business of nonsense about rates goes back to the beginnings of railroads in the United States. It just wasn’t something that arose out of the Granger Movement of the late 1800s. The Beginnings of the New York Central Railroad was written in 1926 and describes the various small lines between Albany and Buffalo, N.Y., that eventually became the New York Central. Several of the lines had rate restrictions or refunds that had to be paid to the state because New York did not want the state-built Erie Canal to suffer from railroad competition. Beginning in the 1840s, there was controversy, and change to these restrictions. In 1845, the various companies were presented with the problem of a New York legislature that wanted them to reduce rates while mandating that the companies spend considerable money to replace old strap rail. The author described this: ‘Thus was presented for the first time in the state of New York, at least, what has ever since been an acute feature of the railroad problem, the imperative necessity for expensive improvements in order to handle business with the dispatch and safety justly demanded by the public, coupled with an insistent demand that the rates of service should be reduced contemporaneously therewith.’

“Almost 170 years later, the same attitudes still exist.

“I believe that the message to take from your editorial and railroad history is that this defense of Staggers is a continuation of a fight that has been going on since the start of the railroad industry. It is imperative that the railroads be continually on guard against the forces that would have the industry return to the conditions existing before 1980. Thanks for the editorial.”