Economic and Governmental Forces
Their Impact on American Railroads in the Twentieth Century
Stephen B. Goddard Analyzes What Went Wrong
For those concerned with the high price of gasoline today, be advised that the real cost resulting from historic national policies is even higher and we are paying it, albeit in a somewhat hidden manner. Further, there is more than one way to get around in America; a balance between road and rail will help not only railroads but highways and our pocketbooks as well.
To help explain this, assume that I'm carrying around a big glass jar with me. You see, I'm a man who tries to pay his bills. Avoiding bills, as we all know, just leads to trouble later. Some years ago, I read about how lucky Americans are to pay low prices when we fill up our gas tanks at the local Texaco station. Not only can our cars chug along 20 or 30 miles for a buck twenty, it said, but a portion of what we pay in gasoline taxes, pays for our highways.
Not a bad deal, I thought. I just love cars, and I love to zip along the interstates, so I thought I can just drive forever. The article went on to observe that the poor folks in Europe actually pay $3 to $4 a gallon for their gas. How lucky I am, I said, to live in America.
The Lure of the Open Road
You know, that article sort of stuck in my mind over the next few years, because the more I thought and the more I looked around me, it all didn't add up. For example, Congress passed what it called a Clean Air Act several years ago because American air was too dirty. And it was dirty, legislators said, because gas-burning cars give off toxic emissions. Well, I said, cleaning up the smog will cost money, and I suppose that since cars cause smog, the gasoline tax will have to go up to pay for it. But no, the gasoline tax hadn't gone up in years. And yet we still had to pay somehow to clean the air. I soon learned even though cars caused the pollution, our income taxes would have to pay the cost of curing air pollution.
The Real Cost of Driving
Now what does all this have to do with this big glass jar? Hold on, I'm coming to that. Several years ago, we went to war in Kuwait, and I'm told we spent $50 billion there just so we'd have plenty of gasoline on hand later. Well, the war made the world safe for gas stations and auto makers and, you know, the huge amount we spent on it didn't increase our gas taxes. Isn't that remarkable? But then I discovered that we still had to pay for the war through our other taxes.
Now hold on! I thought driving was supposed to be cheap, but I was beginning to learn that while government was taking just a little out of my front pocket, it was taking a whole lot out of my back pocket when I wasn't looking! Now on occasion, I have been a member of the "white-knuckle club." White knuckles are what you get when you sit in a traffic jam every morning and afternoon, gripping the steering wheel tighter and tighter. If you let your gaze wander (and you might as well— there's nothing better to do in a traffic jam), you may see nearby a set of rusted railroad tracks, now overgrown with weeds, which used to take people to work. But no more, of course.
Why? Because nearly 40 years ago, America decided it didn't need railroads, only the superhighways. While I was creeping along I thought, I'm really wasting a half hour every morning and every night. I can't read, I can't go to work, I can't play tennis while I'm driving. Now if my time is worth, say, $15 an hour and I spend an hour a day in rush hour gridlock, aren't I wasting $15 an hour each day? And this adds up to $75 a week.
Well, wait a second, I reflected. If every time I pay $1.20 for a gallon of gasoline [written in 1995], I'm incurring a debt for air pollution, military expenses and wasted time, I'd better not just sweep this under the rug or I'll have a big bill when the tax man comes. So I began to look into what all of these extra expenses were costing me. Since I put about 750 gallons of gas in my car each year, I figured I'd better carry around this big jar, because it must be large enough to hold all the money for the extra taxes I'll have to pay.
So now when I buy a gallon of gas, I put 7 cents in the jar to clean the air (here's 7 pennies), because I'm told that curbing air pollution and its effects on our health costs $9 billion a year. Time lost in traffic jams costs Americans $100 billion a year, I'm told, so here's another 75 cents (3 quarters). And keeping our military in the Persian Gulf costs $50 billion a year. Now, to be fair, there are other reasons for defending the Middle East too. The World Resources Institute estimates about half of that goes to protecting oil supplies. So we'll throw in 19 cents for that. I've learned that gas taxes only pay part of the cost of building roads.
Local property taxes pay another $21 billion a year, which means I better set aside 16 more cents for every gallon (drop in 16 cents). Property taxes on my house pay for police patrols, courts to hear traffic cases, and interest on the loans government borrows to build highways. That's another 12 cents (drop in). Now downtown employers sometimes boast that they give free parking spaces to their workers. But wait a minute. They get to deduct on their federal taxes up to $155 a month for each space. And that lowers their taxes by $21 billion every year. Who has to make up the difference? You guessed it—you and me. Yep, another 16 cents. Boy, I'm running out of change fast!
Anyone who pays auto insurance premiums knows it doesn't come cheap. Now this isn't meant to beat up on the insurance industry. Insurance costs a lot because loss of life, lost time and human capacity in auto accidents are hugely expensive. Each year, Americans pay $99 billion in premiums to auto insurance companies. Better save out 75 cents for that. Now this seems like a lot of money. If I added up the money in this jar it would come to $2.25 I have to put aside in extra costs for every gallon of gasoline I buy for a measly $1.20.
And, of course, I'm not including depreciation on my car, which could add another quarter or so. Have you ever planned a train trip to Washington or Boston and decided not to because, at $1.20 a gallon, it was cheaper to drive? Well, next time compare the costs using $3.40 a gallon instead of $1.20 and see how you come out.
Carrying around this big glass jar has changed my life, I want to tell you. Not only did it make people think I'm pretty strange, it got me thinking. By this time I had learned that no country in the entire world depends more on automobiles and less on railroads than the United States. Why should this be? Maybe it's because automobiles are just a smarter way to travel than trains. But then I looked at Japan and spent a month in ten European countries. Now the Japanese and Europeans are plenty smart and they have some pretty high-powered automobiles themselves. But they both use railroads as much as they use cars. The last six years of my life have been spent in trying to find out why. And to tell you what I've found, I have to take you with me on a trip. So fasten your seatbelts folks.
A Trip in the History of Transportation
First we're going to zoom back 150 years to a simpler time. We'll see how the railroad and later the automobile came to be, and we'll witness a century-long struggle-to-the-death between them. After that we'll take a brief look around us in the present before rocketing off into cyberspace. And finally, I'll suggest to you what lessons we might learn from our trip and how, in the next decade, we can be much more influential in our communities than ever before if we put our minds to it.
Our first stop is England on a crisp, fall day in 1829. We're out in the country now, and on the ground in front of us are two long black pieces of iron, about four or so feet apart, stretching as far as the eye can see. Around us are hundreds of spectators, some of them Americans who had taken the steamship across the Atlantic to witness the spectacle that has just taken place. For George Stephenson's primitive locomotive, the Rocket, has just done an amazing thing. Racing against other locomotives along the new iron tracks of the Liverpool and Manchester Railway, belching thick clouds of black smoke, it has hurtled over the finish line at the unheard-of speed of 29 miles an hour! People here are in a near frenzy!
Flush with victory, the illiterate inventor has invited the famous actress Fanny Kemble for a ride. She quickly accepts. Now Fanny is a wildly popular young actress, the Michelle Pfeiffer or maybe even the Madonna of her day. Fresh from starring in Romeo and Juliet to packed houses at Covent Garden, the 21-year-old actress now wears a bonnet over her brunette locks as she stands behind the hulking locomotive, its vertical smokestack ascending from the front of its round horizontal boiler, like a giant black letter "L". Later, Fanny Kemble wrote about what her trip felt like:
... the engine was set off at its utmost speed, 35 miles an hour, swifter than a bird flies, she gushed. You cannot conceive what that sensation of cutting the air was; the motion as smooth as possible, too. I stood up, and with my bonnet off, drank the air before me.
The trip made Fanny Kemble fall desperately in love with both Stephenson and his locomotive. The American engineers present for the contest took the first steamer home to the United States. They knew instinctively that Americans would feel the same electric thrill that filled Fanny Kemble that day.
Until then, it was nature that limited how people related to time and space. A trip by horseback could carry a person five or ten miles in a day over rutted dirt paths that passed for roads. Most people lived, worked and played in the same town. Now, all of a sudden, a wooden box on iron rails could carry people 30 miles in an hour.
The effect on American life was transforming. Soon people could take a train to visit a friend in a city 50 miles away and still be home for supper. The market for a company's product was no longer local but statewide, even nationwide. As one author exclaimed, steam is annihilating space. But others like Henry David Thoreau, warned of dark days ahead. We do not ride upon the railroad, he said, it rides upon us.
Railroad Empires Arise
Soon companies called the New York Central, the Baltimore & Ohio, and the Pennsylvania were snaking iron rails across the countryside in a blistering competition to get there first. Congress added fuel to the fire in the 1860 by giving as much land to the railroads as was contained in the entire state of Texas. Foreign powers had their eyes on the great American wilderness, and the United States decided to stake its claim first. As uncharted territory, the American west was worthless, but with a reliable way to get there, it could be a gold mine. And so towns called Omaha, Denver, Tulsa, and Wichita grew from tiny settlements into cities overnight.
Farmers moved west by the thousands, knowing that railroads would give them a way to get their meat and produce to market. Railroad agents recruited Europeans, and soon immigrants headed west, clutching bits of Irish lace and their German cuckoo clocks. But many of these "railroad towns" had only one rail line in and out of town, and this let the railroads charge, as one rail executive put it, what the traffic will bear. Nearer the cities, farmers paid less because several railroads competed for their business. Soon the rural farmers were hopelessly overcharged.
The Farmers Revolt
In frustration, they burned their corn and shot their hogs. Until then, railroads had their way with the American people. They owned, literally, many western legislatures, plying state legislators with food, drink, and female company to obtain whatever concessions they needed. For a three-dollar-a-day state legislator, a payment of $1,000 was terribly hard to resist. At this point, enter one of those individuals who spawns a revolution, which then sweeps over him and buries him in anonymity.
Oliver Kelley, an obscure post office clerk in Washington, D.C., had traveled widely by train and saw terrible poverty and squalor among farming people that shook him to his heels. In 1868, he quit his clerkship and set off for the hinterlands with a missionary gleam in his eye to do something about it. He had intended to offer farmers social and intellectual uplift. But soon Kelley found himself tapping into a deeper vein of discontent. Farmers in the heartlands did not hesitate when Kelley asked who they blamed for their economic woes: the railroads!
Historically dependent on no one, farmers felt themselves losing control of their lives as they became beholden to faceless tycoons in distant corporate boardrooms. Before long, members of 20,000 chapters of the National Grange of the Patrons of Husbandry were driving their wooden wagons over rutted dirt paths to the state capitals, to demand angrily that a noose be thrown around the runaway railroads.
And so began one of the biggest populist campaigns ever seen in America—the crusade to harness the railroad robber barons. Before long, that drive had spread to Washington where in 1887, Congress legislated not out of reason but out of fear to create the Interstate Commerce Commission. Remember that in the days of a relatively powerless federal government, the railroad industry budget was many times the size of the federal budget. Railroads were America's first big business and, congress feared, they threatened to swallow up and control the entire country.
The angry populist reaction drove the rail magnates underground—men such as the Erie railroad's semi-literate Uncle Dan'l Drew; one-eyed James Jerome Hill, whose rail lines opened up the west; black-bearded, cold-blooded Jay Gould; and Jubilee Jim Fisk. But first among equals clearly was J. P. Morgan, a formidable presence with piercing eyes and a bulbous nose that formed an exclamation point to his rotundity. Famed photographer Edward Steichen, when allowed two minutes to photograph the famous titan, said he could think of nothing but the headlights of an express train bearing down on him. Soon these rail chieftains were creating secret giant holding companies to control rail prices to the detriment of the consumer.
Fanned by the flames of the rabid populist movement in the early days of the 20th century, Congress turned the screws on the railroads, first restricting what property they could own, then what routes they could travel and finally the very rates they could charge. Railroads were apoplectic, for such free-enterprisers looked upon such government interference as unabashed socialism, and government returned their contempt. Soon promising young railroad leaders began to drift away.
One such man was 34-year-old Walter Chrysler, from a three-generation railroad family, who was carving out a bright future in the railroad industry. Then one day in 1912, he received a call from Charles Buick, the maker of motorcars, asking him to jump ship. Within five years, Buick was paying Chrysler $500,000 a year. Such earnings were possible because of a new industry, motor vehicles.
For several decades, bicycle manufacturers had been lobbying legislatures to pave rural roads with macadam, asphalt, or cement, as was being done in Europe. But it was the unprecedented profits possible in manufacturing automobiles that finally caused auto makers, steel makers, tire manufacturers, and cement and asphalt producers to join hands in a crusade to link every county in America with paved roads.
We take hardtop roads for granted today, but in a day when all roads outside of major cities were muddy earthen paths, the notion of roads as smooth as tabletops was as revolutionary as space travel. If the motor industry, consumers, and government had a common enemy, it was the hated railroads, whose exploitation had fouled their own nest. Americans now embraced the motorcar with exaggerated ardor, partly in reaction to the rails.
Soon popular magazines hired such respected writers as novelist Theodore Dreiser, Edith Wharton, and Emily Post to write scathing indictments of railroads and tributes to automobiles. Railroads, with fixed tracks and schedules, made us all march to their tune. Automobiles, by contrast, allowed their drivers to travel where and when they liked. The automobile, one writer observed, is a "highway pullman," which lets the driver be "his own station master, engineer and porter, with no one's time to make except his own."
So while railroads had become arch-enemies of government, the highway-motor complex united government and business in a seamless partnership. In a day before self-dealing was outlawed, auto makers typically left jobs in private industry, served in government long enough to legislate profits for their business, then returned to the corporate helm to harvest those profits.
The Highway-Motor Complex
Ironically, railroads led the crusade for smooth roads in America, thinking it would help them speed produce from the farms to the railheads. But by 1925, it was obvious that the new trucking industry had become the potent competitor of the railroads. When rail freight and passenger business took a nose-dive in the 1930s, railroads began abandoning lines.
Some have said that motor travel was simply a more advanced mode of travel and that it replaced outmoded railroads. This is a myth, for the government built the roads that trucks and cars drove on, while railroads had to buy, maintain, and pay taxes on their railbeds as well as the roads their competitors drove on.
The power of the highway-motor complex—the most potent lobby the world has ever known—as well as the poorly managed and hostile railroads ensured that America would continue to feed the roads and starve the rails. By the 1930s, most of America's farmers were driving model-Ts. But the motor industry hadn't made a dent in the cities, where trolleys quickly and efficiently carried people, usually for a nickel fare.
The only way to convert city people to cars, Detroit realized, was to abolish the urban trolley. So General Motors, Standard Oil of California, Firestone Tire and Rubber, and others, using front men to avoid being identified, bought up 100 trolley lines in 45 American cities and replaced them with gasoline-powered buses. At the same time, they made those cities agree never to go back to electric transportation.
The stage was set for the urban automobile and air pollution. By the late 1930s, plans were afoot to build superhighways, modeled after Adolf Hitler's autobahns, on which cars could reach 100 miles an hour. But the depression and World War II would stall that project. It fell to Dwight Eisenhower, often characterized as a benign, do-nothing president, to turn America on its head. By increasing highway spending tenfold, Eisenhower's plan played a decisive role in changing America from a nation of cities and small towns to a nation of suburbs.
While he didn't intend to, Eisenhower proved to be the most radical president of the 20th century. Eisenhower had become sold on superhighways when, as supreme commander in Europe, he saw Hitler speed men and munitions to the battlefront efficiently over broad thoroughfares separated by medians. But German autobahns go around cities rather than through them.
German Autobahn Poster
The Devastating Side Effect of the Interstates
Amazingly, it was not until three years after the program started that Eisenhower discovered his aides had cut a deal that would bulldoze the interstates directly through cities. In fact, urban members of congress had demanded this be done in return for their votes. Their objective was to bulldoze slums at the same time and draw people into their declining downtown shopping districts.
Too late did they realize that interstate highways are a two-way street. As easily as they could draw people into the central districts of cities, they could also draw the cities' stable middle class out to new suburban tract houses. Before long, critics began to make a startling prediction. Fast highways would allow both employers and white workers to migrate to the suburbs while American cities would become a dumping ground for poor, elderly, and minority citizens.
But by that time, the billions of dollars to be made by mall developers, road contractors, auto makers, and hotel owners assured that there would be no turning back. By the 1970s, however, the highways had begun to take their toll. Designed to eliminate traffic jams, these megahighways created even more gridlock. How could that be? Because traffic in general gravitates toward the fastest routes until there's so much traffic that those routes become clogged. Then drivers look for alternate roads, which again gather more traffic until gridlock results. Engineers call this the fundamental law of traffic congestion.
Also, by then the word smog had entered the urban vocabulary. Relying on gasoline-powered vehicles meant oil pipelines around the world had to be kept open, even if that meant going to war. The urban poor stormed city halls and the courts, protesting their displacement from slum housing. Gradually, urban planners and environmentalists added their voices to the chorus. But mainstream America was in love with wraparound windshields and tail fins.
Collapse of Railroad Giants
By the 1960s, such mighty rail giants as the Pennsylvania and the New York Central were on the ropes. Soon rail passenger service collapsed entirely. Near-empty trains sped into cities next to gridlocked white-knuckled motorists on nearby roads. Freight traffic also went into a freefall.
Only when congress acted in the early 1970s to create Amtrak from leftover passenger trains and Conrail from the remnants of freight trains was any semblance of rail travel in America preserved. Much of the gap between rich and poor that we find in our cities today can be traced directly back to the excesses of the "interstate age." By eviscerating cities, superhighways took valuable land off the tax rolls. When industry moved to the suburbs, only people with cars could follow, since trolley lines had been paved over in the 1950s. Thus the suburbs became white and affluent, leaving the cities largely to minorities and the poor.
So we end up today with the most impressive network of superhighways in the world. However, so overbuilt are they that governments can't afford to maintain them. Do you remember the days before interstates had potholes? And thanks to deregulation, railroads are on the verge of making a comeback.
Needed: A Balanced System
What is my message then? Should we abolish automobiles and superhighways? Of course not. The interstate highways helped create the biggest economic boom America has ever seen. They have allowed us to go places fast that only a car could take us. But by putting all our eggs in one basket, we've ended up shortchanging ourselves. Our highways are clogged while our railroads run at one-third of capacity.
Gradually, Americans are beginning to wake up to the need for a balanced system—one in which road and rail cooperate, rather than compete. Unlike in America, where road, rail, and air travel industries each developed without consulting the other, Europe has an interdependent system, where road, rail, and air travel all work together.
For example: if you travel from Munich to Frankfurt by train on your way to fly home to America, you check your baggage in Munich. It is automatically transferred from train to plane in Frankfurt and you don't see it again until you arrive at Kennedy Airport. Instead of having to take a cab from downtown to the airport, European trains typically run straight to the airports. By using road, rail, and air as tools to work together, Europeans have built an interconnected network.
Our concrete superhighways and our steel rails are the arteries that business and citizens use to get around. Clogging those arteries will strike to the heart of this country just as clogged human arteries will kill victims of heart attacks. Decades ago, when America had no serious economic competitors, it might not have made a difference. Today, however, with Japan, Korea, Europe, and the whole Third World breathing down our necks, we ignore this challenge at our peril.
Railroads are part of a broad fabric of economics and government policy. An understanding of this is essential in a world of a global economy and limited energy resources.
A Positive Step:
Enactment of Federal legislation (the Staggers Act) reducing government regulation of the railroad industry contributed to a recent improvement in their viability, with a number of consolidations having occurred. Passenger service remains limited and less certain. For an overview of today's railroads, see our presentation Railroads Today.