20th Century AD

Through war and peace, recession and plenty, and in every extreme of weather and manner of adversity, railroads during the 20th Century have fueled the American economic engine. With fewer exceptions than any other form of transportation, railroads delivered civilian freight and defense supplies where they were needed, when they were needed, and in the condition they were needed. And until highways and jetliners displaced the passenger train after World War II, people also depended upon trains--and are again returning to the rails as traffic and airport congestion increase. History records that the 20th Century was the American century. It couldn't have been so without America's railroads.

The American railroad experience is one of private enterprise. Only during the final decade of the 20th Century did other nations recognize the overwhelming efficiency of such an approach to railroading. So as the Third Millennium dawns, American railroaders may be found about the globe transforming former government-owned rail operations into more efficient market-driven enterprises mirroring the U.S. model.

Private ownership has not meant laissez faire. Federal regulation--drawing its authority from the Constitution's Commerce Clause--is less pervasive today than in previous years, but still exists. The Interstate Commerce Commission was created by Congress in 1887 to regulate railroad pricing and treatment of customers. Initially, obedience was voluntary. It wasn't until later that the ICC gained power to compel reporting, require a uniform system of accounts, institute investigations on its own motion, suspend tariffs, and prescribe reasonable rates and divisions of revenue.

THE QUEST TO IMPROVE SAFETY

Railroad safety also has been regulated for most of the 20th Century. As the 19th Century closed, the number of railroaders killed annually in on-the-job accidents was measured in the hundreds.

The Safety Appliance Acts, a series of laws passed by Congress between the late 19th Century and 1910, mandated substitution of automatic couplers for link-and-pin devices, installation of compressed-air train brakes applied by the engineer rather than brakemen climbing atop moving cars, and the addition to rolling stock and locomotives of sills, steps, ladders, running boards, and grab irons.

Congress urged railroads in 1907 to utilize telegraph and telephones to institute an automatic block system. Automatic train stops and other train control devices were ordered for passenger trains in 1920.

The caboose, now virtually extinct, was a safety device. American railroads retained the caboose until the 1980s, primarily to house brakemen and conductors who assisted with track and switching functions. Collectively-bargained agreements between railroads and their labor unions in 1982 and 1985 spelled the end of the caboose.

Hospital and rehabilitation insurance was unavailable to the working classes at the dawn of this century. Widows and disabled employees were reduced to depending upon assistance from relatives and friends. In this environment, Congress passed the 1908 Federal Employers Liability Act, which permitted injured rail workers (or survivors of those killed) to sue railroads for negligence in federal court and have a jury of peers determine damages. Railroad workers remain under this plan today.

LABOR GETS A VOICE

Rail unions began as 19th Century fraternal organizations dedicated to helping injured railroaders with medical bills and providing assistance to widows and orphans of railroaders. As railroads became a dominant industry with two million employees and most families counting at least one rail employee, Congress in 1926 passed the Railway Labor Act. It was the first legislation guaranteeing to railroad workers a right to organize and bargain collectively without interference from employers.

The RLA is unique in that it requires railroads be organized along craft lines--a reason for the existence of some one-dozen principal rail unions.

THE MOVE TOWARD CONSOLIDATION

Railroads began as short line enterprises during the 19th Century and efficiency suffered. A passenger journey from New York to St. Louis, for example, required a traveler to pass over nine different railroad lines and board two steamboats. Railroads also employed an abundance of gauges from as narrow as two feet to as wide as six, frustrating physical interchange of freight and passenger cars. Unifications encouraged a single gauge and reduced the number of physical interchanges.

The nation's more than 2,000 railroads in 1900 began to consolidate in the 20th Century. Where there were but 11 railroads with more than 1,000 route-miles in 1877, the number reached 48 by 1900 as railroading became big business. In 1906, 85% of the bonds and 50% of the stocks traded on the New York Stock Exchange were those of railroad companies.

Railroads required immense amounts of capital to build, maintain themselves, and grow. Economies of scale in both purchasing and management encouraged unification. Where the Sherman and Clayton antitrust laws were used to break apart or prevent unified rail systems during the first decade of the 20th Century, lawmakers reversed course in 1920 and actually encouraged unification. This followed World War I, which left railroads with substantial deferred maintenance and huge capital demands.

When the U.S. entered World War I in 1917, troops and all combat supplies moved to ports almost exclusively by rail. But disruption of Atlantic shipping by German submarines caused massive congestion at East Coast ports, leading to unprecedented gridlock in Eastern and Midwestern rail yards and intolerable empty-car shortages nationwide.

Railroads were nationalized under the Army Appropriations Act of 1916--still in effect--which permits the President, during time of war, to take control of any transportation system. The United States Railroad Administration, under the direction of a director general appointed by the president, took centralized operational control of the nation's railroads.

Nationalization lasted for 26 months through March 1, 1920--more than a year after the Nov. 11, 1918 armistice. Congress gave thought to nationalizing the railroads permanently, but shippers began clamoring for a return of competition and its attendant efficiency. Railroads had lost $2 million a day during the war and government overseers failed to invest in sufficient maintenance during the period of federal control.

The Transportation Act of 1920 restored railroads to private ownership with congressional encouragement to merge. Actually, the ICC was instructed to help plan orderly mergers. To prevent the Justice Department from meddling by invoking the Sherman and Clayton Acts, ICC-approved mergers were exempted from antitrust laws.

Alas, healthy railroads were unwilling to absorb unprofitable carriers and their debts. So Congress considered compulsory mergers--but retreated.

DEPRESSION-ERA REFORMS

When the Great Depression commenced during the 1930s, weak railroads failed by the dozens as carloadings and passenger boardings declined by some 40%. The percentage of railroad mileage being operated in bankruptcy reached a record 31% by 1938. Exacerbating the railroads' earnings decline was federal promotion of highways and waterways. As freight and passengers were siphoned off by competing and subsidized modes, railroads endured financially-crippling excess capacity.

The ICC, which gained regulatory authority over line abandonments in 1920, authorized the scrapping of more than 21,000 miles of track during the 1930s--a record that would hold until the 1970s when more than 30,000 miles were abandoned. The nation's rail route mileage, which reached a record 254,037 in 1916, commenced a shrinkage that would continue to the end of the 20th Century.

In the midst of the Great Depression, Congress crafted the 1933 Emergency Railroad Transportation Act, which scrapped central planning of rail mergers. It also created a federal coordinator of transportation with broad powers to order equipment and traffic pooling and track sharing--all aimed at cost-saving efficiencies and shielded from antitrust laws. President Roosevelt recommended greater voluntary coordination among railroads--and so was born in 1934 the Association of American Railroads.

But the hope for voluntary mergers still failed to materialize because of another provision of the 1933 law--job protection for rail workers. The incentive to consolidate was removed when carriers were prohibited from eliminating redundant tasks.

Railroads recognized that nationalization loomed if they did not achieve increased traffic density and other cost savings through merger. So they sat down with their unions and crafted the Washington Job Protection Agreement, which provided temporary income protection in exchange for a scrapping of mandatory job protection. It remains in force today.