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date: 13 August 2020

Summary and Keywords

Since the early 1800s railroads have served as a critical element of the transportation infrastructure in the United States and have generated profound changes in technology, finance, business-government relations, and labor policy. By the 1850s railroads, at least in the northern states, had evolved into the nation’s first big businesses, replete with managerial hierarchies that in many respects resembled the structure of the US Army. After the Civil War ended, the railroad network grew rapidly, with lines extending into the Midwest and ultimately, with the completion of the first transcontinental railroad in 1869, to the Pacific Coast. The last third of the 19th century was characterized by increased militancy among railroad workers, as well as by the growing danger that railroading posed to employees and passengers. Intense competition among railroad companies led to rate wars and discriminatory pricing. The presence of rebates and long-haul/short-haul price differentials led to the federal regulation of the railroads in 1887. The Progressive Era generated additional regulation that reduced profitability and discouraged additional investment in the railroads. As a result, the carriers were often unprepared for the traffic demands associated with World War I, leading to government operation of the railroads between 1917 and 1920. Highway competition during the 1920s and the economic crises of the 1930s provided further challenges for the railroads. The nation’s railroads performed well during World War II but declined steadily in the years that followed. High labor costs, excessive regulatory oversight, and the loss of freight and passenger traffic to cars, trucks, and airplanes ensured that by the 1960s many once-profitable companies were on the verge of bankruptcy. A wave of mergers failed to halt the downward slide. The bankruptcy of Penn Central in 1970 increased public awareness of the dire circumstances and led to calls for regulatory reform. The 1980 Staggers Act abolished most of the restrictions on operations and pricing, thus revitalizing the railroads.

Keywords: transportation, regulation, labor, business, technology, economic development


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