3/04/2011

repealing railroads' antitrust exemption?

Time for another of my minimally-edited and haphazardly-written railroad ramblings.

I'm not sure what I think of this bill making its way through the system right now. As with every piece of legislation passed pertaining to the railroads these days, it doesn't understand the true context, ignores the root concerns, forgets history, has some massive unintended consequences, and will inevitably worsen the very problems it's trying to fix. Oh wait, never mind, I know exactly what I think of it. As reported by Progressive Railroading and Railway Age the Senate Judiciary Committee voted to pass the bill that removes American railroads' antitrust exemptions. In general I tend to side with antitrust protections, however there is no doubt that one of the key factors in the railroads' crash was the stifling government rate controls, and their removal did play a major role in the recovery.

Railroads in America are a unique industry, one that few really understand or appreciate. They are very different from every other rail network in the world, and not at all like any other industry in America. In many ways they are most akin to a utility, and in almost all of the rest of the world would be treated as a public entity. But here we have yet another weird not-free market, not-socialist, not-anything else system that evolved over decades into something very peculiar. America (and Canada - the two networks are functionally one and the same in most situations) is perhaps the only place with private, profitable freight railroads. Certainly the only of this scale or of a comparable context. Nothing else comes close, and our freight rail network is far and away one of the best in the world ("best" meaning efficiency especially, and to a lesser degree, capacity and utilization relative to population though some of that is debatable). But just a few decades ago under very different regulatory conditions (and much more - economy, technology, etc) that was not the case. It's outside the scope of this rambling to go into, and has been covered a million times over. All that matters is that we were very close to having a freight rail network of comparable quality to most of the rest of the world in large part due to the regulatory environment of the time, and we're very lucky that didn't happen.

We treat utilities very haphazardly in America, and on the whole very stupidly I think. We set up the system through regulations in such a way that both true competition and the protection of the public interest are prevented. Not to mention a system that economically-encourages poor investment in the network, helping to worsen our infrastructure gap with the rest of the developed world. And yet our railroads are somehow outside of that usual pattern.

I think that going the route that England and a few others have tried to some degree could possibly work, depending on the details. It's always the subtle nuances and follow-through that make or break seemingly-similar systems. Nationalize the backbone network, and allow open competitive access to all companies over the same track. But the path back towards antitrust regulation and rate-setting will almost-certainly cause the same problems it did last time. As it stands, the railroads are regulated, the standards under which they're regulated are just very different. The rate monopoly complaints of shippers that have prompted this legislation? Some of it is very legitimate. Some of it is total bullshit when you look at the overall transportation system in America. But it is still far less of a problem than it had been under previous regulatory environments.

Mostly I just think this will make things worse in the long run if passed, though it probably won't have a significant immediate impact.

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