Re-Regulating Rail

Re-Regulating Rail

Copyright 2007, Traffic World, Inc.

It was once said that economic regulation is but a transfer of wealth between one entity and the other. That remains true today.

Deregulation of the rail industry was and is the best thing that ever happened. Had it occurred 10 years earlier, it may have saved thousands of miles of rail line, and names of fallen flags like the Rock Island, Erie Lackawanna, Milwaukee Road and a few others from bankruptcy and tearing up track. Market rates could have been set to pay for maintaining some of those lines.

Regulation of rates places an artificial economic cap on the prices that one party charges for their services so other parties can take more. It extinguishes free market pricing and trade.

Harley Staggers, the chairman of the Senate Transportation Committee in the late 1970s and a staunch Democrat, recognized free market pricing was best for everyone in transportation.

It''s somewhat ironic his successors some 30 years later have taken an approach to seek re-regulation, succumbing to the wishes of special interest rail groups who seek simply to divide the pie larger in their favor.

Have these same special interests asked to regulate the steel industry because prices of steel and scrap have doubled, or the oil industry because the price of diesel fuel and gas has tripled, or agriculture because the prices of corn and soybeans have doubled and tripled due to ethanol, export and biodiesel demands?

What about the trucking industry, since prices have increased with huge fuel surcharges and new environmental regulations on engines that have increased their costs 10 to 20 percent?

Simply put, all rate regulation will do is to reduce the return on investment of the rail industry to levels of the early 1980s and 1990s, when huge investments in their physical plants will no longer be possible and will just exacerbate national gridlock, and much higher prices of all goods and services and other modes of transport.

Rail capacity and service has and will continue to contribute more to stabilization of our economy if it is left unregulated and allowed to expand to fill market needs. Rail is the lowest cost method of surface transportation in the world, and now is even cheaper than inland water transport in many cases. And that, too, is an industry which does not operate under economic regulation.

While it is painful to all of us who have to pay three times more for fuel and agricultural products, it''s better than the alternative.

Thousands of miles of rail capacity which became redundant during the 50 or 60 years railroads were regulated may still have been preserved and in operation today, alleviating the huge strain on rail capacity, if the rates railroads could charge had not been controlled down to mere pittance increases by the government back then.

The shippers got what they wanted - regulated, controlled low rates, and thousands of them also got poor rail service or none at all and continue to experience chronic equipment shortages.

John W. Gohmann,

President, Small Railroad Business

Owners of America

Minnesota Commercial Railway Company

Libertyville, Ill.