How to Fix the Railroad Crisis

Open Markets Institute Policy Director Phil Longman released the following statement on the current railroad crisis and how to fix it:

"America is bracing for its first railroad strike in a generation. It's time get serious about reforming a highly monopolized industry that's pulling in record profits by abusing workers, cutting service, and shutting essential rail lines and rail yards that we now need more than ever.

Monopolists will always charge more for less, when we let them. In a pattern found throughout the industry, BNSF, owned by Warren Buffet's Berkshire Hathaway, announced last month that its quarterly profits had surged by 10 percent to $1.66 billion even has it carried less and less freight.

Indeed, BNSF has laid off so many workers and mothballed so many locomotives, that all during this summer it imposed an "embargo" on deliveries of food, automobiles, ethanol and other commodities to California, claiming it lacks the capacity to accept the business.

Yet by cutting expense and charging more and more for the freight it does chose to haul BNSF takes in some 60 cents for every dollar it spends. And as they come under the control of private equity firms, every other major U.S. railway has adopted this same predatory business model.

How to fix this?

First, make railroads live up to their obligations as common carriers. Back in the day, the American people subsidized the construction of most railways. In exchange, their charters required railroads to accept business from everyone, on equal terms. It's time to enforce these charters.

That means not just offering freight service to all comers, but passenger trains as well. By law freight railroads must let Amtrak and commuter railroads use their tracks, but more and more often they just refuse that business as well. It's time to enforce this law too.

It's also time to get serious about regulating railway prices and services, the way we did back when railroads actually worked. From 1887 to 1980 the Interstate Commerce Commission (ICC) strictly oversaw how much railroads could charge. The ICC also made sure that railways truly served America's manufacturers and exporters, and the public as a whole. They did so by regulating routes, and schedules, and investments in new services and technologies. Public regulation of rail markets can help solve our supply chain crisis while helping to build a clearer economy if we demand it.

Government also needs to get serious about safety and working conditions -- and empower unions to get salaries up. For the last several years, railroads have embraced an operating philosophy marketed as "precision schedule railroading." What that means in practice is running fewer, dangerously long trains, using crews that worked to the bone.

And maybe it's time push back against the financiers who now control the nation's rail system. One way to do so: grant new operators open access to America's rail infrastructure in order to provide real competition to today's new robber barons.

Let's remember, the American people chartered America's railroads to serve us and to promote our security and prosperity. If private equity can't do that job, then we have to find someone who will."

For more, read Phil's article in Washington Monthly, "Amtrak Joe vs. the Modern Robber Barons."