Episode 5. Profitability at Any Cost: The Price We Paid to Rescue U.S. Railroads

Episode 5. Profitability at Any Cost: The Price We Paid to Rescue U.S. Railroads

“In the 10 years from 1970 to 1980, America’s relationship to its railroads underwent a profound reorientation of purpose, a paradigm shift that—if we examine it carefully—helps us understand and interpret the circumstances we find ourselves in today.” So begins Episode 5. As we saw in Episode 4 [https://solutionaryrail.substack.com/p/episode-4-private-railroads-for-public], this paradigm shift was meant to address a profound crisis within the railroad industry: faced with competition from other modes of transport—which, unlike railroads, were heavily subsidized by the public—the nondiscriminatory service and pricing that we had required of railroad corporations for almost a century was now driving several of them into bankruptcy. We also saw how policymakers went to extraordinary lengths in the 1960s and ‘70s to save the railroad corporations and keep the infrastructure they operated under private control. But the railroads’ financial woes persisted. As this crisis deepened, there were some who argued for preserving rail service by finally putting railroads on even footing with trucks, airplanes and barges. They proposed doing this either by placing both railroad infrastructure and operations under public ownership, or by having the public take responsibility for just the tracks, creating an open-access steel interstate that would allow railroad corporations to compete directly for every customer. But instead, Congress and the Jimmy Carter administration turned to deregulation. A series of reforms, culminating with the Staggers Act of 1980, attempted to rescue the profitability of railroad corporations once and for all by largely relieving them of their longstanding obligations toward serving the public. As stated in the introduction, this fifth episode of the Reconnect America series “tells the story of how that transformation took place, who benefited, and who got left behind, and how this dovetailed with broader changes in the U.S. and global economies to shape the world that we are living in today.” Reconnect America is hosted by Bill Moyer, co-author of the book Solutionary Rail: A People-powered Campaign to Electrify America’s Railroads and Open Corridors to a Clean Energy Future [https://www.solutionaryrail.org/video2]. Check out the essays and supplemental posts [https://solutionaryrail.substack.com/] that complement this podcast HERE [https://solutionaryrail.substack.com/]. Learn more, get involved and pitch in to support the work of Solutionary Rail at SolutionaryRail.org [http://solutionaryrail.org/]. Keep the podcast ads-free and without paywalls by making a tax-deductible donation HERE [http://solutionaryrail.org/Summer2024]. Co-written and produced by Bill Moyer and Sasha Elenko. Engineering by August Moore and Tom Stiles. Musical theme by Ken Jacobsen [https://open.spotify.com/artist/1vDeoV1gPgYbgUaDKlT4rX?si=GmyTOPKFQZOa8YJbWdu-7w] and additional music by Ota Prota [https://otaprota.bandcamp.com/album/ota-prota-vol-1-2]. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit solutionaryrail.substack.com [https://solutionaryrail.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Panel Discussion: Solutionary Earth Day Special—Pivoting Rail From Problem to Solution

The audio-only player above features a version of the discussion that has been edited for clarity and brevity. Watch the full, unedited video recording of the panel here: Dear Friends, Last week, Solutionary Rail welcomed a panel of environmental justice and labor organizers to discuss how we can shift U.S. rail from being a source of harm to an infrastructure that benefits us all. Our friends at Pace e Bene were calling for Solutions Circles as part of this year’s Earth Week, and we were honored to collaborate by hosting such incredible guests. Included in the panel were Andrea Vidaurre (People’s Collective for Environmental Justice), mark! Lopez (East Yard Communities for Environmental Justice), Tabitha Tripp (Public Rail Now), Ryan Calbreath (UE Green Locomotive program), and Jess Conard (Rail Watch), and myself. Over the last few years, EJ and labor organizers have been deepening their bonds of solidarity and finding common cause in the fight to electrify our rail system. But electrification is not the only interest or benefit that a more accountable rail system would provide. Another goal is shifting our rail system toward delivering greater community safety and broader societal benefit by getting more trucks off the road, reconnecting service to rural communities, and hosting new transmission on rail corridors. Working at the state and federal level, these allies and organizers are shaping policies and shifting the political calculus to overcome the profound power of the biggest (“Class 1”) railroads (BNSF, UP, CSX, NS, CN, and CPKC) whose management has been captured by extractive Wall Street forces. This discussion is both a glimpse into our organizing work, the overlapping interests/reconnect america vision/concrete instantiation, and a preview of things to come in our Reconnect America podcast series This conversation illustrates some of the key interlocking interests that define the Reconnect America vision and serves as a preview of things to come in our Reconnect America podcast series. With Gratitude & Solidarity, Bill Moyer Reconnect America is hosted by Bill Moyer, co-author of the book Solutionary Rail: A People-powered Campaign to Electrify America’s Railroads and Open Corridors to a Clean Energy Future [https://www.solutionaryrail.org/video2]. Check out the essays and supplemental posts [https://solutionaryrail.substack.com/] that complement this podcast HERE [https://solutionaryrail.substack.com/]. Learn more, get involved and pitch in to support the work of Solutionary Rail at SolutionaryRail.org [http://solutionaryrail.org/]. Keep the podcast ads-free and without paywalls by making a tax-deductible donation HERE [http://solutionaryrail.org/Summer2024]. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit solutionaryrail.substack.com [https://solutionaryrail.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Interview: Questioning Staggers—Greed without Guardrails? (w/ Arnav Rao)

Dear Friends, This conversation rounds out a trio of interviews that explore the 46-year aftermath of the deregulatory Staggers Act. Our guest is Arnav Rao, who serves as a transportation policy analyst at the Open Markets Institute, where he works with previous Reconnect America guest Phil Longman. An astute student of the history of the U.S. railroad industry and a keen observer of the present moment, Arnav does an excellent job of weaving together the many threads we have been tracing in recent months. Beginning with the Staggers Act of 1980, Arnav reveals how an ideological program pushed regulators far beyond what Congress had originally intended. Not only were critical protections for shippers, workers, and the public were cast aside, but unchecked consolidation also left the U.S. with a largely monopolized and unaccountable railroad industry. As the conversation turns to the arrival of aggressive so-called “activist” investors from Wall Street and their imposition of the extractive business model known as precision scheduled railroading, Arnav helps tease apart the similarities and differences between this phenomenon and earlier forms of cost-cutting that followed the Staggers Act. Finally, we discuss the current state of the industry—the proposed Union Pacific-Norfolk Southern merger, the captivity of railroad management to Wall Street demands, and the illegal firing of Surface Transportation Board member Robert Primus. We wrap up by envisioning a path toward the restoration of public purpose for this critical national infrastructure. With Gratitude & Solidarity, Bill Moyer Reconnect America is hosted by Bill Moyer, co-author of the book Solutionary Rail: A People-powered Campaign to Electrify America’s Railroads and Open Corridors to a Clean Energy Future [https://www.solutionaryrail.org/video2]. Check out the essays and supplemental posts [https://solutionaryrail.substack.com/] that complement this podcast HERE [https://solutionaryrail.substack.com/]. Learn more, get involved and pitch in to support the work of Solutionary Rail at SolutionaryRail.org [http://solutionaryrail.org/]. Keep the podcast ads-free and without paywalls by making a tax-deductible donation HERE [http://solutionaryrail.org/Summer2024]. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit solutionaryrail.substack.com [https://solutionaryrail.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Interview: How Deregulated Railroads Sacrificed Service in Pursuit of Profit (w/ Ken Kirschling)

Dear friends, We have been exploring the effects of the deregulatory interventions that the U.S. implemented from 1970 to 1980—extraordinary measures that aimed to rescue railroad corporations and keep the infrastructure they operate under private control. As we continue this exploration, we wanted to share a perspective that vividly brings to life the significance of what happened at that time and in the years that followed—not just the harms that were inflicted, but also the opportunities that were missed, the potential that remains untapped, and the enduring urgency of attempting to turn things around. Who better to do that than Ken Kirschling, who began working in the railroad industry shortly after its deregulation in the 1980s and remains deeply involved in it to this day? Ken is the owner and principal bridge engineer at Rail Star Engineering. By a stroke of good fortune, his office is also right next door to mine. As you will hear in our conversation, Ken’s up-close experience of the transformations that U.S. railroads have undergone imbues his stories with a unique energy. Decades after the fact, you can still feel Ken’s excitement when he recounts working in an industry that was no longer resource-constrained and was, for a time, actually growing and innovating—even as it was leaving smaller communities behind in order to free up that capital. No less palpable, however, is Ken’s profound disappointment at the funneling of capital out of the system that has since taken place, and the stagnation and deterioration of service that has ensued. Whether you are already familiar with these themes or approaching them for the first time, this conversation is sure to inspire you with both appreciation and concern for the past, present, and future of this critical national infrastructure on which we all depend. With Gratitude & Solidarity, Bill Moyer Reconnect America is hosted by Bill Moyer, co-author of the book Solutionary Rail: A People-powered Campaign to Electrify America’s Railroads and Open Corridors to a Clean Energy Future [https://www.solutionaryrail.org/video2]. Check out the essays and supplemental posts [https://solutionaryrail.substack.com/] that complement this podcast HERE [https://solutionaryrail.substack.com/]. Learn more, get involved and pitch in to support the work of Solutionary Rail at SolutionaryRail.org [http://solutionaryrail.org/]. Keep the podcast ads-free and without paywalls by making a tax-deductible donation HERE [http://solutionaryrail.org/Summer2024]. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit solutionaryrail.substack.com [https://solutionaryrail.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Interview: Origins of Precision Scheduled Railroading and the Financialization of U.S. Rail Transport (w/ John Strong)

Dear friends, As we gear up for the release of Episodes 5 and 6 of Reconnect America, we wanted to share some of the conversations that have been guiding us toward a deeper understanding of the last 46 years of U.S. rail transport and the evolving relationship between this critical national infrastructure and the businesses and communities that depend upon it. My guest for today’s conversation is John Strong, professor of finance at the College of William and Mary. Professor Strong is the author of a handful of articles that have proven uniquely valuable in illuminating some of the interconnected issues that we are grappling with—in particular, the development of the operating model known as Precision Scheduled Railroading [https://www.sciencedirect.com/science/article/abs/pii/S2213624X24000191] (PSR) and the rise of a class of activist investors [https://www.sciencedirect.com/science/article/abs/pii/S0739885922000749] who have aggressively forced this model upon railroad managers in North America. In addition to these themes, our conversation also explores how the ground for PSR and shareholder activism was laid by an earlier wave of adaptation to railroad and financial deregulation. Driven by the newfound ability to spin off and abandon less profitable lines, merge systems, and enter long-term contracts with discounts that privileged the largest multinational corporations, this initial pivot was aimed at moving fewer, longer, so-called “unit trains” carrying a single commodity from a single origin to a single destination. Financially, it was fueled by an emergent class of index fund managers, whose passive oversight left a power vacuum that would ultimately be filled by activist investors. In a moment when Wall Street’s stranglehold on U.S. railroads threatens to trigger yet another wave of anti-competitive consolidation, this conversation sheds valuable light on the evolving incentive structures that brought us to where we are today. With Gratitude & Solidarity, Bill Moyer Reconnect America is hosted by Bill Moyer, co-author of the book Solutionary Rail: A People-powered Campaign to Electrify America’s Railroads and Open Corridors to a Clean Energy Future [https://www.solutionaryrail.org/video2]. Check out the essays and supplemental posts [https://solutionaryrail.substack.com/] that complement this podcast HERE [https://solutionaryrail.substack.com/]. Learn more, get involved and pitch in to support the work of Solutionary Rail at SolutionaryRail.org [http://solutionaryrail.org/]. Keep the podcast ads-free and without paywalls by making a tax-deductible donation HERE [http://solutionaryrail.org/Summer2024]. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit solutionaryrail.substack.com [https://solutionaryrail.substack.com?utm_medium=podcast&utm_campaign=CTA_1]