The early development of industrialisation was accompanied by the growth of Railroads as a service industry. (Garrison & Levinson, 2014). Due to its importance to the citizens of the US, the government took huge interest in its operations which included regulations of its operations to try meet the demand of the citizens. (Jerry, 2002).
In the course of time, the regulations no longer corresponded to the economic condition of the railroads thus they developed into a serious barrier. A factor which led to collapse of several railroads with majority of remaining ones operating while bankrupt as others earned serious losses. Between 1966 and 1976 the number of accidents due to poorly maintained equipment increased rapidly. (Jerry, 2002).
The regulations hampered the efficiency of operating the rails with the government fixing charges and even restricting change of routes and introduction or abandonment of services. As a result the railroad operators ended up maintaining loss making routes and charging economically unrealistic prices. (Jerry, 2002). As a way of resurrecting the dying industry it thereby become very important to try review the regulations and come up with acts to help solve the current problem facing the industry. Main purpose being maximization of the railroad operations’ benefits to both the shippers as well as the railroad corporations. (Jerry, 2002).
In the spirit of reform, the US government adopted the Staggers act in 1980 which eventually deregulated the railroad operations causing significant improvement in economic welfare due to reduction in real rates and service improvement. (Hendricks, 1994). The maximum and minimum rate regulation prevented the corporations from altering their rates as a way of improving their efficiency, deregulation allowed them to change rates to attract more shippers in a certain region hence maximising their activities in certain places. (Hendricks, 1994). Additionally, the railroads were now permitted to charge high rates for more efficient services something which improved service delivery. They increased their rates in unprofitable routes hence forcing the shippers who were previously enjoying the maximum fixed price remedy to pursue other alternative routes. (Jerry, 2002). This way, the railroads could control their operations in areas of maximum return.
With the power to abandon the uneconomical routes the railroads demand for labour was significantly reduced. Even though it led to increased length of trains and shipment sizes, the result was a less labour intensive operation whose result was reduced cost of operation. (Hendricks, 1994). To the shippers, the freedom to alter rates by the rails enabled them to receive customised serviced at pre-negotiated rates. (Hendricks, 1994).
Based on the great improvement brought about by the deregulation of railroads it is therefore reasonable to allow market forces be the major determinant factor affecting industrial organisation and operation. The Staggers Rail Deregulatory Act indicated improvement in service delivery, more efficient operation of the rails as well as growth in firms which were previously dying. This is a proof that government legislative acts regarding industrial operations should be based on a well-researched recommendation and should be frequently altered to reflect the changes in the market (US Department of Transportation, 1978).
Garrison, L., & Levinson, M. (2014). The transportation Experience: Policy, Planning, and Development. 2nd edn. London: Oxford University Press.
Jerry, E. (2002), Rail Deregulation and Consumer Welfare, Springer Link, Volume 21, Issue 2, pp143-167, https://link.springer.com/article/10.1023/A:1014331206366
Hendricks, W. (1994). Deregulation and Labour Earnings, Springer Link, Volume 15, Issue 3, PP207-234, https://link.springer.com/article/10.1007/BF02685767
United States Department of Transportation, (1978), Prospectus Change in the Freight Railroad Industry, Washington DC, P. L. 94-210
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