45-855 Railroads, The First Big Business: Topic 1

1. Why Are Railroads Important?
   
   
1. Railroads are necessary for the efficient functioning of a modern economy. No other transportation mode can handle the bulk shipping necessary for an industrial economy with the speed and efficiency of a modern Diesel-Electric Locomotive on a high quality roadbed.
   
   
   1. In the U.S. railroads moved about 40 percent of the intercity freight -- about 1,300,000,000,000 ton miles in 1997. The equivalent of almost 5000 ton-miles of freight for every person in the U.S.

2. In the U.S. railroads moved about 65 percent of the nation's coal which is used to generate about 60 percent of the electricty in the U.S.
   
   
2. Railroads are more energy efficient and less polluting than trucks. A diesel-electric locomotive can move one ton of freight an average of 379 miles (610 km) per gallon of diesel fuel. This is 3 times the fuel efficiency of a truck. Diesel-locomotives are three times cleaner than trucks on the basis of air emissions per ton moved.
   
   
3. Railroads transformed almost every aspect of human life. They were the first big businesses and they created what we now call an economy (see topic 2). They were the first mass transportation in human history. For the first time ordinary people could afford to cheaply and safely travel over long distances on land. This freed people to easily move to where they could have better jobs and utilize their skills to the fullest.
   
   In the U.S. all these changes occured in a very short period of time -- 1830 to roughly 1875.
   
   
2. Historical Overview
   
   
1. By the early 1830s, for the first time in human history, a person could travel faster than a galloping horse on land. The steam train revolutionized human existence by literally speeding up the pace of life.
   
   
2. Railroads created the modern economy. The railroad with its speed and its certainty (the trains ran on schedules ) made possible the rise of the factory and its system of mass production.
   
   
3. With the development of the telegraph by Samuel F.B. Morse in 1844, coordinated action at a distance was possible for the first time in human history. The railroad and the telegraph were highly complementary technologies that revolutionized the conduct of business. Mass transportation and mass communication were a reality in the United States by 1850.
   
   
4. Rail-Roads originated as a means of carrying coal out of mines. Two parallel wooden beams or trams were fixed to the ground and furnished with flanges to prevent the wheels from slipping off the beams. Later iron strips were attached to the top of the beams to prolong their life and later still iron beams were used -- the precursor to the modern railway.
   
   
5. The first steam locomotive to run on rails was built by Richard Trevithick in 1803. It could haul 20 tons at a speed of 5 miles per hour.
   
   
   By 1800 steam engine technology was highly advanced in England because steam engines were essential to the coal mining industry. They were used to remove water from underground mines. Early steam engines were extremely inefficient -- only about 1 percent of the thermal energy in the steam was converted into mechanical energy. This inefficiency was the result of the fact that the piston could not make a downward stroke until cold water had been sent into the cylinder to condense the steam. This process wasted time and wasted steam because the cylinder had to be reheated before new steam could push the piston up again. James Watt in 1764 hit upon a clever solution to this problem. His solution was to draw the steam out of the cylinder using a vacuum pump and have the steam condense in a separate chamber. To keep the cylinder from cooling he encased it in a steam filled jacket. This dramatically increased the efficiency of the steam engine and made it a practical and widely used device.
   
   
   
6. By the 1820s all the technology was in place to build what we would now recognize as a railroad. The first true railroad was opened in England on 27 September 1825. In the United States the first regularly scheduled public steam train was run in Charleston, South Carolina on 25 December 1830. However, that August, the Tom Thumb made a 13 mile run from Baltimore to Ellicott’s Mills pulling a single car carrying the Directors of the B&O. Almost a year later, on 9 August 1831 the DeWitt Clinton pulled a train between Albany and Schenectady, New York.
   
   
   
3. Why Focus on American Railroads?
   
   
1. The railroads were critical to the development of the U.S. economy which was the largest in the World by 1892. The U.S. is the 3^rd largest country in the World in terms of population and the 4^th in terms of land area.
   
   
2. Railroads have always been privately owned in the United States. The American railroads emerged in a climate of almost unfette#Cc0000 pure Capitalism. This coupled with the sheer physical scale of the U.S. makes them unique and particularly interesting from an historical standpoint.
   
   
3. The Political-Economic history of American Railroads is important because it vividly illustrates the pitfalls of government regulation of the economy. For example:
   
   
   1. Why are there no high-speed comfortable passenger trains?
      
      




2. Why do Railroads pay excise tax on diesel fuel? Indeed, why do they have to pay local, state, and federal taxes at all? What do they get in return?
   
   
3. Why do Railroads have to pay for road crossings?
   
   


4. The U.S. government began regulating railroads in 1887. This regulation became so onerous that most major railroads were bankrupt by 1917. The government tried to repair some of the damage it had done with the Transportation Act of 1920. However, the 1920 Act introduced even more distortion into the transportation market because it implicitly favo#Cc0000 trucks. Subsequent high subsidies to rival transportation modes prevented the railroads from innovating and they never regained the position they held in the economy at the turn of the 20^th Century. For example:
   
   
   1. Railroads require about $2.48 in assets to generate $1 in revenue while the trucking industry requires only $0.48 for $1 in revenue. Reason -- they are subsidized by local, state, and federal governments. Government builds the infrastructure for trucks using, in part, tax revenue from the railroads.
      
      
   2. A study conducted by the state of Washington of shortline railroads concluded that an active mile of shortline railroad can save from $17,000 to $63,000 in annual costs to either resurface or reconstruct non-interstate highways.
      
      
4. The Modern American Railroad Network
   
   
1. The American Railroad Network is madeup almost entirely of the major freight railroads. Total mileage is about 238,000 (381,000 km).
   
   
2. The Major Class I Railroads (Revenues above $255.9m)
   
   
   1. Burlington Northern Santa Fe: 27,150 mi (43,440 km)
      

2. Union Pacific: 27,900 mi (44,635 km)
   

3. CSX Corporation: 23,125 mi (37,000 km)
   

4. Norfolk Southern: 21,500 mi (34,400 km)