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Railroads Final Exam
Railroads in American Politics
Political Studies
Undergraduate 4

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What is the most fundamental difference between a railroad and a canal (or highway)? How did it affect the operation of a railroad?
The most fundamental difference is their level of excludability. In the canal and highway system, anyone could pay a fee to ship their own goods on their own boat, or vehicle. In the case of the railroad, use depends on owning and operating a locomotive - a practice excludable to railroad companies. What resulted from this excludability was a privatized industry designed to take on the massive organizational and functional task of overseeing the shipping of freight around the country. Entirely dew and revolutionary systems of management and shipping were developed, including the use of telegraph to coordinate the movement on tracks, and systems for keeping track of specific freight.

What are the major advantages of shipping heavy freight by railroads as opposed to trucks?


Railroads are the best way to move heavy freight over land. Railroads are more energy efficient and less polluting than trucks. Diesel-locomotives can move 1 ton of freight an average of 379 miles per gallon on diesel fuel, which is 3 times the fuel efficiency of a truck! Also, 1 ton of freight can travel almost 4 times further on 1 gallon of gas using railroads compared to trucks. Shipping heavy freight using railroads as opposed to trucks also saves states money. For every mile of short line railroad, a state can save from $17,000 to $63,000 in repairs that would be made on the roads. It's also advantageous to ship feright such as chemicals and other hazardous materials on railroads because they would pose a huge risk if they were shipped by trucks due to the high volume of other vehicles on the road and the high risk of truck crashes. 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. 
How did Carnegie transform the iron and steel industry?

Carnegie transformed these industries by applying concepts he learned from the Pennsylvania RR to iron and steel, all fixed cost industries. Before Carnegie, business was highly specialized with one mill producing the pig iron, another mill converting it to bars and slabs, another mill rolling the iron, and so on. Transferring the iron from one establishment to another significantly slowed down the production of finished goods and added to the costs because of all the middlemen involved. Carnegie performed vertical integration, combining the iron industry with his Keystone Bridge Company so basically all parts of the industry were basically under the same roof. With the high fixed costs of railroading, to make money it was essential to have a good cost accounting system, and once the costs were known, to speed the flow of traffic through the system and increase its volume. With the cost accounting system, Carnegie and his associated realized they could hard drive the furnace, which wore out the furnace lining very rapidly, but the increased output more than justified the relining costs and the reduced life of the furnace. 

Carnegie's greatest accomplishment was in the transition from iron to steel, which is realzied would be much more cost effective in the long run. He built his own plant to build Bessemer steel Railroads, the company would eventually become part of Carnegie Steel. He used chemistry and science to improve his product, and made it a low cost staple of the industry. His cheap, quality steel revolutionised the American economy. 


The farmers during the latter half of the 19th century believed they were being victimized by high railroad freight rates. Is this true?



Farmers claimed that farm prices were falling and so were their incomes. Their alleged that the railroads and other companies were charging unfair, high, prices for their services. Farmers believed that interest rates were too high and that there wasnt enough money, which produced deflation. The farmers demanded the Treasury to freely coin silver to inflate the money supply. Because the times were bad, the farmers blamed the railroads, creditors, and industrialists for their problems. Their claim about the railroads was not just, though. 

Gains in productivity in rail shippping did not necessarily translate into lower rates for farmers and thus higher farm gate rates. Real rates at the times, railroad rates relative to the prices farmers received for their output, were variably high during this period. More importantly, there was little decrease in rail rates relative to farm prices. 

What were the major regulatory acts passed by Congress between 1900 and 1920 and what effects did they have on the railroads?

The Elkins Act of 1903 strengthened the prohibition of railroad rebates and made it illegal to ask for a rebate. The ICA had made it illegal for RRs to offer a rebate to shippers, but not illegal if shippers asked for a rebate. The railroads were hapy to be rid of rebates. 

The Hepburn Act of 1906 heavily tightened pricing regulations, setting maximum rates that railroads had to comply with in 30 days. It also set up a system of fast appeals and forced courts to accept its rulings until the railroads massed evidence on their side - they were guilty until proved innocent. The Hepburn Act allowed for the regulation of express, sleeping, and pipeline car companies, as well as the railroads. 

The Mann Elkins Act of 1910 expanded the jurisdiction of ICC to account for some of the RRs vertical integration, now including telegraphs, telephones, cables, wireless, etc.. It provided that RR's could not acquire competing lines, a monopolitstic horizontal integration. The ICC could also suspend proposed rate increases with federal courts. 

The Adamson Act forced RR's into 8 hour days, increasing labor costs, but did not grant rate increases to account for these costs. 

The Transportation Act of 1920 attempted to make up for some of the damages caused, so Congress instructed the ICC to set minimum rates to ensure RR solvency, but this backfired due to the emerging truck industry skimming off some of the valuable freight. The ICC was also granted increased authority over the entry, exit, and consolidation of the RR industry. These regulations essentially crippled the RR industry, a fact the government didn't realize until the RRs were nationalized and the government was forced to deal with their bankruptcy.

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