Tracking Progress: “Rail Renaissance” reconsideration

Over the past 20 years, we’ve heard extensive discussion about the “Railroad Renaissance,” a historical metaphor referring to the period between the Middle Ages and the Modern Era.

The term Renaissance is a translation of the French word for “rebirth,” and its use seems to have originated in the 19th century. Clearly the railroad industry, at least the freight portion, was reborn in 1980. And while the Renaissance saw new schools of thought emerge in fields as diverse as diplomacy, science, and art, the transportation industry experienced the development of supply chain management, globalization, and IT solutions.

Barbara Tuchman’s narrative history titled A Distant Mirror contends that the Renaissance arose in the aftermath of the Black Death, which caused a monumental change in priorities. If Florence was ground zero in the 14th century, Conrail may have had the same role 600 years later.

Only 40 years ago, the railroad industry was considered near death. There was legitimate concern about whether or not the industry could survive without government intervention. Conrail, which had consumed $5 billion in taxpayer funds in just five years, put forth deregulation as an alternative to increased public funding. Today, the railroad industry has become a financial powerhouse.

Johan Huizanga, a Dutch historian of medieval and Renaissance history, has reinterpreted the Renaissance as a period of pessimism and decadence, rather than rebirth. While many leading voices seem to yearn for the bygone, halcyon days of railroad preeminence—the ancient days before airlines and the interstate highway system—we might still similarly question the authenticity of today’s Railroad
Renaissance.

The economic development after the Renaissance has some parallels here. An initial focus on mercantilism, which opened new markets and sources of raw materials, evolved into capitalism, which took these profits and invested in new enterprises. 
It was thought that resources—and wealth—were finite and that each nation should seek to broaden its position in the zero-sum game.

Following deregulation, railroads expanded along a similar path by stealing volumes from competitors—rather than developing new business—or just simply achieving growth through consolidation.

Perhaps considering the post-Renaissance railroad world requires a further look at mercantilism’s history. It was based on extensive government regulation that maximized exports and limited imports through tariffs. The freight railroad industry throughout North America is continually confronted by legislative threats of “re-regulation.”

The railroad industry has decried potential regulatory action as “barbarians at the gate,” aimed at returning our industry to the dark days before the Renaissance. Alternatively, shippers insist such protections would be an enlightened development.  Until recently, the debate was about rates. Railroads maintain that shippers enjoyed marginal pricing for many years—until excess capacity was gone. At that point, railroads needed to price at average cost to support reinvestment.

The microeconomic argument is valid—if the market is truly free. Railroads assert that freight transportation is a free market, and that railroad duopolies are arguable because of competition from other modes. This contention may no longer be valid, given the shortfall of truck, barge, pipeline, and other rail capacity alternatives. 

Many shippers interpret the railroads’ recent failure to support growth as a breach of trust. While deregulation generated significant benefits, shippers believe that an early win-win has evolved into economic imperialism—with railroads controlling the economic life of the relatively weaker shipper. 

If the railroads and their shippers—unlike post-Renaissance Europe—can avoid calamitous conflict before emerging into a new, post-Renaissance, modern era, we may, in fact, one day look back upon this era as the birth of a modern, post-Renaissance industry.