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Adversaries by Design: Railroads and the American State, 1887–1916

Published online by Cambridge University Press:  14 October 2011

Extract

It has become commonplace to acknowledge the exceptionally adversarial nature of business-government relations in the United States. When compared to their counterparts in Germany, France, Japan, and the Nordic countries, American business executives have much more autonomy from the state; and yet, there is also greater distrust between business and government. Such adversarial relations, many students of comparative political economy argue, puts the United States in the late twentieth century at a disadvantage. Faced with competitors in the world market who cooperate with their respective governments on investment, training, and long-term sectoral development, American corporations compete in global markets under a considerable handicap.

Type
Articles
Copyright
Copyright © The Pennsylvania State University, University Park, PA. 1993

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References

Notes

1. Joseph Badaracco and David Yoffee, “‘Industrial Policy’: It Can't Happen Here,” Harvard Business Review 61 (November/December 1983): 97–105; Dietrich, William S., In the Shadow of the Rising Sun: The Political Roots of American Economic Decline (University Park, Pa., 1991)Google Scholar; Lodge, George, The American Disease (New York, 1984);Google ScholarReich, Robert, The Next American Frontier (New York, 1985).Google Scholar

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4. Also, the cultural view cannot explain why a nation like Great Britain, which has an equally liberal culture, has significantly more cooperative business-government relations. See, for example, Vogel, David, National Styles of Regulation: Environmental Policy in Great Britain and the United States (Ithaca, N.Y., 1986);Google Scholar and Badaracco, Joseph, Loading the Dice: A Five-Country Study of Vinyl Chloride Regulation (Boston, 1985).Google Scholar

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10. Political scientists and historians have long recognized that rate discrimination was the paramount force behind popular agitation for regulation. On this account, discrimination pits town against country, section against section, big shippers against small, and all against the railroads. Everyone wanted rate advantages; no one wanted their competitors to have them. If the debate over railroad regulation has persisted, it is over who among this Farmers of interestss got what, where, and why? See, for example, Benson, Lee, Merchants, Farmers, and Railroads: Railroad Regulation and New York Politics, 1850–1887 (Cambridge, Mass., 1955);CrossRefGoogle Scholar Richard H. K. Vietor, “Businessmen and the Political Economy: The Railroad Rate Controversy of 1905,” Journal of American History 64 (June 1977): 47–66; Elizabeth Sanders, “Farmers, Railroads, and the State: A Political Economy Perspective,” paper delivered at the 86th Annual Meeting of the American Political Science Association, 1990; Thomas W. Gilligan, William J. Marshall, and Barry R. Weingast, “Regulation and the Theory of Legislative Choice: The Interstate Commerce Act of 1887,” Journal of Law and Economics 33 (April 1989): 35–62. This debate, however, is flawed on several counts. First, it overestimates the effect of the economic division of labor (whether class, section, or sector) upon policy preferences. During such a volatile period of economic history as the late nineteenth century, however, the division of labor itself was up for grabs. Hence, interests were, at best, ambiguous. Second, it fails to see how claims to rate parity were rooted not merely in particularistic interests, but in a broader normative conception of regional market development. Finally, the obsession with the question of whose interests were served has blinded scholars to Congress's cooperative initiative. As a result, it has also made unintelligible a regulatory architecture that would, in principle, serve several interests if the parties involved altered their dispositions. For a more detailed account of this argument, see Berk, Gerald, “Constituting Corporations and Markets: Railroads in Gilded Age Politics,” Studies in American Political Development 4 (1990): 130–68CrossRefGoogle Scholar; Gerald Berk, Alternative Tracks: The Constitution of American Industrial Order, 1865–1916 (Baltimore, forthcoming), chap. 1.

11. U.S. Congress, Interstate Commerce Debate in 48th Cong., 2d sess. on the Bill (H.R. 5461) to Establish a Board of Commissioners of Interstate Commerce [etc.] (Washington, D.C., 1884), 209, emphasis added. Hereafter cited as ICD48.

12. ICD48, 31.

13. ICD48, 243.

14. U.S. Congress, Interstate Commerce Debate in 49th Cong, on the Bill to Establish a Board of Commissioners on Interstate Commerce, and to Regulate Such Commerce, etc., Compiled by Painter, V. H. (Washington, D.C., 1887), 2728. Hereafter cited as ICD49.Google Scholar

15. ICD48, 103–5.

16. 1CD48, 26–28; and Wilson, ICD48, 32. Admittedly, in order for regionalism to have been effective in practice, the railroads would have had to rethink operating strategy as well. Nevertheless, traffic management in service of regional trade was not beyond highly efficient management. See, for example, the case of the Chicago Great Western Railway in Berk, Alternative Tracks, chap. 5.

17. It was these railroad leaders that Kolko sampled in his path-breaking study, where he concluded that management was the dominant force behind regulation. The trouble with Kolko, however, is not merely, as his critics have said, that he ignored counter-evidence. More important, Kolko failed to see that there was a wide variety of ways for railroads to stabilize competition (e.g., pools, regulated competition, mergers, intercorporate share holding), and that if railroads chose commission regulation they would have to make significant concessions to the regionalists. See Kolko, Gabriel, Railroads and Regulation, 1877–1916 (Princeton, 1965).CrossRefGoogle Scholar

18. McCraw, Prophets of Regulation, 47–52; ICD48, 274–85; Martin, Enterprise Denied, 351–59; Chandler, Alfred D., Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977), 137–43.Google Scholar

19. Ripley, William Z., Railroads: Rates and Regulation (New York, 1913)Google Scholar, Joubert, William H, Southern Freight Rates in Transition (Gainesville, Fla., 1949), 7382.Google Scholar

20. ICD49, 23.

21. Haney, Lewis, A Congressional History of Railroads in the United States (New York, 1968), 293–98Google Scholar; Hoogenboom, Ari and Hoogenboom, Olive, A History of the ICC: From Panacea to Palliative (New York, 1976), 1317.Google Scholar

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23. Jones, Alan. “Thomas M. Cooley and ‘Laissez Faire Constitutionalism': A Reconsideration,” Journal of American History 53 (March 1967): 759.CrossRefGoogle Scholar

24. Cooley, T. M., “State Regulation of Corporate Profits,” North American Review 137 (September 1883): 207–8.Google Scholar

25. Jones, “Thomas M. Cooley and ‘Laissez Faire Constitutionalism,’ “759 (emphasis added).

26. Cooley, “State Regulation,” 210 (emphasis added).

27. Jones, “Thomas M. Cooley and the Interstate Commerce Commission,” 619.

28. ICC, Annual Report (Washington, D.C., 1890), 47.Google Scholar

29. ICC, Annual Report (Washington, D.C., 1888), 17.Google Scholar

30. Ibid., 35 (emphasis added).

31. ICC, Annual Report, 1890,39.Google Scholar

32. MacAvoy, Paul W., The Economic Effects of Regulation: The Trunkline Cartels and the ICC Before 1900 (Cambridge, Mass., 1965), 124.Google Scholar

33. 93 US 113.

34. McCurdy, Charles W., “Justice Field and the Jurisprudence of Government-Business Relations: Some Parameters of Laissez-Faire Constitutionalism, 1863–1897,Journal of American History 61 (March 1975): 994–98.CrossRefGoogle Scholar

35 Ibid., 999 (emphasis added).

36. Stone v. Wisconsin, 94 US 184–85.

37. ICC v. Alabama Midland Railway, 69 Fed Rep 176.

38. Ibid.

39. ICC, Annual Report, 1897 (Washington, D.C., 1897), 42.Google Scholar

40. East Tennessee Virginia and Georgia Railway v. ICC, 181 US 16.

41. Dewey, Ralph L., The Long and Short Haul Principle of Rate Regulation (Columbus, Oh, 1935), 78.Google Scholar

42. MacAvoy, The Economic Effects of Regulation 188–91.

43. Ibid., 184–85; ICC v. Cincinnati, New Orleans and Texas and Pacific Railway. 167 US 479. Although the ICC regained authority over rate discrimination in the Mann-Elkins Act of 1910, by then it had forgotten its genesis in regionalism. See, for example, Arlington Heights Fruit Exchange et al. v. Southern Pacific Company et al., 22 ICC 149, at 157–58, where the commission declares that absent a statutory mandate to choose between regional and national rate-making rules, it will stay with the status quo (namely, national market ratemaking). For a more complete account of the failure of Mann-Elkins to achieve the goals of the regionalists, see Berk, Alternative Tracks, chap. 5.

44. ICC, Annual Report, 1898 (Washington, D.C., 1898), 16;Google ScholarICC, Annual Report, 1899 (Washington, D.C., 1899), 6;Google ScholarICC, Annual Report, 1902 (Washington, D.C., 1902), 7. See also Chief Commissioner Knapp in Kolko, Railroads and Regulations, 87.Google Scholar

45. Congressional Record, 59th Cong., lst sess., 5684–5723, 5695.

46. Hechler, Kenneth W., Insurgency: Personalities and Politics of the Taft Era (New York, 1940), 3243Google Scholar, 165–72; Mowry, George E., Theodore Roosevelt and the Progressive Movement (Madison, 1947), 3132, 155.Google Scholar

47. U.S. Industrial Commission, Report of the Industrial Commission on Transportation, 9 (Washington, D.C., 1901), 382–84.Google Scholar

48. Smyth v. Ames, 169 US 466, 546.

49. ICC, Annual Report, 1901 (Washington, D.C., 1901), 2627.Google Scholar

50. Martin, Enterprise Denied.

51. Skowronek, Building a New American State, 72–79; Elizabeth Sanders, “Farmers, Railroads, and the State,” 50–53; Hoogenboom and Hoogenboom, A History of the ICC, 66, 73–80.

52. Smyth v. Ames, 169 US 466.

53. Henderson, Gerard, “Railway Valuation and the Courts: I,” Harvard Law Review 33 (1920): 909.CrossRefGoogle Scholar

54. Henderson, “Railway Valuation and the Courts: I,” 909.

55. Martin, Enterprise Denied, chaps. 5 and 6.

56. Ibid., 208–9.

57. 20 ICC 267, 334; 31 ICC 358–9.

58. Henderson, Gerard, “Railway Valuation and the Courts: III,” Harvard Law Review 33 (1920): 1051.CrossRefGoogle Scholar

59. Kerr, K. Austin, American Railroad Politics, 1914–1920: Rates, Wages, and Efficiency (Pittsburgh, 1965), 4471; Hoogenboom and Hoogenboom, A History of the ICC, 79–83.Google Scholar

60. See Geertz, The Interpretation of Cultures; Quirk, “In Defense of the Politics of Ideas”; Kelman, “Public Choice and Public Spirit.”