Archive for month: October, 1923

The Transportation Act of 1920 practically guaranteed financial assistance from the government to the railroad companies. It even mandated the ICC to ensure their profitability. But why did wealthy capitalists and the railroads rail, as it were, against the early pioneers of the trucking industry? Profit.

Separate but equal?

During the 1920’s, plans still made headlines to forcefully make rail and trucking transportation systems somehow equal, in an effort to prevent the trucking industry from fairly earning the majority of profits in the freight shipping industry. Under the Transportation Act of 1920, Frederick J. Lisman claimed that Congress was required to make all systems equal. Publications in September of 1926 reveal that arguments were being made that the Transportation Act of 1920 required Congress to maintain competition to whatever extent possible and subsequently keep different systems of freight equal in all fashions. One such suggestion was to allocate specific territories and freight lines for the trucking industry limiting where they are allowed to travel.

Of course, not everyone took these arguments standing. Resolutions were adopted by The Merchants Association of New York against potential amendments for the Transportation Act. In an article on October 20th, 1923, it was made clear that the Merchants Association adopted a resolution to oppose any and all amendments to the Transportation Act of 1920.

Why? The changes in the proposed amendment would further restrict the transportation system in favor of the railroads and against the trucking industry. The main argument was that the trucking industry and the railroad industry and the public needed time to judge the potential impact of the recently passed transportation before changes were made to it. But time wasn’t given. Lawsuits were given instead to distract from the core issue.

Lawsuits galore

In places like Pennsylvania, it was argued that certain coal roads which served the local areas needed to be integrated into the existing Pennsylvania railroad system because at present, they were only accessible by truck, giving an unfair advantage to the trucking industry. Attempts at lawsuits were made. However, these lawsuits eventually reached the Supreme Court involving railway companies from San Francisco, Texas, St Louis, although early in the 1920’s courts held that lawsuits to recover transportation charges do not qualify if they referred to a case that took place prior to the Transportation Act of 1920.

Government funding

This did not dissuade the railroad companies who continued to fight for regulation policy after the Transportation Act in their favor. Small improvements in transportation and earnings for railroads over long haul trucking were applauded by bankers and carrier officials. Arguments were made that people were “fed up” with the inefficiency of the government and the way it had interfered with railroads; these allegations resulted in improved terminal facilities designed to expedite railroad shipping and increased government funding to bolster the railroads accordingly. Provisions from the Transportation Act of 1920 practically guarantee that the government provide financial assistance to the railroad companies, and as such billions of dollars flowed in their direction. Government and commercial investment in improved transportation across 7 railroads in Cincinnati, New York, Buffalo, New York, Pennsylvania, and others represented one of many Investments made in order to beat the rising trucking industry.

Consolidation for profit

Debates were being heard by the Interstate Commerce Commission as to which railroads in individual cities and for how many miles should be integrated into which trucking companies or right under the fold of existing railroad companies. Companies like the Pennsylvania Railroad were fighting for a liberal division of the existing transportation routes and the associated freight. While major railroad companies were fighting against the trucking industry they were also engaged in internecine issues, arguing before Congress that larger companies like the Pennsylvania Railroad company should be allowed to absorb smaller names like Jamestown, Westfield, & Northwestern Railroad Company to gain small, 34 mile segments of line one company at a time.

Networking and political favors

Arguments in favor of railroad consolidations were not new. On November 22nd, 1927, Daniel Willard, the president of the Baltimore and Ohio Railroad hosted a dinner in recognition of his own success serving for the railroad company during which time 100 financial men and businessmen of Baltimore were present alongside Governor Ritche and Mayor Broening who both spoke on behalf of Willard. During this Gala event Willard told tales of his rise from a track Walker all the way to the executive of a railroad company and announced a consolidation plan for all of the existing railroads, grouping them into four different systems based on geographic area in an attempt to counter the success of the trucking industry. The governor praised his public service and his successful rags-to-riches story, indicating that it was the epitome of American industrialism. Dinners of this nature became commonplace, an opportunity to wine and dine wealthy capitalists and government officials thereby creating a network through which pressure could be applied in favor of railroads.

Victories were handed to the railroad companies throughout the 1920’s and 1930’s by Congressional decisions like the Treasury decision to use Recapture Law to return $10,000,000 in profit to railroad companies. The importance of this decision is so nuanced as to almost be glossed over. During the Great Depression, the government captured or took 10 million dollars from the railroads as part of the emergency Transportation Act. The government invested this money in securities which yielded just shy of 4 million dollars in profit for the government. Thereafter on July 21st, 1933, the government repaid railroads the ten million dollars it had appropriated. Having helped the government during a time of crisis and as a direct result of that help yielded almost four million dollars in profit, Congressional decisions were starting to turn favorably toward railroads even if those decisions came at the expense of the trucking industry.

In March of 1933, Roosevelt advisers met with officials from railroad carriers, investors, and bankers to try and draft a new law that would provide ongoing government financial aid to the railroads touted as a form of American unity. The measure in question would further consolidate railroads, ironically doing away with railroad based competition, competition that larger railroads used as their arguments in favor of oppressive tactics against Long Haul Trucking.

It all comes back to profits…

An article from The New York Times published on October 27th, 1925, with the heading “Says Motor Trucking Cuts Rail Revenues” says it all. It was on this day that financial losses to railroads, the result of motor competition from the trucking industry, were recognized as a permanent form of financial loss. What’s more, testimonies at hearings before the Interstate Commerce Commission revealed that companies like Missouri Pacific were already fighting submitted applications from companies like Chicago, Milwaukee & St. Paul Road for increased road building programs west of Chicago at a rate of 5%.

In a testimony against the potential increase in the trucking industry, Mr. Baldwin noted that his passenger earnings from 1924 receded by $1,300,000 compared to the year previous, and the first seven months of 1925 indicated additional decreases of $800,000 compared to the same time frame from the year prior.

During that same testimony he noted that railroads were also losing Freight shipments as a result of the trucking industry, his company having lost over two million pounds of freight traveling from Little Rock to other Arkansas points and over 6,500,000 lbs of freight from Memphis to Arkansas. T.A. Hamilton, the legal counsel for security holders in the trucking industry from Chicago, Milwaukee & St. Paul Road, argued that long haul freight was simply more affordable for companies, due mainly to the fact that they charged less than their rail counterparts.

Each of these moves were relentlessly repeated. Lawsuits continued to be brought forth, the railroad industry leaders fought against truckers, and as more moves were made to secure government funding and network among wealthy capitalists, these efforts came to a head with the passage of the Motor Carrier Act of 1935, a piece of legislation that secured control over regulation, pricing, licenses, and operational activity for the trucking industry, control placed in the hands of the railroad.

Perhaps unexpectedly, trucking companies started to take some of the freight business from the railroads, and they were helped along by the Wall Street Crash of 1929. Throughout the coming decade, trucks were able to pick up the slack where railroads were failing or simply inadequate. They were able to provide better services in some more remote areas, and faster. But this could not stand, not when the railroads had spent so long networking with government and wealthy capitalists. The threat of trucking companies growing in popularity due to their convenience forced wealthy capitalists to enact the Motor Carrier Act of 1935, a move which delayed the rise of trucking by several decades.