The BIG Picture: Industry Jumping by Wealthy Capitalists

Scattered along the perimeter of the Amazon rainforest are cattle farming communities. Over the decades the Amazon rainforest has gotten smaller and smaller as land is demolished to provide grazing for said cattle. The cattle move to a new piece of property, destroy it by consuming anything of value and leaving it unable to rebound for a significant amount of time, and then simply repeat the process on a new piece of property next door.

This manner of consuming and controlling all that there is in a portion of land and then leaving it demolished only to move on to the next piece of land represents the industry jumping by wealthy capitalist over the last 100 years.

Capitalists behind the railroad industry maintained their profits by targeting whichever industry was the next up-and-comer, and that industry wasn’t always railroads. 

After the railroads were used to dominate and subjugate the trucking industry, from 1935 onward railroads were free to prosper.

But this prosperity came to an end around the 1950s.

U.S. Census Data from 1891 through 1957 paints a clear picture of railroad income and expenses. In spite of a small dip during the Great Depression, things continued to look up with an overall increase in operating revenue and net income, often aided by new bankruptcy law measures to provide money to railroads to purchase safety equipment, meet their local and state tax obligations, and more.


The Fall of Rome

However, as 1957 came to a close and the sixties were thrust upon the industry, net income began to drop. Railroads were using “side-stepping” techniques to stay afloat, such as deferring maintenance, accumulating, in the case of the Central Railroad of New York, a small but important Commuter Carrier, $500,000 each month of costs. Maintenance typically represented one-third of the railroads operating revenue so maintenance skimping meant no new rails, ties, or ballasts but better figures on the books.

These types of savings cushioned the railroads during the 1958 decline but they could not stop what was coming. 

20 of the 37 large Eastern railroad systems went into the red by more than $86,000,000 in the first six months of the year. The Pennsylvania Railroad, the number one Railroad in the industry accounted for over $25,000,000 of this collective deficit and the acting president of the Pennsylvania Railroad, James M. Symes was already reporting another $5,000,000 for July of 1957.

President of New York Central, the second largest railroad, Alfred E. Perlman predicted July of 1957 to be the worst yet for railroad debt. 

The New York, New Haven, and Hartford Railroad was reporting losses of $4,900,000 at the start of 1958 and expected another $1,000,000 just in July of that same year. 

The Boston and Maine Railroad already noted a $3,453,528 deficit for the first half of 1958 and only had 15 months left to repay $47,000,000 in mortgage bonds.

In August of 1958 rail bankruptcy was considered a national threat and aid legislation was proposed to help this decline, as it had so often helped in decades prior. For 4 months, railroad leaders spoke before Congress testifying of the dangers of a fallen railroad industry. 

The result?

Calls for legislation, cost-cutting, subsidies, or simply more traffic on the railroads.

new Transportation Act which authorized the government to guarantee 15-year commercial loans up to $500,000,000 to the railroad industry to offset the costs of equipment and maintenance. 

It wasn’t enough. 

Railroads were still showing 22% below the 1957 figures. Perlman said he did not expect the industry woes to resolve until at least the end of the decade, “I see no comeback right now.”

Some rail leaders, however, maintained hope that by 1959, things would resolve. This wasn’t the case. By the start of 1959, railways were facing bankruptcy. 

Backing a New Horse

Between 1960 and 1970, railroad companies started to file for bankruptcy. The New Haven railroad filed for reorganization under the Federal Bankruptcy Act in July of 1961, marking the turning point for the railroad industry. President of the railroad, George Alpert stated in a news conference, “Our battle to save the New Haven railroad from bankruptcy has been lost.”

At the same time remarks were made criticizing the government for no longer providing the same fiduciary support to the railroad industry as it had done in decades prior.

No longer paying lobbyists to encourage Congressional decisions in favor of the railroads, the industry began to collapse as wealthy capitalists profiting from railroad security and opulence pivoted their influence to the next piece of land, as it were, the next industry. 

Now they backed manufacturers, distributors, and retailers to secure their interests. 

Still in control of the Interstate Commerce Commission, wealthy capitalists were able to shift legal support toward shippers for the next 45 years, using the same tactics and phrases. Now it was no longer the railroads but the shippers who were “in the best interest of the people” and best for the national economy. The Interstate Commerce Commission in 1963 now focused on aid for shippers, noting that shortages for shippers. 

Surcharges were suddenly postponed for the industry. So prevalent was the aid invested in shippers that it vexed international counterparts. President Johnson voted in favor of new maritime shipping enterprises to bolster the industry. 

By 1966, the Interstate Commerce Commission was helping shippers with legal orders to aid equipment shortages. The following year, forums held by the Shippers Conference of Greater New York discussed how containerization could cut domestic transportation costs for shippers.

The same lobbyists were sent to Washington to use the Motor Carrier Act as a way to drive transportation costs down so that they could profit as other companies struggled to pay higher prices. Overall, wealthy capitalists jumped from the railroads into the larger shippers—manufacturers, distributors, and retailers. This form of industry jumping was not a new phenomenon, and represented one of the many rules in an antiquated playbook by which they operate.