How Deregulation and Private Equity Gutted the U.S. Freight Rail System—and With it, the Promise of America’s Industrial Renewal

Washington, DC– Democrats and Republicans agree on the need to restore American manufacturing.  Yet as Phillip Longman reveals in a new article published in The Washington Monthly, that goal is deeply threatened by financiers who are radically downsizing the nation’s freight rail system in pursuit of short-term profit. 

Freight rail remains essential to basic manufacturing, including green technology.  Longman shows how making EV batteries in the United States, for example, depends on the ability to move huge volumes of heavy raw materials that cannot be economically transported by truck.  Yet as today’s largely unregulated, monopolistic railroads have fallen under the control of hedge funds and other Wall Street interests, they have adopted  business practices that leave shippers increasingly subject to predatory  pricing, degraded service, and supply chain disruptions.   

Railroads now spend far more rewarding their shareholders with dividend and stock buybacks than they invest in their own infrastructure.  The result is deteriorating service and even refusal to serve shippers who depend on rail.  At one point in 2023, millions, chickens faced starvation because of the Union Pacific Railroad’s  failure to deliver animal feed trains on time.  Major manufacturing companies say their ability to build and operate factories in the United States is threatened by the rail industry’s excessive pricing and lack of reliability.

The implications extend beyond economic concerns. With rail capacity in decline, shippers are making far greater use of trucks, which are far less energy efficient, emit far more pollution, while also causing  extensive road damage and a surging number or highway fatalities and injuries.  Because of their inherent lack of efficiency, even using electric trucks requires far greater amounts of power generation than using electric  trains to move the same amount of cargo. 

The article urges that policymakers restore regulations that once made sure that America's freight rail system served the public interest and promoted economic growth.  Proposed solutions include reintroducing common-carrier obligations to prevent discriminatory pricing and access  and providing government support to supplement infrastructure investments where private capital falls short. 

Longman has long warned US policymakers about the risks of allowing financiers to control America’s rail infrastructure. In November 2021, for example, he published “Amtrak Joe vs. the Modern Robber Barons,” also in The Washington Monthly.  

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