Mass Transit and the Holy Grail

In an earlier article I cited the sugar quota as a key reason for the ongoing destruction of the everglades, and agribusiness subsidies for making toxic grain fed beef a staple of the American diet, along with high fructose corn syrup (responsible for turbo charging our obesity epidemic).  Before tacking the more abstract theory of economic policy, I will stay with the more concrete episode of statist, anti-market, policy induced destruction of one of the holy grails of the environmental activists – mass transit (specifically the railroads).

In the bad old antebellum days of so called unbridled capitalism, the railroad industry was vibrant, highly profitable and intensely competitive.  Whatever you may think of them personally, Vanderbilt and Gould got seriously rich off railroad profits.  What happened to create an industry not even a fading shadow of its powerful past?

Prior to the civil war, the big railroad players were at their wits end over the dog eat dog competition among them, forcing long haul shipping rates down to ridiculously low levels.  To remedy this deplorable situation they repeatedly tried forming cartels to fix rates higher than the prevailing market rate.  They repeatedly failed miserably and spectacularly.

Then, providentially, there arose a drumbeat for the government to step in and slap down those mean railroaders for cheating poor farmers by charging short haul shipping rates that were way too high.  Hallelujah!!!!  The government was given the green light to do what the railroaders had failed to do for decades – artificially fix, and through the long, coercive arm of the law, actually enforce shipping rates.  The big boys could hardly believe their luck.  (For an engaging and detailed analysis of price fixing attempts by the railroads see THE LIFE AND LEGEND OF JAY GOULD by Maury Klein).

While the railroad potentates initially cleaned up as long haul rates rose, it turned out they had made the classic Faustian deal.  Once the government was in control with the creation of the ICC there was no stopping the regulatory train.  The enervation of the industry became inevitable with the passage of the National Railway Labor Act and the creation of the NLRB.  My labor law professor said that even the lawyers did not understand it.  Featherbedding, for example, became an accepted part of the industry, and that was the least of it.

Just to make sure the industry had no chance of recovery of its historic energy, politicians of every stripe took a military measure and used it to massively subsidize the railroad industry’s competition and today’s major polluter and sustainability villain.  That measure was the national highway system.

Most people think Eisenhower proposed the highway system after being impressed with German roads.  What really happened was that Eisenhower led a cross-country, motorized, military convoy shortly after WWI.  It was attended to with much ballyhoo, huge national publicity and intense news coverage.

What Ike discovered was the embarrassing and utterly appalling state of our roads.  Getting mired in the mud was depressingly common.  Proposing the interstate highway system was his way of rectifying this problem for military, not economic, reasons.  Of course this was all too tempting for the politicos at every level.  They all cashed in big time with pork barrel road projects funding roads from everywhere to anywhere.

There you have it – an industry literally destroyed by statist intervention in the marketplace.  Passenger rail travel is comatose – its virtually lifeless carcass subsidized by the taxpayer to the tune of billions each year with no hope of making inroads into the stranglehold of the automobile.  Worse, localities like NYC were home to robust subway system enterprises until the statist decided the greedy capitalists were charging too much and took them over.  Now the subways are wards of the state as well.  This experience is not limited to the US.  Government owned, European rail systems are sucking sustenance out of the public purse to the tune of many tens of $billions each year.

One effect of the simultaneous government destruction of the railroads and subsidizing of the automobile is the sharp reduction of population density and the emergence of widespread sprawl.  This is exacerbated by other statist policies like taxpayer subsidized rural electrification (e.g. TVA) and utility price controls that clearly encourage exurban migration and discourage city living.  Why should someone living a hundred miles or more from an urban center, or on a mountain, pay the same electric utility rates as everyone else?  It clearly cost more to deliver the service!  Yet we require utilities to charge the same rate for everyone they serve.  The same analysis applies for landline phone service, cable TV service and mail delivery.

Now consider the environmental impact of this anti-market nonsense.  Statist, anti-market policy promotes waste on a colossal scale!  With waste of resources comes increased pressure on the environment and dramatically reduced sustainability.  At the root of all of this is the hubris of elitists of all stripes, all across the political spectrum, who believe their values and judgments are so damned superior that their whims deserve to be enforced against everyone else at the point of the government’s guns.

Even if we accept the dubious assumption that the elitists were superior, Austrian school economics shows that, even with all the computer power in the universe at their disposal, the anointed ones cannot allocate resources more efficiently than the market with any consistency over time.  In fact, all such attempts must ultimately end in disaster.  As it turns out, the disaster is not merely economic, but also environmental.

Next up – the cult of consumption.

Read the original story at SedonaCyberLink