The U.S. economy is always experiencing growth. The constant growth causes high demand for rail service. It demonstrates that the rail freight industry is integral to this growth. Railroads provide cost-effective transportation of goods and this range from lumber to oil to auto parts. Also, railroads play a central role in positive economic trends. The economic growth includes an increase in gross domestic product, improving employment statistics and low gasoline prices.
Freight railroad has a set-aside fund for its development and renovation. For example, in 2015, the nation’s major freight railroads plans to spend an estimated $29 billion, which would set an annual record to build, maintain the rail network. Such private spending will go straightway to expenditures for new equipment and locomotives, installation of new track and bridges. It will also include the building of tunnels and new technologies that will be used to keep America’s railroad network the best in the world. Besides, freight railroads estimate they will hire 15,000 people in 2015. These are well-paying jobs being made available due to projected retirements and normal attrition.
The shared economic impact of freight rail spending roughly $575 billion over the past few decades has rippled throughout the country. The private investments have assisted in improving safety, efficiency and reliability of the nation’s 140,000-mile railroad network. It also supports more than 180,000 high-paying jobs at railroads nationwide. Freight railroads are providing an efficient and cheaper means, which U.S. can transport, products for marketing within the country and in the ports, everywhere around the globe
The tremendous benefits provided by private freight rail investments are only made possible by sound public policy and balanced economic regulations. It is essential that the public policy be set to permit railroad development as the 114th Congress begins its legislative session. It is a course that federal regulators ought to have promoted to allow railroads, private developers. The aim should be to work towards meeting the customer demand.. The objective will curb investment at just the time when rail customers are calling for an expansion of service to satisfy the demands of an ascendant economy. The railroad industry’s ability to transport products and commodities rests on its capacity to earn the capital essential to continue with the record of private investments while availing job opportunities in the country. With the right federal policies in place, strategies which support market pricing and fails to stifle railroad investment is expected to improve.
The construction of the railroads in the United States heralded an economic revolution in the 19th century whose ripple effects are still being felt in the country and beyond up to date. It opened the country to new economic opportunities that attracted not only local but also foreign investors. It changed the transportation sector while offering new economic investment and employment opportunities for Americans and foreigners alike. This study focuses on the economic aspect of railroads in America. The study reviews the background of American railroads, economic developments, benefits of railroads, economic policies and regulations and rail traffic.
The Beginnings of American Railroads
According to James & Thomson in 1980 tracks were first presented in England in the seventeenth century as a method to lessen friction in moving loaded wheeled vehicles. The first North American railway was established by 1764 for military purposes at the Niagara portage in Lewiston, New York. The builder was Capt. John Montressor, a British engineer, knew to students of historical cartography as a mapmaker. Furthermore, James & Thomson in 1980 noted that John Thomson drew the earliest survey map in the United States showing a marketable “tramroad” in Pennsylvania in October 1809. It is commonly known as “Draft Exhibiting the Railroad” as envisioned by Thomas Leiper. According to the survey by Thomson, he helped Reading Howell, the project engineer, and a well-known mapmaker, build the first useful wooden tracks for a tramroad. Poor in 1870 noted that a marketable tramroad was plotted and made at Quincy, Massachusetts, by Gridley Bryant, the technology employed through Solomon Willard in 1876 (Slason, 1925). These early uses of railways gave a little hint that a revolution in methods of transportation was underway.
Railroads Helping In Economic Development
Railroads have played a transformational role in the development of America- revolutionizing transportation and catalyzing the country’s economic development for more than 180 years. Today, America’s freight railroads assist nearly every industrial, wholesale, retail, and resource-based sector of the economy, operating over a network of approximately 140,000 miles. U.S. freight railroads are overwhelmingly privately owned. They are run almost exclusively on tracks the railroads build and maintain themselves. According to David, (1969), since 1980 to 2014, railroads have spent approximately $575 billion of the funds on engines. The cash expenditure also goes to cargo cars, tracks, bridges, tunnels, and other infrastructure and equipment. The cost was met to keep the economy moving (David, 1969). In 2015, America’s freight railroads plan to spend an estimated $29 billion to sustain and enhance their nationwide network and hire 15,000 people for jobs throughout the U.S.
Benefits of Freight Railroads
Freight rail is one of the country’s most essential industries, and it provides a foundation on which many other industries rely. Strengthening the Economy- Freight railroads carry the cargo that sustains American commerce in large cities and small towns across the country. Freight railroads have invested more than $575 billion since 1980. The investment includes record expenditures of $115 billion from 2009 to 2013 to maintain and improve bridges, tracks, locomotives, freight cars, and other infrastructure and equipment. These investments help increase the capacity and safety of the rail network to meet America’s growing and changing economy (Slason, 1925).
Delivering Global Competitiveness- Railroads haul approximately one-third of all U.S. exports, allowing American industry to be more competitive in the worldwide economy. The railway provides affordable Freight Transport according. An average U.S. rail rates fell 42 percent from 1981 through 2013 meaning the average track customer is now able to ship almost two times as much freight for almost the same price it incurred more than 30 years ago. Sustaining Jobs — A U.S. Department of Commerce model of the U.S. economy approximate freight railroads sustain more than one million opportunities across the country also to the employees. The model shows that every freight railroad job continues another 4.5 jobs elsewhere.
The road is useful in easing taxpayer burdens. This is unlike trucks, barges, and airlines that operate using infrastructure funded mainly by taxpayers, America’s privately owned freight railroads operate almost exclusively on infrastructure they own, build, maintain, and pay for themselves. Helps in increasing fuel efficiency; on average, railroads are four times more fuel-efficient than trucks. They are also useful in reducing pollution. Freight movement by rail reduces greenhouse gas emissions an average of 75. This mode of transport is helpful in lessening highway congestion. A train can carry the load of several hundred tracks reducing highway gridlock, the cost of maintaining existing railroads, and the pressure to build expensive new railroads.
Privately Owned – The vast majority of U.S. freight railroads are privately owned and operated. The majority of funds needed to maintain, upgrade, and operate the rail freight network comes from the tracks, not taxpayers. There are the record Investments – In recent years, railroads have been reinvesting record amounts on tracks, signaling systems, locomotives, freight cars and more – including more than $25 billion in both 2012 and 2013. There is also the capital intensive; railroads reinvest at six times the rate of the average manufacturer, building the rails that move America’s economy. The growing freight demand –according to government estimates, 56 tons of cargo are moved per person in America each year. Over the following 30 years, that amount is expected to increase more than 33%.
Freight Rail’s Critical Role In U.S. Economic Resurgence
The nation’s railroads are now transporting more goods than ever before the Great Recession. As business production and consumer demand continue to increase, rail is playing a central role in getting an enormous range of American products to market. The products are both domestic and international. It also provides delivery services from around the world.
Working With Customers To Forecast Demand
Proper management of the rail network means continuously working closely with the clients to understand how the demand for their products affect the supply of trains and equipment. Forecasting the transportation demand is a very difficult issue. It extensively relies on the input from customers, economists, and experiences. If the demand exceeds estimates, or if there is an unforeseen need for a particular type of rail car, it can have a temporary impact on service. It especially has been shown by the recent levels of freight traffic. Railroads continuously work with customers and the developers to improve transportation demand forecasts. It also works to improve efficiencies and investments that provide the needed capacity across the world’s best freight rail network. Here are a few ways they are doing this:
Strategic Planning – From redesigning yard and terminal processing plans to rethinking locomotive assignment and deployment, freight railroads are always looking to improve internal processes and planning to keep the network flowing more smoothly. Information technology- Developing and deploying new and improved information technology can improve system functions, from scheduling maintenance to “real time” movement planning. People and Equipment – Railroads know that moving more goods requires more railway assets: trained employees, higher capacity freight equipment, maintenance machinery, and much more. Infrastructure – Over the longer term, new capacity can be added to the main line and terminal upgrades, new signal and control infrastructure, new maintenance facilities and other network replacements, updates and additions.
Types of Railroads
Class I railroads have annual revenue exceeding $453 million and account for sixty percent of the industry’s mileage, ninety percent of its employees, and ninety-four percent of its freight revenue (Henry, 1870). They operate in 44 states and the District of Columbia and concentrate largely on long-haul, high-density intercity traffic. There are seven Class one railroads, which include BNSF Railway Company, Canadian Pacific Railway, CN, Kansas City Southern Railway Company, CSX Transportation, Norfolk Southern Railway Company, and Union Pacific Railroad.
Short line and regional railroads account for 31 percent of U.S. freight rail mileage and 10 percent of employees. They range in size from small operators handling a few carloads a month to multi-state operators close to Class I size. The more than 560 short line and regional railroads operate in every U.S. state apart from Hawaii and in most cases feed traffic to Class one railroads and receive traffic from Class one tracks for final delivery. Switching and terminal railroads usually perform pick-up and delivery services within a port or industrial area or move traffic between other railroads. Passenger trains in the U.S. typically operate over tracks owned by freight railroads. Approximately 70 percent of the miles traveled by Amtrak trains are on tracks owned by freight railroads. Moreover, hundreds of millions of commuter trips every year occurs on commuter rail systems that operate, at least partially, over track or right-of-way owned by freight railroads.
Rail Traffic Growth Reflects Changing Economy
The Business production and consumer demand are on the rise, and railroads are playing an important role in transporting American goods to market, both domestically and internationally. As the year-end results for 2014 indicate, freight rail is transporting more of many different commodities, as rail traffic patterns have shifted along with our changing economy. The rail industry is an indicator of the health of the economy at large. From energy products to consumer goods to agricultural commodities — railroads are continuing to move what helps power our recovering economy.
Rail traffic figures for the year provide a telling snapshot. In fact, 18 of the 20 commodity categories tracked by the Association of American Railroads (AAR) showed year-over-year increases in 2014. Another exciting indicator of overall economic growth is the meteoric rise in U.S. rail intermodal, the containers and trailer traffic that can travel by truck, rail or both. The nation’s rail network experienced this shift in traffic volumes in a relatively short period. The rapid change in customer demand to move more of different products is something neither railroads nor their clients fully anticipated. The industry is adapting and responding, working hard to remedy any service challenges, and the commitment to providing the super service the customers expect and demand.
At the top, of the freight railroad industry’s policy concerns is pushed by some rail shipper groups who strive to obtain price caps and force a change to rail operations through new regulations. The other proposals would majorly expand the role of government in the day-to-day management of railroads. It enables the government to curb railroads’ ability to earn the revenue necessary to sustain infrastructure spending. In seeking increased regulation and government intervention, the rail customers are simultaneously laying the charge that railroads are not investing enough to satisfy the growing demand for train service and to improve network efficiency. It is not possible for shippers to have it both ways. The U.S. rail system survives and expands overwhelmingly on private investment — its own.
Imposing price caps instead of letting the marketplace works on its means. Railroads have less revenue to spend on essential infrastructure improvements at precisely the wrong time. When there is a rise in demand to move more to power the recovering economy. The current economic regulatory structure works towards providing multiple avenues for shippers to seek regulatory review of concerns. Alternatively, it gives railroads the opportunity to earn the revenue that is necessary for the reinvestment in the rail system. The current economic regulatory frameworks also provide an enabling environment in which rail companies — rather than U.S. taxpayers — foot the bill for the maintenance and upkeep of the coast-to-coast railroads that support industries. A healthy freight railroad industry is critical to the nation’s economic recovery and growth. To continue with today’s balanced regulation is essential for a robust freight rail network in 2015 and beyond.
Just as historians argue over the fact whether railroads determined the pace of economic development in nineteenth-century America. Robert Fogel, among others, have tried to measure the impacts of transportation innovations on American development using new tools of economic history. The conclusion is that the contribution of railroads was not very as crucial as some had maintained. The issue is a very controversial one, but the fact remains that the railroads came, saw, and conquered nineteenth century in America in more than one ways.
They are considered the liberating means. They have increased mobility and speed across the continent. On the other hand, they have confined people, for instance, they had the power of economic life and death over many persons, often abusing that power. With no doubt, the railroads played a significant role important role in developing concepts of management and also brought forth big corporations, but usually accompanied by unique financial practices and greed. They provided employment opportunities for thousands of workers, but the conditions under which these laborers had to work and live was harsh and made them revolt and informed the nation of the hardships of the working class. The railroads were largely responsible for the settlement of the West. It simultaneously helped in extinguishing the Native American population. They were prizes won for every part of the divided nation in the initial years before the Civil War. It linked the country with the very first transcontinental railroad in 1869. They were all built on government money, yet eventually they became the first and most heavily regulated segment of the private sector.
David, P. (1969): “Transport Innovation and Economic Growth: Professor Fogel on and off the Rails.” The Economic History Review, 22(3), pp. 506-524.
David highlights innovation, which has taken place in the transport industry. He also highlights the economic growth of the railroads in the twentieth century. The author outlines the history of the American railway and the distribution of the ticket prices in the 1900s. From the journal, we get to realize that there have been great advances in the railroad transport. From the article, it is clear that railroads have played a transformational role in the development of America- revolutionizing transportation. It has further catalyzing the country’s economic development for more than 180 years. The transport system is presently useful in the industrial, retail and economic sector. According to the writer, U.S. freight railroads are privately owned and hence a good income earner for the government.
Henry, V. P. Manual of the Railroads of the United States for 1870-71. 1870. New York: H. V. H.V.& H. W Poor 1870), p. xxviii.
Henry highlights the historical developments, which led to demand of the railroad in the United States. There was the inward movement of people, agricultural growth and utilization of the natural resources which forced people to move from one region to another. He goes on to highlight the developments, which took place in the railroads. According to the writer, the objective of introducing the railroads was to reduce the congestion, which was experienced on the vehicles.
Slason, T. 1925. A Short History of American Railways. Chicago: Bureau of Railway News and Statistics. Page 154.