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"Open Access" and regulation of railroad freight rates.
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<P>[quote user="JSGreen"][quote user="futuremodal"]Now you are the federal government, charged by your constituents to maintain both <STRONG>railroad health</STRONG> <EM>and </EM><STRONG>intramodal competitiveness</STRONG>. What do you do? Do you:[/quote]<BR><BR>But suppose you are the federal government, and you are charged by your constituents to maintain lowest TOTAL AND OVERALL COSTS to the consumer. (Rembering that the Shippers are consumers of Intramodal services). And, since we are supposing here, let us also suppose that you believe that the Market is the best arbitrator of "best use of capital".<BR><BR>Do you <BR>a) make rules <B>that many believe</B> will raise costs, because it will break an integrated transportation system up into different chunks (ie, MOW, Operating) which implies seperate management, overheads, and induced operating ineffeciencies?<BR><BR>b) let the market sort out the best way to do business, without government interference?<BR><BR>c) Do you confuse the issue by subsidizing railroads (with modern day equilivents of land grants) to try to support a company that Market Forces have deemed irrelelvant?</P> <P>[/quote]</P> <P>Let's go back to Econ 101 - Monopolies charge higher prices than competitive enterprises. Our particular brand of capitalism empowers the (1) regulation or the (2) breakup of monopolies where competitive pricing is nonexistent. Of #'s 1 and 2 above, regulation will probably result in higher overall costs than breakup. Staggers eliminated some of the regulatory inefficiencies, but certainly not the most onerous aspects as they affect the customer base. Staggers is thus partial regulation, where we get a hybrid monster embodying the worst of aspects of regulation and nonregulation.</P> <P>The fallacy of your a) above is that you assume the breakup of an integrated company would result in more overhead. Integrated rail companies already have middle management in charge of the various divisions - under simplified break up these middle managers would become the top managers, e.g. no increase in managerial layers. The ridiculous greyhounds example of redundant crews working the same small customers is not complicit with market realities - the evolution of such moves would probably produce a single 3rd party entity that can handle not only the switcing of Railroad 1, but Railroads 2 and 3 as well, e.g. an increase in managerial efficiency. And give us a break - "induced operating inefficiencies"?! You mean like the inefficiency of deferred maintenance, a seeming inherent aspect of the integrated model? The truth is, "induced operating inefficiencies" are part and parcel of the integrated model, because such inbred inefficiencies can be camaflouged within the entire mega corporation. Under breakup, such tendencies toward inefficiencies would become more transparent, and would more likely be nipped in the bud before they become entrenched. </P> <P>Don't forget too - that if the current Class I oligarchy is broken in two from a vertical standpoint, opposition to further mergers would be mitigated, making it more likely that we'd end up with one or two regulated infrastructure companies and three or four transporter companies. That's a lot more overhead reduction than we have now under the Big Six.</P> <P>As for b) and c) above, can you say with a straight face that the current rail oligarchy is the result of no government meddling? Of course not. So is it logical to say "let the market determine railroad winners and losers" when the winners were actually recipients of massive government support while the losers did not recieve the same level of government support? How about this - instead of letting the railroads of lesser government support go belly up, why not equalize the playing field by giving them the equivalent of the winners' level of government support? Then and only then can you allow a market based decision on who the real winners and losers would be.</P> <P>There's a reason Matt Rose is so worried about DM&E getting government aid - with it DM&E may prove to be a better run railroad than BNSF (with it's inherited land grants and court favoritism). BN got off lucky when Milwaukee retrenched - if the trustee of the Milwaukee had chosen to forego the granger lines and keep operations of the PCE as they should have (instead of the other way around), it may have been BN staring down at the face of possible bankruptcy. The government for all intents and purposes bailed out BN by pushing the PCE retrenchment while keeping the Milwaukee granger operations, despite all the evidence of PCE profitability vs granger unprofitability.</P> <P> </P>
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