In war, each side tries to cripple the other’s economy by targeting and destroying its transportation infrastructure: ports, airfields, roads, bridges, railroads, rivers, and canals. The United States, however, like many countries, wrecks its own transportation systems—not with bombs but with laws and regulations.
The American Henry George (1839-1897) once commented on this dismal state of affairs. “What protection teaches us,” he wrote, “is to do to ourselves in time of peace what enemies seek to do to us in time of war.”
Let’s explore some examples of how this works.
The Interstate Commerce Commission (ICC), created in 1887; the Sherman Antitrust Act of 1890; the Elkins Act (1903); the Hepburn Act (1906); the Mann-Elkins Act (1910); the Panama Canal Act of 1912; and the Valuation Act (1913) worked together and at cross purposes to ensure that the nation’s railroads could neither compete, cooperate, nor coordinate with each other. Routes, lading, and rates were all heavily regulated. The result was that even before the country entered World War I, its railroads were grinding to a halt, incapable of transporting steadily increasing amounts of war materiel to the nation’s seaports. As Marc Scribner explains:
Pooling equipment and facilities could have eased the traffic crunch in the short-run, but the Interstate Commerce Act explicitly prohibited the voluntary pooling of railroad resources. In 1917, railroads appealed to the ICC for a 15-percent rate increase to help offset some of the rising costs associated with wartime traffic and afford them the opportunity [to] raise revenue necessary to invest back into network enhancements. The ICC rejected their request.
Frustrated with the growing railroad network inefficiencies during the war, President Wilson nationalized the entire railroad industry. On December 28, 1917, the newly formed United States Railroad Administration took over American railway operations. The agency immediately pooled all railroad equipment and facilities, and six months later increased freight rates by 28 percent.
Scribner adds that partial deregulation in the 1970s saved the country’s railroads from “the brink of collapse.”
The Merchant Marine Act of 1920 (“Jones Act”) prohibits transporting goods between American ports on ships that aren’t American built, owned, registered, and crewed. The Act significantly increases the cost of shipping American products between American cities. As a result, goods that could more efficiently be sent by water are sent by rail, truck, or air, wasting fuel and producing far more pollution and CO2 emissions than necessary. In addition, the high cost of shipping domestic products leads Americans to buy more from abroad. Finally, the Act has crippled America’s shipbuilding industry.
While Covid and Covid lockdowns exacerbated problems at America’s seaports, the issues have been building for decades:
Longshoremen’s unions are limiting automation and job flexibility
The Foreign Dredge Act of 1906 artificially increased the cost of the dredging that would allow our ports to service more and larger ships.
State and local laws prevent seaports from expanding their container storage facilities