5 - The statist evolution of rail governance in the United States, 1830–1986

Summary

As American capitalism's oldest major enterprise, the 155-year-old railroad industry offers a special opportunity for theorists to test hypotheses of governance and state intervention on a wide range of governance transformations. The history of railroad governance includes some of the earliest American developments of governance mechanisms, such as associations and corporate integration, as well as different forms of state intervention. It also provides an opportunity to examine long-term trends in an industry's governance transformations.

This chapter uses the existing literature to offer a new analysis of rail governance. The distinct characteristics of the rail industry, including the steepness of its capital and technical requirements, led from a state-sanctioned, but relatively free-market governance regime to others that were progressively less private and less market-controlled. Triggered at each critical juncture by recurrent performance crises, this evolution proceeded in five stages, moving from what I call private capitalist governance through two stages of negative state intervention to positive, or proactive, state intervention, and finally to the more recent attempts to reverse state intervention. Two factors have been most critical in driving this evolutionary process toward statedominated governance. The first has been the special “density” and mobilization of competing class and intraclass interests. The mobilization of small shippers and rail workers created governance problems that could not be solved by any private institution. The second factor has been the state itself. Once it became an important part of the governance process, the institutional requirements and capacity of the state regarding the railroads increasingly exerted independent pressures for solutions to rail governance crises that involved the state (see Kennedy 1985).