Railroads make eco-friendly comeback

Is the horse-drawn carriage next? It’s 2008 and the once-dying freight railway industry is “enjoying its biggest building boom in nearly a quarter century, a turnaround as abrupt as it is ambitious,” gushes The Washington Post ( 21 April 2008 ). The boom is “largely fueled by growing global trade and rising fuel costs for 18-wheelers,” the article says. However, with the boom comes a concern about a return to the robber barons (and anti-competitive pricing) of the 1800s. Excerpts:

In 2002, the major railroads laid off 4,700 workers; in 2006, they hired more than 5,000. Profit has doubled industry-wide since 2003, and stock prices have soared.

This year alone, the railroads will spend nearly $10 billion to add track, build switchyards and terminals, and open tunnels to handle the coming flood of traffic. Freight rail tonnage will rise nearly 90 percent by 2035, according to the Transportation Department. [Actually: 88%.]

[T]he changing global market has fueled prosperity — and the need to add track for the first time in 80 years. Soaring diesel prices and a driver shortage have pushed freight from 18-wheelers back onto the rails. At the same time, China’s unquenchable appetite for coal and the escalating U.S. demand for Chinese goods, means more U.S. rail traffic is heading to ports in the Northwest, on its way to and from the Far East.

The zeitgeist has even dropped a “green” gift in the industry’s lap. A train can haul a ton of freight 423 miles on one gallon of diesel fuel, about a 3-to-1 fuel efficiency advantage over 18-wheelers, and the railroad industry is increasingly touting itself as an eco-friendly alternative.

But rail customers are complaining about the kind of price-gouging not seen since the robber barons of the 1800s, leading to antitrust suits and calls for re-regulation of rail prices. The rail industry counters that it’s using the same kind of “differential pricing” that airlines use today (i.e., higher prices where they have market power).

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Related:
Railroad news: Shippers say lack of antitrust enforcement hindering rail competition

Policies needed to soften the blows of globalization

The natives, literally, are restless. Great in theory, globalization isn’t turning out to be all it’s cracked up to be, for those who are losing their jobs. The Organisation for Economic Co-operation and Development (OECD) recently acknowledged growing unease about globalization in its annual labor report and worried about a popular backlash, according to press reports.

Now, the businesses that benefit most from free trade are acknowledging the problem, too. A paper commissioned by the Financial Services Forum sets out several policy options “aimed at cushioning the blow from job losses and other dislocations caused by global trade.” The thinking is that, by helping those on the losing end of globalization, businesses can diffuse growing protectionist sentiment, according to The Wall Street Journal (26 June 2007).

The Financial Services Forum report concludes that:

The aggregate gains from global engagement, large though they are, are not evenly shared and do not directly benefit every worker, firm, and community.

  • From the mid-to-late 1970s to the mid-to-late 1990s, the real and relative earnings of less-skilled Americans was poor relative to both economy-wide average productivity gains and also the earnings of their more-skilled counterparts.
  • Since around 2000, the large majority of American workers has seen poor income growth.
  • Global engagement fosters high productivity in American industries, but typically with substantial churn at the level of individual firms, with pervasive shut-down of inefficient plants and even entire companies.
  • Because economic activity tends to be concentrated across American communities, this uneven distribution of globalization’s pressures across workers and firms also means uneven pressures across communities as well.

The bottom line is that today, many American workers feel anxious — about change and about their paychecks. Their concerns are real, widespread, and legitimate.

POLICIES
The typical policy response — retraining — isn’t enough because the relief isn’t fast enough. The report’s new policy ideas include:

  • insuring communities against “sudden economic dislocation” caused by a factory closing
  • merging all worker-assistance programs (e.g., unemployment insurance and trade-adjustment assistance) into one
  • eliminating the payroll tax on incomes less than $32,140

SURVEY
A new survey conducted by the Financial Services Forum and RT Strategies shows that public attitudes towards globalization have dimmed slightly since last year. The most recent poll shows that 49% have a favorable view of globalization, compared with 54% in May of 2006.

However, the survey also found that 67% would have a more favorable view of globalization if policymakers “put in place programs specifically designed to better equip American workers, communities, and firms to participate in, and benefit from, the 21st century global economy, and to help those negatively affected by globalization find new jobs.”