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Whose Hubris? Brandeis, Scientific Management, and the Railroads

Gerald Berk

in Constructing Corporate America: History, Politics, Culture

This chapter reinterprets Louis Brandeis's role in the crisis of progressive era railroad regulation. While others have implicated Brandeis in the crisis, the essay shows how he identified fatal ... More

This chapter reinterprets Louis Brandeis's role in the crisis of progressive era railroad regulation. While others have implicated Brandeis in the crisis, the essay shows how he identified fatal flaws in Interstate Commerce Commission (ICC) ratemaking and proposed a coherent alternative. Brandeis showed how rate-of-return regulation made false promises to measure the objective value of railroad property and gave the railroads perverse incentives to increase costs. Drawing on the work of scientific manager F. Lincoln Hutchins, Brandeis proposed to replace valuation with a benchmarking system by which railroads could compare their performance. Drawing on his work in Massachusetts natural gas, Brandeis proposed to set rates according to a system of ‘sliding scales’, in which railroads received higher dividends when they provided lower rates. In theory, Brandeis's system was superior to rate-of-return regulation because it provided railroads with incentives to improve and information, unavailable from the firm or the market, about how to improve.Less

The Conservative Origins of the American Regulatory State

Samuel DeCanio

in Democracy and the Origins of the American Regulatory State

This chapter argues that the American state was initially created by the response of conservative political elites to electoral pressures and concerns regarding the rationality of public opinion, ... More

This chapter argues that the American state was initially created by the response of conservative political elites to electoral pressures and concerns regarding the rationality of public opinion, rather than a product of popular outrage toward industrialization. It explains how populist social demands led certain liberal reformers and Republicans to endorse bureaucracy in an attempt to resist public opinion and to educate voters. It suggests that certain conservatives empowered bureaucracies, particularly the Treasury Department and the Interstate Commerce Commission, to implement policies they believed were extremely unpopular, culminating in a new regulatory state capable of limiting public opinion's influence upon politics.Less

Charles Francis Adams Jr. and Bureaucracy

Samuel DeCanio

in Democracy and the Origins of the American Regulatory State

This chapter examines why a commission such as the Interstate Commerce Commission (ICC) was created to regulate the railroads by focusing on the views of railroad expert Charles Francis Adams Jr. It ... More

This chapter examines why a commission such as the Interstate Commerce Commission (ICC) was created to regulate the railroads by focusing on the views of railroad expert Charles Francis Adams Jr. It first considers John Reagan's opposition to bureaucracy, and especially to the idea of a regulatory commission, before turning to a discussion of liberal reformers' justifications for commissions. It argues that members of the Republican Party's liberal reform faction favored the creation of an independent commission to mitigate the more radical implications of Reagan's bill. It also explains how the institutional form introduced by Adams and other liberal reformers contributed to state formation and how the creation of the ICC inaugurated a form of state authority that was increasingly federal, regulatory, and bureaucratic.Less

The Compromise of 1877 and Railroad Regulation

Samuel DeCanio

in Democracy and the Origins of the American Regulatory State

This chapter examines the Compromise of 1877 between Republicans and Southern Democrats involving railroad subsidies that would extend Thomas Scott's Texas and Pacific Railroad into their districts ... More

This chapter examines the Compromise of 1877 between Republicans and Southern Democrats involving railroad subsidies that would extend Thomas Scott's Texas and Pacific Railroad into their districts in exchange for making Rutherford Hayes president. Initially documented by C. Vann Woodward in Reunion and Reaction: The Compromise of 1877 and the End of Reconstruction (1954), the Compromise of 1877 involved not only the removal of federal troops from the South but also promises of federal aid to railroads. The compromise collapsed after Hayes became president and refused to provide railroad subsidies to the South. This chapter considers how the collapse of the Compromise of 1877 led Texas Democrat John Reagan to introduce a bill that culminated in the creation of the Interstate Commerce Commission. It also explores the ramifications of railroad regulation championed by Reagan for American state formation.Less

Introduction

Samuel DeCanio

in Democracy and the Origins of the American Regulatory State

This book examines the regulatory state, a specific type of state authority that initially emerged in the late nineteenth century, and its ramifications for American politics. In particular, it ... More

This book examines the regulatory state, a specific type of state authority that initially emerged in the late nineteenth century, and its ramifications for American politics. In particular, it considers the implications of high levels of voter ignorance for democratic politics and the autonomy of modern states as well as the role of political and media elites in the creation of the American state's bureaucratic regulatory authority. Focusing on the period 1860s–1890s, the book shows that this bureaucratic regulatory authority can be traced to the Treasury Department and the Interstate Commerce Commission. It also proposes a theory of the state that challenges widespread assumptions regarding the nature of political power in modern democracies. To support its case, the book explores the impact of conflicts over the gold standard on party ideology and state formation, along with the politics of free silver and inflationary demands for the free coinage of silver at the ratio of 16 to 1. Finally, it discusses the influence of railroad regulation on state formation.Less

Warrior Republicanism

Joshua David Hawley

in Theodore Roosevelt: Preacher of Righteousness

In 1904, Theodore Roosevelt won the presidential election and was sworn in the following year. In his inaugural address, he cast himself as George Washington's intellectual and moral successor while ... More

In 1904, Theodore Roosevelt won the presidential election and was sworn in the following year. In his inaugural address, he cast himself as George Washington's intellectual and moral successor while also placing himself in the company of the framing generation and Abraham Lincoln. Roosevelt's speech signaled his arrival as a mature political leader by portraying himself as a serious political thinker and articulating a brand of politics that was profoundly different from that of his predecessors. His statecraft was more activist, nationalist, and statist and less concerned with rights or the dangers of political power. Roosevelt's warrior republicanism emphasized the importance of cultivating warrior virtues, which he feared might be undermined by self-government, resulting in weakness and mediocrity. Among his policies as president, Roosevelt asked Congress for further reform of the Interstate Commerce Commission, called for strict enforcement of the Elkins Act, proposed to take up tariff reform, and addressed the problem of republican political economy by racializing traditional republican virtues.Less

How the Independent Agency Developed: The Search for Expertise

Marshall J. Breger and Gary J. Edles

in Independent Agencies in the United States: Law, Structure, and Politics

The creation of independent agencies, starting with the Interstate Commerce Commission in 1887, reveals a considerable degree of pragmatic evolution and development. Independence was not an essential ... More

The creation of independent agencies, starting with the Interstate Commerce Commission in 1887, reveals a considerable degree of pragmatic evolution and development. Independence was not an essential element of this commission’s creation. Rather, the prototypical multimember structure emerged as a default model following experimentation in both Britain and the United States, and political compromise in the nineteenth century. At the outset, the ideology buttressing the independent regulatory agency was a theory of expertise. Such expertise resulted in practical independence from executive direction. The notion of expertise faced considerable pushback toward the end of the New Deal. And, by the 1960s, scholars recognized that the theoretical underpinnings of administrative expertise had been largely undermined, replaced in part by public choice theory and the growth of “interest group pluralism.”Less

Transacting with Common Carriage: The Oil Pipeline Regulations of 1906

in The Political Economy of Pipelines: A Century of Comparative Institutional Development

This chapter provides a discussion on the oil pipeline regulations of 1906. The Interstate Commerce Commission was in charge of regulating pipelines. From 1906 on, oil pipelines were regulated as ... More

This chapter provides a discussion on the oil pipeline regulations of 1906. The Interstate Commerce Commission was in charge of regulating pipelines. From 1906 on, oil pipelines were regulated as common carriers that were obligated to provide transport service to all comers. The result of the 1906 Hepburn Amendment, coupled with the antitrust breakup of Standard Oil in 1911, was the rapid creation of a number of independent oil pipeline companies. Joint ventures continued to be a popular way to make predictable shipments among integrated oil pipelines. Over the century since the Hepburn Amendment, the oil pipeline industry has shown an almost complete absence of effective shipper pressure groups. After the consent decree, the oil pipeline industry continued to develop with a high degree of vertical integration and joint ventures.Less

Getting Thwarted

Adam Slez

in The Making of the Populist Movement: State, Market, and Party on the Western Frontier

This chapter examines the failure of economic regulation in southern Dakota during the late 19th century. It begins by situating the creation of the Dakota Territory Board of Railroad Commissioners ... More

This chapter examines the failure of economic regulation in southern Dakota during the late 19th century. It begins by situating the creation of the Dakota Territory Board of Railroad Commissioners within the broader wave of organizational innovation that followed in the wake of the Granger movement. Created in a moment of legal flux when the power to regulate interstate trade was being pushed to the federal level, the Board was limited in what it could do. Further hampered by a legal environment in which private property was consistently favored over public interest, the Board was left to extract voluntary concessions from railroad officials who knew they held the upper hand. Drawing on annual reports provided by Dakota Territory Board of Railroad Commissioners and its South Dakota successor, this chapter describes the process of regulatory failure, focusing in particular on the fights surrounding rate setting and market access.Less

Federal Trial Testimony, Oxford, Mississippi, December 2, 1963

Maegan Parker Brooks and Davis W. Houck

in The Speeches of Fannie Lou Hamer: To Tell It Like It Is

On June 9, 1963, Fannie Lou Hamer, along with five other companions, while traveling back to the Mississippi Delta after a week-long voter education workshop in Charleston, South Carolina, were ... More

On June 9, 1963, Fannie Lou Hamer, along with five other companions, while traveling back to the Mississippi Delta after a week-long voter education workshop in Charleston, South Carolina, were arrested by Winona and Montgomery County officials, who were not keen on heeding the 1961 Interstate Commerce Commission ruling that effectively integrated interstate travel. In the local jailhouse, two black prisoners—Sol Poe and Roosevelt Knox—beat up Hamer. The beating, according to Hamer, was provoked by her civil rights activism back home in Ruleville. The Justice Department took an interest in the case and eventually filed suit against William Surrell, John L. Basinger, Earle Wayne Patridge, Thomas J. Herod, Jr., and Charles Thomas Perkins. As the star witness, Hamer testified in Oxford on December 2, 1963. Despite her testimony and the damning evidence provided by her travel companions, the accused were acquitted by the twelve-member all-white and all-male jury. This chapter reproduces Hamer’s federal trial testimony in Oxford.Less

Theories of Agency Independence

Marshall J. Breger and Gary J. Edles

in Independent Agencies in the United States: Law, Structure, and Politics

There is intellectual heft in various theories of agency independence but no inevitable truth for all situations. Unitary theorists understand the structure of the Constitution to vest executive ... More

There is intellectual heft in various theories of agency independence but no inevitable truth for all situations. Unitary theorists understand the structure of the Constitution to vest executive power only in the president, so Congress is precluded from placing agencies outside the executive branch or impinging on presidential power. Other scholars, using a functionalist approach, embrace a notion of broad congressional power that justifies divesting the president of unqualified executive power. In their view, Congress may structure the executive department and insulate subordinate officers from unfettered removal power of the president. Practical rather than theoretical considerations motivated creation of the first independent agency, the Interstate Commerce Commission. And constitutional and statutory texts, which are often ambiguous or imprecise, can be read either literally or in context in light of history. Supreme Court decisions have not consistently applied a particular approach or theory.Less

The Return of Humpty Dumpty

Maury Klein

in Union Pacific: The Reconfiguration: America's Greatest Railroad from 1969 to the Present

This chapter examines Union Pacific Railroad's evaluation of opportunities for mergers and acquisitions as part of its new strategy under president John C. Kenefick. Ben Biaggin proposed a merger ... More

This chapter examines Union Pacific Railroad's evaluation of opportunities for mergers and acquisitions as part of its new strategy under president John C. Kenefick. Ben Biaggin proposed a merger between Union Pacific and Southern Pacific Railroad. Kenefick notified New York of the offer and directed John Rebensdorf to study whether Southern Pacific was worth acquiring. Both the Interstate Commerce Commission and the Department of Transportation were in favor of mergers as one solution to the railroad industry's woes. For Union Pacific Corporation, the issue was whether to move aggressively to expand its position or play it safe by clinging to the status quo as long as possible.Less

The New Partners

Maury Klein

in Union Pacific: The Reconfiguration: America's Greatest Railroad from 1969 to the Present

This chapter focuses on Union Pacific Railroad's merger with Western Pacific Railroad and Missouri Pacific Railroad. The merger of the three railroads marked a milestone in John C. Kenefick's career ... More

This chapter focuses on Union Pacific Railroad's merger with Western Pacific Railroad and Missouri Pacific Railroad. The merger of the three railroads marked a milestone in John C. Kenefick's career and opened a new era in Union Pacific's history, one that ended its historic role as a bridge carrier. Even while undergoing the long and tedious process of getting the merger approved, Kenefick began planning how best to put the two systems together. Meanwhile, C. Barry Schaefer created a team of four to oversee the merger process: himself, Paul Conley, Charley Eisele, and Tom Watts. By the time the Interstate Commerce Commission granted approval, it had long since sanctioned the other proposed major mergers in the railroad industry, including Burlington Northern Railroad's acquisition of the Frisco and the union of the Chessie and Seaboard systems into CSX.Less

The Sorting Out

Maury Klein

in Union Pacific: The Reconfiguration: America's Greatest Railroad from 1969 to the Present

This chapter examines the changes at Union Pacific Railroad following its merger with Southern Pacific Railroad and its acquisition of the Chicago & North Western Railroad. The fall of 1995 proved to ... More

This chapter examines the changes at Union Pacific Railroad following its merger with Southern Pacific Railroad and its acquisition of the Chicago & North Western Railroad. The fall of 1995 proved to be one of the busiest and most fateful seasons in Union Pacific history. The merger with Southern Pacific required yet another mountain of paperwork and time expended in dealing with those who objected to it. Hearings commenced on the fate of the Interstate Commerce Commision and what would replace it. Union Pacific took a keen interest in the outcome because the Southern Pacific merger would be the first order of business for whatever entity resulted. The Union Pacific–Southern Pacific merger announcement sparked renewed debate over whether too much power was being concentrated in too few hands throughout the railroad industry.Less