Forty Years’ Systemic
Disintegration of American Railroads

by Richard Freeman

[Print version of this article]

March 19—On Feb. 3, the monster Norfolk Southern 32N train, comprising 149 rail cars, derailed near the town of East Palestine, Ohio, and 38 cars flew off or were pulled off the tracks, producing a mangled nest of rail cars (Figure 1), one of which, Number 23, was on fire.

Media from the United States and around the world carried pictures of the disaster. While some, in their coverage, did provide valuable elements of information, most were silent on the underlying cause, and the broader reason for the crash. The cause was that the Norfolk Southern “wayside defect detector” (WDD) system was incompetent. The National Transportation Safety Board (NTSB) has identified, as the proximate cause of the derailment, the fact that the wheel bearing of car #23 had vastly overheated, and ultimately became non-functional. This was not detected within Norfolk Southern’s WDD system until too late.

This wheel bearing fire is a window into the broader reason: In 1980, the Staggers Rail Act deregulated the U.S. rail industry. Through the fierce process of mergers which followed, the rail companies soon morphed into the Big 5 Rail Cartel, and they run the rail system like a barony. On deregulation’s coat tails, as intended, the rail cartel adopted the policy of share-holder value. It slashed capital investment and the labor force, transferring from these two sources more than $100 billion of funds to its profit column. It poured tens of billions into stock buy-backs and large dividend payouts. It abandoned tens of thousands of miles of lines, cutting off hundreds upon hundreds of towns from the rail system. It does not serve the needs of the nation.

Unless the nation makes far-reaching changes from the top down, there will never be a cure for the U.S. rail system. Rail derailments follow rail derailments. Already, since Feb. 3, two dozen more trains have derailed. According to the Federal Rail Administration of the U.S. Department of Transportation, in 2022 there were 1,049 derailments in the United States, an average of 2.7 per day.

Lyndon LaRouche, in opposition to the rail deregulation of the 1980s, put forth a plan which this article will explore. He called for protective reregulation of the American railroads and the construction of an electrified, high-speed and maglev rail system whose advanced qualities would elevate America to a higher level of scientific development.

Questions on Wayside Defect Detectors

Wayside defect detectors (also known as hot-box detectors) use infrared sensors to assess the health of railcar components including bearings, axles, and brakes by monitoring their temperatures. They are placed along the tracks and take readings as the trains pass (Figure 2). According to the International Journal of Rail Transportation in 2020 (Vol. 8, No. 3, pp. 264-284):

Bearings that trigger an alarm or exhibit warm trending are removed and sent for inspection.

It seems the WDDs should be placed along the track at regular intervals, and that a reasonable, sensible standard should be in effect that requires the removal of faulty bearings, axles, etc. before they reach a temperature that is too hot. This was not true for Norfolk Southern train 32N on the fateful evening of Feb. 3.

When train 32N passed through Sebring, Ohio 30 miles west of East Palestine, the Norfolk Southern wayside defect detector reported that a wheel bearing of one car, reportedly car #23, was 38°F above the ambient air temperature. Another detector in Salem, Ohio, now 20 miles west of East Palestine, measured that wheel bearing at 103°F hotter than the surrounding air. This is quite hot, but Norfolk Southern’s standards don’t call for the train to be stopped and inspected until the bearing reaches 115°F above ambient temperature. The standard appears selected to minimize train stops and maintenance.

Norfolk Southern (NS) chose to place the next detector, not another 10 miles, but rather 20 miles to the east, in East Palestine itself. By the time the train passed East Palestine’s wayside defect detector, the troubled wheel bearing was 253°F too hot, and all of the wheel grease was on fire, as well as part of the undercarriage, which ignited a fire among the plastic pellets that car #23 was carrying. That led to the derailment.

This raises urgent questions: First, why did Norfolk Southern not set a standard of 100°F above ambient air temperature for the train to be stopped and inspected? Had that policy been in effect, Norfolk Southern train 32N would have been stopped in Salem, 20 miles west of East Palestine, with the temperature of the wheel bearing half what it was 20 miles later.

Second, why did Norfolk Southern not install a wayside defect detector at a regular interval of 10 miles from the Salem one? That would have shown a wheel bearing whose temperature was rising to far higher than Norfolk Southern’s standard of 115°F above ambient temperature.

Third, why doesn’t Norfolk Southern maintain a real-time monitoring center at its Atlanta headquarters to collect and study trending data? Had it looked at the fact that car #23’s wheel bearing was 38°F above surrounding air temperature at Sebring, Ohio, and 103°F above at Salem, only 10 miles further on, it would have recognized that the temperature was rising exponentially, and could have stepped in immediately from headquarters.

More Damning: Video Surveillance

Even more damning is the surveillance video that surfaced after the crash, taken in Salem, and showing that car #23’s wheel bearing and part of the car’s undercarriage were on fire at Salem, 20 miles west of the derailment site. That video shows the front part of the train passing, surrounded in darkness, and then one car going by bright with flame on its underside.

If a neutral agency can catch this on surveillance camera, why couldn’t Norfolk Southern—and other railroads—have a system of surveillance cameras installed at regular intervals, to capture video of its own trains on fire? Moreover, there are even more sophisticated, highly accurate, and by now standard, instantaneous feedback monitoring systems to track the functioning and safety of the nearly 7,000 satellites orbiting the earth, such as radio-frequency communication terminals, that could be adapted to the rail system, with tremendous results. Why shouldn’t Norfolk Southern make the expenditure? After all, it is responsible for the safety and well-being of the train.

Finally, there are specialized railway signalmen called “electronic leaders” who inspect and maintain devices like the track-side hot-box detectors. As recently as three years ago, Norfolk Southern employed five electronic leaders in the region. Today, it employs none, according to Christopher Hand, Director of Research at the Brotherhood of Railroad Signalmen. Why?

The answer is that Norfolk Southern’s management set requirements and priorities that would not cost much money. They wanted all available funds wrung out of necessary projects to be diverted to “shareholder value”.

The root of this is to be found in a fundamental shift, for the worse, in the rail industry—and indeed in all U.S. industry. In 1980 the Staggers Rail Act tore down the United States’ protective regulation of the rail industry and prepared the ground for the massive speculation in, and take-down of the rail industry (and indeed, of all the U.S. physical economy). The answers to the questions raised above lie in that Act.

The Staggers Act

The Act was named for Rep. Harley Staggers (D-WV), who chaired the House Committee on Energy and Commerce. Prior to the signing of the Act on Oct. 14, 1980 by President Jimmy Carter, rail carriers were regulated and worked within a common rate-making authority, the Interstate Commerce Commission (ICC), which had been established in 1887. A rail carrier company could neither raise its rates too high, nor set them too low. The ICC would approve rate increases which, basically, encouraged railroads to earn sufficient revenue to cover operating costs; provide for a fund for new capital investment in the rail system; and have profit to pay stockholders a fair return in dividends.

The railroads could neither enter nor leave markets without ICC approval. This meant that railroads could not try to take over, all at once, the most profitable markets, and most importantly, could not abandon routes to hundreds of small and medium-sized communities, where rail service either produced a low profit or small losses for the rail company. Rates were set so that the railroads could use the surpluses from their most profitable routes, to cover the costs of low-profit routes, and connect the country—and the companies would nonetheless earn sufficient profits.

Under this regulation, safety standards were observed; plundering of the rail system and get-rich-quick schemes were largely prevented.

But once under the Staggers Act, a rail carrier could charge basically any rate it chose, and rail shippers and rail carriers would be allowed to establish contracts subject to no ICC review. Not satisfied with that, deregulation forces abolished the ICC in 1995.

The Staggers Act, opening the doors to predatory financiers, devastated the rail system, while clothing itself in the language of building up “free competition.” The railroads engaged in a fierce struggle, driving out the weaker companies, and through mergers and acquisitions became ultra-large companies. In 1980, before deregulation, there were 33 Class I railroads in the United States; that was cut down to five.

Figure 3 shows the Big Five companies of the American Rail Cartel in order of size. The Burlington Northern, and the Atchison, Topeka and Santa Fe were two separate railways, but on Sept. 22, 1995 they merged to become the Burlington Northern Santa Fe (BNSF), the largest American rail shark. In 2009, mega-speculator Warren Buffet purchased the BNSF for $44 billion. The Norfolk and Western, and the Southern were separate railways, but in 1982, just two years after the Staggers Act, they merged to become the Norfolk Southern. CSX, the old Chesapeake and Ohio railway, in 1998 bought half of Conrail, which was largely the failed Pennsylvania RR system bought out by the U.S. government and renamed. The government sold the other half of Conrail to CSX for a song.

The giant Canadian rail systems—the Canadian National Railway, and the Canadian Pacific Railway—collaborate with the American rail cartel, and in fact, buy American railroads (Canadian National Railway swooped in like a vulture, and purchased the Illinois Central Railway in February 1998).

Railroad Take-Down and Shrinkage

Under the new, post-deregulation financial plan of seeking maximal returns by looting capital stock and labor, the rail cartel took down the rail system to a trackage size last seen in America in the Nineteenth Century.

Figure 4 shows that in 1980, the year the Staggers Act became law, the size of the American rail system’s Class I railroads was 165,000 route miles. Class I railroads are the biggest and are classified by a necessary level of annual revenues—today, Class I railroad carriers must earn $900 million in revenue annually. By 2022, the Class I carriers had slashed their route miles to 93,000, a loss of 72,000 miles, and a fall of 44% since 1980. The route mileage of the smaller Class II and Class III railroad carriers had also been slashed, so that from 1980 to 2022, more than 100,000 route miles were abandoned to rust, or pulled up.

To put 100,000 route miles into perspective: Only one country in the world has more rail mileage in its entire system than the amount the United States eliminated—China. This massive route reduction cut off many hundreds of mid- and small-sized communities from rail service, or made it intermittent.

Simultaneously, as Figure 5 shows, from 1980 to 2022 the ravenous Big 5 chopped the rail workforce from 518,000 to 147,000, a loss of 371,000 workers, or 72%. To zero in, Figure 6 shows that just within the four years 2018–2022, the Rail Cartel fired 35,000 workers.

The cartel concentrated on the most profitable routes, where a certain commodity could be transported from Point A to Point B, and there existed a guaranteed fat rate of return. Comprehend for a moment the deadly accountant’s criteria that the City of London and Wall Street encouraged, guiding the rail company’s practice since 1980. One criterion is “revenue per mile.” For each trainload of freight transported one mile, how much revenue does it earn? Let us say that a rail company uses a 50-car train to transport freight one mile and earns $150,000 for that. Well, if it were to double the length of the train to 100 cars, it could double its earnings to $300,000 per mile from the same train (although it would have to employ another locomotive somewhere along the train). And if it tripled the train length to 150 cars, it could earn $450,000 per mile.

That is exactly what the rail companies did. As a result of this and other practices, in 1980, the average revenue per train for the rail industry was $150,000 per mile; by 2014, it quintupled to $823,000 per mile; today, it is likely well above $1 million per mile. This feeds profits and stock prices.

But these “monster trains,” as they are commonly called, with 150–200 cars, which can stretch in length from 1.5–3 miles, can be quite dangerous and produce derailments, especially if the weight of the cars is not balanced and distributed properly along the length of the train. This is particularly true when trains round a curve, producing an increase in torque which can, in turn, increase angular acceleration, which many rail companies do not take into account because it would subtract from their earnings.

Jeff Kurtz, a locomotive engineer for 41 years who retired in 2014, told the Albany Times-Union in an Aug. 8, 2017 article titled, “Railroad Union Says Trains More Than Mile Long Too Risky,”

Long trains often crash or derail in the simulator. They’re a new phenomenon. The engineer driving can’t even see the end of the train. Weather is now more of a challenge. We have to be aware of “sun kinks” caused by waves of heat that make rails so hot they buckle under a heavy train. And more than 100 cars takes quite a while to stop when the engineer hits the brakes, even at 10 mph.

JP Wright, a CSX locomotive engineer for 12 years and freight conductor for 16 years, added,

When we had crews of five and shorter trains, we could walk the entire length and make sure the car numbers and cargo correctly matched what was on the manifest. The only thing that regulated how many cars were in a train were union contracts.

Today, there is no regulation on how many cars a train can carry. Recall that the Norfolk Southern train 32N, that crashed in East Palestine was a monster train, carrying 149 cars. CBS News reported Feb. 15 that, according to employees, the train had already broken down once before it reached East Palestine. It derailed even though it was going only 47–49 miles per hour.

Currently, the rail industry allows only one conductor and one engineer per train. During the rail negotiations between the Big 5 and the Rail Brotherhood unions in December 2022, the unions asked for an increase in the number of engineers per train to two from one, but the cartel ruled it out.

Shareholder Value

Everything mentioned—eliminating 100,000 route miles of trackage; axing 350,000 workers; increasing the revenue per mile on the most profitable routes by running monster trains—works hand in glove with the guiding financial policy that has dominated the rail system for the last four decades: shareholder value, better expressed as looting.

Norfolk Southern exemplifies the process, but the example of any of the Big Five would do. In March 2022, Norfolk Southern announced another stock buy-back plan, this time for $10 billion. To date, it has bought back $2.5 billion of its common stock under the plan. This is a gift to the stock holders and officers who hold stock. The buy-back, by taking shares off the open market, making them scarce, increases the value of outstanding stock. The stockholder can either take the increased value as a realized capital gain, or use the higher valued stock as the collateral for broker loans, etc.

Norfolk Southern also made $1.2 billion in dividend payouts in 2022.

As for the industry as a whole, Martin Oberman, Chairman of the Surface Transportation Board, reported in 2021 that between 2010 and 2021, the five railroad giants poured $114 billion into stock buy-backs. They also paid out $77 billion in stock dividends—a combined total of $191 billion extracted from the company’s treasury for pure speculation. What would be the benefit of that money had it instead been invested in electrified, high-speed rail and maglev, which in fact the rail companies block?

The result is that the railroad industry is the most profitable in America. Comparisun magazine reported the profit margins for 100 American industries in 2019. The railroad industry had an obscene profit margin of 50.9% according to Comparisun, the Oct. 22, 2019 issue of the American Journal of Transportation reported. Rail’s profit margin exceeded that of investment and management firms: 24.5%; money center banks: 21.5%; hospitals and healthcare facilities: 0.8%; and so forth.

Some 40-plus years after the Staggers Act, the rail companies have been turned into their opposite: financial extraction machines.

Deadly Consequences

But there are some deadly consequences.

First, derailments.

The Feb. 3 Norfolk Southern derailment is just one of a series. On March 8, just hours before Norfolk Southern CEO Alan Shaw was to testify before Congress, a monster 212-car Norfolk Southern train derailed in Calhoun County, Alabama, spilling 30 cars in a tangled mess all over the tracks. On March 5, 28 cars of another monster 212-car Norfolk Southern train had derailed in Springfield, in Clark County, Ohio. Through a sequence of events, 1,500 households in Clark County were left without power.

But the other rail companies are as bad or worse. On Feb. 17, thirty cars of a long Union Pacific train jumped off the track near the town of Gothenburg, Nebraska. More than 50 train derailments so far this year could be cited.

Second, failure to deliver vital commodities.

On Jan. 4, the U.S. Surface Transportation Board (STB) issued an emergency order to compel the Union Pacific Railroad to haul corn and grain feed to California to prevent the death of millions of chickens and cattle belonging to Foster Farms, which had contracted with the railroad to deliver the grain. Foster Farms has priority in feed trains coming from the central United States to fulfil orders for livestock and poultry facilities in several locations in California. Foster Farms had to file a petition with the STB to make Union Pacific deliver the grain.

On April 14, 2022, the same Union Pacific ordered CF Industries, a fertilizer group, to cut its shipments on the rail line by 20%. Union Pacific said it reduced fertilizer shipments to “clear up congestion” and “improve service” on the rail system. Union Pacific could not have issued this order at a worse time, as the fertilizer was critically needed for spring planting.

This refusal to haul vital commodity types happens year-in and year-out. It is a critical indicator of the way the rail system is run.

Third, cutting off of communities from the rail system.

The shutdown of 100,000 route miles of rail lines, in order to concentrate on the most profitable, has meant that hundreds upon hundreds of communities have been cut off from rail service. Some still get some rail service from Class II and Class III lines, called “short lines”. But a large number of communities do not. Some rail lines were cut because manufacturing facilities faltered; but reciprocally, the cutting of rail lines led to the shutting of manufacturing plants.

Fourth, raising freight rates.

At first, after the implementation of the Staggers Act, there was sharp cutting of freight rates, in part to drive competitors out of business. But from 2004 to 2019, freight rates have increased 43% on an inflation-adjusted basis, according to a press release of the American Fuel & Petrochemical Manufacturers. Moreover, Freight Waves magazine reported Feb. 18, 2022 that from January 2020 to January 2022, freight brokerage rates rose by 45%. They have risen even further since then. The total freight-rate increase since 2004 is thus over 85%.

The problem is that nearly 80% of companies that ship freight are served by only one rail carrier. If that carrier raises rates, there is little the shipping company can do about it.

National Transportation Safety Board chair Jennifer Homendy announced Feb. 23 that her agency will hold a hearing this Spring to look into the Norfolk Southern 32N derailment near East Palestine, Ohio. The hearing will examine derailment damage, railcar design and maintenance procedures, Norfolk Southern’s use of wayside defect detectors, and railcar inspection practices. That will be helpful and welcomed, although there are larger issues to be looked at.

Destroying the Economy, More Deregulation

In a roughly seven-year time frame, from 1975–1982, the rail industry was not the only sector deregulated. Figure 7 shows that the airline industry was deregulated in 1978 and the trucking industry in 1980, just three months before the railroads. Thus, the three strategic chokepoints of the entire U.S. transportation system were deregulated.

The brokerage industry had been deregulated in 1975, and the banking industry was partially deregulated by the Garn-St. Germain Depository Institutions Act of 1982, freeing up rivers of money that flowed into speculation in transportation, among other industries.

In October 1979, then Federal Reserve Board Chairman Paul Volcker, applying a policy that he designated as “controlled disintegration of the economy,” began tightening interest rates until the prime rate reached an unprecedented 21.5% by Dec. 19, 1980. As a result, the transportation sector, and the total American and worldwide physical economy, disintegrated.

LaRouche’s Call To Reverse Course

The late economist and statesman Lyndon LaRouche long knew the deregulation insanity had to be entirely turned around. Speaking in an Aug. 24, 2002 broadcast, LaRouche asserted:

So, therefore, these areas are [among] the first areas the President must act upon, in a Franklin Roosevelt fashion. First of all, for government intervention and regulation, to defend, and improve the national rail system, as a high-priority investment project. Number two, we must save the air traffic system. Both of these are essential parts of our national economic security. So we must do that.

Now, that opens up a larger area. We are now in the greatest depression in more than 200 years, right? This means that we have to make some fundamental changes, away from the policies of the past 35-odd years, back to the policies of Roosevelt, and the policies of the post-Roosevelt period from 1946 through 1964.

We have to go back to that kind of economic system, now. Which means a regulated system: End privatization, end deregulation, end the funny monetary policies, all these things—get back to things that worked before, and do it immediately!

In the first decade of the 2000s, the Big Three auto makers—GM, Ford and Chrysler—and their auto suppliers, like Delco, were closing or downsizing manufacturing facilities, closing down or selling off the machine tools in the plants, and at the same time, teetering on the edge of bankruptcy. On Nov. 26, 2005, LaRouche responded:

If we allow the U.S. auto manufacturing industry to be destroyed, the U.S.A. becomes a virtual “Third World” nation overnight. The nation’s machine-tool design capability, most of which is tied up in the U.S. auto-manufacturing firms, is lost.

In 2006, LaRouche proposed his Economic Recovery Act of that year. The idea was to take a section of the auto making factories—those closed down and some of those still open as well—and retool their machine tools for other essential purposes. The purpose of that Act, as reported in a Sept. 12, 2008 Executive Intelligence Review article (“Revive LaRouche’s Economic Recovery Act”), was to use the machine tools of auto, and some of the idled aerospace sector, for a mission:

The mission is a large one: trillions of dollars of investment in new high-speed electrified rail corridors; third- and fourth-generation nuclear power plants and transmission systems; high-energy-density water desalination and hydrogen fuel production; water management and treatment; replacing ancient river navigation systems with modern ones; repairing thousands of upstream dams, and thousands of bridges; building components of NASA launch vehicles and satellites.

At the top of the list was a 42,000 mile, electrified, combined high-speed and magnetic levitation rail system, that could carry freight at starting speeds of 80–90 miles per hour, and passengers at a speed in the range of 210–300 miles (338–483 km) per hour as shown in Figure 8. The system would connect every major city, be much faster than current rail service, and be electronically monitored and safe. A second phase of electrified rail would connect southern Chile, through the United States rail network, and up through Alaska into Russia, eventually to Rotterdam.

LaRouche had introduced earlier the idea of rail development corridors, in which the railroad serves as a spine, to develop cities, farmland, water systems, electricity generating plants, etc., in an area 50 to 100 miles on either side of the railroad, bringing productivity to the land.

The development of rail corridors is the way the United States was developed. In 1870, railroads had built 51,000 miles of rail lines, largely in the east of the United States. Under the impetus of Abraham Lincoln’s 1862–65 rail-building legislation—which took a few years to implement—the railroads extended for 163,000 miles by 1890, including five transcontinental railroads, and cities such as Chicago, Omaha, Denver and San Francisco were strengthened or built.

Returning to the present mission, in December 2020, CRRC Tangshan Co. Ltd—a unit of China Railway Rolling Stock Corp.—unveiled a high-speed freight train with a top speed of 217 miles or 350 km per hour. Each car can carry 110 tons of commodities, apparently light- to medium-freight. With the proper mission focus, further advancements can be made in this area. A train of that quality, whoever builds it, would constitute a great benefit to the American rail system.

Deregulation Produced a Backward Cartel

The Big 5 cartel is committed against high-speed rail. Nearly 100% of its fleet of locomotives is diesel-electric. This means their locomotives must haul diesel fuel in tanks holding up to 5,500 gallons, to be injected into an onboard diesel engine that drives an alternator, which produces electricity to run electric motors that power the train. This is absurd; locomotives and trains could obtain electricity directly from overhead catenaries, supplied by power plants, and be rid of diesel fuel altogether. The predator cartel, which has a significant portion of its capital invested in diesel-electric locomotives, defends that outdated technology tooth and nail, and screeches that electrification is too expensive.

The power of the Big 5 rail cartel to keep a lock grip on the operations of the nation’s rail system, ensures that revenues can be looted for stockholder value, with the deadly consequences of daily derailments, restricted service, outmoded technology, and rising rate prices. The cartel’s capital investment is intended only to keep the rail system operating within the mode it chose.

The ability to transport goods and people is an indispensable feature and right of an economy, and is not the private possession of five companies. The destruction should be stopped—through government regulation; we do not wish the government to own the rail companies. The aim is to set guidelines for policy. The rail system reflects the mission, values, and directionality of a society. Breaking the hold of the barons will infuse long overdue scientific transformation into the rail system that will raise the level of technological productivity of the whole physical economy, and the productivity of the powers of labor.

During February, presidential hopefuls Tulsi Gabbard and Donald Trump travelled to East Palestine to offer support; that is well and good. But to put an end to repeated derailments and other depredations, and help the people of that town and the whole country, we need the courage to get to the root cause, to call for protective reregulation and expand capital investments, especially in electrified rail.