NEWS & REPORTS

History Of Trucking And Transportation

Feb 9, 2020 | Articles

By Spencer Jensen

Introduction To The History Of Trucking And Transportation

The history of trucking and transportation has followed an interesting trajectory. A good portion of the transportation that is still used today was invented in the twentieth century, a time period in which most of the earlier forms of transportation rapidly became obsolete. The history of trucking is just another part of the picture. The history of trucking changed very rapidly once the twentieth century began, although the history of trucking technically dates back to the late nineteenth century.

Trucking Before 1900

Railroads were basically the trucks of their day. Freight was moved from place to place using railroads in the nineteenth century. Railroads were considered wonderfully impressive inventions at the time, and many people treated railroads as symbols of the fact that they were living in an era of tremendous technological and social progress. A good portion of the people who became wealthy in the nineteenth century did so by investing in railroads.

Railroads almost serve as a symbol of the fact that the nineteenth century was indeed an impressive time period full of rapid social and technological change, but the twentieth century was more impressive and the changes were more dramatic. The twenty-first century appears to be leaving the twentieth century in the dust as well, continuing this trend.

As impressive as railroads were, the freight could still only travel in highly predetermined paths, and the freight was often limited to the most centralized urban areas. From there, the freight was still moved using vehicles pulled by horses. Railroading was a departure from traditional modes of transportation, but it was still dependent on earlier modes of transportation and limited in terms of what it could accomplish.

The rise of trucking made all the difference in terms of the movement of freight, but trucking didn’t really begin until the twentieth century. There were trucks in the nineteenth century, but they were treated as showpieces and technological marvels as opposed to valuable tools. Their utility was primarily for advertising revenue.

It should be noted that one of the biggest boosts to the trucking industry was the widespread growth of paved roads. Roads were much less extensive in the nineteenth century, especially in rural areas. The roads that people would find there weren’t paved. Even if trucks were more advanced in terms of the technology, they weren’t going to be as useful as the trucks today just because the infrastructure of the nineteenth century was not up to the task.

However, the technological limitations of the earlier trucks were certainly nothing to sneeze at for anyone. These trucks used electric engines. It is true that electric engines are praised today for being more environmentally friendly than the internal combustion engines that they could theoretically replace. However, today, the storage batteries for the electric charges are much more efficient. People are capable of traveling longer distances on a single charge. It is also possible to design lots of different refueling stations in the modern world, which would theoretically make it easier for electric engines to be adopted on a wider scale.

Even with the earlier internal combustion engines, drivers were often limited in terms of the distance that they could cover due to the lack of refueling stations on their journeys. With electric engines, the engines would run out of the necessary power fairly early in the process. Drivers could only travel using electric engines using a very narrow driving range.

Modern trucks are also distinguished by the fact that they have tremendously large load capacities. The trucks of the nineteenth century were miniature by comparison. Even if the infrastructure were in place to allow people to travel longer distances and even if the electric engines were more efficient than they were, people still would not be able to carry much in the way of freight using the earliest nineteenth century trucks. As such, the entire process would not be especially cost-effective for anyone.

Traveling much more than short distances in these trucks also would have been unsafe and nearly torturous. Trucking today is often a difficult and dangerous job. Truckers work long hours, and they’re technically getting exposed to the pollution of the road and the sun all day long. The earliest trucks were amazingly even worse when it came to exposing the drivers to the elements. Early vehicles in general were extremely unsafe compared to the vehicles of today. A good portion of the safety features that people take for granted did not become standard until the late twentieth century. The temperature fluctuations that bother truckers today would have been torturous for the people who were driving the trucks of the nineteenth century.

Railroad Routes 1900s

However, the trucks of the nineteenth century were certainly an important part of the process. They served as a template for the trucks that would shortly arrive on the scene in a more influential manner. Technology builds on itself, and the trucking industry of the twentieth and twenty-first century had to get its start with some prototypes. The nineteenth century provided those prototypes.

Railroads also helped set the precedent for being able to move large amounts of freight over long distances. People were already used to that at this point during nineteenth century history, which made the transition to the modern trucking industry that much easier for the people of the time.

 Trucking in 1910

The internal combustion engine was technically invented in 1884, but the gasoline-powered internal combustion engine didn’t really become an economic and cultural force to be reckoned with until the 1910’s. There were other technological improvements during this time period when it came to early trucks, including the switch from chain drives to gear drives. Gear drives last much longer and are easier to use.

The combination of the tractor and the semi-trailer that is so iconic today began during this time period. This design made it that much easier for people to transport freight across large distances in the first place. Trucks were not going to be profitable unless they could carry large amounts of freight from one location to the next in the modern manner. The trucks of the 1910’s were some of the first trucks that were capable of doing so.

There were around one hundred thousand trucks on the road by the year 1914 in the United States. However, the trucking industry was still nothing like it is today. Early trucks had wheels made from solid rubber and iron. The rubber that people are more familiar with today was created in World War Two. The tires of old were woefully inefficient.

People today often complain about trucks wearing down the surface of asphalt roads. However, asphalt roads can withstand a lot of weight. The roads of the early twentieth century were often covered with gravel, and some of them barely even had that level of protection. The first weight limits imposed on trucks in 1913 were actually imposed in order to defend the roads against damage. The first trucks were also not capable of traveling very quickly, largely due to the nature of the tires. As such, it was not going to be very easy to try to move cargo with them anyway.

The Trucking Industry and World War I

World War One, like World War Two after it, helped create many of the facets of modern life that are taken for granted today. Railroads were strained with overuse during the years of World War One. The situation created a demand for alternatives, and the technology was in place for a new trucking industry.

Roy Chapin was the industrialist who helped pioneer the trucking industry of today. He helped found the company that set the stage for American motors. He also helped pioneer the first long-distance shipments by truck. The development of the new inflated tires, known as pneumatic tires at the time, allowed trucks to travel more quickly and more efficiently. By 1920, a million trucks were on the road. It was a steep increase from the previous six-figure estimation.

The development of the trucking industry only became more extensive over the course of the twentieth century. The New Deal policies that expanded the roads and the development of the interstate revolutionized the trucking industry. However, even before 1920, the trucking industry was already thriving.

The beginning of trucking happened earlier than many people think, which is partly due to the fact that moving freight is so economically important. Developments related to moving freight were going to occur relatively early since there is so much economic push for them. The history of transportation has always been colored by technological, cultural, and economic factors.

The early trucking industry and the beginning of the history of trucks was largely influenced by factors as major as a world war and factors as minor as a change in tire technology. Many of the developments that have transformed society got off the ground as a result of similarly modest beginnings. However, by 1920, many of the most major developments in the trucking industry were yet to come for everyone in the world.

Trucking History 1920s

The history of trucking changed dramatically between the beginning of the 1920’s and the beginning of the 1930’s. Technological and tremendous social changes managed to drive the history of trucking in the 20’s. Trucking in the 20’s specifically was largely shaped by technological change that made trucks more efficient and the economic growth that created more drivers in general, as well as the lingering effects of World War One. It was a crucial decade for the history of trucking.

Trucking in the 20’s

People in the 1920’s were still recovering from the effects of World War One in more ways than one. A huge portion of the culture of the day developed based on a reaction to the war. The government took over the railroads until the year 1920, and railroads barely had the capacity for any domestic products when they were burdened with moving around munitions and other supplies that were important to the war effort.

Domestic Products Fueled Trucking Industry

The burgeoning trucking industry began to get more involved in transporting domestic products around the country, and this didn’t stop even when the government relinquished control of the rails in the 1920’s. The trucking industry achieved more power during the war years, and the industry held onto that power and reach. A new niche had expanded, and this was a trend that was only going to continue in conjunction with many of the other cultural changes in the 1920’s.

Driving Becomes The New Norm

This new niche attracted a lot of enthusiastic entrepreneurs. Some of the same people who would have become wealthy for constructing new railroads or getting involved with the railroad business a generation ago soon started to get in on the new trucking industry that was taking shape all around them. Given the economic improvements of the 1920’s relative to earlier points during this time period, it was the perfect moment for a lot of new entrepreneurs to enter the market and try to expand this particular niche.

Automotive Industry Takes Off

One of the most striking aspects of automotive history in general during the 1920’s is the simple fact that driving went from a niche activity to a common one. There still weren’t as many drivers on the road in the 1920’s as there are today, but it was the decade in which driving was really becoming an important part of the American lifestyle.

The 1920’s was the Model T era, where cars were still black and interchangeable, but these black and interchangeable cars still helped transform the nation. Henry Ford made it possible for middle class people to own and operate their own motor vehicles, and he also managed to indirectly create a lot of new industries and technological developments in the process.

New And Improved Roads

Since driving was becoming so common, there was an incentive to update and improve the roads in rural areas. Technically, the old-fashioned roads served their purposes just fine, but they didn’t meet the needs of automobile drivers. Updating and improving the roads opened up rural areas to both cars and trucks, expanding the range of truck drivers everywhere. A lot of the resources that trucks are going to be transporting originate in the country in the first place, so being able to open up the country to trucks made all the difference in the trucking industry.

The Diesel Engine Is Born

The development of the diesel engine was also a major development in the history of trucking. Diesel engines have excellent fuel efficiency compared to gasoline engines. While today, an improvement like that would largely be praised for its environmental benefits, at the time, the improved fuel efficiency helped expand the range of trucks. Filling stations still weren’t as common as they are today. However, the introduction of more filling stations was also an important development in the history of trucking in the 20’s. The long haul truck driving jobs that are famous and infamous today started to become more commonplace during the 1920’s, along with the short haul trucking jobs.

When many people imagine trucks of the past, they are probably mainly wondering when the trucks that they would conceptualize as modern trucks emerged. The trucks made before the 1920’s looked like motorized wagons and ran more like motorized wagons. People today would visually recognize 1920’s trucks as modern trucks. The cabs of the trucks became enclosed, which helped complete the look. The important fifth wheels of trucks were also introduced during the 1920’s, and these were essential for the sake of hooking up trailers in the first place.

Filling Stations Begin To Pop Up On Local Corners

American filling stations date back to the year 1905, where the first one was constructed in St. Louis, Missouri. The drive-in filling stations that people are more familiar with today got their start in 1913. The number of filling stations expanded considerably throughout the 1920’s as the number of American drivers increased and the gas stations could become more profitable.

Before this point in time, the people who needed to replenish their gasoline supplies would have to count on bringing enough gasoline with them, or they would have to hope there was a blacksmith shop, general store, or hardware store nearby. Neither strategy was going to work particularly well for trucks, so the increased availability of filling stations and the increased efficiency of trucks made all the difference in the history of trucking.

The Roaring 1920s Saw It All

Truck and trailer sizes also become standardized during the 1920’s. It was easier for the freight industry to function under those circumstances, and producing trucks on a broad scale became more efficient as a result. The standardized size and weight of trucks was also good for the new roads, so the development of both managed to reinforce each other during the 1920’s.

Safety was a huge issue with early vehicles in general, but trucks did become safer during the 1920’s as well thanks to power assisted steering and brakes. The power assisted steering and brakes made the trucks much easier to use, which made it possible for more people to drive trucks. Trucking in the 1920’s was largely driven by technological and economic progress, which makes complete sense in the era that is still known as the Roaring Twenties.

Trucking History 1930s

The trucking industry suffered throughout the Great Depression of the 1930’s just like every other industry, but the industry did still manage to make some progress during this time period nonetheless. Some entrepreneurs still succeeded, taking advantage of the economic stratification that occurs during times of economic depression. The governmental reforms of the decade helped truckers then, and have continued to help truckers now within the framework of the history of trucking. Trucking in the 30’s continued in spite of everything, making trucking seem like a fitting metaphor for the time period in general.

Trucking Entrepreneurs During the Great Depression

The onset of the Great Depression changed almost everything throughout the world. Most industries suffered during the Great Depression, and the burgeoning trucking industry and freight industries were no exception. In the 1920’s, many entrepreneurs flocked to the new trucking industry in order to jump on the trend and build their fortunes. They helped make the trucking industry a force to be reckoned with in the first place, taking some of the power and domination away from railroads as a result.

A lot of these entrepreneurs were out of business by the time the Great Depression hit, and some of them never recovered their lost fortunes. However, it should be noted that the economic depressions that are bad for society as a whole can end up benefiting some of the wealthiest and most successful people in any given society.

Trucking Industry Able To Grow During Great Depression And Years After

These individuals can take advantage of the reduced competition during these bad economic times, and they can also benefit from a time period in which many items have lost value and have come down in price. These sorts of trends were specifically beneficial for the people entering the trucking industry who needed capital.

Entrepreneur W.W. Estes got a trucking business off the ground in Virginia. He didn’t need much capital in order to do so, and the capital that he did manage to get his hands on was very inexpensive. Even during the worst years of the Great Depression, his business managed to grow and succeed. W.W. Estes wasn’t the only one. The trucking industry more or less managed to contract but also expand during the ’30’s.

People in the trucking industry who managed to stay in business during the Great Depression managed to benefit from the economic recovery that started to take place after the worst years of the Great Depression, so they ultimately came out ahead even if they suffered from setbacks during the early 1930’s. Even some of the wealthiest people of the 1930’s lost everything during the Great Depression, but the wealthy people who didn’t sometimes became even richer.

New Deal Policies and the Great Depression

The Great Depression also changed the history of trucking forever, partly as a result of New Deal policies.The construction of roads expanded further as a result of the Public Works Administration, which was started as part of the New Deal in order to create more jobs throughout the United States. Thousands of miles of road were constructed through the Public Works Administration.

It is true that the creation of the interstate highway system did not really get off the ground until the 1940’s, but the development of the new roads during the Great Depression helped set the stage for these developments too, while also making a huge difference in the history of trucking in general.

American Trucking Association Formed

The lives for truck drivers improved after the early 1930’s. The American Trucking Association formed, which helped protect the interests of truckers. In 1934, a code of fair competition was created in the trucking industry, making it a more equitable industry in general. Many of the corrupt corporate practices that helped initiate the Great Depression in the first place also influenced the trucking industry, and regulations like this were partly created in order to stop that situation from arising again.

Railroad/Trucking Rivalry

The rivalry between the railroad industry and the trucking industry really started to become more heated during the 1930’s as well. Early in the decade of the 1930’s and before that point, the Interstate Commerce Commission only regulated the railroad industry. They did not regulate trucking companies. This was largely the result of cultural inertia. Railroads had been around much longer than trucking companies, some of which were actually formed in the 1930’s itself.

1930s Economic Downturn

The early 30s were hard for most Americans. The government during the 1930’s was desperate to try to fix the economic problems of the day, and they were receptive to the complaints and concerns of many different industries. The rail industry of the day was losing business to the trucking industry, largely because the trucking industry’s lack of regulation gave them something of an unfair advantage.

This lack of regulation was actually one of the reasons why some trucking entrepreneurs during this time period were able to succeed in such a bad economy. If these same people had participated in the rail industry, they would have had worse luck. The fact that trucks could now complete long haul journeys worsened a problem that had been developing for years.

Motor Carrier Act Of 1935

The government responded to the concerns voiced by the rail industry, and Congress passed the Motor Carrier Act in 1935. As a result, the trucking industry was to be regulated by the Interstate Commerce Commission. While it is true that this was partly a measure that was enacted in order to help the railroad industry, it did have benefits for the trucking industry and its employees. The Interstate Commerce Commission helped push for regulations concerning the working hours of truck drivers, which were often far too long and strenuous during the 1930’s. By 1938, hours of service regulations improved the lives of truck drivers all over the country.

Given the cultural changes that took place in response to World War Two in the 1940’s, the benefits that truck drivers received during this time period were that much more important. The lives of truck drivers would have been very different if they had been forced to work in a manner that was more consistent with earlier policies, while also trying to meet the demands of the war effort.

The trucking industry was still fairly new during the 1920’s and the 1930’s. During the 1930’s, many of the problems in the trucking industry were ironed out, creating a more stable and more equitable system. Truckers today are still benefiting from many of the reforms that took place during this time period, even if the Interstate Commerce Commission no longer exists today.

Trucking Industry During The 1950s-1960s

The construction of the interstate highway system continued during the 1960’s, so in some ways, the developments in the trucking industry that occurred during the 1950’s were continued during the 1960’s. However, trucking itself was starting to become a popular topic of discussion during the 1960’s. Trucking and the lives of truckers themselves weren’t as well known to the general public before that point in history, and this change helped shape trucking in the 60’s. However, the development of the interstate highway made trucks and truckers ubiquitous enough that neither could be ignored by the general public. Regulations regarding trucks were also refined during the 1960’s, which only helped raise awareness about trucks and truckers.

Interstate Highway Development and Pop Culture

People were moving to the suburbs in droves during the 1950’s, and commuting to the city through the new interstate highways was becoming very commonplace. Trucks were hauling items throughout the country at the same time. Drivers became used to driving right alongside the large and intimidating long-haul trucks. This was during a time period where there were few safety features for cars or trucks. Highways during the 1960’s were significantly narrower than modern highways. The speed limits were also 55 mph. The highways of the day had a way of creating camaraderie among drivers. Drivers saw truck drivers transporting everything from gasoline to logs in a society that was increasingly dependent on successful long-haul trucking.

Suburban drivers all throughout the country began discussing trucks more often, which raise both awareness and curiosity about them. The American Wild West was a popular subject during the 1950’s and the 1960’s, and the people of the day had a tendency to project those narratives onto lots of unrelated subjects, including truckers. Truckers started to be conceptualized in terms of modern cowboys riding powerful modern vehicles and surviving based on their own wits and determination. This narrative was still developing in the 1960’s, but in many respects, it has not died out even today.

Popular Trucking Songs

Films and songs about truckers and truck driving started achieving popularity during the 1960’s. There is still a stereotype today that many country songs are about trucking. Some of the first country songs about trucking were written during the 1960’s, which is also when a lot of modern music genres were being crystallized. Some of these same songs are even around today.

Driving And Music Becomes Part Of The American Culture

The first FM radio to be installed in a car was introduced in 1952. In 1963, all-transistor radios were added to cars. Listening to music in cars during long commutes was starting to become part of American culture during this time period. Unsurprisingly, a lot of people were interested in listening to songs that were about cars and driving. They liked listening to songs about the powerful trucks driving on the road next to them as well.

Field tests during the 1950’s and 1960’s demonstrated that a lot of the trucks of the day were contributing to the degradation of the new roads just due to their sheer size. In 1964, theAmerican Association of State Highway and Transportation Officials told Congress that one solution to this problem was that there should not be a solid upper weight limit for trucks. Instead, they recommended that the weight limit should be determined on a more case-by-case basis, where the weight limits were calculated based partly on the lengths of axles. This solution managed to avert a lot of potential conflicts between both sides, although it was not put into place until later.

It is possible that the discussions about the effects that the weight of trucks had on the roads only helped to cement their roguish reputation in popular culture. Naturally, professional truckers actually needed to have commercial driver’s licenses, which require their own set of training and education. There were special hours of services for truckers, and this was for the sake of other drivers on the road as well as for the truckers themselves.

The roguish image of truckers from this time period and today is somewhat dubious when the professional and rule-abiding aspects of the job are taken into account. Truckers also come in contact with police officers more than people in other professions, since they spend their careers on the road. However, people during this time period and through to the present were content to view truckers in a more symbolic way, and it seems as if a lot of truckers tried to embrace this image.

This image almost certainly inspired more people to become truck drivers in the first place. The 1960’s was a time period in which a lot of people were searching for their identities in an era of rapid social and technological progress. The restrictive lifestyle of the 1950’s and Cold War conformity left a lot of people wanting more. Some people embraced the progressive counter-cultural movements of the day. Some people embraced images of traditional masculinity, and they adopted truck driving as a profession that embodied freedom, manliness, and independence.

Naturally, the middle class 1950’s lifestyle was never accessible to everyone, and members of the working class would often have to embrace their own very different dreams. Trucking is a job that has attracted a lot of hardworking blue collar workers looking for job security for a long time, and this effect became more pronounced during the 1960’s. By the middle of the 1960’s, 8 million Americans made their living in the trucking industry.

Technological changes in trucks in the 1950’s and 1960’s helped popularize the truck driving experience further. Air conditioning, variable rear suspension, individual front suspension, and power steering all helped make these huge trucks safer and more comfortable to drive. Diesel engines became more powerful during this time period, and engine brake systems improved tremendously with the famous Jake Brake. Even new tinted windows made a big difference, helping truck drivers cope with sun exposure. Trucking driving quickly became open to more people.

The growth of interstate highways increased the number of trucks on the road. Technological and cultural changes helped popularize trucking. The increased interest in trucks and trucking caused more people to go into the profession. It isn’t surprising that there were over 18 million trucks operating in the United States by the year 1970.

How We Got Here: A History Of Regulation

The roots of regulation of the transportation industry go back to 1887, when Congress created the interstate Commerce Commission to oversee the railroad industry. The purpose of the ICC was to ensure that small communities, or communities with limited transportation access, would not be charged excessive rates and be held financially captive by their transportation providers. The ICC approved and set rates that controlled how much a product could be hauled for.

Trucking came under the control of the ICC in 1935, partly due to lobbying from the railroads, which were losing business to the trucking industry. By the 1930’s, trucking was no longer just an urban and short haul transporter, but was now competing head to head with the railroads for long haul transportation.

Under the Motor Carrier Act of 1935, new trucking companies had to seek a “certificate of public convenience and necessity” from the ICC. Companies already operating prior to 1935 were grandfathered in, and got their certificates automatically if they could document their prior service. New trucking companies found it extremely difficult to get operating authority.

The law required companies to file their rates or “tariffs” with the ICC 30 days before they became effective. Anyone was allowed to protest these rates, including competing companies or the railroads.

The regulatory landscape changed again in 1948 with the passage of the Reed-Bulwinkle act which exempted both the railroads and the trucking industry from anti trust laws. This allowed trucking companies to collectively set rates for cargo.

Trucking was broken down into three categories of freight. “Common carriers” were the large pre 1935 existing companies, that could apply for a tariff to haul any freight for any customers. “Contract carriers” could only haul for a maximum of 8 customers, which severely limited the growth of the trucking companies to the size of their customer. Unless the customer grew, the trucking company could not grow. And “Exempt Freight” was things that could be hauled by anyone, at whatever price was negiotiated, but only covered a few products such as logs, produce, cattle, and a few other items that were either very time sensitive or the big companies did not want to handle.

Under this system, one of the biggest issues became that of one compny buying the authority of another in an effort to expand their business. To understand the concept of “authority” lets look at a hypothetical situation. You have a trucking company in Philadelphia, and you have the authority to haul drywall to Buffalo. You find another company that has the right to haul drywall from Buffalo, to Pittsburgh. You buy the second company, and now you would seem have the authority to haul drywall between Philly and Pittsburgh. In truth, the only way you can haul is by going through Buffalo, transferring the load to another truck, and making up a second bill of lading. You do not have authority to haul directly between Philly and Pittsburgh. You also would need a separate authority for another product for the return trip, or the truck would have to return empty.

So from 1935 until 1980, the only way to grow a trucking business was to buy up other companies with authority to haul the products you wanted to the location you wanted to serve. Other companies or the railroads would fight this, claiming that they already served this market, or that they could serve that market but the demand was not there.

By the 1970’s, the handwriting started to appear on the wall that the system of regulation was outdated and ineffective. Products that were exempt from regulation were able to move at prices as much as 20-40% less than regulated commodities. For example, regulated prices for hauling cooked poultry were almost 50% higher than the rates for carrying unregulated fresh dressed poultry.

One of the most famous cases illustrating the absurdity of regulation was the “Yak Fat” case filed by a trucker in Omaha Ne. He had authority to haul meat, but when the customer asked him to haul drums of lard, he submitted an application to the ICC to haul the product and the railroads protested, claiming that they were serbing the customer and the area already. So they next filed an applcation to haul “Tibetan Yak Fat”, and of course, the railroads protested the application. They claimed that they were already hauling millions of tons of yak fat, and that allowing a trucking company in would cut into their business. They also claimed that the truckers could not haul yak fat for the rate they proposed and the lower rate would devastate the market.

Of course, the ICC rubberstamped the railroads protest and ruled in their favor. The story appeared in various newspapers and business magazines, and the owner of the trucking company was pictured with a yak at the Omaha zoo. The Yak Fat issue was one of the prime arguments for deregulating the trucking industry.

In the 1970’s, the Ford and Carter administrations altered the membership of the ICC by adding commissioners who were committed to deregulation of the trucking industry. In 1977, the ICC began to administratively deregulate the trucking industry. between 1975 and 1979, the number of companies applying for entry grew by over 700%, and the number approved climbed by over 800%. In 1980. the Motor Carrier Reform Act of 1980 basically ended the regulation of most trucking companies and commodities, and paved the way for the basic forms of trucking as we know it today.

The deregulation of the trucking industry led to the loss of power from the hands of unions, the end of many of the big unionized LTL companies that prospered under regulation, and the rise of the large truckload carriers that we see today. Companies that fought deregulation and free market rates died, companies that embraced deregulation prospered.

Origins of Trucking Regulation

Like an understudy who outshines the absent star, the trucking industry established itself during a temporary “absence” of railroads, and the railroads never regained the spotlight. During World War I, when the rails were nationalized to assure speedy transport of military troops and supplies, they were often forced to suspend shipment of other freight. Motor carriers took up the slack. The railroads returned to private control in 1920, but by then, trucks were an accepted form of transportation, and their use quickly expanded.

The railroads campaigned for state controls that would limit the competitive advantage of the trucking industry. The railroad industry had itself been regulated for many years–both by state commissions and by the Interstate Commerce Commission, established in 1887 for that purpose. Maximum-rate controls shielded merchants and formers from monopolistic pricing. Even more important as a historical explanation for regulation, minimum-rate controls protected the railroads from one another. But the same regulation that restrained rate cutting within the rail industry left railroads vulnerable to competition from outside.

The state commissions that oversaw railroads also sought controls on trucking, as a way both to ease the decline of railroads and to expand their own influence. Pennsylvania was the first state to adopt trucking controls, in 1914. Thirty-five states had followed suit by 1925. These controls–modeled after regulation of railroads and public utilities–restricted entry into the trucking industry and limited maximum and minimum rates that truckers could charge.



The first proposal for federal regulation of motor carriers took shape in 1925, in response to Supreme Court decisions that upset the informal practice of states controlling interstate trucking on the grounds that the practice invaded a field reserved by the Commerce Clause of the Constitution for federal regulation. The bill–drafted by the National Association of Regulatory Utility Commissioners–called for national controls that would be administered by boards of state commissioners, with the ICC–which had shown little interest in trucking regulation–to intervene only in the event of an appeal. The railroads solidly supported the proposal. Opponents included most truckers, representatives of labor, and shipper groups. But Congress delayed action with respect to trucks and focused instead on regulation of buses, since railroads were still primarily concerned with the decline in passenger traffic and revenue

When the depression settled in several years later, the railroads were extremely hard hit, and the pressure for trucking regulation increased. One vocal proponent was the Security Owners’ Association–a politically powerful group of investors in railroad securities that included more than 1,500 national and state banks, trust companies, mutual savings banks, and life insurance companies. In 1932, the SOA established the National Transportation Commission, with former president Calvin Coolidge as its chairman, and the following year the commission recommended regulation of trucking.

The railroads’ plight also attracted the support of many politicians, most notably Franklin Roosevelt. In a widely publicized campaign speech in 1932, presidential candidate Roosevelt called for elimination of the “unfair competitive advantages” of the trucking industry. Once elected, Roosevelt announced “plans for the regulation of all forms of transportation.”

The depression also served to eliminate the trucking industry’s resistance to regulation, as Ellis Hawley describes:

With the coming of the depression, the drastic drop in demand, and the resulting struggle for available markets, the attitude of some of the larger trucking firms began to change. Their position, they felt, was seriously threatened by the appearance of cut-rate, “fly-by-night” operators, who, with the aid of truck dealers and manufacturers, managed to get a truck on credit, to eke out a living on cut rates until they lost it, and in the process to force down wages and disrupt the whole rate structure. Under the circumstances, there was growing support in trucking, bus, and teamster circles for some type of regulation, some system that would establish minimum rates and wages and eliminate irresponsible operators.

Thus, in 1933, many trucking firms welcomed the establishment of a price and wage code under the National Industrial Recovery Act. Most truckers continued to prefer the code to legislation that would give regulatory control to the rail-minded ICC–the alternative favored by railroads, state rail commissions, and Roosevelt’s federal coordinator of transportation. The motor carrier industry–represented by the newly formed American Trucking Associations (ATA)–was joined in its opposition to legislation by shippers and by auto manufacturers concerned with maintaining the growing market for trucks.

Fearful that Congress would not renew the National Recovery Administration codes when they expired in 1935, the ATA modified its stance on a regulatory bill and testified that the industry was “willing to be controlled by the Federal Government” under a reorganized ICC. But when the Supreme Court declared the NRA unconstitutional in May of 1935, the ATA dropped its opposition to a regulatory bill altogether and became an active sponsor of federal controls.

With the major source of resistance now gone, legislation passed Congress with relative ease. The Motor Carrier Act of 1935 gave the ICC broad regulatory powers over most interstate motor carriers with respect to entry and rates, as well as labor practices, safety, and the issuance of trucking securities. Exempted from regulation were shippers who transported their own goods and carriers hauling unprocessed agricultural commodities–a testament to the political clout of “private carriers” and farmers. (In addition, intrastate trucking remained subject solely to state regulation.) With its domain only slightly narrowed by these exemptions, the ICC set out to reduce competitive disturbances both within the trucking industry and between trucking and rail.

The following years saw dramatic changes in the ICC and the industries it oversaw. Once regarded suspiciously by the trucking industry, the commission gradually adopted an attitude toward motor carriers that was strongly protectionist. The regulated trucking industry changed too–from a struggling infant to a mature, prosperous adult. State highway construction, responding to the flood of new cars bought following World War II, made trucking faster and cheaper. But the real boon was construction of the interstate highway system, which permitted truckers to compete seriously with railroads for long-distance freight. With the highways began a movement of industry away from rail sites and into suburban and rural areas serviceable by trucks. The industrialization of the South, which had few railroads to start with, also benefited trucking as it hurt the rails.

The highway network, combined with significant increases in standard truck size (from twenty-seven feet in the late 1940s to forty-five feet thirty years later), and the inherent advantage of being able to offer door-to- door delivery, produced a rate of growth in motor carriage far greater than that of the economy itself. By 1980, interstate trucking earned $67 billion a year, accounting for over 70 percent of interstate freight revenues. In 1979, the average family spent $800 a year for interstate truck transportation, which is a hidden cost in virtually every product the consumer buys. Of that, about 46 percent-$31 billion total-went to motor carriers regulated by the ICC.

The basic regulatory system that shaped the growth of the entire industry has been described. Many of the policies described were modified or eliminated in the late 1970s by the ICC; the Motor Carrier Act of 1980 essentially codified changes made by a commission that became increasingly reform minded as the prospect of legislative deregulation increased. Other aspects of the system were preserved; the 1980 act reduced regulatory controls on the trucking industry, but it did not eliminate them altogether.

Entry

ICC controls on trucking (like the earlier state controls) were modeled after classical public-utility regulation. The traditional rationale for such regulation is that certain enterprises–like the telephone industry, railroads, and electric utilities–are “natural monopolies.” The technology of these industries is (or once was) such that it would be wasteful to society to have more than one company take on the enormous cost of stringing phone lines or laying track. Since the average cost per connection goes down as the network expands, one competitor will inevitably emerge as the sole provider–or “natural monopolist.” In return for protecting the naturally monopolistic industry from competition, regulation requires that it provide service to all who desire it–what’s known as the common-carrier obligation. Thus the phone company can’t refuse to connect lines to a new home just because it’s out of the way.

The motor carrier industry was regulated as a public utility, even though it did not fit the description of a natural monopoly and that was not the rationale for the 1935 act. The ICC granted trucking firms near-exclusive operating rights to carry certain commodities on certain routes. In principle, these firms performed a common-carrier obligation in return.

The great majority of common-carrier operating rights held even in the late 1970s were issued under the “grandfather clause” of the Motor Carrier Act Given automatically to (18,000) trucking companies that were in business in 1935, the grandfather rights authorized them to maintain their existing routes and service. Later, operating rights became much more difficult to obtain.

New operating authority required a showing of “public convenience and necessity,” the watchwords of the 1935 act. An applicant had the burden of proving that existing firms weren’t already providing a needed service and that they wouldn’t be financially damaged by the additional competition. That a new carrier promised to offer an existing service at a lower cost was by law not relevant to the ICC.

Entry applications were open to challenge by established carriers, and requests for significant operating authority were almost always litigated–a process that could take up to two or more years and $250,000. As a result, applicants often struck deals with would-be competitors, narrowing the scope of their request in return for withdrawal of the legal challenge. Other requests were narrowly drawn to begin with so as to avoid litigation. Thus while the ICC technically granted a very high percentage of all applications for operating rights, the effect on competition was negligible. Most amounted to insubstantial requests, and from existing carriers at that. (Because operating rights were so narrowly defined, carriers had to apply continually for new authority to meet changing freight demands resulting from, for example, construction of a new factory or warehouse.)

Since entry was so tightly restricted, trucking firms typically acquired rights by buying them from an existing carrier. Operating certificates, like broadcast licenses and taxicab medallions, had a market value. For many companies, these certificates were their most valuable asset, and banks routinely accepted them as collateral on loans.

Most coveted were the “general commodity, regular route” certificates, which represented common-carrier authority to truck all but legally exempt goods over designated (“regular”) routes. Those licenses were so lucrative that, in 1977, the eight largest trucking companies–all of which held them–earned a rate of return on equity twice that of the average Fortune 500 company.

General commodity carriers engage in “less-than-truckload” operations–the heart of the motor carrier business. An LTL operation involves diverse cargoes of packaged freight and requires large terminals with loading docks where the cargo can be assembled for shipment or reassigned to local fleets for final delivery. LTL service makes transportation of many small shipments economically feasible–a service no other form of surface transportation can duplicate. Only 1,000 of the 17,000 trucking companies that were regulated in 1979 were general commodity carriers, but they accounted for two-thirds of total regulated trucking revenue. Each of the three largest general commodity carriers–Roadway Express, Consolidated Freightways–and Yellow Freight System–earned close to a billion dollars in 1979.

Most of the remaining firms regulated by the ICC were specialized, irregular route common carriers. These firms, which rely heavily on owner-operators to perform the actual transportation, haul truckload (TL) shipments of a homogeneous cargo using specially tailored equipment such as refrigerated trucks (“reefers”), armored cars, or automobile trailers. Specialized carrier rights-less valued than LTL rights because of competition from railroads for TL shipments-allowed considerable flexibility with respect to routes but authorized only a narrow range of specified commodities.

This system of assigning rights produced some bizarre restrictions. A specialized carrier, for example, might be allowed to carry exposed film but not unexposed film, or lead pipe but not plastic pipe. General freight carriers were often forced to take long, roundabout routes because their authority represented a “tacking” together of operating rights acquired through purchase and merger. Many operating rights contained only one-way authority; thus carriers were legally barred from carrying a load on their return trip (backhaul), even if cargo was readily available to be shipped.

Overall, the ICC’s system of route and commodity restrictions served to divide the market into thousands of segments, each served by only a few carriers. For shipments between large cities that were well-served in 1935, when grandfather rights were issued, there might have been as many as 12 carriers to choose from. In geographic areas of the country that developed after 1935, the choice was likely between only two or three. Long-distance shipments often had to be “interlined” between two or more carriers with adjacent routes.

In addition to general commodity and specialized common carriers, ICC regulation governed contract carriage-service to individual shippers on a long-term contract basis, often using specialized equipment. In recent years, some 3,000 contract carriers, operating under ICC permits that had negligible market value, hauled approximately 7 percent of the total regulated tonnage. During the 1920s and early 1930s, state-regulated common carriers perceived the contract hauler as a threat because he could attract lucrative freight by undercutting their published rates-rates that in theory reflected the added cost of the common-carrier obligation. To prevent what common carriers argued was cream-skimming, the 1935 act provided for setting a floor on contract carriage rates. The ICC also limited severely the number of shippers a contract carrier could serve.

Rates

In addition to restricting entry, the ICC was authorized to regulate trucking rates. The need to control excessive rates is apparent, since a shipper often had little choice as to which carrier could haul his goods to a given destination. But the major objective of ICC controls was to prevent rates from being set too low to maintain an acceptable level of profits and service in the industry. The system that developed collective ratemaking was well suited to that objective.

Collective ratemaking in the (regulated) motor carrier industry was performed, much as it had been historically in the railroad industry, by private “rate bureaus.” These bureaus–regional organizations run by a full-time staff and financed by dues from participating carriers–established rates that were applied uniformly throughout a designated geographic area. Ten rate bureaus composed of general commodity carriers controlled the vast majority of trucking shipments within and between regions of the country.

Rate bureaus operated much like cartels. Carriers held open meetings at which shippers could testify but then voted in secret on proposed rates. While this is price-fixing pure and simple, it was exempted from antitrust action by the Reed-Bulwinkle Act of 1948 passed by Congress over the veto of President Truman.

By law, all bureau-set rates had to be approved by the ICC. But over the years, the commission was extremely sympathetic to the industry and protective of its health. What’s more, the magnitude of the task-several thousand rates were filed every day–left the ICC little choice but to rubber-stamp rate-bureau decisions. In 1977, the commission rejected lesser than 1 percent of the trucking rates filed.

In theory, any regulated firm was free to undercut the collectively fixed rate, but few did since the local rate bureau or a rival carrier was sure to protest. Protests were often filed automatically, regardless of whether the challengers were directly affected. The most notorious example involved an exasperated carrier who filed a rate to carry yak fiat from Omaha to Chicago. Even though yak fat was an imaginary product, thirteen different carriers challenged the rate!

Rate bureaus traditionally served other functions besides providing a forum in which carriers could meet to discuss and set rates. None was more important than the periodic filing of “general rate increase” proposals, designed to raise every bureau-published rate by a fixed percentage in response to higher costs. These proposals, based on average carrier costs, were routinely approved by the ICC. Unlike most regulated utilities, the trucking industry was not held to a maximum rate of return, and the average return on equity for regulated truckers was well above that for other industries.

Unregulated Trucking

A substantial sector of the trucking industry was unregulated, technically speaking. Though not of major size in 1935, this sector accounted for 60 percent of total industry revenue in 1979 and was growing rapidly. Unregulated trucking companies–primarily private carriers and haulers of exempt products–did not need ICC approval to operate, but their services were severely restricted by the ICC nonetheless.

Private carriers are actually shippers who choose to haul their own goods. In 1935, only a small percentage of industry freight went by private truck; by 1978, that share of tonnage had grown to 40 percent. Some of the largest private carriers–Sears Roebuck, for example–have fleets of more than 1,000 trucks.

The dramatic growth in private trucking came about despite ICC regulations. In general, private carriers were barred from soliciting freight on a commercial basis. (The major rationale was the potential for a private carrier to subsidize his transportation operations out of his non-transportation operations and thus gain a competitive advantage.) Since the normal flow of goods for an individual shipper is in only one direction, private carriers’ backhauls were generally empty.

Empty backhauls were also a chronic problem for the 100,000 or more owner-operators who made a living hauling unprocessed food–the other major form of unregulated trucking. An exempt trucker who carried tomatoes to a cannery could not haul canned tomatoes–a regulated commodity–back to the growing area. To avoid “deadheading,” many independent truckers carried nonexempt goods on the return haul under temporary contract to a (specialized) regulated carrier–a practice known as trip-leasing. (Also common was the hauling of “hot” freight.)
Other owner-operators worked under permanent contract to regulated carriers. Under this system–much as with trip-leasing–the certified carrier provided operating rights plus managerial services in return for a 20 to 30 percent commission. (Critics of regulation termed this practice “share- cropping.”) Many specialized commodities–such as household goods and steel–were carried almost exclusively by owner-operators working under long-term contract.

Economic Objections to Regulation

A common view is that regulated firms naturally abhor regulation and would prefer their “freedom.” But the regulated firms in the trucking industry are the very last to want freedom …In this sense, regulation is topsy-turvy. Rather than protecting consumers from the vices of “unbridled enterprise,” regulation is protecting regulated enterprises from the discipline of the marketplace.

Economists criticized the idea of regulating the trucking industry almost from the beginning. Their basic theoretical argument can be simply stated: Trucking is an inherently competitive industry which, when allowed to operate by free-market rules, does an efficient job of allocating and pricing trucking services. The industry possesses neither of the characteristics of a natural monopoly–high capital costs (or other natural barriers to entry) and large economies of scale. Only in LTL operations, which require expensive terminals and a large volume of shipments to run efficiently, might one find significant concentration, but even there, the economies of scale are exhausted far short of monopoly control. And the truckload sector–made up of tens of thousands of small firms, many of them operating just a single rig–is almost a textbook example of a competitive industry.

Regulation’s defenders often counter that the trucking industry should be sheltered from competition because, like a public utility, motor common carriers have an obligation to provide service. The economist’s first response is that such an argument puts the cart before the horse. The common-carrier obligation is the necessary result of a regulated system in which consumers have no alternative supplier, not the justification for it. Second, there is no evidence that ICC-regulated common carriers actually honor that obligation, which is impossible to enforce anyway; trucking firms serve out-of-the-way places, but only when it’s profitable to do so.

While trucking was regulated as if it were a natural monopoly, the rationale for the 1935 act–aside from protection of railroads–was that the industry was too competitive, with alleged results–chaos, cutthroat pricing, excess capacity–that were destructive to the trucking industry, shippers, and ultimately the public. Even if that rationale was valid during the Depression, it ceased to be long ago.

Destructive competition is a “theoretical novelty” about which economists have argued for years, according to James Miller:

It is still not clear whether even in theory destructive competition is feasible (assuming that firms in the industry are rational profit maximizers). But if it is, the requirements are that the industry has substantial fixed costs and that demand be either quite unstable or secularly declining. The interstate trucking industry simply does not fit these requirements. Although there are some fixed costs, the vast majority of costs are variable. As a matter of fact, the ICC uses a rule of thumb that 90 percent of all trucking costs are variable. Also, though demand fluctuates, with seasonal peaks in various areas of the country and for different commodities, its overall pattern is fairly predictable. Finally, as is well known, the demand for trucking has grown rather steadily over time.

That growth in trucking demand came partly at the expense of railroads, and one argument for continued regulation of trucking-echoing the concerns of the 1930s-was the need to prevent further diversion of freight from rails. This raises considerations related to the theory of the second- best, which states that when distortions exist in one part of the economy (e.g., certain aspects of railroad regulation), it is not necessarily efficient to correct distortions in other parts (e.g., trucking regulation). However economists have also shown that second-best considerations do not hold insofar as the distortions are the source of excessive costs of operation. It is always desirable to correct imperfections that lead to smaller output.

In sum, the major arguments for treating the trucking industry like a public utility–to prevent industry concentration, assure service to out-of- the-way places, and hinder destructive competition–have little basis in theory and scant empirical support. Nor are second-best considerations with respect to railroads compelling. What theory and evidence point to, rather, is a system that produces monopoly profits, excessive costs, inefficient price–service options, and discriminatory rates–in short, a system that benefits the regulated industry at great cost to the public.

Monopoly Profits

Regulation provided the two conditions necessary for cartelization: barriers to entry and a means of price fixing. Rate bureaus could set prices well above cost without fear of being undercut by new firms. As a result, regulated carriers received monopoly “rents.”

The clearest evidence of monopoly profits is the value the market placed on operating certificates granted free by the ICC. If profits were normal, no one would pay for the right to enter the industry.

Various estimates placed the total value of operating certificates prior to deregulation at several billion dollars. In 1974, the ATA reported that in recent acquisitions, operating rights had generally sold for amounts equal to 15 to 20 percent of the revenue produced by those rights. Using ATA figures, the White House Council on Wage and Price Stability estimated that industry rights were worth $3 billion to $4 billion. In an independent study of twenty-three attempts to purchase certificates, Thomas Gale Moore confirmed the ATA’s judgment: Buyers on average paid about 15 percent of the expected annual revenue for the rights they purchased. Based on that figure, Moore estimated that large and medium-sized carriers owned rights worth between $2.1 billion and $3 billion.

Other evidence of monopoly profits comes from the 1950s, when unusual circumstances produced a virtual controlled experiment. A series of court decisions forced the ICC to broaden the exemption of unprocessed agricultural goods to include fresh and frozen poultry and frozen fruits and vegetables. The U.S. Department of Agriculture conducted “before” and “after” studies in different markets and concluded that deregulation led to both lower rates and improved service. Shipping rates for fresh poultry fell by 12 to 53 percent, for an average of 33 percent. For frozen poultry the average decline was 36 percent. (Averages for poultry are unweighted.) Rates for frozen fruits and vegetables declined by 19 percent on average. After Congress reregulated frozen fruits and vegetables in 1958, shipping rates rose.

Variations on intrastate trucking controls have also enabled economists to conduct crude natural experiments. Trucking within the state of New Jersey is unregulated. Rates there were found to be 10 to 25 percent lower than for comparable interstate shipments. In Maryland, where intrastate household-goods moving is unregulated, rates were found to be 27 to 87 percent below those of interstate movers. International comparisons also found that trucking rates in countries with little or no regulation were substantially lower than those in regulated countries.

Still other evidence of monopoly profits comes from a comparison of brokerage commissions in the regulated and unregulated sectors. Regulated carriers typically claimed 20 to 30 percent of the revenues earned by owner-operators working under a leasing arrangement. This commission paid for services-insurance, marketing, management-and rental of operating rights. In the exempt sector, agricultural brokers charged 7 to 10 percent for the same services. The difference in commission rates would seem to represent a monopoly rent on ICC certificates.

Excessive Costs

ICC controls enabled carriers to set rates above cost, but they also raised the cost of operation itself-for both regulated and unregulated truckers. The evidence here is more qualitative, as analysts have been hard put to quantify the economic effects.

Route and commodity restrictions are one likely source of inefficiency, leading to unnecessary circuitry, low load factors, and excessive interlining (i.e., transfer of cargo between shippers), all of which consume gasoline and labor. Various studies have reported finding high rates of empty backhauling, particularly among exempt and private carriers, but it’s hard to say how much of total industry underutilization was caused by ICC restrictions.
The ICC’s system of rate regulation was another source of excessive costs. Particularly in the LTL sector–where general rate increases were based on average industry costs–the system protected less efficient firms. That protection was limited, however, in areas where (LTL) carriers could compete on the basis of service.

The general rate-increase mechanism also led to higher labor costs. Since over 60 percent of motor carrier operating expenses go for labor, a rise in Teamster wages was usually sufficient to trigger an across-the-board increase in bureau-set rates. Regulated carriers had less incentive to resist union demands, knowing they could pass the cost along to their customers automatically. Any single firm had an incentive to reduce its costs, but the industry as a collective bargainer faced no such incentive. (While high wages are treated here as an “excessive cost” of operation, they more accurately represent a monopoly rent to organized labor.)

Regulation tends to increase wages through another effect as well. It strengthens union power by preventing nonunion firms from entering the industry and competing for traffic carried by unionized firms. Based on an empirical study of these two effects, Moore estimated that regulation–unionization produced gains to Teamsters employed in the trucking industry of between $1 billion and $1.3 billion in 1972.

Inefficient Price-Service Options

In the same way banks offered depositors free checking accounts and other bonuses to get around federal ceilings on interest rates, many regulated truckers offered better service–such as more frequent pickup or rush-hour delivery–in place of cheaper rates. When regulation restricts rival firms from lowering prices, they will inevitably compete by offering customers better service. Additional service raises operating costs. While this is not intrinsically bad, service competition is inefficient because customers generally don’t value the additional service at what it costs to provide it. On the plus side, the service is worth something to customers, and it serves to reduce monopoly rents as it restores consumer surplus.

While regulated carriers found limited ways to circumvent ICC controls, shippers were still faced with inflexible and inefficient rate-service (price-quality) choices. Some shippers would have preferred less service at a lower rate. Others would have gladly paid a premium for still better service. Collective ratemaking precluded this, however, and thus distorted shippers’ decisions about such things as where to locate, when to schedule production, and how large an inventory to maintain.

Discriminatory Rates

Other distortions resulted from the rate structure for regulated trucking. To prevent individual shippers from being arbitrarily advantaged by preferential treatment or efficiency differences between carriers, the ICC required regulated firms to charge “equal rates for equal miles” to shippers moving similar freight. But when costs varied, some shippers were overcharged and others were subsidized.

For example, regulated carriers charged the same rates for backhaul (the direction with the light load) as for prime haul, even though backhaul costs are lower because of the additional capacity. This affected shippers’ locational decisions and discriminated against certain regions, because traffic to an area tends to be either predominantly prime haul or predominantly backhaul. The “equal rates for equal miles” rule also precluded peak-load pricing. Thus shippers had no incentive to take advantage of off-season months, when carrier costs are lower.

Another form of price discrimination resulted from regulated truckers’ policy of charging more for high-value goods than for low-value goods that cost the same to transport. The greater the market value of a product relative to its transportation costs, carriers reasoned the less concerned shippers would be with freight prices. Thus truckers charged twice as much to haul nylon as cotton hosiery out of South Carolina. The shipping rate for champagne was considerably higher than that for ginger ale.

This system of price discrimination eventually proved counterproductive as certain shippers resorted to more expensive (to society) alternatives such as private carriage or air freight. The loss of “good freight”–freight assigned rates that were especially high relative to cost- eventually became one of the most serious problems faced by the regulated trucking industry.

In sum, ICC regulation produced monopoly profits, excessive costs, and other inefficiencies resulting from inflexible price-quality choices and rate discrimination. The price tag to consumers, by many estimates, was billions of dollars annually.

Who benefited from this system? Most directly, the owners of ICC certificates did; but only the original owners, oddly enough. Those who bought certificates earned no more than a competitive rate of return when the cost of the certificates was taken into account. As with any asset, the value of future earnings made possible by ownership gets capitalized into its price.

Labor was the other major beneficiary of ICC regulation. Teamsters, like certificate owners, earned economic rents in that cartelization of the industry, combined with unionization, resulted in wages higher than would have been necessary to entice them to work. Moore estimated that between 74 and 97 percent of the cost to consumers of ICC regulation ($3.4 billion in 1972 by his calculations) was rent to capital and labor.

Trucking regulation had other, less direct beneficiaries. Among them were the 3,500 attorneys who comprised the ICC Practitioners’ Association. Employees of the ATA, member conferences, state trucking associations, and rate bureaus also benefited. These individuals were evidence for the argument that a large portion of monopoly rents will often be spent on trying to protect the monopoly.

About the Author

NEWS & REPORTS

All 3G ELDs Do Not Comply with FMCSA Regs by 12/31/2022

Verizon is the last network to shut down their 3G network, the sunset date is December 31, 2022.  The other major networks shut down their 3G earlier this year. If you have an ELD system that relies on 3G to operate, it will no longer be compliant.  The carrier has 8...

Preparing your Drivers for Deposition

Doug Marcello, a shareholder with the law firm of Saxton & Stump and chief legal officer of Bluewire, is a trucking defense attorney with a CDL. He had represented trucking clients across the country, having been specially admitted for cases in 35 states. Doug...

10 laws that changed how trucking works

A look back at some of the top labor issues in the freight-hauling industry since deregulation in the 1980s—and even before—as well as the notable impacts of ongoing worker and driver challenges. FleetOwner Staff Although the federal government doesn’t regulate labor...

CATEGORIES