America’s Railroad System Is Great — for Freight

In most of the world’s affluent countries, railroads were either built by the government or eventually claimed by it. Beset by growing losses due to high labor costs, bureaucratic inefficiency, and the rise of automobiles and airplanes, those governments began reforming their rail systems in 1980s and 1990s with a mix of privatization, competition and arms-length contracting.

In the U.S. the railroads began as private enterprises, albeit aided by massive government land grants in the 19th century and subjected to increasingly strict regulation in the 20th. They too struggled as the century proceeded, and the U.S. government embarked on its major rail reforms well before the rest of the world. The Rail Passenger Service Act of 1970 freed private railroads from the requirement of providing passenger service and gave that responsibility to the newly created, government-owned National Railroad Passenger Corporation, or Amtrak. In 1973, after several railroads serving the Northeast and Midwest nonetheless went bankrupt, Congress stepped in again to nationalize and reorganize the industry in the region. Then, with the Staggers Act of 1980, it deregulated freight rail.