The Impact of Railroads on America
The railroad sector has played a crucial role in shaping the United States, influencing everything from the Industrial Revolution to urban development. Without trains, the landscape—and, really, the entire structure—of our country would be vastly different.
Currently, the proposed merger between Union Pacific and Norfolk Southern Railway has sparked discussions that extend beyond transportation. Many criticize such mergers for consolidating power within just a couple of rail companies. Unlike in other industries, where competition thrives, the number of available railways and existing government policies have allowed a few companies to dominate the market. If these two giants merge, American consumers could find themselves at their mercy.
Historically, the introduction of steam locomotives shows how significant this industry remains. Interestingly, in 2023, approximately 38% of all rail traffic in the U.S. was tied to international trade. It’s staggering to think that over 543 million tons of goods traversed through ports and borders.
The Trump administration’s Water Transport Commission should resist this merger, as it could adversely affect consumers, workers, and the national economy as a whole. This situation exemplifies poor trading practices that undermine American competitiveness.
In a recent meeting, Union Pacific’s CEO, Jim Vena, suggested deploying National Guard troops to key cities like Memphis, St. Louis, and Chicago. These are vital hubs for both Union Pacific and its merger partner, Norfolk Southern. Together, they’re aiming to create a “megarailroad” focused on central U.S. routes.
Past mergers indicate that cities connected by these rail systems often face challenges, impacting not just the railways but also the broader network throughout the country. The merging of operations, cultures, and plans complicates matters, creating ripples across the supply chain. Families frequently deal with blockages that can delay them at intersections.
The railway industry is also a significant job creator, employing 153,000 individuals directly as of 2023. Remarkably, it supports around 749,000 jobs through various supply chain activities. This interconnectedness underscores the industry’s vital role in the economy and its community impact.
Under Vena’s leadership, Union Pacific has intensified its effects on the public by significantly reducing its workforce. Texas, with its major population centers served by the company, feels these impacts the most, but it’s not just limited to that state. The operations seemed to suffocate without considering where they might halt, and the federal government initiated a database to track prolonged blocked intersections.
Since 2018, Union Pacific has cut more than 25% of its rail workforce. The result? More blocked crossings due to fewer personnel available to manage trains and resolve public issues. The CEO argues that if the merger is sanctioned by the surface transport committee, no jobs will be lost. He speaks of the synergy of a nationwide railway, along with commitments to retain all staff—but promises like these aren’t new.
While Vena asserts that the merger will be beneficial for customers, history suggests otherwise. The deal entails an investment of $85 billion in Norfolk Southern, which includes a $15 billion “premium” for activist shareholders—costs that will ultimately fall on consumers. Rail rates have surged over 40% as the industry experienced a reduction in competition due to the consolidation of major railroads.
The merger seems primarily aimed at driving revenue growth to satisfy Wall Street’s demands. Strikingly, over the last 20 years, Union Pacific hasn’t managed to increase the volume of goods transported by rail; in fact, the volume has declined. Norfolk Southern has seen comparable decreases in car road volume over the same timeframe. In response, Union Pacific has expanded its back service, resulting in fewer workers and better financial outcomes.
This rail merger appears to serve more the interests of railroad executives and their investors, rather than addressing the needs of American consumers, who rely on affordable shipping solutions.
