The deregulation of United States transport industry picked momentum in 1970s. The inefficiency caused by strenuous regulations angered many policy makers who began to agitate for reforms. While the Civil Aeronautics Board (CAB) exercised control of the aviation industry, the Interstate Commerce Commission (ICC) checked the rates of railroad carriers. The efforts of President Jimmy Carter, Sen. Edward Kennedy, Howard Cannon and Alfred Kahn finally, paid off in 1978 when the Congress passed the airline deregulation act. The law liberalized the operations of airlines in United States. As Anderson (2005), noted “the act ended economic regulations in a series of steps over several years” (p. 67).
Despite the spirited endeavor to weaken government control of the air transport, not much reformation was taking place in the railroad transport. The ICC regulations restricted the interstate freight services. Strict regulations were applied to limit joint ventures, partnerships and acquisitions. Freight companies had to seek approval before changing routes. However, in 1980, the Congress passed the motor carrier act which fundamentally changed the trucking business environment. Boyer & Dubofsky (2001), state “the motor carrier act of 1980 deregulated the trucking business, and stagger act (1980) allowed railroads to compete trucks” (p. 393). After presiding over an industry that was characterized by bureaucracy and public criticism for over 100years, the ICC was abolished in 1995. As a result, the Surface Transportation Board (ISB) was formed in 1996 as an oversight regulator of railroad transport.
Supporters of the deregulation have pointed out numerous impacts of the policy on US economy. Indeed, the freight transportation has made great steps since 1970s. For the last thirty years, the revenue generated from cargo transport and traffic volume grew by 1600% and 1500% respectively. The America transport and logistics companies like DHL and FedEx acquired significant share of the national and international markets. Within the five years of deregulation, the industry saved approximately $ 80 billion in cost due to enhanced efficiency. Besides, the transportation cost accounted for one quarter of these companies operating expenditure in 1970s. By 1900s, the figure had fallen to one fifth of the total expenses.
The expanded transportation network brought about by deregulation stimulated economic growth. Manufacturing and distribution companies were set up in key cities like Boston because of the increased supply of goods and raw materials within US. Consequently, there were millions of job created in the economy. The country also attracted international investment and trade as a result of advancement in technology.
The United States of America experienced about 21% reduction in the cost of shipping cargo after deregulation policy was adopted. The entrepreneurs exploited the efficiency in transportation to deliver commodities in time, manage inventory and reduce distribution cost. They also got access to the global supply chain and international markets and hence produced high quality products such as electronics for exportation
The policy opened the US skies to global Airlines. According to Gilbert & Perl (2010), “US Air line deregulation act of 1978 pioneered eliminations of restrictions on which route air carriers could fly” (p.57). With the deregulation, the number of airlines operating in US increased tremendously. However, there was minimal investment in airport expansion and facilities. As a result, main airports in US started experiencing congestion due to heavy traffic. At times flight could be delayed for hours due to technicalities in Air control department. Conversely, the urge to reduce the cost of operation in the industry occasioned massive retrenchment and lowering of wages of people who worked as drivers and other support staff.
References
Anderson, M. (2005). The new airline code: Why the industry must be programmed to a public private integration. Lincoln: iUniverse, p. 67.
Boyer, S. P., & Dubofsky, M. (2001). The Oxford companion to United States history. New York: Oxford University Press, p. 393.
Gilbert, R., & Perl, A. (2010). Transport revolutions: Moving people and freight without oil. Gabriola Island: New Society Publishers, p. 57.