How the North kept the South poor

Jackson Jambalaya ^ | July 13, 2015 | kingfish

[prplhze2000]

This 1938 Jackson Daily News article tells the story of how the Southern governors fought to level the playing field with the North when it came to railroad freight rates. The railroad commissions kept the freight rates very slanted towards the North. Canada, yes- Canada, enjoyed lower freight rates on railroads than did the South; so slanted weighted against the South were the rates. Thus a builder in New Orleans could get steel shipped more cheaply from Pittsburgh than he could from Birmingham....

[kidd]

I don’t think there would even be a war.

I think the South+Midwest could escape
gay marriage
Obamacare
creeping socialism

by just deciding to walk away and without a shot being fired. Who’s going to stop the South+Midweat from becoming the better America?

[Bubba Ho-Tep]

FDR was the first national leader to recognize the problem of an impoverished South. I don’t like his solutions, but he was the first one to say something was wrong. At least he backed the South on the railroad fight.

Good, balanced article about the situation here. One way to look at it is northerners keeping the southerners down. Another way is private business and their ability to set their own rates being interfered with by FDR and his Interstate Commerce Commission

[Sherman Logan]

A third way is to recognize that a free market doesn’t exist when there is a monopoly supplier of an essential service.

One railroad into a town, that town has no other way to ship its products. In the days before interstates and long-distance trucking, that is.

So difference in freight rates often reflected more whether there was more than one railroad into a town than the costs of shipping from that town. Differential rates between north and south may simply have reflected the larger number of southern communities served by only one railroad rather than a conspiracy to keep the South impoverished and make the North wealthy.

The owners of railroads, after all, are simply interested in making themselves wealthy, not their region.

[Ditto]

The Grange won that battle in 1887 with passage of the Interstate Commerce Act which ended discriminating rail rates. All rates had to be published and no difference in pricing was allowed between shippers.

[Bubba Ho-Tep]

The owners of railroads, after all, are simply interested in making themselves wealthy, not their region.

Absolutely. And in most of these cases, it seems to have been more about giving favored treatment to larger customers, or some sort of reciprocal arrangement than a conspiracy to keep down a section of the country. And I'll also note that it was northern money that rebuilt the southern rail system after the war and made it possible to integrate with the national rail network. Before the war, the south had 9600 miles of track in a variety of gauges. By 1870, they had 11,000 miles in a standard gauge, and by 1890 they had 26,000 miles. Almost all built with northern money.

[Sherman Logan]

Remember the stories about the 75 mpg carburetors? Rights bought up by carmakers, then kept in the closet to protect the profits of the oil companies.

But any carmaker who put such a device into his cars would instantly and totally dominate the car market.

So for the conspiracy theory to work you have to believe that a carmaker would lose out on a BUNCH of money to protect somebody else’s profits.

Does not compute.

[Hawthorn]

>> The owners of railroads, after all, are simply interested in making themselves wealthy, not their region <

For sure!

Basically, what those ancient “monopoly” railroads were doing was indulging in good old-fashioned price discrimination — an economic phenomenon that has been recognized equally by Marxist economists (e.g., Joan Robinson) and free-market economists (e.g., Milton Friedman).

Moreover, in terms of economic analysis, it basically makes no difference whether the monopolists in question were evil thieves, crony capitalists, sincere Christians, accidental owners of “natural” monopolies or whatever. The normal profit motive calls for price discrimination no matter the “morality” of the monopolist.

(It often won’t be possible for a monopolist to use price discrimination, as for example when there’s no low-cost way to differentiate among classes of customers. But that’s an entirely separate analytical matter.)

[x]

I'd say the main reason is smaller families. The average household has 2 children. Presumably one of those is a son. No way any Union government could bear the 500K dead only sons it would take to hold the country together against a determined secession effort by the red states.

The same logic works the other way around: no way is there going to be any "determined secession effort" by anyone. Other reasons are that we have been such a rich country -- and so preoccupied by mass amusements -- that no region is going to get together to tear the country apart for ideological reasons. And no issue is as monolithically divisive and as impassioned as slavery was a century and a half back. For better or worse, we're still one country.

[rockrr]

I thought it interesting that the 1860 democrat party platform featured making coast to coast railways a national interest:

4. Resolved, That one of the necessities of the age, in a military, commercial, and postal point of view, is speedy communications between the Atlantic and Pacific States; and the Democratic party pledge such Constitutional Government aid as will insure the construction of a Railroad to the Pacific coast, at the earliest practicable period.

[Sherman Logan]

If I remember correctly, westerners and farmers everywhere also complained of price discrimination.

The South may have suffered more not because it was southern but because it was more rural and agricultural and thus easier to exploit than the North, which was much more industrial.

A city-based industry almost always had more than one way to ship his products. A farmer in the South or elsewhere, not so much.

[Hawthorn]

>> If I remember correctly, westerners and farmers everywhere also complained of price discrimination <<

I think you're correct.

Anyway, the main point we need to make in regard to the article that began this thread is not that the "North" wanted to "keep the South poor" -- but rather that whenever there's a monopoly, the normal profit-maximizing motive will induce the monopolist to use price discrimination. He will find this tactic profitable regardless of whether the customer is a poor southern dirt farmer, a wealthy western rancher or whatever.

Moreover, if the monopolist had his druthers, he would in fact prefer that his southern customers and other customers BE AS RICH AS POSSIBLE -- so that they could afford to pay EVEN MORE for the monopolist's services.

In a word, I guess I'd have to say that the underlying premise of the article that started this thread is simply hogwash.