Reviving Capitalism: Lessons from the Near-death and Rebirth of American Railroads

• Published in: Policy File 2015
• Main Authors: Smith, Fred L, Scribner, Marc
• Format: Report
• Language: English
• Subjects: Competitive Enterprise Institute; Economic policy; Industry; Transportation

Free market capitalism, the system that has made possible the prosperity we enjoy today, has been in retreat over the last century. This retreat has been caused in part by the failure of business leaders to defend the moral legitimacy of their companies and products, and indeed, of capitalism itself. The result is widespread popular support for top-down government regulation of the economy. To push back against, and even reverse, this trend, business leaders need to gain the societal legitimacy needed to fend off political predation. In short, continued success in the marketplace increasingly requires successful promotion of economic freedom in the public policy arena. This case study sketches out one such successful effort, in the freight railroad industry's response to political intervention over the last century. The political and economic history of American railroads suggests that regulatory restrictions can be reduced as well as expanded. It also offers concrete lessons on how other types of businesses might respond to government overregulation and gain greater economic freedom in general. Success in the policy arena requires entrepreneurial and intellectual investments in promoting economic freedom, just as investment in promoting one's products leads to success in the marketplace. This essay clarifies the nature of such investments, the rationale for business leaders to join in the fight for economic liberty, and why such efforts may offer attractive economic returns.