The Rise and Fall of the Interstate Commerce Commission: The Tortuous Path From Regulation to Deregulation of America's Infrastructure

For a thousand years from its dedication in 360 A.D., Constantinople's Hagia Sofia was the largest building in the world. As the first Christian Emperor, Constantine had ordered pagan temples pillaged and leveled. Several of Hagia Sofia's stones thus were taken from a nearby Roman temple, which itself had borrowed stones from an earlier Greek temple on the same site. Indeed, as Vikings found themselves in the city during the middle of this time period, some graffiti may attest to a worship of Norse gods. Hagia Sofia was a Christian cathedral until 1453, when the invading Ottoman Turks converted it to an Islamic mosque. In 1935, it was converted into a secular museum. So in today's Istanbul, various generations in tum worshiped Greek gods, Roman gods, a Christian God, and a Moslem God-to say nothing of the Norse gods-on the same hallowed ground. Today, as a museum, Hagia Sophia is no longer a place of worship of any god. As we shall see with respect to regulation of the transportation industry, succeeding generations worship different economic gods as well. Building upon principles of Roman law, English courts, beginning in the Middle Ages, imposed “common carriers” special duties to serve all without discrimination and with strict liability for loss and damage to goods in their care. In 1887, the US government established the first independent regulatory agency, the Interstate Commerce Commission ("ICC" or "Commission"), and would grant it jurisdiction to regulate the rates and practices of the railroads. Currently, several federal agencies, including the Surface Transportation Board, the Federal Maritime Commission, the Federal Energy Regulatory Commission, and the Department of Transportation, regulate rail, motor, air, and water carriage, as well as pipelines and freight forwarders. Despite substantive differences between the kind and scope of regulation by the various agencies, each mode of transportation is in the business of moving passengers or commodities from one point to another. But the policy objectives driving transportation regulation have changed significantly since 1887. Congress initially instituted regulation under the ICC largely to protect the public from the monopolistic abuses of the railroads. Between 1920 and 1975, however, the goal of the national transportation policy shifted to protection of the transportation industry from the deleterious consequences of unconstrained competition. Then, just as market failure had given rise to economic regulation, regulatory failure gave rise to deregulation. Thus, in the last quarter of the twentieth century and into the twenty-first, regulatory policy has sought to stimulate competition in order to enhance consumer welfare. Managed competition across a number of infrastructure industries was jettisoned in favor of market Darwinism. Transportation, as the first major industry to be regulated and, nearly a century later, the first to be deregulated, has been at the forefront of this dramatic (r)evolution in economic policy. In short, the transportation industry has been a great sea upon which the relationship between government and the market has ebbed and flowed over time, with various aspects of laissez-faire, regulation, managed competition, subsidization, and socialism cast upon it during several historical periods. This article surveys some of the historical, political, economic, and public policy forces that have been catalysts for regulation and deregulation. In Constantinople (now Istanbul) and a hundred other national capitals, it is common for young generations to ignore the lessons of history and conclude that their ancestors got it wrong.