Running on Empty: Trucking Deregulation & Economic Theory

Abstract

Deregulation, that powerful legal, economic, and political movement of the last decade, is beginning to reveal its profound impact upon the industries it has grasped. During the late 1970s and early 1980s, deregulation embraced airline, railroad, bus, telecommunications, broadcasting, banking, cable television, oil and gas and motor carrier industries. Stripped bare of government bureaucrats and layers of red tape, firms in these industries were cast into the stormy seas of the free market to sink or swim on their own.

Not unlike other deregulated industries, the motor carrier industry has been plagued by severe economic problems in the decade of deregulation. Indeed, perhaps the most onerous economic impacts of deregulation have been suffered by savings and loan institutions and motor carriers. Although deregulation of the thrifts made the headlines because the taxpayer has been saddled with more than half a trillion dollars in federal insurance liability, the trucking story has been left untold. Trucking only makes the local news when a semi turns over on the interstate and flattens a few automobiles. But make no mistake about it, the economic carnage in both industries has been relentless.

The level of bankruptcies and rate of concentration among motor carriers have been unprecedented in American business history. The public served by the trucking industry is paying highly discriminatory prices for service. Motorists are endangered by an unacceptable deterioration in the level of safety. As we shall see, these deleterious results of deregulation in the 1980s and 1990s parallel those which preceded economic regulation of motor carriers in the 1930s and of the railroads in the 1880s.

The movement of goods over the highways accounts for more revenue than all the other modes of transportation (i.e., air, rail, water, and pipeline) combined. Nearly everything we Americans consume-our clothes, our food, our furniture, our appliances-was at some point moved by truck. Moreover, transportation as a whole accounts for nearly 18% of the U.S. gross national product. Hence, governmental policy here, good or bad, has profound implications.

In the first part of this article, we will review the principal theoretical underpinnings of deregulation. In the second, we examine the results of deregulation upon this important industry and the public it serves. Finally, we shall explore the theory of economic regulation, and advance a policy justification for a more responsible governmental approach to this important industry.

Keywords: Transportation, Deregulation, Motor Carrier Industry, Trucking Industry, Truckload Carrier, Less-than-truckload, LTL Transportation, Laissez Faire, Destructive Competition, Monopolization, Economic Barrier, Economies of Scale, New Entry, Overcapacity, Declining Productivity, Monopsony, Oligopsony