Tariffs, rail rates and social welfare in the USA, 1887-1914

Abstract

Purpose This study aims to explain how the Interstate Commerce Commission (ICC) used its power over rail rates as part of an effort to promote the growth of economically underdeveloped regions of the USA. This was accomplished by subsidizing shipments of food and fuel staples to major domestic and world markets and by offsetting the burden of high protective tariffs through low transportation rates on imported goods, from its inception in 1887 until the disruption of ocean transport with the outbreak of First World War in 1914. Design/methodology/approach Through examination of contemporary ICC studies and cases, this study shows how the ICC condoned rate practices that promoted the socioeconomic welfare of sparsely populated regions primarily in the Southern and Western USA. Findings The study illustrates that the ICC facilitated exports by authorizing rates that subsidized the transport of overseas food and fuel staples from the interior while at the same time allowing preferential rail–sea contracts on imports that partially offset the burden of protective tariffs on these regions. The focus on regional social welfare within the ICC largely ended by 1914, with the end of protective tariffs and the start of First World War. Originality/value This new interpretation explains how international trade patterns in the USA were influenced in significant ways by the ICC to achieve regional social welfare objectives and to promote greater national economic integration.