Imagine you've just invented, like a revolutionary
piece of technology. OK. Let's say it's 1920,
right? And you've developed this high -speed
electric monorail. Oh, wow. Yeah. You have the
blueprints, you've done the math, and you are
absolutely convinced this thing can hit 160 miles
per hour. Which for 1920 is just, that's unbelievable.
Exactly. It could completely modernize American
transportation. So you take it to the federal
government. Makes sense. You show up at the agency
in charge of the nation's transit expecting them
to maybe, I don't know, offer you a grant or
at the very least give you a hearing. Right.
Hear you out. Right. Instead, after weeks of
you pitching your idea, the officials in charge
get so annoyed by your persistence that they
literally have you legally committed to an insane
asylum. It honestly sounds like a dystopian novel.
I mean, the idea that a government bureaucracy
could just lock up an innovator just because
his ideas were disruptive to their daily routine.
It's terrifying. It really is. But that actually
happened in March of 1920. This inventor. named
Ibn Moody Boynton, was thrown into a psychiatric
institution in Washington D .C. as a, quote,
lunatic. Just wild. All because he kept bothering
the Interstate Commerce Commission with his monorail
pitch. And that bizarre, deeply unsettling piece
of history is kind of our gateway into today's
deep dive. Yeah, we are looking at a massive
stack of historical research today. We really
are. We're detailing the life, the explosive
growth, and the eventual and highly protracted
death of the Interstate Commerce Commission,
the ICC. Right. Tracing its whole arc from its
creation back in 1887 all the way to its final
abolition in 1995. So our mission today, for
you listening, is to really understand the hidden
machinery of the modern regulatory state and
to do it without getting completely bogged down
in all the legal jargon. Which is easy to do
with this stuff. But to really grasp the magnitude
of the ICC, you kind of have to look at it as
a structural blueprint. Oh, so? Well, when it
was created, the ICC wasn't just... you know,
another government office added to some org chart.
It was the very first independent regulatory
agency in the United States. The very first one.
Exactly. It essentially birthed this idea of
a fourth branch of government. I mean, before
1887, the structure of the republic was strictly
divided. You had the executive, the legislative,
and the judicial branches. Right, the classic
three. Yeah. And the ICC introduced this completely
new concept. a multi -headed commission designed
to sit outside direct political control. Operating
with this mix of rulemaking, enforcement, and
adjudicative powers. all rolled into one entity.
So every single time you see a federal agency
regulating a part of your life today, you're
essentially looking at the direct descendants
of the ICC. Oh, absolutely. Like when the FCC
manages broadband access, or the SEC monitors
the stock market, or the FTC goes after corporate
monopolies. They are all utilizing the exact
administrative architecture that was invented
for the ICC. They're the children of this late
19th century experiment. We are going to explore
how this single agency, which, by the way, was
created just to keep train ticket prices fair
for farmers, accidentally became a trailblazer
for the Civil Rights Movement. Yeah, that pivot
is incredible. It tried to micromanage the entire
American economy and eventually became so toxic
that it literally legislated itself into total
irrelevance. The trajectory is just staggering.
But to understand the end, or even the middle,
We have to look at the massive economic forces
that forced the U .S. government to invent this
new type of regulatory body in the first place.
We have to go back to the Gilded Age. We do.
So let's set the stage. It's the 1880s. Grover
Cleveland is president. The country is expanding
rapidly westward. I want to know the why here.
What was the specific spark that made Congress
decide they needed a fourth branch of government?
The spark was actually a furious widespread agrarian
revolt. Farmers. Exactly. We're talking about
intense anti -railroad agitation, predominantly
driven by Western farmers, and this really influential
rural organization known as the Grange Movement.
Right, the Grangers. Yeah. You have to put yourself
in the economic reality of an American farmer
in the 1880s. I mean, there are no interstate
highways. There are no commercial trucking fleets.
Airplanes obviously haven't been invented yet.
The railroad is the sole artery of commerce.
So if you're a farmer growing wheat in Nebraska
and you need to sell that wheat in Chicago, you
don't have options. None. You can't just go rent
a fleet of U -Hauls if the local train depot
charges too much. That lack of options was the
absolute crux of the crisis. The railroads possessed
a level of economic power that was virtually
unprecedented in human history. Wow. They were
the tech giants of their day. They operated these
massive capital -intensive networks that completely
dictated the economic life or death of entire
region. And the farmers were just at their mercy.
Completely. And they had three massive systemic
grievances against the railroads. First, absolute
monopolistic power. Second, rampant rate discrimination.
And third, deep -seated political corruption.
Let's break down that rate discrimination piece
first, because I think people assume monopoly
just means, you know, high prices. Right. But
looking at the source material, the pricing wasn't
just high. It was chaotic. It was arbitrary.
And it was specifically designed to punish the
little guy. Arbitrary is the perfect word for
it. The railroads engaged in this rampant price
discrimination between similarly situated customers.
How did that work? Well, They would look at two
different farmers shipping the exact same volume
of grain to the exact same destination and they
would charge them Wildly different prices just
based on who they were pretty much a massive
corporate shipper like a large mining operation
or a sprawling industrial farm They would secretly
negotiate a massive rebate. So the railroad would
charge them a fraction of the published rate
Okay, so the big guys get a huge discount. Yeah
and to make up for that lost revenue The railroad
would then gouge the small independent farmers
who had zero negotiating leverage. So the small
farmer is literally subsidizing the profit margins
of the massive corporation. Exactly. It's like
it's like if an internet service provider charged
a local mom -and -pop bakery a thousand dollars
a month for basic dial -up speeds. Yeah, that's
a great comparison. But then they gave a multinational
tech conglomerate a secret deal for top -tier
gigabit fiber for like ten bucks a month. The
mom -and -pop bakery can't compete, not because
their product is worse, but because the infrastructure
costs are totally rigged. That analogy hits the
underlying mechanism perfectly. The railroads
were picking winners and losers in the American
economy. But it gets even more complex when you
look at geographical discrimination. Right, the
long haul versus short haul problem. I saw that
phrase repeated throughout the research. How
did that actually work in practice? Why would
a shorter trip ever cost more than a longer one?
It comes down to the nature of railroad competition
at the time. Let's say you want to ship a load
of manufactured goods from New York to Chicago.
Okay. That's a long haul. Yeah. But because those
are two massive metropolitan hubs, there are
three or four different railroad companies that
have tracks connecting them. So they have to
fight for your business. Exactly. To win your
business, those four railroads have to compete.
So they slash their prices. The rate from New
York to Chicago just plummets. OK, that makes
sense. Competition drives down prices. That's
capitalism. Right. But. Railroads have massive
fixed costs. They're maintaining thousands of
miles of track, paying huge crews, buying tons
of coal. If they're losing money on that highly
competitive New York to Chicago route, they have
to make it up somewhere else. So they look for
a captive audience. Precisely. They look at the
rural routes. Let's say a farmer in a tiny town
in Iowa wants to ship grain to Chicago. That
town only have one railroad track running through
it. The railroad has an absolute localized monopoly
there. So they just jack up the price astronomically.
Exactly. It was a completely common occurrence
for a farmer shipping grain 200 miles to pay
significantly more than an industrialist shipping
steel 800 miles. That is infuriating. I mean,
you can entirely see why the Grange movement
was mobilizing. They are just being bled dry.
Completely. But if this was so obviously unfair,
why didn't the state governments or the local
mayors step in and stop it? Because the railroads
had already bought them and they did it using
one of the most brilliant insidious and perfectly
legal soft lobbying tactics ever invented. The
free annual pass. The free annual pass. This
detail fascinated me because we aren't talking
about handing over briefcases full of cash and
dark alleys here. This was out in the open. It
was entirely institutionalized. The railroads
would issue free unlimited yearly transportation
passes to anyone they deemed an opinion leader.
So who are we talking about? We are talking about
state legislators, judges, city councilmen, newspaper
editors, and even local ministers. Come ministers,
that is so calculated. Isn't it? They are ensuring
that the moral authority in the town can't preach
a sermon against the real rude without looking
like a massive hypocrite. Precisely. I mean,
if the editor of the local newspaper is using
his free pass to take his family on vacation
to the coast every summer, he is significantly
less likely to run a skating front page editorial
about how the real rude's freight rates are driving
local farmers into bankruptcy. Right. It functioned
as a systemic muzzle on any local opposition.
It really did. So the system is completely rigged.
The states are powerless because their politicians
are corrupted by these free passes. And even
if a state did manage to pass a law, The railroad
just crosses a state line where the law no longer
applies. Exactly. The jurisdiction issue was
huge. So the farmers finally take this to Washington,
D .C., and in 1887, Congress passes the Interstate
Commerce Act. Yes, signed by President Grover
Cleveland. The act creates the ICC. It mandates
that all shipping rates must be just and reasonable.
It explicitly bans the secret rebates and that
long -haul, short -haul discrimination. Right.
And it establishes a five -member commission
to oversee it all. And they put a really serious
legal mind in charge, too. Thomas M. Cooley.
Thomas M. Cooley was the perfect choice to give
this brand new fourth branch some meaty credibility.
He was a titan of legal scholarship. He was the
former dean of the University of Michigan Law
School and the chief justice of the Michigan
Supreme Court. Serious credential. Very. The
explicit design was to have a panel of independent
experts nominated by the president and confirmed
by the Senate. who would sit above the partisan
fray of regular politics. But I have to stop
and point out the sheer audacity of this. Yeah.
You have five guys sitting at wooden desks in
Washington DC and their job is to rein in the
Vanderbilts, the Goulds, the Morgans, the absolute
wealthiest, most ruthless corporate titans of
the Gilded Age. That was a tall order. How could
this tiny untested agency possibly enforce these
massive new rules across a continental economy?
Well, the harsh historical reality is that they
couldn't. They couldn't? No. The ICC's first
decade was an absolute disaster of enforcement.
They were a textbook example of a toothless tiger.
So Congress wrote a rule book, but they basically
forgot to give the referees a whistle. Oh, they
gave them a whistle. Yeah. They just didn't give
them the authority to throw anyone out of the
game. The foundational flaw in the 1887 Interstate
Commerce Act was a severe lack of enforcement
mechanisms. It was a massive gap between the
grand legislative intent of Congress and the
grinding legal reality of the American judicial
system. Walk us through what happened when the
ICC actually tried to enforce that just and reasonable
clause. Let's say a group of farmers complains
that a railroad is charging them triple the rate
of the next town over. OK. The ICC investigates
and agrees. What happens next? So following the
passage of the act, the ICC would hold a hearing.
review the data, and then issue an order telling
the railroad to lower its maximum rate to a specific
dollar amount. The railroad's response, almost
universally, was to simply ignore the order.
Wait, they just threw the federal order in the
trash? Effectively, yes. Because under the original
law, if a railroad ignored an ICC order, the
ICC didn't have the power to fine them directly
or shut down their operations. So what could
they do? The ICC had to go to a federal court
and file a lawsuit to force the railroad to comply.
Ah, so the railroad just moves the fight to a
venue where they have the ultimate advantage.
Exactly. Infinite legal budgets. Yeah. And they
deploy those legal budgets mercilessly. The railroads
drag these cases out for years through endless
appeals. Right. Just stall them out. Yeah. And
when the cases finally reached the Supreme Court
in the late 1890s, the courts dealt the ICC a
series of devastating blows. What did they rule?
The Supreme Court ruled that while the ICC had
the power to declare an existing rate unjust
or unreasonable, the 1887 law did not explicitly
give the ICC the power to set a new maximum rate
for the future. Wait, wait, let me make sure
I understand the absurdity of that legal logic.
The government agency could point at a $10 train
ticket and say, that is illegal and unfair. Yes.
But they couldn't say, the ticket must be $5.
Exactly. They could diagnose the disease, but
the courts ruled they had no legal authority
to prescribe the cure. That is wild. So a railroad
could have their $10 rates struck down, and the
very next day they could issue a new rate of
$9 .99. And the ICC would have to start the entire
multi -year court process all over again. Precisely.
It was a nightmare. That is maddening. It basically
renders the entire agency performative. If they
can't actually fix the prices, what were these
five commissioners doing all day? Well, they
pivoted. They moved to areas where they did have
some undisputed authority. They actually became
the primary federal investigation agency for
railroad accidents. Oh, really? Yeah. They started
compiling massive databases of crash statistics,
looking into boiler explosions and derailments,
which objectively was vital public safety work.
Sure. But it wasn't the aggressive economic regulation
that the Grange movement had demanded. Right.
They were supposed to be the financial watchdogs,
and they ended up being the crash scene investigators.
Pretty much. There is a specific document in
the source material from this era that I think
is one of the most cynical, revealing things
I've ever read. It perfectly captures how the
corporate elite viewed this neutered agency.
You are definitely referring to the Richard Olney
letter. Yes. Listener, you need to hear the actual
text of this because it is an absolute master
class in corporate strategy. It really is. The
year is 1892. Richard Olney is a highly connected
private attorney who frequently represents railroad
interests. He is writing a confidential letter
to Charles Elliot Perkins, who is the president
of the massive Chicago, Burlington, and Quincy
Railroad. A very powerful man. Very. And Perkins
is furious that the ICC exists and wants to lobby
Congress to abolish it. Olney writes back and
essentially tells him to calm down because the
ICC is the best thing that ever happened to them.
And Olney's exact phrasing is chillingly precise.
Here's what Olney wrote, quote, the commission
is or can be made of great use to the railroads.
It satisfies the popular clamor for a government
supervision of the railroads, while at the same
time, that supervision is almost entirely nominal.
Nominal supervision is a devastating indictment.
What Olney is explaining to the railroad president
is the concept of regulatory theater. He is saying,
look, if we abolish the ICC, the farmers will
riot and Congress might pass a law with actual
teeth. But if we keep the ICC around, the public
thinks they are being protected. Right. They
see the official seal and feel safe. Exactly.
They see a federal building with an eagle on
the seal and they assume someone is watching
out for them. Meanwhile, the agency has no actual
power and we can continue operating our monopolies
exactly as we always have. It's the ultimate
shield. The watchdog isn't just toothless. The
burglar is literally feeding the watchdog steak
so the homeowners stay asleep. That's a great
way to put it. And this raises a massive question
about the psychological impact of government.
I mean, when a regulatory body is created with
immense fanfare, promising to level the playing
field, but actually functions as a buffer to
protect corporate monopolies from public anger,
it breeds a deep systemic cynicism. And that
cynicism eventually boiled over. Congress eventually
realized the charade just couldn't continue.
The agrarian populist movement was gaining massive
political traction. The courts had completely
humiliated the ICC, and the federal government
decided they needed to stop playing games. So
what did they do? They decided to hand the ICC
a legislative sledgehammer. Which kicks off the
second major era in our deep dive. From roughly
1906 to 1935, the ICC transforms from this mocked
toothless tiger into an absolute bureaucratic
behemoth. Oh, yeah. They start absorbing jurisdiction
over the American economy at a terrifying pace.
The expansion is breathtaking. It starts with
a tightening of safety regulations. The 1893
Railroad Safety Appliance Act, which was further
strengthened in 1903 and 1910, gave the ICC supreme
jurisdiction over railroad safety technologies,
completely preempting state laws. They mandated
automatic couplers and air brakes, which genuinely
saved thousands of lives. But the real shift
in economic power came with the Hepburn Act of
1906. How did the Hepburn Act solve the problem
of the Supreme Court constantly striking down
the ICC's orders? Congress simply rewrote the
law to be airtight. The Hepburn Act explicitly,
unquestionably authorized the ICC to set maximum
railroad rates. The legal ambiguity was gone.
So no more loopholes? None. If the ICC said the
rate from Chicago to Omaha was $5, it was $5,
and the burden of proof shifted to the railroads
to prove why it shouldn't be. So they finally
get the power to fix the prices. But they didn't
stop at trains, did they? Not even close. The
HEPRON Act expanded the ICC's regulatory umbrella
to cover bridges, terminals, ferries, sleeping
car companies, express shipping companies, and
even oil pipelines. We oil pipelines. I have
to jump in here. How does an agency created specifically
because farmers were mad at grain shipping rates
suddenly get jurisdiction over the booming petroleum
industry? It seems like a stretcher. It feels
like a massive leap in scope. It was a leap.
But a calculated one. Congress realized that
oil pipelines functioned exactly like railroads.
They were massive, capital -intensive infrastructure
projects that effectively created regional monopolies.
Standard oil. Exactly. John D. Rockefeller's
standard oil was using its control of pipelines
to crush competing refineries. Congress saw the
ICC as their new all -purpose hammer for any
infrastructure monopoly. So they threw pripe
lines into the mix. And then four years later,
they tossed telecommunications onto the pile.
Yes. The Mann -Elkins Act in 1910. This act finally
put the nail in the coffin of the long haul versus
short haul fare discrimination we talked about
earlier. Oh, good. But crucially, it expanded
the ICC's jurisdiction to include the regulation
of telephone, telegraph and wireless companies.
Oh, wait. For a period of time, the ICC was regulating
the physical movement of goods and the electronic
movement of information across the continent.
Okay, giving an agency this much power is one
thing. But how a bureaucracy chooses to exercise
that power is where things usually go off the
rails. Definitely. And we have to talk about
the Valuation Act of 1913. When I read this section
of the research, I actually had to read it twice
because the sheer scale of the bureaucratic hubris
is just mind boggling. The Valuation Act is widely
considered one of the most extreme examples of
administrative bloat in early 20th century history.
It's nuts. The logic behind it. from a purely
academic standpoint, almost makes sense. The
ICC was tasked with setting rates that allowed
the railroads to earn a fair return on their
investments. Right. Because the Constitution
says you can't just seize private property, so
the government has to let the railroads make
some profit. Correct. But the ICC bureaucrats
asked themselves, how do we calculate a fair
percentage of profit if we don't know the actual
mathematical value of the company? Oh, no. The
railroads claimed their networks were worth billions.
The populace claimed the railroads were inflating
those numbers to justify high ticket prices.
So the ICC decides they need to find the objective
true value of every railroad in America. Yes.
In 1913, Congress passed the Valuation Act, ordering
the ICC to organize a massive new Bureau of Valuation.
Their mission was to physically assess the value
of every single piece of railroad property in
the United States. Let's ground this in reality
for a second. Consider the physical scale of
the United States in 1913. Huge. The railroad
network stretched from the harbors of New York
to the deserts of Arizona to the logging camps
of the Pacific Northwest. And the government
decided they were going to count Every single
railroad tie. Every single one. Every spike.
Every mile of steel track. Every wooden depot.
Every water tower. Every steam locomotive. Every
switching yard. They tried to physically inventory
a continental empire to figure out what a train
ticket should cost. To pull this off, the ICC
had to hire an absolute army of civil engineers,
accountants, and field inspectors. They sent
teams out into the wilderness with clipboards,
surveying equipment, and adding machines. I just
picture guys in suits hiking into the mountains.
Pretty much. They were measuring the depth of
the gravel ballast under the tracks in the middle
of Montana. It's like if the government today
decided that before they could regulate internet
prices, they needed to deploy federal agents
to individually appraise every single server
in every Amazon data center. Yeah, trace every
mile of deep sea fiber optic cable. Right. And
calculate the exact depreciation curve in millions
of cooling fans. It is an impossible task. How
long did this actually take? The evaluation process
continued for almost 20 years. 20 years! That
means by the time you finish counting the rail
cars in California, the ones you counted in New
York have rusted away and been replaced three
times over. The data is structurally obsolete
the moment you write it down. Exactly. The economy
is dynamic. A bureaucracy moves at a crawl. By
the time the ICC finally began publishing these
massive multi -volume valuation reports in the
1930s, the entire transportation landscape had
changed. I mean, we had cars by then. The automobile
had been invented, the Great Depression had hit,
and the meticulously calculated true value of
a 1913 steam engine was completely irrelevant.
Historians and economists universally agree that
this two -decade massively Evaluation Project
was of practically zero use in actually setting
fair rates. It was a monument to administrative
waste, but the expansion era wasn't just wasteful.
It actually had severe immediate consequences
for the broader economy. It did. Let's talk about
the panic of 1907. Because the research suggests
the ICC's new rate -setting powers directly contributed
to a massive financial crisis. How does capping
a train ticket price crash Wall Street? It comes
down to the mechanics of corporate finance and
unintended consequences. When the Hepburn Act
passed in 1906, the ICC immediately began aggressively
enforcing strict limitations on railroad rates.
They capped the revenue the railroads could bring
in. Okay. But at the same time, the cost of labor
and materials, steel, coal, wages was rising.
So the railroad's expenses are going up, but
the government legally forbids them from raising
their prices to cover those expenses. Their profit
margins get squeezed. They don't just get squeezed.
They collapse. Now, in the early 20th century,
railroad securities, the corporate bonds issued
by the railroads to fund their expansion, were
the bedrock of the American financial system.
Wow. Major trust companies and banks held massive
portfolios of railroad bonds. as their primary
secure assets. Because everyone assumed the railroads
would always make money. They were the blue chip
stocks of the era. Exactly. But when investors
realized the ICC's new price controls meant the
railroads could no longer generate enough profit
to guarantee those bond payments, the value of
railroad securities plummeted. The bonds depreciated
drastically. And when the bonds lose their value,
the balance sheets of the major banks holding
those bonds suddenly look toxic. Precisely. The
banks no longer had the capital reserves they
thought they had. This massive depreciation in
railroad securities was a major direct contributing
factor in triggering the panic of 1907. That's
incredible. A liquidity crisis swept through
Wall Street. Banks failed and the broader economy
suffered a severe contraction. The agency created
to protect the American economy from instability.
inadvertently engineered a financial panic by
failing to understand the complex interconnected
nature of capital markets. It is the ultimate
cautionary tale of heavy -handed price controls.
And yet, the ICC's response to this wasn't to
back off, was it? By 1935, they look at the emerging
trucking and bus industries, and they demand
control over those, too. Yes. The Motor Carrier
Act of 1935 brings interstate trucking and bus
lines under the ICC's jurisdiction. The logic
was that if the ICC only controlled trains, they
couldn't actually control the transportation
market because shippers would just switch to
trucks. Right. So the bureaucracy had to absorb
the competing technology to maintain its grip.
As the ICC gathered all this unprecedented power
over decades, their internal culture really shifted.
They started attempting these massive utopian
social and economic engineering projects. Yeah,
they really did. And this brings us back to the
wild anecdotes we touched on at the start of
the deep dive, the Ripley Plan and the inventor
in the asylum. These stories perfectly illustrate
the mindset of a bureaucracy that has convinced
itself that it possesses the omniscience to manage
a continental economy from a desk in Washington.
Right. Let's examine the Ripley Plan first. OK,
so after World War I, in the Transportation Act
of 1920, Congress directed the ICC to prepare
a master plan to consolidate all the hundreds
of independent railway properties in the United
States into a limited number of massive systems.
They want to forcibly merge the industry. Why?
Because the ICC was tired of having to set different
rates for strong, profitable railroads and weak,
failing railroads. They thought, hey, if we just
force all the strong companies to absorb the
weak companies, we'll have a uniform system that
is much easier for us to regulate. So they hire
an academic to draw the map. Yes. They hired
William Z. Ripley. a prominent professor of political
economy at Harvard University. Naturally. Between
1920 and 1923, Professor Ripley sat in an office
and drafted a master plan for the American economy.
In 1929, the ICC published it as the complete
plan of consolidation. What did this professor's
map actually look like? How do you carve up the
United States? He proposed consolidating the
entire sprawling industry into just 21 regional
railroads, plus about 100 specific terminal operations.
He was playing corporate matchmaker on a staggering
scale. He was literally drawing lines on a map,
declaring that the Boston and Maine railroad
must merge with the Delaware and Hudson. He mandated
that the mighty Baltimore and Ohio Railroad had
to absorb the Reading Railroad and half of the
Moonin Railroad. Just, just dictating it. Yeah,
he told the Union Pacific they were now paired
with the Kansas City Southern. It is staggering
hubris. You have a Harvard professor and a panel
of bureaucrats looking at a map and casually
deciding the fate of billions of dollars of private
enterprise. They're ignoring corporate cultures,
existing debt structures, deeply ingrained rivalries,
just completely overriding market. You two companies
will marry, you will share this track, because
it makes our regulatory models run smoother.
And the reality of the free market completely
rejected this academic exercise. Almost immediately
after the plan was published in 1929, the Great
Depression hit. Oh, perfect timing. Yeah. Many
smaller, weaker railroads went bankrupt. Of the
major lines that survived, the strong ones absolutely
refused to be shackled to the failing ones just
because a government pamphlet said they had to.
Because in reality, a strong company's board
of directors isn't going to deliberately bankrupt
their own shareholders to save an inefficient
competitor just to make the ICC's map look aesthetically
pleasing. Exactly. The railroads resisted furiously,
the economic realities on the ground shifted
daily, and the ICC's grand vision completely
crumbled. Finally, Congress had to admit defeat.
They formally repudiated the Ripley plan with
the Transportation Act of 1940, and the entire
top -down consolidation idea was scrapped. So
they failed spectacularly at corporate matchmaking.
But the story of Ibn Moody Boynton, the monorail
inventor, is where the ICC's behavior crosses
the line from bureaucratic overreach into something
genuinely dark. Let's delve back into that. Boynton's
story is a profound warning about the psychological
rigidity of entrenched bureaucracies. So in 1920,
Ibn Moody Boynton had developed the Boynton Bicycle
Railroad. As we mentioned, it was an innovative
electric light rail system running on a single
track. And he had working prototypes, right?
He did. Proponents of the technology claimed
it could achieve speeds of up to 160 miles an
hour, which would have completely superseded
traditional heavy steam train travel. It is the
1920 equivalent of pitching a hyperloop. Boynton
knows the ICC controls all transportation in
America, so he goes to them to get his technology
adopted. Yes. And he was persistent. According
to the sworn testimony of the ICC's own chief
clerk, Boyne became virtually a daily visitor
at the ICC headquarters in Washington. He was
constantly seeking meetings, constantly pushing
the commission to evaluate and adopt his proposal.
And how does this multi -headed independent agency,
which was ostensibly created to foster and protect
American commerce, respond to a persistent innovator?
They didn't assign an engineer to review his
math. They didn't tell him to go build a test
track. No. In March of 1920, officials of the
ICC coordinated with local authorities and literally
had even Moody Boynton committed to a psychiatric
institution in Washington, D .C. The government
agency in charge of transportation locked an
inventor in an asylum. On what medical grounds?
That is the most disturbing part. ICC officials
later stated on the record that they had him
committed because he was, quote, worrying them
to death with his constant promotion of the bicycle
railroad. worrying them to death. That is the
actual historical quote. It is. They didn't claim
he was violent. They didn't claim he was a danger
to himself. He was simply a nuisance to their
administrative routine. He challenged their paradigm.
Bureaucracies, by their very nature, crave stability,
predictability and order. They exist to manage
the status quo. Right. When someone walks in
off the street with an idea that threatens to
render the entire existing infrastructure obsolete,
the bureaucracy doesn't view that as an opportunity.
They view it as an attack. They pathologized
his innovation. It perfectly illustrates how
ordinary citizens often feel when dealing with
impenetrable government systems today. You bring
a new way of doing things, and the machine tries
to grind you down. Did Boynton ever get out?
He did, thankfully. He fought back from inside
the institution. Based on his own highly coherent
testimony, and with the crucial high -level intervention
of a Massachusetts congressman named William
S. Green, Boynton won his release on May 28,
1920. He spent roughly two months locked in an
asylum simply for pitching a train to the train
commission. While the ICC was busy drawing fantasy
maps and swatting away eccentric inventors, the
timeline of American history was moving forward.
And the agency found itself inadvertently thrust
into the center of the greatest moral and social
struggle of the 20th century. The ICC, almost
entirely by accident, became a pioneer in the
civil rights movement. It is a remarkable historical
pivot, and it highlights the unforeseen consequences
of centralized power. It is vital to state clearly
upfront racial integration, social justice, and
civil rights were never the primary focus of
the ICC's legislative mandate. The commissioners
were economists, lawyers, and logistics managers.
But because the Constitution grants the federal
government power over commerce that crosses state
lines, and because passenger travel is explicitly
defined as commerce, the ICC was letally forced
to confront Jim Crow. This is where we see the
legal mechanics of the Constitution doing some
really unexpected, profound heavy lifting. Civil
rights leaders looked at the board, saw the southern
courts were heavily biased, and brilliantly realized
they could use the federal economic regulatory
framework of the ICC to dismantle segregation.
They turned a logistics agency into a civil rights
battleground. It's genius. Let's trace the timeline.
because it builds a steady drumbeat of legal
victories that precede and parallel the broader,
more fainous events of the civil rights movement.
The strategy really gains traction in April 1941
with a case called Mitchell v. United States.
OK, what happened there? A black congressman
from Illinois, Arthur Mitchell, paid for a first
-class train ticket. When the train crossed into
Arkansas, he was compelled by the conductor to
leave the first -class car and ride in a segregated,
dilapidated second -class car. So Mitchell complains
to the ICC, right? And what does the ICC say?
The ICC initially dismissed his complaint. They
were very reluctant to interfere with Southern
social customs. But Mitchell took it to the Supreme
Court. Good for him. And the Supreme Court ruled
that compelling a passenger who paid for a first
-class ticket to ride in second -class conditions
was fundamentally unjust and a direct violation
of the Interstate Commerce Act's ban on discrimination.
They forced the ICC to reverse this order. So
the Supreme Court forces the ICC to recognize
that if you pay the first -class rate you get
the first -class seat, regardless of race, purely
because to do otherwise is bad business practice
under the regulatory framework. It's an economic
argument achieving a moral victory. Exactly.
Then the strategy moves to buses. In June 1946,
you have Morgan v. Virginia, where the Supreme
Court strikes down state laws requiring segregation
on interstate buses. Using the same logic. Again,
the reasoning was primarily economic. Forcing
a bus driver to stop and rearrange all the passengers
by race every time the vehicle crossed a state
line was deemed an unconstitutional burden on
interstate commerce. Wow. And then they tackle
the dining cars. Yes. In June 1950, Henderson
v. United States, a black passenger with a first
-class ticket was denied service in the dining
car because the single table, conditionally reserved
for black passengers, was occupied by white passengers
and the curtain was drawn. I want to highlight
the ICC's initial reaction to the Henderson case
because it shows how deeply resistant the bureaucracy
was to taking a stand. Right. The ICC's initial
ruling was to try and pass the buck. They ruled
that the railroads racist policy was merely an
error in judgment on the part of an individual
dining car steward. Unbelievable. They tried
to treat systemic racism as a localized customer
service failure. But the Supreme Court struck
that down, too. finding that the published systemic
policies of the Southern Railway itself violated
the Interstate Commerce Act. The ICC keeps trying
to dodge the issue, and the Supreme Court keeps
forcing them back into the ring. But the truly
landmark moment, the case where the ICC itself
finally changes its internal legal paradigm,
happens in the 1950s. It involves a woman named
Sarah Keys. Listener, this is a story that should
be taught in every history class. The Sarah Keys
case is a master class in legal perseverance.
The date is August 1st, 1952. Private Sarah Keys,
a member of the Women's Army Corps, is traveling
in full military uniform on a bus from New Jersey
to North Carolina. Okay. During a stop, the driver
ordered her to give up her seat in the front
of the bus to a white Marine and move to the
back. She refused. She was arrested, held overnight,
and fined. A woman serving her country in uniform
is arrested for sitting in a seat she paid for.
So she files a formal complaint with the ICC,
challenging the fundamental separate but equal
doctrine in bus segregation. And she is represented
by an absolutely brilliant civil rights lawyer
named Dovey Johnson Roundtree. Roundtree's strategy
was audacious. They file the complaint against
the Carolina Coach Company. Now remember the
timeline. This is unfolding right around the
time the Supreme Court is deciding Brown v. Board
of Education in 1954, which famously struck down
separate but equal in public schools. How does
the ICC react to the Syracuse complaint? Do they
see the writing on the wall with Brown v. Board?
Not initially. The initial ICC reviewing commissioner
assigned to the case declined to accept it. The
commissioner made a highly compartmentalized
legal argument. He stated that the Brown decision
only applied to public institutions like state
-funded schools and did not preclude segregation
in a private business such as a bus company.
So the bureaucracy's instinct is to build a wall
around their jurisdiction. Yes, the schools must
integrate, but we govern private commerce and
private businesses can do what they want. But
Debbie Johnson -Rountree refused to accept that
dismissal. She understood the massive implications
of the Commerce Clause. She aggressively petitioned
for a full on -bank review by the entire 11 -person
commission to the ICC. She argued that the logic
of Brown, that separate is inherently unequal,
must apply to interstate travel. And against
all odds, she wins the room. She wins a decisive
victory. Yeah. On November 7, 1955, in the case
of Syracuse v. Carolina Coach Company, the full
ICC explicitly and formally banned bus segregation
in interstate travel. Incredible. This was a
monumental ruling. It officially extended the
moral and legal logic of Brown v. Board of Education
out of the classroom and injected it directly
into the realm of private businesses operating
across state lines. I really want you listening
to this to consider what this means in the broader
context of history. The battle for civil rights
wasn't just fought in the streets or at lunch
counters or in the high -profile Supreme Court
chambers. It was fought in the dusty filing cabinets
and obscure administrative hearing rooms of a
railroad regulatory agency. It's like discovering
a loophole in the IRS tax code and using it to
achieve a massive human rights victory. It's
finding the lever of power wherever it is hidden
and pulling it with everything you have. It was
incredibly strategic and it paved the way for
further action. In 1960, the Supreme Court ruled
in Boynton v. Virginia that segregation in the
actual bus terminal buildings was also illegal.
under the Interstate Commerce Act. And finally,
on September 23, 1961, at the heavy direct insistence
of Attorney General Robert F. Kennedy, who was
dealing with the violence around his Freedom
Riders, the ICC issued sweeping definitive new
rules. They finally put some teeth into it. Yes.
They mandated that all interstate buses display
a physical certificate stating that seating is
without regard to race, color, creed. national
origin and it had to explicitly say it was by
order of the Interstate Commerce Commission.
It is an incredible, undeniable legacy. The ICC
was a vital instrument in dismantling Jim Crow
and transportation. But historical narratives
are rarely simple. Even as the ICC was making
these landmark rulings on human dignity, the
actual economic foundation of the agency, the
core reason it was created to protect consumers
back in 1887, was rotting from the inside out.
It was. The economists were starting to look
hard at the data, and they realized the ICC had
become deeply, structurally corrupted. The civil
rights victories were a triumph of using the
regulatory machinery for good, but the economic
machinery itself was fundamentally broken. Which
brings us to a crucial concept in public policy,
the era of the cartel, the rise of the critics,
and the theory of regulatory capture. This is
where the economists enter the narrative, and
they are absolutely ruthless in their assessment
of the ICC. We need to talk about Milton Friedman,
the Nobel Laureate, and his son, David D. Friedman.
What did they see happening under the hood of
this agency? Let's start with Milton Friedman's
analysis He looked at the long arc of the ICC
and identified it as the textbook classic case
of regulatory capture regulatory capture, right?
it's an economic theory that describes a deeply
cynical cycle a Regulatory agency is created
by public demand to act in the public interest
to protect the people from a powerful industry
But over time the agency gets co -opted or captured
by the very industry. It is supposed to be regulating
How does that actually happen? How does the watchdog
become the guard dog for the burglar? It happens
through a slow alignment of interests. The general
public, the farmers who protested in the 1880s,
eventually go back to their lives. They aren't
paying daily attention to the ICC. But the railroad
executives, their entire profit margin depends
on what the ICC does. So they dedicate all their
resources to it. Exactly. So the railroads hire
the best lawyers, the best lobbyists, and they
engage with the ICC every single day. Eventually,
a revolving door develops. The people working
at the ICC come from the railroad industry, and
when they leave the ICC, they go back to the
railroad industry. So the culture merges. Precisely.
Friedman argued that the existing railroad interests
quickly realized it was much cheaper and far
more profitable to control the ICC than to try
and compete in a ruthless free market. Oh, that
makes sense. They use the ICC's regulations,
the very rules designed to stop them, to erect
massive barriers to entry, strengthen their monopolistic
control, and legally prevent new competition
from emerging. Let's use an analogy to clarify
this mechanism. It's like a town that builds
a massive dam to protect a village from a flooding
river. The dam is run by a government agency.
But over time, the private water company buys
off the dam operators. And soon, the operators
aren't using the dam to stop floods, they are
using the dam to artificially restrict the water
supply, causing a drought in competing villages
so the private water company can charge a premium
for bottled water. The tool of protection becomes
a weapon of monopoly. That is exactly the mechanism.
And David D. Friedman explicitly expanded on
this by looking at how the ICC handled emerging
technologies. He argued that the ICC essentially
served as a government -enforced cartelizing
agent for the railroads. The cartelizing agent.
Meaning they forced everyone to collude on high
prices. How did they do that with the trucking
industry? Remember back in 1935, the ICC expanded
its buffet of power by taking over interstate
trucking and bus lines. According to the critics,
we have to look at why they took over trucking.
They didn't do it to protect the consumer from
bad truck drivers, they did it to protect the
railroads from the trucks. In the 1930s, trucks
were new, they were nimble, they didn't have
massive infrastructure costs like maintaining
steel rails, and they were aggressively undercutting
the railroads on freight prices. The railroads
were terrifying. So the railroads go to their
captured agency, the ICC, and ask for help. Yes,
and the ICC's response was to use its authority
to force the trucking companies to raise their
rates. They actively denied licenses to new trucking
companies who wanted to offer cheaper routes.
That is insane. They artificially inflated the
cost of shipping by truck, specifically to prevent
them from undercutting the railroad's outdated
business model. Wait, I want to make sure the
listener grasps the absurdity of this. If I'm
a farmer or a manufacturer in 1940 and I want
to ship my goods by truck because the truck is
faster and significantly cheaper, the federal
government steps in and says, No, that is illegal.
The truck driver must charge you more money so
that you are forced to consider using the more
expensive, slower train so that the railroad
company doesn't go bankrupt. You have grasped
it perfectly. They were deliberately propping
up an obsolete technology by punishing the innovative
one. And the American consumer paid the price
in hidden inflation on every single shipped good.
The illusion of regulation is highly, highly
profitable for the regulated. Okay, my mind is
completely blown because this takes us all the
way back to Richard Olney in 1892, the letter
we discussed earlier. Olney told the president
of the railroad that the commission satisfies
the popular clamor while being of great use to
the railroads. He wasn't just being cynical.
He was engineering the capture from day one.
He predicted the Milton Friedman thesis over
80 years before Friedman published it. only saw
the architectural flaw from the beginning. And
by the 1970s, the economic damage caused by this
cartel behavior became mathematically impossible
to ignore. The criticism of the ICC was mounting
to a fever pitch. And uniquely, it was coming
from all sides of the political spectrum. That
is rare. Usually, agencies have partisan defenders.
Not the ICC in the 70s. You had critics on the
political left, including consumer advocates
like Ralph Nader, who saw the ICC as a bloated
inefficient corporate capture bureaucracy that
was stifling progress and hurting the working
class. And on the right. And you had critics
on the political right, the free market economists
who saw it as a massive, unnatural interference
in capitalism that was destroying market efficiencies.
When both the progressive left and the free market
right look at your agency and agree that it is
an unmitigated disaster, your days are severely
numbered. Which brings us to the final chapter.
the slow dismantling and the eventual abolition
of the ICC. But you can't just flip a switch
and turn off 100 -year -old bureaucracy. How
does it actually die? It dies through a slow
process of legislative amputation. It's a death
by a thousand cuts. As we mentioned, Congress
actually started stripping away peripheral powers
quite early. Right, like the telecom stuff. Exactly.
In 1934, they realized regulating telegraphs
and trains together was absurd. So they took
telecommunications away and gave it to the newly
created Federal Communications Commission. Then
in 1970, jurisdiction over rail safety, the crash
investigations and equipment standards, was transferred
to the Federal Railroad Administration under
the newer Department of Transportation. So they
are slowly losing limbs. But the real death blow,
the strike to the heart of their economic power,
comes with the massive deregulation wave of the
1970s and 1980s. What changed in the political
calculus? The physical reality of the American
transportation network was collapsing. Despite
all the ICC's protectionist cartel behavior,
the railroads were going bankrupt anyway. Companies
like Penn Central filed for historic bankruptcies.
So the protection didn't even work? No. The tracks
were literally falling apart because the regulations
were so stifling, so slow and so rigid that the
railroads couldn't adapt to the modern logistics
market. They couldn't secure capital to rebuild.
The micromanagement finally choked the patient
to death. So Congress has to step in and apply
a defibrillator. They start torching the 1887
rulebook. Precisely. We see a series of massive,
sweeping deregulation bills. It starts with the
Railroad Revitalization and Regulatory Reform
Act of 1976, known as the 4R Act, which began
loosening rate controls. But the fatal double
punch lands in 1980. First, the Motor Carrier
Act of 1980. massively deregulates the trucking
industry, allowing new companies to enter the
market and compete on price. Then, later that
year, the Stagger's Rail Act of 1980 essentially
strips the ICC of its day -to -day control over
the railroads. Let's explain what the Staggers
Act actually did on the ground. Before 1980,
if a railroad wanted to lower a price to win
a shipping contract or if they wanted to start
running trains on a rural route that was losing
money, what did they have to do? Before Staggers,
they had to file an application with the ICC,
endure months or sometimes years of public hearings,
face protests from competitors, and beg for permission.
It paralyzed business decisions. And after Staggers?
After the Staggers Act. Railroads were suddenly
allowed to negotiate confidential, dynamic pricing
contracts directly with shippers based on market
demand. They were allowed to quickly abandon
highly unprofitable rural branch lines. And what
was the result? Did the sky fall like the Grange
movement predicted a century earlier? The opposite
happened. Politicians like Senator Fred R. Harris
of Oklahoma had strongly advocated for abolishing
the commission, arguing the free market would
save the industry, and they were right. Really?
The railroad industry experienced a massive,
unprecedented renaissance. Without the ICC micromanaging
their balance sheets, railroads became profitable
again. They reinvested billions into track maintenance
and new locomotives. Freight rates adjusted for
inflation actually plummeted for consumers because
efficiency skyrocketed. The cure to the crisis
was simply removing the agency that was ostensibly
managing it. By the 1990s, the Stagger's Act
had proven so successful that the ICC was left
as a hollowed out ghost of its former self. It
had almost no real economic power left to wield.
So what was the final nail in the coffin? The
end came in December 1995. Congress passed the
ICC termination act. After 108 years of continuous
operation, the agency was finally officially
abolished. The final chair, a woman named Gail
McDonald, oversaw the administrative process
of shutting off the lights and locking the doors.
It's kind of sad in a weird way. It is. But like
any complex bureaucracy, the ICC didn't completely
evaporate into thin air. It was more of an organ
donation. Right, because even in a deregulated
market, you still need some foundational oversight.
You can't have complete anarchy regarding corporate
mergers or safety data. Exactly. The government
still needed a referee, just not a dictator.
So the ICC's few remaining vital functions, like
reviewing major corporate mergers to prevent
absolute monopolies or finalizing the legal abandonment
of railroad lines, were transferred to a brand
new, significantly smaller, and much weaker agency
called the Surface Transportation Board, or STB.
And what happened to the trucking oversight?
The licensing and safety registration of motor
carriers was transferred to the Federal Highway
Administration. Eventually, that function was
spun off into the Federal Motor Carrier Safety
Administration, the FMCSA. And this administrative
organ donation leads to a detail that I absolutely
love because I guarantee that you, the listener,
have seen this but perhaps never understood what
you were looking at. Oh, the trucks. Yes. If
you are ever driving down the interstate today
and you pass an 18 -wheeler, I want you to look
at the side door of the cab. You will see a number
printed there that says USDOT followed by a string
of digits. That USDOT number is the direct visible
ghost of the ICC. That is a brilliant connection
to make. Before the ICC was abolished, they issued
specific identification numbers to every trucking
company they licensed, which were printed as
ICCMC followed by the carrier's numbers. And
then they just swapped it out. When the ICC was
terminated in 1995 and the Department of Transportation
took over, USDOT numbers simply replaced the
old ICCMC numbers. So every piece of freight
moving on the highway today carries the genetic
marker of an 1887 railroad law. Those numbers
are critical infrastructure. They allow the government
to track carrier identification, audit safety
records, and coordinate complex logistics across
state lines. The infrastructure of commerce still
requires oversight. It just operates under a
different, somewhat more rational name now. but
its administrative DNA permanently infected the
entire structure of the federal government, which
brings us to the ultimate lasting legacy of the
Interstate Commerce Commission. When historians
look back at this 108 year experiment, what is
the final verdict? The legacy is that the ICC
was the definitive blueprint for the modern administrative
state. It proved to Congress that you could create
a full time permanent regulatory body made up
of appointed experts who theoretically had no
partisan political ties to the industries they
regulated. Right. They weren't elected politicians
subject to the whims of the ballot box. They
were career administrators. And once Congress
saw the blueprint, they copied it relentlessly.
They used the ICC model. to create the Federal
Trade Commission in 1914, the Federal Communications
Commission and the Securities and Exchange Commission
in 1934, the National Labor Relations Board in
1935, and the Consumer Product Safety Commission
in 1975. It's everywhere. All of these powerful
entities were modeled directly on the ICC's structure
of a multi -headed independent commission with
staggered terms. Its influence even crossed the
globe. If you look at the Constitution of Australia,
it actually provides for an interstate commission
that was explicitly directly modeled after the
American ICC. It is the template for modern governance.
But the source material notes something really
profound about that blueprint today. And I want
to leave you, the listener, with this final thought
to mull over. In recent decades, the United States
government has essentially stopped creating independent
commissions like the ICC. The multi -headed independent
model has gone completely out of fashion in Washington.
Yes. If you look at the major regulatory agencies
created since the 1970s, agencies with massive
power over your daily life, like the Occupational
Safety and Health Administration, OSHA, or the
Transportation Security Administration, the TSA,
or the Environmental Protection Agency, the EPA.
They aren't run by a bipartisan panel of five
independent commissioners serving staggered terms.
No, they're not. They are usually headed by a
single person, an administrator, who is directly
appointed by and answers directly to the president
of the United States. They are structured as
executive divisions, not independent branches.
Anne, I want you to really think about what that
structural shift means for the country. We missed
away from regulatory bodies that were intentionally
designed to be isolated from the shifting winds
of presidential elections. that were meant to
be cold, calculated, and somewhat immune to public
pressure. We have replaced them with agencies
that are directly tied to the whims of the Oval
Office, where the enforcement of safety rules
or environmental standards can change drastically
the moment a new president is inaugurated. It
is the central unresolved tension of the modern
administrative state. Which system is actually
better? Exactly. As you navigate the countless
rules that govern your life today, the safety
standards at your workplace, the environmental
regulations on your car, the security lines at
the airport, ask yourself, is it better for a
powerful regulator to be completely independent,
operating like an untouchable panel of experts?
Or is it better for them to be completely accountable
to the politicians we elect, subject to the messy,
volatile realities of a democracy? There is no
easy answer. But the ghost of the ICC, that very
first clunky, over -engineered, massively flawed
gear in the machinery of government, is watching
us as we continually try to figure it out. Thank
you so much for joining us on this deep dive.
Keep questioning the hitter structures around
you. Keep looking for the history in the everyday.
And we will see you next time.