Railways in Britain and the United States, 1830-1940: Studies in Economic and Business History (review)

Geoffrey Channon opens his very interesting book by stating his intellectual standpoint clearly. He writes that he is not a rail fan. Rather, he is interested in railroads as business enterprises. This approach has lead him to be critical of the analytical model proposed by the dean of business historians, Alfred D. Chandler, Jr. It also has caused him to doubt the validity of neoliberal theories of firm behavior and markets.

Channon's book is a collection of articles and essays, and suffers from all of the weaknesses of that form. The pieces do not consistently address the main themes that concern the author. Some are of interest only to those with a focus on particular British railway companies. Others suffer from conceptual flaws. The author raises his most important arguments in chapter one, which serves as an introduction, and in his conclusions. Interesting chapters deal with the foundation of the Great Western Railway, the expansion of the Midland Railway, the different organization of locomotive construction in Britain and the United States, the railway consolidation in Britain in 1921, and the Pennsylvania railroad's labor policies. Rather than discussing specific chapters, this review concentrates on the most important themes raised by Channon, namely his view of railroads as businesses, his critique of Chandler, his concept of the role of government, and his attack on neoliberal theory.

Despite his opening assertion, Channon spends little time looking at railways as business enterprises. If one accepts the notion that businesses exist to make money for their owners by satisfying consumer wants, one will come away from this book disappointed. There is no discussion of profitability of any railroad company. Nor is there an analysis of railroad service, either passenger or freight. Rather, the author's approach is more social and institutional.

Channon's critique of Chandler bears serious consideration. Essentially, he contends that Chandler's model does not apply to British railway companies. In Channon's opinion, Chandler has an unrealistic picture of the railway situation that existed in Britain. Consequently, Chandler underestimates the challenges faced by British railway managers. Channon also asserts that British railways did not employ the M organizational structure and did not serve as models for firms in other industries. He also points out, quite insightfully, that the regulation of railways in Britain was similar in many ways to the regulation of U.S. railroads in the late nineteenth century. Less effective is his criticism of Chandler's economic views. Channon simultaneously criticizes Chandler for advocating a neoliberal market model while pointing to the reduced role of the market. However, Chandler explicitly states that he sees the market as the final arbiter of economic decisions (Alfred D. Chandler, Jr., The Visible Hand, 1977, p. 11), although he does not engage in an extended discussion of the matter. Chandler instead focuses his attention on how firms reacted to changes in demand and technology, taking the competitive market order as a given.

Channon's critique of neoliberalism also is weak. He never explicitly defines what he understands as neoliberal market theory. He simply denies its relevance in some places and pronounces it wrong in others. He goes so far as to assert that neoliberal theory is in eclipse, clearly an erroneous statement. On this shaky foundation, he then claims that markets were inefficient mechanisms for allocating resources. For example, he contends that the capital cost of building railways in Britain in the early nineteenth century was substantially increased because of lack of regulation, implying that a central authority could have allocated resources more efficiently. Similarly, Channon argues that the railway consolidation of 1921 did not achieve its intended purposes, dubbing the affair a case of "market failure" (p. 301).

These assertions relate directly to Channon's claim that government played a positive role in promoting railroad development. Underlying this argument is Channon's belief that competition...