The transport industry has been instrumental in aiding commerce, a role that gained significance in the 1980s following a paradigm shift in ‘economic regulation’ (Banister & Button, 2016). The outcome was the liberalization of economic markets due to relaxation or removal of price and market entry controls. The changes occurred globally, and the US has not been spared as it has been central to transformation of the transport industry market, with its ground transport interstate highway system serving as the industrial blue print. The interstate highway system is a critical component of the highly competitive logistics and transportation industry in the US. Investors in the industry, including multinational firms, are dependent on this ground transportation system to facilitate smooth flow of goods. The benefits for stakeholders are enhanced by the abundance of a highly skilled workforce, and relatively low regulatory burdens and costs. The significance of the interstate highway system is evident from the trucking subsector of the transportation industry, which American Transport Association posits to account for an average of 10.5 billion tons of cargo, representing 71% of all tonnage of freight transported domestically. One can argue that the interstate highway system is an essential component of the transport industry whose annual contribution to the US GDP in 2015 averaged $1.45 trillion (representing 8% of GDP), which makes it indispensable in advancing the country’s economy (International Trade Administration, 2017). Therefore, it is imperative to examine the contribution and the role of the interstate highway system subsector of ground transport to the US transport industry.
Factors Contributing to the Obsolescence or Dissolution of Companies in the Highway Interstate Transport System
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Development of the Interstate Highway Systems
The transportation industry in the US is directly linked to the advancements in the automobile industry, but the development of the interstate highways systems was more of a military ideology than a commercial undertaking. The planning was implemented through the Federal Aid Highway Act of 1956, also known as the National Interstate and Defense Highway Act of 1956. The interstate highway systems refer to “a network of controlled-access highways that forms a part of the National Highway System of the United States” (US Department of Transportation, 2017). The network of highways inspired by experiences of Dwight Eisenhower during World War II in Germany, and approved for funding allocation by Congress, has become an integral part of road transportation industry in the US. This is evident from data showing that by the end of the 19th century, there was one automobile for every 18,000 Americans, contrary to the case today where on average, each American has a car or truck to their name. This justifies the argument that the interstate highways system was conceptualized for defense purposes, but its commercial significance in the ground transport industry has superseded the originally intended role.
The idea of the interstate highway, before its approval and allocation of funding by Eisenhower administration, had been mooted severally in the previous years. For instance, the Federal Aid Road Act of 1916 allocated funding for improvement of highway networks, but the policy expired in 1921 after implementation failed to take off due to pressing revenue needs associated with World War I. Similarly, the Federal Aid Highway Act of 1944 fell short after it failed to offer funding mechanisms for the authorized construction of the 40,000 mile National System of Interstate Highways. The Federal Aid Highway Act of 1956 was fruitful after it allocated $26 billion for the construction of 41,000 mile network of interstate highways. The federal government was to fund 90% of the project through the Highway Trust Fund from increased taxation of gasoline.
After the successful completion of the interstate highway, the project has not been spared by critics, notably in reference to its commercial significance. Jaffe (2014) posits that the design and planning of the interstate highway did not envision the negative implications it presented to authorities and stakeholders. According to Jaffe (2014), the interstate highway should have been designed with two spate networks, one running between cities and the other within cities. The implications drawn from the US experiences indicate that such interstate highway networks needed conception through two separate national transportation systems – the intrametropolitan and intermetropolitan systems with different institutions, methods, goals, and financing. Jaffe (2014) argues that the approach could have contributed positively in balancing transportation and commercial needs, a confounding problem for the transport industry.
The Concept of Intermodal Transportation
The need for two separate national transport systems, an approach not foreseen by original planners of the interstate highway system, was addressed through the Intermodal Surface Transport Efficiency Act of 1991. The act was a public law that massively transformed transportation planning and policy. The act was conceptualized post interstate highways system to decentralize planning and policy from the federal government by adopting a dual approach to funding and a collaborative planning. The act gave additional powers to metropolitan planning organizations thereby making planning and funding a shared responsibility of both intramentopolitan and intermetropolitan systems.
The interstate highway system marked the last major US government transportation project. However, the US transportation industry is faced with growing urgency to solve the problems of congestion, security, safety, energy, and environmental issues, which cannot be solved by the interstate highway system. A visionary approach is needed to develop a new and advanced transportation system that can integrate technological developments to contribute towards growth of the US industrial and commerce sectors (Sinha, 2007). The US Department of Transportation defines intermodal transportation as facilities that enable efficient movement of traffic and connects the major subsystems that make up the National Highway System. The intermodal system is critical in seamless movement of passengers and goods through different modes on the same journey. Intermodal transportation is an integrated network of highway and rail transportation that connect major population and economic centers with ports and airports (Gómez-Ibáñez, Tye, & Winston, 2011; Sinha, 2007). The intermodal transportation pulls together all modes of transportation into a multimodal system that aids the movement of people and freight in intracity and intercity travel.
The state of transportation in a free market economy has been examined by different stakeholders. Banister and Button (2016) posit that the transport industry has been the beneficiary of a wave of changes in regulation in the global economy. The shift from economic regulation has led to liberalization of economic markets through relaxation of economic regulation, but concerns have been raise relating to continues influence of social regulation in respect to consumer safety, protection, and environmental controls. Deregulation is heralded as the best strategy for implementing a multitude of changes that would allow free working of market forces.
From inception of planning to completion, as well as to post completion, the federal government has been central to regulation of the interstate highway. While intermodal transportation partly addressed the challenge through collaboration, calls have intensified asking to relinquish autonomy of regulation to private stakeholders. Deregulation refers to the reduction or removal of state regulations from an economic venture (Gómez-Ibáñez, Tye, & Winston, 2011). Proponents of deregulation of the interstate highways systems cite the increased commercial role of the National Highway System, and its impact on operations of investors whose productivity and competiveness is dependent on them. Deregulation has been an influential strategy in the use of the interstate highway system by the trucking industry, which revolutionized movement of freight in the 1960s and 70s. Deregulation was achieved by increasing the number of trucking companies hence liberalizing transportation market. De-unionization followed, drastically reducing drivers pay as a result, but increasing competition and productivity generating significant benefits for the consumers of transportation services. Complaints continue to build up about the about the costly nature of government regulations and critics of the government approach cite the success of the deregulation of air transportation as evidence why it is necessary to extend deregulation to rail and trucking freight industries. The implication of such an approach is a shift in the management of the interstate highway system from the federal government to private investors thus ensuring efficiency needed for productivity and competitiveness of the transportation industry.
The US Department of Transportation observed that the last quarter century has witnessed significant growth in the transportation industry. The transportation system has evolved in form and size, and the interstate highway is integral to this evolution. The increasing number of passengers and freight volumes supplemented by economic growth has resulted to a tremendous rise in rise in demand of transportation services. Additional construction of roads to compliment the interstate highway systems has immense impacts on the environment whose effects can be long term.
Environmental implications of the interstate highway system gained significance following the Federal Aid Highway Act of 1968 which sought to expand the interstate highway system by 1,500 miles. Part of the role of the act was to explicitly apply environmental protections of the Department of Transportation Act of 1966 to federal highway projects. However, such autonomy of the federal government that protects itself from the law has been diminished by the National Environmental Policy Act of 1970, which was enacted to ensure that all federal agencies prepare environmental assessment and environmental impact assessment reports before implementation. However, the act is limited by the fact that it does not apply to specific projects whose approval has been sought from the president, Congress and federal courts.
Impact of Factors Analyzed on Opportunities for Change and Innovation in Transportation Business Environment
The development of interstate highway system has presented investors with rich opportunities in the transportation sector. The demand for transport and freight services is ever on the rise and the interstate highway system, which cuts across the continent, connecting different cities and rural regions continues to be central to the evolution of US transport industry. The adoption of the intermodal concept has been instrumental in improving the connectivity of transport networks, widening the opportunity sphere to other modes of transport. In fact, the US transport network system is so integrated that it is difficult to point out the area of separation. According to Sinha (2007), intermodal transportation is instrumental in pulling together benefits of individual transport subsectors including high speed passenger and freight rail and truck ways, and also accommodating the integrated system. Transfer stations that provide easy connections between interstate corridors and local systems ensure a continuous link that does not interrupt operations of stakeholders in the transport industry. Passenger and freight transit companies have exploited the opportunity provided by the interstate highway system and its accompanying intermodal transportation.
For instance, evidence shows that the US ground transport industry, to which the interstate highway is central, has a reached a technological tipping point as innovations take root within the industry. The trend is an outcome of a shift in consumer behavior. Americans have been noted to drive less, but travel more and are willing to pay premium prices for innovations that improve their experiences on the road. The opportunity has been exploited by some of the innovative companies in the transportation industry. Uber is one of the companies that has maximized on the opportunity offered by the interstate highway systems and intermodal transportation. According to Hagan (2017), Uber commands majority of the US ground transport accounting for 52% of transport in the subsector.
The success of Uber is an outcome of deregulation in the transportation industry that has given private investors a competitive edge because of their willingness to integrate innovations into their systems and operations. The US Department of Transportation posits that the last quarter of a century, deregulation opened opportunities for new competitors by lifting barriers to entry, thus creating and enabling environment that has seen proliferation in innovative, efficient, and affordable transportation services that are backed by the globalizing economy. However, deregulation has also faced out investors lacking in innovative ideas to respond to the shifts in customer preferences, notably the contemporary taxi industry (Gómez-Ibáñez, Tye, & Winston, 2011). Nevertheless, the main challenge for federal and private projects needed to further compliments the interstate highway system is in application of environmental laws whose punishments are extreme in cases of violation by the latter. As a result, the need to satiate Americans growing demand for ground transport through interstate highways remains far from being fulfilled.
The US interstate highway system has been heralded as the blueprint of road networks projects because of its contribution to the US economy. Since completion, no other ground transportation project has come close to it in expenditure or miles of road network covered. However, recent developments indicate that while the interstate highway system continues to be critical to its originally intended role of military transport, it has been overwhelmed by commercial needs. As a result, planner and policy makers advocate for adoption of intermodal transportation to lift off part of the load from the interstate highway, and deregulation of the industry to allow principles of free market to take root. However, the key lies in creating an integrated system implying that additional miles of road networks need to be added to the existing interstate highway system, a process limited by environmental policies.
Banister, D., & Button, K. (Eds.). (2016). Transport in a free market economy . Springer.
Gómez-Ibáñez, J. A., Tye, W. B., & Winston, C. (Eds.). (2011). Essays in transportation economics and policy: a handbook in honor of John R. Meyer . Brookings Institution Press.
Hagan, S. (2017, Jan). Uber takes majority of ground transport market for U.S. business travelers. Bloomberg – Technology. Retrieved 7/7/2017 from: https://www.bloomberg.com/news/articles/2017-01-26/uber-takes-majority-of-ground-transport-market-for-u-s-business-travelers.
International Trade Administration. (2017). The logistics and transportation industry in the United States. Select USA. Retrieved 7/7/2017 from: https://www.selectusa.gov/logistics-and-transportation-industry-united-states.
Sinha, K. C. (2007). Integrated intermodal interstate transportation system. Retrieved 7/7/2017 from: http://transportationfortomorrow.com/final_report/pdf/volume_3/blue_ribbon_panel_submissions/06_integrated_intermodal_interstate_transportation_system.pdf
US Department of Transportation – Federal Highway Administration. (2017, Jun). Highway history: Dwight D. Eisenhower Highway. Retrieved 7/7/2017 from: https://www.fhwa.dot.gov/infrastructure/ddehwy.cfm.