It’s become a pretty standard analogy to compare the media giants of today to the railroads of the 1800s.
The US railroads had a powerful monopoly that generated enormous wealth and changed society completely. They were a privately-owned utility and they virtually printed money, but once their technological honeymoon period was over they settled into their monopolistic position.
They failed to innovate and improve, they used their monopolies to compete unfairly in other industries, and consequently they were heavily regulated and subsequently nationalised. Weighed down by regulation and unable to compete, they were eventually marginalised by competition from road and air travel. Even after decades of regulatory repeal and consequent resurgence, what remains of the US railroads are businesses with assets measured in the billions, but little societal impact.
The banks have frequently held a similar position; given a right by the state to literally create money, they have generated enormous wealth, but have regularly suffered industry-wide struggles, coming to terms with their own position.
However, in the face of crisis, rather than be nationalised they have always accepted regulation, reconstructed their industry and put safeguards in place to protect its longevity. Now the largest US banks have assets in the trillions and are fundamental lynchpins of society.
We are at social media’s fork in the road — they have enjoyed the honeymoon period, now they can either model themselves on the banks — take up the mantle of self-regulation, build their own versions of credit ratings agencies and work closely with the state — or they can model themselves on the railroads — dogmatically independent to the last, and for decades irrelevant.
Read more:
- The Guardian has a particularly powerful article on a similar topic, inspired by Elizabeth Warren.
- The book by Charles Adams “Railroads: Their Origin and Problems” is a deep analysis of the topic from which you can draw your own analogies.
- The Morgan family’s involvement in both the US railroad and banking sectors makes The House of Morgan a very enlightening read.
