Railroaded: The Transcontinentals and the Making of Modern America

By Bogart, Dan | Independent Review, Spring 2013 | Go to article overview

Railroaded: The Transcontinentals and the Making of Modern America


Bogart, Dan, Independent Review


* Railroaded: The Transcontinentals and the Making of Modern America

By Richard White

New York: Norton, 2011.

Pp. xxxiv, 660. $35.0 cloth.

Network industries are especially prone to market and government failures because they involve large, durable, and fixed investments across space. History is useful in trying to understand how network industries evolve and the role of policies and institutions in their development. One needs to see them in a long-run perspective, which is exactly what Richard White does in his provocative and well-researched book on the American transcontinental railroads.

It is difficult to overstate the centrality of railroads to American history, especially in the territories west of the Mississippi River. In economic terms, transcontinental railroads are seen as an engine of growth, integrating eastern and western markets and thereby opening the possibility of settlement. Frederick Jackson Turner's famous safety-value argument posits that the opening of the frontier kept American wages relatively high because it prevented diminishing returns to labor. In this perspective, railroads are seen as a great achievement. This story has a dark side, however. Private companies built the transcontinental railroads, but they received significant government aid. The federal government most notably gave land grants and low-interest loans. The official rationale for the subsides was that railroads across the American West would be built too slowly or not at all unless investors received extra inducements. Government was giving a helping hand to a strategic industry. As it turned out, transcontinental railroads were not a financial success in the short term. By the 1890s, many could not meet their interest obligations and went into receivership. They also aroused tremendous complaints from farmers and shippers. Discrimination in freight rates across space and across traffic types led to calls for regulation and eventually led to the founding of the Interstate Commerce Commission.

In Railroaded, Richard White gives a comprehensive account of the economic, social, and political aspects of transcontinental railroads. The book is based on a deep reading of the sources and is a must read for anyone interested in transportation and the development of the American economy. White is particularly keen on pointing out the transcontinental railroads' failings in order to counter many studies that view them in a favorable light. He makes several main points that are worth exploring in detail.

First, he argues that tremendous corruption was involved in building and operating the transcontinental railroads. The promoters of the Central Pacific, Southern Pacific, and Union Pacific railroads were more interested in the profits from constructing railroads than from operating railroads efficiently. Leyland Stanford and Collis Huntington used various schemes to line their pockets, such as forming a construction company that they controlled and from which they profited exclusively in building the railroads. As long as the federal government did not call in the loans and investors were still willing to provide capital, promoting and building transcontinental railroads provided a path to immense fortunes. White gives the details of how fortunes were amassed, including countless examples of bribes to politicians and double-dealing with distant investors. For example, he reports evidence that the Central Pacific's legal expenses were more than three times its total tax payments in the 1870s (p. 130). Influencing politicians apparently cost more than legitimate payments to government. There is also much evidence of the antagonisms between the great railroad barons. For example, Huntington hated Jay Gould, which is not surprising because he operated a rival railroad, but more surprising is that Huntington also hated Stanford, with whom he controlled the Central Pacific. As White points out, it is impossible to understand the transcontinental railroads' history without knowing their promoters' character. …

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