The U.S. Government and the Railroads—A Tale of Bribery and Corruption
It was noontime, May 10, 1869, when Leland Stanford drove a ceremonial golden spike into a special laurel tie to complete the first U.S. transcontinental railway. The iconic photo shows hundreds of dignitaries and railroad workers gathered in the Utah desert around two facing locomotives. It was an extraordinary event, a media sensation, for the frontier had been bridged, and the West was now open for business. But there were big problems.
Nineteenth-century America has been habitually portrayed as an age of “robber barons” whose greed and corrupt practices illustrated the evils of laissez-faire capitalism. This history is one of the reasons many Christians support extensive state intervention in the economy, thinking it necessary to protect consumers and further the public interest. But the record suggests that the very opposite lesson should be drawn in some cases—that government interference can create the incentives and opportunities for large-scale business corruption.
Such was the case with the construction of America’s railroads, particularly between the 1830s and the 1890s.1 According to popular historian Stewart Holbrook,2 almost from the first, the railroads had to undergo the harassments of politicians or pay some sort of blackmail. For instance, a member of the state legislature would deliberately introduce legislation threatening the interests of the railroads in his state. After talking loudly about how his bill must pass “if the sovereign people were to be protected against the monster railroad,” he then “waited for some hireling of the railroad to dissuade him by a method as old as man.”3 As many as 35 bills surfaced at one sitting of a single legislature. By 1870 the railroad companies had bought for cash whole state legislatures, and often state courts too.4
The railroads also used the power of the state to destroy existing competitors and to prevent the emergence of new ones. Some used political connections for purely short-term, speculative purposes.5 They drew on federal land grants, subsidies, and state and municipal bonds to fleece the public, starting railroad projects simply as a quick means of obtaining government cash, without any attempt to evaluate the true commercial prospects. Others simply pocketed this money and vanished without laying down a single mile of rail track.
The two great transcontinental railroads – the Union Pacific and the Central Pacific – were the worst offenders. With the emphasis on cheapness, excessive track, and speed of construction to take advantage of the government largesse, both railroads often used inferior materials, ignored weather conditions, and chose longer and more winding routes than necessary. As a result, after the golden-spike celebration at Promontory Point, Utah, large sections of rail had to be rebuilt or even relocated, a task that was only completed five years later.
All along, Union and Central Pacific executives stole money from their own companies, profiting personally from all the government funds floating around.6 Worst of all, the “Big Four” group of politicians and businessmen heading the Central Pacific Railroad controlled the California legislature and used their political muscle to keep the state closed to competitors, thus exploiting Californian farmers and shippers over a period of 30 years.7
In this current season of government expansion, with massive distribution of “stimulus money” for infrastructure projects, the citizenry should be mindful of the nineteenth-century, American railroad story. No doubt, many interests will be served, but it is far from clear that the public interest will come out on top.
1 Described in detail in Thomas J. DiLorenzo, How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present (New York: Crown Forum, 2004), 88-91 and 110-121.
2 Holbrook was an American lumberjack, writer, and self-proclaimed “low-brow” historian. His writings focused on what he called the “Far Corner” of the United States: Washington, Oregon, and Idaho.
3 Stewart H. Holbrook, The Story of American Railroads (New York: Crown, 1947), 231.
4 Ibid., 235-236.
5 DiLorenzo, 110-112.
6 Ibid., 116-117.
7 Ibid., 111-112.
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articel from Karios Journal
First Baptist Church of Perryville is 1 and 1/2 miles east of Route 222.