Point 1: White’s Railroaded: The Book’s Argument

Where it fits in the broader historical dialogue

White’s Railroaded successfully redirects our focus on how corporations, specifically those that controlled transcontinental railroads in the latter half of the nineteenth century, shaped the modern corporate world. This is no small feat.

White examines the behavior of transcontinental railroad corporations, and the men who controlled them, to determine that transcontinentals altered and inhibited the economic development of the U.S. West. White asserts that the influence wielded by these transcontinental corporations were fundamentally harmful to U.S. economic stability.

White’s argument goes against what other scholar’s have traditionally said about the economic achievements of railroads. He does not see Railroads as “the great engine of the nineteenth-century economy” (White, 514), rather, railroads imposed a financial burden on the twentieth-century because its expensive capital and labor costs would have been put to better use after 1900.

Furthermore, White does not see the transcontinentals as symbolizing “the ultimate manifestation of modern rationality” (White, xxxii) in a manner that other historians have supported and promoted. The railroad is credited for the expansion, settlement, and development of the U.S. West. The transcontinentals moved people, manufactured goods, and raw materials across the country.

White acknowledges that the railroads were important in these purposes, just not at the rapid rate of growth and location that Western transcontinentals were expanding at.

White’s critique does not fall in line with what historians have acknowledged as the negative role that railroads played in their treatment towards the Indians and other minority groups, their abuses towards labor in general, and their financial scandals and bankruptcies, but historians look upon these unpleasantries as necessary evils that can be downplayed in order to celebrate the railroad’s long term impact on U.S. industrialization.

What White instead argues, is that transcontinentals invoke a paradox that defies rational explanation as to how and why these railroad corporations ushered in the modern world despite widespread evidence indicating their destructive capacity.

Point 2: How White’s argument also matters against broader economic themes in history

White incorporates the ideas of other economists and economic historians to challenge the mainstream economic ideals historically associated with the transcontinentals.

White uses economist Joseph Schumpeter’s theory of “creative destruction”, the idea that “the necessity of capitalism always to uproot the old in order to institute the new” (White, xxv), to demonstrate how the use of credit financing alongside American entrepreneurship instilled routine economic failures incapable of establishing order.

Economic historians Robert Wiebe and Alfred Chandler,

Why Wiebe/Chandler matter

Both have emphasized the importance of managerial capitalism in establishing an order that corresponded to modern growth.

Argued that large scale organizations imposed a transformative order on the modern economy .

However, White does not see the same arrangement in the transcontinentals, rather, the transcontinentals failed on such a large scale, they consistently required federal aid and court support to maintain their operations.

Late nineteenth-century Americans strongly identified with corporations as beacons of control over the American economy.

White argues that the anti-monopolists recognized in a more sophisticated manner than the economists of the day how transcontinental corporations were destructive to society’s social and economic well-being despite their so-called association with modern “progress”

Point 3: Contrasting White to Burton W. Folsom’s The Myth of the Robber Barons.

Folsom’s approach is similar to White in that he challenges the use of federal subsidies to help finance the railroads, and that the railroads created more obstacles than opportunities for investment and economic growth

Folsom argues that few people were willing to properly learn the railroad business and that railroad entrepreneurs viewed it as an opportunity for profit more than an actual freight/passenger service.

He uses James Hill as an ideal model of what a an effective Railroad man should be doing

White assigns a lesser role to Hill, acknowledges his moderate success as a railroader, but does not isolate Hills’ line to demonstrate that not all railroads were manipulating federal funding and constructing poor quality tracks.

Claims that Hill built “the best railroad in America”

James J. Hill & The Transcontinental Railroads

Hill owned the only transcontinental built without assistance from government

Subsidies that also never went bankrupt

Folsom argues that government aid bred inefficiency in railroads because it created a consumer wrath that in turn spurned government regulation that ended options for railroads such as Union Pacific.

People upset with railroad corruption

Congress insists loans be paid back

In turn creates difficulties for rail lines with small profit margins to repay government and instead raise rates

Disastrous consequences

Folsom demonstrates that Central Pacific fared better than Union Pacific because of the men who controlled it.

“Big Four”, able to dominate/bribe CA legislators

This falls in line with White’s argument, that Railroad entrepreneurs harmfully managed their railroad lines.

White and Folsom are also of similar mind in critiquing railroad’s use of federal subsidies either through funding or land payments.

Problem with subsidies: encouraged rapid track building, not quality

Steep gradients = higher fuel costs & more repairs

Req’d to carry U.S. mail at discount rates

One example is

Northern Pacific, received government subsidies through land

NP’s controlled by Henry Villard

Manipulated NP stock

Purchased railroads & steamships along the pacific coast to remove them as competitors.

NP declared bankruptcy

Villard had overinvested in a population that never came

Villard had also never bothered to learn about railroads

NP was poorly constructed

Folsom’s antidote to the NP and Men such as Henry Villard is James J. Hill, who had succeeded where Villard had failed

Hills Lines were constructed in a specific manner

Built for “durability and efficiency” 27

Obtained cheaper coal fuel than Villard

Found opportunities for trade with the Orient

Purchased Great Northwestern Steamship Co.

Exported Southern Cotton to Japan

Personal business philosophy: build the most efficient line possible, use this line to promote the exports in your section. “you must help others before you can be helped.”

Also, only expand as you go, do no overextend your investments

However, the Hill story is not picture perfect:

Hill faced opposition from UP & NP, who tried to block Hill in congress from obtaining passage through Indian lands

Yet despite the negative evidence provided by White and Folsom that disproves of transcontinental business behavior, some historians have argued that the railroads, regardless of their dark side, still were vital to the economic growth of the latter half of the nineteenth century.

Economic historians, including Robert Fogel, have argued that despite the steep costs imposed by railroads, they offered rewards in terms of the social rate of return for the United States

Despite the lack of profit made by transcontinental railroads, they still boosted the value of the railroad’s surrounding lands, and encouraged the growth of farms & cities in places that would not have been able to exist otherwise

Point 4: The Pacific Mail & other Pacific Steamships.

Yet if White’s argument holds that railroads were financial detriments to the late nineteenth century U.S. economy, how does this factor in with Steamships?

White acknowledges that steamships were problematic for railroads because steamship competition drove down transportation rates

However, Steamships also faced significant financial hurdles which parallels White’s argument that financial subsidies produced more harmful financial results than positive ones for U.S. shipping firms.

White and other historians discuss the post-Civil War significance of the railroad, yet how does this contrast to the steamship, the railway’s primary competitor?

Despite White’s and other historian’s claims that nationally, railroads faced stiff competition from shipping interests, shipping interests in turn struggled to compete internationally. Their rates were not only affected by railroads, but even more significantly from other countries, most specifically England.

White specifically chooses to use the Pacific Mail Steamship company to demonstrate its role as the “nemesis” of Southern Pacific

However, White’s use of the Pacific Mail as an example is problematic.

By the 1890s, Southern Pacific had acquired more than fifty percent of Pacific Mail stock, and was the controlling shareholder. SPs Collis P. Huntington even appointed the PMs Vice President and leader. White does not acknowledge this

The Pacific Mail also did not produce financial dividends for its stock holders as its profit margin was too slim to enable it to do so

If the Pacific Mail was harmful for railroaders they were not profiting themselves and struggled to financially survive in the comepetitive shipping industry where it played a minority as U.S. Firm.

Moreover, White only uses the Pacific Mail to demonstrate its competition to railroads, but not to explain problems U.S. faced in general with transportation costs

Hill owned the Great Northwest Steamship Company.

US only had a few US ships

Pacific Mail owned the rest

Hill lost three of his ships off the coast of San Francisco in an accident and had one remaining ship that went out of business as a consequence of federal policies.

Hill was not a successful steamship owner in the long term despite his reputation as a successful railroader.

Moreover, Railroad ownership of steamships were viewed unfavorably by Congress, and the Sherman Act’s antitrust legislation and Panama Canal Act were crafted to inhibit Railroad and Steamship alliances

Rates passing through Panama canal between U.S. rail and ship had to be approved by a special committee and had to be extended to others

Creates stiff competition amongst companies that is good for customers and bad for them.

CONCLUSION:

Throughout the areas discussed, there is this consistent and pervading “competition” as railroads competed against one another nationally. This competition demonstrates how most men were operating within a similar system with similar tools producing similar results.

The exception is Hill. However if Hill succeeded in railroads because he was a so called “decent businessman” he failed in shipping

This raises some questions:

What this suggests is that if so many of these men were behaving in a similar fashion, were they really the ones initiating the economic struggles that accompanied railroads during the late half of the nineteenth century, or was this really a symptom of something else, such as the U.S. government’s own actions?

Were the subsidy incentives and the U.S. agenda to expand westward more at fault for these transcontinental failures than the transcontinental’s failure to successfully enter the market in a timely and fiscally responsible manner?

White makes a compelling case in how Western transcontinental’s were corporate powerhouses that harmed rather than helped the economy. However, in consideration that so many of them made the same mistakes and still went bankrupt, was it really about men who were manipulative and destructive or were the market conditions fueled by the U.S. government responsible for the chaotic turn of events?