Alternate Government Involvement in United States Rail?

[Delta Force]

Waterways are government owned, as are most roads, highways, and air and sea ports. Water and electric utility systems are a mixture of public and private ownership. Railroads seem to be the only major form of transportation or really national infrastructure in general that doesn't have some level of government ownership.

Since the United States gave massive land grants and other subsidies to promote the development of the railroad industry (including operating subsidies in the form of United States Post Office carriage contracts) how plausible would it have been for the state and/or federal governments to have simply built and operated the railroads themselves, or to have acquired them followed the railroad bankruptcies of the late 1800s? Were there any cases in which eminent domain could have been useful seeing as the United States Supreme Court didn't rule that private lands could be seized for private purposes that benefit the public until the 2000s?

Alternatively, how would the railroads have developed if the government hadn't given any land grants and other subsidies to the railroads, choosing instead to sell or auction off land to railroad companies which would still benefit the companies by allowing them to acquire most of the land needed from a single source? Might it have resulted in a more efficient railroad industry by eliminating the incentive for creating long winding pathways to maximize land grants and subsidies?

 

[Delta Force]

Here are some maps of the land grants. They are so massive that they can still be seen today in land ownership maps, especially in Wyoming and Nevada.

 

[DominusNovus]

Seems to me that the government had far more land than cash to spend in the 19th century when it came to wanting to develop the rail network.

 

[Tonifranz]

Waterways are government owned, as are most roads, highways, and air and sea ports. Water and electric utility systems are a mixture of public and private ownership. Railroads seem to be the only major form of transportation or really national infrastructure in general that doesn't have some level of government ownership.

Since the United States gave massive land grants and other subsidies to promote the development of the railroad industry (including operating subsidies in the form of United States Post Office carriage contracts) how plausible would it have been for the state and/or federal governments to have simply built and operated the railroads themselves, or to have acquired them followed the railroad bankruptcies of the late 1800s? Were there any cases in which eminent domain could have been useful seeing as the United States Supreme Court didn't rule that private lands could be seized for private purposes that benefit the public until the 2000s?

Alternatively, how would the railroads have developed if the government hadn't given any land grants and other subsidies to the railroads, choosing instead to sell or auction off land to railroad companies which would still benefit the companies by allowing them to acquire most of the land needed from a single source? Might it have resulted in a more efficient railroad industry by eliminating the incentive for creating long winding pathways to maximize land grants and subsidies?

Owning or nationalization in the 19th century, for me, is ASB, as the United States was too embedded in the free enterprise system, was seen as socialist (in fact, it was advocated by Socialist Parties, which made the idea anathema to both major parties) etc. The only time that the U.S. nationalized railroads was during World War I, and even then, only the management was Nationalized under the United States Railroad Administration, not ownership. And as soon as the war was over, it was given back to private control. And any proposal to make the government own it never made any headway.

As for the last one, not plausible. The purpose of the land grants was to allow the railroads to sell them, or to pledge them to bondholders, which would then acquire the funds needed to built the railroads. Building railroads is not cheap. The government is unwilling to directly fund the railroads, so they did it indirectly through land grants.

The railroad companies themselves needed to have cash to construct all that rail. Buying land from the government would be counterproductive.

The federal government in this era simply did not engage in railroad building.

As for the government acquiring the railroads during the 1890s, the government itself nearly because bankrupt, and was only saved by JP Morgan lending gold to the US Treasure at the behest of President Cleveland. They cannot afford to acquire bankrupt railroads, as doing so would mean the US would acquire even more debt. By the time the US government got on its feet, most of the bankrupt railroads were sold to the more financially better off railroad companies or other private companies. That's how the Northern Securities Company came to be.

 

[Delta Force]

Seems to me that the government had far more land than cash to spend in the 19th century when it came to wanting to develop the rail network.

The government could always have sold the land itself. That's one of the ways the railroads were expected to acquire financing.

 

[Delta Force]

Owning or nationalization in the 19th century, for me, is ASB, as the United States was too embedded in the free enterprise system, was seen as socialist (in fact, it was advocated by Socialist Parties, which made the idea anathema to both major parties) etc. The only time that the U.S. nationalized railroads was during World War I, and even then, only the management was Nationalized under the United States Railroad Administration, not ownership. And as soon as the war was over, it was given back to private control. And any proposal to make the government own it never made any headway.

As for the last one, not plausible. The purpose of the land grants was to allow the railroads to sell them, or to pledge them to bondholders, which would then acquire the funds needed to built the railroads. Building railroads is not cheap. The government is unwilling to directly fund the railroads, so they did it indirectly through land grants.

How was is it lassiez-faire capitalism for the government to give out such massive land grants and subsidies to private companies though? I'm not sure how complete the map above is, but that rail network is a total mess. What's even going on in Minnesota and Iowa? The density there is far greater than in the areas that had a high density of population and heavy industry, it's obvious the companies must have found some kind of loophole there where they were reaping windfall profits (or windfall land grants) by simply laying in track as densely as practical on the wide open plains to gain farmland and mining rights.

In addition to the blatant land grab in Minnesota and Iowa, going off of the map above it would seem that no one bothered to extend the railroads to export terminals on the East Coast, and the companies also failed to build railroads to Kentucky (a large state at the time), Delaware (a small state, but one inexpensive to please by building a relatively short rail junction), and South Dakota (a growing territory/state and one more populous than North Dakota).

The railroad companies themselves needed to have cash to construct all that rail. Buying land from the government would be counterproductive.

The federal government in this era simply did not engage in railroad building.

That's fair, but it seems that there wasn't really any effort at ensuring the land grants and subsidies went towards constructing a rational railroad network. The density and branching nature of railroad growth in Minnesota and Iowa is evidence of that (especially with the lower density of rail in areas of actual population and industry, and lack of rail to many ports), and then there's the fact that many railroads actually did go and fail despite the massive land grants and subsides they were afforded due to overconstruction.

As for the government acquiring the railroads during the 1890s, the government itself nearly because bankrupt, and was only saved by JP Morgan lending gold to the US Treasure at the behest of President Cleveland. They cannot afford to acquire bankrupt railroads, as doing so would mean the US would acquire even more debt. By the time the US government got on its feet, most of the bankrupt railroads were sold to the more financially better off railroad companies or other private companies. That's how the Northern Securities Company came to be.

Could the state governments have stepped into the role? I'm not sure how expansive the railroad crisis was, but it seems an East Coast state could have purchased a defaulted railroad and built rail to one of its ports to help local industry, and the Midwestern states could have purchased the railroads for populism to help out farmers and then negotiated for export out of the state by bundling grain shipments as huge blocks. North Dakota even went and built a state owned mill to give farmers more leverage in grain sales, and that was in the 1920s.

 

[Pesterfield]

Could the government order a Lewis and Clark style expedition to find the best route for a railroad? Then even if private companies have to do it they can be given the route they need to fill in.

This could help the Plains tribes some, without those meandering routes the Great Plains might still be seen as worthless for settlement.

 

[David T]

"Third.—We believe that the time has come when the railroad corporations will either own the people or the people must own the railroads, and should the government enter upon the work of owning and managing all railroads, we should favor an amendment to the Constitution by which all persons engaged in the government service shall be placed under a civil-service regulation of the most rigid character, so as to prevent the increase of the power of the national administration by the use of such additional government employes."--platform of the People's Party, 1892. http://historymatters.gmu.edu/d/5361/ So have the Populists come to power (not totally inconceivable if both Democrats and Republicans nominate conservatives in 1896).

Also, even if we look only at major parties, William Jennings Bryan came out for government ownership of railroads in 1906--he advocated a hybrid system under which the federal government would own interstate railroad lines and state governments would own local lines. https://books.google.com/books?id=tt67UmTL8MwC&pg=PA149 However, (1) that's post-1900, and (2) Bryan (who while accepting Populist support in 1896 had ignored their demand for government ownership of the railroads) soon abandoned the idea, not to revive it until World War I.

 

[Kevin C. Smith]

How was is it lassiez-faire capitalism for the government to give out such massive land grants and subsidies to private companies though? I'm not sure how complete the map above is, but that rail network is a total mess. What's even going on in Minnesota and Iowa? The density there is far greater than in the areas that had a high density of population and heavy industry, it's obvious the companies must have found some kind of loophole there where they were reaping windfall profits (or windfall land grants) by simply laying in track as densely as practical on the wide open plains to gain farmland and mining rights.

In addition to the blatant land grab in Minnesota and Iowa, going off of the map above it would seem that no one bothered to extend the railroads to export terminals on the East Coast, and the companies also failed to build railroads to Kentucky (a large state at the time), Delaware (a small state, but one inexpensive to please by building a relatively short rail junction), and South Dakota (a growing territory/state and one more populous than North Dakota).

That's fair, but it seems that there wasn't really any effort at ensuring the land grants and subsidies went towards constructing a rational railroad network. The density and branching nature of railroad growth in Minnesota and Iowa is evidence of that (especially with the lower density of rail in areas of actual population and industry, and lack of rail to many ports), and then there's the fact that many railroads actually did go and fail despite the massive land grants and subsides they were afforded due to overconstruction.

Could the state governments have stepped into the role? I'm not sure how expansive the railroad crisis was, but it seems an East Coast state could have purchased a defaulted railroad and built rail to one of its ports to help local industry, and the Midwestern states could have purchased the railroads for populism to help out farmers and then negotiated for export out of the state by bundling grain shipments as huge blocks. North Dakota even went and built a state owned mill to give farmers more leverage in grain sales, and that was in the 1920s.

It wasn't lassiez-faire, but it was capitalism...what we today might call a "public/private partnership". It took land that was worth little to settlers because it was without access and provided the access that made it attractive and valuable. The remaining land held by the government was sometimes able to be priced high enough to recoup the loss of the granted lands. While the resultant network had a lot of redundancy (both then and later) from the standpoint of simple mechanical efficiency, it generally followed existing patterns of trade.

The reason for the extreme density of grants in Iowa & Minnesota have to do with the confluence of a few things: 1) The land is easy to build in, essentially flat. So, capital needed to build tracks is much lower than the hilly or mountainous lands to the west, 2) The land was available. Much of the eastern trunk lines were built up after the land was settled, or at least sold. 3) The land was intensively developed. Fertile and easily farmed, it could support a denser population than the more arid states to the west and south. 4) It also helped that lines in Iowa & Minnesota were on the way to somewhere else. Minneapolis/Saint Paul were the starting point for the transcontinental routes of the Great Northern and the Northern Pacific. Iowa, of course, lay between Chicago and the Union Pacific's bridgehead at Omaha.

Some of the eastern states, in fact, did build railroads to their ports-well, from, actually. The Baltimore & Ohio was (with support from the state of Maryland) to provide interior access for the port of Baltimore. The Pennsylvania Railroad began as an inter-canal connector for the state of Pennsylvania's public canal/railroad project to connect Philadelphia to the west. Other states either had no need (New York), or already had access. The states you mentioned had their various discouragements to more construction: Kentucky was hilly/mountainous (so more expensive to build in and less densely populated), and did not lie on a natural route to anywhere (the most important line through the state-the Cincinnati Southern, which is still owned in part by the city of Cincinnati-could be easily bypassed via either Louisville or Washington DC). Delaware is so small that almost any point reachable by railroad is going to already have water transport competition which is historically cheaper (and, in the case of agricultural shipments to nearby areas, just as fast or faster). South Dakota, while more populous, did not lie on a transcontinental route during the land grant era of construction.

The land grants were not (or almost never) granted all at once. While an initial grant might be made to start construction, additional grants were forthcoming only as construction advanced. Of course, construction could be delayed, which tied up the granted or alloted land from sale or development until construction began/resumed, or the land was taken and granted to another concern, instead. All this was because investment capital was scarce, and could dry up easily in a financial downturn, which would prevent farmers from selling their crops (no freight to ship), paying their debts (often to the railroad directly), and losing their farms (to bank mortgages). All of this leveraged capital would leverage back down just as fast and as hard (think of the housing bubble).

As for state/federal direct ownership? Maybe for some specialized or lines of local importance/interest (see examples above) but not of any larger state system, and certainly not any national system. The suggestion of a planned national system built by private companies is even too restrictive without a POD that limits the rights and powers of corporations to an extent that would butterfly away economic history from at least the 1840's on. The only chances would have been after the network was built. The opportunities were: 1) WWI federalization-as pointed out in above posts, that wasn't gonna happen. The railroads were going back to their owners. 2) The ICC consolidation plan of 1929*, coupled with federal help to the railroads as the Great Depression deepened-unlikely in the extreme but perhaps the most plausible. 3) WWII-even if the system had broken down badly, I don't see a second federalization lasting much past VJ Day. 4) The 1980's-No Staggers Act, no deregulation, and maybe-just maybe-some or all of the railroads end up government wards. Possibly possible but no more.

*My personal favorite alternate history idea/speculation.

 

[David T]

BTW, to give an example of the kind of thing that could stand in the way of federal ownership of the railroads during the Populist and Progressive eras: When Bryan came our for government ownership in 1906, the idea got a chilly reception not only from the press (as might be expected) but also (though more quietly) from some leading southern Democrats who feared that it might endanger railroad segregation in the South.

Bryan was bitter about this, telling some southern lawmakers "You...are opposed to government ownership because you are afraid your Jim Crow laws against the negroes will be abolished by the general government. As if your personal objections to riding with negroes should interfere with a great national reform." Michael Kazin, *A Godly Hero: The Life of William Jennings Bryan*, p. 147. https://books.google.com/books?id=GUzEO18oGYUC&pg=PA147 But he bowed to political realities, assuring Democrats that he had spoken for himself alone on government ownership and that he would not insist on its being included in the 1908 platform (though he did urge that the idea at least be kept in mind if regulation proved insufficient).

From all this I think it clear that if elected in 1896 or 1900 or 1908, Bryan would favor stricter regulation of the railroads, but not government ownership. At most he might hint at the latter as a last resort; as he was to note in 1906, even those who disagreed with him on government ownership should keep in mind that the *threat* of it would exercise a restraining influence on the "railroad magnates." (Kazin, p. 146)