Railroads

Reference reading

Reference reading

Transcontinental railroads of the 19th century were characteristic boondoggles of the hampered economy:

"While none would argue that transcontinentals would not become economically feasible in the private market at some point, during the 1860s, as the first transcontinentals took shape, there was no economic justification. This is why the first transcontinentals were all creatures, not of capitalism or the private markets, but of government. There simply were not enough people, capital, manufactured goods, or crops between Missouri and the West coast to support a private-sector railroad.

"As creatures of government and of taxpayer-funded schemes to subsidize the railroads and their wealthy owners through cheap loans and outright subsidies, the railroads quickly became scandal-ridden, wasteful, and contemptuous of the public they were supposed to serve. 

"This tale is told in grim detail in historian Richard White’s 2011 tome on the transcontinental railroads, Railroaded: The Transcontinentals and the Making of Modern America, which exposes the near-utter disconnect between the railroads and the true geography of the markets in the mid-nineteenth century."

      There was one important exception: the Great Northern Railway, constructed under the auspices of James J. Hill. In contrast to other railroad tycoons, Hill was a businessman, not a lobbyist. Through thorough knowledge of the detailed technical and financial underpinnings of the business, he gradually brought into existence the "only privately funded — and successfully built — transcontinental railroad in U.S. history."
      Given the greatness of Hill's achievement, one wonders what kept him from even greater accomplishments in the railroad industry. Actually, Hill did try to create a super-railroad stretching from Chicago to the West Coast: 

"Hill ... acquired control of NP with the intent of merging GN, NP, CB&Q and SP&S into a single railroad. As a start, he formed Northern Securities as a holding company, but the Interstate Commerce Commission (ICC) quickly ruled against such a merger. In 1927 the Great Northern Pacific Railway was incorporated to merge GN and NP and lease SP&S and CB&Q. The ICC approved the merger upon the condition that GN and NP divest themselves of the CB&Q — a condition the two Northerns were unwilling to meet.
"More than four decades passed before the merger went through on March 2, 1970 — with the CB&Q included and indeed half the name of the merged company, the Burlington Northern Railroad (BN)."

     In other words, the rationality of the merger finally triumphed over meaningless anti-trust legalism.
     However, with Hill's death in 1916 and the takeover and corporatization of all railroads in 1917, the Great Northern gradually became unremarkable in its operation or business results compared with other railroads.
     Now, for the counter-analyses and my rebuttals.
1. Hill received "valuable" land grants when he acquired the SP&P (forerunner of the GNR) in 1878 and the Minneapolis and St. Cloud in 1880. His success was built on the pioneering efforts of railroads that had tried and failed.
     But the land grants associated with the SP&P and the Minneapolis and St. Cloud were small compared to what other transcontinental railroads were given. Therefore, land grants can't reasonably be considered a factor determining success or failure of a transcontinental railroad.
2. Hill benefited from government negotiations with Indians for right-of-way permission.
     Except for the need to satisfy the requirements of unnecessary legalism, there's no reason why the GNR couldn't have negotiated directly with the Indians.
     The Great Northern Railway came into existence in a hampered market, with all of the baggage that entails. It was not and could never have been a completely untainted example of the workings of the theoretical free market. However, for a while, it was pretty close. Eventually, as one would expect, the GNR was absorbed into the corporatist system, but not before it had given us a glimpse into what a free market railroad might have looked like.