I’ve read in several books about the idea that James J. Hill, who built The Great Northern Rialroad, was a successful railroad king who did not not need any financial assistance from the government to become a self-made man.
Usually, it’s pointed out, in contrast to Villiard(sp?) who built the NP. Something I read today even suggested that Hill was so much the better businessman, that he and his “friends” had to pool their pocket change to save the NP from financial disaster(!)
How accurate is that, to say that Hill became what he was without government money?
The first railroad acquired by Hill and associates was the St Paul and Pacific. It had the prospect of a couple million acres in federal land grants of Red River Valley land in Minnesota if they could complete the line in time. The land produced for them about $10 million in sales to settlers.
The re-named St Paul, Minneapolis & Manitoba extended across Dakota Territory and Montana without government help. Local communities were encouraged, if not extorted, to donate lands for depot grounds and yards.
Finally, as the Great Northern, they completed the line to Puget Sound, again without government money but with local land donations, especially in Spokane where land within the city was expensive. Hill threatened to bypass the city unless the desired land was donated by local interests.
Albro Martin and Michael Malone each have many details of this financing in their biographies of Hill, including his personal disdain for the mismanagement and wastefulness of the Northern Pacific.
The NP was one of the original Federal ‘Land Grant’ railroads(UP/CP/KP/NP) authorized by congress. There was a lot of financial wheeling & dealing as you mentioned, and the NP had a heavy debt load. Some of the problem was self inflicted, some of it was the Fed’s changing the way the ‘checkerboard’ land grants actually worked.
The GN was privately build by Hill and had a better line and connections with Pacific Rim shippers(and friends in the lumber and mining industry). Hill was known to be ruthless when competing with other railroads, but did arrange the financing to save the NP(and fight off being considered a monopoly). It was really part of the ‘Hill Lines’ and Jim Hill used the NP to help finance the purchase of the CB&Q and construct the connection between St Paul and Chicago(another part of the Hill Lines). Once the CB&Q was in the GN fold, the Milwaukee lost out on GN traffic, and the C&NW lost out on NP traffic. The Milwaukee decided to build the ‘Pacific Extension’ and never really recovered financially.
Just look at the mansions on Summit Ave in St Paul. Hill’s and Weyerhauser’s are right there!
I think there are two things that set Hill apart. First he got into the business “right”, buying the St. Paul & Pacific for pennys on the dollar AND just as the country was comming out of the Panic of 1873. Some of that was vision, some was luck.
Hill’s vision changed to fit the times. I think when he started he was looking to complete a nice little railroad in Minnesota that happened to have a connection to Winnepeg. Soon Hill became a founder of the Canadian Pacific, along with most of his associates in the St. Paul project. Hill then saw the Manitoba as part of a transcontinental line and was bitterly disapointed when the CP chose to build its own line north of Lake Superior.
When that decision was made, I think he decided that he would build his own line to the Pacific Coast, but he did it bit by bit with the bits becoming progressively larger. The first bit was to Devils Lake from Grand Forks 68 miles in four years, 1880-1884. The second was to Minot 121 miles in 1886, then to Great Falls and on to Helena, 640 miles in 1887 and the final 73 miles to the objective, Butte in 1888. There was mininig traffic at Butte. Hill meant to get his share, and much of the segment to Great Falls would be useable for the line to the coast.
Construction to the coast began in 1890 from Pacific Junction, very near today’s Havre Montana. This last piece was built in just under three years, the last spike being driven in Washington State in January of 1893.
Second, and particularly in contrast with NP, Hill basically built and ran the Manifoba and the GN with a free hand. He could implement his vision and his vision was generally correct. The NP, by contrast was built and run by committees and the vision changed from time to time so there were fits and starts and some really dumb management decisions.
Jim,
If you check your history of the CB&Q I think you will find that the line to Minneapolis/St. Paul predates Hill’s purchase of the Q by
There are those in business who believe you get ahead best when you use somebody else’s money instead of your own…government loans and grants, stockholder’s and bondholder’s money, friends’ and banks’, even your grandmother’s money, but never from your own pocketbook. They think that is “right” and “smart” rather than risking all they have. Our business and political sturcture and practices are so hidden in rhetoric and convenience today, we really don’t know what anyone is taking about!
Are suggesting that Hill financed everything out of his own pocket? He had partners and a friend name J.P. Morgan who let him use a lot of their money.
I don’t see your point. Nobody has the luxury of simply using somebody else’s money just because they don’t want to use their own. Whoever risks their money is acting on their own free will. They are not being commandeered into risking their money by someone else who does not want to risk their own money. If business looks like it will make money, it attracts investment. The greater the attraction, the more risk investors will take. It’s a beautiful concept.
If only Human’s were proven to be Rational creatures. Alas, we are absolutely not.
Anyway, it looks to me like Hill took advantage of Federal land grants in his initial purchase, and made extensive use of state and local land grants along the way.
So the answer to the question appears to be that it depends on your point of view. He certainly didn’t pay market rate for every piece of land the company purchased.
Without the land grants railroads were inclined to wait on building into new territory until it was settled with agricultural shippers. And those shippers were inclined to wait on settling into new territory until it was served by rail. So to break this logjam, the government granted land to the railroads as an incentive to get them to invest in building into new territory ahead of shipping demand.
So the government paid railroads to build early. Is that a grant? No, it is a contract. It has a quid pro quo. The railroads received value in the form of land, and the government received value in the form of premature railroad investment in a territory without rail se
The US governmental desires of the 19th Century and the 21st Century are not the same. In the 19th Century the desire was to add land to the country (preferably with valuable minerals) and then once the land was obtained, get it populated. If inducements were required to get the land populated, so be it. We can’t apply 21st Century political and business thought to the requirements of 19th Century political and business needs.
What I was talking about above applies to all time frames. It is basic economics. I am just saying that the land grants were not fee money to the railroads.
Funny thing is, a lot writers like to apply today’s economic picture, and use it as a reference for past economic or historical comparison. I recently read something that basically said: “The welfare queen corporations don’t need those free government handouts to make a profit. Look at ol’ Jim Hill. He built a railroad empire from scratch with his bare hands, and not a single penny of free government money!”. [sigh]
Did Hill have a choice as to whether to use land grant money or not? Was it offered? If not, did he ask for it? If not, could he have gotten it had he asked? Do we know the answers to any of the questions?
Well, think of it this way, Hill came through after the NP right. If you take it as fact that the land grants encouraged NP to build which in turn caused settlers to settle which in turn made it far more compelling for Hill to build the GN into those areas, then it becomes clear that Hill did in fact use the landgrants. He just didn’t use them directly. He took advantage of the NP’s paving the way.
No, we don’t know any of these answers. In fact, I’m not even sure I understand your questions. My point was, that a lot of writers like to use their own interpretation of historical events to bolster their own preconceived ideas about current events.
[?] Since income taxes didn’t come into being until about 1913(?), I’m fairly certain no one else in his day paid them either. Corporate income taxes? I’m not sure when those came into being.
Yes, you made that point and I believe that BaltACD made the same point. But I don’t understand what it has to do with this thread. Could you please explain how this fits the discussion of Hill?
The land grant was made to the Minnesota & Pacific Railroad in 1857. The M&P failed and by an Act of the Minnesota legislature the possessions and franchise of the M&P were turned over to a new company the St. Paul and Pacific in 1862. The StP&P issued slightly more than $30 million face value of bonds from 1862 to 1871. After building 282 miles of line the StP&P failed, as did many other railroads, in the panic of 1873.
Hill and his associates gained control o the StP&P by buying up the various issues bonds at prices ranging from 75% of par to 13.75% of par. At this point the land grant was one of the assets of the company, just like locomotives, cars, tracks, and shops.
The next step was to foreclose on the company and have it purchased by a new company, the St. Paul Minneapolis & Manitoba, making payment with the bonds of the old company. At this point again, the land grant was one of the assets of the new company.
Hill and his associates would probably have liked to sell the land grant for cash, but there is no evidence of anyone being silly enough to buy it in 1879 when the new company took over.
I will not claim that the land grants were not helpful, but they were far from “free money”. First they were not money, they were lands in the wilderness when granted. In addition they were granted only after various increments of line were constructed. That means that real cash had to come from somewhere before any land grants were earned. Once earned taxes had to be paid. To be sold massive marketing campaigns had to be run and a department created to deal with gaining title and selling the land. Some land was sold relatively quickly, other lands took decades, and some was never sold, typically for lack of buyers.
The most common source of cash was bonds, and in some cases stock. Most land grant railroads had complex capital structures with first and second mortgage bonds just for starters. Some carriers issued "Land Grant bond