Not confusing at all…very interesting…you guys keep it up.
I think that we have all gotten more out of the discussion than even crayon scribbles would bring.
Johnny
While it is true that the UP failed as a result of the panic of 1893, so too did the NP and ATSF among the transcontinentals.
UP and NP failed from the same root causes poorly built high cost routes. In the UP case costs were inflated by an insider ring and continuous management fights between Durant, who in my opinion was insane, and those on the board who were businessmen. Selling congressmen a few shares of stock was an economic side issue that amounted to nothing and was reported then with the same lack of truth as our current financial panic. Both UP and CP were uniquely saddled with debt owed to the government, and the government was rabidly hostile to both for the 20 years preceeding 1893.
In the NP case the railroad was built by committee and most of them were no great shakes, with the possible exception of Billings. Henry Villard spent $40 million to complete the line, spending much more than he should have. Villard was a financer, not a detail oriented builder. It was Villard who spent $250,000 to haul trainloads of the rich and famous to Gold Creek Montana for the most ostentatous and expensive transcontinental completion celebration ever. Three months later the railroad was almost broke and Villard was out of office. Villard’s building tended to be low quality and high cost. Jeff Asay makes this case very well in his “Union Pacific Northwest - The Oregon-Washington Railroad & Navigation Company”
I do not recall the details of ATSF in 1893 so clearly but suspect they expanded too fast and had too much debt that they could not service during a downturn.
CP survived by being owned by SP which during the decade after its completion was the rate maker on transcontinental traffic due to a water subsidiary between New Orleans and New York. SP/CP survived to and beyond 1893 due to Huntington’s ability to
The author of this particular book, Thomas J. DiLorenzo, notes that also, but tries to suggest that those railroads all failed simply because they were Government Subsidized, and not run as well as the Capitalist GN was. I fail to see a correlation.
Adding to Mac’s points:
- UP was saddled with heavy debt due to acquisition of subsidiaries purchased at higher than market price – notably the KP, DSP&P, and the Utah Northern.
- SP was built from CP cash flow and had zero debt, giving it strength to survive downturns and rate wars
- GN was the first transcon built as a permanent railway rather than a development railway
- Iron prices during and immediately after the Civil War were extremely high, and steadily fell thereafter. Iron was more than 1/2 the cost of the UP but only 1/10 the cost of the GN. And the GN was buying steel rails with advanced metallurgy not wrought iron, too.
RWM
[quote user="Railway[quote user=“Railway Man”]
Iron prices during and immediately after the Civil War were extremely high, and steadily fell thereafter. Iron was more than 1/2 the cost of the UP but only 1/10 the cost of the GN. And the GN was buying steel rails with advanced metallurgy not wrought iron, too.
RWM
[/quote]
I’ve read that UP/CP was bound by their charters, to using American rails only, which were higher priced than British rails. Was GN able to buy rails from anywhere?
I’ve always read what an undertaking it was to build the UP/CP. I always wondered what kind of traffic boom surrounded getting all those supplies to council bluffs. Was it a railroad traffic boom, or a riverboat traffic boom?
J. J. Hill dead in St. Paul home at the age of 77
http://query.nytimes.com/mem/archive-free/pdf?res=9C07EFD9113FE233A25753C3A9639C946796D6CF
http://content.lib.washington.edu/cdm4/item_viewer.php?CISOROOT=/ayp&CISOPTR=366&CISOBOX=1&REC=20
I’ve read that UP/CP was bound by their charters, to using American rails only, which were higher priced than British rails. Was GN able to buy rails from anywhere?
I’ve always read what an undertaking it was to build the UP/CP. I always wondered what kind of traffic boom surrounded getting all those supplies to council bluffs. Was it a railroad traffic boom, or a riverboat traffic boom?
[/quote]
That’s correct – the Act (oh like so many many acts since) had all sorts of tangential goals thrown into the mix, in this case a subsidy to U.S. iron works. Politics and sausage, anyone?
It was a riverboat traffic boom for the first few years – the first railway, the C&NW, reached Council Bluffs on March 15, 1867.
RWM
Murphy,
I would suggest the real issue is motivation of the key players. UP and GN are the extreeme cases. I would argue that motivation was driven by the times and the incentives available.
The Federal Government, which is to say the American People, wanted the UP/CP built before there was economic demand to support it. Kind of like ethanol today but lets not go there.
The UP’s promoters, say Dr. Durant, had to figure out how to make money out of building the railroad. They knew they would never make money operating it. The CP’s chief promoter was an idealist who just wanted a job as chief engineer. He had to recruit four hardware peddlers in Sacramento, one of whom, Huntington, did figure out how to make money out of it.
Durant used the common device of a construction company. The directors of the railroad form a construction company. The railroad contracts with the construction company to build the railroad at a figure that will be profitable for the construction company. The construction company raises a relatively little money by selling its stock. The construction company is paid some combination of railroad stock, railroad bonds, and cash. The railroad sells its bonds for cash, usually at a discount. If all goes well the construction company ends up with a substantial portion of the stock of the railroad, having paid dividends in cash, stock, and/or bonds to its owners, many of whom were also railroad directors.
This gives the construction company insiders a good chance to make a big profit out of construction. If the railroad shows any earning capacity, they get a cut of it too. This is not a risk free operation however. First, money was tight and interest rates were high during and immediately after the civil war. This made selling bonds very difficult and bonds
What an elegant, pithy summary Mac wrote.
RWM
What he missed was that the book that started this discussion was purely political and not histoircal.
Henry,
Neither Murphy nor I missed it. Politics and history are intertwined as are politics and the media. At best the media repeats what somebody said. The politicians always have something to say. The business manm who is usually the victim of the politicain, too often says nothing, so by default or repetition the politician’s stories become the media report, become history and become common knowledge. The link between the story and what really happened is weak at best and often nonexistant.
Just to make it interesting reporters, editors and historians often have their agendas too. It helps to sell papers by reporting the most outrageous claims, and that is the politician’s stock in trade. Just watch the news or pick up a paper.
Mac
The book that Murphy proffered into the group is very bad history, but it is recognizable as an effort at historical inquiry.
Thanks, Mac. As a one time media reporter and still in broadcasting, I am ashamed to say that today’s reporters and thier editors or quite ignorant and lazy…they do not dig for a story, do not try to find the real story, because too often they cannot decypher rhetoric or emails or just thy plain don’t want to or are not allowed to by management constraints on time and duties.
But I don’t think this book was an “historical inquiry” but rather a blatent political statement to mislead the readers like a reporter or editor I describe above. If one were to read it, he/she would accept it as gospel, report to his/her audience, without investigation, question, or comment. Too often now, the internet does the same thing; a statement is posted and never challenged. That’s why I am enjoying the Kalmbach forums; there does seem to be a fair amount of intellegent discussion; other rail forums I find fall to rumor mongering, name calling, and other personal attacks.
[quote user=“henry6”]
Thanks, Mac. As a one time media reporter and still in broadcasting, I am ashamed to say that today’s reporters and thier editors or quite ignorant and lazy…they do not dig for a story, do not try to find the real story, because too often they cannot decypher rhetoric or emails or just thy plain don’t want to or are not allowed to by management constraints on time and duties.
But I don’t think this book was an “historical inquiry” but rather a blatent political statement to mislead the readers like a reporter or editor I describe above. If one were to read it, he/she would accept it as gospel, report to his/her audience, without investigation, question, or comment. Too often now, the internet does the same thing; a statement is posted and never challenged. That’s why I am enjoying the Kalmbach forums; there does seem to be a fair amount of intellegent discussion; other rail forums I fi
Or to use more air polluting gasoline and feed the gas cartel, the Republican Party as GWBush created, and denying the left leaning earth huggers’ claim that humans cause global warming.
Damn, wasn’t it a Bush ancestor who mounted all of the resistance when the glaciers from the Ice Age were receeding, claiming it was not the fault of those man made factories, SUV’s and mans desire for uneeded comforts. Looks like those leftists have to fight that battle once again.[soapbox]
Gentleman, I am acutely aware of my one-tune repertoire, but…a caution…please. Let’s keep the topic alive and not slipping into the left-right two-step.
-Crandell
[:O] Forgive me please. I was trying to make fun of the author’s use of a fact-stretcher, not start a political flame war![:I]