Don't Blame the RRs

[Murphy Siding]

The reasoning does not explain why we did not build a railroad to Alaska, if the reasoning were true, or to Hawaii, since anything ridiculous passes here as a justification.

Maybe you should tell us how good our relations were with Canada in this time period. So good that they'd let the US build a railroad across their territory from Washington to Alaska? The reason is, the government owned the land for the transcontinental, they didn't own Canada.

Ummmm, I think the US did build a highway up the whole of Western Canada, if I'm not mistaken!

Does this mean that we really did own Canada?

     Wasn't that sort of a *road grant* sort of project?  The U.S. built the road, and pretty much *gave* it to Canada.  Now Dave, according to your theory ,those darn Canadians got an advantage over the private, non-road grant countries that tried to build roads later, without government financing.

[Anonymous]

The reasoning does not explain why we did not build a railroad to Alaska, if the reasoning were true, or to Hawaii, since anything ridiculous passes here as a justification.

Maybe you should tell us how good our relations were with Canada in this time period. So good that they'd let the US build a railroad across their territory from Washington to Alaska? The reason is, the government owned the land for the transcontinental, they didn't own Canada.

Ummmm, I think the US did build a highway up the whole of Western Canada, if I'm not mistaken!

Does this mean that we really did own Canada?

[TomDiehl]

Again, trying to take things out of historic context. Even the second sentence answers why the government had to step in. If left completely to private enterprise, the first transcontinental railroad never would have been completed by 1869, connecting the settled east and west coasts as the government felt necessary, if nothing else, for defense reasons.

I am sure, insofar as defense was concerned, invasion was imminent, no doubt from the King of Hawaii who was a notorious threat to California.

Wow, a "student of history" that doesn't know about Mexico of that time period. All he can come up with is a rather lame reference to King Kamehameha.

If you know "about Mexico" in that time period, you would know that in 1862, France was in the process of invading Mexico and any alleged threat by Mexico to California at that point existed only in the mind of a Trains forum poster in 2006. An actual student of history might guess that being invaded by a major European power was a "distraction" to the Mexicans.

However, I see the conversation once again descend to the "lame" stage, and I am sure the usual "feeble-minded" and "weak-minded" epithets are not far behind as the standard level of discourse of TomDiehl threads.

Suffice it to say we disagree.

Yes, we do disagree. If France had successfully invaded Mexico, I guess you're saying they would have no desire to expand into what was the western US. Mexico (or whatever the French would have renamed it) just might make a good staging ground for the invasion. And that doesn't just exist in my mind.

Oh good grief, something "might make a good staging ground for an invasion"  -- by France?

So you give away a bunch of public land to enrich a bunch of Congressman (a 100% dividend was declared to stockholders, Congressmen who happened to receive "free stock" from Oakes Ames) to stave off an invasion by an ally.

This isn't history. This is pure speculation of the rankest kind.

If you review the quotes above, it's you that started the "what-if" part of this discussion. "Defense" isn't just about the possibility of invasion by a foreign country.

You seem to forget, imperialism was more than alive and well in the 1800's.

[Murphy Siding]

     Wow!  I had to go back to the first page to see what the thread had been about.  I don't even know what it's about now.  When France finishes taking over Mexico, and then invades California, I hope Hawaii comes in on our side.

[MichaelSol]

Again, trying to take things out of historic context. Even the second sentence answers why the government had to step in. If left completely to private enterprise, the first transcontinental railroad never would have been completed by 1869, connecting the settled east and west coasts as the government felt necessary, if nothing else, for defense reasons.

I am sure, insofar as defense was concerned, invasion was imminent, no doubt from the King of Hawaii who was a notorious threat to California.

Wow, a "student of history" that doesn't know about Mexico of that time period. All he can come up with is a rather lame reference to King Kamehameha.

If you know "about Mexico" in that time period, you would know that in 1862, France was in the process of invading Mexico and any alleged threat by Mexico to California at that point existed only in the mind of a Trains forum poster in 2006. An actual student of history might guess that being invaded by a major European power was a "distraction" to the Mexicans.

However, I see the conversation once again descend to the "lame" stage, and I am sure the usual "feeble-minded" and "weak-minded" epithets are not far behind as the standard level of discourse of TomDiehl threads.

Suffice it to say we disagree.

Yes, we do disagree. If France had successfully invaded Mexico, I guess you're saying they would have no desire to expand into what was the western US. Mexico (or whatever the French would have renamed it) just might make a good staging ground for the invasion. And that doesn't just exist in my mind.

Oh good grief, something "might make a good staging ground for an invasion"  -- by France?

So you give away a bunch of public land to enrich a bunch of Congressman (a 100% dividend was declared to stockholders, Congressmen who happened to receive "free stock" from Oakes Ames) to stave off an invasion by an ally.

This isn't history. This is pure speculation of the rankest kind.

[TomDiehl]

The reasoning does not explain why we did not build a railroad to Alaska, if the reasoning were true, or to Hawaii, since anything ridiculous passes here as a justification.

Maybe you should tell us how good our relations were with Canada in this time period. So good that they'd let the US build a railroad across their territory from Washington to Alaska? The reason is, the government owned the land for the transcontinental, they didn't own Canada.

[TomDiehl]

Again, trying to take things out of historic context. Even the second sentence answers why the government had to step in. If left completely to private enterprise, the first transcontinental railroad never would have been completed by 1869, connecting the settled east and west coasts as the government felt necessary, if nothing else, for defense reasons.

I am sure, insofar as defense was concerned, invasion was imminent, no doubt from the King of Hawaii who was a notorious threat to California.

Wow, a "student of history" that doesn't know about Mexico of that time period. All he can come up with is a rather lame reference to King Kamehameha.

If you know "about Mexico" in that time period, you would know that in 1862, France was in the process of invading Mexico and any alleged threat by Mexico to California at that point existed only in the mind of a Trains forum poster in 2006. An actual student of history might guess that being invaded by a major European power was a "distraction" to the Mexicans.

However, I see the conversation once again descend to the "lame" stage, and I am sure the usual "feeble-minded" and "weak-minded" epithets are not far behind as the standard level of discourse of TomDiehl threads.

Suffice it to say we disagree.

Yes, we do disagree. If France had successfully invaded Mexico, I guess you're saying they would have no desire to expand into what was the western US. Mexico (or whatever the French would have renamed it) just might make a good staging ground for the invasion. And that doesn't just exist in my mind.

[TomDiehl]

Indeed, insofar as "defense" is concerned, building of the transcontinental railroads caused the Indian wars. Custer's activities out West, including his final appearance, involved protecting railroad surveyors. The premature and forcible advance of the U.S. Army to protect the railroads offers evidence of two contentions 1) it was premature to be building a railroad, and 2) building one (or two) caused the bloody conflicts that ensued. Some "defense"!

The fact that a government boondogle can be justified by hyperventilating over some completely hollow rationale has not changed either in the intervening years, and experience only confirms that, if there is no economic justification, it is likely a boondogle, and particularly so for projects justified on allegedly economic or "development" grounds.

So now you're trying to claim that the building of the transcontinental railroad was the cause of Manifest Destiny, not a tool of it.

So exactly when do YOU believe that the time to build this railroad was "mature?" After California broke away from the Union? After the Model T was invented? After the Interstate Highway system was built?

The only one "hyperventilating" over this is you with your claim that it needed to be an overnight economic success. Even the government in that time didn't believe that. And just what would be your requirements for this not to be a "boondoggle?" The west get completely cleared and farmed in 10 years? This area of the country to become the grain supplier of the country, and in some cases, the world? (oh wait, it is) Too bad the railroads had NOTHING to do with that.

[nanaimo73]

  If you know "about Mexico" in that time period, you would know that in 1862, France was in the process of invading Mexico and any alleged threat by Mexico to California at that point existed only in the mind of a Trains forum poster in 2006. An actual student of history might guess that being invaded by a major European power was a "distraction" to the Mexicans.
 

Tom,

Do you have an answer for this ?

[TomDiehl]

Again, trying to take things out of historic context. Even the second sentence answers why the government had to step in. If left completely to private enterprise, the first transcontinental railroad never would have been completed by 1869, connecting the settled east and west coasts as the government felt necessary, if nothing else, for defense reasons.

I am sure, insofar as defense was concerned, invasion was imminent, no doubt from the King of Hawaii who was a notorious threat to California.

The reasoning does not explain why we did not build a railroad to Alaska, if the reasoning were true, or to Hawaii, since anything ridiculous passes here as a justification.

The government "had to step in." Dramatic, but there is no actual reasoning behind these statements. There was in fact a functioning transportation system of the type which brings most goods to California even to this very day: ocean shipping.

So now you're trying to tell us that the government had no desire, after the Civil War, to bind the country together, with something faster than ocean shipping around the horn or wagons across Panama, or a wagon train across the west? The "reasoning" was from the time period

So since the "ocean shipping" was a viable alternative, why don't you tell us how long an ocean journey took from any military bases on the east coast to California. Remember, this was BEFORE the Panama Canal was built.

And since it is an alternative to railroads "even to this very day," why haven't they put the railroads out of business?

[MichaelSol]

Again, trying to take things out of historic context. Even the second sentence answers why the government had to step in. If left completely to private enterprise, the first transcontinental railroad never would have been completed by 1869, connecting the settled east and west coasts as the government felt necessary, if nothing else, for defense reasons.

I am sure, insofar as defense was concerned, invasion was imminent, no doubt from the King of Hawaii who was a notorious threat to California.

Wow, a "student of history" that doesn't know about Mexico of that time period. All he can come up with is a rather lame reference to King Kamehameha.

If you know "about Mexico" in that time period, you would know that in 1862, France was in the process of invading Mexico and any alleged threat by Mexico to California at that point existed only in the mind of a Trains forum poster in 2006. An actual student of history might guess that being invaded by a major European power was a "distraction" to the Mexicans.

However, I see the conversation once again descend to the "lame" stage, and I am sure the usual "feeble-minded" and "weak-minded" epithets are not far behind as the standard level of discourse of TomDiehl threads.

Suffice it to say we disagree.

[TomDiehl]

Again, trying to take things out of historic context. Even the second sentence answers why the government had to step in. If left completely to private enterprise, the first transcontinental railroad never would have been completed by 1869, connecting the settled east and west coasts as the government felt necessary, if nothing else, for defense reasons.

I am sure, insofar as defense was concerned, invasion was imminent, no doubt from the King of Hawaii who was a notorious threat to California.

Wow, a "student of history" that doesn't know about Mexico of that time period. All he can come up with is a rather lame reference to King Kamehameha.

[MichaelSol]

I still find it kind of interesting that someone would get their shorts in a knot over the appearant inequities of a government program that took place over 100 years ago.  So the railroads got land free and the farmers had to pay 2-3 bucks an acre.  Perhaps the $19.8 billion in taxpayer funded federal subsidies paid to US wheat farmers ($1.4 for Montana wheat farmers) in the last 10 years maybe could be viewed as evening the score?  (Another $1 billion + went to Montana land owners for "conservation reserve" for the same period.)

Come to think of it, those of you who get in a snit over the chump change doled out to Amtrak and other railroads ought to go over and take a look at the farm thing.  Total USDA farm subsidies 1995-2004:  $143.8 billion.

 

I am sure you find it interesting.

I agree, however, that Montana farmers, who receive among the lowest of such subsidies, would be better off relative to their competitors if they were all abolished. However, those Midwest and Texas farmers are ruthless, and if the cotton growers didn't get their $230 an acre subsidy, there would be hell to pay in the next election.

It absolutely does skew rational economic investment decisions, to wit, the sugar cane and cotton farmers are Exhibit A. Without subsidies, things would change. Montana farmers would do better, Texas farmers would do worse without the subsidies. Subsidies now and subsidies then have exactly the same results: economic inefficiency and poor investment decision-making.

I am glad we agree.

It certainly assists any debate on any particular topic to look at something else, based on a different policy, in a different time frame, regarding a different industry, just to get a clearer picture of the topic at hand.

[MichaelSol]

Again, trying to take things out of historic context. Even the second sentence answers why the government had to step in. If left completely to private enterprise, the first transcontinental railroad never would have been completed by 1869, connecting the settled east and west coasts as the government felt necessary, if nothing else, for defense reasons.

I am sure, insofar as defense was concerned, invasion was imminent, no doubt from the King of Hawaii who was a notorious threat to California.

The reasoning does not explain why we did not build a railroad to Alaska, if the reasoning were true, or to Hawaii, since anything ridiculous passes here as a justification.

The government "had to step in." Dramatic, but there is no actual reasoning behind these statements. There was in fact a functioning transportation system of the type which brings most goods to California even to this very day: ocean shipping.

Indeed, insofar as "defense" is concerned, building of the transcontinental railroads caused the Indian wars. Custer's activities out West, including his final appearance, involved protecting railroad surveyors. The premature and forcible advance of the U.S. Army to protect the railroads offers evidence of two contentions 1) it was premature to be building a railroad, and 2) building one (or two) caused the bloody conflicts that ensued. Some "defense"!

The fact that a government boondogle can be justified by hyperventilating over some completely hollow rationale has not changed either in the intervening years, and experience only confirms that, if there is no economic justification, it is likely a boondogle, and particularly so for projects justified on allegedly economic or "development" grounds.

[TomDiehl]

Well, you refuse to read what the words say, so there's not much point in rehashing them. If young historians are surprised by the fact that the transcontinentals didn't bring in many settlers, then the railroads at that point in time didn't do much to open up the west, did they? A long empty stretch of country, which after construction becomes a long empty stretch of country with a bankrupt railroad going through the middle of it probably isn't what the government had in mind.

Government fiat didn't change the fact that building a railroad where none had any economic justification provided no more economic justification. What it did do was transfer immense wealth to private hands -- and I don't mean the railroad companies -- through unprecedented corruption, precisely because the whole endeavor had no rational economic justification.

And when the time arrived that it did make sense, two bankrupt railroads were reorganized around former public lands, effectively shutting out private capital and the logical and legitimate course of development that would have been represented by the privately financed railroads that would have reasonably expanded west as the country developed.

The lack of much development out West after the transcontinentals were built is simply proof that government can't force development. Putting in railroads out West made no sense for the time period involved and the fact that notwithstanding the generous provisions of the Homestead Act nothing much happened under it, gives lie to both the power of  a railroad track to change economic principles, and the alleged lure of "free land" to attract people where there was no economic justification or ability to go.

Indeed, the bankruptcy of the two big land grant railroads in 1893 offers prima facie proof that development had not occured as anticipated.

 No less an authority than John Wesley Powell, founder of the US Geologic Survey, coomplained that "I think it would be almost a criminal act to go on as we are doing now" to try and induce people to move west to support the railroads  "and allow thousands and hundreds of thousands of people to establish homes where they cannot maintain themselves." [United States Geologic Survey Professional Paper 669, The Colorado River Region and John Wesley Powell (Washington D.C.: U.S. Government Printing Office, 1969) p. 17].

Viewing it as a criminal act, corruption aside, provides a contemporary perspective that  "someone who studies history" can perhaps appreciate.

Powell was not an economist, and only looking at the human toll. He had traveled the West and examined it from a professional eye. He could see the folly, and he wasn't the only one. Land grants came to a screeching halt in 1871 as the country, as well, realized they were pure folly.

Funny that one who "studies history" has no comment on the desire to connect the settled (at the time) east and west coasts. He seems to keep rehashing the "economic benefit" or "economic justification" of the western railroads but convientently sidesteps the fact that the government wasn't concerned with immediate economic benefit, they needed that connection and a single path through a (at the time) wilderness. There was no "refusal to read what the words say." The words you chose to quote don't address the situation and desires of the time. You could use the same criteria and come to the same conclusions about the interstate highway system.

Those "young historians" who were "surprised by the fact that the transcontinentals didn't bring in many settlers," what time frame were they expecting? Was the west not settled until the Model T came along? Or the US or interstate highways? Is the west still not settled?

And if building the transcontinental railroad (or the way it was built) truly was a "criminal act," why wasn't there more prosecution of the guilty?

(from above) "No less an authority than John Wesley Powell, founder of the US Geologic Survey, coomplained that "I think it would be almost a criminal act to go on as we are doing now" to try and induce people to move west to support the railroads  "and allow thousands and hundreds of thousands of people to establish homes where they cannot maintain themselves." [United States Geologic Survey Professional Paper 669, The Colorado River Region and John Wesley Powell (Washington D.C.: U.S. Government Printing Office, 1969) p. 17]." (BTW, Powell was the second director, Clarence King was the first)  http://www.usgs.gov/aboutusgs/who_we_are/directors.asp

So Powell was saying that all the land in the west was below "economic benefit?"

[vsmith]

 

 

 

 

 

 

Whew! I need a break from all this......

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ahh thats much better...

[MichaelSol]

Well, you refuse to read what the words say, so there's not much point in rehashing them. If young historians are surprised by the fact that the transcontinentals didn't bring in many settlers, then the railroads at that point in time didn't do much to open up the west, did they? A long empty stretch of country, which after construction becomes a long empty stretch of country with a bankrupt railroad going through the middle of it probably isn't what the government had in mind.

Government fiat didn't change the fact that building a railroad where none had any economic justification provided no more economic justification. What it did do was transfer immense wealth to private hands -- and I don't mean the railroad companies -- through unprecedented corruption, precisely because the whole endeavor had no rational economic justification nor the normal controls that private capital puts upon its own expenditures.

And when the time arrived that it did make sense, two bankrupt railroads were reorganized around former public lands, effectively shutting out private capital and the logical and legitimate course of development that would have been represented by the privately financed railroads that would have reasonably expanded west as the country developed.

The lack of much development out West after the transcontinentals were built is simply proof that government can't force development. Putting in railroads out West made no sense for the time period involved and the fact that notwithstanding the generous provisions of the Homestead Act nothing much happened under it, gives lie to both the power of  a railroad track to change economic principles, and the alleged lure of "free land" to attract people where there was no economic justification or ability to go.

Indeed, the bankruptcy of the two big land grant railroads in 1893 offers prima facie proof that development had not occured as anticipated.

 No less an authority than John Wesley Powell, founder of the US Geologic Survey, complained that "I think it would be almost a criminal act to go on as we are doing now" to try and induce people to move west to support the railroads  "and allow thousands and hundreds of thousands of people to establish homes where they cannot maintain themselves." [United States Geologic Survey Professional Paper 669, The Colorado River Region and John Wesley Powell (Washington D.C.: U.S. Government Printing Office, 1969) p. 17].

Viewing it as a criminal act, corruption aside, provides a contemporary perspective that  "someone who studies history" can perhaps appreciate.

Powell was not an economist, and only looking at the human toll. He had traveled the West and examined it from a professional eye. He could see the folly, and he wasn't the only one. Land grants came to a screeching halt in 1871 as the country, as well, realized they were pure folly.

[TomDiehl]

Interesting to see proponents of massive government intervention in the rail industry to promote projects which would not attract private capital and which shut out the natural and reasonable economic expansion of privately funded railroads that would have likely built West when it was economically justified.

It is true that whatever benefits the Homestead Act may have had, free land near railroads was not one of them as the railroads themselves proved to promote, or abet, the most ruthless forms of corruption of allegedly Homestead lands. The Railroad Acts effectively gutted the Homestead Acts.

Was their economic efficiency in any sense gained by building ahead of demand?  Although the Homestead Act was passed in 1862, young historians are invariable surprised by Government Land Office records that show little activity under the Act for its first 30 years. Whoever was of the idea that bulky, low value agricutlural commodities could be raised out West and then shipped hundreds of miles to the markets back East and still make a profit was simply delusional and the only interesting part of that is that the same rationalizing view exists today by uninformed victims of the hagiography of the transcontinental railroad construction.

The grants themselves made no economic sense, used as they were to justify an economic project with no economic justification.

"The addition of an asset, with a return positively correlated with expected return from operations, thus might not sufficiently enhance the desirability of the package, which suggests why land might have been a rather ineffective method of overcoming the market’s feelings concerning risk, and explains why the land-grant feature apparently did not raise the valuation of the securities issued.  Land might have been the cheapest way to provide a subsidy, but was clearly not economically the most efficient.  If the problem was “building ahead of demand” or builing before private investors thought the time was ripe, the form of subsidy selected was inappropriate.

"... Land grants of the type used were not efficient in the promotion of the appropriate investment decision.”       

[“Some Economic Issues Relating to Railroad Subsidies and the Evaluation of Land Grants,” Stanley L.  Engerman, The Journal of Economic History (June, 1972) p.  452.]

They were simply an extraordinary instrument of corruption, and a placement of public dollars guaranteed to skew rational economic decision making, as subsidies and grants always do. The contemporary objection to the grants became so fierce that Congress was compelled to end them entirely in 1871 -- the opposition being the highest among Westerners themselves -- the purported ultimate beneficiaries of such grants.

The main "use" of the land grants came in 1893 at a point in time when privately financed railroads were beginning to find economic justification for building West. The grants themselves, having done little to promote development of the West, became the leverage by which Wall Street financiers such as J.P. Morgan and Jacob Schiiff could leverage the reorganization of the inevitably failed railroads into roads that could dominate their rivals courtesy of millions of acres of free land at a time when private investment would have, and should have, been building West and those failed railroads, the NP and the UP, transferred into combinations which had been succcessful as private enterprises.

As Engermand suggests, the land grants had little economic value as a means of raising funds at at time when no economic rationale existed for building out West. What little effect the Land Grants did have was to screw up the idealism of the Homestead Act and render it a farce. Then the Land Grants became a means of providing a leverage against rational private investment at a time when private investment in railroad building out West finally made sense.

We live with the negative impact of the Land Grants to this day.

What I find interesting is someone that claims to have studied history still attempts to evaluate events of over 100 years ago without keeping them in historic context.

(from above) "The grants themselves made no economic sense, used as they were to justify an economic project with no economic justification."

The original reason for proposing a transcontinental railroad was to open the west to settlement. After the Civil War, it became equally important to bind the settled east and west coasts together, to allow troops for protection to be transported across the unsettled central US without taking months to do it. The government owned a vast amount of open land (the Louisiana Purchase, for one), that wasn't selling or homesteading very fast once you got beyond the natural waterways. The government didn't have the money to build a federal railroad, but they had that land. They never intended to invest (in the Wall Street sense) in a transportation system for any direct economic gain.

(from above) "Was their economic efficiency in any sense gained by building ahead of demand?  Although the Homestead Act was passed in 1862, young historians are invariable surprised by Government Land Office records that show little activity under the Act for its first 30 years. Whoever was of the idea that bulky, low value agricutlural commodities could be raised out West and then shipped hundreds of miles to the markets back East and still make a profit was simply delusional and the only interesting part of that is that the same rationalizing view exists today by uninformed victims of the hagiography of the transcontinental railroad construction."

Again, trying to take things out of historic context. Even the second sentence answers why the government had to step in. If left completely to private enterprise, the first transcontinental railroad never would have been completed by 1869, connecting the settled east and west coasts as the government felt necessary, if nothing else, for defense reasons.

The land grants, as well as financial incentives from the government were designed to encourage the railroads to build through this area of "no economic justification" to speed up the process rather than wait for economic justification. The government got what they paid for, plus passed the headaches of operation and expansion to private companies.

You can also cite examples of abuses of grants and power for any industry. They in no way convict an entire industry, nor take away the fact that the railroads are still providing the transportation they were originally built for.

[Poppa_Zit]

I still find it kind of interesting that someone would get their shorts in a knot over the appearant inequities of a government program that took place over 100 years ago.  So the railroads got land free and the farmers had to pay 2-3 bucks an acre.  Perhaps the $19.8 billion in taxpayer funded federal subsidies paid to US wheat farmers ($1.4 for Montana wheat farmers) in the last 10 years maybe could be viewed as evening the score?  (Another $1 billion + went to Montana land owners for "conservation reserve" for the same period.)

Come to think of it, those of you who get in a snit over the chump change doled out to Amtrak and other railroads ought to go over and take a look at the farm thing.  Total USDA farm subsidies 1995-2004:  $143.8 billion.

Does that figure include the government price-fixing our milk?

[jeaton]

I still find it kind of interesting that someone would get their shorts in a knot over the appearant inequities of a government program that took place over 100 years ago.  So the railroads got land free and the farmers had to pay 2-3 bucks an acre.  Perhaps the $19.8 billion in taxpayer funded federal subsidies paid to US wheat farmers ($1.4 for Montana wheat farmers) in the last 10 years maybe could be viewed as evening the score?  (Another $1 billion + went to Montana land owners for "conservation reserve" for the same period.)

Come to think of it, those of you who get in a snit over the chump change doled out to Amtrak and other railroads ought to go over and take a look at the farm thing.  Total USDA farm subsidies 1995-2004:  $143.8 billion.

 

[mudchicken]

(1) Gee - anyone remember the great failures of the post-railroad land entities?

Glacier Park (BN) - bad management is bad management, period.

Trillium (BN, sorta) - reinvented bad management..

Cattellus (SPSF) - So bad even BNSF fired them as asset managers .

(all three did away with railroad land managers as soon as they were free of the railroad that spawned them...intrinsic worth did not register, they all knew better...Wall Street's short term guru's were terribly wrong.).....and Delta Airlines (Grinstein today?)

 

[MichaelSol]

Interesting to see proponents of massive government intervention in the rail industry to promote projects which would not attract private capital and which shut out the natural and reasonable economic expansion of privately funded railroads that would have likely built West when it was economically justified.

It is true that whatever benefits the Homestead Act may have had, free land near railroads was not one of them as the railroads themselves proved to promote, or abet, the most ruthless forms of corruption of allegedly Homestead lands. The Railroad Acts effectively gutted the Homestead Acts.

Was their economic efficiency in any sense gained by building ahead of demand?  Although the Homestead Act was passed in 1862, young historians are invariable surprised by Government Land Office records that show little activity under the Act for its first 30 years. Whoever was of the idea that bulky, low value agricutlural commodities could be raised out West and then shipped hundreds of miles to the markets back East and still make a profit was simply delusional and the only interesting part of that is that the same rationalizing view exists today by uninformed victims of the hagiography of the transcontinental railroad construction.

The grants themselves made no economic sense, used as they were to justify an economic project with no economic justification.

"The addition of an asset, with a return positively correlated with expected return from operations, thus might not sufficiently enhance the desirability of the package, which suggests why land might have been a rather ineffective method of overcoming the market’s feelings concerning risk, and explains why the land-grant feature apparently did not raise the valuation of the securities issued.  Land might have been the cheapest way to provide a subsidy, but was clearly not economically the most efficient.  If the problem was “building ahead of demand” or builing before private investors thought the time was ripe, the form of subsidy selected was inappropriate.

"... Land grants of the type used were not efficient in the promotion of the appropriate investment decision.”       

[“Some Economic Issues Relating to Railroad Subsidies and the Evaluation of Land Grants,” Stanley L.  Engerman, The Journal of Economic History (June, 1972) p.  452.]

They were simply an extraordinary instrument of corruption, and a placement of public dollars guaranteed to skew rational economic decision making, as subsidies and grants always do. The contemporary objection to the grants became so fierce that Congress was compelled to end them entirely in 1871 -- the opposition being the highest among Westerners themselves -- the purported ultimate beneficiaries of such grants.

The main "use" of the land grants came in 1893 at a point in time when privately financed railroads were beginning to find economic justification for building West. The grants themselves, having done little to promote development of the West, became the leverage by which Wall Street financiers such as J.P. Morgan and Jacob Schiiff could leverage the reorganization of the inevitably failed railroads into roads that could dominate their rivals courtesy of millions of acres of free land at a time when private investment would have, and should have, been building West and those failed railroads, the NP and the UP, transferred into combinations which had been succcessful as private enterprises.

As Engermand suggests, the land grants had little economic value as a means of raising funds at at time when no economic rationale existed for building out West. What little effect the Land Grants did have was to screw up the idealism of the Homestead Act and render it a farce. Then the Land Grants became a means of providing a leverage against rational private investment at a time when private investment in railroad building out West finally made sense.

We live with the negative impact of the Land Grants to this day.

[TomDiehl]

I might suggest that anyone interested in the Homestead Act and its implications, go to a source other than "Ed" and LC's online Park Service pamphlets. The quality of those arguments offered is equal to those offering them.

A better source showing that most Western lands were auctioned or sold, and the Homesteading through "proving" was a minor aspect in the settling of the West, and mostly a failure, would be Paul Wallace Gates, “The Homestead Law in an Incongruous Land System," The American Historical Review (July, 1936), p.  662-681.

Gates was the "dean" of American historians on homesteading, having published, among other extensive works, The Illinois Central Railroad and It's Colonization Work (1934) , Fifty Million Acres (1954), Landlord and Tenants on the Prairie Frontier (1973).

Aside from the general economic unliklihood of a homesteader going five long years without a credit source in order to get his "free" land, you will quickly see that the "Blysard -- LC --Diehl"  school of history is unaccredited through a more general lack of competence on the subject matter. Not that that ever stops them ...

An excerpt from "The Homestead Law ...":

"It was not entirely necessary, however, for speculators to resort to these illegal and fraudulent means of acquiring land since Congress proceeded to aid their schemes by enacting a series of laws which went far toward vitiating the principle of land for the landless.  By continuing after 1862 the policy of granting land to railroads to encourage their construction, Congress from the outset struck a severe blow at the principle of free homesteads.  In the eight years after the passage of the Homestead Law five times as much land was granted to railroads as had been given in the twelve preceding years.  Such imperial generosity was at the expense of future homesteaders who must purchase the land.  As it was necessary to withdraw all lands from entry in the regions through which such roads were projected to prevent speculators from anticipating the railroads in making selections of land, and as the routes were rarely definitely established when the grants were made, more than double this amount of land was withdrawn from entry and remainded unavailable for settlement for a long period of years.

"The railroads were, of course, built through undeveloped regions and, other things being equal, routes were selected which would ensure to the companies the largest among of what was then considered to be the best agricultural land.  When the alternate government sections were finally restored to market, settlers were frequently outbid for them by speculators, Moreover, the provision in the Homestead Law which confined the homesteader to eighty acres within the limits of a railroad grant was sufficient to send many homeseekers father afield.  On the railroad sections, of course, no free homesteading was permitted and thus the prospective settler found it necessary to go far from transportation facilities in order to take advantage of the government’s bounty."

Funny, your quote above (first paragraph of "The Homestead Law") verifies what I've been saying, the railroads built the transportation system the government wanted built, and the only way they could encourage it was to give them land.

And the first sentence of the second paragraph of that quote says exactly what I was saying, too. Looks like I've got Michael doing my references for me.

The one quote I find "curious" is (first paragraph) "In the eight years after the passage of the Homestead Law (1862, from sentence preceeding but 2) five times as much land was granted to railroads as had been given in the twelve preceding years." Anyone that is familiar with history might realize that between 1862 and 1870 was when the majority of the construction occured on the first  transcontinental railroad. Gee, I wonder if those two facts could be related?

"When the alternate government sections were finally restored to market, settlers were frequently outbid for them by speculators," (last paragraph). You don't mean the real estate was opened to the free market forces. How selfish of those corrupt railroads. Maybe that's where Realtor's got that "location, location, location" quote.

And of course "On the railroad sections, of course, no free homesteading was permitted." (last paragraph) The governemt can't give the land away twice without taking it back.

[bobwilcox]

The AT&SF and SP lands went about 1984 when Krebs had to fend off a raider.  I beleve the UP spun off their grants, etc. just before the C&NW merger in 1995.  It appears the bulk of the Federal land grants to intice transcontiental railroads has gone out of the control of the BNSF and UP.

[MichaelSol]

I thought the BN spun off their land grants in the 1980s, long before the creation of the BNSF.  Does the BNSF retain the land grants that went to the NP in the 1800s?

The feeling was that the "real money" was in the old land grant properties, -- there was by the 1980s enormous wealth contained in and coming from the resource division. The lands themselves were obligated under the old NP mortgages to be held as collateral and to provide revenue for the railroad company. Wall Street, however, decided that the railroad was a drag on the potential of the resources division. The mortgage bonds were paid off in 1988.

In that year, the railroad transferred 1.8 million acres of timber, oil, natural gas, and coal in Minnesota, North Dakota, Montana, Wyoming, Idaho, Washington, and Oregon to the new Burlington Resources.

BN president Jerry Grinstein remarked that "the standing joke was that they [Burlington Resources] got the gold and we [the railroad] got the shaft."

[bobwilcox]

I thought the BN spun off their land grants in the 1980s, long before the creation of the BNSF.  Does the BNSF retain the land grants that went to the NP in the 1800s?

[vsmith]

[Limitedclear]

Why yes, yes it is nice work.

With out the sweat from your little brow, we robber barrons would have to find real jobs....

Yeah Ed, in the next life we could be economists and consultants from Idaho and spew all sorts of trash...

LOL...

LC

[edblysard]

Why yes, yes it is nice work.

With out the sweat from your little brow, we robber barrons would have to find real jobs....

[Anonymous]

By the way, Futuremodal, I own farmland that I inherited.  It's true, I do.  It seems to me what that inheritance amounts to is essentially a personal "land grant".  So you see just as BNSF inherited land from the Northern Pacific, I inherited land from my family.  Should I be penalized for my inheritance as you would have BNSF be penalized for its inheritance from the Northern Pacific?  Let's let this whole land grant issue go.  It's ancient history, and a dead issue.

Fine, but one more thing before we close this up - land inheritance, whether personal or corporate, is not a "land grant".  And I have never stated per se that BNSF should be penalized for it's land inheritance from NP.  Rather, the subject of the railroad land grants needs to be kept at the forefront of these discussions, as some seem willing to obfuscate and omit such federal aid when claiming that "everyone else" is subsidized while "railroads are not".  More specifically, there's shear hypocrasy on the part of BNSF to publicly oppose the federal aid for DM&E.