How the modern railroad corporations and the state operated symbiotically
Review of Railroaded: The Transcontinentals and the Making of Modern America by Richard White
White introduces this fascinating study with an unusual motive: what we have been told about railroads, he claims, is flatly untrue and, because the reasons for this are very interesting, he wants to explore them. Railroads were not, he says, forewarnings of the future, our modern era. They may have introduced technologies that revolutionized American life, but they did not lead directly to mature capitalism, that is, managerial practices that introduced efficiency, planning, centralized hierarchy under visionary leaders, etc. They largely did not even immediately benefit American citizens, but came at great cost and waste that burdened generations with financial detritus. Indeed, White wants to get us to question conventional economics and social science at the profoundest levels. The result, if challenging to follow, is an absolutely first-rate reading experience that only a great historian can provide.
White’s findings are very clear. First, railroads were deeply dependent on governments to get going and then to financially survive. This was accomplished not by direct payment, but by a complex system of land grants, tax breaks, and, most important of all, bailouts.
Second, railroads reshaped our sense of time and space, not just shortening distances, but rendering them unstable, i.e. mired in bitter political and economic conflicts in the name of speculative opportunities and the acquisition of power.
Third, they were “not the harbingers of order, rationality, and effective large-scale organization”, but stubbornly unprofitable, indeed disasters of inefficiency and chaos.
Fourth, governments were corrupted and influenced in their turn by the railroad magnates. This led to the rise of the anti-monopolist opposition, which failed to control the large corporations in formation but had a significant regulatory impact nonetheless.
Fifth, the “octopus” entrepreneurs of the railroads were not ruthlessly efficient or even visionaries, but men on the make who improvised, flagrantly enriched themselves even as their businesses failed, and had little concept of the consequences, impact and even the managerial requirements to run their corporations.
In other words, he argues, Schumpeter’s “creative destruction” meme is a glib, ridiculously Panglossian oversimplification of very complex events and trends. It was, White writes, “the triumph of the unfit, whose survival demanded the intervention of the state, which the corporations themselves corrupted.”
The consequences were extremely dire. Not only were many railroads unneeded (built ahead of demand), but they led to a series of social and environmental disasters. Creating the conditions for boom and bust cycles – railroads needed to create traffic in a desperate and ultimately unsuccessful attempt to cover their high fixed costs and debt burdens – they generated unsustainable surges in silver mining, cattle and wheat production, in the process breaking up Indian reservations in order to bring settlers to arid western regions that would later almost certainly fail. It was too much, too fast.
As White demonstrates, it was only their symbiotic development with the modern state that saved them. Investors also fared poorly, corruption became endemic, yet the “entrepreneurs” became extraordinarily rich.
In spite of its populist racism and simplistic ideals, the anti-monopolist movement is one of the more interesting aspects of the book. Its proponents wanted, White explains, to force American businesses via regulation and political action to function like democracy was supposed to, to enable republican citizens to share in the prosperity. There is a great deal in the book about their strike actions, electoral campaigns, political violence, and failure to come up with a coherent ideological message that would unite them. Their ideas represented, in my opinion, one possible path that capitalism might have taken, perhaps culminating in an early welfare state and state-managed capitalism.
As White proves, reality stood in stark opposition to the economists of the era, the “marginalists” who believed that the market would inevitably, indeed magically, result in optimal solutions so long as politicians did not meddle in their affairs. The evidence, White asserts, in no way supports this ideology. Not only did railroads never achieve anything beyond momentary success in boom surges – they were normally “in either crisis or decline” – but they could never economically compete with the industry they were intended to replace, water transportation. While they opened up new geographical areas, the result was invariably wasteful, pushing the extraordinary financial burden of maintaining their infrastructure onto the next generation. Moreover, he argues, in extolling the impact of railroads without appraising its real costs, social science ignores too much, indeed the most essential.
In this light, classical economic science appears not just to be a theoretical construct imposed on events far more complex than acknowledged, but a misleading narrative that obscures deeper inconvenient truths to the present day – neo-liberal economics is political while claiming to be apolitical science.
White’s most audacious assertion is that the historian must contemplate what alternatives might have resulted if things had been handled differently. The scenario he explores is one where demand rather than supply might have governed the development process. (The example of North and South Dakotas is key here: the formal led by supply with success, the latter by demand, hence failure.) Instead of boosters frantically trying to create demand for unneeded railroads – pushing farmers into questionable landscapes, where they were often doomed to failure as they created gluts of wheat and silver, causing a ruinous collapse in prices – development would have proceeded more slowly and in better measured ways. This might have given Native Americans more time to adjust as well as avoided environmental degradation and innumerable other deleterious consequences, such as the bankruptcies and human tragedies in unviable booster towns.
In academic terms, White’s take is significant and subtle. Instead of relying on what the entrepreneurs claimed about themselves in propagandistic annual reports and similar self-serving documents as found in standard accounts (e.g. in Chandler’s Visible Hand), White went much deeper into the archives, including their personal letters, congressional investigations, and local sources who provided witness to the events. This results not in a simple jeremiad against robber barons, but in a nuanced portrait of their motives, cluelessness, and uncanny ability to enrich themselves even as their corporations repeatedly and consistently failed, only to be resurrected by the state they had corrupted.
As White demonstrates, the early modern state developed coeval with the industrial corporation; this is a profound revelation that added immensely to my understanding of the 19th century, on a par with Empire of Cotton by Sven Beckert. (https://crawdaddy.substack.com/p/how-slavery-colonialism-and-strong)
This is not an easy book to read, no matter how fun the details and narratives are. I had to read it twice before I felt ready to review it. White’s book is chock full of challenging ideas and, I believe, a must-read for anyone interested in economic development, political science, and the 19th century. It is not for the casual reader, only for the seriously engaged. Recommended with the greatest enthusiasm.
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