A Brief History of Doom by Richard Vague

Author:Richard Vague [Vague, Richard]
Language: eng
Format: epub
ISBN: 9780812251777
Publisher: University of Pennsylvania Press, Inc.
Published: 2019-06-15T04:00:00+00:00

CHAPTER 5

The Railroad Crises Era

1847–1907

Perhaps no other invention has transformed the world as dramatically as the railroad, accompanied by its indispensable adjunct, the telegraph. Together, they collapsed the human experience of time and space. They completely consumed, disrupted, and transformed the nations that embraced them. Railroad companies quickly became the largest components of the equity and debt markets of the era, issuing a nonstop flood of new stocks and bonds to finance their capital-intensive enterprises. By 1899, railroads had become 60 percent of the market capitalization of the New York Stock Exchange.1 In 2018, by contrast, no single industry was much more than 20 percent.2

Railroads, together with the construction of new depots, towns, and farms along their lines, became the biggest single component of the world’s debt, much of it in the form of bonds rather than bank loans. From the Transcontinental Railway to the Orient Express, entrepreneurs and legislators raced to build new railroads. Fortunes were made and lost, and then made and lost again. Railroads involved the biggest names in business and banking, from Cornelius Vanderbilt to J. P. Morgan.3 The legendary Union Pacific Railroad, part of that first transcontinental line, captivated the attention of the world in the 1860s before falling into financial distress in 18734 and then bankruptcy in 1893.5

Railroads incurred massive debt to establish and maintain their operations, but the debt required for the land sales and housing and commercial construction in the towns and farms along railroad routes was every bit as large, and often larger. A map of the Illinois Central Railroad, the largest railroad when established in 1851, shows the two main track branches (Figure 5.1). The darker areas alongside them are the land grants provided by the government to help finance the company. Two-thirds of the closely spaced towns along these tracks were brand-new, started by the company to provide buyers for its land and thus funds for its operations and to bring in the people and crops that it would transport. From 1851 through 1856, the number of inhabitants in these towns grew from 13,400 to more than 70,000. In 1856 alone, 3,392 farms were purchased within the land grant area, again largely with debt, bringing the total area under cultivation to more than 1.6 million acres.

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