The Great Railroad Revolution (47 page)

His first venture into major railroads was with the Illinois Central, joining the board in 1883 with the help of a director of the railroad, Stuyvesant Fish, and becoming a vice president four years later when Fish assumed the presidency. It was Harriman, though, who transformed the railroad, and brought about its expansion. The Illinois Central had long harbored ambitions of becoming a major north-south artery, but had failed to do so until Harriman oversaw the completion of the line all the way through to New Orleans. Harriman created such an efficient railroad that it survived the panic of 1893 without a blip in profitability.

However, other railroads suffered even worse than during the previous depression twenty years before. Of America's 364 railroads, 89 went bankrupt, representing forty thousand route miles, around a quarter of the total. As with America's major airlines, which have frequently sought protection under
Chapter 11
of the US Bankruptcy Code that allows them to keep flying despite being technically bankrupt, most of these railroads continued running, as they could be operated profitably provided their debt burden was ignored. The multiple bankruptcies resulting from the panic of 1893 enabled Harriman to move to even bigger pastures, the massive Union Pacific. Like all the transcontinentals except the Great Northern (fittingly, the
only one not to have received government aid), it had gone under following the panic, and by 1898 Harriman managed to assume control. And he transformed it. He saw that the potential to make it a money spinner was by hauling freight long distances at lower rates than the other guys. The Union Pacific still suffered from the economies made during its construction, and so Harriman straightened curves, reduced gradients, and installed signaling that allowed greater frequencies. As a result, it could carry more trains, which were both heavier and faster, making the railroad highly profitable. Harriman then used this money to expand. He did battle briefly with old Collis Huntington, the sole survivor of the four Central Pacific pioneers, who controlled the Southern Pacific and resisted its takeover. However, the timing of Huntington's death, in 1900, proved opportune for Harriman, who then assumed control of the railroad and improved it in the same way. By the early 1900s, Harriman controlled the greatest-ever mileage of railroads of any individual in the history of the American railroads. The dream of many railroad entrepreneurs was to control a coast-to-coast network of lines, and none really achieved it. Harriman came closest, as for a while he owned the Baltimore & Ohio and the Chicago & Alton as well as the Union Pacific, but he never managed to consolidate these holdings into a unified railroad. He nearly became the only person to own two transcontinentals when he fought with James Hill over the Northern Pacific, but at the last minute the two men reached a compromise, resulting in joint ownership through a holding company mostly controlled by Hill. Like the other barons, Harriman attracted widespread opprobrium, mostly because he was not only very rich, but also pugnacious and ruthless. As an example, he got rid of Fish, who had previously been his mentor from the Illinois Central board, because the latter cooperated with the investigation of an insurance company in which Harriman was involved. Yet now, as his biographer in the
Encyclopedia of North American Railroads
suggests, “with a century's perspective, his reputation has rebounded, and he is now considered on balance to have been a positive force.”
³⁸

The image of the robber barons was nevertheless long lasting, as it was in railroads, more than any other industry, that these men made their fortunes. It was highly damaging to the railroads, whose image suffered from the barons' infamy. The later barons, who included the reformed Gould,
may have been somewhat different in their aims and methods from their predecessors, who were out-and-out rogues, but the damage had been done. As rail historian Keith Bryant Jr. comments, “Journalists created the image of the ‘robber baron' who displayed no interest in operating a railroad for profit or in improving the property, but simply used the carrier's stock and bonds as vehicles for personal gain. . . . [This image] never dissipated and was used again and again by the detractors of the industry as representative of all railroad executives.”
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But there was more to the growing antipathy to the railroads than merely a dislike of the corrupt moguls. As we have seen, labor had started organizing, and although the series of workers' strikes beginning in the 1870s ended in defeat, they attracted considerable support from the wider population. Moreover, the railroads in general and the barons in particular seemed to show a particular disregard for the safety of their workforces, always blaming the workers themselves for any accidents.

It was not, though, the workers who were to attract the most sympathy in their battles with the railroads, but the farmers, who were by far the best-organized group of railroad opponents; even though their case was at times tenuous, they ran a highly effective lobbying campaign that would force the railroads on the defensive. The railroads changed the nature of farming. In the prerailroad days, markets were still local enough for the farmer to transport his produce there with his horse and cart, and the use of any possible transportation system, such as a river or a railroad, was entirely optional. If it were cheap and convenient enough, then he might use it, but otherwise not. The railroads were sensitive to this, as they were mostly local concerns, and therefore ensured their rates were tailored to the farmers' needs. However, as the West became settled, and large farms created out of the land given to the railroads began to emerge in the 1870s, the situation became very different. In states such as Nebraska or Iowa, farmers were no longer self-reliant producers, but, as John Stover puts it, “had no choice but to use rail facilities offered at the rates ordained by a largely absentee ownership.” There simply was no local market. The farmers were growing cash crops that had to be transported long distances to the east or for export, and “it was the rare western farmer who had the choice of two rail routes to market.”
⁴⁰
The farmers were consequently at
the mercy of the railroads, and they perceived the cost of transportation as an unavoidable tax.

Not only were the farmers tied inexorably to the railroads, but in some cases they had even helped finance them by raising mortgages on their farms. Now, though, they were in a powerless position, as the railroads imposed what the farmers felt were punitive rates. According to Stover, “The farmer's transition from railroad proponent to railroad antagonist came earlier along the eastern prairie than it did farther west.”
⁴¹
The standard complaint was simple: why did the railroads charge more per mile for shorter journeys than for longer ones, which seemed to put local farmers at a disadvantage? There were, in fact, understandable reasons, since much of the cost of a journey occurs in the loading and unloading at each end, but this argument was dismissed by the farmers. They blamed the low margins they could earn on their produce on high freight charges. Even when rates began to fall in the 1880s, there was continued resentment because of the railroads' dominant position as the sole viable means of transportation. Probably apocryphal stories spread through the Midwest about the Illinois farmer who returned from selling his load of grain with the amount it had cost him to buy a pair of shoes for his son, or the similar tale from Iowa of a smallholder who burned his corn for fuel as, at fifteen cents a bushel— compared with the dollar he would have received in the East—it was cheaper than coal. In fact, there were bigger forces at work that affected the farmers. Much of the land in the West was in areas with poor rainfall, and yields were not as good as promised; also, partly thanks to the opening up of vast swaths of land in the United States and Canada as a result of the spread of the railroads, worldwide prices for grain were falling.

No matter. The railroads were an easy target. The weather and global prices could not be influenced by pressure from the farmers. The railroads and the state legislatures could, and consequently the railroads became the great symbol of grasping capitalists who were responsible for all the farmers' ills. Helped by the antipathy to the barons, the farmers captured the zeitgeist and became the first organized force against the power of the railroads. The railroads were perceived as having destroyed the traditional American way of life, a feeling encapsulated by Henry George in an 1868 essay: “[The railroad] kills little towns and builds up great cities, and in the
same way kills little businesses and builds up great ones.”
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The hostility started in Illinois at the back end of the 1860s, whereas in Nebraska, farther west, it did not emerge until the deprivations in the depression following the panic of 1873. Although the farmers' complaints were hardly new or even noteworthy, they were given added strength because they were backed by a curious but effective organization, the Patrons of Husbandry, better known as the Grange. It was created by a brilliant orator and organizer, Oliver Kelley, a Minnesota farmer who had decided that farmers needed an association to press for their interests. He used the model of the Masonic order, creating a series of local Granges and a structure based on “degrees,” as members rose through the ranks. Unlike the Masons, women were admitted on the basis that they would be crucial in winning over their menfolk. After a slow start, as Kelley toured first his own state and later neighboring ones giving rousing speeches with the aim of setting up local groups, the movement blossomed and by 1875 had eight hundred thousand members in twenty thousand local Granges.

The feelings of the farmers toward the railroads were evoked powerfully in a series of books and pamphlets on the Mussel Slough tragedy of May 1880 in California's San Joaquin Valley, in which seven men died in a shoot-out between local settlers fearing eviction by the Southern Pacific Railroad and a marshal and his three associates who, it was thought, had been sent in to clear the land. The most famous was Frank Norris's 1901 novel
The Octopus
, which describes the railroad as that “great monster, iron-hearted, relentless, infinitely powerful.” On this occasion, the issue was not freight rates, but, rather, the railroad was accused of misleading the settlers about the rent levels they had to pay on their land and was portrayed as callous in trying to evict them. The Southern Pacific was victorious in various court decisions, helped by sympathetic judges, but the widespread publicity given to the incident ensured public support for the settlers, which in turn helped stimulate wider feelings of antagonism toward the railroad companies. The understandable failure of the public to comprehend the historic role of the railroads in light of their oppressive behavior is brilliantly encapsulated by railroad historian Richard Saunders Jr.: “[The Southern Pacific] made enemies in California even though, probably more than any other institution, it also made modern California possible.”
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The farmers pressed for the states to bring in legislation controlling railroad rates. It was no coincidence that it was the states where the Grange was most active that became the first to control freight charges. Minnesota, the birthplace of Kelley's movement, passed a law fixing railroad rates and providing for a railroad commissioner in 1871. Two years later, similar legislation was introduced in Illinois, where many Granges had also been formed. Iowa and Wisconsin followed suit the next year, and by the end of the decade another four states, including California, had passed laws restricting the freedom of the railroad companies to set rates. The railroads, however, did not stand meekly by, accepting their fate. Quite the opposite. Their lawyers challenged the legislation in the courts, arguing that the states did not have the power to set rates. Here, another railroad practice that had attracted widespread criticism came into play, the issuing of passes to prominent people, such as judges, sheriffs, both local and national politicians, and, of course, journalists, allowing them free travel on request on the railroad. Favoring the great and the good with free travel might seem like a rather trivial matter given the other ways in which the railroads had made themselves unpopular, but it had widespread resonance. It was seen as yet another abuse of railroad power, and paying passengers hated sitting near the “deadheads,” as they were termed, who did not have to contribute to the railroad company's coffers. The benefits of having politicians on their side were all too obvious to the railroads. Giving a pass to a town assessor, for instance, might well result in a lower tax bill; alternatively, the railroads were not averse to withdrawing passes from politicians or officials who did not do their bidding. The scale of this crude PR can be gauged by the fact that by 1897, the railroads of North Carolina alone were giving out passes for no fewer than one hundred thousand journeys per year, costing them more than three hundred thousand dollars in revenue foregone. The public's interest in these concessionary arrangements was so strong that legislation banning the practice became law in 1906.

Legislators and even judges could also be influenced by the issuing of these passes, and even when battles in the courts were lost, the railroads at times simply ignored the legislation. It was not easy. The question of what was a fair rate for freight, and how it could be enforced, was far from straightforward. Some legislatures tried to control passenger fares, too,
and the railroads played a nasty game of trying to make the journey of passengers on these regulated services as unpleasant as possible, using old stock and introducing timetables with longer journey times. The balance of interest in the court cases was neatly poised, as Stover aptly suggests: “The Grangers had votes; the railroads possessed money.”
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It was not only high rates that angered the farmers and, indeed, other shippers. The railroads tended to favor big shippers and granted them substantial rebates. The pricing arrangements with these larger clients were secret, and this lack of transparency was seen as masking the railroads' preference for dealing with fellow big corporations to the detriment of the little guy. Worse, on many routes, the railroads simply pooled their income and operated jointly in order to prevent uneconomic competition, which was seen as operating an unfair cartel.