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Development of Early Transportation Systems in the United States
LAND-GRANT RAILWAYS
RAILWAY MISFORTUNES
WHILE the early portion of the seventh decade had been the most fortunate
period ever known, in a financial sense, for a number of the northern
railways, a considerable portion of the eighth decade was a peculiarly
disastrous era. They encountered popular antagonism which crystallized into
hostile legislation; a shock was given to public confidence in matters
relating to their management which, in combination with other adverse
influences, led to numerous bankruptcies and receiverships; fierce
rivalries found expression in protracted and damaging rate wars; the
charges for many classes of railway services fell to unprecedentedly low
figures; and a long train of disasters finally culminated in the
destructive riots of 1877.
It would be impossible to fully describe all the calamities that occurred.
Titanic industrial and monetary forces were engaged in conflicts scarcely
less stupendous, in their way, than clash of armed hosts during the
previous decade. Exactly what they meant, how they came about, how far they
extended, and how a better state of things was restored, can scarcely be
fully comprehended. Many of the proceedings were of a peculiarly American
type, and some were an outgrowth of a combination of influences
predominating a few years after the close of the war.
Underlying everything else was an irredeemable paper currency, which made
the question how soon specie payments should be restored a leading issue
for years,-one large body of men, and especially owners of national bonds,
striving to hasten such a restoration, and another large body, especially
those who were deeply in debt represented by obligations contracted when
gold commanded a high premium, endeavoring to retard it, while many active
business men believed that their fortunes depended upon the decision
reached on this momentous issue. Enormous public, private, and corporate
debts had been suddenly created, the burden of which might be borne with
comparative ease if the country was flooded with greenbacks, while
pecuniary ruin was inevitable in many quarters if the touchstone of gold
was too quickly applied. Great transitions had occurred in the prospects of
many agricultural districts and manufacturing enterprises, and in
connection with numerous avocations producers had become more numerous than
consumers. Bright expectations had been disappointed; it was found that
many things which had glittered were not gold; a scape goat was in demand;
and there was a strong disposition to press the railway system into that
undesirable service, which was strengthened by the fact that some of the
proceedings connected with its development or management had at sundry
times and places furnished legitimate cause of complaint.
THE RAPID CONSTRUCTION OF LAND-GRANT RAILWAYS,
Granger legislation, and the Jay Cooke panic. It is not improbable that
there was a considerable amount of logical connection between these events,
but just how far the business of constructing land-grant roads was pushed
so rapidly as to inflict temporary injuries on irate farmers, thus inciting
Granger legislation, and how far Granger legislation led to a loss of
confidence in north-western railway enterprises, which precipitated the Jay
Cooke panic, cannot be stated with precision. There is an influence
affecting such matters which rarely receives the consideration it merits.
It is the effect of unduly increasing the productive power of any great
interest at a time when means for disposing of the additional surplus have
not been devised, and it is possible that the available agricultural area
of the west and north-west had been expanded with so much more rapidity
than corresponding markets for surplus products had been created that the
most powerful cause of the distress and agitation of the period might be
traced to this single source. It certainly was one of the factors of the
unfortunate situation, acting in conjunction with the strain produced by
the effort to resume specie payments.
The practice of using donations or grants of land, to be earned on
condition that a railway should be constructed on a particular route as a
basis of credit for such construction, had been well established during the
sixth decade, and some of the operations of this description, after
encountering a certain amount of financial difficulty, had been attended
with remarkable success. It was claimed that through a land grant the
entire cost of construction might be defrayed, the proceeds of the lands
sold eventually paying the principal of bonds, and the stockholders finally
owning an unencumbered property for which they had paid nothing. The civil
war temporarily interrupted activity in this direction, but it was no
sooner ended than operations were resumed with redoubled activity. This
country, unlike all others, has so large a body of men trained to the
business of building railways, and more or less familiar with all the
legal, engineering, mechanical, and financial tasks involved in this
pursuit, that such labors may be regarded as one of the greatest of the
established American industries, liable, it is true, to notable
fluctuations, but still being pursued, with varying degrees of activity, at
nearly all times, by a considerable number of trained contractors,
engineers, projectors, financiers, manufacturers of rolling stock and
railway supplies, laborers, and other parties. Many representatives of
these classes, whose energies had been largely diverted to warlike channels
during the first half of the seventh decade, eagerly embraced opportunities
for returning to their favorite pursuits after the war was over, and the
Pacific and land-grant railways, together with a variety of new southern
and south-western and other schemes, afforded extraordinary facilities for
gratifying their predilections. According to the stock exchange standard,
railways generally had become valuable properties. Leading land-grant
roads had Been financially successful, and there seemed to be no good
reason why the methods their managers had pursued could not be successfully
applied to any remarkably fertile region; and whether railways proved to be
permanently paying enterprises or not, methods had been devised in
connection with the construction of the Pacific and other roads which
rendered it reasonably certain that the creation of important new lines
would yield a handsome profit to the controlling spirits of such
undertakings. The press, the public, politicians, state legislatures, and
Congress, instead of endeavoring to interpose obstacles to the rapid
development of the schemes of the period, generally went to the opposite
extreme, and in many quarters their promotion was habitually advocated as
one of the highest of patriotic duties. A national movement of this
description is apt to expand into gigantic proportion, especially while it
appears to furnish opportunities for profit to many classes, including tens
of thousands of settlers, who flock to the new regions, where they can
obtain farms by a real or pretended compliance with the provisions of the
homestead act, to hosts of adventurers, who aim at becoming the founders or
leading inhabitants of new towns and cities that spring up with magical
rapidity, and to politicians, state legislators, and congressmen, who
receive tangible representations of a share of prospective profits, as well
as to railway projectors and constructors, and their indispensable allies
and assistants.
It is, therefore, not surprising that several hundred millions of acres of
land were granted by Congress to aid railway construction, and that of
this amount a considerable quantity of land was sold, while other large
quantities remain unsold, and the title to enormous areas remains in the
Government, subject to actual or threatened revocation. In addition to
lands in the territories granted directly by Congress there was a
considerable quantity of land granted by Congress to the states, which was
subsequently granted by those states to railway companies, and some of the
states, especially Texas, held large bodies of land in their own right
which were granted to railway companies. The magnitude of land-grant
railway legislation which had been effective to the extent of securing an
actual transfer of title to railway companies, and the amount of sales of
land in 1880, is stated in the census report on railways for that year.
This table shows that there was then a wide discrepancy between the
quantities of land theoretically or conditionally granted to companies,
and the amounts for which they had actually received a title. For instance,
the grant to the Northern Pacific was, in round figures, for more than
50,000,000 of acres, while the amount reported in 1880 is set down at
7,743,870.03, acres, and although the main line has been substantially
completed since it has continued to be a debatable question in Congress up
to 1887 whether the title of the company to the chief body of the lands
originally granted shall be forfeited, and sundry bills have been
introduced which aimed at forfeiting this title on the ground that the road
was not finished within the time originally prescribed. Several grants to
other companies have been finally forfeited for various reasons, including
the refusal, in some instances, of companies to accept them on the
conditions prescribed, and the failure, in other instances, to make any
show of vigorous activity whatever, in the way of promoting construction,
within a reasonable period. The actual amount of sales of land, derived
from state or national land grants, up to 1880, as stated in the census
report of that year, was as follows:
Amount of sales
Corporation U.S. Government State
grants grants
European and North America............. $ ...... ......
Flint and Pere Marquette............... 3,132,991.43 ......
Grand Rapids and Indiana............... 3,144,832.68 ......
Mobile and Girard...................... 18,270.90 ......
Mobile and Ohio........................ 476,611.58 ......
Vicksburg and Meridian................. 85,898.00 ......
Chicago, Burlington and Quincy......... 3,403,572.05 ......
Chicago and North-western.............. ...... 238,166.42
Chicago and North-western.............. ...... 150,901.49
Chicago and North-western.............. ...... 3,600.69
Chicago, Rock Island and Pacific....... 2,728,802.93 ......
Chicago, St. Paul, Minneapolis & Omaha. ...... 412,746.48
Chicago, St. Paul, Minneapolis & Omaha. ...... 362,628.90
Des Moines and Fort Dodge.............. 50,602.00 ......
Hannibal and St. Joseph................ ...... 5,100,873.13
Illinois Central....................... ...... 23,703,035.64
Iowa Falls and Sioux City.............. ...... 1,991,042.42
Missouri, Kansas and Texas............. 1,952,126.15 312,661.84
St. Louis, Iron Mountain and Southern.. 1,042,591.14 ......
St. Paul, Minneapolis and Manitoba..... 1,209,928.99 ......
St. Paul and Sioux City................ ...... 2,070,928.74
Stillwater and St. Paul................ 59,204.89 ......
Western (of Minnesota)................. ...... 65,463.27
Winona and St. Peter................... 174,587.51 ......
Wisconsin Central...................... 204,489.76 ......
Wisconsin Valley....................... ...... 175,826.18
Little Rock and Fort Smith............. 1,043,885.86 ......
Memphis and Little Rock................ 156,179.63 ......
Vicksburg, Shreveport and Pacific...... 70,620.29 ......
Atchinson, Topeka and Santa Fe......... ...... 7,342,912.71
Burlington and Missouri River (in Neb.) 8,148,446.81 ......
Central Branch Union Pacific........... 800,000.00 ......
Central and Montgomery................. ...... 17,820.00
Central Pacific........................ 4,285,410.38 ......
Corpus Christi, San Diego & Rio Grande. ...... 42,292.90
East Line and Red River................ ...... 82,024.04
Henderson and Overton.................. ...... 20,736.00
Houston and Texas Central.............. ...... 54,720.00
Northern Pacific....................... 10,481,489.17 ......
Omaha and South-western................ ...... 27,808.81
Oregon and California.................. 216,142.04 ......
Southern Pacific....................... 1,017,255.89 ......
Texas and Pacific..................... ...... 181,677.64
Union Pacific.......................... 6,923,706.09 ......
Waxahachie Tap......................... ...... 7,944.58
The only companies reporting more than one million acres of lands granted
by the United States government, and unsold in 1880, were the following:
Mobile and Ohio, 1,038,998.84 acres; St. Louis, Iron Mountain and Southern,
1,132,625.86; St. Paul and Duluth, 1,276,138.26; St. Paul, Minneapolis and
Manitoba, 2,769,584.36; Winona and St. Peter, 1,315,571.50; Central
Pacific, 11,045,705.46, Northern Pacific, 5,347,859.40, Oregon and
California, 2,465,142.93; Southern Pacific, 11,684,536.60; Union Pacific,
10,431,561.38. The only companies which reported more than one million
acres of grants received from states unsold in 1880, were the Atchison,
Topeka and Santa Fe 1,826,835.31; Galveston and Camargo International,
3,604,480 Houston and Texas Central, 5,203,520; Texas and Pacific,
4,755,862; Texas Trunk, 3,584,000, and several other Texas railway
companies, whose grants had not been located or patented.
The following statements of the amount of railway construction which had
been secured by land grants in each state or territory and of the amount of
land granted and certified, up to 1880, were published in that year:
Mileage Constructed Through Land-Grant Aid
States and 1 Territory. Miles
Alabama......................................................822
Arkansas.....................................................575
California.................................................1,288.89
Colorado.....................................................298
Dakota.......................................................196
Florida......................................................247
Illinois.....................................................750.72
Indian Territory.............................................155
Iowa.......................................................1,580
Kansas.....................................................1,654
Louisiana....................................................152
Michigan...................................................1,005
Minnesota..................................................1,745
Mississippi..................................................406
Missouri.....................................................703
Nebraska.....................................................832
Nevada.......................................................460
Oregon.......................................................227
Texas (where there are no United States lands)...............342.87
Utah.........................................................255
Washington...................................................106
Wisconsin....................................................533
Wyoming......................................................400
_________
Total ................................................14,628.48
Number of Acres Granted and Certified
States Acres Granted Acres Certified
Illinois.................. 2,595,053.00 ................. 2,595,053.00
Mississippi............... 2,062,240.00 ................. 935,158.11
Alabama................... 2,579,120.00 ................. 2,829,545.86
Florida................... 2,360,114.00 ................. 1,760,468.38
Louisiana................. 1,578,720.00 ................. 1,072,405.45
Arkansas.................. 4,878,149.14 ................. 2,376,130.63
Missouri.................. 2,985,160.21 ................. 1,828,005.02
Iowa...................... 6,795,527.31 ................. 3,940,270.75
Michigan.................. 4,712,480.29 ................. 3,228,987.09
Wisconsin................. 4,808,436.07 ................. 2,672,803.56
Minnesota................. 9,992,041.95 ................. 6,925,351.19
Kansas.................... 9,370,000.00 ................. 3,851,536.28
_____________ _____________
55,717,041.97 34,015,715.33
Corporations:
Pacific Railroads....... 159,486,766.00 8,831,687.79
______________ _____________
Total................... 215,203,807.97 42,847,403.12
Number of Acres of Land Granted by Congress for Railroads Each Year
Year No. of acres
1850............................................ 3,751,711
1852............................................ 2,280,635
1853............................................ 1,856,711
1856........................................... 12,083,295
1857........................................... 4,126,638
1862........................................... 15,345,166
1863........................................... 4,430,000
1864........................................... 50,787,579
1865........................................... 128,000
1866........................................... 64,902,000
1867........................................... 100,000
1869........................................... 1,100,000
1870........................................... 2,741,600
1871........................................... 24,152,515
__________
Total......................................... 187,785,850
It will be seen by the statements of amount of land sales that in a few
cases, and notably in that of the Illinois Central, the receipts for land
represented large sums; but, generally speaking, revenues from this source
did but little to pay either the cost or even the interest on the cost of
the land-grant roads. The financial facts of the entire land-grant
construction of the country present a notable contrast with some of the
theories ventilated on this subject. Speedy success was the exception
rather than the rule; disastrous failures were numerous; and the grant of
large quantities of land to aid construction had two effects which helped
to precipitate a crisis, viz.: First, a wide extension of the practice of
attempting to build railways without any substantial basis of cash capital
legitimately paid for capital stock in sums approximating to a considerable
percentage of its nominal value; and second, an effective encouragement of
attempts to construct railways over numerous routes at periods when it was
practically impossible to attract a sufficient amount of traffic to earn
interest on cost, or even, in some instances, operating expenses. The waste
of capital involved in building railways before they were needed, became
doubly injurious when the chief effect of efforts to attract population to
their lines was to stimulate the overproduction of the surplus breadstuffs
and provisions upon which many western and north-western states relied for
the payment of pressing obligations. Some of these obligations, in turn,
had been contracted for the purpose of aiding railway construction,
especially those represented by taxes imposed to meet the interest on bonds
issued by towns and counties to promote the construction of new lines, and
there were also some individual subscriptions to railway stock by farmers
whose ventures in that direction had been decidedly unprofitable.
EFFECT OF LAND-GRANT RAILWAYS IN HASTENING SETTLEMENTS
The following extract from an address delivered by Mr. Drake, a president
of a land-grant road, in 1876, gives some interesting experiences:
"About six years ago," says Mr. Drake, " I went out with my engineer to
locate a road in the southern part of Minnesota, to Sioux City, in the
northern part of Iowa. We traveled with our camp equipage, because there
were no houses there. We traveled as far as thirty miles at times without
seeing the vestige of a human habitation, or a person, over, perhaps, as
fine a body of land as there is under the sun. We camped out, at night,
lived on the provisions we carried with us, and often found ourselves in
places where there was not a tree for thirty miles, or a stick or switch
large enough to hitch a horse to. A herd of antelopes during the day roamed
around us for a distance of forty miles, in sight of which we drove every
hour or two. That was in the south-western part of Minnesota. In the
north-western part of Iowa, a state with over a million people, I have
traveled for thirty miles without seeing a solitary habitation or human
face. I am happy to say, or, rather, unhappy to say, that one of those
counties has been since organized, and has made a debt of $250,000 for the
land-grant roads to pay... We all know that railways, particularly
those built during the war, at the expense at which they were constructed,
could scarcely be built with any hope of profit through the sparsely
settled parts of our country... Take the case that I have cited in
Minnesota, of the St. Paul and Pacific road, a road that I was first
indirectly connected with. For probably 150 miles upon that road there is
now a dense settlement for a prairie or new country, sending off from a
single station from one to three hundred thousand bushels of wheat, where
four or five years ago there was not a settler, and where, to this day and
for all time to come, it would have remained unsettled but for that
railway... Scarcely a road in Minnesota would have been built, but for
land grants. We had a prairie soil, stretching off for more than one
hundred miles, and along the road which I represent there is not a cord of
wood to-day, except what has been planted by the railway since it was
located. We passed through township after township, and mile after mile,
and not a single acre of land, that had been surveyed for years-the finest
land under the sun-not one single acre had been taken by anybody. We
commenced building the road, and before it was graded almost every acre,
except the railway grant, was taken up on the theory of actual settlement,
but which theory was very much abused, of course. The homestead, and
particularly the pre-emption laws, the soldiers' claim law, and the tree
claim law were all very much abused.
A little incident occurred to me which I may relate. I happened to be
riding over our road to Omaha with a late Secretary of the Interior, when
he turned to me and said: 'Mr. Drake, why is it that these lands are not
settled up? As far as the eye can reach there isn't a single man to be seen
here.' Said I: Mr. Secretary, the evidence exists in your department, under
oath, that every even section of this land is taken up, and has an actual
settler upon it.' To his question what I meant, I replied: 'These are
pre-emptions, taken up by actual settlers, and sworn to, and you have
granted patents in your office to them.'''
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