Trains in Vain: On Richard White
When thoughtful commentators describe the United States as returning to the excess and inequality of the Gilded Age, it is often with nostalgia for the happy days of the mid-twentieth century, a time when capitalism seemed less flagrantly predatory and democracy less flagrantly subverted, and when intellectuals could imagine American history as a story of progress. In 1955 the historian Richard Hofstadter wrote confidently of a period he labeled “the age of reform,” during which the nation moved away from the unregulated corporate aggrandizement that quickly emerged after the Civil War and toward a series of social guarantees for a large proportion of the population. While much of the legislation underpinning the guarantees had originated in the New Deal, it did not gain force for many Americans until the late 1940s and ’50s, when a powerful labor movement was recognized as one of the core institutions of the country’s economy, society and political system.
Yet mid-twentieth-century America was no paradise of amicable politics and social justice. Redbaiting was ubiquitous, and the benefits of monopoly capitalism, with its broad settlements between big business and organized labor, never reached beyond the economic sectors where most workers were white and male. Segregation remained intact, and Washington’s interventionist foreign policy regularly sabotaged democratic movements in the third world. And although the nation’s tremendous wealth and power were celebrated by many intellectuals of the era as a reward for its cultural virtues—among the notable panegyrics were Lionel Trilling’s The Liberal Imagination (1950), Daniel Boorstin’s The Genius of American Politics (1953), David Potter’s People of Plenty (1954) and Daniel Bell’s The End of Ideology (1960)—that good fortune depended on a tremendous stroke of luck: the United States was the only industrial power to have escaped massive destruction in both world wars.
From the vantage of our second Gilded Age, the preamble of the Populist Party’s 1892 platform—“The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind”—is less anachronistic than GM president Charles Wilson’s 1953 paean to corporate public spirit: “What was good for our country was good for General Motors, and vice versa.” That midcentury period is now behind us, not just historically but politically. The luck of the twentieth century has run out, and we are faced with the chilling possibility that the postwar era was the truly exceptional period of modern US history, sandwiched between corrupt and brutalizing Gilded Ages.
For this reason, Railroaded, Richard White’s trenchant history of the political economy of the first Gilded Age, told through a close examination of the transcontinental railroad corporations, could not be more timely. Parts of the book read like a Matt Taibbi exposé of fraudulent high finance and venal politics, but the bulk of it resembles a Vanity Fair article that gasps even as it sympathizes with insiders divulging the details of how things went terribly wrong. White chronicles the many instances of greed, hubris, incompetence and, in some cases, outright stupidity of the railroad tycoons that culminated in colossal business failures and bloody social clashes. Though there is no shortage of stealing at the top and suffering at the bottom, the story White tells is not about omnipotent robber barons. Instead of recycling Frank Norris’s iconic image of a corporate octopus slowly and purposefully strangling states and even whole regions, White describes “a group of fat men in an Octopus suit fighting over the controls” of a runaway train.
The train left the station in 1862, when Congress handed huge land grants and cash subsidies to two railroad corporations, the Union Pacific and the Central Pacific, in order to link the Eastern railroad system to the West Coast. The Union Pacific built westward from Omaha; the Central Pacific, eastward from California. They met at Promontory Summit, Utah, in 1869 to drive the Golden Spike—though they banished from the photograph commemorating the occasion the thousands of Chinese workers who had undertaken many of the dangerous tasks, such as blasting through Western mountains. Both corporations also funneled their vast federal subsidies into the pockets of their principals by subcontracting construction work to companies they controlled, which dramatically overcharged the railroads for their services. The front erected by the Central Pacific for this scam was called the Contract and Finance Company, and it made its five partners, known as the Associates (Collis Huntington, Leland Stanford, Mark Hopkins, and Charles and Edwin Crocker), extremely rich. The front put up by the Union Pacific, the Crédit Mobilier, did the same for its partners until it overreached by bribing Congressmen too shamelessly, selling them blocks of underpriced stock in a scandal that broke in 1872. “The accused lied so voluminously and so ineptly,” White says of the ensuing hearings, “that simply cataloguing and refuting the lies became a full-time occupation for the press.”
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While White tells many horrifying and entertaining stories about corruption and incompetence, his overarching argument is primarily about the fundamental characteristics of capitalism and modernity. For White, “modernity” has nothing to do with bureaucratic rationality and efficiency. Rather, in the transcontinentals he sees a blundering form of corporate capital that reorganized everyone’s lives “but did so unevenly and chaotically,” such as by rendering distances “radically unstable” as shipping costs became “an ever-changing realm of mystery”—even for the corporations whose “whims” they seemed to reflect. Modernity was “a world dominated by large, inept, but powerful failures whose influence could not be avoided,” and it remains “as much a product of disaster as of success; both can bring the new into being.”
The “new” here was a series of railroads—seven by the mid-1880s—that were poorly constructed (“steep grades, sharp curves, missed sources of traffic”) and, more important, were strung across vast stretches of territory that offered little in the way of freight-worthy commodities. In order to generate freight traffic, the railroads had to attract settlers who would produce things to ship on their trains. Accordingly, the transcontinentals lured ranchers, farmers and miners to the Great Plains, where they proceeded to flood world markets with tons of surplus cattle, wheat and silver. West of the ninety-eighth meridian, the railroads lured farm families to arid regions (western Nebraska and Kansas, eastern Colorado) where they were bound to fail, having accepted junk science claiming that cultivation produced helpful climate change. The notion that “rain follows the plow”—that farming turned deserts into well-watered gardens—was extrapolated incorrectly from several years of unusually heavy rainfall, but it did not originate as a spontaneous popular delusion. It was railroad propaganda. By 1890 six companies had completed seven separate lines in Kansas, overlaying the state with more miles of track than New York had and for a population less than one-third the size. Even the inveterate Kansas booster (and crooked US senator) J.J. Ingalls had to admit that “empty railroad trains ran across deserted prairies to vacant towns.”
The overbuilding of track, like the overbuilding of housing today, was not spurred by demand. It was the handiwork of insiders looking to get rich through chicanery and government largesse. “The entrepreneurship so apparent in the 1880s involved innovations that combined financial manipulation, the waste of capital and labor, and the construction of railroad lines that fulfilled little or no discernible need except the enrichment of the promoter,” White explains, calling the railroad magnates “Superheroes of Bad Management.” They understood that “corporate failure” could be lucrative because ordinary investors had no recourse against insiders who were more than happy to “wreck these trains and walk away with millions.” Some of the more pathetic characters in Railroaded are these ordinary investors, particularly syndicates from Britain and Germany. They were hardly blameless; greedy for returns higher than those of easily monitored funds, the syndicates pumped money into “developing countries such as the United States,” where they “encountered lies, deception, fraud, and large and repeated defaults.” Like the latecomers to the securitized mortgage game, they entrusted their money to scoundrels like Henry Villard, who “mixed greed with heedless optimism and thought the result was vision,” all the while disguising his company’s debts with fraudulent accounting tricks.
The investors were victimized all the same. The railroad promoters led them “along the financial gangplank one small step at a time,” White writes, selling them government bonds first, then government-secured railroad bonds, then convertible bonds, first mortgage bonds, second mortgage bonds, mortgages on trunk lines, mortgages on branch lines, land grant bonds, income bonds and even more esoteric financial instruments to tap “anything and everything that investors might accept as collateral.” The railroads and the bankers who sold their bond issues “trumpeted the security of these investments, but they were in effect so many carnival barkers.”
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