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.”
* * *
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.”
* * *
One reason White chronicles the corrupt and chaotic business practices of the transcontinentals in great detail is to challenge the idea that the railroad corporations pioneered managerial innovation and bureaucratic rationality. This notion, argued most influentially by the business historian Alfred Chandler Jr. in The Visible Hand: The Managerial Revolution in American Business (1977), shifted attention away from the promoters and financiers—Jay Gould, Thomas Scott, Collis Huntington and the rest—toward midlevel railroad managers who invented such useful tools as cost accounting and the organizational chart. White implicitly concedes that Chandler was right about management innovation at Eastern railroads such as the Pennsylvania, which, in fairness, was his major example. In the West, however, White shows us a railroad business that was “closer to Dilbert than to Chandler.”
White has even less patience for an idea related to Chandler’s—Joseph Schumpeter’s view of capitalism as “creative destruction,” with markets rewarding entrepreneurs and companies for efficiency, competence and innovation, and punishing them for lacking these characteristics. Nobody was punished for running railroads into the ground, or at least nobody at the top. The transcontinental railroad corporations failed repeatedly, but they did not vanish. Instead they went into receivership, preserved by the law as what White calls “corporate zombies—the undead who preyed on the living.” Once in receivership, a railroad corporation could stop paying interest to its bondholding creditors, prevent organized workers from initiating labor actions (now defined as crimes against the federal receivers) and undermine solvent competitors by shipping freight at cut rates. The story of the transcontinental railroads is about dysfunction rewarded. What everyone involved kept discovering was that “market signals” had nothing to do with running a railroad.
White’s quarrel with Chandler, Schumpeter and other bullish economic historians owes much to his scholarly rigor. The sparkling portraits of heroic entrepreneurialism sketched by Chandler and others relied heavily on the annual reports of the railroad corporations. White, however, draws copiously from the correspondence of railroad insiders, which describes the brazen dishonesty of the annual reports as purposeful and systemic. “If the goal is to have great villains or powerful heroes,” he warns, “don’t read the mail of the men who ran the transcontinentals.” White read sacks of this mail. Luckily for him, and for us, he located two especially rich troves of letters. One was penned by the relatively high-minded and obsessively literate Charles Francis Adams Jr. (grandson of John Quincy Adams), who ran the Union Pacific from 1884 to 1890 and supplemented his extensive correspondence about railroading with frank and highly detailed diary entries. The other contains letters in which Collis Huntington and his partners in the Central Pacific, the Southern Pacific (a spinoff of the Central) and allied businesses had to commit many details to paper because, White explains, “the dimmer lights among them, such as Leland Stanford, had to have so much explained to them.”
White has some fun at Stanford’s expense, with Huntington providing most of the punch lines. Huntington, White writes, “despised Stanford for his stupidity and carelessness, his selfishness and greed, his laziness and his immense self-regard.” Huntington once asked Stanford to “tell me whom to correspond with in Cal. when I want anything done; for I have become thoroughly convinced that there is no use in writing to you.” Huntington was not alone in his contempt for Stanford. Mark Hopkins, a Central Pacific partner, told Huntington at one point that there was a task Stanford might have been able to perform, “but not without more mental effort than is agreeable to him.” The letters of Stanford’s business partners, White explains, are “a chronicle of amazement, dismay, and irritation at his greed, laziness, ignorance, and ineptitude.” As one politician concluded, Stanford was an “immensely stupid man.” That he was also an immensely wealthy railroad entrepreneur proves White’s case against historians who insist that success in the capitalist world must axiomatically bespeak innovation, intelligence or even moderately hard work. None of Stanford’s shortcomings prevented him from using his railroad fortune to found a university to memorialize his dead son Leland Stanford Jr., which is where White, a MacArthur-winning historian, has taught since 1998.
If naïve investors and deluded settlers were the whole story of the transcontinentals, it would be sad and criminal. What made the scam a full-scale tragedy, as White reminds us periodically, was the displacement, confinement and murder of American Indians by railroads, farmers, miners and ranchers who coveted ever more of their land. Yet Indians are not at the center of Railroaded in the way one might expect of White, whose reputation as a leading historian of the American West rests on three crucial books about encounters between Indians and colonizing Europeans: The Roots of Dependency: Subsistence, Environment, and Social Change Among the Choctaws, Pawnees, and Navajos (1983); The Middle Ground: Indians, Empires, and Republics in the Great Lakes Region, 1650–1815 (1991); and “It’s Your Misfortune and None of My Own”: A New History of the American West (1991). White reminds us that Indians were reliant on, as well as victimized by, the railroads. Among the many vignettes told in Railroaded is one about Elias Boudinot, a Cherokee railroad investor who argued in favor of the abolition of Indian Territory (now Oklahoma) and of independent tribal status for Indians generally. Another vignette focuses on twenty-eight Indians (Lakotas, Shoshones, Cheyennes, Bannocks and an Arapaho) riding the Oregon Short Line and the Central Pacific to visit a Paiute prophet who claimed that God would rid the West of whites.
Railroaded has a lot more to say about workers, especially the white male workers who organized large unions: the Knights of Labor in the car shops, the Railroad Brotherhoods (of locomotive engineers, firemen and brakemen) on the trains and, in the early 1890s, the American Railway Union (ARU), which was most powerful in the shops but also organized on the trains. Railroading was exceptionally dangerous work, with accidents caused by the lack of basic safety devices such as automatic couplers and air brakes. (The tycoons thought they were too expensive to install.) White’s discussion of the Knights—which by 1885 had organized about 10,000 of the 15,000 workers on the Union Pacific, with strong political allies in most of the Western states—also focuses on their racism. “Sinophobia,” he explains, “was an essential part of [the] worldview” of workers as well as other “antimonopoly” opponents of the railroad corporations. The heart of the problem was that many of the Chinese railroad workers had been brought to the United States by labor contractors, who exploited them as “combination employment agency, travel agency, loan shark, and merchant” and offended white workers’ racialized self-images of masculine independence. European laborers migrated to the United States under similar conditions, but the “face of the contract laborer” was the Chinese “coolie,” an ideological construct independent of facts—and linked inextricably in workers’ minds with corporate exploitation in general.
One gruesome outbreak of Sinophobia occurred in Rock Springs, Wyoming, in 1885. The Union Pacific owned coal mines in the town, which had little else in it, and for a decade the corporation continually cut wages while increasing the ratio of Chinese to white workers. A work-related dispute between white and Chinese miners escalated into a pogrom: the white population of European immigrants (“English, Scots, Welsh, Swedes, Danes, Irish, and, in smaller numbers, Poles, Bohemians, and Hungarians”) stormed the Chinese part of Rock Springs, setting homes afire and shooting Chinese immigrants attempting to flee. With about fifty Chinese dead, the white workers drove the survivors into the desert, destroying or stealing their savings and property. There were no prosecutions. Charles Francis Adams, who by then was president of the Union Pacific, likened the Western Knights of Labor to the Southern Ku Klux Klan. Leading Knights disavowed the murders, but local organizers supported the white workers’ demand that the Union Pacific stop employing Chinese, which Adams refused to do.
The epic battle between the railroads and the workers occurred in 1894 with the Pullman strike, which the railroads won decisively. Unlike most accounts of the strike, which tend to focus on Chicago, White’s focuses on Sacramento and draws heavily on detailed records of the battle kept by the Southern Pacific. He can get bogged down in details—“Frank Baldwin reported that Tony Kaiser and Charles Rowlands confronted him at the foot of Peralta Street and called him a scab”—but the California focus is refreshing, even as it sidelines ARU leader Eugene Debs. Ultimately it was in Washington, not Sacramento or Chicago, that the railroads broke the strike, and they prevailed because the US attorney general, Richard Olney, coordinated strategy for them and deployed the Army against the strikers. Olney had not only been the general counsel of the Chicago, Burlington and Quincy Railroad before becoming attorney general; he stayed on its payroll (and also that of the Atchison, Topeka and Santa Fe) while working in Washington.
White draws some comfort from the fact that a broad swath of the public mistrusted the railroad corporations. These “antimonopolists,” who appear in every chapter as defenders of the farmers, miners, settlers, shippers and railroad workers against corporate arrogance and greed, sometimes won elections, particularly in Western states, where they could deputize workers instead of Pinkertons to keep the peace during strikes. Nevertheless, the antimonopolists were rarely a strong countervailing power to the corporations, and their demands were easily co-opted when, for example, one railroad saw a particular regulatory gesture as a convenient way to cripple a rival. The antimonopolists could see that corporations were not “individuals” in the sense that the courts meant when they introduced “corporate personhood” into American law. But they could not stop the courts from creating the concept or, after the adoption of the Sherman Act in 1890, invoking it in antitrust rulings against unions, which, unlike a single corporate person, consisted of multiple “individuals” conspiring to restrain trade.
The most troubling aspect of the story White tells in Railroaded is how fully recognizable its characters and their struggles are today. Even corporate personhood is back in the headlines, with the Supreme Court’s ruling in the Citizens United case having revived the idea that corporations are people endowed with all the rights of citizenship, among them the ability to use money as free speech through unlimited campaign contributions. White’s railroad barons and their Washington lobbyists jumped through hoops to bribe politicians effectively, hoping that the norms of “friendship” would ensure that the politicians remained on the take. But these guys were pikers compared with K Street. The capitalism of the transcontinentals is back. The question is whether another “age of reform” can dent its new defenses.