Government Promotion of American Canals and Railroads 1800-1890 9780231883221

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GOVERNMENT PROMOTION OF AMERICAN CANALS AND RAILROADS 1800-1890

CARTER

GOODRICH

GOVERNMENT PROMOTION OF AMERICAN CANALS AND RAILROADS 1800-1890

COLUMBIA U N I V E R S I T Y N E W YORK

1960

PRESS

COPYRIGHT

©

COLUMBIA

1960

PUBLISHED

IN

BY

OREAT

THE

Library

of Congrett

MANUFACTURED

BRITAIN,

OXFORD

LONDON,

IN

UNIVEMITY

BOMBAY,

Catalog THE

INDIA,

UNIVERSITY AND

AND

NEW

YORK

PAKISTAN

PRESS

KARACHI

Card

UNITED

PRESS,

Number:

STATES OF

60-6546 AMERICA

FOR FLORENCE NIELSEN

GOODRICH

PREFACE

Publication of a book on government promotion is made timely by the current interest in economic development. During the century in which the United States transformed itself into a great industrial nation, the most important and the most widely employed measures by which American governments attempted directly to promote economic growth were devoted to the construction of canals and railroads. The analysis of this experience may be of service to those who are considering what should be the roles of government and of private enterprise in the nations now striving for development. The writing of the book has been made possible by the large amount of monographic research that has been carried on in recent years by a number of scholars, particularly on the activities of state and local governments. A decade or two ago, a general book on the subject could hardly have been ventured. Now, although much remains to be done in the collection and analysis of data, it appears possible to present the main outlines of the history of public promotion in nineteenth century America and to offer some interpretation of the part it played in the economic development of the country. The study has received generous support from the Council for Research in the Social Sciences of Columbia University, which made a series of grants beginning in 1946. Earlier findings have been published in four articles in the Political three in the Journal

of Economic

History,

Science

Quarterly,

and two in the

Pro-

viii

PREFACE

ceedings of the American Philosophical Society. The titles are listed in the Bibliography. With the kind permission of the editors, the substance of these articles has been freely used in the present work. Aid in the final stages of the p r o j e c t has been provided by the Industrial Countries Center of the Economics Research Centers of Columbia University. F o r stimulating criticism through the entire period of the study, I owe much to my friend and colleague Joseph Dorfman. I have also been encouraged by the interest taken in the work by fellowmembers of the Committee on Research in Economic H i s t o r y and of the Economic H i s t o r y Association, of whom a number have worked longer than I in the field of internal improvements. A particularly rewarding aspect of the work has been association with successive groups of g r a d u a t e students a t Columbia whose research has been devoted to related subjects. H . Jerome Cranmer, Harvey H . Segal, and N a t h a n Miller each held a fellowship from the Committee on Research in Economic H i s t o r y , acted as my research assistant, and completed a dissertation on internal improvements. Other students whose dissertations or master's essays have been used and cited below are Frederick K. Abbott, James P. Cairns, George A. Donely, Robert W . Fogel, Forest G. Hill, William Marcuse, Beatrice G. Reubens, Julius Rubin and Alfred G. Smith, J r . Vivien Carlip and Naomi Waxman Perlman served as research assistants, as did Ludwig W a g n e r and Jerome B. Komisar for shorter periods. M a r y C. Magill and Jane Lancaster supplied cartographic skill. Carolyn M. Stedman performed the laborious task of typing without losing her curiosity as to what was to come next. Finally, I wish to express my appreciation for the courtesies shown to me by the officials of the Press and my pleasure t h a t their decision to publish the manuscript made the entire undertaking an enterprise of Columbia University. CARTEE

Inlet, New York August 4, 1959

GOODRICH

CONTENTS

INTRODUCTION 1.

THE

SPIRIT

OF

IMPROVEMENT

FEDERAL

2.

AN

ERA

OF

THE

3.

THE

k

FROM

DEBATE AND 1801-1830

NATIONAL

BOSTON

TO

AN

ERA

OF

THE

6.

THE

7.

"THE

STATE

AND

CITIES

51

MOBILE

NATIONAL

PROGRAMS OF

121

DEBATE AND 1850-1812

DECISION

SUBSIDY

EMULATION

PATRONAGE

OF STATES 1815-1861

19

COMPETITION

FEDERAL

5.

DECISION

PROJECTS

EMULATION

APPALACHIAN

3

OF

169

OF STATES 1861-1890 THE

LOCAL

AND

RECONSTRUCTION

LEGISLATION"

CITIES

SOUTH

207 230

CONTENTS

X

CONCLUSION 8.

PUBLIC

PROMOTION

AND

PRIVATE

265

ENTERPRISE

NOTES

299

BIBLIOGRAPHY

353

INDEX

365

MAP

AND

TABLE:

CONSTRUCTION

G A L L A T I N ' B PROPOSALS AND

ACTUAL 34

INTRODUCTION

Prompted by these actual observations, I could not help taking a more contemplative and extensive view of the vast inland navigation of these United States, and could not but be struck with the immense diffusion and importance of it; and with the goodness of that Providence which has dealt his favours to us with so profuse a hand. Would to God we may have wisdom enough to improve them. George

Washington,

in a letter

of

17SS

1 T H E S P I R I T OF IMPROVEMENT

T h i s is a s t u d y of the role of American g o v e r n m e n t s — f e d e r a l , s t a t e , and local—in the creation of the facilities of inland t r a n s p o r t . I n t o d a y ' s terms, it is an a n a l y s i s of a n i m p o r t a n t a s p e c t of development policy, the provision of social overhead c a p i t a l , a n d of the relations between public p r o m o t i o n a n d the e f f o r t s of p r i v a t e e n t e r p r i s e . I n the l a n g u a g e of t h e time, the issue was t h a t of i n t e r n a l improvements. T h e older p h r a s e c a r r i e s the conn o t a t i o n which the modern s t u d e n t must not overlook—of a movement t h a t called f o r the exercise of public s p i r i t as well as the search f o r immediate economic gain. T o improve t h e c o u n t r y ' s n a t u r a l a d v a n t a g e s by developments in t r a n s p o r t a t i o n was, in the eyes of W a s h i n g t o n and m a n y others, a d u t y incumbent b o t h on governments

and on individual citizens. 1 Even

before

the

American Revolution, the American Philosophical Society maintained a s t a n d i n g Committee on American I m p r o v e m e n t s , a n d its members went o u t one winter into the frozen swamps t o s t u d y the p r o s p e c t s of a canal to connect the Chesapeake and the Delaware. Thev were l a t e r praised as men "whose views, extending beyond themselves, [ w e r e ] employed u p o n o b j e c t s of general benefit a n d u t i l i t y . " 2 W h e n canal and r a i l r o a d companies were organized, individuals were often urged to buy stock n o t only f o r the dividends they would receive, b u t also f o r the s a t i s f a c t i o n of b e a r i n g an honorable p a r t in a g r e a t s t a t e or n a t i o n a l work. One r a i l r o a d

4

S P I R I T OF IMPROVEMENT

president even reproved his stockholders for clamoring for dividends " a s if they had invested as c a p i t a l i s t s . " 3 A g a i n and a g a i n , during a century of canal and railroad building, arguments for government support were based on appeals to the spirit of improvement. The announced purpose of Virginia's plan of state partnership with local undertakings, for example, was "to elicit individual wealth for public improvement." 4 The works themselves were thought of not only as business enterprises but also as g r e a t civic undertakings and "monuments of renown" to be passed on to f u t u r e generations. Something of this emphasis survived even a f t e r it became evident t h a t government aid was sometimes the result of public corruption rather than of public s p i r i t ; and the promoters who made the quick and questionable profits of the Credit Mobilier appeared anxious to convince the Congress and the people, not merely t h a t they were guiltless of wrongdoing, but t h a t they deserved the nation's g r a t i t u d e for the enterprise with which they had pushed through the first transcontinental railroad. T h i s book will not a t t e m p t to follow the spirit of improvement through all of its manifestations. The Philosophical Society's committee gave as much attention to the importation of silkworms for the encouragement of manufactures as to the Chesapeake and Delaware Canal for the improvement of transportation. The historian of railroad aid in the South has described the movement as the last of a series of g r e a t associative efforts that began with the process of colonization itself, and a critic has pointed out t h a t it might be regarded equally well as a forerunner of the twentieth-century activities of American governments in their aids to aviation, in their renewed programs of road building, and in the federal development of atomic energy. 5 The present study is more limited in time and scope. Its time span is from the e a r l y d a y s of the Republic to the completion of the American r a i l w a y network toward the close of the nineteenth century. It is confined to inland transport, though some-

SPIRIT OF IMPROVEMENT

5

what similar issues are raised by government subsidies to the merchant marine and by aids to ocean navigation. Even within inland transport, it will not give equal emphasis to all forms of governmental encouragement. 6 Its principal concern is with the cases in which the users of the improvement were to pay for the services rendered. As free roads replace turnpikes, as local feecharging navigation companies disappear, and as river and harbor improvement become services rendered without charge by the federal government, the building of roads and the clearing of rivers become of less interest to the study. Its main theme is the relation between public and private activity in the creation of canals and railroads. Limitation of the discussion to toll- and freight-charging enterprises has the advantage of concentrating attention on those aspects of development which required deliberate choice between alternative private and public means. It was obvious that business enterprise could not be expected to provide facilities from which revenue could not be collected. But if charges were to be made for the service, and profits were a possibility, there was room for the selection of either a private or a public agency or—as the American experience showed—of a remarkable variety of combinations of the two. The focus is therefore on the controversial, and still timely, issue of competition and cooperation between government and business. Even with these limits, the field is a wide one. The number of cases of government promotion, and the volume and importance of public investment, have been greater than is commonly remembered. Local government authorities aided turnpikes, canals or railroads in several thousand cases and in almost every state. All but a few of the state governments carried on their own programs of public improvements or gave their support to transportation companies by loans or subscriptions. Action by the federal government was less frequent and less continuous, but its history contains a period of prolonged discussion of a national

6

S P I R I T OF IMPROVEMENT

plan of internal improvements and another period in which millions of dollars were loaned and more than a hundred million acres were granted for the promotion of railroad development. These programs were indeed large enough to provide in their time a leading example of "the modern tendency to extend the activity of the state into industry." Guy Stevens Callender, who pointed this out in 1902, went on to ask why this should have taken place "here in America, where of all places in the world we should least expect to find it." 7 The question is still a challenging one to all who regard the United States of the nineteenth century as the historic stronghold of laissez faire. Yet the vigor of this American resort to government action appears somewhat less surprising if it is considered in relation to practice in other p a r t s of the world or to the economic characteristics of developmental transportation. The most conspicuous contrast was with England, where the railroads and most of the canals were built by unassisted private enterprise. Elsewhere, as Thorold Rogers pointed out in 1880, their construction had been " r a r e l y thus effected . . . the state having assisted in many cases, and having altogether accomplished the work in more." 8 In France an early method of assistance to railroads was a government guarantee of return on the private capital invested. In Belgium, the state built the main railway network, leaving secondary lines to private companies. This case, together with government expenditures in Holland and Austria, was cited with approval by a committee of the United States Congress. 9 Outside of Europe, the expedient of government guarantee, "private enterprise at public risk," was used extensively in British India as well as sometimes in Brazil and Argentina. Throughout Latin America, most of the railroads were built either as public undertakings or with government subsidy. The Trans-Siberian Railway was a state enterprise, under the Czars as well as under the Soviets; and the railroads of China were for the most p a r t built either on government account

SPIRIT OF IMPROVEMENT

7

or with the aid of foreign governments establishing spheres of influence.10 Of more direct relevance is the comparison with the nations most closely resembling the United States, the other "new countries" of British origin. Of these, Australia and New Zealand built their railroads as public enterprises ; and Canada employed the three methods of government subsidy, of government construction, and of the government rescue and operation of a bankrupt private company. Why, then, was the English example so rarely followed? The American

Railroad

Journal

once demanded rhetorically why the

manifest advantages of private action were not equally applicable "to the Anglo-Saxon race on this as well as on the other side of the Atlantic" and in New as well as in Old England. 1 1 But this spokesman for the American industry found no great difficulty in distinguishing the two cases on the many occasions on which it advocated government assistance. Certainly the

circumstances

under which the English canals and railroads were built differed substantially from those that prevailed either in the United States or in most other nations to which these innovations were spread. In the first place there was in England a large supply of capital available for investment. In the second place, there was more experience there than elsewhere in the use of the corporate form to mobilize and manage the resources required for large undertakings. There was also another difference arising from the nature of the works to be attempted. A railway between London and Manchester would run through settled country and connect established channels of trade. It could expect substantial traffic as soon as it was completed. On the other hand, a railroad built westward across the plains of the United States or Canada, or eastward over the Siberian steppes, or from Sydney or Melbourne into the Australian interior, would be opening up an almost empty country and could not hope for large traffic until settlement took place along its route. The words "exploitative" and

8

S P I R I T OF I M P R O V E M E N T

"developmental" have been suggested to describe these two types of enterprise. 1 2 E x p l o i t a t i v e canals or railroads were built to take

advantage

of

an

existing

opportunity

and

established

channels of t r a d e . W i t h them early r e t u r n s could be expected and p r i v a t e enterprise could o p e r a t e without subsidy. On the other hand, the developmental u n d e r t a k i n g had to depend f o r most of its prospective revenue on the settlement and the economic activity which its own construction was intended to promote. In the n a t u r e of the case, such development could not be immediate, and there would therefore be little p r o s p e c t of substantial early profits. "Developmental t r a n s p o r t a t i o n . . . has r a r e l y been profitable in the narrow commercial sense of giving to those who first p u t u p the money the 'going r a t e of r e t u r n ' on investment c a p i t a l . "

13

T h e ultimate benefits might be very g r e a t , but they would certainly be largely deferred, and much of the gain was likely to be widely diffused and i n a p p r o p r i a b l e by those who invested

the

capital. Only a p a r t of "all t h a t diversified g o o d " of which the advocates of improvement so often spoke—the increases in land value and the government's t a x base, the widened o p p o r t u n i t i e s f o r individual activities, and in general the external economies provided to a g r i c u l t u r e and industry—would ever be collected in the tolls or freights o r f a r e s t h a t could be charged by the enterprises themselves. Developmental undertakings, therefore, could h a r d l y be carried to success by unaided p r i v a t e means. T h e y required, a t least in the absence of e x t r a o r d i n a r y illusions on the p a r t of the original investors, either public enterprise or public assistance. Even a c u r s o r y i n t e r n a t i o n a l comparison illustrates the relevance of these differences. A shortage of domestic c a p i t a l , and the f a c t t h a t governments find it easier than individuals to borrow a t a distance, were t h r o u g h o u t the nineteenth c e n t u r y and remain today m a j o r reasons f o r the governmental provision of t r a n s p o r t facilities, p a r t i c u l a r l y outside of W e s t e r n E u r o p e . Corp o r a t e or other organizations f o r the massing of p r i v a t e c a p i t a l

SPIRIT OF IMPROVEMENT

9

were little developed in most p a r t s of the world. In the p a s s a g e a l r e a d y cited, Thorold R o g e r s somewhat complacently a t t r i b u t e d the resort of "foreign countries" to public enterprise to their v a r y i n g degrees of deficiency in "the habits of association and enterprise." L a t i n American experience illustrates the distinction between exploitative and developmental enterprises, since its relatively few examples of purely p r i v a t e undertakings include the roads that c a r r y coffee to Santos and s u g a r from the canefields to the Cuban ports. Bolivia provides an exceptionally exact example: the two railroads that take the tin from the g r e a t mines to the coast were built, and until very recently were owned and operated by p r i v a t e British interests, while the other railroads a r e all governmental. Each of the three points of difference is significant for the explanation of American policy. Shortage of local capital was from the beginning a principal argument for governmental action. " T h e population along the contemplated line of the r o a d , " read one t y p i c a l plea, "though industrious and f r u g a l , a r e too poor to build the r o a d . " 14 Reviewing the history of state action for internal improvements before the United S t a t e s Senate in 1850, William H. Seward declared t h a t " a g r e a t and extensive country like this has need of roads and canals earlier than there is an accumulation of p r i v a t e c a p i t a l within the state to construct them." 15 During the decade t h a t followed American railroad companies were for the first time able to raise substantial sums in the European market, but lack of c a p i t a l within a state continued to be used as an argument for government aid borrowing. "No new people," said H e n r y Varnum Poor, "can afford to construct their own r a i l r o a d s " ; and the Railroad Journal under his authorship frequently made the distinction between the older regions, where abundance of capital made aid unnecessary, and the newer areas, where government assistance was still required. 1 8 The lack of large-scale corporate enterprise was also a factor in American decisions. In the e a r l y d a y s of internal improvements,

10

S P I R I T OF I M P R O V E M E N T

private corporations in the United States were few in number, required special legislative acts f o r their incorporation, and were often attacked as instruments of monopoly and special privilege. Outside the field of banking, few of them possessed either substantial amounts of capital or experience in their management. The p e t t y scale of much of private enterprise may be illustrated by the fact t h a t one of the advantages claimed for the Virginia system of state aid was t h a t its Board of Public Works, unlike the local undertakings to which it gave assistance, would have sufficient means to employ a full-time professional engineer! Even more obvious was the developmental character of most of the projects of American improvement. There were to be sure certain particularly f o r t u n a t e undertakings, principally along the Atlantic seaboard, t h a t could exploit immediate opportunities for profitable traffic. Edward C. Kirkland compares certain of the New England railroads to wealthy dowagers who would have scorned to ask for public assistance. 17 One such dowager railroad ran from Boston to the m a n u f a c t u r i n g town of Lowell. The Delaware and R a r i t a n , between Philadelphia and New York, might similarly be described as a dowager canal. These were exceptions, however, and through much of the nineteenth century the most characteristic American improvement was one which extended from an established center of t r a d e and population out into a less developed area. The Times of London, reflecting the experience of unlucky investors, once defined the American railroad as running from "Nowhere-in-Particular to Nowhere-at-All." 18 This was only half the t r u t h . The typical improvement was one which started somewhere and ended a t a point which was perhaps nowhere when the p r o j e c t started, but which was to become important as a result of the improvement itself. The force of these considerations tended to diminish as the years went on. Corporate enterprise grew in power and competence as well as in public acceptance, finding indeed in railroading a particularly favorable field of growth. The case for government

11

S P I R I T OF I M P R O V E M E N T

action decreased in cogency as the corporations found it possible to assemble larger amounts of capital and to commit them on a longer-term basis, though sometimes the very strength of the corporations

was exerted

to prolong

the period of

subsidy.

Similarly the developmental argument for support of transportation enterprises diminished in strength as population and economic activity increased. Y e t developmental conditions continually recurred as settlement advanced, and the subsidy-seeking canal or railway promoter might well have appeared in Turner's famous roster of frontier types in their march across the continent. It was indeed late in this march that the necessity of crossing the Rockies and bridging some eighteen hundred miles of almost empty land between the Missouri River and the Pacific Coast became the basis for the most massive railroad assistance ever granted by the federal government. Under

these

circumstances,

American

use

of

government

agencies to promote the development of transportation h a r d l y seems paradoxical, even for a nation of individualistic traditions. The spirit of improvement was abroad, and Americans were eager to build up a new country and to make their own fortunes. I t need not seem strange that communities desiring rapid development should attempt to accelerate the process, even at the risk of sinking public funds in improvements that might or might not prove to be of long-run economic value. It would have been more surprising if they had been content to wait patiently f o r their canals and railroads until the way was clear for prudent private enterprise to supply them without assistance. The amount of governmental activity, and to some degree its distribution between periods and regions, are best to be explained as p a r t of the g r e a t developmental effort by which the United States of the nineteenth century was opening up so vast an area of new land to settlement and economic use. Yet neither the economics of development nor analogy from the experience of other countries would serve to account f o r the

12

SPIRIT OF IMPROVEMENT

diversity of the expedients employed in the promotion of these American improvements. All levels of government took p a r t in the movement, and public and civic and p r i v a t e efforts were brought together in an e x t r a o r d i n a r y variety of combinations. Some commentators on internal improvements, contemporary and modern, have written as if the word governmental were a synonym for federal. A Colorado promoter, for example, boasted that he had built his railroad "without a subsidy of any k i n d " and then went on to recount his success in inducing three countries to issue bonds on its behalf. 1 9 Similarly, a railroad historian wrote that the refusal of Congress to vote assistance saved the Baltimore and Ohio from governmental interference, though the state of M a r y l a n d and the city of Baltimore were soon to hold a m a j o r i t y of its stock and to appoint a m a j o r i t y of its directors. 2 0 T o consider internal improvements in terms of federal policy alone would miss the g r e a t e r p a r t of the story. Individual amounts of local government aid, like the subscription of Brazil Township, Clay County, Indiana, to a forgotten N o r t h and South R a i l r o a d , or even of state aid, like Virginia's assistance to the U p p e r A p p o m a t t o x Company or to the turnpike through Snicker's G a p , were often very small. Y e t the total volume of financial investment by s t a t e and local governments was considerably g r e a t e r than t h a t of the federal government, and their activities are no less instructive to the student of the relation between government and private enterprise. A t each level of government, there was a choice to be made among the m a j o r alternatives of public enterprise, of mixed enterprise in which government agencies shared ownership and control with individual investors, and of loans or donations to private corporations. T h e federal government built the N a t i o n a l R o a d before turning it over to the states for operation

and

maintenance. New Y o r k S t a t e d u g the E r i e Canal as a public work and others followed its example. Georgia built and operated

S P I R I T OF IMPROVEMENT

13

its own railroad. The city of T r o y constructed a short line of railroad, and Cincinnati built one of over three hundred miles. Yet this alternative was used less often than the others. The federal government subscribed to the stock of several canal companies, and state and local authorities bought shares in turnpikes and canals and railroads. The original stockholders of the Chesapeake and Ohio Canal Company included the federal government, the state of Maryland, three municipalities, and a number of private investors. 2 1 Aid by loan was given by the federal government to the first transcontinental railroad, and the states and larger municipalities assisted many enterprises by loans or by guarantee of the company's bonds. There was also frequent resort to the method of outright subsidy, in amounts ranging from the small donations of villages and townships to the massive land grants made by the federal government. When governmental investment or assistance took a directly financial form, the principal source of funds was public borrowing, though the federal government paid for its early canal subscriptions out of treasury surpluses. State enterprises like the Erie Canal and state aid to mixed or private enterprise were generally financed with borrowed funds. What the companies asked was, indeed, often described as "the loan of the state's credit." Municipal and country authorities in most cases paid their subscriptions or made their donations in bonds. But one North Carolina law, adopted at a time when the state had exhausted its borrowing capacity, authorized the counties along the line of a certain railroad to levy a tax for its benefit, payable either in cash or country produce. 2 2 This was by no means the only case in which assistance was given in forms other than money or credit. The greatest largesse extended by the federal government was its gift of public lands. Texas, which entered the Union with a vast public domain, used it for the same purpose with equally lordly generosity. States and

14

SPIRIT OF IMPROVEMENT

nation alike granted almost as a matter of course free right of way through public lands, often with the privilege of taking timber and stone from neighboring property. Municipalities frequently gave rights of way, as well as lots for depots or roundhouses or machine shops, and sometimes built the structures themselves. In the early days of the movement, improvement companies were sometimes permitted to raise funds by conducting lotteries, and the grant of a coveted banking franchise enabled New J e r s e y to secure the construction of a costly developmental canal. Exemptions from various forms of taxation were a more common and persistent form of encouragement. 23 All this called for a complex set of legislative and administrative decisions. Government enterprises required management and operation. Assistance to private or mixed companies required the framing of conditions to ensure good faith in the completion of the work. Federal or state bonds would be issued, for example, when so many miles of track were l a i d ; a municipal donation might be withheld until "the cars were running" to a given point. In the case of mixed enterprise, the public authorities generally, though not always, named "proxies" to vote their stock and directors to sit on the boards of the companies. Other provisions, adopted after unlucky ventures had brought losses and in some cases bankruptcy to a number of state and local governments, placed restraints on the public authorities themselves in the attempt to prevent unwise commitments. Limits were imposed on the amount of debt that could be incurred for purposes of improvement, and a vote of the electorate was generally required before local aid could be granted. In a number of cases, the development of improvement programs resulted in the creation of specialized governmental bodies. Standing committees on internal improvements were maintained in city councils in Baltimore and elsewhere, in many state legislatures, and in Congress. New York had its Canal Commissioners and Commissioners of the Canal Fund. Boards of Public Works were established to supervise the pro-

S P I R I T OF

IMPROVEMENT

15

g r a m s of a n u m b e r of s t a t e s , a n d a t one time t h e C o r p s of A r m y E n g i n e e r s was t h o u g h t of as a similar a g e n c y of the n a t i o n a l government. T h e p r o m o t i o n a l activities of t h e m a n y g o v e r n m e n t a l agencies differed widely in the n a t u r e a n d scope of the public

planning

involved. I n some cases they involved only the decision of a small c o m m u n i t y t o c o n f o r m or not t o c o n f o r m t o the p l a n s of o u t s i d e promoters. In others they represented the establishment and a p p l i c a t i o n of a g e n e r a l system of aid within a s t a t e . In still o t h e r s t h e y a p p r o a c h e d more closely t o t h e c r e a t i o n of a p l a n n e d n e t w o r k of t r a n s p o r t a t i o n facilities. In t h i s r e s p e c t public p r o m o t i o n r a n the g a m u t

f r o m t h e mere t o w n s h i p d o n a t i o n t h r o u g h t h e f a r -

flung e n t e r p r i s e s of some of the commercial cities a n d t h e n o t a b l y c o h e r e n t p r o g r a m s of several s t a t e s to a t least t h e serious discussion of a comprehensive n a t i o n a l p l a n of i n t e r n a l i m p r o v e m e n t s . T h e s e diversities d e f y a n y simple a n a l y s i s a n d c a n be u n d e r s t o o d only t h r o u g h an e x a m i n a t i o n of t h e h i s t o r i c a l r e c o r d . E v e n a c h r o n o l o g i c a l a r r a n g e m e n t is difficult because of t h e v a r i a t i o n s between d i f f e r e n t a r e a s in the same p e r i o d a n d because of a l t e r n a t i o n s of a c t i v i t y a n d r e t r e n c h m e n t r e l a t e d t o t h e u p s a n d downs of the business cycle, the f a i l u r e s o r successes of p a r t i c u l a r imp r o v e m e n t s , a n d the v a r y i n g f o r t u n e s of p o l i t i c a l leaders

and

p a r t i e s . T h e r e is, however, one p r e l i m i n a r y d i s t i n c t i o n t h a t can be made. S t a t e a n d local a c t i o n , if n o t c o n t i n u o u s , was a t least cont i n u a l l y r e c u r r i n g t h r o u g h t h e g r e a t e r p a r t of t h e

nineteenth

c e n t u r y , with local a c t i o n p e r s i s t i n g u n t i l its end. On the o t h e r h a n d , a c t i v i t y by t h e f e d e r a l g o v e r n m e n t on i n t e r n a l

improve-

m e n t s was m o r e s p o r a d i c a n d was l a r g e l y confined t o two p e r i o d s . T h e first of these, an e r a of extensive n a t i o n a l p r o j e c t s , o c c u r r e d a t a time when the A p p a l a c h i a n M o u n t a i n s were t h e chief b a r r i e r t o c o m m u n i c a t i o n a n d s e t t l e m e n t . T h e second, a n e r a of extensive n a t i o n a l s u b s i d y , b e g a n when t h e r a i l r o a d s were b e i n g built a c r o s s t h e p r a i r i e s b u t r e a c h e d its climax when t h e i r a d v a n c e a c r o s s t h e c o n t i n e n t c o n f r o n t e d the massive obstacles of t h e Rockies

and

16

S P I R I T OF

the Sierras. I t

therefore seems appropriate

IMPROVEMENT to

separate

the

activity of the federal government from that of state and local authorities and to begin an examination of the record with the " E r a of National Projects."

F E D E R A L DEBATE AND DECISION 1801-1830

. . . with me fell, I f e a r never to rise again, certainly never to rise again in my day, the system of internal improvement by means of national energies. . . . With this system in ten years from this day the surface of the whole Union would have been checkered over with railroads and canals. I t may still be done half a century l a t e r and with the limping gait

of S t a t e legislature and

private

adventure. John

Quincy

Adams,

in a letter of

1837

2 A N E R A OF NATIONAL

PROJECTS

T h e first decade of the nineteenth c e n t u r y marked the beginning of an era of n a t i o n a l p r o j e c t s of i n t e r n a l improvement. B y this time f r o n t i e r settlement h a d passed the b a r r i e r of the A p p a l a c h i a n M o u n t a i n s , b u t t r a n s p o r t a t i o n had n o t yet b o u n d the new a r e a s to the economy of the seaboard s t a t e s . I n 1 8 0 6 Congress a u thorized the first surveys f o r the N a t i o n a l R o a d . T w o y e a r s l a t e r , A l b e r t G a l l a t i n , the S e c r e t a r y of the T r e a s u r y , presented t o the S e n a t e his R e p o r t on R o a d s and Canals. T h e first action initiated the one m a j o r developmental e n t e r p r i s e of the time t o be cons t r u c t e d d i r e c t l y by the federal g o v e r n m e n t . T h e second was the earliest a n d most distinguished a t t e m p t t o f o r m u l a t e a comprehensive n a t i o n a l plan of interal improvements. 1 T h e s e actions represented a new t u r n in n a t i o n a l policy. W a s h i n g t o n ' s enthusiasm f o r improvements h a d been channeled t h r o u g h o t h e r agencies, and little a t t e n t i o n was p a i d t o H a m i l t o n ' s s t a t e ment, in the R e p o r t on M a n u f a c t u r e s , of the a d v a n t a g e s of federal action. T h e early Congresses voted a p p r o p r i a t i o n s

for a

few lighthouses and spent much time d e s i g n a t i n g a n d r e d e s i g n a t ing the r o u t e s f o r p o s t r o a d s . T h o u g h it was sometimes recognized t h a t " u n p r o f i t a b l e r o a d s might be e s t a b l i s h e d — f r o m the p a r t i a l i t y of members to their own d i s t r i c t a n d c o u n t r y , " the a l t e r n a t i v e of leaving the selection to the E x e c u t i v e was r e j e c t e d as a g r e a t e r evil and even described as a d a n g e r o u s advance " t o w a r d

Mon-

20

ERA OF N A T I O N A L

archy."

2

PROJECTS

But it was only occasionally t h a t voices were raised to

advocate the federal construction of post roads, as a g a i n s t the mere choice of routes ; and the most elaborate of these proposals, under which the government would have subscribed to the stock of t u r n p i k e companies f o r the improvement of the principal post r o a d from Maine to Georgia, aroused little interest. 3 On the other hand, there was a considerable b a c k g r o u n d of s t a t e and local, as well as p r i v a t e , effort f o r the improvement of t r a n s p o r t a t i o n . T h r o u g h o u t most of the colonial period the means of inland communication had remained extremely primitive. R o a d s were mainly the responsibility of local public authorities, and it was they who made the a r r a n g e m e n t s with f e r r y men for the stream crossings. In the early days of s c a n t y t r a f fic, the towns had to give these men other inducements besides the r i g h t to collect tolls ; as traffic increased, the towns were sometimes able to charge them f o r the privilege instead. 4 In certain cases the provincial authorities gave directions and aid f o r t h r o u g h lines of road or f o r roads to open u p the f r o n t i e r . L o n g a f t e r w a r d s , S e n a t o r Seward cited as a precedent f o r internal improvements an act of the early eighteenth c e n t u r y by which the province of New York a p p r o p r i a t e d money f o r a road westward from the lower Hudson, but the scale of the effort may be gauged by the requirement t h a t the limbs of the trees had to be cut off high enough to permit the passage of a c a r r i a g e with a calash t o p / ' L a r g e r p r o j e c t s of river improvement and canal building and of the construction of " a r t i f i c i a l " roads were p r o j e c t e d and undertaken in the second half of the century. " B u t the d a r k and distressing period of the revolution," as a Pennsylvania improvement society recalled, "necessarily suspended all improvements of this n a t u r e , in every p a r t of America, until the glorious era of the peace and independence of the United S t a t e s . "

6

When progress could be resumed, much of the leadership was taken by p r i v a t e enterprise. B e f o r e the time of Gallatin's R e p o r t two principal canals were built without financial aid f r o m public

ERA OF N A T I O N A L PROJECTS

21

a u t h o r i t i e s . T h e Santee, e x t e n d i n g f r o m Charleston, South C a r o lina, was opened in 1800, a n d the Middlesex, f r o m B o s t o n t o Lowell on the M e r r i m a c k , in 1803. E a c h served to connect a seap o r t which lacked a m a j o r river with a river which lacked a s a t i s f a c t o r y p o r t . A number of toll-bridge companies s p r a n g u p , p a r t i c u l a r l y in New E n g l a n d , s u p e r s e d i n g the older f e r r y p r o p r i e t o r s , and were o f t e n

financially

successful. M o r e i m p o r t a n t

was the development of t u r n p i k e companies, of which over seventy h a d been c h a r t e r e d by 1800 a n d several h u n d r e d by the time of G a l l a t i n ' s inquiry. These were crisscrossing the n o r t h e r n

and

middle s t a t e s with a network of m o d e r a t e l y improved toll r o a d s , a n d G a l l a t i n ' s i n f o r m a n t s were able t o indicate c e r t a i n

main

lines of travel formed b y connecting t u r n p i k e s . T h e s e enterprises, p e r f o r m i n g " a h i t h e r t o g o v e r n m e n t a l f u n c t i o n , " were o p e r a t i n g with little or no public aid. I n New E n g l a n d the t u r n p i k e companies received no public f u n d s , t h o u g h those in Connecticut p r o f ited by the exemption of t h e i r stock f r o m t a x a t i o n . On the other h a n d , New J e r s e y aided a t u r n p i k e c o m p a n y in 1804, and the city of A l b a n y became the l a r g e s t stockholder in the F i r s t

Great

W e s t e r n T u r n p i k e . I n 1806 the P e n n s y l v a n i a legislature debated the general policy of s t a t e p a r t i c i p a t i o n and made its first subscription to the stock of a c o m p a n y which u n d e r t o o k to build a r o a d across the m o u n t a i n s to the W e s t . 7 Meanwhile t h e r e h a d been a number of examples of s t a t e p a r t i c i p a t i o n in p r o j e c t s of canal building and river improvement. T h e movement b e g a n , a c c o r d i n g t o the Pennsylvania " i n the s t a t e s of Virginia a n d M a r y l a n d , u p o n the

Society, Potomac,

u n d e r the auspices of the illustrious W a s h i n g t o n " and

spread

"with a noble emulation of public s p i r i t " t o o t h e r s t a t e s " a c c o r d i n g t o their n a t u r a l a d v a n t a g e s . " M a r y l a n d and

Virginia

p a i d more t h a n $ 1 5 0 , 0 0 0 f o r 3 4 0 of the 7 0 1 shares of the P o t o m a c C o m p a n y . Virginia was also interested in a n o t h e r and rival r o u t e to the W e s t and in a connection with the S o u t h , and the s t a t e p a i d $70,000 f o r half of the stock of the J a m e s River C o m p a n y and

22

ERA OF N A T I O N A L

PROJECTS

provided $17,500 of the $100,000 c a p i t a l of the Dismal Swamp Company. 8 T h e s t a t e of New Y o r k had adopted a similar policy. Two companies were organized to open the promising lines of connections leading f r o m the H u d s o n

River

system—the

Northern

Inland Lock Navigation C o m p a n y to develop a route t o Lake Champlain and the W e s t e r n to improve the Mohawk River and connect it with Lake O n t a r i o . E a c h received a t the outset a donation of $12,500 and l a t e r a subscription to 200 shares of stock. T h e W e s t e r n C o m p a n y , which was the more active, was also given a loan of $ 3 7 , 5 0 0 ; a t the time of Gallatin's R e p o r t , the s t a t e ' s subscription to its stock amounted to $92,000 out of a t o t a l of $232,000. T h e s t a t e of Pennsylvania, which had made unusually large direct expenditures f o r roads and river improvements, voted a small a p p r o p r i a t i o n f o r the Chesapeake and Delaware Canal and stood ready to p a y a $300,000 bonus on the completion of the Schuylkill and Susquehanna. In the W e s t , the s t a t e of Kentucky had committed itself to a subscription f o r a canal a r o u n d the Falls of the Ohio. 9 W i t h all this emulation and stir of activity, however, the actual progress of improvement was on the whole disappointing, both in the private and the state-aided undertakings. T h e t u r n p i k e movement, t o be sure, was still spreading, though without much financial return to the companies. T h e Middlesex Canal was in active use and tolls were increasing; but the Santee, though also completed, was "very unprofitable."

10

The J a m e s River Company

had improved p a r t of its river and paid a dividend. T h e P o t o m a c Company had less to show. In New Y o r k the N o r t h e r n p a n y had accomplished almost n o t h i n g ; the Western

Com-

Company

had built and then had to rebuild a set of locks a t Little Falls and had made the short connection between the Mohawk and W7ood Creek. T h e work of both companies was virtually

suspended,

as was t h a t on the Chesapeake and Delaware and a number of other undertakings. M a n y others, like t h a t of Kentucky, remained still in the p r o j e c t stage.

ERA OF N A T I O N A L

PROJECTS

23

T h e r e p o r t s collected by G a l l a t i n c o n t a i n a n u m b e r of e x p l a n a t i o n s f o r the a r r e s t e d development. Sonne were e n t i r e l y p e r s o n a l . N o t h i n g h a d been done on t h e C a p e F e a r N a v i g a t i o n a f t e r t h e d e a t h of t h e c o n t r a c t o r , who h a d become the sole owner. On t h e C a t a w b a a n d W a t e r e e , t h e engineer h a d q u i t , " b e i n g h y p o c h o n d r i a c a l ^ i n c l i n e d . " Few u n d e r t a k i n g s h a d p r o f e s s i o n a l e n g i n e e r s a n d several c o r r e s p o n d e n t s r e p o r t e d c o s t l y m i s t a k e s f r o m l a c k of t e c h n i c a l knowledge. T h e s u p e r i n t e n d e n t s

of one

company,

a d m i t t i n g m a n y d e f e c t s in t h e p l a n a n d e x e c u t i o n of t h e w o r k , e x p l a i n e d in e x t e n u a t i o n t h a t t h e y h a d " e x e r t e d themselves

to

t h e u t m o s t a n d . . . never t a k e n a single s h i l l i n g " e i t h e r

for

s a l a r y o r expenses. B u t the m o s t c o m m o n e x p l a n a t i o n f o r t h e lack of p r o g r e s s ran" in still s i m p l e r t e r m s . " T h e p r i n c i p a l difficulty . . .

to be s u r m o u n t e d , " r e p o r t e d t h e A p p o m a t t o x

Com-

p a n y , " a r i s e s f r o m w a n t of m o n e y . " I n c a s e a f t e r case, w o r k h a d ceased because of " t h e e x h a u s t e d s t a t e of the f u n d s . " S e v e r a l of t h e c o r r e s p o n d e n t s a t t e m p t e d t o e x p l a i n why t h e f u n d s could n o t be replenished. I n t h e case of t h e D i s m a l S w a m p C a n a l , a t t e n t i o n was called " t o t h e p e c u l i a r c i r c u m s t a n c e s of t h e i n h a b i t a n t s of t h e c i r c u m j a c e n t c o u n t r y . . .

t o t h e i r p o s s e s s i n g b u t little

s p a r e money, a n d t h e i r aversion t o risk t h a t little in s p e c u l a t i o n . " E v e n in P h i l a d e l p h i a , it was p o i n t e d o u t t h a t t h e f u n d s of t h e moneyed i n t e r e s t were f o r the m o s t p a r t a b s o r b e d in i n v e s t m e n t s promising "more a d v a n t a g e and immediate benefit."

11

A l t h o u g h G a l l a t i n ' s q u e s t i o n n a i r e did n o t ask f o r o p i n i o n s on i m p r o v e m e n t policy, a n u m b e r of his c o r r e s p o n d e n t s v o l u n t e e r e d a r g u m e n t s f o r the use of f e d e r a l f u n d s t o s u p p l y t h e deficiencies in t h e p r o g r a m . Some stressed t h e specifically n a t i o n a l p u r p o s e s of p a r t i c u l a r u n d e r t a k i n g s . I t was a r g u e d , f o r e x a m p l e , t h a t t h e C h e s a p e a k e a n d D e l a w a r e would give a d v a n t a g e s t o the U n i t e d S t a t e s N a v y similar t o t h o s e t h a t t h e B r i t i s h e x p e c t e d f r o m the C a l e d o n i a n C a n a l t h r o u g h t h e H i g h l a n d s of S c o t l a n d

or—pro-

p h e t i c a l l y — t h a t would s o m e d a y be g a i n e d f r o m a c a n a l a c r o s s t h e I s t h m u s of P a n a m a . O t h e r s stressed t h e p o i n t , so o f t e n m a d e by W a s h i n g t o n , t h a t d e v e l o p m e n t of m e a n s of c o m m u n i c a t i o n with

24

ERA OF N A T I O N A L P R O J E C T S

the settlers beyond the mountains was vital to the cementing and preservation of the Union. According to one correspondent, the best way to serve this p a t r i o t i c purpose, and a t the same time to "wither the consequence of Quebec," was to build a r o a d uniting " t h e navigation of our g r e a t western lakes with t h a t of the A t l a n t i c . " Combining the language of the classics with t h a t of the G r e a t N o r t h Woods, he described his p r o j e c t as " a n

Appian

W a y or national p o r t a g e . " Moses Brown, the Quaker m a n u f a c t u r e r of Providence, advanced still another a r g u m e n t for federal action. Noting, as had m a n y others, the intercity and inters t a t e jealousies t h a t had impeded the progress of improvements, he asked: " W o u l d not such improving a u t h o r i t y be p r o p e r to be vested in the General Government?"

12

In one m a j o r case, t h a t of the N a t i o n a l R o a d , the general government had already assumed a u t h o r i t y f o r internal improvement. This u n d e r t a k i n g found its occasion in the settlement of the Northwest T e r r i t o r y and in the m a j o r political decision by which the public lands in the region were to remain a t the disposition of the federal government. Even before the first s t a t e in the area was admitted t o the Union, federal power over the land had been used to advance internal improvements. In an early example of the p r a g m a t i c a r r a n g e m e n t s linking public p u r p o s e with profitable private speculation, Ebenezer Zane, a pioneer entrepreneur of Wheeling, had marked out and cleared an import a n t land route across southeastern Ohio (Zane's T r a c e ) in r e t u r n f o r the privilege of t a k i n g u p town sites a t the river crossings where he was certain t h a t settlements would arise. 1 3 As Ohio's admission a p p r o a c h e d , improvement policy became a subject of more general discussion. E a r l y in 1802, Gallatin proposed in a letter t h a t p a r t of the proceeds of the sale of public lands be used for the building of roads from " t h e navigable waters emptying into the Atlantic to the Ohio, and a f t e r w a r d s

continued

through the new S t a t e . " Construction was to be carried on bv the federal government with the consent of the states t h r o u g h

ERA OF N A T I O N A L P R O J E C T S

25

which t h e r o a d was to p a s s . H e l a t e r endorsed his c o p y of t h e l e t t e r , " O r i g i n of the N a t i o n a l R o a d " ;

14

it did in f a c t outline the

p o l i c y which was followed. T h e E n a b l i n g A c t of 1 8 0 2 ,

under

which Ohio became a s t a t e , p r o v i d e d t h a t five p e r c e n t of t h e net p r o c e e d s of public l a n d sold within its a r e a should be a p p l i e d t o t h i s p u r p o s e ; a n d C o n g r e s s l a t e r a c c e p t e d t h e s t i p u l a t i o n of t h e Ohio l e g i s l a t u r e t h a t t h r e e fifths of t h e money should be s p e n t on r o a d s within t h e s t a t e . T h e two p e r c e n t f u n d b e g a n t o a c c u m u l a t e , a n d l a t e in 1 8 0 5 a S e n a t e c o m m i t t e e r e p o r t e d in f a v o r of b u i l d i n g t h e r o a d f r o m C u m b e r l a n d on the P o t o m a c t o Steubenville o r W h e e l i n g on t h e Ohio, c r o s s i n g the m o u n t a i n s b y t h e g e n e r a l r o u t e of t h e h i s t o r i c B r a d d o c k ' s R o a d . C o n s i d e r i n g it " a n i n d e l i c a c y " t o assume t h a t t h e S e n a t e needed t o be convinced of t h e i m p o r t a n c e of t h e u n d e r t a k i n g , t h e C o m m i t t e e members devoted t h e i r m a i n a t t e n t i o n t o t h e g e o g r a p h i c a d v a n t a g e s of t h e C u m b e r l a n d

route.

Since

this would p r o v i d e d i r e c t c o n n e c t i o n s f o r B a l t i m o r e a n d W a s h i n g t o n , as a g a i n s t possible a l t e r n a t i v e r o u t e s f r o m P h i l a d e l p h i a a n d R i c h m o n d , the choice was a c o n t r o v e r s i a l one a n d r e p r e s e n t a t i v e s f r o m P e n n s y l v a n i a a n d V i r g i n i a c a s t 2 9 of t h e 5 0 n a y s in a close vote in the H o u s e . I n M a r c h , 1 8 0 6 , however,

Congress

a d o p t e d A n A c t to R e g u l a t e t h e L a y i n g O u t a n d M a k i n g a R o a d f r o m C u m b e r l a n d , in t h e S t a t e of M a r y l a n d . T h i s a u t h o r i z e d the P r e s i d e n t t o a p p o i n t commissioners f o r l a y i n g o u t t h e r o a d , t o d e t e r m i n e its l o c a t i o n a f t e r receiving t h e i r r e p o r t , a n d to quest the necessary

consent f r o m the s t a t e s c o n c e r n e d . 1 5

reThe

C o m m i s s i o n e r s r e p o r t e d in D e c e m b e r , n o t i n g as one of t h e difficulties of t h e i r t a s k " t h e solicitude a n d i m p o r t u n i t i e s of the inh a b i t a n t s of every p a r t of the d i s t r i c t , who severally considered t h e i r g r o u n d s entitled t o a p r e f e r e n c e . "

16

T h e s t a t e of

Penn-

s y l v a n i a m a d e its consent t o t h e p r o j e c t c o n t i n g e n t on t h e inclusion in t h e r o u t e of U n i o n t o w n a n d W a s h i n g t o n ,

Pennsylvania.

P r e s i d e n t J e f f e r s o n was s o m e w h a t disillusioned b y this official exp r e s s i o n of " s o l i c i t u d e " f o r local i n t e r e s t s , b u t decided t o a c c e p t

26

ERA OF NATIONAL PROJECTS

the t e r m s . E a r l y in 1808, the P r e s i d e n t a n d the S e c r e t a r y of the T r e a s u r y were able t o r e p o r t t h a t the r o a d h a d been located f r o m C u m b e r l a n d on t h e P o t o m a c t o Brownsville on the M o n o n g a h e l a , and t h a t c o n t r a c t s h a d been let f o r clearing t h a t p o r t i o n of the r o u t e f o r half of its width. 1 7 B y this time, two other p r o j e c t s f o r internal

improvements

were u n d e r active discussion, the Chesapeake a n d Delaware Canal and the p r o p o s e d c a n a l a r o u n d the Falls of the Ohio a t Louisville. E a c h h a d been before the Congress since 1805, and each h a d received a f a v o r a b l e r e p o r t f r o m a S e n a t e committee a n d an adverse r e p o r t f r o m a H o u s e committee on g r o u n d s of economy. 1 8 B o t h p r o p o s a l s were advocated on g r o u n d s of n a t i o n a l interest. T h e a d v a n t a g e s of a canal a t Louisville would be felt t h r o u g h o u t the entire area served by the Ohio River. T h e Chesapeake and D e l a w a r e was presented in the c o m p a n y ' s memorials as an essential p a r t of a g r e a t system of inland navigation valuable t o the n a t i o n in time of peace and still more vital in time of w a r . T h e Dismal S w a m p Canal would c a r r y the communication s o u t h w a r d t o Albemarle Sound, " a n d f r o m thence t h r o u g h

the

inlets to S o u t h C a r o l i n a a n d G e o r g i a . " T o the n o r t h , " a communication is now nearly opened from Albany, u p the Mohawk R i v e r , to L a k e O n t a r i o and all the u p p e r lakes," and the H u d s o n C h a m p l a i n canal would extend the navigation to Quebec. T o t h e east, " t h e p a s s t h r o u g h J e r s e y " and a contemplated canal f r o m B u z z a r d ' s B a y would "in like m a n n e r extend it to Boston and all the c o a s t of M a s s a c h u s e t t s . " " T h u s , " the c o m p a n y

concluded,

"with opening only a few s h o r t passes, of which the Chesapeake a n d D e l a w a r e C a n a l is the g r e a t and p r e l i m i n a r y one, a communication m a y be made, nearly f r e e f r o m all the d a n g e r s of the ocean, a l o n g the whole coast of the United S t a t e s . "

19

E a r l y in 1807, measures were before the Congress to aid these two e n t e r p r i s e s by g r a n t s of western land in exchange f o r stock in the companies. T h e F a l l s of the Ohio bill was introduced in J a n u a r y by H e n r y Clay, and he had joined with the D e l a w a r e

ERA OF N A T I O N A L P R O J E C T S s e n a t o r s a n d o t h e r f r i e n d s of i n t e r n a l i m p r o v e m e n t s

27 in

active

s u p p o r t of the two p r o p o s a l s . I n t h e d e b a t e on t h e C h e s a p e a k e a n d D e l a w a r e p r o j e c t , J o h n Q u i n c y A d a m s , as his f r i e n d S e n a t o r P l u m e r r e p o r t e d , " w a s violent in his o p p o s i t i o n . " H e s p o k e of t h e " l e a g u e " of s e n a t o r s r e p r e s e n t i n g t h e six s t a t e s i m m e d i a t e l y int e r e s t e d a n d w a r n e d of the f r a u d a n d collusion which would result f r o m similar c o m b i n a t i o n s in behalf of l o c a l m e a s u r e s . 2 0 A f t e r t h i s , A d a m s i n t r o d u c e d a r e s o l u t i o n a s k i n g t h e S e c r e t a r y of t h e T r e a s u r y t o submit t o t h e S e n a t e a g e n e r a l p l a n of r o a d , c a n a l a n d r i v e r i m p r o v e m e n t s which m i g h t r e q u i r e a n d deserve t h e a i d of C o n g r e s s — a n a c t i o n t o which he p o i n t e d y e a r s l a t e r a s m a r k i n g t h e real b e g i n n i n g of s y s t e m a t i c n a t i o n a l p o l i c y . 2 1 T h e

resolu-

t i o n was p r o m p t l y d e f e a t e d , b u t a s t h e end of t h e session

ap-

p r o a c h e d , it became evident t o t h e i m p r o v e m e n t a d v o c a t e s

that

t h e y would n o t o b t a i n positive a c t i o n on t h e i r m e a s u r e s . I n t h i s s i t u a t i o n , t h e S e n a t e p a s s e d a bill t o a p p o i n t c o m m i s s i o n e r s

to

investigate the Kentucky p r o j e c t , and Senator T h o m a s W o r t h i n g t o n of Ohio i n t r o d u c e d resolutions a s k i n g T r e a s u r y

s t u d i e s of

the proposals for the Chesapeake and Delaware Canal and a

t u r n p i k e c o n n e c t i n g the A t l a n t i c

states.

Finally

for

Worthing-

t o n withdrew these two m o t i o n s a n d p r e s e n t e d i n s t e a d t h e p r o p o s a l f o r a more g e n e r a l s t u d y . T h i s r e s o l u t i o n , which followed closely the s u b s t a n c e a n d l a n g u a g e of t h e A d a m s p r o p o s a l

but

which came f r o m a m a n who h a d v o t e d f o r specific i m p r o v e m e n t p r o j e c t s a s c o n s i s t e n t l y as A d a m s h a d v o t e d a g a i n s t them, 2 2 won t h e s u p p o r t of a l a r g e m a j o r i t y . On M a r c h 2, 1 8 0 7 , t h e S e n a t e d i r e c t e d t h e S e c r e t a r y of the T r e a s u r y t o p r e p a r e a n d

report

t o its n e x t session, t o g e t h e r with i n f o r m a t i o n on t h e p r o g r e s s a n d p r o s p e c t s of e x i s t i n g i m p r o v e m e n t s , a plan for the application of such means as are within the power of Congress, to the purposes of opening roads and making canals, together with a statement of the undertakings of that nature, which, as objects of public improvement, may require and deserve the aid of Government. 23

E R A OF N A T I O N A L

PROJECTS

G a l l a t i n ' s R e p o r t on R o a d s and Canals, p r e p a r e d in response to this resolution, reached the Senate on A p r i l 6, 1808. " T h e general u t i l i t y of artificial r o a d s and c a n a l s , " it a s s e r t s , "is universally a d m i t t e d . " I n some countries, "these improvements may o f t e n , in o r d i n a r y cases, be l e f t to individual exertion, without a n y direct aid f r o m G o v e r n m e n t . " B u t in the A m e r i c a n

case,

two m a j o r circumstances, "whilst they render the f a c i l i t y of communications t h r o u g h o u t t h e U n i t e d S t a t e s an o b j e c t of p r i m a r y i m p o r t a n c e , n a t u r a l l y check the a p p l i c a t i o n of p r i v a t e c a p i t a l and e n t e r p r i s e to improvements on a l a r g e scale." T h e first of these is the relative s c a r c i t y of c a p i t a l . I t is much more difficult t h a n in E u r o p e to a t t r a c t investment by " p r o s p e c t s of remote and m o d e r a t e p r o f i t . " T h e second is " t h e extent of the t e r r i t o r y compared to the p o p u l a t i o n . " W i t h a s p a r s e p o p u l a t i o n , local traffic c a n n o t be counted on t o make an improvement profitable. In general, a canal will be u n p r o d u c t i v e unless it opens " a communication with a n a t u r a l extensive navigation which will flow t h r o u g h t h a t new channel." F o r this reason, "some works a l r e a d y executed a r e u n p r o f i t a b l e ; m a n y more remain u n a t t e m p t e d , because their u l t i m a t e productiveness depends on o t h e r improvements, too extensive or too d i s t a n t to be embraced b y the same individuals." " T h e General G o v e r n m e n t , " declares the R e p o r t , " c a n alone remove these obstacles." I t s resources are " a m p l y sufficient f o r the completion of every p r a c t i c a b l e improvement. . . . W i t h

these

resources, a n d e m b r a c i n g the whole Union, it will complete on any given line all the improvements, however d i s t a n t , which may be necessary t o render the whole p r o d u c t i v e . " The argument continues: T h e early and efficient aid of the Federal

Government is recommended

by still more important considerations. T h e inconveniences, complaints, and perhaps dangers, which m a y result from a vast extent of territory, can not otherwise be radically removed or prevented than by opening speedy and easy communications through all its parts. Good roads and

ERA OF NATIONAL P R O J E C T S

29

canals will shorten distances, facilitate commercial and personal intercourse, and unite, by a still more intimate community of interests, the most remote quarters of the United States. No other single operation, within the power of Government, can more effectually tend to strengthen and perpetuate that Union which secures external independence, domestic peace, and internal liberty. W h a t , then, are the specific objects t h a t on this argument require and j u s t i f y action by the national government? Gallatin derives his answers from a broad view of the geography of the country. The main problems are to improve communications along the Atlantic seaboard and to create means of communication t h a t will reach the settlers beyond the mountains and promote the development of the West. W i t h respect to the former, the United States possesses " a tide water inland navigation . . . which, from Massachusetts to the southern extremity of Georgia, is principally, if not solely, int e r r u p t e d by four necks of land." T h e four are Cape Cod, New Jersey between the R a r i t a n and Delaware rivers, the peninsula between the Delaware and Chesapeake bays, and the "marshy t r a c t which divides the Chesapeake from Albemarle Sound." These should be cut by canals, which would total less than one hundred miles and would be useful "in peace or w a r " as protection against "storms and enemies." T o this should be added " a great turnpike extending from Maine to Georgia . . . passing through all the principal seaports." T h e problem of communication with the West presents a greater difficulty. From New York to southern Georgia, the way is blocked by the two g r e a t ranges of the Appalachians. " I n the present state of science," it is useless to think of crossing them by canals. There are, however, places a t which the upper waters of the western and Atlantic rivers are near enough together to make communication practicable. F o r each of four pairs of rivers, therefore—the Allegheny and the Susquehanna or the J u n i a t a , the Monongahela and the Potomac, the Kanawha and the James, and the Tennessee and the Santee or the Savannah—the Report

ERA OF NATIONAL

30

PROJECTS

recommends improvements in navigation of the eastern river and a road connecting it with the western stream. T o the north, g e o g r a p h y opens a different possibility.

The

H u d s o n is the only river which "breaks through or turns all the mountains." " T h e tide in no other . . . comes within thirty miles of the Blue Ridge, or E a s t e r n chain of mountains. In the N o r t h river it breaks through the Blue Ridge at W e s t P o i n t , and ascends above the E a s t e r n termination of the Catskill, or g r e a t W e s t e r n chain." A d v a n t a g e should be taken of this obvious g a t e w a y to open communication with the inland navigation

of the

Great

Lakes. Gallatin summarizes his proposals as follows: I. From north to south, in a direction parallel to the seacoast, 1. Canals opening an inland navigation for sea vessels from Massachusetts to North Carolina, being more than twothirds of the Atlantic seacoast of the United States, and across all the principal capes, cape Fear excepted. . . $3,000,000 2. A great turnpike road from Maine to Georgia along the whole extent of the Atlantic seacoast 4,800,000 $7,800,000 I I . From east to west, forming communications across the mountains between the Atlantic and western rivers, 1. Improvement of the navigation of four great Atlantic rivers, including canals parallel to them 2. Four firstrate turnpike roads from those rivers across the mountains, to the four corresponding western rivers. 3. Canal around the falls of the Ohio. 4. Improvement of roads to Detroit, St. Louis and New Orleans.

1,500,000

2,800,000 300,000 200,000 4,800,000

ERA OF N A T I O N A L

PROJECTS

I I I . In a northern and northwestwardly direction, forming inland navigations between the Atlantic seacoast, and the great lakes and the St. Lawrence, 1. Inland navigation between the North river and Lake Champlain. . . . 2. Great inland navigation opened the whole way by canals from the North river to Lake Ontario 3. Canal around the falls and rapids of Niagara, opening a sloop navigation from Lake Ontario to the upper lakes as far as the extremities of Lake Michigan

31

800,000

2,200,000

1,000,000 4,000,000

Making together

.

.

$16,600,000

T h e s e a r e n a t i o n a l o b j e c t s , a n d t h e i r benefits should " d i f f u s e a n d i n c r e a s e the n a t i o n a l w e a l t h in a v e r y g e n e r a l w a y . " Y e t t h e s t a t e s t h r o u g h which these r o u t e s p a s s will receive m o r e d i r e c t benefit t h a n the o t h e r s . T h e r e f o r e , s a y s G a l l a t i n , " j u s t i c e , a n d , p e r h a p s , policy no less t h a n j u s t i c e , " seem t o r e q u i r e n a t i o n a l aid t o m o r e local p r o j e c t s in o t h e r a r e a s . F o r this p u r p o s e he a d d s $ 3 , 4 0 0 , 0 0 0 t o b r i n g his t o t a l t o the r o u n d figure of $ 2 0 , 0 0 0 , 0 0 0 . H o w is this money t o be raised a n d s p e n t ? " A n a n n u a l a p p r o p r i a t i o n of two millions of d o l l a r s would a c c o m p l i s h all these g r e a t o b j e c t s in ten y e a r s . " " I n times of p e a c e a n d u n d e r p r o s p e r o u s c i r c u m s t a n c e s , " this sum could be p a i d f r o m t h e s u r p l u s revenues w i t h o u t t a x a t i o n . I n d e e d , a still l a r g e r a m o u n t was b e i n g p a i d between 1 8 0 1 a n d 1 8 0 9 on t h e n a t i o n a l d e b t , which would t h e n be a l m o s t completely d i s c h a r g e d . O r , as an a l t e r n a t i v e , t h e p r o ceeds of t h e sale of p u b l i c l a n d s m i g h t be a p p l i e d t o this p u r p o s e . T h e i m p r o v e m e n t s themselves would be of i m m e d i a t e a n d d i r e c t benefit t o t h e p u r c h a s e r s of l a n d , a n d " t h e U n i t e d S t a t e s , considered merely as owners of t h e soil . . . would be a m p l y r e p a i d " in t h e rise of value of t h e l a n d s r e m a i n i n g u n s o l d . If it were desired, also, t h e f u n d m i g h t be a r e v o l v i n g one. P r o j e c t s once

32

ERA OF N A T I O N A L P R O J E C T S

b r o u g h t to profitable operation might be sold " t o individuals or companies, and the proceeds applied to a new improvement." As an essential first step, the R e p o r t suggests t h a t Congress should authorize t a k i n g " t h e surveys and levels" of the routes proposed. In the present constitutional position, the federal government can make improvements only with the consent of the states on whose t e r r i t o r y they are to be built. F o r this reason, President Jefferson has proposed the adoption of an amendment " t o remove every impediment to a national plan of internal improvements." Yet the specific p r o j e c t s p u t f o r w a r d in the R e p o r t are, Gallatin argues, of such obvious a d v a n t a g e t h a t the consent of the states should be easy to obtain. As f o r the method of organization, the United States may have the work done " a t their sole expense," or may subsidize private companies, p r e f e r a b l y by subscription to their stock. T h e former method, "by effectually controlling local interests," would p e r h a p s assure better general direction. T h e l a t t e r might be more economical in detailed execution. P e r h a p s the two might somehow be "blended" to obtain the advantages of each. In the closing p a r a g r a p h

the

Secretary

returns to the problem of local interests in the choice of p r o j e c t s in a sentence notably optimistic in its choice of c o n j u n c t i o n : " T h e National Legislature alone, embracing every local interest, and superior to every local consideration, is competent to the selection of such national o b j e c t s . " Here, then, was a notable ten-year plan of national action. The economic a r g u m e n t is modern in substance if not in p h r a s e ology. T h e specific recommendations were based, as the hundred and eighty folio pages of appendix indicate, on a p a i n s t a k i n g investigation of improvements already undertaken or p r o j e c t e d . Most of the elements, indeed, were a l r e a d y familiar. Gallatin's four "necks" corresponded to the f o u r " p a s s e s " of the Chesapeake and Delaware enthusiasts. T h e g r e a t t u r n p i k e was the main post road. Improvements had been s t a r t e d on the H u d s o n , the Mohawk, the P o t o m a c , and the James. One of Gallatin's f o u r high-

ERA OF N A T I O N A L ways

connecting eastern

and

PROJECTS

western

rivers, the

33 Cumberland

Road, was already being built under his own direction.

What

distinguishes the Report from earlier discussion is not the novelty of its particular proposals, but the presentation of a coherent p r o g r a m of p r o j e c t s of national importance. Based, as Gallatin said, on the "great geographical features of the country," their selection demonstrated his keen appreciation of the natural advant a g e s of the United States and the ways in which they might be shaped to human use. 2 4 T h e principal improvements proposed in the R e p o r t are presented in the map on p. 34 and compared with later construction on the same or similar routes. T h e four canals along the seaboard were all finally constructed, and t o d a y ' s Inland W a t e r w a y as well as highway and railway connections follow the general direction of Gallatin's proposals. On the more significant problem of connection with the W e s t , the map indicates t h a t — s u b j e c t to certain deviations—the Erie Canal and four of the five trunk-line railroads all took advantage of the openings suggested in the R e p o r t . T h o u g h changes in technology and economic circumstance reduce the relevance of the criterion of later development, the comparison tends to corroborate the

firmness

of Gallatin's g r a s p of

geo-

graphic reality. T h e political and administrative aspects of the plan, on the other hand, are much less fully developed. The basis for selecting objects of truly national importance is indicated by

example

rather than precept. T h e alternate forms under which federal action might be organized are discussed only briefly; and the choice between them is p u t forward, perhaps for tactical reasons, more as a matter of detail than of substance. T h e constitutional issue is presented as offering no g r e a t difficulty. T h e question of conflicting state and local interests, though clearly seen, is answered with a hopeful phrase and the "justice and policy" fund for a p p e a s i n g the states less favored by the m a j o r projects. Y e t it was on these points that the principal difficulties were to appear.

'Boston

-Jío/tatfk Rf V ^ RIE

/ CANAL

CAPE COD CANAL

New York. DELAWARE S. RAR1TAN CANAL

J i ¿Q&Säß.

^

Philadelphia

¿Pi

Pittsburgh

CHESAPEAKE & DELAWARE -^s / CANAL M A I N LINE

;

^Columbus

RS.W.^C

"¿W^W*" 1' M T 'SV Í ^CHESAPEAKE & OHIO ifa^CANALJ-».'

Parkersbun Richmond Norfolk

Huntincjtori J A M E S RIVER C A N A L .....

KANAWHA DISMAL SWAMP CANAL ^

um Chafctanooqa

i ' - a i ^

Charlestoi

n na

GALLATIN'S PROPOSALS AND A C T U A L CONSTRUCTION Gallatin's Proposals C— ACTUAL CONSTRUCTION: 1 Railroads ' Roads Canals

GAT,LATIN'S PROPOSALS A N D ACTUAL Gallatin's

propotaU

Actual

The N o r t h e r n Opening H u d s o n to L a k e Champlain Mohawk to Lakes Ont a r i o and E r i e

Agency

comtruction

The F o u r Necks of L a n d C a p e Cod Canal (1) Cape Cod Delaware and R a r i t a n (2) New J e r s e y Canal Chesapeake and D e l a w a r e (3) Delaware and Canal Chesapeake Bay (*) Dismal S w a m p Canal Chesapeake B a y to Albemarle Sound

CONSTRUCTION Year compUted

Private Private

1914 1834

Mixed ( f e d e r a l , state, private) Mixed ( f e d e r a l , state, private)

1830

Champlain Canal

State

1823

E r i e Canal Oswego Canal New York Central Railroad

State State Mainly p r i v a t e *

1933

1828

1825 1828 1841-1881"

The F o u r P a i r s of Rivers (1) A l l e g h e n y - J u n i - Main Line—Pennsylvania S t a t e ata, SusqueState Works hanna Philadelphia & Columbia R . R . Susquehanna a n d J u n i a t a Divisions ( C a n a l ) Portage Railroad W e s t e r n Division Canal Mixed (local government, Pennsylvania R a i l r o a d private) 6 National ( C u m b e r l a n d ) Federal Government (2) MonongahelaRoad Potomac Chesapeake & Ohio Canal Mixed ( f e d e r a l , state, local government, p r i v a t e ) Baltimore & Ohio Railroad Mixed (state, local government, p r i v a t e ) Mixed (state, local gov(3) K a n a w h a - J a m e s J a m e s River & K a n a w h a ernment, p r i v a t e ) Canal Mixed (state, local govChesapeake & Ohio Railernment, private) ' road Mixed (state, local gov(4) Tennessee-Savan- Blue Ridge R a i l r o a d ernment, p r i v a t e ) nah, Santee • Local aid between Albany and Schenectady. P h i l a d e l p h i a & Columbia section p u r c h a s e d f r o m state. c Two of its components, the Blue R i d g e Railroad (of V i r g i n i a ) and the Covington & Ohio, were built as state works. The state's interest was sold to p r i v a t e p u r c h a s e r s before the railroad was completed to the Ohio River. d 1841, Albany to Buffalo. 1851, H u d s o n River Railroad f r o m New York City. New York Central R a i l r o a d formed by consolidation in 1853. River a t A l b a n y not bridged until 1866. " T o P i t t s b u r g h ; Wheeling; Wheeling; a n d H u n t i n g t o n , W. V a . respectively. ' F u r t h e r work abandoned. « N o significant d a t e can be assigned. Different sections of the road fell into disuse a t different times. The present U.S. R o u t e 40 follows much of its course. b

Tear abandon ed

1834

1901 1857 1865 1855 • 1818 "

1850

1924

1853 > 1851 1873' 1861 '

1880

ERA OF N A T I O N A L PROJECTS

36

One m a j o r political obstacle was evident even before the R e p o r t was submitted. I t s fiscal proposals, which contemplated neither new taxation nor borrowing, were based explicitly on the maintenance

of

peace,

the

continuation

of

substantial

revenue

f r o m customs, and the absence of g r e a t military expenditure. B u t the E m b a r g o A c t had been passed in December, 1 8 0 7 ; and the years that followed were characterized by interruptions to trade, by the creation of a military establishment, and

finally

by the

W a r of 1812. E v e n under these circumstances, the advocates of internal improvement, armed with numerous petitions on behalf of particular p r o j e c t s , made various attempts t o persuade the Congress that " f o r e i g n relations ought not to exclude every other o b j e c t of legislation." A small a p p r o p r i a t i o n f o r the Carondelet Canal at New Orleans was made in 1809 as a defense measure. Senator John P o p e

of

Kentucky

and Representative

Paul

B.

P o r t e r of New Y o r k introduced in 1810 a comprehensive bill to c a r r y out a list of p r o j e c t s similar to Gallatin's, choosing the method of subscription to the stock of mixed enterprises and p r o posing to finance the contribution by borrowing on the security of tracts of public land. 25 Bills f o r the Chesapeake and Delaware and Falls of the Ohio canals several times won Senate m a j o r ities. 26 In 1811, Gouverneur M o r r i s and De W i t t Clinton were sent by N e w Y o r k

State's Canal Commission to appeal f o r federal

support f o r the proposed canal t o the Great Lakes. In an attempt to win the widest possible support, they inspired the d r a f t i n g of an e x t r a o r d i n a r y omnibus bill which was to set aside all the land in Michigan T e r r i t o r y north of the fortieth parallel and g i v e it, f o r the purposes of various improvements, to twelve states and the P o t o m a c C o m p a n y , with New Y o r k receiving 4,500,000 acres out of a t o t a l of j u s t under 10,000,000 acres. 27 But early

in

1812, a House committee appointed to consider these and other p r o j e c t s drew f r o m Gallatin himself the emphatic statement that direct a p p r o p r i a t i o n s could not be considered in the present state of the nation's finance, and the committee reported with r e g r e t its opinion " t h a t the inauspicious situation of the United States,

ERA OF NATIONAL PROJECTS

37

in regard to our foreign relations" rendered it "inexpedient for Congress of the United States to make a donation in land or money." 28 The committee's policy prevailed, and its arguments were reinforced by the outbreak of war. The return of peace removed these obstacles and revived the agitation for internal improvement. The war experience itself furnished an additional argument. The effectiveness of the navy had suffered for want of internal navigation along the seacoast, and that of the army by lack of proper transport to the Great Lakes. The chartering of the Second Bank of the United States seemed to provide a special opportunity for action, and John C. Calhoun appeared as its leading advocate. During the session of 1816—17, he proposed a measure to set aside the federal government's bonus from the charter and its future income from the Bank as a fund for internal improvements. "Let us then, said Mr. C."—as the Annals

of Congress

reported—"bind the Republic

together with a perfect system of roads and canals." For this the state of the nation was now most favorable, "at peace with all the world, abounding in pecuniary means." T o these two circumstances, Calhoun added a third "of the most importance . . . party and sectional feelings immerged in a liberal and enlightened regard to the general concerns of the nation."

29

In spite of this optimism, the conflict of state versus more general interests appeared at once in the Bonus Bill discussions. As introduced, the measure provided for a permanent national fund to be spent under the direction of Congress for improvements of national importance. As passed, it represented hardly more than a distribution of g i f t s to the states in proportion to their population. The fund was first to be carved into portions for the several states and then within each state applied to improvements under the concurrent authority of Congress and the legislature. Clay and Calhoun and others pointed out that this would make it very difficult to secure the construction of projects of national importance, citing as a favorite example the canal around the Falls of the Ohio which would be of more benefit to states up and down the

38

ERA OF N A T I O N A L PROJECTS

river t h a n to K e n t u c k y . Y e t they could secure only the p r o v i s o t h a t a s t a t e m i g h t , if it wished, ask Congress t o spend its s h a r e of the f u n d within the b o r d e r s of a n o t h e r state. 3 0 I n the end the bill failed because of P r e s i d e n t Madison's v e t o ; b u t the m e a s u r e , which he considered beyond the powers of the federal government, would in a n y case have given i t too little a u t h o r i t y f o r the syst e m a t i c n a t i o n a l p l a n n i n g called f o r in G a l l a t i n ' s R e p o r t .

The

same limitation, moreover, was acceptable t o most of those who tried, unsuccessfully, t o c l a r i f y the government's powers i n t e r n a l improvements by the process of c o n s t i t u t i o n a l

over

amend-

ment. 3 1 Meanwhile the N a t i o n a l R o a d , on which c o n s t r u c t i o n h a d continued even d u r i n g the w a r , reached the Ohio a t Wheeling in 1818 a n d began a t once t o c a r r y s u b s t a n t i a l traffic. 3 2 T h e acts a d m i t t i n g I n d i a n a , Illinois, a n d M i s s o u r i t o s t a t e h o o d all contained

pro-

visions similar t o those of the Ohio A c t and seemed to a s s u r e its extension. B u t this e n t e r p r i s e also, as its historian "swung . . .

on

a

swaying

constitutional

rope."

33

remarked, In

1822,

M o n r o e vetoed a m e a s u r e a u t h o r i z i n g the government to establish toll g a t e s a n d collect revenue f o r its maintenance. W i t h o u t such power there could be little p r o s p e c t of its continuance a n d o p e r ation as a fully n a t i o n a l work. New p r o j e c t s were slow t o win s u p p o r t in spite of the f a v o r a b l e circumstances cited b y Calhoun. As S e c r e t a r y of W a r , he p r e sented in 1819 a comprehensive p l a n of improvements, similar t o Gallatin's, b u t added p r o j e c t s f u r t h e r to the west, and b u t t r e s s e d it with f o r c e f u l a r g u m e n t s on both military and developmental g r o u n d s . A H o u s e committee in 1822 a p p r o v e d a bill e m b o d y i n g these recommendations.

An

important

step

toward

the

more

orderly consideration of improvement p r o j e c t s was taken in the General Survey A c t of 1824, which i n s t r u c t e d the P r e s i d e n t to a r r a n g e f o r surveys of the r o u t e s of canals and r o a d s of n a t i o n a l importance.

34

As a r e s u l t , the r e p o r t s of the U n i t e d S t a t e s C o r p s

of E n g i n e e r s and its B o a r d of I n t e r n a l I m p r o v e m e n t began

to

ERA OF NATIONAL PROJECTS

39

play an important part in the discussions in the House and Senate and in their respective committees on Roads and Canals. The persistent efforts of the sponsors of the Chesapeake and Delaware Canal won their first success early in 1825, and a subscription to its stock was approved by Monroe on his last day in office. The inauguration of John Quincy Adams appeared to be the sign for more vigorous action. His first annual message asked the Congress to consider "the general principle" of internal improvement "in a more enlarged extent." The federal government should carry out "works important to the whole . . . and to which neither the authority nor the resources of any one State can be adequate." Impartial and scientific judgment in the selection of objects would be provided by the Board of Engineers for Internal Improvement. "The swelling tide of wealth" from the sale of public lands would be "made to reflow in unfailing streams of improvement from the Atlantic to the Pacific Ocean." 35 W i t h the inclusion of the ideas of the great revolving fund and of the planning agency, this may indeed be taken as the most "enlarged" expression of the philosophy of internal improvements as a national system. Charles F. Mercer, who was chairman of the House Committee on Roads and Canals and already well known for his part in creating the Virginia system of internal improvements, introduced a set of resolutions which proposed to set aside a fund for internal improvements and to devise a system of rules for its impartial and judicious application. T o aid Congress in the selection of objects an enlarged Civil Engineer Corps was to be set up within the Army Engineers to "gather information on the susceptibility of the United States to improvement by roads, canals and railways" and also to supervise the work itself. The progress of all internal improvement was to be recorded in the Census. 36 Positive action took the form of aid to specific projects. One method adopted was that of land grants to individual states: to Ohio for the construction of a turnpike from Columbus to Sandusky

40

ERA OF NATIONAL P R O J E C T S

on Lake E r i e ; to Indiana for a road the length of the state from Lake Michigan to the Ohio River, and also for a canal from the Wabash River to Lake E r i e ; and to Illinois for a canal to connect the Illinois River with Lake Michigan. All these could be thought of as westward extensions of the Gallatin plan, linking the commerce of the Lakes and the E r i e Canal with t h a t of the Mississippi system; and the proposal to make the short connection a t Chicago had long been the subject of congressional eloquence on the creation of a "circumnavigation" of the United States. 3 7 Three of these measures set the i m p o r t a n t precedent of g r a n t i n g alternate sections of land in strips along the improvement, with the remaining half reserved f o r the United States. 8 8 Federal public works were authorized by the passage in 1824 of the first river-improvement bill and the first harbor-improvement bill, the latter following earlier precedents in lighthouse construction. Two years later the Congress adopted the first of the long series of combined "rivers and h a r b o r s " measures. Principal reliance, however, was placed on the method of subscription to the stock of improvement companies. This was generally accepted as meeting the constitutional difficulty, since the company's powers were derived from a c h a r t e r granted by the state. This method, moreover, appeared to require smaller a p p r o p r i a t i o n s ; and the prevailing opinion was t h a t the government's money would be spent more wisely if the judgment and zeal of the private investor were also involved. In this way, as a Senate committee had argued, the government was less likely to "become engaged in impracticable p r o j e c t s for improvement" and more certain of "the economical expenditure of the funds." 39 A second subscription was made to the stock of the Chesapeake and Delaware Canal, and two subscriptions each were made to the Dismal Swamp Canal Company and to the Louisville and P o r t land Company which was to make the improvement a t the Falls of the Ohio. In May, 1828, Congress a p p r o p r i a t e d a million dollars for the greatest of the proposed improvements—the

ERA OF NATIONAL PROJECTS

41

Chesapeake and Ohio Canal—the heir of Washington's Potomac Company. In this case, the federal government was the largest stockholder, and state and municipal subscriptions outweighed those of private investors. 40 The President took great satisfaction in turning the first earth for the canal on the Fourth of July. 4 1 B y the close of Adams' administration these four undertakings, each a part of Gallatin's original plan, had received the following appropriations: Chesapeake and Delaware Canal Company Ixjuisville and Portland Canal Company Dismal Swamp Canal Company Chesapeake and Ohio Canal Company

$300,000 Approved March 3 , 1 8 2 4 150,000 March 2, 1829 May 13, 1826 100,000 March 2 , 1 8 2 9 135,000 180,000 May 18, 1826 60,000 March 2 , 1 8 2 9 1,000,000 May 24,1828

T h e three smaller canals were almost completed, the large one j u s t begun. The National Road had been built across the mountains and into Ohio, but the federal government could not collect tolls and operate it as a turnpike. Something more than two million dollars for the Road, less than two million in stock subscriptions, and land grants which were ultimately to amount to some 2,500,000 acres—these had been the tangible contributions of the federal government to internal improvements. The prospects were decisively changed by the election of Andrew Jackson to the presidency. The principal announcement of new policy was the famous Maysville Road veto of May 27, 1830. The measure proposed a subscription of $ 1 5 0 , 0 0 0 to the stock of a company which was to build a sixty-mile turnpike. Though it was to continue the line of Zane's T r a c e , the road itself was to be wholly within the single state of Kentucky. I t was therefore easv for the President to describe it as " a measure of purely local character . . . conferring partial instead of general advantages" and bearing "no relation to any general system of improvement." The organization of the project, moreover, made it vulnerable to the charge that it represented an expedient for saddling upon the government " t h e losses of unsuccessful private spec-

ERA OF NATIONAL PROJECTS

42

u l a t i o n . " I t m a y be said t h a t J a c k s o n was in effect condemning the Maysville p r o j e c t precisely on t h e g r o u n d t h a t it did n o t meet the specifications laid down by G a l l a t i n . B u t p r o j e c t s which did meet these specifications f a r e d no b e t t e r . A f u r t h e r a p p r o p r i a t i o n f o r t h e Louisville a n d P o r t l a n d C a n a l received a p o c k e t veto. 4 2 T h e f e d e r a l government withdrew f r o m l e a d e r s h i p in the a f f a i r s of the Chesapeake a n d Ohio C a n a l C o m p a n y , a n d C o n g r e s s refused all its petitions f o r f u r t h e r aid. 4 3 A p p r o p r i a t i o n s continued f o r the extension of the N a t i o n a l R o a d ; b u t its completed p o r t i o n s were handed over to the s t a t e s of Ohio, P e n n s y l v a n i a , M a r y l a n d , a n d Virginia, which could exercise the powers of o p e r a t i o n and m a i n t e n a n c e denied to the federal government u n d e r the p r e v a i l i n g c o n s t i t u t i o n a l doctrine. R e f e r r i n g t o internal improvements in his Farewell Address, J a c k s o n boasted t h a t he h a d "finally overt h r o w n . . . this plan of u n c o n s t i t u t i o n a l e x p e n d i t u r e f o r the p u r p o s e of c o r r u p t i n f l u e n c e " ; 4 4 a n d the E r a of N a t i o n a l P r o j ects m a y be t h o u g h t of as ending in his a d m i n i s t r a t i o n . T h i s does not mean t h a t all f o r m s of f e d e r a l aid t o t r a n s p o r t a t i o n were completely a b a n d o n e d . T h e N a t i o n a l R o a d continued to be built westward a t n a t i o n a l expense until the m i d - c e n t u r v , r e a c h i n g Vandalia, then the c a p i t a l of Illinois, b u t it never extended to the Missouri b o r d e r . F e d e r a l a p p r o p r i a t i o n s f o r construction

and m a i n t e n a n c e of the seven-hundred-mile

reached a t o t a l of nearly $ 7 , 0 0 0 , 0 0 0 ;

45

highway

b u t its c h a r a c t e r as a

fully n a t i o n a l improvement h a d been lost, a n d the final sections were ultimately ceded t o I n d i a n a

and Illinois. M i l i t a r y

built t h r o u g h the t e r r i t o r i e s c o n t r i b u t e d to economic

roads

develop-

ment as well as t o defense. A p p r o p r i a t i o n s f o r rivers a n d h a r b o r s improvement increased until 1838 and continued

intermittently

a f t e r t h a t date. 4 6 T h e A r m y E n g i n e e r s expanded t h e i r activities n o t as central p l a n n e r s b u t as a service agency f o r these federal p r o j e c t s and also f o r m a n y s t a t e and p r i v a t e u n d e r t a k i n g s . As F o r e s t Hill has shown, t h e y c o n t r i b u t e d to the

transportation

development of the time a l a r g e s h a r e of the scarce a n d indispensable f a c t o r of engineering skill. 47

ERA OF N A T I O N A L PROJECTS

43

Yet the negative decisions, though never officially stated in precise terms, were in their broad lines unmistakable. The national government might aid transportation

in various

ways

which

returned no direct income, but it must refrain from building revenue-producing public works. It was not to construct roads and canals on which tolls were to be collected. I t was not to subscribe to the stock of improvement companies. Most certainly, it was not to undertake the burden and the responsibility of a comprehensive and scientifically planned system of national improvements. "Posterity," said one congressional debater, would find it difficult to "credit" or understand the success of the opponents of federal action, especially considering "the enlightened period in which we live, and the spirit of universal improvement."

48

Why,

then, had the government carried out so small a part of Gallatin's ten-year plan in the twenty years between its presentation and the election of Jackson? And why had the opponents of the program then prevailed? The explanation clearly does not lie in the competition between public and private enterprise. The issue as debated in these early decades of the Republic bears little analogy to the present-day controversy as to whether the federal government or a great utility company should develop the hydroelectric power of Hell's Canyon. Most participants in the debate took it for granted that it was desirable to leave to private enterprise the things which it could accomplish, but few or none believed that this included major improvements like those comprised in the Gallatin plan. Though many considered that the willingness of private investors to share in the cost was a good criterion for the soundness of government-aided projects, it was only rarely argued that the works themselves should be put off until "industrious and careful people" were ready to build them entirely with their own money "for a reasonable profit." 49 T h e basic individualism of the country had its most direct effect on the federal improvements program through the reluctance of both the leaders and the people to sanction

ERA O F N A T I O N A L

44

substantial

taxation.

Appropriations

PROJECTS t h e r e f o r e were h a r d

to

secure, and the same f a c t o r had some influence on the choice of the method of action which was s u b j e c t t o a t t a c k as "stockj o b b i n g " and as a d e g r a d i n g association between the government and g r o u p s of its own citizens. On this point J a c k s o n i a n opposition was based on a desire to keep business out of government —if the modern p h r a s e can be a p p l i e d — r a t h e r t h a n a desire to keep government o u t of business. Certainly the small and s t r u g gling road and canal companies of the time were more likely to be found petitioning f o r federal aid, as in the Maysville case, than complaining a g a i n s t federal competition. 5 0 T h e real issue was between national and s t a t e action. T h i s was clear in the constitutional debates which filled so m a n y p a g e s in the Annals

of Congress

and in the works of later historians. In

these the issue turned solely on the powers given by the Constitution to the federal and s t a t e governments respectively and not a t all on the rights of private individuals and c o r p o r a t i o n s . Advocates of federal action made elaborate a t t e m p t s to find j u s t i fication

in various powers enumerated in the document, and on

many occasions presidents or legislators professed themselves to be in s y m p a t h y with the purposes of the measures proposed b u t unable to accept the arguments f o r their c o n s t i t u t i o n a l i t y . Behind the subtleties of i n t e r p r e t a t i o n there was no doubt a deep-seated reluctance to strengthen the powers of the general government and to increase the amount of "executive p a t r o n a g e . " Modification or looser construction of the constitution in one field was sometimes opposed for f e a r t h a t it might make it easier to extend federal powers in other fields and even—as was occasionally s u g g e s t e d — t o such an extreme as the emancipation of the slaves. 51 Y e t it is difficult f o r a modern student to believe t h a t the constitutional issue, f o r all the passion with which it was contested, was in f a c t the decisive one. F o r many y e a r s the method of stock subscription satisfied the constitutional scruples of most of the legislators. T h e r i g h t to go f a r t h e r and to create a fully national system of improvements

ERA OF NATIONAL PROJECTS

45

could have been secured by constitutional amendment. If there had been a great positive demand for a federal program, it would be hard to understand why more was not accomplished under the former method and why the advocates of improvement did not make a more serious attempt to amend the constitution. The lack of compelling popular pressure on behalf of a national program was in p a r t due to a belief that the states were themselves well equipped to carry out the essential improvements. Jackson argued that public funds for the purpose would be "more judiciously applied and economically expended under the direction of the State legislatures." 52 The advantages of state action were described by the enthusiasts who contributed articles on internal improvements to the North American Review: The compass of each state is sufficiently narrow, and its legislative power sufficiently diffused, to render knowledge of its internal condition, wants, and resources easily attained. . . . Scarce any object of public utility is beyond the grasp of the resources of the single states; so that, after all, the care of individual objects of public improvement is put into the hands of those most sure to be benefited by them.53 These arguments were used again and again by congressional orators, and acquired particular force when it became possible to compare New York's success with the Erie Canal with the federal government's slow progress with the Cumberland Road. 54 In the defeat of the federal program, however, the conflicts of state and sectional interests seem to have played a larger p a r t than either the belief in states' rights or any positive faith in the states' capacities. Throughout the debates these rivalries stood in the way of the adoption of specific measures or agreement on a general program. One Maryland congressman declared that Pennsylvania seemed more inclined "to put a mountain in the middle of the Cumberland road than to repair it," and another saw his enemies in another direction when he complained that scarcely a single vote from the "southward and westward of the Potomac" had been cast in favor of the Chesapeake and

46

ERA OF NATIONAL PROJECTS

Delaware Canal. 55 More frequently, internal improvements appeared as a demand of the West. They were often urged as an aid to western agriculture, "cheapening the carriage of its heavy products," and as an offset to the favors already given to eastern commerce and manufactures. There was even, warned Congressman Porter, danger of revolt if the people of the W e s t came to believe that Congress "can constitutionally create banks for the accommodation of the merchant but cannot construct canals for the benefit of the farmer."

56

Still another alignment divided states which had already spent substantial sums on improvement from those which had not done so. The New England states belonged to the former group. New York and Pennsylvania, on main routes to the West, were at first eager for federal assistance and willing to support broad programs of action. A f t e r their demands had been rejected, and they had built their own improvements at heavy cost, their representatives were understandably more reluctant to vote appropriations for the projects of other states. 5 7 Adams's charge that the national program was overthrown by what he called "the Sable Genius of the South" is therefore a great over-simplification. There were other cleavages besides that between North and South to make agreement difficult. Calhoun in his W a r Department days and Mercer of Virginia were as strong adherents of a fully national system of improvements as were Gallatin of western Pennsylvania or Adams of Massachusetts or Clay of the border state of Kentucky. Y e t as the debate continued, the most implacable opposition to a national program came from the South. For this there were obvious explanations both in the geographic setting and in alignment of

political

forces. The greatest of the improvements, in Gallatin's Report and in subsequent action, were those designed to overcome the A p p a lachian Barrier. Their function was to provide trade connections between E a s t and West. They brought little benefit to the southern states and to the Lower South, none at all. Without such inter-

ERA OF NATIONAL

PROJECTS

47

vention, on the other hand, the rivers would serve to carry western produce to the South and southern cotton to the sea. T o the political explanation, Adams's own phrases provide the clue. He speaks of the South as "cursing the tariff and internal improvements."

58

Protection to manufactures was clearly inimical

to the interests of the South as a region exporting agricultural products. The tariff was linked to internal improvements as a principal source of the funds from which they might be constructed and—more important—as an element in the American System of Henry Clay which offered tariff protection to the E a s t and internal improvements to the West. Since success in the creation of an E a s t - W e s t alliance on such a basis would obviously threaten the political position and influence of the slaveholding states, it is not surprising to find a stiffening of southern opposition to both elements in the program. Resort to national action had been advocated by those who feared that state and local conflicts of interest would prevent the construction of needed improvements. T h e effect, they thought, would be to place decisions in the body "in whose councils a local or partial spirit is least likely to predominate." 8 9 B u t in the Congress, state and regional differences were from the beginning too great to permit agreement either on a broad national program or on a large number of individual projects. As the lines of sectional controversy hardened, the possibility of such agreement became still more remote. 60 In 1837, lamenting the fall of the program of "internal improvements by means of the national energies," Adams wrote: With this system in ten years from this day the surface of the whole Union would have been checkered over with railroads and canals. It may still be done half a century later and with the limping gait of State legislature and private adventure.81 Even by the close of the E r a of National P r o j e c t s , "private adventure" was hardly strong enough to claim more than a junior partnership in the larger projects. In default of national action,

48

ERA OF N A T I O N A L

PROJECTS

leadership in internal improvements passed to the states and in some cases to c i t y governments. I t is therefore necessary to turn to the field of state and local action to see what p r o g r e s s , " l i m p i n g " or otherwise, was made in breaching the A p p a l a c h i a n B a r r i e r and in building the essential network of t r a n s p o r t a t i o n .

THE EMULATION OF STATES AND CITIES 1815-1861

. . . an example to other states worthy of emulating enterprise. James Madison on the completion of the Erie Canal, 1825

The true spirit of Internal Improvement is abroad in the West. American Railroad Journal, 1836

3 THE

APPALACHIAN

COMPETITION

W i t h the federal g o v e r n m e n t l a r g e l y o u t of the field, the emulation of s t a t e s a n d cities became the most conspicuous f e a t u r e of t h e movement f o r i n t e r n a l improvement. T h e advocates of r o a d s a n d canals, and soon of r a i l r o a d s , pushed their p r o j e c t s in every s t a t e and in almost every locality. Some of these followed c o a s t a l routes, m a n y were of n a r r o w l y local c h a r a c t e r , and o t h e r s were directed t o w a r d the o p e n i n g of the W e s t . These l a s t were of the g r e a t e s t general i n t e r e s t , a n d until the middle of the nineteenth c e n t u r y the leading o b j e c t of i n t e r n a l improvement continued to b e — a s in the G a l l a t i n R e p o r t — t h e p a s s a g e or the t u r n i n g of the A p p a l a c h i a n B a r r i e r . T h e direct c o n t r i b u t i o n s of the

national

government t o w a r d this goal h a d been the c o n s t r u c t i o n of t h e Cumberland R o a d a n d the million-dollar subscription to the Chesapeake a n d Ohio C a n a l C o m p a n y . S t a t e efforts t o overcome the b a r r i e r had begun b e f o r e the f e d e r a l government withdrew, a n d the work continued u n d e r a g r e a t v a r i e t y of s t a t e , local, a n d p r i v a t e auspices. I n the competition f o r " t h a t i n t e r e s t i n g p r i z e , " the commerce of the W e s t , 1 a t t e m p t s were made to develop each of t h e five routes described b y G a l l a t i n : the o p e n i n g in the N o r t h p r o v i d e d by the valleys of the H u d s o n a n d t h e Mohawk a n d the f o u r p a i r s of e a s t e r n and western rivers. T h e first r o u t e belonged t o New Y o r k S t a t e and the S u s q u e h a n n a - A l l e g h e n y connection t o P e n n -

52

APPALACHIAN

COMPETITION

sylvania. T h e P o t o m a c g a t e w a y , t h r o u g h which both the federal p r o j e c t s h a d been directed, became p r i n c i p a l l y the concern of the s t a t e of M a r y l a n d and the city of Baltimore. T h e J a m e s and Kanawha

Rivers lay within the boundaries

of

Virginia.

The

b r e a c h i n g of the b a r r i e r of the S o u t h e r n A p p a l a c h i a n s to reach the u p p e r w a t e r s of the Tennessee was the objective of

ambitious

p r o j e c t s of S o u t h Carolina and the city of C h a r l e s t o n , a n d t o a lesser degree of N o r t h Carolina. T h e a l t e r n a t i v e t u r n i n g of the b a r r i e r a t its s o u t h e r n end was to be the accomplishment of the s t a t e of Georgia. T h e first and g r e a t e s t success in these competing e f f o r t s was m a d e by the n o r t h e r n m o s t of these routes. E v e n before 1800, the W e s t e r n I n l a n d Lock N a v i g a t i o n C o m p a n y , following the old Oswego r o u t e of the f u r t r a d e r s , had accomplished an i m p e r f e c t connection between the Mohawk River a n d streams flowing into L a k e O n t a r i o . T h e c o m p a n y , however, h a d long since r u n out of f u n d s , and the u n d e r t a k i n g which replaced it differed in three m a j o r respects. I n the first place, it was to be a fully independent c a n a l r a t h e r t h a n a set of river improvements with s h o r t canals a t the m a j o r obstacles. In the second place, it was to be a single " g r a n d c a n a l " extending all the way to L a k e E r i e instead of two much s h o r t e r canals, one to Lake O n t a r i o and the o t h e r a r o u n d N i a g a r a , as p r o j e c t e d in the G a l l a t i n R e p o r t .

Though

this innovation seemed so shocking to the 1808 L e g i s l a t u r e t h a t it was unwilling t o give explicit a p p r o v a l even f o r a survey of the p r o p o s e d

route, and t h o u g h m a n y observers a g r e e d

P r e s i d e n t J e f f e r s o n t h a t the idea of a canal e x t e n d i n g

with three

h u n d r e d and fifty miles t h r o u g h the wilderness was a c e n t u r y ahead of its time, the final decision was the bold one, to s t r i k e directly t o L a k e E r i e to win the t r a d e of the u p p e r lakes and the American West.2 T h e t h i r d decision was t h a t an u n d e r t a k i n g of such m a g n i t u d e must be carried on as a public work r a t h e r t h a n b y

private

APPALACHIAN COMPETITION

53

initiative with state aid and participation. I t was at first not clear that this would be by New Y o r k State alone. Canal commissioners appointed under an act of 1810 attempted to enlist the cooperation of the federal government and of other states that would benefit from the canal. From the states they received nothing more tangible than resolutions of encouragement. Of federal aid, they had high hopes on two occasions—on the eve of the W a r of 1812 and again at the time of the Bonus Bill, which would have brought to the state $1,500,000. The Bill was vetoed by President Madison on March 3, 1817. On April 15, the New Y o r k Legislature, acting, it was said, "under the scoff and hiss of [ t h e ] general government," 8

adopted a measure providing

for

the

building of the canal on the sole responsibility of the state. This act authorized the Canal Commissioners to begin the construction of the middle portion of the Erie Canal, from the Mohawk to the Seneca River, and also of the Champlain Canal, following the route of the old Northern Inland Lock Company, from the Hudson to Lake Champlain. As the basis f o r these and subsequent efforts, it established a permanent Canal Fund which was to obtain its income from three main sources: first, by the earmarking of certain state revenues (taxes on salt manufacture and steamship passages, and part of the proceeds of lotteries and auction duties); second, by borrowing on the credit of the state; and, eventually by the collection of tolls on the canals themselves.4 The first earth was turned on July 4, 1817. On the 4th of November, 1825, Governor De W i t t Clinton, who had from 1810 to 1824 been the leading spirit among the Canal Commissioners, celebrated the opening of the canal by pouring into the Atlantic a keg of water from Lake Erie. The historian of the celebration summarized the achievement in the following words, setting them in full capitals: " T h e y have built the longest canal in the world in the least time, with the least experience, for the least money, and to the greatest public benefit." 6 I f one may disregard the canals

54

APPALACHIAN

COMPETITION

of a n c i e n t China, these superlatives a r e a f a i r l y sober measure of w h a t h a d been accomplished b y the a g e n t s of a s t a t e whose p o p u l a t i o n was little more t h a n a million when the work began. W i t h o u t professionally t r a i n e d e n g i n e e r s — B e n j a m i n W r i g h t and J a m e s Geddes, the two p r i n c i p a l engineers h a d each been lawyer, j u d g e , a n d s u r v e y o r — t h e y h a d devised methods of canal-building a n d c o n t r a c t i n g t h a t were to be followed in m a n y other undertakings. T h e y h a d c o n s t r u c t e d 3 6 3 miles of c a n a l , much of it t h r o u g h unsettled c o u n t r y , f o r a little more t h a n $7,000,000. T h e r a i s i n g of this money itself involved innovation. B o r r o w i n g s d u r i n g the e a r l y y e a r s were relatively small. As N a t h a n Miller has shown, s u b s c r i p t i o n s t o the first loans were made almost entirely by citizens of the s t a t e and f o r the most p a r t in modest amounts. B u t when the financial success of the canal was foreshadowed by the collection of s u b s t a n t i a l tolls as soon as the middle section was opened f o r traffic, the securities became a t t r a c t i v e t o l a r g e r investors in New Y o r k City a n d then in L o n d o n . T h e b i g g e r issues of the l a t e r y e a r s were l a r g e l y m a r k e t e d a b r o a d , and by 1829 more t h a n half of the o u t s t a n d i n g c a n a l d e b t was held by foreigners. 6 As f o r " p u b l i c benefit," p a r t of the evidence lies in the returns.

The

$7,000,000

canal

collected

$1,000,000

financial in

tolls

before it was open f o r p a s s a g e f r o m end to end. F r o m the time of completion t o n n a g e on the c a n a l began t o rival t h a t of the entire Mississippi system. O p e r a t i o n showed a s u b s t a n t i a l p r o f i t f r o m the beginning. B y 1836, a f t e r two r e d u c t i o n s in the r a t e of tolls, the s u r p l u s f r o m the C a n a l F u n d was g r e a t enough to p r o vide f o r p a y m e n t of the entire debt incurred f o r the c o n s t r u c t i o n of the E r i e a n d Champlain Canals. H a l f of this surplus, to be sure, h a d come f r o m the c o n t r i b u t i o n s of t h e salt and auction duties, 7 b u t the a n n u a l excess of tolls over expenditures on the two canals was now over $1,000,000. F r o m this time on these t a x revenues reverted to the general f u n d , and beginning in 1835 the

APPALACHIAN COMPETITION

55

legislature made a substantial levy on the canal tolls for the general purposes of the state. Still more important was the effect on economic development. The force of the impact may be suggested by the often-cited f a c t that the cost of shipping a ton of wheat or flour from Buffalo to New York City fell a t once from one hundred to ten or twelve dollars. Now for the first time settlers in the American W e s t could ship heavy and bulky produce overland to the E a s t r a t h e r than down the Mississippi or perhaps the S t . Lawrence, and the basis was laid for the increasingly significant exchange of eastern manuf a c t u r e s for the products of western agriculture. The stimulus to the commerce of New York C i t y , to the growth of cities along the canal route, and to the spectacular development of the old Northwest, a s well as the canal's service as a g r e a t channel of westward migration, have been often noted. 8 Its opening, indeed, may be regarded as the most decisive single event in the history of American transportation. B u t the story of the New Y o r k S t a t e ' s public effort in improvement by no means ends with the construction of the original Erie Canal, and some of the later chapters a r e much less triumphant. An immediate effect of the Erie's success was to stimulate public demand for more and more canals. A law of 1825 authorized surveys for no less than seventeen other routes. The Champlain Canal had been completed two y e a r s before the Erie, a t a cost of about $1,000,000, and was doing a profitable business. The branch to L a k e Ontario, by the Oswego Canal, was finished in 1828 and a t t r a c t e d substantial tonnage, which some thought was at the expense of the western division of the Erie itself. In the same y e a r s the C a y u g a and Seneca Canal connected these two lakes with the main system, and five y e a r s later the Crooked L a k e Canal extended the connection to L a k e Keuka. During the thirties two southern laterals were constructed, each extending to the waters of the Susquehanna and intended to connect with the Penn-

56

APPALACHIAN

COMPETITION

sylvania c a n a l s y s t e m — t h e Chemung f r o m L a k e Seneca t o E l m i r a , a n d t h e C h e n a n g o f r o m U t i c a t o B i n g h a m t o n . T o w a r d t h e end of the decade, work was s t a r t e d on a t h i r d southern l a t e r a l , the Genesee Valley, t o be built f r o m R o c h e s t e r t o Olean on the Alleg h e n y , a n d on a n o r t h e r n l a t e r a l , the B l a c k River, to serve the f a r m i n g c o u n t r y west of the A d i r o n d a c k s a n d the timber t r a d e of the m o u n t a i n s and t o b r i n g a supply of w a t e r to the main c a n a l . I n a d d i t i o n , it h a d become evident t h a t the E r i e C a n a l itself m u s t be made l a r g e r a n d more efficient in order t o h a n d l e t h e c o n t i n u a l increases in the volume of traffic, and to meet the competition f r o m other s t a t e s " a n d especially the provinces of Canada."

9

A p r o g r a m of enlargement, which eventually was to

cost more t h a n f o u r times t h e original investment, was accordingly a u t h o r i z e d by the legislature in 1835. N o r were these the only efforts t o w a r d internal improvement. T h e D e l a w a r e and H u d s o n C a n a l , p r o j e c t e d by a p r i v a t e comp a n y t o c a r r y a n t h r a c i t e f r o m the P e n n s y l v a n i a coal fields t o the H u d s o n a t K i n g s t o n , was completed in 1829 with the aid of s t a t e loans of $ 8 0 0 , 0 0 0 and became highly profitable. Assistance on a similar basis was given t o a number of r a i l r o a d companies. L i t t l e of this went to the series of short lines p a r a l l e l i n g the " w a t e r level r o u t e " of the E r i e C a n a l ; indeed, the s t a t e f o r some time acted t o p r o t e c t its own e n t e r p r i s e f r o m their competition by f o r b i d d i n g the c a r r i a g e of f r e i g h t or p e r m i t t i n g it only d u r i n g the closed season of the C a n a l and on p a y m e n t of canal tolls. 1 0 I n s t e a d , the l a r g e s t a m o u n t of aid went t o the New Y o r k and E r i e R a i l r o a d , which was t o cross the s t a t e by a s h o r t e r r o u t e b u t over r o u g h e r t e r r a i n t h r o u g h a region almost devoid of m a j o r settlements. I n this case the a r g u m e n t s f o r assistance r a n l a r g e l y in terms of j u s t i c e to the people of a region which received little benefit f r o m the canal system of the s t a t e . A loan of $ 3 , 0 0 0 , 0 0 0 was made under legislation of 1836 and 1839. I n the l a t e thirties and e a r l y forties, the s t a t e also aided ten other r a i l r o a d companies to the extent of a little more t h a n $2,000,000. In these cases

APPALACHIAN COMPETITION'

57

its experience ranged from that of the Catskill and Canajoharie, which never built its road and cost the state more than $350,000, to those of six railroads whose loans were promptly repaid. 11 The expansion of this program received an abrupt check at the beginning of the forties. The state was in financial difficulty and its improvement securities, which before had commanded premiums, could not be sold except at a discount. The $3,000,000 loan for the Erie Railroad yielded the company less than $2,600,000. This was partly because of the depression following the crisis of 1839 and partly because of the amount of expenditures and commitments that had already been made. The Oswego Canal and the other early branch and lateral canals had cost more than $3,500,000. The railroad commitments were another $5,000,000. It was estimated in 1840 that three works already authorized and begun, the Erie Canal enlargement and the Genesee and Black River laterals, would cost no less than $30,000,000. The state debt, which was under $7,000,000 in 1837, rose to nearly $27,000,000 in 1842. In the meanwhile, faith in the prospects of the canal system, formerly so unbounded, had been weakened by the formidable competition of the railroads. On the other hand, the activities of the lobbyists for the railroad companies, whom one politician described as "asking the legislature to give them leave to thrust their hands up to the elbows into the public treasury,"

12

provided an argument against further aid to railroads.

In 1840 Governor Seward pointed out that continuation of canal expenditures during the depression had aided the economy of the state; but he argued that any new loans should be based solely, as before, on "the existing and anticipated revenues of the canals . . . since taxation for internal improvement deservedly no advocate among the people."

13

finds

Under these circumstances,

the legislators, who had been counting on the surplus of canal tolls to meet a large proportion of the current expenses of the state, were far from willing to reverse the position and place sound fiscal supports under a program of further development.

58

APPALACHIAN

COMPETITION

T h e new policy of retrenchment was embodied in the " s t o p law" of 1842 and in the constitution of 1846. T h e former ordered a cessation of construction on all the canals, except the most necessary repair and maintenance, and imposed a statewide property tax, for the first time since 1827, to replenish the general and canal funds. The constitution provided t h a t the system of public canals, including the two unfinished laterals, must not be disposed of by the state. On the other hand, it placed a heavy burden on their receipts. Charges of $1,850,000 per year, subject to increase under certain conditions, were levied against the canal revenues-—for sinking funds f o r the debts on the original and lateral canals and on the state's railroad loans, and f o r a contribution of $200,000 to the current expenses of the s t a t e — before any of the receipts could be spent for f u r t h e r construction. Moreover, no new debts of more than $1,000,000 were to be incurred except a f t e r a popular referendum. Still more decisive was the change in policy with respect to state aid. By unanimous vote the delegates to the constitutional convention adopted a provision prohibiting f u r t h e r state loans to private corporations. Yet the revulsion against internal improvements was neither complete nor permanent. Local government s u p p o r t of railroads began in 1837 and continued during the depression years. The most important of the early cases were those of the rival cities of T r o y and Albany. In the effort to establish itself as the Hudson River terminus for traffic from the W e s t , T r o y built the Schenectady and T r o y Railroad a t a cost of $700,000 and operated it as a municipal enterprise. When this was completed in 1842, the city of Albany countered by pledging $250,000 in aid to the Mohawk and Hudson. T r o y ' s road was well constructed but failed to secure the traffic and was finally sold at a heavy loss. Both roads were eventually absorbed by the New York Central, but the Mohawk and Hudson became the main line. Albany thus won the competitive victory, and it emerged without financial loss both on this commitment and on its earlier loan of $1,000,000 to the

APPALACHIAN

COMPETITION

59

Albany and W e s t Stockbridge for a road to the Massachusetts line. Less successful were the ten cases of local railroad investment in the fifties, which totalled $ 1 , 2 7 5 , 0 0 0 . More than half of this represented another costly venture of the city of T r o y , in the stock of the T r o y Union; and the others were smaller investments in railroad stock, all but one of which proved financially worthless. 14 Though new state aid to private enterprise was forbidden by the constitution of 1 8 4 6 , a conditional obligation to the Erie Railroad assumed by legislation of the preceding year involved the state in substantial additional expenditure. Under this act, completion of the road to Dunkirk on Lake Erie in 1 8 5 1 resulted in cancellation of the original loan of $ 3 , 0 0 0 , 0 0 0 and assumption by the state of interest payments on the company's other bonds, which came ultimately to more than an additional $ 3 , 0 0 0 , 0 0 0 . Meanwhile, with the return of prosperity and with the continuing increases in Erie Canal traffic and revenue, investment in the state's public works was resumed both on the enlargement and on the two laterals. F o r several years the restrictions of the new constitution were p a r t i a l l y evaded by the sale of "canal revenue certificates" in anticipation of future tolls; and in 1 8 5 4 a $ 9 , 0 0 0 , 0 0 0 loan was approved by popular vote. The Black River lateral was completed in 1 8 5 5 and the Genesee Valley two years later. A private company built the Junction Canal in the mid-fifties, which increased the usefulness of the Chemung lateral by connecting it with the Pennsylvania canal system. On the other hand the state never finished the Chenango Extension which was intended to perform the same service f o r the less successful Chenango lateral. The long delay in constructing the Genesee Canal, on which traffic began to decline even before it was completed to Olean, destroyed whatever possibility it might have had of a period of usefulness ; and the piecemeal progress on the Erie enlargement, not officially completed until 1 8 6 2 , prevented full exploitation of its steadily increasing opportunity. Yet in spite of these

APPALACHIAN' COMPETITION

60

difficulties the operating income on the public works as a whole, which by 1861 had cost the state about $57,000,000, had exceeded the interest on the loans incurred f o r their construction by nearly $27,500,000. 15 A f t e r more than twenty years of vigorous state action

and

another twenty years of more restricted state and local a c t i v i t y , New Y o r k State was served by three main routes to the W e s t . Of these the E r i e Canal remained the most important. T h e public works also included useful connections to Lakes Champlain

and a system of

Ontario

branches and laterals

which

and was

already seen to be overextended. T h e other through routes were railroads. Of these the less f a v o r a b l y located, the E r i e , had twice been rescued by the state f r o m financial distress. T h e second was the New Y o r k Central, which was mainly the work of

private

enterprise. I t was formed in 1853 by the consolidation of a number of short lines which had joined A l b a n y to B u f f a l o as early as 1842 and had made the connection to New Y o r k C i t y , with a f e r r y at Albany, when the Hudson R i v e r Railroad was completed in 1851. Of the Central's main line only one section received public aid. 16 T o these through routes should be added the Delaware and Hudson Canal and a g r o w i n g network of shorter railroads, which had been initiated by p r i v a t e promoters but were often recipients of public aid. A n analysis of public policy must take into account these varied experiences. Possessing what was potentially the best route

to

the W e s t , the state of N e w Y o r k acted p r o m p t l y and decisively, without diversion to side issues, to exploit this m a j o r advantage. T h e E r i e Canal, built as a public work at a time when its scope was beyond the reach of p r i v a t e enterprise, was and remained

the

greatest single triumph of American improvements. T h e innovation included a sound basis f o r approaching the E u r o p e a n money m a r k e t ; 1 7 and the establishment of the Canal Commissioners as a permanent agency permitted the development of orderly cedures of construction

and administration and at least

prosome

APPALACHIAN COMPETITION

61

progress in devising reasonable estimates, not a l w a y s heeded by the legislature, of the costs and benefits of new canals. 1 8 Yet the very success of the Erie Canal tended in certain ways to distort subsequent policy decisions. On the one hand, it encouraged popular demands for building a number of other canals with more dubious economic prospects. On the other hand, the possibility of a p p l y i n g its revenues to general state purposes and thus avoiding t a x a t i o n was so tempting that legislators were unwilling to provide funds for the completion of improvements a t the times a t which they would have yielded the greatest return. Success in exploitation made it difficult to think in terms of the economics of development. In the third place, concern for maximizing the tolls from the Erie Canal led the state to restrict the growth of the competing railroads along its route. Little attempt was made to foresee the respective roles of the rival types of improvement or to provide for their coordinated development. 19 When state and local authorities gave assistance to individual railroad companies, they did so on a piecemeal basis without much relation to the creation of a general network of transportation. A number of other states, as President Madison predicted, found in the Erie Canal "an example . . . worthy of emulating enterprise." 20 T h e y were impressed both by its success as an improvement and by "the revelation that states could borrow in London" for purposes of development. The example proved p a r t i c u l a r l y stimulating to the neighboring commonwealth of Pennsylvania, which had a l r e a d y a considerable background of planning, a g i t a t i o n , and action in internal improvements. A Society for Promoting the Improvement of Road and Inland Navigation, organized as e a r l y as 1789, produced what might be regarded as a Gallatin Plan for Pennsylvania. A series of "memorials" analyzed "the various improvements of which the S t a t e of Pennsylvania is susceptible." One was the "Delaware N a v i g a t i o n , " which would involve " a h a p p y rivalship

62

APPALACHIAN

COMPETITION

between the cities of Philadelphia and New Y o r k . " Others were the improvements of routes f r o m the Delaware and

Susquehanna

valleys across New Y o r k S t a t e to Oswego on L a k e Ontario. Most i m p o r t a n t of all was the western communication with P i t t s b u r g h and Lake E r i e . F o r this last, three possible routes were considered, but the Society's recommendation was an eighteen-mile p o r t a g e between the J u n i a t a t r i b u t a r y of the Susquehanna and the Kiskiminitas b r a n c h of the Allegheny. F o r the execution of such a p r o g r a m of improvements, the Society proposed the a d o p t i o n of "some uniform and consistent p l a n , " with a b o a r d of commissioners as its administrative a g e n t and financial procedures v a r y i n g with the economic circumstances. Wherever possible, " t u r n p i k e r o a d s , or toll n a v i g a t i o n s " should be made by purely p r i v a t e enterprise. On the other h a n d , the necessary work should be done a t the expense of the s t a t e where " t h e smallness of the tolls, the distance from the m a r k e t and other circumstances may yield the least probability of an

adequate

encouragement or speedy reimbursement to the a d v e n t u r e r s . " In intermediate cases, a t the discretion of the board, the s t a t e might encourage p r i v a t e companies either by loans o r by subscription to their stock. 2 1 T h i s plan was never a d o p t e d as a whole, but assistance was given to a number of individual p r o j e c t s . T h e s t a t e ' s first a p p r o p r i a t i o n f o r a turnpike, extended under a law of 1806, was to a company t h a t was building a p a r t of the P i t t s b u r g h Pike. T h i s famous t h o r o u g h f a r e , finished in 1817, competed on equal terms with the Cumberland R o a d , and f o r a number of y e a r s the two were the nation's p r i n c i p a l routes f o r the shipment of m a n u f a c t u r e d goods to the West. 2 2 By 1825, the s t a t e was a stockholder to the amount of a b o u t $1,800,000 in

fifty-six

turnpike

corporations, as compared with p r i v a t e subscriptions of over $4,000,000, and Pennsylvania possessed a system of t h r o u g h roads which it considered u n s u r p a s s e d in the c o u n t r y . T h e s t a t e also held stock of some $180,000 in bridge corporations, as a g a i n s t

APPALACHIAN COMPETITION

63

a b o u t $ 1 , 6 0 0 , 0 0 0 in p r i v a t e subscriptions. On the a r g u m e n t t h a t it would b r i n g the t r a d e of the Susquehanna Valley t o the p o r t of Philadelphia, the L e g i s l a t u r e authorized a subscription of $100,0 0 0 t o the Chesapeake and Delaware C a n a l C o m p a n y , which received smaller sums f r o m the states of M a r y l a n d and D e l a w a r e and $300,000 f r o m the federal government. P e n n s y l v a n i a

also

held investments of $ 1 8 5 , 0 0 0 in three canal a n d n a v i g a t i o n companies o p e r a t i n g within the s t a t e . I n the M o n o n g a h e l a N a v i g a tion, in the western region, the s t a t e held the m a j o r i t y of the s t o c k ; b u t its s h a r e in the Schuylkill N a v i g a t i o n was a b o u t five p e r c e n t of the whole and in the Union C a n a l C o m p a n y a b o u t ten p e r c e n t . By 1825, the l a t t e r c o m p a n y h a d still, a f t e r m a n y delays, n o t quite completed t h e connection between the S u s q u e h a n n a a n d the D e l a w a r e Valleys, f o r which the first surveys h a d been made sixty-five y e a r s before. 2 3 W h e n New Y o r k ' s c a n a l was opened, P e n n s y l v a n i a possessed a s u p e r i o r r o a d connection with the W e s t b u t h a d not

finished

even the first s t r e t c h of a possible w a t e r

r o u t e across the s t a t e . T h e challenge of the E r i e C a n a l h a d a p r o m p t a n d decisive effect on Pennsylvania policy. Advocates of i n t e r n a l improvements drew two morals f r o m the New Y o r k experience: first, t h a t P e n n sylvania and p a r t i c u l a r l y the city of Philadelphia would lose the t r a d e of the W e s t if t h e y did n o t meet the new c o m p e t i t i o n ; and second, t h a t a P e n n s y l v a n i a canal would have similar

financial

success and f r e e the s t a t e f r o m much of the b u r d e n of t a x a t i o n . Few called a t t e n t i o n t o the g r e a t differences in t e r r a i n ; and some claimed t h a t a P e n n s y l v a n i a canal, in spite of the mountains t o be crossed, would be even more profitable t h a n the E r i e because of the s h o r t e r d i s t a n c e t o the W e s t and a longer season free of ice. I n December, 1823, a committee of the legislature cited the a p p r o a c h i n g completion of the E r i e Canal as a m a k i n g it imperative exertion those

financial

f o r Pennsylvania

consideration

" t o b r i n g into

active

and g e o g r a p h i c a l means with which she

is endowed by a b o u n t i f u l C r e a t o r . " I n 1824, commissioners a p -

64

APPALACHIAN'

COMPETITION

pointed to explore routes for a canal from the E a s t to Pittsburgh, reported in favor of the Juniata connection. In the same year, still another society was formed, again following old Philadelphia custom, to assume the leadership of the movement. 24 The Pennsylvania Society for the Promotion of Internal

Improvements

produced an eloquent series of memorials and sent an agent abroad to investigate European canals and railways. T h o u g h this indicated an initial willingness to consider the very new alternative of the railroad, the leading spirits in the Society soon came to the conclusion that it was necessary to close ranks in support of a canal, apparently in the belief that complete unity among advocates of a western connection was needed to obtain action while New York's example was still fresh in the public mind. 2a Largely through the efforts of the Society, an internal improvement convention, organized on a voluntary basis but with delegates from almost every county in the state, was held at Harrisburg in August, 1825. This body, by a large but not unanimous vote, declared itself in favor of "opening an entire and complete communication . . . from the

Susquehanna

to

the

Allegheny

and Ohio, and from the Allegheny to Lake Erie, by the nearest and best practicable route." This, it said, was

"indispensably

necessary to preserve the character and standing of the State." Finally in February, 1826, a few months after the Erie celebrations, the Pennsylvania legislature adopted an act "to provide for the commencement of a Canal, to be constructed at the expense of the State, and to be styled 'The Pennsylvania Canal.' " This measure provided for commencement of the work along the Allegheny and Juniata Rivers. As its title indicates, the plan was for a single canal "for the purpose of connecting the eastern and western waters." But an act passed in the following year, though described as providing "for the further extension of the Pennsylvania Canal," in fact reflected a quite different set of pressures and purposes. The "Main Line" of the east-west connection would, if successful, bring great benefits to Philadelphia,

APPALACHIAN* COMPETITION*

65

to Pittsburgh and to the territory along its route; but other parts of the Commonwealth were no less determined to secure the advantages of public works constructed in their own regions. Though the majority at the Harrisburg convention had urged putting aside "all local objects" in order to permit "an undivided assertion of the public strength," the Main Line advocates found that they could not advance their own undertaking without concessions to win the votes of the supporters of local and regional projects. Accordingly, the law of 1 8 2 7 , while providing for further work on the east-west connection, also authorized the construction of canals on the upper Susquehanna and the Delaware and provided for surveys of nine other projects in the Delaware region and in the upper and lower parts of the Susquehanna Valley. 26 The measure thus resembled New York's great canal law of 1825, with the crucial difference that the latter was passed at the end instead of at the beginning of work on the Erie Canal. A similar relationship continued throughout the history of the program. By 1835, a Main Line of 3 5 9 miles had been completed between Philadelphia and Pittsburgh at a cost of a little over $ 1 2 , 0 0 0 , 0 0 0 , but nearly $6,500,000 had been spent on the construction of 3 1 4 miles of other canals. The Main Line itself consisted of alternate segments of canal and railway. Between Philadelphia and the Susquehanna, use of the recently-completed Union Canal was, on the advice of an officer of the Army Engineers, rejected in favor of a shorter railroad route. For the mountain crossing, once early notions of a great tunnel had been discarded, a canal was recognized to be wholly impracticable. Through travel and traffic therefore required three changes: going from east to west, a f t e r 82 miles of railroad, there were 172 miles of canal along the Susquehanna and Juniata, the 3 6 miles of the Allegheny Portage Railroad, and finally another 1 0 5 miles of canal from Johnstown to Pittsburgh. Inclined planes were used at both ends of the Philadelphia and Columbia Railroad, and a battery of ten

66

A P P A L A C H I A N COMPETITION*

planes was used to g e t t r a i n s u p and down the 2,200-foot summit of the mountain p o r t a g e . On the two railroads, the s t a t e furnished the motive power, but p r i v a t e f r e i g h t carriers provided their own rolling stock. T h u s , if P e n n s y l v a n i a did not have the single canal of the original plan, it m a y be said to have operated its hybrid system as much like a canal as it could. Completed a t a time when there were b a r e l y a thousand miles of railroad in the count r y , the M a i n Line was a remarkable engineering achievement but an equally remarkable operational and economic a n o m a l y . T h e so-called branch or l a t e r a l canals differed among themselves in c h a r a c t e r and purpose. T h e Delaware Division, quite unrelated to the others, was built mainly for the t r a n s p o r t of a n t h r a c i t e coal, like New Y o r k ' s Delaware and Hudson. C a n a l s on the Susquehanna and its north and west branches connected with each other and with the M a i n Line. The Beaver and French Creek divisions in the northwestern p a r t of the state, though not y e t linked up with the rest of the system, reflected the earlv intention to provide a t h r o u g h route to L a k e Erie. F u r t h e r legislation in 1 8 3 6 and 1838 authorized another wave of "branch line" construction, as well as the replacement of the inclined plane a t Columbia on the M a i n Line. The new undert a k i n g s included a North B r a n c h Extension to connect with the c a n a l system of New Y o r k , a n E r i e Extension to complete the route to the L a k e , a n d — s t i l l more ambitious—a W e s t B r a n c h Extension intended eventually to provide a second line across the mountains, on one of the a l t e r n a t i v e routes suggested in the Gallatin R e p o r t . W o r k was also begun on two feeder canals and on the G e t t y s b u r g Extension R a i l r o a d , which was to make connections in M a r y l a n d with the Baltimore and Ohio, and with the Chesapeake and Ohio C a n a l . Of this work the ironmaster and politician Thaddeus Stevens was the leading advocate and would be—according to his enemies—the principal beneficiary. F o r these various purposes some $ 7 , 0 0 0 , 0 0 0 were spent or committed before the p r o g r a m was brought to an a b r u p t halt, with all the

APPALACHIAN COMPETITION new u n d e r t a k i n g s u n c o m p l e t e d , b y t h e s t a t e ' s 1842.

67

financial

crisis in

27

I n A u g u s t , 1 8 4 2 , when t h e s t a t e failed t o meet its p a y m e n t s , a t o t a l d e b t of over $ 3 3 , 0 0 0 , 0 0 0 h a d been

interest incurred

f o r t h e p u b l i c works. T h e financial difficulty was f o r several r e a s o n s m o r e severe t h a n in t h e case of New Y o r k . A m a j o r difference l a y in t h e economic a n d

financial

r e s u l t s of t h e

improvements

themselves. T h o u g h t h e M a i n L i n e yielded some o p e r a t i n g revenue f r o m t h e s t a r t a n d t h o u g h in m o s t y e a r s this exceeded t h e o p e r a t i n g deficit of t h e l a t e r a l

canals, the net operating

revenue

of

whole

to

the

public

works

as

a

amounted

in

1839

less

t h a n a q u a r t e r of t h e a n n u a l i n t e r e s t b u r d e n . A t t h e same time t h e N e w Y o r k c a n a l s , c a r r y i n g well over twice a s g r e a t a t o n n a g e a s t h o s e of P e n n s y l v a n i a , were e a r n i n g on a n i n v e s t m e n t of comp a r a b l e size a n e t r e t u r n of some $ 5 0 0 , 0 0 0 over c u r r e n t i n t e r e s t p a y m e n t s . 2 8 T h e r e were also differences on t h e side of

financing.

P e n n s y l v a n i a l e g i s l a t o r s a n d citizens h a d been even m o r e r e l u c t a n t t h a n N e w Y o r k e r s t o r e s o r t t o t a x a t i o n f o r the s u p p o r t of int e r n a l i m p r o v e m e n t s . T a x revenues p l e d g e d t o t h e c a n a l f u n d s by t h e a c t of 1 8 2 7 were c o n s i d e r a b l y less t h a n in New Y o r k S t a t e , a n d an a d d i t i o n a l t a x was n o t v o t e d u n t i l 1 8 4 0 . M o r e o v e r , two financial

w i n d f a l l s , coming a t a s t r a t e g i c time in the p r o g r a m ,

e n c o u r a g e d the P e n n s y l v a n i a l e g i s l a t u r e t o f u r t h e r l i b e r a l i t y . T h e f e d e r a l S u r p l u s R e v e n u e A c t of 1 8 3 6 a l l o t t e d n e a r l y $ 3 , 0 0 0 , 0 0 0 t o P e n n s y l v a n i a . I n t h e same y e a r t h e B a n k of t h e U n i t e d S t a t e s , d e p r i v e d of i t s f e d e r a l c h a r t e r a n d f u n c t i o n , avoided liquidation bv t r a n s f e r t o P e n n s y l v a n i a j u r i s d i c t i o n . T h e " p r i c e . . . p a i d f o r s u r v i v a l " included a b o n u s of $ 2 , 0 0 0 , 0 0 0 t o t h e s t a t e f o r i m p r o v e m e n t s a n d the o b l i g a t i o n t o g r a n t l o a n s of six or seven million d o l l a r s f o r t h e same p u r p o s e . T h e B a n k , said P r e s i d e n t Biddle, w a s t o be " m a d e t h e c h a n n e l b y which c a p i t a l t o extent

ma}' be b r o u g h t

ments."

29

financial

in t o aid o u r

T h i s r e l a t i o n s h i p , which a t

Pennsylvania

first

any

improve-

seemed t o solve the

p r o b l e m s of t h e s t a t e ' s i m p r o v e m e n t s , b r o u g h t new diffi-

68

APPALACHIAN

COMPETITION

culties with the Bank's successive suspensions and ultimate failure. U n d e r these circumstances, the incidence of crisis and depression, which in New Y o r k s u b j e c t e d the public works to r e t r e n c h ment and delay, h a d in P e n n s y l v a n i a the effect of b r i n g i n g the p r o g r a m to a v i r t u a l close. W a y s were found to meet obligations t o c o n t r a c t o r s , a n d s t r e n u o u s financial measures restored the solvency of the s t a t e 3 0 and made it less e m b a r r a s s i n g f o r t r a v e l i n g P e n n s y l v a n i a n s t o sit down a t English tables. 3 1 B u t the legisl a t u r e was much more inclined t o dispose of the public works t h a n to a p p r o p r i a t e money f o r them, even in those cases in which a small e x p e n d i t u r e would b r i n g into o p e r a t i o n an all-but-completed canal. In 1842 the governor was authorized to receive bids f o r a n y or all sections of the public works. An a c t of the following y e a r provided

f o r the disposal

without

compensation

of

the

Beaver and F r e n c h Creek divisions to a p r i v a t e c o m p a n y on condition t h a t it complete the connection with L a k e E r i e . I n 1844 t h e legislature passed an act, confirmed by a closely-contested p o p u l a r referendum, offering the Main Line f o r sale a t $20,000,000. T h e r e were no t a k e r s a t this price f o r an o p e r a t i o n which a t the time was e a r n i n g less t h a n 3 p e r c e n t on an original cost of $12,000,000. W i t h the r e t u r n of p r o s p e r i t y and increasing t r a n s p o r t a t i o n needs, s t a t e investment f o r the improvement of the system was resumed. T h e N o r t h B r a n c h E x t e n s i o n was

finally

completed,

the Philadelphia and Columbia R a i l r o a d was reconstructed a f t e r the replacement of its last inclined plane, the profitable D e l a w a r e Division was enlarged, and—less u n d e r s t a n d a b l y — t h e Alleghenv P o r t a g e was replaced by a new r a i l r o a d , completed some two y e a r s a f t e r the P e n n s y l v a n i a R a i l r o a d h a d built its competing line across the mountains. On all these some $6,000,000 were spent between 1846 and 1858. B u t the policy of disposal h a d never been abandoned. In 1857 the Main Line was finally sold f o r $7,500,0 0 0 to the P e n n s y l v a n i a R a i l r o a d which p r o m p t l y abandoned the new P o r t a g e R a i l r o a d . In the following j'ear the disconnected

APPALACHIAN'

COMPETITION

69

r e m n a n t s of the s t a t e system were sold t o the S u n b u r y a n d E r i e R a i l r o a d C o m p a n y a t a f i g u r e finally set, a f t e r the r a i l r o a d h a d resold the p r o p e r t i e s , a t $ 3 , 7 8 1 , 0 0 0 . Since t h e s t a t e a c c e p t e d m o s t of its p a y m e n t in the bonds of the s t r u g g l i n g c o m p a n y while t h e l a t t e r was f r e e t o collect c a s h , if it c o u l d , f r o m the u l t i m a t e p u r c h a s e r s , it is clear t h a t the t r a n s a c t i o n was p l a n n e d l a r g e l y with t h e p u r p o s e of a i d i n g t h e c o m p a n y t o complete its r o a d .

The

t e r m s on which the two sales were m a d e were h o t l y c o n t e s t e d in the legislature, and opponents a t t r i b u t e d their approval to the work of lobbyists a n d " p a i d s c r i b b l e r s " f o r t h e

companies;32

b u t it a p p e a r s t h a t t h e r e was little p o s i t i v e s e n t i m e n t in f a v o r of s t a t e r e t e n t i o n of t h e s y s t e m . J u d g e d on fiscal g r o u n d s , t h e f a i l u r e of t h e p u b l i c

works—

w h a t e v e r t h e i r c o n t r i b u t i o n t o t h e g e n e r a l d e v e l o p m e n t of s t a t e — w a s clearly evident. T h e t o t a l i n v e s t m e n t in t h e i r

the con-

s t r u c t i o n h a d been n e a r l y $ 3 3 , 5 0 0 , 0 0 0 . Since m o r e t h a n $ 1 0 , 5 0 0 , 0 0 0 of this h a d been f o r i m p r o v e m e n t s e i t h e r l e f t unfinished o r given a w a y , it a p p e a r s t h a t t h e f u n c t i o n i n g p r o p e r t i e s were sold f o r a b o u t half t h e i r c o s t . O p e r a t i n g revenues h a d yielded $ 8 , 0 0 0 , 0 0 0 , b u t this was f a r outweighed b y the $ 4 3 , 5 0 0 , 0 0 0

already

p a i d o u t in i n t e r e s t . E v e n d i s r e g a r d i n g i n t e r e s t t o be p a i d on o u t s t a n d i n g obligations, the state's net

financial

o u t l a y to t h e

t i m e of final sale a p p r o a c h e d $ 5 8 , 0 0 0 , 0 0 0 . 3 3 Sale of the M a i n L i n e t o t h e P e n n s y l v a n i a R a i l r o a d C o m p a n y in 1 8 5 7 h a s been c h a r a c t e r i s t i c a l l y r e g a r d e d , by c o n t e m p o r a r i e s a n d by l a t e r w r i t e r s , as a m a j o r t r i u m p h of p r i v a t e over public e n t e r p r i s e . Now, said a H a r r i s b u r g n e w s p a p e r , t h e works will be r u n by " t h e best businessmen of t h e s t a t e . "

34

Y e t m o r e t h a n half

of t h e s h a r e s of t h e c o r p o r a t i o n which h a d achieved t h i s t r i u m p h were still held by p u b l i c a u t h o r i t i e s ; 3 5 a n d t h e o t h e r p u r c h a s e r of t h e s t a t e p r o p e r t i e s , the S u n b u r y a n d E r i e , was also a p r o d u c t of mixed e n t e r p r i s e . T h r o u g h o u t t h e p e r i o d of t h e s t a t e w o r k s , public encouragement

to i m p r o v e m e n t s

in t r a n s p o r t a t i o n

was

a l s o b e i n g given t h r o u g h s t o c k s u b s c r i p t i o n a n d o c c a s i o n a l l y b y

70

APPALACHIAN

COMPETITION

loans or g u a r a n t e e s to the mixed enterprises. B y 1842, state investments in the stock of t u r n p i k e companies h a d risen to over $ 2 , 0 0 0 , 0 0 0 and in bridge companies to more than $ 5 0 0 , 0 0 0 . Even in inland navigation, the p r i n c i p a l field of the public works, state holdings in the stock of mixed corporations totalled $850,000, and nearly $ 4 0 0 , 0 0 0 had been subscribed to the stock of four r a i l r o a d companies. Moreover, the s t a t e h a d found a w a y of g i v i n g aid by indirection; the price exacted for the c h a r t e r of the Bank of the United S t a t e s included the requirement t h a t it purchase $ 6 7 5 , 0 0 0 of the stock of certain t r a n s p o r t a t i o n companies. Meanwhile, local authorities had invested smaller amounts in bridge and turnpike enterprises. 3 8 The financial crisis brought about a marked change in the position and policy of the state. In order to raise money to meet pressing obligations, the l e g i s l a t u r e authorized the sale of the s t a t e stock in mixed enterprises. Of the t r a n s p o r t a t i o n stock, which had yielded very scant return, a little more than $ 2 , 0 0 0 , 0 0 0 was sold, at not much more than twenty cents on the dollar, and n e a r l y $ 2 , 0 0 0 , 0 0 0 remained unsold for lack of tolerably s a t i s f a c t o r y bids. 3 7 When investment in mixed enterprise was resumed with returning p r o s p e r i t y , the movement showed two marked differences. In the first place, the emphasis, a s would be expected, was on railroads r a t h e r than on other forms of t r a n s p o r t a t i o n . In the second place, the g r e a t e r p a r t of the investment was made not by the s t a t e legislature, which remained under the shadow of financial difficulties, but by the authorities of counties and municipalities anxious to improve the competitive position of their localities. The state g a v e no new aid to r a i l r o a d s except through the Sunb u r y and Erie transaction. On the other hand, local authorities took p a r t in the movement on a scale dwarfing the earlier s t a t e p a r t i c i p a t i o n , and their total subscriptions exceeded $ 1 8 , 0 0 0 , 0 0 0 . B y f a r the l a r g e r p a r t of the t o t a l was from the two g r e a t urban

APPALACHIAN*

COMPETITION

71

areas. The city of Philadelphia and urban districts within the county subscribed abut $10,000,000, of which half was for the Pennsylvania Railroad ; and Allegheny County and its cities of Pittsburgh and Allegheny subscribed $5,500,000, of which $1,000,000 was for the Pennsylvania. The remainder of the investment of the Pittsburgh area was for other roads radiating from that center. Philadelphia, which made its initial investment in the Pennsylvania when the railroad's nearest point was Harrisburg, continued to support enterprises at a distance that were considered important to the city's trade. I t became the principal stockholder in the Sunbury and Erie in northwestern Pennsylvania, and its subscriptions in 1853 to railroads in the northeastern and far southwestern parts of the state were subjects of political controversy and legal contention. The remaining $2,500,000 of local subscriptions was scattered among a dozen railroads by nine counties and ten municipalities. 38 The subscriptions of the local authorities, together with some public aid from Maryland sources for roads in the Susquehanna Valley, played a major part in the rapid extension of railroads within the state of Pennsylvania. Some fifteen hundred miles were added between 1845 and 1858. 3 9 Except in the anthracite region, little of this mileage was built by unaided private enterprise. Without local assistance, the Pennsylvania Railroad certainly could not have reached Pittsburgh by the middle fifties in time to compete effectively with the Erie Railroad and the New York Central. The financial results, however, were much less favorable. With the major exception of the Pennsylvania, most of the companies paid small dividends or none at all, and an almost complete cessation of payments during the panic of 1857 led to a partial repudiation of Allegheny County bonds and brought to a head a statewide movement of opposition to mixed enterprise. In that year amendments to the constitution were adopted forbidding state aid to corporations, either by loan or subscription,

72

APPALACHIAN

COMPETITION'

and prohibiting loans or gifts or stock subscriptions on the part of local

authorities.

These

anti-investment

amendments

were

approved by a nine to one majority in a popular referendum. Pennsylvania history is thus marked by a complete revulsion against government participation in transportation development. The traditional and almost unquestioned acceptance of the promotional role of the state gave way, as Louis Hartz has shown, to the belief that action in this field was entirely outside the proper sphere of government. 40 With respect to public enterprise, the major turning point occurred during the financial difficulties of the early forties, but the final disposal of the state works coincided almost exactly with the decisive action taken against mixed enterprise in 1857. The revulsion was partly due to the growing strength of the Pennsylvania Railroad and other

corporations under

private

leadership. However heavily they had depended on public subscription in the past, they now seemed confident that they could raise the funds for further expansion from earnings and private investment. N o less important was general disillusionment with the financial results of the public program. For its heavy expenditures on the public works, the state had no assets to show, though most of the works themselves were still in operation under mixedenterprise or private corporations. Of its subscriptions to mixed enterprise, stocks with a face value of nearly $1,750,000 were still in the treasury but yielded almost no return. 41 These results were in part the consequences of mistakes in policy and failures in administration. The poor record was to some degree due to corruption and political patronage in the management of the state works, 42 and some of the losses caused by abandonments and forced sales could have been avoided if the necessity of taxation had been recognized at an earlier stage. With respect to the public works, it is often argued that the major mistake was the failure to push through the Main Line to the

APPALACHIAN COMPETITION

73

W e s t without diversion of effort to less essential u n d e r t a k i n g s . The e a r l y proliferation of branch lines certainly reflected legislative b a r g a i n s between conflicting local forces r a t h e r t h a n a n y rational determination of priorities. The g e o g r a p h i c a l diversities of interest within the s t a t e — a m o n g them the Susquehanna Valley's interest in t r a d e downriver to Baltimore as a g a i n s t the Philadelphian's identification of s t a t e p a t r i o t i s m with the commerce of his own port—continued to make agreement on a coherent prog r a m almost impossible. Yet the financial results of the completed branch lines, taken as a whole and measured either in o p e r a t i n g revenues or final disposition, were not much more unfavorable than those of the Main L i n e ; and it is not clear t h a t their contribution to development was g r e a t l y inferior. The one highly profitable segment of the s t a t e system was the c o a l - c a r r y i n g Delaware Division, which might well have been built by p r i v a t e enterprise and would easily have ranked as a "dowager c a n a l . " In retrospect it is easy to see t h a t the M a i n Line could not possibly have been made an effective competitor of the E r i e Canal for the t r a d e of the W e s t . A c a n a l over the mountains was, as a modern writer has said, " a technological m o n s t r o s i t y . " No combination of linked canals and r a i l r o a d s , which had to surmount an elevation of more than two thousand feet, could match the costs of a w a t e r w a y which a t no point had to be raised above the level of L a k e Erie. 4 3 It is perhaps ironic t h a t the planners of internal improvements in Pennsylvania, who were somewhat more receptive than those of New Y o r k to the innovation of the railroad, made use of it in this limited and ineffective w a y a t a time when its potentialities could not be c l e a r l y seen. P e n n s y l v a n i a ' s combination of old and new, "elucidating the defects peculiar to both methods of t r a n s i t , " 44 could not solve the problem. The state's disadvant a g e s in terrain could not be s u b s t a n t i a l l y overcome, nor could its a d v a n t a g e s in distance to the W e s t be effectively utilized until it became p r a c t i c a b l e to build an all-rail route. This was not

74

APPALACHIAN*

COMPETITION

a c c o m p l i s h e d u n t i l m o r e t h a n t w e n t y y e a r s a f t e r the completion of t h e M a i n Line, a n d t h e n b y mixed r a t h e r t h a n public e n t e r prise. I n the P e n n s y l v a n i a case, m o r e o v e r , effective l e a d e r s h i p u n d e r mixed e n t e r p r i s e came a l m o s t e n t i r e l y f r o m t h e p r i v a t e side. I n p a r t this was a m a t t e r of c l e a r legislative i n t e n t . An e a r l y a c t g o v e r n i n g the s t a t e ' s b r i d g e a n d t u r n p i k e s u b s c r i p t i o n s p r o v i d e d t h a t , in cases in which the s t a t e held half o r m o r e of the s t o c k , it should a p p o i n t two of the five d i r e c t o r s ; a n d a m e a s u r e r e l a t i n g t o t h e P e n n s y l v a n i a R a i l r o a d s u b s c r i p t i o n s , the g r e a t e s t c a s e of local a c t i o n , c o n t a i n e d t h e e x p r e s s p r o v i s i o n

single

that

"a

m a j o r i t y of t h e b o a r d of d i r e c t o r s shall, a t all times be elected b y the private stockholders."

45

W i t h i n this general framework there

were v a r i a t i o n s in t h e d e g r e e t o which t h e public

authorities

a t t e m p t e d t o p a r t i c i p a t e in t h e m a n a g e m e n t of the e n t e r p r i s e s which t h e y s u p p o r t e d . I n a n u m b e r of cases the s t a t e m a d e no p r o v i s i o n f o r the a p p o i n t m e n t of g o v e r n m e n t d i r e c t o r s , a n d t h e r e were i n s t a n c e s in which s t a t e d i r e c t o r s were r e f u s e d a d m i t t a n c e t o meetings of t h e b o a r d s . T h e p r i n c i p a l concerns of t h e less p o w e r f u l local a u t h o r i t i e s were e x p r e s s e d in p r o v i s i o n s in the a c t s r e q u i r i n g t h a t t h e r a i l r o a d should " p a s s t h r o u g h the said b o r o u g h " o r t h a t t h e f u n d s " b e expended in the said c o u n t r y . " I n P h i l a d e l p h i a , where t h e i n i t i a l s u b s c r i p t i o n

46

t o the

Penn-

s y l v a n i a R a i l r o a d was a u t h o r i z e d a f t e r a n election c o n t e s t e d bv " R a i l r o a d " a n d " A n t i - R a i l r o a d " slates of c a n d i d a t e s , t h e C i t y Councils m a d e a c t i v e a t t e m p t s t o w a t c h over t h e i r i n t e r e s t s in t h i s a n d o t h e r r o a d s . T h e y withheld t h e i r p r o m i s e d s u b s c r i p t i o n

to

t h e S u n b u r y a n d E r i e u n t i l a n u n a c c e p t a b l e b o a r d of m a n a g e r s was r e p l a c e d a n d e x p r e s s e d v i g o r o u s o p i n i o n s on the question of t h e P e n n s y l v a n i a R a i l r o a d ' s i n v e s t m e n t s in the securities of conn e c t i n g r a i l w a y s in the W e s t . I n t h e 1 8 5 3 s t o c k h o l d e r s ' meeting, t h e r e p r e s e n t a t i v e s of A l l e g h e n y C o u n t y

opposed

purchase

of

s t o c k in t h e M a r i e t t a a n d C i n c i n n a t i ; b u t those of P h i l a d e l p h i a s u p p o r t e d it, a c t i n g u n d e r a r e s o l u t i o n of t h e C i t y Councils d e c l a r -

APPALACHIAN COMPETITION

75

ing t h a t the measure was essential t o secure t o their city " h e r j u s t p r o p o r t i o n of the t r a d e of the W e s t and S o u t h - W e s t " which was endangered by " t h e g r e a t efforts now making by the cities of New York a n d B a l t i m o r e . " 4 ' Even in t h e revulsion y e a r of 1857, an a t t e m p t was made a t the time of sale of the public works to assure

perpetual

representation

of

the

city

and

Allegheny

County a u t h o r i t i e s on the board of the Pennsylvania R a i l r o a d on the g r o u n d t h a t " s o i m p o r t a n t a work should not be m a n a g e d " wholly in the interests of its p r i v a t e stockholders. 4 8 B u t

what

was a t issue was m i n o r i t y r e p r e s e n t a t i o n — i n this case five o u t of fourteen d i r e c t o r s — a n d initiative a n d effective control had rested f r o m the beginning in p r i v a t e h a n d s . Pennsylvania's e a r l y improvement Society, it will be recalled, recommended t h a t the work should be c a r r i e d f o r w a r d under a " u n i f o r m a n d consistent p l a n , " supervised by a b o a r d of improvement, and by a j u d i c i o u s division of l a b o r between p r i v a t e , public, and mixed enterprise. Down to 1857, the t h r e e methods continued to be employed, t h o u g h in v a r y i n g p r o p o r t i o n s f o r the different means of t r a n s p o r t . T h e canals were mainly built by the s t a t e and the r a i l r o a d network was supplied p a r t l y by unaided p r i v a t e enterprise a n d p a r t l y by the s t a t e b u t more largely by mixed enterprise r e s t i n g heavily on the s u b s c r i p t i o n s of local a u t h o r ities. On the other hand, the first p a r t s of the Society's recommendations went largely unheeded. T h e b o a r d of improvement was never established. L i t t l e consistency of p l a n n i n g was achieved within the p r o g r a m of s t a t e works a n d still less between it and the other measures. Pennsylvania's vigorous b u t o f t e n conflicting efforts t o w a r d

internal

improvement

little of the coordination a d v o c a t e d by its

went

forward

with

eighteenth-century

memorialists. M a r y l a n d ' s way to the W e s t was by the P o t o m a c and then across the m o u n t a i n s to the M o n o n g a h e l a and the Ohio. T h i s was the r o u t e of B r a d d o c k ' s R o a d a n d of George W a s h i n g t o n ' s

76

APPALACHIAN

COMPETITION

g r e a t e s t interest, and it followed t h e s h o r t e s t of Gallatin's lines f r o m the A t l a n t i c p o r t s to the western waters. T w o g r e a t e n t e r prises a t t e m p t e d t o reach this g o a l : the Chesapeake and Ohio Canal and the B a l t i m o r e and Ohio R a i l r o a d . F o r each the

first

e a r t h was t u r n e d in competing ceremonies on the F o u r t h of J u l y , 1828, and their r i v a l r y was l a t e r d r a m a t i z e d in a legal contest f o r the use of a n a r r o w p a r t of t h e P o t o m a c Valley. T h o u g h one represented the older, and the o t h e r the newer technology, b o t h were the p r o d u c t s of mixed e n t e r p r i s e , with the canal receiving its main s u p p o r t f r o m the s t a t e a n d the r a i l r o a d f r o m the city of Baltimore. I n p a r t because of this r i v a l r y , 4 9 M a r y l a n d never followed New Y o r k and P h i l a d e l p h i a in employing the method of public w o r k s ; and aid to these a n d t o c e r t a i n other enterprises continued to be given by s t a t e a n d municipal subscriptions and loans a n d g u a r a n t e e s . W h e n work began in 1828 on t h e two m a j o r p r o j e c t s , one of them had behind it a long period of a g i t a t i o n and endeavor. T h e Chesapeake and Ohio C a n a l was the successor of the old P o t o m a c C o m p a n y , of which George W a s h i n g t o n was the first p r e s i d e n t . B o t h M a r y l a n d a n d Virginia h a d s u p p o r t e d the enterprise, with M a r y l a n d ' s investment a m o u n t i n g t o a b o u t $150,000. T h e comp a n y improved n a v i g a t i o n on the river f r o m Cumberland down, with some work on the t r i b u t a r i e s , a n d by the time of G a l l a t i n ' s R e p o r t h a d built canals a r o u n d t h e five m a j o r falls on the P o t o mac. B u t it did not a t t a i n its modest c h a r t e r objective of p r o viding a safe channel in all seasons f o r vessels c a r r y i n g

fifty

b a r r e l s of flour. T w e n t y y e a r s l a t e r little more had been done a n d the c o m p a n y was b a n k r u p t . T h e new a n d more ambitious p r o j e c t of a completely independent canal t h a t would extend u p t h e valley to Cumberland

and

eventually across the m o u n t a i n s t o P i t t s b u r g h , was launched in the eighteen-twenties by a combination

of federal, s t a t e , mu-

nicipal, a n d p r i v a t e e f f o r t . E a r l y i n t e r e s t was s t r o n g in Virginia but the terms f o r a s t a t e subscription offered in 1823 were never

APPALACHIAN

COMPETITION

77

met. On the other hand, Maryland refused participation in that year, largely because of opposition from Baltimore, but subscribed $500,000 in 1825 on condition that the charter provide for a branch canal to Baltimore. The decisive actions were the federal government's subscription of $1,000,000 (its largest financial participation in the mixed enterprise of the time) and the permission it gave to the District cities for municipal subscriptions of $1,000,000 by Washington and $ 2 5 0 , 0 0 0 each by Georgetown and Alexandria. Private individuals subscribed only a little more than $600,000 as compared to the $3,000,000 of public money. The federal government also provided an engineering survey of the proposed route, the first carried out under the General Survey Act, and its leading role in the initiation of the project was symbolized when the first shovelful of dirt was turned by President John Quincy Adams. 50 The initial impetus and leadership were, however, not long maintained. The company decided, in part because of the recommendation of the Army Engineers, that the canal should be built to higher specifications in width and depth than the other canals of the day. For this and other reasons it soon became evident that the costs, even to Cumberland, would exceed the original subscriptions. The latter proved partly uncollectible; nearly a third of the private subscription was never paid, and the obligations of the District cities had finally to be assumed by the federal government. Labor was unexpectedly difficult to obtain, and the problem was only partly solved by recruitment from abroad. In 1832 an epidemic of cholera swept through the workers' shanties. The legal contest with the Baltimore and Ohio Railroad for control of the narrow valley above the Point of Rocks, where there was barely room to build both canal and railway, caused serious delays in construction even though the Chesapeake and Ohio's prior claim was finally sustained by the courts in 1832. A t the end of that year, the company was out of funds and construction was halted far short of the hundred miles which, ac-

78

APPALACHIAN

COMPETITION

c o r d i n g t o the terms of t h e c h a r t e r , were to be completed by 1833. A p p e a l s f o r f u r t h e r aid f r o m the n a t i o n a l g o v e r n m e n t were fruitless. J a c k s o n i a n

opposition

to federal improvements

had

t a k e n the place of A d a m s ' s a d v o c a c y , a n d the effect of the c h a n g e was t o leave the Chesapeake a n d Ohio c a n a l p r o j e c t " s t r a n d e d on the southern shore of M a r y l a n d . "

51

I n the emergency it was the

s t a t e t h a t took over the responsibility. An a c t of 1 8 3 3 forced upon the rival companies a compromise p r o v i d i n g f o r j o i n t c o n s t r u c t i o n of canal and railway between P o i n t of R o c k s and H a r p e r ' s F e r r y . In 1834 the s t a t e made an a d d i t i o n a l subscription of $ 1 2 5 , 0 0 0 and in the following y e a r a loan of $2,000,000. An omnibus bill of 1836, which also provided s u p p o r t f o r the B a l t i m o r e a n d Ohio and other u n d e r t a k i n g s , made the s t a t e the m a j o r i t y stockholder in the Chesapeake and Ohio with an additional s u b s c r i p t i o n of $3,000,000. A n o t h e r m e a s u r e in 1839 b r o u g h t the s t a t e ' s t o t a l subscription t o $5,000,000. " T h e g r e a t n a t i o n a l p r o j e c t " h a d become " a M a r y l a n d w o r k . "

52

W i t h this s u p p o r t , work on the canal was resumed. E n g i n e e r i n g difficulties increased, b u t the B o a r d continued t o m a i n t a i n

its

policy of expensive c o n s t r u c t i o n and high technical s t a n d a r d s , insisting the " f a l s e notions of e c o n o m y " were i n a p p r o p r i a t e in a work designed n o t " t o subserve the p u r p o s e s of the p r e s e n t d a y or c e n t u r y , b u t . . .

to e n d u r e f o r all time." r'3 L a b o r problems

were intensified by the o u t b r e a k of pitched b a t t l e s between the laborers f r o m the two I r i s h counties of Cork and L o n g f o r d . M o r e over, the c o m p a n y ' s a p p a r e n t assets could not always be realized. M a r y l a n d s t a t e bonds, like those of the D i s t r i c t cities, were sometimes unsalable or could be disposed of only a t heavy d i s c o u n t s ; and the c o m p a n y ' s final realization f r o m the $7,000,000 of s t a t e aid was only a little more t h a n $6,000,000. A t the various p e r i o d s of

financial

stringency,

the

company

employed

unorthodox

methods to keep the work going. I n 1 8 3 4 , f r o m 1837 to 1838, a n d again from 1839 to 1841, the c o m p a n y met p a r t of its obliga-

APPALACHIAN' COMPETITION

79

tions, particularly to its contractors, in its own notes or " s c r i p , " each time issued in larger amounts and reaching finally a total of over $1,400,000. B y these and other means work was maintained through periods of depression, but finally came to a halt in 1842. One hundred and thirty-five miles had been completed; but the canal's first o b j e c t i v e — C u m b e r l a n d — w a s still fifty miles away. T h e rival enterprise had by this time already reached Cumberland. T h e Baltimore and Ohio R a i l r o a d , organized in 1827 under the stimulus of the E r i e Canal, represented the e f f o r t of the merchants and the city of Baltimore to retain or regain their position in the commerce of the W e s t . I n this it resembled Philadelphia's parallel efforts to meet the competition by means of the State W o r k s . I t s merchant promoters, however, unlike the Pennsylvania legislators, made the bold choice of the newer technology. R e j e c t i n g the alternative of a branch canal to the Chesapeake and Ohio, they decided to a t t e m p t to build a railroad over the mountains, at a time when England's short lines were still in an experimental stage. 54 T h e original subscription

consisted of

$1,-

500,000 from private investors and $500,000 f r o m the city of Baltimore;

and

in

the

following

year

the

capitalization

was

doubled with an additional $1,500,000 from individuals and $500,000 f r o m the state of M a r y l a n d . Requests f o r aid from the federal government were refused, but the state added $500,000 in 1833 f o r a branch to W a s h i n g t o n . A s a pioneering enterprise, which H e n r y Varnum P o o r called " t h e Railroad

University

of

the United

States,"65

once the

B a l t i m o r e and Ohio had many problems of construction and operation to solve. Y e t once it had learned a satisfactory application of steam power, a f t e r early use of horses and even an experiment with sail, construction went f o r w a r d more rapidly and at lower cost than in the case of the canal. A first short section was opened f o r traffic in 1831, and in the following year the road reached the P o i n t of Rocks, some seventy miles from Baltimore. A f t e r

80

APPALACHIAN

COMPETITION

settlement of the controversy with the Canal Company, the line was extended in 1834 to a point across the river from H a r p e r ' s Ferry. Here, however, there was a check to further progress. The canal interests were anxious to keep the railroad out of competition along the river to Cumberland; and the railroad itself might, given sufficient encouragement from Virginia, have chosen to take an alternate route to the West by way of the Shenandoah Valley. Private funds to finance the next stage of construction were not forthcoming. Under these circumstances, the company again appealed to state and city. Each responded in 1836, the peak year of public appropriations, with a subscription of $3,000,000. As a result of these actions, an enterprise that had begun three p a r t s private and one p a r t public now had a public m a j o r i t y of stock and directors. B u t bonds authorized in 1836 could not be sold under the crisis conditions of 1837 and 1839; and the railroad company, like the canal, began in 1839 to anticipate receipts by circulating its own currency. Nearly $1,500,000 of its "railroad notes" were issued by September, 1841, and the city of Baltimore accepted them in payment for all city dues. 58 By these expedients, work on the road was continued without interruption, and it reached Cumberland, 178 miles from Baltimore, in 1842. On railroad and canal, work was halted in 1842. There was a long hiatus in construction and in public aid to these and other improvements. In the case of the state government, which defaulted on its bond interest in 1842 and was unable to resume full payment until 1848, the revulsion was permanent. No new financial aid was given to any company; and the members of the Reform Convention of 1851, commenting bitterly on those who had thought t h a t investments in internal improvements would make the state a taxless " E l D o r a d o , " adopted constitutional amendments prohibiting state works and loans or gifts to improvement companies. 57 In the case of the city, which remained solvent, no

APPALACHIAN'

COMPETITION'

81

further appropriations for improvement were made until 1852. In spite of these circumstances, work was finally resumed on the canal. After another failure to obtain federal aid, the company managed in 1845 to secure from the M a r y l a n d legislature— by the margin of a single vote in the face of bitter opposition from the representatives of Baltimore—an act waiving the state's prior lien on the canal in order to permit the company to issue its own first mortgage bonds. Guarantees of $300,000 from Virginia, $25,000 from Georgetown, and $50,000 from the city of Washington were secured for new construction, with an additional $200,000 guarantee from Virginia for necessary repairs. W i t h this aid, the canal was finally completed to Cumberland in 1850 a t a total construction cost of almost $10,000,000, of which the state of Maryland had supplied a little more than three fifths. The usual celebrations were held, but the triumph was a limited one. Standards of construction had been maintained in spite of engineering difficulties, and the canal was built to the most generous dimensions of any in the United States. But the original purpose of a waterway to the Ohio had been tacitly abandoned. The canal reached only the foot of the mountains, and that a t a time when the railroad had already taken much of its prospective trade. Canal tonnage rose from about 100,000 in 1850 to about 350,000 at the end of the decade, and tolls from $65,000 to over $180,000; but net receipts yielded no surplus over interest, and by the outbreak of the Civil W a r the company was close to bankruptcy. 5 8 B y contrast, the railroad succeeded in crossing the mountains without further aid from the state or from the city of Baltimore. The city of Wheeling, its Ohio River terminus, subscribed $500,000. A substantial p a r t of the remaining funds came from the ploughing back of the Baltimore and Ohio's own operating revenues, since the company in this period issued its dividends mainly in bonds and stock. Another p a r t came from the disposal between 1849 and 1851 of the predepression M a r y l a n d bonds,

APPALACHIAN

82

COMPETITION

which had finally become negotiable with the return of prosperity and the restoration of the state's credit. The remainder came from the company's own borrowing, done largely

through

Baring

Brothers, which regarded the Baltimore and Ohio as "the best railroad investment in the United S t a t e s . "

59

The construction

cost from Cumberland to Wheeling amounted to about $6,600,000 as compared with some $7,600,000 from Baltimore to Cumberland. Of this total a little more than half had been obtained from government sources. 8 0 T h e line was completed in 1853, a little after the New York and E r i e and a little before the Pennsylvania R a i l r o a d ; and Baltimore had achieved its connection with the western waters. This was by no means the end of Baltimore's aid to the B . & O. system. In 1852 the city endorsed $1,500,000 of the bonds of the Northwestern Virginia, which was to be the B. & O.'s alternative route to the Ohio; and additional loans were made in 1859, paid for out of dividends on the city's B. & O. stock, of $135,000 to the Northwestern Virginia and of $20,000 to the Union R a i l r o a d across the river in Ohio, which formed p a r t of the connection to Cincinnati. T h e parent company itself received a loan of $5,000,000 in 1853 for the rehabilitation of the road. In 1856 a loan of $1,000,000 was made to the Pittsburgh and Connellsville, which had already received aid from

Allegheny

County and from several Pennsylvania municipalities and which would ultimately provide the system's connection between Cumberland and Pittsburgh. 6 1 This road was f a r from completion a t the outbreak of war, but by this time the B . & O.'s main line to Wheeling and the more southerly route to Parkersburg and Cincinnati were both effective lines of transportation to the West. Neither state nor local aid was confined to these efforts to reach the western waters. As early as 1800 the state loaned $30,000 to the Susquehanna Canal C o m p a n y ; a decade later it subscribed $15,000 to the stock of two turnpikes; and in the twenties it made a $50,000 subscription to the Chesapeake and

APPALACHIAN' C O M P E T I T I O N Delaware Canal.

62

83

A much larger amount of assistance was given

to the Baltimore and Susquehanna Railroad which was intended to maintain Baltimore's position as the natural outlet of Pennsylvania's rich Susquehanna Valley. After a stock subscription of $100,000 in 1830, Maryland in its major period of improvement legislation, 1835 to 1839, added three loans bringing its total aid to about $2,250,000. A canal by-passing the obstructions of the lower river, the Susquehanna and Tidewater, received a $750,000 loan in 1839 and was completed in the following year. The state's other appropriations were for more questionable undertakings. The Eight Million Dollar Act, defeated by a single vote in 1835 and passed after great controversy in the following year, provided major sums for the two routes to the West but added to them appropriations of $500,000 for a cross-cut canal to connect Baltimore with the Chesapeake and Ohio, the same amount for a canal from Annapolis to the Potomac, and $1,000,000 for the Eastern Shore Railroad. The two canals were never started, but $300,000 of the second appropriation was transferred to the Annapolis and Elkridge Railroad, which also received aid from the city of Annapolis ; and the state later guaranteed the interest on $80,000 of the company's bonds. The Eastern Shore Railroad, projected in a little-developed area, received almost no private subscriptions; but the state paid some $150,000 toward the beginnings of construction and in payment of the debts of the soon-bankrupt company. An act of 1848 aided the Baltimore and Susquehanna by granting a moratorium on its arrears of interest, and a measure of 1860 revived the balance of the old subscription to the Eastern Shore, though with little immediate expenditure. But new financial aid to internal improvements had ended with the state's financial difficulties and with the constitutional provision of 1851. The remainder of Baltimore's aid was almost entirely devoted to the Susquehanna route. A subscription of $380,000 was made in 1837 to the Susquehanna and Tidewater Canal. Larger amounts

84

APPALACHIAN

COMPETITION

went to the railroad. A f t e r m a t c h i n g the s t a t e ' s subscription to the Baltimore and Susquehanna in 1830, the city added in 1837 and 1 8 3 8 loans t o t a l i n g $850,000 and in the following y e a r gave the company $250,000 in its own bonds in exchange f o r the same amount in unsalable bonds of the s t a t e of M a r y l a n d . I n 1 8 4 8 it relinquished its claim to a r r e a r s of interest f r o m the company, and in 1855 endorsed $500,000 of the bonds of the B. & S.'s n o r t h e r n extension, the Y o r k and Cumberland. Construction of the system on Pennsylvania soil required a series of conflicts in the legislature

at

Harrisburg

with the

representatives

of

Phila-

delphia, which the road's friends called the " C i t y - o f - W a n t - a l l Trade";

63

but the railroad reached the main line of the Penn-

sylvania S t a t e W o r k s in 1840 and, a f t e r reorganization as the N o r t h e r n Central, was completed to Sunbury on the u p p e r river in 1858. In 1860 the City Councils gave their first aid to a new enterprise, the W e s t e r n M a r y l a n d Railroad, a u t h o r i z i n g a bond endorsement of $500,000, of which $200,000 was executed. Between the s t a t e and the city p r o g r a m s of internal improvement, there were marked c o n t r a s t s in planning, in continuity, and in results. As heir to the old dream of a canal f r o m the P o t o m a c to the Ohio, which the A r m y Engineers had so recently pronounced practicable, M a r y l a n d p e r h a p s could not have been expected to foresee the canal's obsolescence, although the railroad had already reached the river by the time the s t a t e

assumed

m a j o r responsibility f o r the Chesapeake and Ohio. I t is, however, h a r d to understand the insistence on "timeless" construction under these circumstances. P r o m p t e r completion on a less elaborate scale would have given the canal a longer period of usefulness in the coal and other

trades. Moreover, an administration

less

subject to the political spoils system might well have shown somewhat better o p e r a t i n g results in the fifties. T h e division of the state's aid between the two rival enterprises had some basis in the belief t h a t they had different functions to p e r f o r m ( t h e canal t o c a r r y the heavy p r o d u c t s of the f a r m s and mines and the railroad

APPALACHIAN COMPETITION'

85

to c a r r y passengers and lighter and more perishable g o o d s ) . 6 4 T h e a c t u a l decisions, however, seem to have reflected the compromise of conflicting interests r a t h e r more t h a n a n y r a t i o n a l assessment of advantages. Sectional influence was even more conspicuous in determining the allocation of the other p a r t s of the state's p r o g r a m of assistance. T h e discussions and decisions of 1836 provide an extreme example. T h e House W a y s and Means Committee presented a r e p o r t s t a t i n g the case f o r " a general system of improvements [of which] the principal a x i s " would consist of the routes to the W e s t and u p the Susquehanna, 8 5 b u t the bill reported by the Committee and adopted by the legislature a p p r o p r i a t e d n o t h i n g f o r the Susquehanna route and appealed instead to the votes and interests of other a r e a s by including the two obsolete canal p r o j e c t s and the p r e m a t u r e r a i l r o a d f o r the E a s t e r n Shore. Of a t o t a l of some $16,500,000 of aid authorized by the legislature, nearly $1,500,000 remained unextended because the p r o j e c t s themselves were abandoned. Moreover, the legislature's false hopes of quick r e t u r n s and its failure to back its a p p r o p r i a t i o n s by an adequate system of t a x a t i o n and revenue reduced the effectiveness of the aid given and made it impossible f o r the s t a t e to continue its s u p p o r t f o r the enterprises which it had wished to encourage. By c o n t r a s t , the record of the city's aid is one of clearer p u r pose and more sustained effort. W i t h o u t the necessity of composing sectional differences, the City Councils were able to follow a policy directed toward securing and maintaining the commercial interests of the city and of its ambitious merchants. E a r l y advocates of the Susquehanna railroad proclaimed their determination to make Baltimore " t h e G r e a t Central City of the U n i o n . " The Joint

Committee on I n t e r n a l Improvements

of the

68

City

Council, in an 1836 r e p o r t which laid down the general principles and the geographic directions of the p r o g r a m , defined the issue in the following t e r m s : "whether the city of Baltimore is to be reduced to a place of comparative insignificance in a commercial

APPALACHIAN

86

COMPETITION

p o i n t of view, o r t o a s s u m e a p o s i t i o n , equal if n o t s u p e r i o r to t h a t of a n y o t h e r c i t y in t h e U n i o n . " T h e J o i n t C o m m i t t e e rem a i n e d t h e Council's a g e n c y f o r i n v e s t i g a t i o n a n d

recommenda-

t i o n s on i m p r o v e m e n t p r o j e c t s , a n d t h e c i t y was r e p r e s e n t e d on t h e B . & O. a n d B . & S . b o a r d s b y d i r e c t o r s who t o o k an a c t i v e p a r t in t h e p r o c e e d i n g s , a n d m a d e a n n u a l r e p o r t s . I n 1 8 6 0 the c i t y j o i n e d with t h e s t a t e in r e s i s t i n g t h e e f f o r t of t h e c o m p a n y ' s p r e s i d e n t t o r e d u c e t h e p u b l i c r e p r e s e n t a t i o n t o a m i n o r i t y of the board. T o this i m p r o v e m e n t e f f o r t t h e c i t y c o m m i t t e d l a r g e r e s o u r c e s . T o t a l authorizations f o r stock subscriptions, loans, and endorsem e n t s , a m o u n t e d t o m o r e t h a n $ 1 3 , 0 0 0 , 0 0 0 . Service of t h e debt i n c u r r e d f o r these p u r p o s e s r e q u i r e d a h e a v y c u r r e n t o u t l a y , f o r which a special i n t e r n a l i m p r o v e m e n t t a x was levied f r o m 1 8 3 9 on. N e t p a y m e n t s on i m p r o v e m e n t a c c o u n t , a f t e r s u b t r a c t i n g divid e n d s a n d i n t e r e s t received, a v e r a g e d m o r e t h a n a q u a r t e r

of

e n t i r e m u n i c i p a l e x p e n d i t u r e s f r o m 1 8 4 3 t h r o u g h 1 8 5 0 , r i s i n g in t h e l a s t of these y e a r s t o n e a r l y a t h i r d , a n d then d e c l i n i n g as t h e B . & 0 . resumed p a y m e n t of c a s h dividends. Very little income was received f r o m t h e o t h e r c o m p a n i e s , a n d t h e r e t u r n s on the N o r t h e r n C e n t r a l were p a r t i c u l a r l y d i s a p p o i n t i n g ; b u t b y 1 8 6 1 t h e r e was every r e a s o n f o r t h e c i t y t o r e g a r d its o w n e r s h i p of B a l t i m o r e a n d Ohio s t o c k as a g o o d

financial

a s a b u l w a r k of its c o m m e r c i a l position.

i n v e s t m e n t as well

67

F o r a c i t y m u c h s m a l l e r t h a n New Y o r k or P h i l a d e l p h i a , it was an e x t r a o r d i n a r i l y

a m b i t i o u s u n d e r t a k i n g to build a

two-

p r o n g e d r a i l r o a d t o t h e O h i o , so l a r g e l y with m u n i c i p a l r e s o u r c e s , a n d t o v e n t u r e on t h e c o n s t r u c t i o n of a t h i r d p r o n g . T h i s was an e r a in which t h e r i v a l r y of c o m p e t i n g cities was a f a m i l i a r element in t h e p r o m o t i o n of A m e r i c a n i m p r o v e m e n t s ; b u t it should be n o t e d t h a t B a l t i m o r e p l a n n e d its p r o g r a m with u n u s u a l consistency

of p u r p o s e ,

conducted

it

with

fiscal

responsibility,

and

d u r i n g this p e r i o d devoted t o it l a r g e r f u n d s t h a n a n y o t h e r c i t y in t h e n a t i o n .

APPALACHIAN COMPETITION

87

I n t e r n a l improvements in Virginia presented a quite different p a t t e r n . In this case a carefully contrived statewide system of mixed enterprise competed f o r a t t e n t i o n and s u p p o r t with the drive f o r a t h r o u g h route to the western waters. T h e P o t o m a c lay on Virginia's n o r t h e r n b o r d e r ; and the t h i r d of Gallatin's p a i r s of rivers, the J a m e s and K a n a w h a , offered another

route

to

the W e s t entirely within the state. As e a r l y as 1784, George W a s h i n g t o n urged development of communication with the W e s t " b y one or both of the rivers of this s t a t e , which have their sources in the A p p a l a c h i a n m o u n t a i n s . "

68

H i s own p a r t i c u l a r

interest was in the P o t o m a c , but a much g r e a t e r p a r t of Virginia's effort was to be expended on the J a m e s . Y e t the state's improvement p r o g r a m as officially adopted provided f o r the extension of aid on equal terms to enterprises in all p a r t s of the Commonwealth. As a result the record shows a series of compromises between the principle of even-handed assistance and the necessity f o r l a r g e outlays if the J a m e s - K a n a w h a connection was to be made. E a c h of the two tendencies was embodied in a notable early r e p o r t to the Virginia legislature. T h e first of these was presented in 1812 by a commission to examine the J a m e s - K a n a w h a route, of which the chairman was Chief J u s t i c e J o h n Marshall. On p a r t of the way there was already a company in operation. In the twenty years following its i n c o r p o r a t i o n in 1785, the J a m e s River Company had built canals a r o u n d the falls a t Richmond to connect with tidewater and had improved the navigation of the river f o r some 220 miles upstream. On a capitalization of $140,000, of which the s t a t e had subscribed one half, the c o m p a n y — a f t e r a number of lean years—was by this time p a y i n g annual dividends of about twelve percent. Contentedly collecting tolls on the existing works, the company had little incentive to meet the growing demands f o r f u r t h e r improvements on the r i v e r ; and it possessed neither the funds nor the a u t h o r i t y nor the ambition to extend the route across the mountains. Appointment of the com-

88

APPALACHIAN

COMPETITION

mission reflected t h e l e g i s l a t u r e ' s concern with this l a r g e r aim. J o h n M a r s h a l l a n d his fellow "Commissioners t o view c e r t a i n rivers within the C o m m o n w e a l t h " proceeded—-evidently

during

recess of the S u p r e m e C o u r t — t o examine the u p p e r p a r t of the J a m e s R i v e r , a r o u t e a c r o s s t h e m o u n t a i n s , a n d then the K a n a w h a t r i b u t a r i e s , t h e G r e e n b r i e r a n d the New, as f a r as the G r e a t F a l l s of the K a n a w h a . T h e y concluded t h a t no e x t r a o r d i n a r y difficulties would be e n c o u n t e r e d in the improvement of navigation on the u p p e r J a m e s a n d the G r e e n b r i e r or in the c o n s t r u c t i o n of a t w e n t v eight-mile t u r n p i k e over the m o u n t a i n s between them. T h e y had more d o u b t s a b o u t u p s t r e a m navigation on the New River, because of the velocity of the c u r r e n t , b u t on this took

courage

f r o m t h e reflection t h a t the s t e a m b o a t , then in its i n f a n c y , would doubtless be m a d e m o r e efficient and powerful. As to the value of t h e work, the commission's

findings

were

e m p h a t i c a n d positive. O p e n i n g the communication would be a g r e a t stimulus t o a g r i c u l t u r e on the immediate route. Still more i m p o r t a n t was t h e o b j e c t i v e of winning the t r a d e of the Ohio Valley. W a r n i n g t h e l e g i s l a t u r e of the possible effect of " t h e immense works m e d i t a t e d in New Y o r k , " the Commissioners a r g u e d t h a t this t r a d e would n o t use the r o u n d a b o u t lines of communication t h r o u g h New Y o r k S t a t e or by the m o u t h of the Mississippi if Virginia seized its o p p o r t u n i t y to open u p the much s h o r t e r r o u t e by the J a m e s o r t h e P o t o m a c : In a contest for this interesting prize, the states through which these rivers run have geographical advantages, the benefit of which they can lose only by supineness in themselves, or by extraordinary exertions in others. T o this a p p e a l to the s t a t e ' s competitive s p i r i t , the Chief J u s t i c e a n d his colleagues added t h a t completion of this " g r e a t c e n t r a l channel of c o m m u n i c a t i o n by w a t e r " would be of value to the entire n a t i o n a n d would serve t o "cement more closely the union of the eastern a n d western s t a t e s . "

69

T h e second of these e a r l y r e p o r t s was presented in 1815 by the assembly's C o m m i t t e e on R o a d s and N a v i g a t i o n under the chair-

APPALACHIAN

COMPETITION

89

nianship of Charles F . Mercer, who was later a congressman and president of the Chesapeake and Ohio Canal Company. T h e rep o r t ' s concern was with the extension and sjstematization of the movement f o r internal improvements, which already had behind it a body of tradition and experience. I n colonial Virginia the legislature had from time to time authorized associations of gentlemen to raise subscriptions f o r the clearing of rivers or the building of the roads, sometimes adding the privilege of a l o t t e r y . T h o m a s Jefferson recalled with satisfaction his efforts in initiating an improvement in the Rivanna R i v e r . 7 0 I n 1785 the state of Virginia had taken p a r t in launching the P o t o m a c as well as the James p r o j e c t s , and it purchased 120 shares of the stock of the Potomac Company. I t had also made subscriptions to the stock of a local river-improvement company and of a turnpike; and it had done the same f o r the Dismal Swamp Canal Company which was to make a connection with the waters of N o r t h C a r o lina. W i t h this background, the Committee felt that it could take f o r granted the general acceptance of governmental responsibility f o r internal improvements. T h o u g h there might have been differences of opinion on " t h e expediency of controlling the voluntary direction

of

the

wealth

and

labor

of

individuals . . . there

never," it said, had "existed a doubt, but that it is the duty, as well as the interest of every g o o d government to facilitate the necessary communication between its citizens." N e x t perhaps " t o the enjoyment of

civil liberty

i t s e l f " were the blessings which

governments could secure to their people " b y g o o d roads, navigable rivers and canals." T h e argument applied with particular f o r c e to Virginia, which had " s o many advantages to improve and so many obstacles to overcome" and which had allowed so much of her commerce to "pass out of her hands to enrich the coffers of her neighbors." A l l this might equally have appeared in the Marshall report. W h a t is distinctive in the second document is its concern with improving the method of state action :

90

APPALACHIAN

COMPETITION

Should the General Assembly determine to patronize by application of the public revenue all such works as are likely to be of great public utility, it becomes important to decide whether an improvement may not be made in the mode heretofore pursued, of extending to them that patronage. T w o difficulties had to be m e t : blunders in the operation of p a r ticular enterprises, and mistakes or favoritism in the choice of p r o j e c t s to be undertaken. T h e Committee believed t h a t all the canal companies thus f a r organized in Virginia had suffered " f o r want of skill in their c o n d u c t . " Their directors had generally been "public-spirited p r i v a t e gentlemen" serving without

com-

pensation. No company had employed or would be able to employ the full-time service of a trained engineer. This was a want the s t a t e must supply. T h e second problem was t h a t of the choice of p r o j e c t s f o r s u p p o r t . This was difficult f o r the legislature, both because of lack of expertness and because of " t h e variety of opinions always existing in an Assembly representing many local interests." T o meet this the Committee made two recommendations: a b o a r d should be established t o "collect and p r e p a r e f o r the General Assembly, the f a c t s and information necessary to c a s t " sufficient light upon each application for s u p p o r t ; the s u p p o r t should be given not by special a p p r o p r i a t i o n but f r o m a general improvement f u n d set u p in advance. T h o u g h each subscription would still require a specific a c t of the legislature, it should be made under uniform conditions a p p l y i n g to all approved p r o j e c t s . I n f o r m u l a t i n g these conditions the Committee made explicit its philosophy of mixed enterprise. I t could never be to the state's interest " t o become the sole p r o p r i e t o r of all the public works within its t e r r i t o r y . " T h e r e might be cases in which s t a t e ownership of a p a r t i c u l a r road or canal would be advisable "in order to accomplish some g r e a t commercial or political p u r p o s e " ; b u t this should not be the general rule, since experience shows t h a t internal improvements "will be more economically made, and b e t t e r

APPALACHIAN

COMPETITION

91

repaired, if their management be left to the individuals who subscribe to their stock with a view to private g a i n . " W h a t , then, should be the functions of the state? Since there are many works essential to its prosperity which cannot secure sufficient capital and which cannot be expected to yield returns until population and commerce follow the line of the improvement, the state must provide financial support and it must also exercise a degree of supervision. It should, however, perform both these functions in such a way as to give the greatest possible encouragement to private and local initiative. Its control over the mixed enterprises "should extend no farther, than to correct or prevent such abuses on the community at large, as might be apprehended from the too eager incentive of gain." Moreover, the terms of its financial contributions should be devised to give them the maximum effectiveness in stimulating private investment: "The Commonwealth should subscribe so much, to their stock, and on such terms as will suffice to elicit individual wealth for public improvement." 71 It was the second of these two reports which resulted in the earlier legislative action. The recommendations of the Mercer Committee were fully embodied in the act of February 5, 1816, creating the Fund for Internal Improvements and the Board of Public Works. The Fund was to include the state's small existing investment in improvement companies and its much larger holdings in bank stock, together with any future bonuses for the extension, modification, or creation of bank charters. The initial assets, taken at face value, were as follows: 7,947 shares 3,334 250 125 70 70 125y2 "

Bank of Virginia Farmers Bank of Virginia James River Co. Appomattox Co. Dismal Swamp Canal Co. Potowmac Co. Little River Turnpike Co.

$794,700.00 333,400.00 50,000.00 12,500.00 17,500.00 31,111.11 12,550.00 $1,251,761.11

APPALACHIAN

COMPETITION

Income from these securities, and any returns from new enterprises supported by the Board, were to constitute a permanent revolving fund to be used for subscription to the stock of improvement companies. This fund was to be managed by a Board of Public Works consisting of the Governor as president ex officio, the Treasurer, the Attorney General, and ten private citizens selected to give representation to each of the state's principal geographic areas. The Board was to employ a Principal Engineer and with his aid was to examine the proposals for aid to particular improvements. Its reports must includc "the surveys, plans and estimated expenses of such new works as they may recommend to the patronage of the General Assembly." F o r such patronage the act laid down specific terms. The sponsors of each project approved by the legislature must raise by subscription three fifths of the amount needed. The Board would then subscribe the other two fifths and appoint its proportional share of the directors. Dividends on the state's portion of the stock, however, would be deferred until the private subscribers had received six percent on their investment. B y this device the Committee believed that "a much smaller subscription of public money [would] suffice to draw forth private enterprise." The purpose of the measure was to give systematic encouragement to individual improvements. Initiative was deliberately decentralized, and the essence of the system was "to call on each section of the State for their three-fifths, who apply for their portion of the public funds."

72

The recommendations of the Marshall Commission were translated into legislation much less promptly. Plans for the prosecution of the James-Kanawha enterprise were not "mature for the decision of the Legislature" until early in 1820.' 3 By this time, after recommendations by the Board of Public Works and surveys by its engineers, the proposals included the replacement of part of the existing improvements by an independent canal, the con-

APPALACHIAN C O M P E T I T I O N

93

struction of a canal along the upper James to the foot of the Alleghenies a t what is now Covington, the building of a turnpike to the Great Falls of the Kanawha, and the improvement of the lower river to its junction with the Ohio. "Improvements of such magnitude," said the Board, could "properly be undertaken by the General Assembly alone." ' 4 The state assumed the full responsibility—in 1820, by making the James River Company its agent, and in 1823, by completely taking over the management of the company. Stockholders in the old company were guaranteed twelve percent dividends f o r the first twelve years and fifteen percent thereafter. On these improvements the s t a t e borrowed and spent about $1,300,000. W i t h this sum, a canal of some t h i r t y miles was built from Richmond to Maiden's Adventure, superseding earlier works, and another canal of seven miles was built a t the point where the river breaks through the Blue Ridge. Some work was done on the lower p a r t of the Kanawha River. The Kanawha T u r n p i k e was built across the mountains and, a t the end of the decade, extended to the Ohio River with a t o t a l length of two hundred miles. This became a well-traveled highway, and the canals on the James made possible some increase in traffic and decrease in tolls. But this fell f a r short of the aim of a canal to the foot of the mountains; and discouragement over meagre results and high costs, together with opposition from other sections of the state, led before the end of the eighteen-twenties to an almost complete stoppage of appropriations and of new construction. Meanwhile the Fund and Board had begun to operate according to the original plan. Subscriptions from the revolving fund were made to a number of undertakings, and holdings in improvement stocks rose to some $800,000 in 1831. 75 But progress was neither as rapid nor as widely diffused as the authors of the plan had hoped. F o r this there were several reasons. As the B o a r d pointed out in its second r e p o r t , "the usual contributions from individuals" could hardly be expected from the sparsely settled valleys

94

APPALACHIAN

COMPETITION

of the K a n a w h a a n d the Ohio. R e t u r n s on the new investments were very small, t h o u g h income f r o m the banks tended to increase. F r o m 1 8 2 5 on, moreover, i n t e r e s t on the s t a t e ' s loans f o r the J a m e s R i v e r p r o j e c t was c h a r g e d a g a i n s t the F u n d ; and

the

deficits i n c u r r e d on this a c c o u n t amounted to over $200,000 bv 1831. T h e J a m e s R i v e r debt, said Governor T y l e r " o p e r a t e s as a m o t h on the f u n d set a p a r t f o r the beneficent o b j e c t of S t a t e i m p r o v e m e n t , in violation of the principle on which the f u n d was c r e a t e d " ; a n d the B o a r d itself p o i n t e d out t h a t its income "was t o t a l l y insufficient t o effect a n y extended scheme of improvement c o m m e n s u r a t e with t h e g r e a t i n t e r e s t s of the S t a t e . "

18

U n d e r these c i r c u m s t a n c e s two significant a l t e r a t i o n s were made in s t a t e policy. T h e first was t o p e r m i t the B o a r d to borrow money on the credit of the s t a t e f o r its subscriptions to improvement c o r p o r a t i o n s — a power g r a n t e d first in 1832 f o r a small loan a n d l a t e r extended a n d made general by legislation a t the end of the decade. T h e second was t o build certain improvements, p a r t i c u l a r l y r o a d s beyond the m o u n t a i n s , entirely with public f u n d s ; modest investments in " s t a t e w o r k s " began t o a p p e a r in the a c c o u n t s in 1837. 7 7 A c t i v i t y on the J a m e s River r o u t e was revived t h r o u g h a n o t h e r r e o r g a n i z a t i o n . Since the l e g i s l a t u r e was unwilling t o a p p r o p r i a t e f u n d s f o r c o n t i n u a t i o n of the e n t e r p r i s e as a s t a t e work, the friends of t h e p r o j e c t secured the o r g a n i z a t i o n in 1 8 3 5 of a new mixed e n t e r p r i s e , t h e J a m e s R i v e r and K a n a w h a C o m p a n y . I t s c a p i t a l i z a t i o n of $ 5 , 0 0 0 , 0 0 0 included the p r o p e r t y of the s t a t e owned J a m e s R i v e r C o m p a n y , valued a t $1,000,000, a n d $2,000,000 in new f u n d s f r o m the s t a t e . P r i v a t e subscriptions were very h a r d t o o b t a i n , in spite of eloquent a p p e a l s by Chief

Justice

M a r s h a l l and o t h e r s , and in spite of the agreement t h a t the s t a t e was never to c a s t more t h a n a minority of the votes in stockholders' meetings. T h e remaining $2,000,000, as finally secured, included a s u b s c r i p t i o n of $ 6 5 0 , 0 0 0 by the city of Richmond, obtained a f t e r close s t r u g g l e s both in the city a n d in the leg-

APPALACHIAN C O M P E T I T I O N

95

i s l a t u r e ; a subscription of $100,000 f r o m the c i t y of L y n c h b u r g ; and $500,000 subscribed by the B a n k of Virginia u n d e r p r e s s u r e f r o m the s t a t e . T h e new c o m p a n y completed a continuous i m p r o v e m e n t a l o n g the J a m e s f r o m R i c h m o n d t o B u c h a n a n , a d i s t a n c e of 197 miles, m a k i n g little use of the old works a n d r e l y i n g on

slackwater

navigation f o r only a small p a r t of the r o u t e . T h e c a n a l was opened t o L y n c h b u r g in 1840 b u t did n o t r e a c h B u c h a n a n ,

fifty

miles f u r t h e r on, until eleven y e a r s l a t e r . T h e c o m p a n y also rebuilt the Richmond Dock into an effective o u t l e t t o t i d e w a t e r , c o n s t r u c t e d c e r t a i n side connections, a n d did some work on the K a n a w h a . I t b e g a n b u t never completed t h e section of the c a n a l t h a t was to t a k e it t o the f o o t of the m o u n t a i n s a t Covington. T h r o u g h o u t the period the c o m p a n y was in c o n t i n u a l

financial

trouble, in p a r t because of the difficulty of d i s p o s i n g of the municipal and s t a t e bonds d u r i n g depressions, a n d in p a r t because of the unexpected costliness of the work. B y 1 8 6 0 it h a d borrowed some $5,500,000 mainly f r o m the s t a t e o r with t h e s t a t e ' s g u a r antee ; and its net o p e r a t i n g income, t h o u g h s u b s t a n t i a l in the fifties, had fallen s h o r t of interest p a y m e n t s by a b o u t

$500,-

000. T h e canal provided an outlet f o r the s u b s t a n t i a l a g r i c u l t u r a l p r o d u c t i o n of the G r e a t Valley, and its t o n n a g e reached a peak in 1860, with an a m o u n t more t h a n f o u r times t h a t of the s t a t e ' s l a r g e s t r a i l r o a d . By this time, however, its net income h a d a l r e a d y begun to decline as a result of r a i l r o a d competition. T h e c h a r t e r of the J a m e s River and K a n a w h a C o m p a n y made provision f o r the possibilities of a r a i l r o a d f r o m the head of the canal across the mountains or of a c o n t i n u o u s r a i l r o a d line f r o m Richmond t o the Ohio River. Even f r o m the beginning t h e r e was some sentiment in f a v o r of the l a t t e r a l t e r n a t i v e ; b u t the m a n a g e m e n t , t h o u g h sometimes willing to concede the u t i l i t y of a r a i l r o a d as a "mere p o r t a g e , " m a i n t a i n e d ultimate c o n s t r u c t i o n

its belief in

of an all-water connection. As l a t e

the as

1860, plans f o r c o n t i n u i n g the canal to the K a n a w h a , either by a

APPALACHIAN"

96

COMPETITION

further reorganization of the company or by its sale to a firm of French engineering contractors, received the approval of the legislature and the company. 78 T h e remainder of the state's aid went almost entirely to railroads. T h e first m a j o r enthusiasm f o r railway building coincided with the decision to borrow heavily in the late thirties, and the railroad companies shared the proceeds of the loans with the James River and Kanawha in what the latter's historian describes as a log-rolling operation. 78 New investment averaged about a million dollars a year from 1836 through 1839. In addition to stock subscription, the state sometimes gave further encouragement by loans to the companies or guarantees of their bonds. In the depression years of the early forties, these loans were converted into preferred stock; and the amount of new public aid, as in other states, dropped almost to nothing by the middle of the decade. In sharp contrast with Maryland and Pennsylvania, however, Virginia increased its volume of state aid at the end of the eighteen forties; and the terms of subscription were made even more generous than before, with the state contributing three fifths of the capital. In 1851, the Board boasted that Virginia was at last "awake to the transcendent importance" of internal improvements and that the commonwealth stood "not prostrate in repudiation, a f t e r the example of so many states . . . but with her bonds commanding high premiums in the markets at home and abroad."

80

F o r the years 1850 to 1861 inclusive, the Board's borrowings averaged more than $2,000,000 a year, with peaks of

almost

$4,000,000 in 1853 and 1854. From 1837 on, moreover, the state had made a practice of meeting the Board's deficits on current income account from appropriations; and after the heavy borrowings of 1853, these sums averaged nearly $2,000,000 a year. Expenditures in the later years included two notable cases of state works, each intended to overcome a mountain barrier considered too formidable even f o r generously-aided mixed enter-

APPALACHIAN COMPETITION

97

prise. When the Louisa (later Virginia Central) Railroad Comp a n y found the Blue Ridge t o o much of an obstacle, the Board of Public W o r k s tunneled the mountain and built some eighteen miles of track at a cost of about $ 1 , 0 0 0 , 0 0 0 and then turned its road over to the company for operation. T h e more important case was t h a t of the Covington and Ohio Railroad which was to cross the second line of mountains and complete the connection between the James River and the Ohio which the James River and Kanawha had failed to make. More than $ 3 , 0 0 0 , 0 0 0 were spent on the construction of "this great national highway," but the work remained unfinished at the outbreak of war. 8 1 In the administration of the extensive s t a t e p r o g r a m , both legislature and B o a r d continued to follow the general policy laid down by the 1 8 1 6 committee of reliance on individual initiative and limitation of state control. P r a c t i c e s developed for a system in which the s t a t e held a minority interest remained largely unchanged when the financial basis of mixed enterprise was altered. T h e state's vote in stockholders' meetings was deliberately held to a minority after its standard subscription became three

fifths

instead of two fifths, and after the s t a t e supplied more than half of the c a p i t a l for the J a m e s River and Kanawha Company. T h e annual reports and still more the letter books of the Board of Public W o r k s , with their instructions to the state proxies and s t a t e directors, show its self-restraint in the exercise of its power and its g r e a t reluctance "to obtrude upon the detailed administrat i o n " of the various companies. An extreme case was that of two state-aided railroads which quarreled over the interchange

of

freight until one railroad built a line parallel with the other. T h e B o a r d deplored the dissension but made no a t t e m p t to use the state's power as a stockholder to compel agreement. 8 2 A t the end of the period, the s t a t e was building the Covington and Ohio Railroad on the same route on which the James River and Kanawha C o m p a n y — w i t h legislative a p p r o v a l — w a s still planning an allwater connection.

98

APPALACHIAN

COMPETITION'

T h e r e were, however, p o i n t s a t which the B o a r d exerted firm pressure. F r o m the beginning it insisted, with increasing and subs t a n t i a l success, on full a n n u a l r e p o r t i n g on the p a r t of all improvement companies. T h e B o a r d also provided i m p o r t a n t engineering services and where necessary insisted on their use. I t s P r i n c i p a l Engineers, including Loammi Baldwin of Massachusetts and the F r e n c h m a n , Charles Crozet, b r o u g h t new technical standa r d s to replace what Crozet called the crudities of " t h e p r a c t i c a l m a n . " In 1831 the B o a r d resolved to require a survey and location before payment of the subscription, and state proxies and direct o r s were instructed to vote a g a i n s t d e p a r t u r e s from plans laid down by the Principal Engineer. 8 3 By these means and by checking occasional scandals, the B o a r d exercised i m p o r t a n t functions of surveillance and oversight. In a system f r a n k l y based on the principle of localism, it is not surprising t h a t s t a t e money was spent on certain improvements t h a t were really "limited to neighborhood convenience" and t h a t the competition of communities for "a little of the sunshine of public f a v o r " led to jealousies and charges of favoritism. 8 4 A legislative committee declared t h a t Virginia harbored more local and discordant interests t h a n any other state. A classicist from the Tidewater region charged the people of the West with wishing to make some splendid " A p p i a n or Flaminian w a y " a t the expense of eastern t a x p a y e r s , 8 5 and the men from the mountain counties in t u r n complained t h a t most of the state's money was spent east of the Blue Ridge. W i t h o u t a u t h o r i t y to impose a general plan, the B o a r d nevertheless exerted its influence to prevent the dissipation of energies on improvements t h a t did not fulfill what it considered the original p u r p o s e of connecting remote p a r t s of the state. F o r this p u r p o s e it included in the questionnaire to be filled out f o r each p r o j e c t the heading, "Links of Connection." In 1838 it declared t h a t the s t a t e m a p p r e p a r e d under its direction would serve to call a t t e n t i o n to the " c h a s m s " t h a t remained to be filled in. In its 1851 r e p o r t the B o a r d claimed t h a t a coordinated net-

APPALACHIAN

COMPETITION

99

work of railways was in fact emerging, of which the principal elements were the line of roads from the Potomac to the North Carolina border and four routes extending from it to the west. 86 Of these, the Virginia and Tennessee, making the southwestern connection, was completed within the following decade. In addition to the contributions of the state government, substantial sums were invested in internal improvements by Virginia local governments. The counties, which had had the principal responsibility f o r road building in colonial times, were active in encouraging the building of turnpikes, and a number of statebuilt or state-aided roads were l a t e r transferred to their jurisdiction. Two counties on the upper Ohio made railroad stock subscriptions of $ 6 5 0 , 0 0 0 . Of the municipal subscriptions, those of Richmond and Lynchburg to the James River and Kanawha Canal, and of Wheeling to the Baltimore and Ohio Railroad, have already been mentioned. Alexandria subscribed $ 4 5 0 , 0 0 0 to the Alexandria Canal Company and invested another million dollars in railroads. Petersburg made an even larger commitment to railroads in its vigorous efforts "to add to the trade of the town." The municipality provided p a r t of the capital and much of the impetus f o r the Petersburg Railroad, one of the earliest in the state, which extended southward to t a p the Roanoke River trade and ultimately become p a r t of the main north-south line. In 1 8 4 7 the town bought out both the state and private interests in the City Point Railroad. In 1 8 4 9 the state, recognizing Petersburg's "energetic and enterprising spirit," turned over its stock in the Petersburg Railroad "to the common hall of the town" for use in constructing still another railroad, the Southside. 87 According to the figures of Milton S. Heath, the total municipal aid to railroads in this period was $ 6 , 3 0 2 , 0 0 0 and the total of county aid $1,625,400.88 The records of the state Fund show a total holding in improvements in 1 8 6 1 of more than $ 3 9 , 0 0 0 , 0 0 0 , of which about $6,500,0 0 0 was in state works. If allowance is made f o r earlier invest-

100

APPALACHIAN COMPETITION

ments that had been disposed of by the Fund and for the state's g u a r a n t e e of the improvement bonds of companies and municipalities, the total of state aid and commitment in the construction of internal improvements was a t least $43,000,000. 8 9 T a k i n g account of the contributions of local authorities, the t o t a l of public money and credit committed to the improvement of transportation facilities cannot have been much less than $55,000,000, a substantial sum for a commonwealth of planters and farmers. On this l a r g e outlay, the financial returns had been f a r from s a t i s f a c t o r y . For the entire period from 1816 through 1861, the state's current expenditures on its investment program, including interest, exceeded revenue from improvements by almost $22,500,000, a deficiency made up by current appropriations and revenue from bank investments. Obsolescence had taken a heavy toll on the earlier improvements. Only one navigation company was p a y i n g dividends in 1860, and a committee of the House of Delegates calculated the r a t e of return on the state's investment in "minor improvements, including turnpikes, plank roads and bridges" as .007 percent. 9 0 On the other hand, half of the total investment and much more than half of the railroad investment were less than eight y e a r s old in 1860, and the state's annual income from railroads was over $300,000 and evidently on the increase. The Board of Public W o r k s published annual tables of " r a i l r o a d progress," and miles in operation had risen to 1,350. Instead of showing disillusion in the face of the figures of return, the legislature of 1860—61 authorized the largest appropriations in the history of the p r o g r a m . Thus Virginia ended the antebellum period, not in revulsion against state p a r t i c i p a t i o n in internal improvements, but with actions that appeared to reflect pride in its accomplishments and confidence in the soundness of its system. The successes of the Virginia system were l a r g e l y in the more settled areas, in which a t least some "individual wealth" could

APPALACHIAN

COMPETITION

be "elicited for public improvement." Its greatest

101

shortcoming

was the failure to overcome the Appalachian Barrier. In the days before the railroad, the Kanawha Turnpike won only a small part of the trade of the Ohio Valley ; 91 and war intervened before the completion of a railroad across the mountains to rival the Pennsylvania or the Baltimore and Ohio, which reached the river on Virginia soil but belonged to what Virginians regarded as "the Baltimore drainage." In spite of the prestige of the great names of Washington and Marshall, in spite of repeated warnings that the commonwealth was being "circumvallated" by more enterprising neighbors, 92 and in spite of the added argument in the sixties for an east-west route that would not pass over "a foot of abolitionist soil,"

93

ante-bellum Virginia never succeeded in

making effective use of the James-Kanawha gateway. If part of the explanation lies in the persistence with which the leaders of the company clung to their belief in an all-water route, another and significant part rests in the inherent contradiction between a system of orderly grants-in-aid to local enterprise and the concentration of funds and effort required for the accomplishment of a major developmental work. The fourth of the possible mountain gateways suggested by Gallatin was to be found between the Tennessee and either the Savannah or the Santee. This pairing of rivers differs sharply from the other three both in its geography and in its transportation history. In each of the more northerly cases, the eastern river, the Susquehanna or the Potomac or the James, breaks its own way through the Blue R i d g e ; but in this fourth case the headwaters of the Savannah and of the entire Santee system lie to the east of the mountains. Though the tributaries of the western river, the French Broad and the Little Tennessee, cut their way through the western part of the mountain mass, the steep and unbroken eastern wall of the Blue Ridge presented a particularly formidable obstacle to internal improvement. N o railroad crossed

102

APPALACHIAN

COMPETITION

the A p p a l a c h i a n B a r r i e r in this region until a f t e r 1 8 8 0 M and it has never provided a m a j o r east-west a r t e r y of t r a n s p o r t a t i o n . Nevertheless both N o r t h and South Carolina included p l a n s f o r building across these mountains in their ante-bellum p r o g r a m s of internal improvement, and the l a t t e r a t t r a c t e d p a r t i c u l a r l y wides p r e a d attention by its ambition to draw to Charleston the t r a d e of the Middle W e s t and thereby make it " t h e New Y o r k of the South."

95

I n colonial times, the S o u t h Carolina legislature assumed occasional responsibility f o r river improvements bv the a p p o i n t ment of commissioners who were authorized to commandeer the services of local residents ; in 1785 a more general plan of river improvement was outlined. 9 6 T h e Santee Canal, which connected the state's principal h a r b o r with its principal river system, was built between 1793 and 1800 by private investors, who received from the s t a t e only the privilege of conducting a lottery to raise f u n d s for the enterprise. T h e purpose, in the words of its chief engineer, was " t o give the I n h a b i t a n t s of the U p p e r C o u n t r y an O p p o r t u n i t y to receive a R e w a r d f o r their I n d u s t r y , which would a t the same time benefit the M e t r o p o l i s . "

97

Gallatin's

Report

cited this improvement along with the Middlesex as the c o u n t r y ' s two m a j o r achievements in canal building; but the Santee Canal, although kept in operation f r o m duplicating

the

until the eighteen-fifties, was

financial

success

of

the

far

Massachusetts

enterprise. T h e beginnings of a s t a t e system of internal improvements d a t e f r o m 1817 with the establishment of the office of Civil and M i l i t a r y Engineer, the purchase of a p r i v a t e company which had a t t e m p t e d improvements on the C a t a w b a and the W a t e r e e , and the subscription to seven of the twenty shares of the Winyaw and W a n d o Canal Company. In the following year the legislature voted an a p p r o p r i a t i o n of $1,000,000 to be spent a t the r a t e of $250,000 p e r annum. T h e p r o j e c t s included the improvement of almost all of the state's many rivers, both above and below the fall line,

APPALACHIAN COMPETITION

103

together with sections of intercoastal waterway and a turnpike from Charleston to Columbia. T o t a l state expenditures through 1834 approached $2,000,000, of which about $1,250,000 was f o r canals ; and the work done included at least some improvement on nearly 2,000 miles of waterways and the construction of 25 miles of canals and 147 miles of roads. A f t e r 1819 the work was directed by a Board of Public W o r k s and later by a Superintendent of Public W o r k s . T h e i r efforts, according to a contemporary, were " a b l y seconded by the personal exertions of gentlemen of fortune and influence," who took p a r t in the superintendence and contributed the labor of their slaves in the slack season. 98 But the net operating returns on these enterprises never approached the interest charges, and the contributions to development as well as the financial results were on the whole disappointing. A legislative committee attributed p a r t of the difficulty to the diffusion of e f f o r t over such a multiplicity of p r o j e c t s ; and a disillusioned governor declared that there was hardly a public work in the state, except the State R o a d and the Columbia Canal, that "would find a purchaser . . .

at public auction."

99

B y this time a more novel and a more successful undertaking had been completed by the method of mixed enterprise. T h e South Carolina Railroad and Canal Company, which was chartered in 1827, completed in 1833 what was then " t h e longest railroad in the w o r l d , " running from Charleston to H a m b u r g on the Savannah River, a distance of 136 miles. I t s locomotive, the " B e s t Friend of Charleston," was the first built in the United States f o r railroad use.100 T h e name was a reflection of the road's p r i m a r y purpose to divert the cotton trade of inland Georgia

and

South

Carolina that would otherwise g o down-river to Savannah. T o t a l cost to the date of completion was about $950,000. T h e m a j o r backing was provided by merchants and other private individuals in Charleston; but this was supplemented by a stock subscription of $20,000 by the C i t y Council and a loan of $100,000 f r o m the state. When the returns on the road proved disappointing in the

104

APPALACHIAN COMPETITION

early years, this loan was extended for an additional ten years as " a liberal indulgence" toward a company "which risked so much in a problematical project." 101 Meanwhile Charleston merchants had begun to look much further afield in their attempts to increase their city's trade. The new proposal was for a railroad over the mountains from Charleston to Cincinnati. "What a bold conception!" exclaimed the Charleston Courier. "What a magnificent p r o j e c t ! " 1 0 2 Its effect would be to give Cincinnati its nearest port on the Atlantic and to make Charleston "the Commercial Emporium of the South." Southern rice and cotton would be exchanged for western meat and grain, 103 and Charleston would become the great outlet for the export of the produce of the Middle West. A political argument supported the commercial one; and Senator Robert Y. Hayne told his fellow Carolinians that the trade connection would give Middlewesterners a better understanding of institutions, including slavery, and an interest "in defending and maintaining them." 104 Meetings of interested citizens assembled in the proposed terminal cities and railroad conventions were held at points on the projected route—Asheville, North Carolina, on the French Broad, and Knoxville on the Tennessee. On the last of these occasions, Senator Hayne offered as a toast: "The South and West—We have published the banns." 105 To carry out the project, South Carolina granted a charter in 1835, and supporting action was taken in the legislatures of North Carolina, Tennessee, and Kentucky. Since the last of these imposed the condition of a branch to Louisville, the company became the Louisville, Cincinnati, and Charleston Railroad. Funds were difficult to raise, and very few private subscriptions were made outside South Carolina. A further appeal to the legislature in 1836 brought substantial aid: a state subscription of $1,000,000 and the privilege of establishing a banking corporation whose stock could be held only by the stockholders of the railroad. The new provisions required the raising of a total

APPALACHIAN

COMPETITION

105

capital of $8,000,000 before validation of the state subscription or organization of the South Western Rail Road Bank. The prospect of banking profits was an attractive one, but the canvass for subscribers coincided with the financial crisis of 1 8 3 7 ; and the requisite figure was reached only with the aid of subscription of $650,000 bv the state of Tennessee and $50,000 by the city of Charleston and by counting the assets of the existing South Carolina Railroad and Canal which the new company absorbed through an exchange of stock. 106 After these beginnings the later history is anticlimactic. On the basis of surveys in the mountain region, the directors adopted the more easterly route by way of the French Broad River, though Calhoun and others preferred a line to the Little Tennessee. 107 Since no railroad even approached the mountains from the Carolina side, a sensible first step, once the South Carolina Company had been acquired, was to build a branch from its line to Columbia. Construction began in 1838 and the branch was completed in 1842 at a cost of about $2,250,000. Subscriptions were hard to collect in a time of deepening depression, and this effort exhausted the remainder of the company's funds. Long before the branch was finished, the great ambitions of a mountain crossing were abandoned as impractical. Tennessee and North Carolina subscriptions were returned, and in 1843 the new corporation gave up its more grandiose title and became the South Carolina Railroad. What it had accomplished was the completion of a useful and ultimately profitable rail connection between Charleston and Columbia, at a time when construction in many states had come to a complete standstill. What it had abandoned was the attempt to overcome the mountain barrier. The challenge was renewed in the eighteen-fifties. By this time railroads in the Piedmont gave a base from which to enter the mountain country, and the proposal was to make the crossing by a more westerly route between the headwaters of the Savannah and the Little Tennessee near the point at which the three states of

106

APPALACHIAN COMPETITION

N o r t h and South Carolina and Georgia meet. F o r this purpose the Blue R i d g e R a i l r o a d Company was chartered in 1852 with subsidiaries in the other three states concerned. P r i v a t e subscriptions were very much smaller than f o r the earlier p r o j e c t ; and almost the entire financial support came from the state of South Carolina, which subscribed $1,000,000 and endorsed $1,000,000 of the company's bonds, and from the C i t y Council of Charleston, which took $1,049,000 of the company's stock. T h e Blue R i d g e R a i l r o a d confronted from the outset the difficulties of building through mountain terrain, and plans called f o r the digging of a tunnel of

nearly

6,000 feet through the solid granite of Stump House Mountain. W o r k progressed very slowly, in p a r t because of troubles with unsatisfactory contractors ; and an additional subscription of $300,000, made by the state in 1858, was soon spent. When work was finally

abandoned in 1861, thirty-three miles of track had been

laid, and the tunnel had been carried with g r e a t e f f o r t two thirds of the way through the mountain. 108 B y contrast a network of less ambitious railroads was completed between 1847 and 1861 by a combination of private and public effort. A number of short roads in the Piedmont were started by local subscriptions, with some town aid. T h e city of Charleston subscribed $400,000 f o r

a road to connect

with

Wilmington,

N o r t h Carolina, and $260,000 f o r a road to Savannah.

State

aid was added in almost every case but without attempt to influence the planning or choice of routes. Subscriptions t o a dozen companies were made f r o m a "securities revolving f u n d " based originally on the state's holdings in the South Carolina R a i l r o a d Company and the South Western R a i l r o a d Bank. In this way a total

of

state subscriptions

to

railroad

companies

amounting

nominally to nearly $4,500,000 was made at an original cost to the state of a little more than $2,500,000. 109 T h e state also guaranteed railroad bonds totaling $4,680,000. T o g e t h e r with the small amount of loans, this brings the figure of state participation and commitment to well over $9,500,000. In the same period

municipal

APPALACHIAN C O M P E T I T I O N

107

aid amounted to a little more than $4,000,000, of which Charleston provided all but a small amount. 110 South Carolina built one of the country's first canals and one of its first important railroads. Yet its public effort in internal improvements, in spite of the substantial contributions of the city of Charleston, was on a lesser scale than in the states previously discussed. During the railroad period, there was no state organ attempting the role of central study and surveillance performed by the Virginia Board of Public Works. On the other hand, private railroad investment, beginning with the Charleston and Hamburg, was of substantial amounts. In 1861 the total capitalization of the railroads was $22,000,000, and about 700 miles of road were in operation. There were no defaults before the Civil W a r on the bonds endorsed by the state, and the workability of the state's revolving fund was an indication that the earlier lines had become substantial properties. As for the "transmontane" railroad that was to surpass the achievements of Xerxes and Hannibal, 1 1 1 the unfinished tunnel in Stump House Mountain was evidence of complete failure. Ante-bellum South Carolina had been unable either to amass the resources needed for so great an undertaking or to arrive at a clear recognition that the project was economically impracticable. 112 The western counties of North Carolina lay across both of the proposed routes between the Tennessee Valley and the eastern waters. Though the state's ports were inferior to those of Charleston and Savannah and further from the mountains, there were nevertheless patriotic North Carolinians who argued that their territory provided the best of all natural routes from the Atlantic to the West. Proposals for a great central railroad extending from the seacoast across the mountains competed for attention with more local projects and with lines crossing the state from north to south. 113 Public support for these various undertakings was given on a scale comparable with that in South Carolina;

108

APPALACHIAN

COMPETITION

but private investment was much less, since there were no accumulations of wealth to match those of the Charleston merchants, and the major part of the burden was assumed by the state government. Early efforts in North Carolina resembled those of Virginia and South Carolina in philosophy and organization. Between 1815 and 1819, a series of committee reports and pamphlets prepared by Archibald D. Murphey outlined a comprehensive plan of measures to improve navigation on the state's rivers, to build highways in the mountain country, and to improve the inlets in the sandy barrier that separates the ports and sounds of North Carolina from the Atlantic. The first of these proposals included the principle of state subscription of one third of the stock of navigation companies formed for each of the state's primary rivers. The entire program included appointment of a Board of Internal Improvements and, "as a primary part of the Plan . . . the employment of a Civil Engineer of Science and Experience to direct this great work."

114

The plan was not adopted as a whole, but state subscriptions to the Roanoke and Cape Fear Navigation Companies were made in 1815. Four years later, the services of an experienced English engineer were secured and the Board for Internal Improvements was organized. "The leading objects of a system of Internal Improvements in North Carolina," said the Board in its 1821 report, "ought to be 1. To give to all our citizens an easy and commodious way of getting to market the productions of their industry. 2. To fix that market within our own limits."

115

The second of these purposes expressed a concern, like that of the Philadelphians in Pennsylvania, with the fact that so much of the state's produce found its markets in the neighboring states. Most of the trade of the Roanoke Valley went to Norfolk either overland or by way of the Dismal Swamp Canal, and much of the

APPALACHIAN

COMPETITION

109

trade of the central part of the state followed the river valleys down into South Carolina. I t was therefore argued that construction of a canal from the Catawba and the Yadkin to the Cape Fear to divert these shipments would have " g r e a t national" —i.e., state—importance. If these leakages to north and south could be checked, said the Committee on Inland Navigation, North Carolinians "might indulge the hope that a commercial city would grow u p " on their coast "equal in importance to Philadelphia, Baltimore and Charleston."

lla

The results fell f a r short of these aims. The state subscribed to the stock of companies organized to improve the navigation of six rivers, to attempt a canal between the Yadkin and the Cape Fear, and to cut a short intercoastal passage. A number of these subscriptions were made on condition that the companies "place the execution of their works under the direction of the Chief Engineer for the State, and the superintendence of the Board f o r Internal Improvements." Except on the Roanoke, for which Virginia's subscription was larger than North Carolina's and to less extent on the Cape Fear, little progress was made; and most of the companies abandoned their efforts. The failure of the program has been attributed partly to blunders made "before the aid of science and skill had been enlisted to direct the operations" and partly to the diffusion of effort among so many projects. 117 In any case the entire effort was on a very small scale, with meager private investment and a total state expenditure to 1833 of less than $300,000. North Carolina's railroad effort was much more substantial. A proposal for a great east-west railroad was made as early as 1828, in the Reverend Joseph Caldwell's "Numbers of Carlton"; and an internal improvement convention, held in November 1833, framed a comprehensive program

of

improvements, mainly

railroads,

designed to serve the interests of the various parts of the state. I t was proposed that these be built as state works at an estimated

110

APPALACHIAN COMPETITION"

cost of $5,000,000. T h e first a c t u a l railroad construction, however, which began in 1836, was done on two north-south lines initiated by p r i v a t e enterprise. One of these was the Wilmington and Raleigh, later the W i l mington and Weldon, built—as its second title indicates—to connect the state's chief port with the Virginia railroads on the northern border. T h o u g h the work was begun without public aid, subscriptions were h a r d to r a i s e ; and in 1837, the state, enriched by the windfall of the federal surplus revenue, agreed to subscribe two fifths of a capitalization increased to $1,500,000 and took two of the five places on the board of directors. During the difficulties of the depression y e a r s which followed, the state made possible the continuation of the work by endorsing $300,000 of the the company's bonds. The line of more than 160 miles was completed in 1840. B y 1845, net revenues had begun to exceed interest charges and dividends were paid r e g u l a r l y from 1851 on. In the l a t t e r y e a r the s t a t e transferred $200,000 of its stock in the company to aid a connecting road, the Wilmington and M a n chester, which continued the line to the southward with additional assistance from the city of Wilmington and from the state of South Carolina. T h e Wilmington, Charlotte, and Rutherfordton also received state encouragement, in the form of a bond endorsement of $ 2 0 0 , 0 0 0 for each twenty-five miles; and built northwestward into the Piedmont for more than a hundred miles, crossing the lines of t r a d e to South Carolina. The second of the original p a i r of railroads, the Raleigh and Gaston, was also begun in 1836 and completed in 1840. A shorter road with a more checkered history, it ran the eighty-five miles from the state's c a p i t a l to the Roanoke River, not f a r from Weldon, to connect with the P e t e r s b u r g Railroad. Private subscriptions along the route and in Virginia provided inadequate capital and the road received no windfall from the surplus revenue. The legislature was induced to endorse $500,000 of the company's bonds in 1839 and an additional $300,000 in 1841.

APPALACHIAN COMPETITION

111

On the latter occasion it took as security not only a new mortgage but a personal bond of $500,000 given by the stockholders and other individuals. Earnings failed to cover interest or even proper maintenance. T h e company defaulted on its interest payments in 1843, the personal bond proved uncollectible, and the state foreclosed in 1845. F o r six years the road was run as a state enterprise. Under a reorganization in 1851, the state retained a half interest valued a t $400,000 and invested an additional $87,500 to cover half the cost of a branch line from Gaston to Weldon. By the mid-fifties the Raleigh and Gaston was a dividend-paying road ; but the amount still due on the principal of the old endorsed bonds, plus payments already made for principal and interest and a small operating deficit incurred during the period of public management, exceeded the state's equity by more than $900,000. Neither of these companies met the demand for a great central railroad, and the Raleigh and Gaston ran directly counter to the ideas of the home market advocates by providing more efficient means for carrying North Carolina products to Petersburg and Norfolk. A second wave of railroad investment, in which the state provided the m a j o r p a r t of the funds, was devoted to a series of lines following in general an east-to-west direction. The first of these was the North Carolina Railroad, chartered in 1849 to run from Goldsboro on the Wilmington and Weldon through Raleigh to Salisbury and Charlotte. T h e state agreed to subscribe two thirds of the capital stock of $3,000,000 but only a f t e r $1,000,000 of private subscriptions were made and half of the sum paid. I t took the promoters two years to meet these conditions; and the selection of a somewhat roundabout route from Raleigh to Salisbury, which was made before the state was represented on the board of the company, suggests the importance attached to collecting subscriptions in each of the towns along the way. Even so, the $500,000 required to validate the state's contribution in 1852 was obtained only by inducing the contractors to begin the work and take payment in stock. The state subscribed a f u r t h e r $1,000,-

112

APPALACHIAN

COMPETITION

000 in 1855, bringing its ownership to three fourths. With this assistance and the flotation of a small bond issue, the company completed the road in the following year. Traffic waB substantial from the s t a r t ; and on the eve of the Civil W a r , though no dividends had yet been paid, operating revenue had risen to almost five percent on the original investment. The dream of a great central railroad still required extensions to the seacoast and across the mountains. T o accomplish these purposes the legislature agreed in 1855 to subscribe for two thirds of the stock of the Atlantic and North Carolina and the Western North Carolina railroads. The former was to build from Goldsboro via New Bern to the harbor of Beaufort. Since the capitalization was set at $1,600,000, this required the promoters to raise $533,400. They found few private subscribers, and the initial list fulfilling the requirement included $250,000 in county subscriptions and nearly $200,000 set to the account of contractors who agreed to accept payment partly in stock. By the time the bulk of the money had actually to be secured, the problem was complicated by the controversy over the location of the ocean terminus. The decision to place it on the western side of Beaufort Harbor rather than on the eastern side, on which the town of Beaufort was located, had the effect of sacrificing a subscription offered by the town, and jeopardizing that of Carteret County, but of obtaining substantial support from the proprietor of the new real estate development of Morehead City. Additional state aid was obtained in 1857 in the form of a $400,000 loan. 1 1 8 Actual construction offered no great difficulties, and the road was finished in 1858. The period of operation before the Civil W a r was too short to provide a test of the road's earning power, but there was little to suggest that it would turn Morehead City into a major port. The Western North Carolina undertook an enterprise that was geographically and financially much more formidable. Its purpose, as stated in the act, was to form a connection with the

APPALACHIAN COMPETITION

113

Mississippi Valley; and the legislature committed itself to providing $4,000,000 of a total capitalization of $6,000,000, with the important condition that the road was to be done in sections and the work completed on each section before any state money could be applied to the next. The line was to be carried westward from Salisbury on the North Carolina Railroad across the Blue Ridge to Asheville on the French Broad and beyond as the legislature might later direct. The first section was to run to Morganton at the eastern base of the Blue Ridge. Private subscriptions sufficient to validate a state subscription of $800,000 were secured and the company was organized in 1855. Three years later, with the aid of a Burke County subscription of $50,000 obtained by a close margin after an earlier proposal had been defeated by the voters, another $220,000 was raised and matched by $440,000 more from the state. Outbreak of war found the first section still five miles short of its terminus at Morganton, but even the uncompleted line was providing a considerable amount of traffic for the North Carolina Railroad. In the meanwhile Western North Carolina had been agitating for the immediate commencement of the work across and beyond the mountains. Some of its spokesmen wished the line to run into Tennessee down the valley of the French Broad, and others preferred a route through the extreme southwestern corner of the state in the direction of Memphis, but both factions demanded the elimination of the section rule so that state money could be made available to match subscriptions for the western portions of the road. The Asheville News hailed the example set by the Burke County subscription: "We trust McDowell will next put her shoulder to the wheel, and shove it along to the Buncombe line, when, our word for it, the noble old 'mother of counties' will not prove a laggard in the work." 119 McDowell did in fact vote a $50,000 subscription; but when the 1859 legislature, after a bitter contest between eastern and western interests, refused to eliminate the section rule, Buncombe and two neighboring counties

114

APPALACHIAN

COMPETITION

voted to subscribe instead to a p r o j e c t for a South Carolina connection. In spite of these discouragements, a considerable amount of grading and other work was done on the summit part of the route, and late in 1861 the state finally released $ 2 2 0 , 0 0 0 of its subscription for payment of the contractors. A t the outbreak of the war, North Carolina was closer to a successful crossing of the Blue Ridge than South Carolina, and a state with very limited resources had built some 8 5 0 miles of railroad. F o r their construction, the state government had spent or committed more than $ 1 0 , 0 0 0 , 0 0 0 ; and smaller amounts had come from private, county and municipal subscriptions. 1 2 0 The earlier program of state aid to roads and inland navigation was under the superintendence of a Board for Internal Improvements, but the much larger expenditures for railroads were made without central direction. T h e advocates of a conccrted plan placed their emphasis on a great east-west route from the coast to a crossing of the Appalachian Barrier. The state's actual investment, however, showed no consistent pattern, and the results reflected the strength of the economic forces stimulating trade along lines paralleling the seaboard and extending southward from Washington to South Carolina and beyond. The most successful of the state-aided railroads was the Wilmington

and Weldon, which

crossed the state from north to south and was later joined with its Virginia connections to form the Atlantic Coast Line Railroad. Support of the Raleigh and Gaston, which took so much of the public funds, appeared "suicidal" to those who thought that the prime object of state policy should be to bring trade to North Carolina ports. 1 2 1 Well over half of the state's investment, to be sure, was in the three roads which formed a connected route from the coast to the interior; but of these the N o r t h Carolina Railroad was built on such a "sweeping curve" that much of the line was later to find its greatest usefulness as p a r t of the north-south route of the Southern Railway. 1 2 2 There was indeed little reason to believe that a "great central railroad" could ever have ful-

APPALACHIAN*

COMPETITION*

115

filled t h e d r e a m of d r a w i n g s t r e a m s of p r o d u c e f r o m t h e i n t e r i o r t o a new P h i l a d e l p h i a behind t h e s a n d y inlets of t h e N o r t h C a r o lina c o a s t . In G e o r g i a the m o u n t a i n s were lower, a s t h e A p p a l a c h i a n B a r r i e r a p p r o a c h e d i t s end, a n d t h e y p r e s e n t e d a less f o r m i d a b l e b a r rier t o t r a n s p o r t a t i o n . I t was t h e r e f o r e possible, in

Calhoun's

phrase, to " t u r n the Alleghany to the Southwest, as New Y o r k h a d to the Northwest."

123

E a r l y p r o j e c t s called f o r a c a n a l t o con-

n e c t t h e T e n n e s s e e with t h e r i v e r s y s t e m of G e o r g i a , which indeed G a l l a t i n h a d s u g g e s t e d ; 1 2 4 b u t t h e a g e n c y which finally t u r n e d t h e b a r r i e r a n d f o r m e d t h e connection w i t h t h e M i d d l e W e s t w a s the Western and Atlantic Railroad. Like New Y o r k ' s E r i e Canal, t h e r o a d was an e n t e r p r i s e of t h e s t a t e g o v e r n m e n t ; a n d it b o r e a unique and planned relationship to the other internal improvem e n t s of the s t a t e , which were m a i n l y t h e w o r k of p r i v a t e individuals a n d c i t y g o v e r n m e n t s . 1 2 5 I n 1 8 0 4 a n d 1805, G e o r g i a b u i l t a s t a t e w a g o n r o a d t o t h e T e n n e s s e e line t h r o u g h w h a t was then t h e C h e r o k e e c o u n t r y , a n d t h e r e were v a r i o u s e a r l y e f f o r t s a t r i v e r i m p r o v e m e n t , sometimes c a r r i e d on as in V i r g i n i a by v o l u n t a r y o r g a n i z a t i o n s a n d occasionally receiving small a m o u n t s of s t a t e aid. A f t e r tions were m a d e f o r two rivers in 1 8 1 5 , a m o r e

appropria-

comprehensive

p r o g r a m of r i v e r i m p r o v e m e n t was i n i t i a t e d in 1 8 1 7 ; a n d a p e r m a n e n t I n t e r n a l I m p r o v e m e n t F u n d of $ 2 5 0 , 0 0 0 , l a t e r i n c r e a s e d to $ 5 0 0 , 0 0 0 , was set u p in t h e same y e a r . S t a t e e n c o u r a g e m e n t was also offered to several t u r n p i k e c o m p a n i e s , in t h e f o r m of stock s u b s c r i p t i o n , b u t none were s u c c e s s f u l l y o r g a n i z e d . D e m a n d s f o r a more c o n c e r t e d a p p r o a c h t o t h e p r o b l e m led t o t h e e s t a b l i s h ment of a B o a r d of P u b l i c W o r k s in 1 8 2 6 , m u c h l a t e r t h a n in Virginia and t h e C a r o l i n a s . As a member of t h i s B o a r d , W i l s o n L u m p k i n examined r o u t e s f o r t h e p r o p o s e d c a n a l t o t h e T e n n e s s e e R i v e r a n d selected t h e same g a p between L o o k o u t M o u n t a i n a n d t h e main r a n g e of the Blue R i d g e t h a t h a d been used b y t h e e a r l y

116

APPALACHIAN

COMPETITION

r o a d a n d was eventually t o be used by the W e s t e r n and A t l a n t i c . T h e R e p o r t of the B o a r d a n d of the S t a t e E n g i n e e r , p r e s e n t e d the following y e a r , laid g r e a t e r stress on the i m p o r t a n c e of railroads a n d presented a n o t a b l e a n a l y s i s of G e o r g i a ' s

transpor-

t a t i o n needs and possibilities. I t a r g u e d f o r " a s t a t e system of t r a n s p o r t a t i o n " t h a t would on the one h a n d resist seduction " b y the siren magic of d i s t a n t t r a d e " which h a d been so persuasive in S o u t h C a r o l i n a a n d on the o t h e r h a n d avoid the wastefulness of " u n c o o r d i n a t e d local e f f o r t s . "

126

T h e B o a r d was abolished a f t e r a y e a r ' s service, largely because of sectional rivalries, a n d the s t a t e r e t u r n e d to more piecemeal e f f o r t s a t river improvement and r o a d building. Much of the work was done by slaves, the so-called " p u b l i c h a n d s , " t h a t h a d been p u r c h a s e d b y the s t a t e . A t o t a l of over $ 4 0 0 , 0 0 0 was spent on river improvements to 1840, with d i s a p p o i n t i n g l y little result, and a smaller a m o u n t on the c o n s t r u c t i o n of m a r k e t r o a d s . A g i t a t i o n f o r the building of a c e n t r a l canal h a d been checked b y the B o a r d ' s comments on the a d v a n t a g e s of r a i l r o a d s , b u t two smaller canal p r o j e c t s

were

actively p u r s u e d . E a c h was p l a n n e d to connect a p o r t with t h e s t a t e ' s l a r g e s t river s y s t e m — o n e to r u n f r o m S a v a n n a h t o the Ogochee a n d thence to the A l t a m a h a , and the other to r u n t h e s h o r t e r distance f r o m the h a r b o r of Brunswick to the A l t a m a h a . T h o u g h the f o r m e r received aid f r o m the city of S a v a n n a h a n d nearly $ 1 0 0 , 0 0 0 f r o m the s t a t e and the l a t t e r received $50,000 f r o m the s t a t e , S a v a n n a h ' s canal reached only its first river and never the second, and the Brunswick c a n a l was d u g b u t never opened t o traffic. R a i l r o a d building began with two c a m p a i g n s of p r i v a t e a n d local e f f o r t . T h e first, o r i g i n a t i n g in the towns in the i n t e r i o r of the s t a t e , resulted in the c o n s t r u c t i o n of the Georgia R a i l r o a d westward f r o m A u g u s t a on the S a v a n n a h River. T h e second resulted in the building of the C e n t r a l of G e o r g i a R a i l r o a d f r o m S a v a n n a h to M a c o n in the center of the s t a t e and of several connccting r o a d s r a d i a t i n g f r o m M a c o n . T h e two p r i n c i p a l com-

APPALACHIAN C O M P E T I T I O N

117

panies were chartered in 1833 and began construction shortly thereafter. The Georgia road received a small county subscription and also $200,000 from the city of Augusta on the embarrassing condition t h a t the railroad should not connect its line with the Charleston and H a m b u r g without permission of the city council. The Central of Georgia received more substantial municipal aid. Savannah subscribed $500,000, together with $50,000 to a connecting road, and Macon subscribed $250,000. Neither received a financial contribution from the state, but the g r a n t of banking privileges by an act of 1836 stimulated private subscription, particularly in the case of the Central. W i t h work continued during the depression years, the Georgia Railroad was carried as f a r as Madison and Athens by 1841, and the Central of Georgia was completed to Macon in 1843. Meanwhile the prospects of these companies, and of Georgia railroads in general, had been influenced by a decisive new development in state policy. Acting on the recommendation of Governor Lumpkin, the legislature of 1834 adopted a resolution in favor of " a scheme of internal improvements from the seaboard of this state to the interior by railroad on the faith and credit of the S t a t e as a great S t a t e work." 127 W h a t developed was a state enterprise more limited in scope but more unusual in character. Under the powerful advocacy of Governor Lumkin and the officials of the existing railroad companies, 128 the p r o j e c t was elaborated in the Macon Railroad Convention of 1836 and adopted by the legislature in the same year. I t provided t h a t the state should on its own account build a railroad through the mountainous northwestern p a r t of the state from a point south of the Chattahoochee River to the Tennessee border near what is now Chattanooga. From the southern end of the road, a locality referred to as Terminus before it received the name of Atlanta, branch lines should be built to connect with the remaining p a r t s of the state. These branches were not themselves to be state enterprises, though on certain conditions the state might subscribe to a q u a r t e r of their stock; they were to be built either

118

APPALACHIAN COMPETITION

by the existing railroads or by other companies organized by private and local enterprise. The effect of this decision was to assign to the state government the more clearly developmental p a r t of the task of railway construction : it was to build in the mountainous country where the costs would be the greatest and the prospect of immediate traffic the least. If the vital connection with Tennessee could be achieved by this means, companies organized on the basis of mixed enterprise could do the rest. The result would be a coherent network of transportation extending to the coast and throughout most of the state. W i t h "the main trunk . . . common in its use," declared the Macon Convention, "this system of railroads would diffuse over all p a r t s of the state almost a precise equality of advantages." 129 Construction of the Western and Atlantic proceeded slowly under depression conditions, even though contractors accepted payment in state scrip, and an economy-minded administration suspended work from 1841 to 1843. The line was not completed to Chattanooga until 1850. The extension of the Georgia Railroad reached A t l a n t a in 1845, and the Central of Georgia's connection, by way of the Monroe Railroad, was established in the following year. The southwestern prongs of the system, to Columbus and other points on the Alabama border, were built later and with greater difficulty. E a r l y returns on the state road were small, and the legislature was at one time prepared to sell the property a t a substantial loss; but revenues rose steadily during the fifties, and the annual payment to the treasury after debt service reached the figure of $450,000 in 1860. Since total appropriations to that date were about $4,500,000 and an additional $1,600,000 had been reinvested from earnings, thi.-s return to the state—for the p a r t of the railroad system assigned to it as the least attractive to private enterprise—represented ten percent on the sum appropriated and more than seven percent on the total cumulated investment.

APPALACHIAN

COMPETITION

119

In the l a t t e r fifties the policy of s t a t e investment, t h o u g h n o t of s t a t e construction and o p e r a t i o n , was revived f o r

another

trunk-line p r o j e c t f o r which somewhat similar a r g u m e n t s could be made. The south and southwest of the s t a t e were little developed, and a route t h r o u g h them would provide access to the Gulf p o r t s of western Florida and Alabama. R i v a l companies t o build in this direction were organized by S a v a n n a h and Brunswick interests. In 1856 the Albany and Gulf R a i l r o a d was c h a r t e r e d to cons t r u c t a t r u n k line westward from a p o i n t of intersection of these two roads. T h e s t a t e subscribed $1,000,000 of a c a p i t a l i z a t i o n of $2,200,000, and most of the remainder was taken b y the city governments of Thomasville and S a v a n n a h . By the o u t b r e a k of war, construction had been completed f o r the g r e a t e r p a r t of the r o u t e across the state. Determined efforts to secure s t a t e aid f o r a number of other railroads were defeated in the legislature, and the s t a t e ' s financial contribution to railroad development

was

confined almost exclusively to the two trunk-line p r o j e c t s . T o t a l s t a t e investment in the r a i l r o a d p r o g r a m was

about

$5,500,000 in initial aid, and more t h a n $7,000,000 if the reinvestment of earnings is included. As H e a t h has shown, the sums devoted to railroads, aside from debt service, amounted to a b o u t a q u a r t e r of the state's t o t a l expenditures in the eighteen-thirties and over a t h i r d in the forties. F o r 1851—60, they were still eighteen percent of the budget but a little more than matched by the revenue f r o m the W e s t e r n and Atlantic. 1 3 0 Local government investment, mainly by stock subscription, amounted to some $5,750,000. In this the municipalities took a much l a r g e r role t h a n the counties, and Savannah's share was nearly $2,750,000. T h e city's investments were first placed in the Central of Georgia and in aiding the same road to encourage the building of a network of lines f r o m its Macon terminus. L a t e r in the period they were applied, p a r t l y by use of the dividend-paying Central stock as a revolving f u n d , to the encouragement of railway building toward the southwest and the Gulf. Though the city authorities seem to have taken little

120

APPALACHIAN COMPETITION

p a r t in the direction of the companies which they aided, 1 3 1 their s t r a t e g i c role in the placement of investments was almost c o m p a r able to t h a t of the s t a t e itself. On the other hand, the t o t a l of p r i v a t e investment in Georgia's railroads, plus the reinvestment of the earnings of mixed enterprise, fell j u s t short of equaling the public share. B y these means ante-bellum Georgia, which h a d had little success with its earlier waterway improvements, secured a network of some 1,200 miles of railroad. Georgia's mileage was roughly equal to t h a t of Virginia, which had committed well over twice as g r e a t an amount of public funds, and considerably g r e a t e r t h a n t h a t of South Carolina, which had spent somewhat more public money and made a much l a r g e r p r i v a t e investment. As compared with the Carolinas, Georgia had the very g r e a t a d v a n t a g e of a p r a c ticable route t h r o u g h the mountain b a r r i e r . Y e t the decisiveness with which the g e o g r a p h i c coherence of the railroad

opportunity

was

seized, and

the

system which was developed, owed

much to a public policy which so largely concentrated the effort of the s t a t e government on a single strategic improvement.

4 FROM B O S T O N TO M O B I L E

T h e Governor of Missouri boasted in 1850 t h a t railroad promoters all the way " f r o m Boston round to Mobile" were competing f o r the privilege of building to his s t a t e and through it to the Pacific. 1 Even this phrase is not broad enough to cover the full range of public action for the development of t r a n s p o r t a t i o n during the period before the Civil W a r . T h e line of coastal cities could be extended to reach from B a n g o r to Galveston and beyond; and in almost every state from Maine to Minnesota and from Florida to Texas governmental agencies—state or local and more often both—took an active p a r t in the promotion of internal improvements. For the non-Appalachian states there was no such common geographic goal as t h a t which gave unity to the preceding c h a p t e r ; but their programs show the same emulation of states and cities, similar calculations and miscalculations of advantage, and perhaps an even greater diversity of expedients in the combination of public and private effort. Among the Atlantic states t h a t had no direct access to the main Appalachian Barrier, there were several in which there was little reason to expect m a j o r public effort toward internal improvement. I n Delaware there was perhaps more than its size and geographical position would suggest. The canal between the Chesapeake and Delaware bays, a p r o j e c t discussed even when the

122

FROM BOSTON TO MOBILE

colony was in the h a n d s of the Dutch," was finally completed in 1 8 2 9 . D e l a w a r e ' s s e n a t o r s led the c a m p a i g n f o r f e d e r a l aid t o the e n t e r p r i s e ; b u t the s t a t e ' s own s u b s c r i p t i o n of $ 2 5 , 0 0 0 was less t h a n those obtained f r o m the federal g o v e r n m e n t a n d

the

s t a t e s of P e n n s y l v a n i a a n d M a r y l a n d . F o u r y e a r s a f t e r the opening of the canal, D e l a w a r e loaned its stock to the New Castle a n d F r e n c h t o w n T u r n p i k e and R a i l r o a d C o m p a n y . A n o t h e r improvement clearly indicated by the s t a t e ' s g e o g r a p h y was a r a i l r o a d a c r o s s t h e n o r t h e r n p a r t of the s t a t e between P h i l a d e l p h i a a n d B a l t i m o r e . T h o u g h the connection between two such m a j o r cities m i g h t have seemed to offer an o p p o r t u n i t y t h a t could be t a k e n by u n a i d e d p r i v a t e enterprise, the s t a t e government assisted the P h i l a d e l p h i a , W i l m i n g t o n and B a l t i m o r e R a i l r o a d

(which l a t e r

became a p a r t of the P e n n s y l v a n i a system) with a loan of a b o u t $80,000. T h i s , t o g e t h e r with aid t o several smaller r o a d s , was provided f o r f r o m Delaware's s h a r e of the s u r p l u s revenue of 1837. T h e l a r g e s t a m o u n t s of s t a t e aid, r e a c h i n g a t o t a l of $130,000 in stock subscription and a loan of $170,000, were given t o the D e l a w a r e R a i l r o a d built t h r o u g h less wealthy a r e a s " t o the s o u t h e r n line of this s t a t e in a direction t o w a r d C a p e C h a r l e s . " I m p a t i e n c e with this m o u n t i n g t o t a l of costs was shown by t h e l e g i s l a t u r e in the acts of 1855 and 1859, which made concessions t o the c o m p a n y but a t t e m p t e d to provide t h a t it should never a g a i n " a s k f o r a n y p e c u n i a r y aid f r o m the S t a t e or f o r the loan of S t a t e c r e d i t . "

3

T h e case of New J e r s e y a p p r o a c h e s the minimum of public aid to t r a n s p o r t a t i o n . T h e only money a c t u a l l y

direct appro-

p r i a t e d by the s t a t e f o r this p u r p o s e was an early s u b s c r i p t i o n of $ 1 2 , 5 0 0 , authorized in 1804, t o half of the stock of the N e w a r k T u r n p i k e C o m p a n y . T h e p r o j e c t languished f o r a number of y e a r s b u t eventually proved profitable. F r o m 1818 on, the s t a t e a p pointed two of the five members of the board of d i r e c t o r s . I n d i r e c t aid to two i n t e r s t a t e t u r n p i k e companies was a u t h o r i z e d in t h e f o r m of l o t t e r y privileges, b u t the lotteries were conducted in-

FROM BOSTON TO MOBILE efficiently or fraudulently, and little investment was

123 actually

made. New Jersey's abstention from financial aid to improvements, after the turnpike period, has sometimes been attributed to the exceptional self-reliance of New Jersey's enterprisers or to the devotion of its legislators to the principles of laissez faire. Jerome Cranmer has recently made an attempt to determine "the peculiar forces or conditions which enabled ( o r forced) the State to provide for her two major internal improvements, the Morris and the Delaware and Raritan canals, without resort to State aid."

financial

4

In the second of these cases, the explanation runs in quite obvious economic terms. The route of the Delaware and Raritan, which was completed in 1834, lay across one of Gallatin's four necks of land; New Jersey parlance changes the metaphor and calls it the "waist" of the state. If this was the only one of the four to be exploited during this period by unaided private enterprise, it was the one that presented the special opportunity to connect New York and Philadelphia by a cut of some thirty miles through almost completely level country. The private company chartered in 1824, instead of receiving a subsidy, paid the state a bonus of $ 1 0 0 , 0 0 0 for the privilege of building the canal. Yet the history of actual construction followed a more complex pattern. The original company failed, partly because it could not secure the consent of Pennsylvania to the necessary diversion of water from the Delaware River; and measures providing for the construction of the canal as a state work came close to passage in the legislatures of 1827 and 1828. B y the time building actually

commenced, the

financial

prospects had become

less

promising because of the innovation of the railroad; and the terms under which the canal was constructed formed the less important part of the set of arrangements under which the same intercity route was exploited by rail transport. E a r l y in 1830 the legislature passed two measures on the same day, separate in form

F R O M BOSTON TO M O B I L E

124

b u t s u p p o r t e d b y the same interests, c h a r t e r i n g the Camden and Amboy R a i l r o a d a n d the Delaware and R a r i t a n Canal

Com-

panies and r e q u i r i n g them t o p a y tonnage taxes to the s t a t e in lieu of other t a x a t i o n . T h e stock of the r a i l r o a d was quickly oversubscribed, b u t subscriptions to the canal were h a r d to obtain. T h e problem was met in the following y e a r by the union of the two companies. T h e r a i l r o a d ' s a d v a n t a g e a p p e a r e d in 1832 when the legislature g r a n t e d it the full monopoly of rail t r a n s p o r t a t i o n between New Y o r k and Philadelphia in exchange f o r a g i f t of 1,000 shares of the stock of the canal and the g u a r a n t e e by the J o i n t Companies t h a t the state's receipts f r o m t o n n a g e dues and dividends should n o t be less t h a n $30,000 per y e a r . The

railroad,

which l a t e r

became p a r t

of

the

Pennsylvania

system, was p r o f i t a b l e f r o m the beginning. On the other h a n d , the canal made little r e t u r n d u r i n g its first decade, b u t its opera t i n g profits g r a d u a l l y increased and by 1855 reached a r a t e of ten percent on an investment of something over $4,000,000. 5 R a t h e r more s u r p r i s i n g is the method by which New J e r s e y managed t o obtain the construction of the M o r r i s Canal. T h i s was as clearly a developmental enterprise, in Cranmer's terms, as the Delaware and R a r i t a n had a p p e a r e d t o be an exploitative one. A canal f r o m the waters of New Y o r k B a y to the Delaware River was intended t o stimulate agriculture and m a n u f a c t u r i n g and to revive the iron i n d u s t r y of n o r t h e r n New J e r s e y , which had flourished in colonial times, by bringing a n t h r a c i t e f r o m the Pennsylvania mines. I t s p u r p o s e s , therefore, were more to c r e a t e new t r a d e s t h a n to exploit an existing one; and since it was to cross the hilly n o r t h e r n section of the state, the physical obstacles were more formidable t h a n on the R a r i t a n route. A g i t a t i o n f o r the M o r r i s Canal was begun in 1822 by George P . M'Culloch, a prominent citizen of the region, in a series of letters to t h e Morristown Palladium

of Liberty.

T h e original intention was to

ask f o r c o n s t r u c t i o n as a s t a t e enterprise, a p r o j e c t which won s t r o n g s u p p o r t in the n o r t h e r n counties and was enthusiastically

FROM BOSTON TO M O B I L E

125

endorsed from outside the state by De W i t t Clinton. But adoption of the proposal was blocked in the legislature by what M'Culloch described as a combination of "local interests, jealousy, and most laudable dread of public d e b t " ; and advocates of the enterprise came to the conclusion that "the only remaining expedient . . . was to raise a company, endowed with privileges and banking powers sufficiently liberal to allure subscriptions." * T h e result was the act of December 29,1824, which, "in order to secure to the state the results of this public work," authorized the organization of the Morris Canal and Banking Company, and gave it the right to raise $1,000,000 for the canal and $1,000,000 f o r the bank, subject to the proviso that money could not be used f o r banking operations until equivalent amounts had been devoted to the construction of the canal. The " a l l u r e " of this proposition, coming at the very height of the "Bank M a n i a , " was sufficient to induce an oversubscription of at least ten to one: the company was promptly organized under the control of New Yorkers interested in the banking privilege rather than of M'Culloch and the local canal enthusiasts. Its career as a bank was a chequered one, with a series of ups and downs before final failure. Canal construction proceeded slowly and provided less drama. The engineering difficulties at the summit level were overcome by the device of inclined planes, the principal section from Newark to Philipsburg was opened in 1829 at the cost of somewhat more than $2,000,000, and the canal was later extended to Jersey

City.

Financially it was never a great success, earning a substantial rate of return only during the Civil W a r ; but it carried a considerable tonnage, of which anthracite was the principal item; and it contributed materially, as had been intended, to the economic development of the northern part of the state and particularly to the growth of its iron-working industries.7 I t appears, therefore, that New Jersey secured the construction of its major improvements less by non-intervention and laissez faire than by the granting of valued privileges to private inter-

FROM BOSTON TO M O B I L E

126

ests. In the case of the bank c h a r t e r , which b r o u g h t about the building of the Morris Canal, the b a r g a i n was made at the only possible time, thanks to the optimism of the speculators and the opportunism of the canal enthusiasts. A year l a t e r the state's offer would

have

found no

takers. 8

The

second

privilege—

monopoly of t r a n s p o r t a t i o n over the routes of the Camden and Amboy and the Delaware and R a r i t a n — w a s

another

matter.

T h e advantages which it offered were certainly not illusory, and New Jersey's sale of this " p r o f i t o p p o r t u n i t y . . . produced a m a j o r portion of s t a t e revenue"—and much of the subject m a t t e r of

the state's p o l i t i c s — " f o r

the

four

s a l e . " 9 New J e r s e y could avoid the

decades

financial

following

the

subsidies of the

other states and could make this b a r g a i n , good or bad, because of its s t r a t e g i c position

on the r o u t e between the nation's

two

g r e a t e s t cities. New E n g l a n d , though cut off by New Y o r k S t a t e and C a n a d a f r o m direct access to the West, 1 0 nevertheless produced intersectional as well as local schemes of improvement. I n this region public financial aid was relatively slow to develop. T h e extensive network of turnpikes was built without state assistance. New E n g l a n d ' s first i m p o r t a n t canal, the Middlesex, was constructed entirely by private c a p i t a l ; b u t the s t a t e of Massachusetts cont r i b u t e d a small g r a n t of public land in the district of Maine to aid the company in c o n s t r u c t i n g a series of connecting works f u r t h e r u p the Merrimack in New H a m p s h i r e . T h e forty-fivemile Blackstone Canal, constructed in the eighteen-twenties

to

connect W o r c e s t e r and Providence, was also built without p r i v a t e f u n d s ; and a number of unconnected p r i v a t e companies made efforts to overcome the various obstacles to navigation on the Connecticut River. T h e s t a t e of Rhode Island, however, gave banking privileges to aid the Blackstone, as New J e r s e y had done in the case of the Morris. Connecticut did the same f o r one of the river improvement companies. T h e third of New E n g l a n d ' s

FROM BOSTON TO MOBILE canals, its "longest and feeblest,"

11

127

required not only aid t h r o u g h

banking privileges but extensive

financial

of

seventy-eight-mile

New H a v e n .

This

was

the

s u p p o r t f r o m the city Farmington

Canal, built in b i t t e r r i v a l r y with the river improvements intended to t a p the C o n n e c t i c u t River t r a d e a t

and

Northampton,

M a s s a c h u s e t t s , and b r i n g it down t o the p o r t of New H a v e n . T h e municipality subscribed $ 1 0 0 , 0 0 0 to the stock of the e n t e r prise and l a t e r voted it a loan and an a n n u a l subsidy. Begun in 1825, the canal reached N o r t h a m p t o n a decade l a t e r ; b u t , unlike the o t h e r two, it never c a r r i e d a s u b s t a n t i a l traffic. Railroad

construction

in

Massachusetts

began

with

three

r o a d s leading f r o m B o s t o n t o the n o r t h , s o u t h , and west. T h e Boston and Lowell, the B o s t o n a n d Providence, a n d the B o s t o n and W o r c e s t e r were all opened in 1835. These also were built without public aid t h o u g h t h e i r c h a r t e r s , like those of so m a n y t u r n p i k e s , contained provisions p e r m i t t i n g u l t i m a t e p u r c h a s e by the s t a t e . In commercial t e r m s , these " r a i l r o a d s r a n t o w a r d the p r o p e r destinations and f o r the r i g h t r e a s o n s . "

12

T h e y were,

in o t h e r words, exploitative improvements t a k i n g a d v a n t a g e of existing traffic o p p o r t u n i t i e s ; a n d their

financial

returns

soon

p u t them into the c a t e g o r y of " d o w a g e r r a i l r o a d s . " I t was not to be expected, however, t h a t an ambitious s t a t e or a g r e a t commercial city would l o n g r e f r a i n f r o m bolder developmental u n d e r t a k i n g s in t h e e r a following the completion of the E r i e Canal. In the y e a r the E r i e was opened, the M a s s a c h u s e t t s legislature a p p o i n t e d commissioners t o survey routes f o r a canal f r o m the coast to the H u d s o n . T h e i r r e p o r t , p r e p a r e d by the distinguished engineer L o a m m i Baldwin, J r . , contained the s u r p r i s i n g j u d g m e n t t h a t such a c a n a l would be p r a c t i c a b l e b y a r o u t e t h r o u g h the n o r t h e r n p a r t of t h e s t a t e crossing its " A l p i n e r e g i o n s " by way of a tunnel u n d e r H o o s a c M o u n t a i n . T h e ent h u s i a s t s f o r a western connection soon shifted their interest t o a r a i l r o a d r a t h e r t h a n a c a n a l a n d to a more southerly r o u t e ; b u t bills c h a r t e r i n g r o a d s to the H u d s o n and t o Providence, to which

128

FROM BOSTON TO MOBILE

the s t a t e was to subscribe a third of the stock, were decisively defeated in 1830. T h e Hudson p r o j e c t was renewed with the completion of the Boston and Worcester, which provided the first f o r t y - f o u r miles of its route. P r i v a t e subscriptions amounting to $2,000,000 were obtained for the Western Railroad, in p a r t by a house-to-house canvass of B o s t o n ; and the Legislature in 1836 reversed its earlier position and authorized a state subscription of $1,000,000. T h e crisis of 1837 and the high cost of construction t h r o u g h the Berkshires kept the company in financial difficulties, and the s t a t e came to its rescue with a series of loans amounting by 1841 to $4,000,000. W i t h this aid work was continued during the depression y e a r s ; and the entire two hundred miles of what is now the Boston and A l b a n y — t h e Boston and Worcester, the W e s t e r n , and a New Y o r k connection largely financed by the city of Albany—were open f o r traffic in 1842. The Western Railroad proved profitable and repaid the state's advances. T o Boston it brought an i m p o r t a n t addition to its western t r a d e by t a p p i n g the routes of the E r i e Canal and the New York Central Railroad, though it did n o t — a n d , considering grades and distances, could not—replace New York City as their principal beneficiary. In the meantime, the depression conditions which had led to the loans to the Western resulted also in the g r a n t i n g of aid to a number of smaller railroads. Loans amounting to nearly $1,200,000 (all eventually r e p a i d ) were made to the E a s t e r n and the Boston and Maine, which were building toward M a i n e ; the N a s h u a and Lowell, which was building into New H a m p s h i r e ; and the Norwich and Worcester, which was building into Connecticut. These appeals f o r help and a decline in the market for state bonds led, as in other states, to something of a revulsion against internal improvements; and the constitutional convention of 1853 came close to a d o p t i n g a clause prohibiting state loans to private companies. This provision was defeated largely by the proponents of another intersectional improvement.

129

FROM BOSTON TO MOBILE

The new proposal was for a railroad to the West following the route which Loammi

Baldwin had chosen

for the

projected

canal. A pair of railroads, connecting at Fitchburg, crossed the northern part of the state to Greenfield on the Connecticut. Investors in Troy, in their eager rivalry with Albany, were ready to build to the Massachusetts line. W h a t remained was to "construct a tunnel and railroad under and through the Hoosac Mountain," over which motorists today pass on the Mohawk Trail. For this purpose, the T r o y

and Greenfield was

chartered in 1848. So formidable a project, which would serve the less settled and less wealthy part of the state, could be carried through only with the aid of public funds. Accordingly the T r o y and Greenfield asked for a state loan. Its advocates reminded the legislature that "the votes of the northern border of the State . . . were united with the southern in granting the aid of the State to the Western Railroad. . . . Now," they said, "the time of reciprocity [ h a d ] arrived."

13

Against the proposal stood the

interests of the Western Railroad and of Springfield and other towns along its route, as well as those who opposed state aid on principle or who thought that costs would outweigh benefits in building a second railroad parallel to the first. In its favor were the determined representatives of the northern section, "a part of the country for which nothing had been done,"

14

and

others who saw visions of a road superior to its rival and drawing an almost unlimited trade from the West. In the 1854 legislature, as in the convention, the forces of the tunnel proved stronger than those of the Western: the state granted a loan of $2,000,000 to be made available in installments as certain conditions of subscription and construction were met. Even with this backing, little private money was ventured; and, when the state authorized subscriptions by the towns along the route, only half of them voted in the affirmative. B y 1859, the paid-in capital was still considerably less than $400,000, and the company had been taken over by a contractor whose perform-

130

FROM BOSTON TO MOBILE

a n c e was a s u b j e c t of violent c o n t r o v e r s y . I n the following y e a r the s t a t e liberalized the t e r m s u n d e r which its f u n d s were to be released, b u t work was s t o p p e d in 1861. More t h a n a million of the s t a t e ' s money h a d been s p e n t , t o g e t h e r with $ 1 2 5 , 0 0 0 of the towns', 1 5 and a b o u t half a mile of the tunnel had been built with f o u r miles still to go. B y the time of the Civil W a r , the s t a t e of M a s s a c h u s e t t s h a d devoted some $7,350,000 t o r a i l r o a d p r o m o t i o n , and its towns h a d c o n t r i b u t e d $228,000. T h e t o t a l , t h o u g h l a r g e r t h a n

that

of the rest of New E n g l a n d , was considerably less t h a n in a n y of the seven A p p a l a c h i a n states. T h e s t a t e ' s aid, as given in the eighteen-thirties and early f o r t i e s , made possible the building of a useful intersectional r a i l r o a d a n d served to keep alive o t h e r viable roads. B u t its l a t e s t venture, the T r o y a n d Greenfield, stood in the position of S o u t h C a r o l i n a ' s Blue R i d g e R a i l r o a d , with the difference t h a t M a s s a c h u s e t t s was l e f t with a s h o r t e r tunnel d u g into the side of a l o n g e r m o u n t a i n . R h o d e Island a n d C o n n e c t i c u t h a d less occasion f o r ambitious p r o j e c t s . W h e n the New Y o r k , Providence, and B o s t o n was c h a r tered in 1832 to build f r o m Providence to the Connecticut line, the s t a t e reserved the r i g h t t o subscribe to 1,000 shares, b u t no such p u r c h a s e was ever made. T h e city of Providence, however, subscribed $ 5 0 0 , 0 0 0 in the l a t e eighteen-forties to the H a r t f o r d , Providence, and Fishkill, which was p r o j e c t e d t o connect with the E r i e and which went into b a n k r u p t c y a decade l a t e r . I n Connecticut, also, t h e s t a t e provided no f u n d s f o r r a i l r o a d s , b u t there were several cases of municipal aid. M o s t characteristicwere the efforts of its c o m p e t i n g coastal cities to p r o m o t e n o r t h south r a i l r o a d s extending into M a s s a c h u s e t t s . New H a v e n , disillusioned by its c a n a l experience, made no c o n t r i b u t i o n

either

to the New H a v e n and H a r t f o r d , which became the s t a t e ' s d o w a g e r r a i l r o a d , or t o the rival r o a d which made use of the bed of t h e abandoned canal. On the other h a n d , B r i d g e p o r t competed e a g e r l y in the l a t e thirties to obtain t h e southern terminus of the H o u s a -

FROM BOSTON TO MOBILE

131

tonic R a i l r o a d , subscribed $ 1 5 0 , 0 0 0 t o its stock, and soon def a u l t e d on its own bonds as a result. I n the early forties, N o r w i c h loaned $ 2 0 0 , 0 0 0 to the Norwich a n d W o r c e s t e r ; a n d in 1 8 5 2 New London made a loan of $ 1 0 0 , 0 0 0 f o r its n o r t h e r n connection which s t r u g g l e d as f a r as A m h e r s t b e f o r e the Civil W a r u l t i m a t e l y became p a r t of the C e n t r a l Vermont. 1 6

and

Meanwhile,

H a r t f o r d h a d m a t c h e d Providence's c o n t r i b u t i o n to the east-west E r i e connection. Neither s t a t e n o r municipal aid was given to r a i l r o a d s d u r i n g this period in New H a m p s h i r e a n d Vermont, 1 7 y e t a boldly conceived intersectional r o u t e was built across their lightly settled a n d r u g g e d t e r r a i n . I t s objective was t o b r i n g t o B o s t o n the t r a d e of C a n a d a a n d of the G r e a t L a k e s b y a r o u t e f a r enough t o the n o r t h t o circumvent the a t t r a c t i o n s of New Y o r k City. M o n t r e a l was t o be reached by way of the head of L a k e C h a m p l a i n ; a n d L a k e O n t a r i o was to be reached a t O g d e n s b u r g , New Y o r k , in the h o p e t h a t C a n a d a ' s Welland C a n a l would d r a w t o it much of t h e traffic of the u p p e r lakes. T h e Vermont C e n t r a l was t o accomplish the crossing of the Green M o u n t a i n s ; its ally, the Vermont a n d C a n a d a , was t o provide the u p p e r p o r t i o n of the New E n g l a n d r o u t e ; and the N o r t h e r n of New Y o r k was c h a r t e r e d to complete the connection with L a k e O n t a r i o . F r o m B o s t o n the connecting r o u t e could begin with three p r o f i t a b l e "lower r o a d s " extending to Concord, New H a m p s h i r e , or could be made by other r a i l r o a d s in western M a s s a c h u s e t t s a n d Vermont. I n 1851 the last link was completed, with a floating b r i d g e across L a k e Champlain a t Rouses P o i n t ; and t r a i n s could r u n f r o m Boston t o L a k e E r i e a n d the St. Lawrence. T h e p h y s i c a l achievement was a notable one, b u t the economic a n d financial results were less impressive. T h e new r a i l r o a d s cont r i b u t e d to modest local development, and Boston did obtain b y this r o u t e a s h a r e of the i n c r e a s i n g t r a d e between C a n a d a a n d t h e United S t a t e s ; b u t the g r e a t hopes placed on traffic f r o m t h e Lakes p r o v e d illusory. T h e financial h i s t o r y is a tangled one.

132

FROM BOSTON TO M O B I L E

T o complete the roads, the p r o m o t e r s pieced o u t insufficient subscriptions by resort to short-term borrowing o r by f a r m i n g out the enterprises to c o n t r a c t o r s paid mostly in stock. A f t e r completion, the record of the u p p e r roads is one of b a n k r u p t c y , reorganization and—in the case of the Vermont C e n t r a l — t h e count r y ' s "first m a j o r railroad receivership."

18

I n most states ambitious p r o j e c t s under similar circumstances received public aid. T h e r e s t r a i n t of New H a m p s h i r e and Vermont was in this period as complete and, considering their g e o g r a p h i c situation, much more remarkable t h a n t h a t of New J e r s e y . I t can h a r d l y be a t t r i b u t e d entirely to the reaction against public p r o g r a m s exhibited in a number of states d u r i n g the depression years, since the u p p e r roads were not launched until p r o s p e r i t y had returned. P a r t of the explanation, no doubt, lies in the rockribbed conservatism of citizens and legislators, as illustrated by the refusal of New H a m p s h i r e between 1840 and 1844 to allow to railroads even the r i g h t of eminent domain. B u t another p a r t of the explanation must be found in the e x t r a o r d i n a r y f a i t h which Boston investors, who provided the g r e a t e r p a r t of the c a p i t a l , placed in so venturesome an undertaking. An even bolder enterprise, and a much more successful one, had its origin in Maine. H e r e again the s t a t e gave no

financial

aid. T h o u g h Maine had established a B o a r d of I n t e r n a l Improvements in 1834, no action was taken on its recommendations, and in 1848 the s t a t e bound itself by constitutional amendment n o t to loan its credit to p r i v a t e enterprises. W h a t the s t a t e refused to do was undertaken by the ambitious city of P o r t l a n d . T h e p r o j e c t was a r a i l r o a d to Canada. T h e physical obstacles a p p e a r e d even g r e a t e r t h a n those encountered by the Vermont roads. T h e W h i t e Mountains r a t h e r than the Green stood across the route, and much of it led t h r o u g h almost completely unsettled wilderness. Yet there were real economic a d v a n t a g e s to which its advocates could point. " P o r t l a n d , " they said, "is the n a t u r a l s e a p o r t of the C a n a d a s . "

19

T h e St. Lawrence was closed f o r the

FROM BOSTON winter months, and P o r t l a n d ' s

TO

MOBILE

ice-free harbor

133 was nearer

to

M o n t r e a l than B o s t o n and much nearer than the p o r t s of the M a r i t i m e Provinces. Moreover, by the ocean speeds of the d a y , P o r t l a n d was two d a y s closer to E u r o p e than New York and a half d a y closer than B o s t o n . 2 0 T h e A t l a n t i c and S t . Lawrence R a i l r o a d 1 8 4 5 . I t s principal

propagandist,

was chartered

in

J o h n A. P o o r , traveled

by

sleigh through the storms of the same winter to persuade the c a p i t a l i s t s of M o n t r e a l to place their money on a P o r t l a n d rather than a B o s t o n connection. A s a result they organized the S t . Lawrence and A t l a n t i c to build t o the American border. W h e n p r i v a t e funds f o r the American c o m p a n y ran out, the c i t y of P o r t l a n d loaned it $ 1 , 0 0 0 , 0 0 0 in 1 8 4 8 and by later enactments doubled the amount. T h i s " F i r s t I n t e r n a t i o n a l R a i l w a y , " which received public aid on both sides of the border, 2 1 was opened from P o r t l a n d t o M o n t r e a l in 1853. I t was then leased to the G r a n d T r u n k R a i l r o a d of C a n a d a at a rental which made the investment secure. B e f o r e the end of the decade this

city's

provided

P o r t l a n d with a t h r o u g h route to D e t r o i t , at a time when B o s t o n ' s W e s t e r n Railroad still reached only the east bank of the H u d s o n . B y this alliance between its own p r i v a t e and municipal

enter-

prise and Canadian c a p i t a l , public and p r i v a t e , the city of P o r t land

secured

the State

a

notable

of Maine,

increase

in

trade.

Poor's

newspaper,

had g o o d reason to celebrate in verse the

completion of T h a t iron arm that links Atlantic " M a i n e " With H u r o n ' s waters, in a single chain. 2 2 A f t e r this first example, the p o l i c y of municipal aid was continued in the development of Maine's other railroads. In

1850

the towns a l o n g the route of the Kennebec and P o r t l a n d were authorized to loan their credit to the enterprise, t o the amount of $ 8 0 0 , 0 0 0 ; and their investment was preserved in the c o m p a n y ' s l a t e r receivership. B a n g o r , the e a s t e r n m o s t of the nation's ambitious s e a p o r t s , contributed an equal amount t o the P e n o b s c o t

184

FROM BOSTON TO MOBILE

a n d Kennebec. O t h e r a c t s were passed p e r m i t t i n g aid to smaller lines. D u r i n g the fifties, also, P o o r was a t t e m p t i n g to secure p r i v a t e a n d governmental s u p p o r t f o r his " p l a n f o r s h o r t e n i n g the time of p a s s a g e between New Y o r k a n d L o n d o n " by " e x t e n d i n g a line of railway across the S t a t e of Maine a n d the Provinces of New Brunswick a n d N o v a S c o t i a to the nearest available p o i n t of N o r t h America t o I r e l a n d . "

23

T h i s was a second bold p r o j e c t

f o r a r o a d crossing n a t i o n a l lines. F o r the present, however, the " F i r s t I n t e r n a t i o n a l R a i l w a y " was achievement enough. In backi n g it with an investment of $ 2 , 0 0 0 , 0 0 0 , the city of P o r t l a n d h a d given one of the most n o t a b l e examples of municipal aid. W e s t of the A p p a l a c h i a n B a r r i e r , the most i m p o r t a n t internal improvements were intended t o complement and extend,

rather

t h a n compete with, the E r i e C a n a l and its rivals. Connection between the G r e a t Lakes and the A t l a n t i c stimulated the idea of f u r t h e r connection with the Mississippi Valley, and lake p o r t s f r o m Pennsylvania t o Wisconsin offered themselves as s t a r t i n g p o i n t s f o r canals t o the Ohio or the Mississippi. In the railr o a d a r e a , completion of the trunk-line r a i l r o a d s t o L a k e E r i e or the Ohio R i v e r — a n d the G r a n d T r u n k t o " H u r o n ' s w a t e r s " — l e d in the same way t o e a g e r competition in the building of connecting lines to the westward. I n each of the s t a t e s of the Old N o r t h w e s t , the public a u t h o r i t i e s took p a r t in the creation of improvements intended t o serve these p u r p o s e s and to meet t h e o t h e r needs of a r a p i d l y g r o w i n g f r o n t i e r a r e a . Ohio's p r o g r a m was an e a r l y and s u b s t a n t i a l one. R o u t e s f o r canals across the s t a t e f r o m lake to river were surveyed while the E r i e C a n a l was u n d e r c o n s t r u c t i o n . In the y e a r of its completion Ohio a d o p t e d a comprehensive public works m e a s u r e ; De W i t t Clinton came over f r o m New Y o r k to help Ohio's governor

to

s t a r t c o n s t r u c t i o n on the first canal on J u l y 4, 1825. T h e a c t authorized b o r r o w i n g on the credit of the s t a t e , provided f o r an

FROM BOSTON TO MOBILE

185

annual canal tax to be applied to the servicing of the loans, and established—as in New York—both a Board of Canal Commissioners and a Board of Commissioners of the Canal Fund. The first works authorized were the Ohio Canal, to extend across the entire state from Cleveland in the northeast by way of Columbus in the center to Portsmouth on the Ohio River, and the Miami Canal, to be built northward from Cincinnati as f a r as Dayton, with the idea of ultimate extension to Lake Erie. The sixtyseven miles of the Miami Canal were completed in 1829, and the full length of the Ohio Canal was open for traffic in 1833, giving the state a total of 400 miles of canal at a cost of something over $5,000,000. This early accomplishment promptly inspired extension and emulation, in p a r t because of the substantial traffic attracted to the canals and in p a r t because of the claims of the regions which did not share their advantages. I t was, said the governor, incomprehensible that the wants of these portions of the state "should have been wholly overlooked in our system of improvements" ; 24 and the legislature proceeded in 1836 to correct the oversight by authorizing six additional undertakings—the extension of the Miami Canal to Toledo, the Wabash and Erie, Walholding, and Hocking Valley canals, the improvement of Muskingum River, and the Western Reserve and Maumee Road. Of these improvements, the first was to provide a north-south connection from Cincinnati through the western p a r t of the s t a t e ; the second represented Ohio's share of the enterprise of joining Lake Erie with the Wabash River in Indiana; the other canals were laterals to connect with the main Ohio Canal. F o r the first two, the federal government had also contributed support. The state of Ohio received a land g r a n t of 438,301 acres for the Miami Extension, and 292,224 acres of Ohio land granted to the state of Indiana for the Wabash and Erie were transferred to Ohio when the latter state agreed to build the portion of the canal that fell within its own borders. 2 5

136

FROM BOSTON TO MOBILE

During the same period, enthusiasm for internal improvements added the method of mixed enterprise to that of public works. Early in 1837 the legislature passed a general law requiring the state to provide its aid to any railroad, turnpike, canal, or slackwater navigation company meeting certain standard conditions. In the case of railroads, the state's support was to take the form of a loan of one third of the capital needed for construction. In the case of turnpikes, the state was to subscribe for half the stock. In the case of canals and navigation companies, it was to take a third of the stock. Under this law, twenty-six turnpike companies, two canals, and three railroads received nearly $3,000,000 in aid from the state. This lavish and optimistic policy, however, was shaken by the financial crisis of 1837 and did not survive the long depression that began in 1839. Enthusiasm for new projects evaporated when it became clear that the state could no longer borrow at a premium and when it became difficult or impossible to sell new bonds even at heavy discounts. Yet this revulsion of feeling affected the two parts of the program in somewhat different ways. The mixed enterprise measure—called the "Plunder L a w " by its opponents—was repealed in 1840. With the exception of the loan to the Little Miami Railroad, which became a good investment after conversion into stock, 28 the state had little to show for its venture into mixed enterprise. With respect to the public works, no new measures were added, but the entire ambitious program of 1836 was carried through to completion. The Board of Public Works convinced the legislature that abandonment of works in process would be bad economy, and the Canal Fund Commissioners managed to scrape together the necessary funds —by selling bonds at discounts that reached a maximum of forty percent, by obtaining temporary assistance from local banks, and for several years by paying contractors in postdated checks. As a result, Ohio, unlike either New York or Pennsylvania, was able to continue its program "without interruption, even at the

FROM BOSTON TO M O B I L E nadir of the depression,"

27

137

as Harvey Segal has pointed out,

until the last of the canals was opened in 1845. When the system was completed, the state owned 731 miles of canal, 91 miles of slack-water navigation, and a 31-mile turnpike. These had been built at a cost of a little less than $16,000,000. Canal revenues exceeded current expenditures from 1827 through 1 8 5 5 ; and the net return exceeded $500,000 in 1847 and totaled more than $6,000,000 for the entire period to 1861. These sums fell far short of meeting interest charges.

The

showing would have been better if the lateral canals had not been built, and it is clear that the Board members made no serious attempt to justify their

findings

that these would yield

"a

revenue to the State, sufficient to meet the interest on the cost of the improvement." 28 On the other hand, both contemporary and later judgments agree that the canals, and particularly the earlier ones, had a substantial effect on the economic development of large areas of the state. Early hopes of a large through movement between lake and river proved illusory; but the canals carried a heavy traffic, particularly of the products of Ohio farms and mines, and continued to do so until railroad competition made them largely obsolete in the fifties. With the credit and resources of the state government strained by its effort on the canals, the promoters of railroads turned to local authorities for assistance. For a time the response was enthusiastic. More than a hundred special laws, as well as a general measure passed in 1846, were enacted to authorize local aid. Almost every one of the railroads projected and being built between 1836 and 1850 asked and received subscriptions or loans from the counties and cities which it was to serve. In this movement, the city of Cincinnati played a leading role, aiding the Little Miami with a subscription of $200,000 and a loan of $100,000, lending $100,000 to a road to the eastward, and subscribing $200,000 to the Ohio and Mississippi in the hope of a St. Louis connection. The city also obtained authorization to sub-

138

FROM BOSTON TO

scribe $200,000

to South

Carolina's

MOBILE grand

p r o j e c t , the

Cin-

cinnati, Louisville and Charleston, and would have contributed $1,000,000 more to the Ohio and Mississippi in 1850 if the Illinois legislature had been willing to g r a n t passage across the state. In all, the totals of local aid to railroads were about $8,000,000. 29 I n Ohio, as in other states, revulsion followed the early enthusiasm. T h e constitution adopted in 1851 prohibited both local and state aid to private companies. T h e rapid extension of railroads during the rest of

the decade was accomplished

with

private

capital, of which a considerable portion was provided by the four trunk lines, each of which established through connections across Ohio to the W e s t . T h e state's interests in improvement corporations were disposed of to p r i v a t e interests, in most cases

for

very small return ; and in 1861, the state canals were leased to a private company f o r a rental of a little more than $20,000 a year. These actions were " p a r t

of

a general movement . . .

alienation of state p r o p e r t y and functions."

30

of

the

Ohio had been one

of the m a j o r improvement states, with public investment amounting to some $27,000,000, and its early public works had made a substantial contribution to development. B y the end of the period, however, with its p r o g r a m of public construction long since ended and with mixed enterprise prohibited, it stood as one of the chief examples of the revulsion of feeling against governmental

pro-

motion of internal improvements.

In three other states of internal

improvements

the Old Northwest, the history

resembled

in timing

and in results

of the

more hectic and the less successful elements of the Ohio experience. In either 1836 or 1837, the years of the g r e a t expansion of the Ohio p r o g r a m , Indiana, Illinois, and Michigan each launched a highly ambitious p r o g r a m of internal improvements. Each of the three p r o m p t l y

encountered

financial

difficulties during

the

period of crisis and depression ; each abandoned most of its unfinished program in 1840 or shortly a f t e r ; and each went on to

FROM BOSTON TO M O B I L E

139

enact constitutional provisions against further state action. In two of the states, Indiana and Illinois, local governments assumed the functions of assistance given up by the states. Each of these two states had a lake-to-river p r o j e c t , like those of Ohio; the planning of these canals—and in Indiana the beginning of construction—antedated

the more

general

programs.

With

the

p a r t i a l exception of these two undertakings, neither they nor Michigan could show anything to match the steady progress of Ohio's earlier canal program or its persistence in carrying its public works to completion during the depression. Indiana's early hopes of capturing the trade between the Great Lakes and the Mississippi were based on the development of the old French and Indian trade route that made use of the Wabash River, which flowed across most of the state from the northeast to the Ohio, and the Maumee River, which entered Lake Erie at what is now Toledo. George Washington was one of the early proponents of a canal along this route, and in 1 8 1 8 De W i t t Clinton welcomed the proposal as a natural extension of the Erie Canal. 3 1 Federal support for the W a b a s h and Erie Canal, in the form of a land grant, was given in 1 8 2 7 . Construction as a state work began in 1 8 3 2 but proceeded slowly and with many interruptions. B y 1 8 4 3 , it had reached L a f a y e t t e in the upper p a r t of the Wabash Valley; and the opening of the eighty-eight mile portion from the state line to Toledo, which the state of Ohio had agreed to build in exchange f o r its p a r t of the lands granted by the federal government, provided the connection with Lake Erie. But Indiana did not succeed in carrying the canal to Terre Haute, midway down the Wabash, until 1 8 4 8 . Moreover, extension of the canal to Evansville on the Ohio River was not opened until 1853. The completed canal, of more than four hundred and

fifty

miles, was the longest in the country. Its financial and economic results, however, were by no means commensurate. Construction costs amounted to almost $ 6 , 5 0 0 , 0 0 0 , of which less than $3,000,-

140

FROM BOSTON TO MOBILE

000 came f r o m t h e proceeds of the land sales; and net o p e r a t i n g revenues over the whole life of the improvement were only a b o u t $1,300,000. C o n s t r u c t i o n of the earlier p a r t s of the canal had a s u b s t a n t i a l effect in reversing the direction of I n d i a n a ' s t r a d e f r o m the Mississippi t o the E a s t and in p r o m o t i n g t h e settlement of the a r e a . Even on the n o r t h e r n sections, however, tolls reached their peak as e a r l y as 1852, a n d the extension below T e r r e H a u t e never carried a heavy traffic a n d was abandoned in 1862. A p a r t of the difficulty with the W a b a s h and E r i e a r o s e in the entanglement of this e n t e r p r i s e with a more g r a n d i o s e general p r o g r a m . E a r l y in 1836, a f t e r the question h a d been the l e a d i n g issue in the s t a t e elections, the legislature a d o p t e d w h a t

was

r e f e r r e d to as the " M a m m o t h I n t e r n a l I m p r o v e m e n t Bill." T h i s created a B o a r d of I n t e r n a l Improvements a n d an I n t e r n a l Improvements F u n d and a u t h o r i z e d b o r r o w i n g to the a m o u n t of $10,500,000 f o r completion and extension of the W a b a s h

and

E r i e ( $ 1 , 8 0 0 , 0 0 0 ) , f o r a C e n t r a l C a n a l ( $ 3 , 5 0 0 , 0 0 0 ) , f o r the W h i t e w a t e r C a n a l in the s o u t h e a s t e r n p a r t of the s t a t e ($1,400,0 0 0 ) , f o r a highway p a r a l l e l i n g the Ohio River

($1,350,000),

f o r a r a i l r o a d f r o m M a d i s o n on the Ohio to L a f a y e t t e on the W a b a s h ( $ 1 , 3 0 0 , 0 0 0 ) , a n d f o r o t h e r smaller p r o j e c t s . T h e s h o r t h i s t o r y of the p r o g r a m was marked by a t t e m p t s to s t a r t all the various p r o j e c t s a t once, by c o r r u p t i o n and inefficiency in o r g a n i zation, and by p r o m p t financial disaster. Since no t a x resources h a d been placed behind the I m p r o v e m e n t s F u n d , interest c h a r g e s were met out of borrowed f u n d s . W h e n no f u r t h e r loans could be secured, under the depressed conditions of 1839, the B o a r d called a h a l t to all c o n s t r u c t i o n . M o r e t h a n $3,000,000 was lost when the M o r r i s C a n a l and B a n k C o m p a n y and other financial a g e n t s , which h a d received s t a t e bonds on credit, failed in the depression. By 1841 the s t a t e was in d e f a u l t , with a debt of over $13,000,000, of which nearly $9,500,000 h a d been incurred f o r i n t e r n a l improvements. A g a i n s t this, its improvement assets consisted of 200 miles of c a n a l in use, yielding $5,000 y e a r l y , two r a i l r o a d s yielding $26,000, and f r a g m e n t s of other canals.

FROM BOSTON" TO MOBILE

141

U n d e r these circumstances, the legislature in 1842 abandoned the policy of public works. I t authorized the o r g a n i z a t i o n of p r i v a t e companies t o own, complete, and o p e r a t e all unfinished s t a t e works except the W a b a s h and E r i e . U n d e r these provisions the W h i t e w a t e r Canal was completed in 1846 with aid f r o m the city of Cincinnati. T h e Madison a n d I n d i a n a p o l i s Railr o a d , in which the s t a t e retained a stock interest, obtained local subscriptions, l a r g e l y paid in l a n d a n d p r o d u c e , and managed t o b o r r o w eastern c a p i t a l . I t was finished in 1847 and f o r a time became a highly p r o f i t a b l e r o a d . 3 2 As a p a r t of the s t a t e ' s settlement with its creditors, c o n t r o l over the W a b a s h and E r i e was t u r n e d over in 1847 t o t r u s t e e s f o r the bondholders, a n d it was u n d e r their auspices t h a t it was completed t o the Ohio River. I n 1851, with the public works p r o g r a m a l r e a d y a b a n d o n e d , the revulsion a g a i n s t a n improvements policy was f u r t h e r expressed b y the adoption of c o n s t i t u t i o n a l provisions a g a i n s t s t a t e loans o r subscriptions t o p r i v a t e companies. Y e t in I n d i a n a , as in a number of other s t a t e s , public aid f o r improved means of t r a n s p o r t was not completely checked b y the rejection of s t a t e action. P a r t i c u l a r l y a f t e r 1845, the p r o moters of a l a r g e number of r a i l r o a d p r o j e c t s appealed f o r aid t o the interests of c o m p e t i n g cities and counties. Sometimes these pleas were r e j e c t e d — I n d i a n a p o l i s ' s M a r i o n C o u n t y , f o r example, voted a g a i n s t a subscription t o the Madison r o a d — a n d the sums involved were not so g r e a t as t h e y were t o be in l a t e r decades. Y e t before the Civil W a r , r a i l r o a d aid was given by some sixteen counties and ten cities, to an a m o u n t t h a t m a y be estimated as a b o u t $1,750,000. 3 3 T h i s local aid made a significant c o n t r i b u t i o n t o the r a p i d development which g a v e to the s t a t e more t h a n 2,100 miles of railroad in 1860 a n d which had a l r e a d y fulfilled the ambition of an e a r l y g o v e r n o r t o make I n d i a n a p o l i s the " R a d i a t i n g Rail R o a d C i t y . "

34

Illinois possessed the a d v a n t a g e of the best and shortest p o r t a g e between the L a k e s and the river system. F r o m Chicago t o a t r i b u t a r y of the Illinois River, the connection was so nearly a

FROM BOSTON TO MOBILE

142

natural one that small boats occasionally made the passage in high water. T h e p r o j e c t of the Illinois and Michigan Canal was included in Calhoun's proposed system of national internal improvements, though not in Gallatin's, and was eagerly pressed by the state's representatives. In 1827, Congress granted aid

for

its construction by donating to the state of Illinois the alternate sections of land f o r a distance of five miles on each side of the proposed

canal. T h e

state appointed

Canal Commissioners

to

c a r r y on the work, but they were unable to sell a substantial amount of bonds on the basis of the land alone and had difficulty

in raising money when the state's credit was also pledged

to the venture. A c t u a l construction began in 1836, but soon encountered the obstacles of the crisis of 1837 and the subsequent financial difficulties of the state. T h o u g h a number of the contractors accepted p a y m e n t in bonds and interest-bearing checks, work was halted in 1841 and was not resumed until 1845. A t

this

time, plans were altered to provide f o r a so-called "shallow-cut" canal instead of the more costly lake level p r o j e c t ; and control was given to a b o a r d of Trustees, two representing the bondholders and one the state. Under the new management, and with additional funds provided by the bondholders, the work was completed and the canal opened in 1848. Outlays

on

construction

though the total

amounted

to

about

$6,500,000,

costs were made greater by the accruals

of

interest during the period in which work was suspended. I n the end, the proceeds f r o m the sales of land, including Chicago lots, and the revenue f r o m the canal itself, proved ample f o r the discharge of the indebtedness, so that the improvement was constructed without net cost to the state or loss to the investors. I t s economic impact was immediate and important, and its construction was one of the m a j o r reasons f o r the phenomenal g r o w t h of Chicago as a transportation center. 35 B y contrast, the remainder of the state's p r o g r a m of internal improvements was an almost wholly unrelieved failure. E a r l y p r o -

FROM BOSTON TO MOBILE

143

posals for mixed enterprise were rejected, a n d a comprehensive p r o g r a m of s t a t e works was i n a u g u r a t e d in 1837. T h e southern p o r t i o n s of the s t a t e objected to the c o n c e n t r a t i o n of expendit u r e in the n o r t h , and every section developed p r o j e c t s f o r improved t r a n s p o r t a t i o n . A f t e r the bill p r e p a r e d in committee had been added to on the floor of each house, it had indeed something f o r everyone: improvements f o r five r i v e r s ; three east-west r a i l r o a d s a c r o s s the state, with various b r a n c h e s ; and a g r e a t c e n t r a l railr o a d to extend f r o m the northwestern corner t o the southern t i p of the state. In addition, presumably on g r o u n d s of what Gallatin had once described as "policy no less t h a n j u s t i c e , " the a c t a p p r o p r i a t e d $200,000 f o r improvements in counties which did not s h a r e in the specific a p p r o p r i a t i o n s . T h e t o t a l e x p e n d i t u r e authorized was $10,500,000, and the legislature prescribed

that

work should commence simultaneously on all t h e p r o j e c t s . A d o p tion of the measure was received with enthusiasm. T h e next legi s l a t u r e added an additional $1,000,000 t o the p r o g r a m and a t a x measure to give it p a r t i a l s u p p o r t . 3 6 Disillusion followed swiftly, however, when it became clear t h a t no such sums could be either raised o r serviced by a y o u n g commonwealth in a depression period. T h e m a j o r p a r t of the p r o g r a m was abandoned in 1840, and in the following y e a r the s t a t e defaulted on its bond interest. By this time some $5,600,000 had been borrowed under the a c t , besides the obligations incurred f o r the Illinois and Michigan

Canal. C o n s t r u c t i o n

continued

only to complete a p a r t of one r a i l r o a d , which was l a t e r sold f o r a f r a c t i o n of its cost. 3 7 T h e rest of the work consisted only of f r a g m e n t s , and the heavily burdened f r o n t i e r s t a t e remained in d e f a u l t until 1847. A new constitution, a d o p t e d in the following y e a r , limited f u r t h e r s t a t e borrowing to $50,000 and prohibited aid t o p r i v a t e companies. Even a f t e r this experience, however, neither the legislators n o r the people of Illinois were willing t o rely entirely on p r i v a t e enterprise to b r i n g them the railroads which they desired. In

144

FROM BOSTON TO MOBILE

1849, the legislature passed a general law allowing each town and c o u n t y to buy or g u a r a n t e e r a i l r o a d bonds t o the a m o u n t of $ 1 0 0 , 0 0 0 , and some sixty special laws a u t h o r i z i n g local aid were enacted d u r i n g the eighteen fifties. A m o n g t h e l a r g e r municipal subscriptions were those of P e o r i a , A l t o n , a n d Quincy. In the two l a t t e r cases, as in smaller R o c k I s l a n d , the s p u r to public investment was the ambition t o provide a m a j o r crossing place f o r trans-Mississippi r a i l r o a d s . T h e more t h a n $ 4 , 0 0 0 , 0 0 0 of local government investment provided s u b s t a n t i a l aid t o the r a i l r o a d building of the decade. 3 8 Y e t Chicago, with its a d v a n t a g e s of position, was able t o become the nation's g r e a t e s t r a i l r o a d center without c o n t r i b u t i n g a cent of city f u n d s t o r a i l r o a d development; and the s t a t e ' s longest r a i l r o a d , the Illinois C e n t r a l , was a p r o d uct of federal r a t h e r t h a n s t a t e or local assistance. 3 9 Michigan became a s t a t e in 1835 a t the height of early enthusiasm f o r r a i l r o a d building, and its first c o n s t i t u t i o n contained the i n j u n c t i o n : " T h a t i n t e r n a l improvements shall be encouraged by the government of the s t a t e . " In his messages to the first two legislatures, the g o v e r n o r recommended meeting this obligation by the method of mixed e n t e r p r i s e in o r d e r t o "combine the resources of the s t a t e with the interest and e n t e r p r i s e of the individual." I n s t e a d , the legislature a d o p t e d in 1837 a comprehensive p r o g r a m of s t a t e works. T h e sum of $ 5 5 0 , 0 0 0 was a p p r o p r i a t e d to begin work on t h r e e r a i l r o a d s across the s t a t e — t h e C e n t r a l (of which a few miles had been built by a p r i v a t e c o m p a n y ) , the S o u t h e r n , and the N o r t h e r n . T o finance the p r o g r a m the governor was i n s t r u c t e d t o negotiate a loan of $5,000,000. Difficulties soon a p p e a r e d with respect to c o n s t r u c t i o n , with controversies over the choice of routes, with costs exceeding early estimates, and with charges of mismanagement a n d c o r r u p t i o n ; but

the

difficulties with respect to b o r r o w i n g were g r e a t e r and more decisive. A f t e r the B a r i n g s and other financiers h a d refused to t a k e the bonds, the problem a p p e a r e d to be solved b y the sale of the entire issue t o the B a n k of the United S t a t e s , o p e r a t i n g under

FROM BOSTON TO M O B I L E

145

its Pennsylvania charter, and to the associated Morris

Canal

and Banking Company. T h e two companies, however, went into bankruptcy in 1839, a f t e r hypothecating the b o n d s ; and the s t a t e received only about half the proceeds. Opponents of internal improvements were victorious in the elections of 1840, and the p r o g r a m was abandoned, except f o r continuation of work a t a reduced r a t e on the Central and Southern railroads. In 1842 the s t a t e repudiated the p a r t s of the bond issue on which it had received no payment, and in 1846 it decided to sell the two railroads in order to meet p a r t of the remaining debt. The Michigan Central, which was in operation for the 145 miles west from Detroit to K a l a m a z o o and was earning a substantial revenue, was sold f o r $2,000,000. T h e price was considerably below its cost to the s t a t e and proved an excellent bargain for J o h n M u r r a y Forbes and his associates who provided the capital and enterprise to extend it to Chicago and make it one of the nation's m a j o r railroads. T h e Michigan

Southern,

which had been constructed for about seventy-five miles westward from Monroe, had made less p r o g r e s s . A f t e r a brief period of operation as a municipal enterprise of the city of Monroe, it also was sold to private interests. T h e s t a t e received $500,000, less than half of what it had spent on the road, and in this case the purchasers altered its location before they entered into competition with the Central for a Chicago connection. 4 0 A f t e r these transactions, Michigan's net outlay on construction, aside from interest and the proceeds of some 300,000 acres of land, had been under $ 2 , 0 0 0 , 0 0 0 — a sum small by comparison with the p r o g r a m s of many states but large for the new commonwealth. T h e state's venture in internal improvements was so universally regarded as a failure that prohibitions a g a i n s t both public works and mixed enterprise were voted almost without discussion for inclusion in the constitution of 1850. A loophole was left, however, for the transmission of aid that might be offered by the federal government; and in this way Michigan ob-

146

FROM BOSTON TO M O B I L E

tained an improvement of l a s t i n g importance. In 1852 Congress g r a n t e d to the s t a t e 750,000 acres of mineral and timber land to make possible the building of a canal a t Sault Ste. M a r i e to connect the waters of Lake Superior with those of the lower lakes. A g r o u p of capitalists f r o m the E a s t and from Michigan itself obtained the c o n t r a c t from the s t a t e government, and t h e work was completed in 1855. T h o u g h its cost of $1,000,000 was double the original estimate, the principal investors found it the " h a n d some o p e r a t i o n " they had anticipated, 4 1 since the g r a n t included much of the richest copper land of the U p p e r Peninsula. T h e s t a t e of Michigan was left in possession of a canal, on which it levied tolls a t a r a t e intended only to cover o p e r a t i n g expenses and on which traffic in timber and wheat and, above all, iron and c o p p e r ore continued to increase. T h e present Soo Canal, as is often noted, carries a g r e a t e r tonnage than any other in the w o r l d ; and an o r a t o r a t the semicentennial celebration, with an exaggeration a p p r o p r i a t e to the occasion, claimed t h a t the mile-long waterway, as "known by its results," was " t h e biggest on e a r t h . "

thing

42

In spite of the value of the canals ultimately c o n s t r u c t e d a t Chicago and Sault Ste. Marie, it is clear t h a t each of these t h r e e states had undertaken a p r o g r a m of internal improvement f a r too elaborate f o r its means. As Governor Carlin said f o r Illinois, they had been "allured from the p a t h of wisdom and economy by the seductive spirit of speculation" in the inflationary boom of the middle thirties. 4 3 N o r is there doubt t h a t c o n t e m p o r a r y criticism of their p l a n n i n g and administration was largely justified. T h o u g h a t least half of Michigan's railroad effort was spent on a well-chosen route, I n d i a n a failed to give p r i o r i t y to the more promising p a r t s of its p r o g r a m , and the Illinois a d m i n i s t r a t i o n was forbidden by law to do so. Yet it must be conceded t h a t the three states were also most u n f o r t u n a t e in the time a t which they began their operations. If they could have had several y e a r s of construction before entanglement in the toils of the depression,

FROM BOSTON TO M O B I L E

147

the results would have been less dismal and the revulsion perhaps less complete. From the experience of these states, their neighbor, Wisconsin, drew a lesson of self-denial. It entered the union in 1848 with a constitution forbidding both state works and loans to private companies. Yet its inhabitants had shown an early interest in internal improvements, and they made extensive use of local government agencies for their support. During the territoral period, Wisconsin had its own project for a lake-to-river connection, from Milwaukee to the Rock River, which was intended in part to divert from the Mississippi to Lake Michigan the production of the lead mines in the southwestern part of the area. In 1838, the federal government granted land in aid of the proposed canal and later increased the amount to a total of 500,000 acres. But neither the lands themselves, nor financial

aid voted by the territorial government in 1840, were

ever made available to the company. At the end of the decade, the company claimed the lands in aid of a railway rather than a canal, but the state decided to use the grant for educational purposes instead. In 1856, on the other hand, the legislature after long controversy divided between two railroad companies a large land grant made by the federal government. The first of these companies, which became a part of the Chicago and Northwestern, built toward

the northeast

and ultimately

received

nearly 550,000 acres. The second, which was to build to Lake Superior, was found to have won its grant by bribing the governor and members of the legislature; and the large acreage intended for it was later divided among several other companies. 44 In the constitutional convention, there was a strong minority of delegates who argued that, with proper safeguards and restrictions, Wisconsin could construct a useful system of internal improvements without falling into the errors of its neighbors. In the year following the defeat of their proposal, the improve-

148

FROM BOSTON TO MOBILE

ment advocates turned to the alternative method, and a law was passed authorizing the city of Milwaukee to aid the Milwaukee and W a u k e s h a Railroad. During the decade of the fifties, nearly eighty measures were enacted authorizing local aid, and county, city and town bonds were issued to the amount of about $7,250,000. 4 5 This was a decade of rapid r a i l w a y construction, in which nine hundred miles were built, and the network of lines that covered the southern p a r t of the state by 1860 received a large p a r t of their capital from this source. In the case of Milwaukee, the policy was pursued until, as the mayor could boast in 1857, "the different r a i l w a y s having Milwaukee as a terminus [ w e r e ] mostly in that state of progress that they need no further aid from the c i t y . " 4 9 B u t many of the farming localities were less complacent about their railroad contributions, p a r t i c u l a r l y to companies that collapsed in the crisis of 1857, and several municipalities repudiated their railroad bonds before the decade was over. 47 To the west of Wisconsin l a y the still newer state of Minnesota. Though it obtained no railroad mileage before the sixties, its history displayed a remarkable series of alternations in sentiment and legislation. During the territorial period, there was a g i t a t i o n for federal aid to r a i l r o a d s : the Minnesota and Northwestern R a i l r o a d Company was organized in 1854 in the hope of receiving a land g r a n t , which was made but later revoked. When Minnesota entered the union in 1857, its first constitution followed the Wisconsin p a t t e r n , forbidding both public works and aid to p r i v a t e companies, except as a trustee of possible federal g r a n t s . In the following y e a r , the position was reversed by constitutional amendment, and bond issues were authorized in aid of four railroads up to $1,250,000 each. The railroads were entitled to half the sum on the basis of g r a d i n g alone, and bonds were issued to the amount of $2,275,000. B u t the companies had almost no private resources, and little work was a c t u a l l y done.

FROM BOSTON TO MOBILE

149

In 1860 there was a sharp revulsion against the improvements policy. The "swindling bonds" were repudiated, to be compromised some y e a r s later, and further bond issues were prohibited by constitutional amendment. In the same tier of states, Iowa was older and more populous than Minnesota and l a y on the direct route from Chicago to the West. Construction of 655 miles of railroad by 1860 was l a r g e l y the result of these advantages, supplemented by substantial local assistance. Adopting its constitution in 1846 under the influence of the difficulties experienced by Illinois and other states, Iowa entered the union with strict limitations on the creation of s t a t e debt and a prohibition against s t a t e participation in mixed enterprise. Here as elsewhere, however, local governments came forward e a g e r l y to extend the aid denied by the state. B y 1858, when the p r a c t i c e was held unconstitutional by the courts, they had invested an amount which has been estimated as more than $7,000,000, though the proceeds to the companies, a f t e r deductions for discounts and commissions, were in many cases not much more than sixty percent of the face value. 4 8 Of all the western programs of state and local aid, the l a r g e s t was that of Missouri. Its timing, however, differed significantly from most of the others, although railroad building was enthusiastically advocated, in Missouri as elsewhere, in the middle thirties. A committee appointed by an 1836 railroad convention in St. Louis proposed a statewide system of improvement which would approximate the east, west and middle country . . . break down sectional animosities . . . increase the value of agricultural products, extend commerce and aid in the development of unexplored resources. 49 Provisions permitting local aid were included in several railroad charters, and there was strong pressure in favor of state assistance as well. However, the crisis of 1837 intervened before further action was taken or construction begun. Thus Missouri,

150

F R O M BOSTON T O M O B I L E

without public commitments, avoided the financial difficulties and the disillusion t h a t beset so many improvement p r o g r a m s d u r i n g the depression y e a r s . When p r o s p e r i t y returned, the demand for improvements was renewed. T h e first local government aid, however, was n o t given until 1850, and the first s t a t e aid was given in the following year. B y this time the desire f o r r a i l r o a d development was intensified by the hope t h a t Missouri, and p a r t i c u l a r l y the city of St. Louis, might become the p r i n c i p a l terminus of a p r o j e c t e d railway t o the Pacific. W i t h this in mind, the governor recommended t h a t the s t a t e ' s p r o g r a m be concentrated on aiding two main t r u n k lines t o cross the s t a t e f r o m east to west; and an act of 1851 authorized a loan of $2,000,000 to the Pacific Railroad, to extend f r o m St. Louis to K a n s a s City, and of $1,500,000 t o the H a n n i b a l and St. J o s e p h , to cross the n o r t h e r n p a r t of the state. These sums were soon found insufficient to secure actual cons t r u c t i o n , and the interests of other p r o j e c t s and other sections soon broke down the policy of concentration. Successive a p p r o p r i a t i o n s in 1852, 1855, and 1857 raised the t o t a l

authoriza-

tions f o r s t a t e aid t o almost $25,000,000, of which $23,701,000 was actually extended. Recipients of the new loans, in addition to the two roads originally designated, were the Southwest B r a n c h , p r o j e c t e d to t a k e a d v a n t a g e of a federal land g r a n t ; a northsouth r o a d , the N o r t h M i s s o u r i ; the S t . Louis and I r o n Mountain ; a n d — o f smaller a m o u n t s — t h e P l a t t e County and Cairo and Fulton Railroads. E a c h of these railroads also received s u p p o r t d u r i n g the same period f r o m local governments. T h e t o t a l local aid authorized t h r o u g h the y e a r 1860 was over $9,000,000, and the amount actually extended was $8,335,000. T h e bulk of the amount—over $ 6 , 0 0 0 , 0 0 0 — c a m e f r o m the city and county of St. Louis: they subscribed $2,200,000 to the Pacific R a i l r o a d and $700,000 to the Ohio and Mississippi, which gave the city its connection with the

F R O M B O S T O N TO M O B I L E B a l t i m o r e a n d Ohio a n d the E a s t .

50

151

T h e r e m a i n d e r of the aid

came in much smaller a m o u n t s f r o m t h i r t y - f i v e o t h e r

counties

and f o u r small towns. S u b s c r i p t i o n s were u s u a l l y p a i d in bonds, b u t the c o u n t y c o n t r i b u t i o n s to the Cairo a n d F u l t o n were mainly in swamp lands taken a t the valuation of a d o l l a r an acre. U n d e r most of the laws, the c o u n t y c o u r t s were allowed t o m a k e subscriptions on their own a u t h o r i t y , but t h e y m i g h t — a n d , in f a c t , usually d i d — t a k e a r e f e r e n d u m of the v o t e r s " f o r i n f o r m a t i o n . " T h e c o u n t y stock was generally d i s t r i b u t e d t o t h e p r o p e r t y holders in o r d e r , as a r a i l r o a d official explained, t o " c o n s t i t u t e the t a x an

p a y e r s stockholders in the Co. t h u s giving every t a x p a y e r

interest in t h e r o a d in p r o p o r t i o n t o the a m t of his t a x e s " a n d " a voice in the election of d i r e c t o r s and l o c a t i o n of t h e r o a d . "

81

I n a law a f f e c t i n g St. Louis C o u n t y in 1857, t h e conclusion was drawn f r o m this p r a c t i c e t h a t only p r o p e r t y owners should vote on the question of s u b s c r i p t i o n . W h a t e v e r t h e m e t h o d , public supp o r t f o r the p r o g r a m a p p e a r s t o have been g e n e r a l , a n d few a p p e a l s f o r aid were r e j e c t e d , t h o u g h in some cases the a u t h o r i z e d subscriptions h a d t o be declined because the r a i l r o a d s were not willing t o meet the specified conditions of l o c a t i o n . If the p u r p o s e of mixed enterprise was t o d r a w o u t p r i v a t e wealth f o r public ends, its success in M i s s o u r i was limited.

By

1860 the public a u t h o r i t i e s

had

distinctly

committed

over

$ 3 2 , 0 0 0 , 0 0 0 t o r a i l r o a d aid, t h o u g h its value t o the companies was lessened by the f a c t t h a t s t a t e and local bonds h a d o f t e n to be disposed of a t a discount. Even allowing f o r this, t h e y seem t o have provided about t h r e e q u a r t e r s of the t o t a l a m o u n t spent on c o n s t r u c t i o n . 5 2 Almost all of the stock of the S t . Louis a n d I r o n M o u n t a i n was t a k e n b y the city and c o u n t y of S t . L o u i s ; local governments subscribed a b o u t three q u a r t e r s of the c a p i t a l of the N o r t h M i s s o u r i ; the Southwest B r a n c h h a d almost

no

p r i v a t e subscriptions except f r o m c o n t r a c t o r s . T h e n o t a b l e exception was the H a n n i b a l a n d St. J o s e p h which p r o f i t e d by f e d e r a l ,

152

FROM BOSTON TO M O B I L E

state, and modest c o u n t y aid b u t also drew in a large amount of eastern c a p i t a l , built more substantially t h a n the other r o a d s , and became a p r o f i t a b l e p a r t of the Burlington system. B y 1860 a b o u t eight hundred lines of railroad were in operation. T h e H a n n i b a l a n d S t . J o s e p h had been completed the y e a r before, but the Pacific was still a hundred miles short of K a n s a s City, and the o t h e r r o a d s remained mostly unfinished. E a c h of the s t a t e ' s seven railway companies—again with the exception of the H a n n i b a l and S t . J o s e p h — w a s in default on its bond interest. W i t h the coming of the crisis of 1857, the bonds of the s t a t e and counties became unsalable except a t heavy discounts, and additions to the aid p r o g r a m were almost completely suspended. In 1 8 5 8 an amendment t o the constitution limited to $30,000,000 the t o t a l of s t a t e debt t h a t could be c o n t r a c t e d " f o r the p r o s ecution of i n t e r n a l improvements" or f o r any other t h a n emergency p u r p o s e s , and laws of 1860 and 1861 tightened the conditions under which c o u n t y aid could be given. T h u s a t the end of the period Missouri had begun to show a t least p a r t i a l evidence of the revulsion a g a i n s t internal improvements which had occurred in a number of other states under similar circumstances two decades before. In the p a r t of the c o u n t r y south of the Ohio River, the s t a t e of K e n t u c k y showed an e a r l y interest in internal improvements b u t devoted relatively little s t a t e money to their construction. I t s first i m p o r t a n t p r o j e c t was a canal a r o u n d the Falls of the Ohio a t Louisville. Since these formed the one serious obstacle

to

navigation in the whole length of the river, the Kentucky Legislature had reason f o r asserting, as it did in 1805, t h a t the p r o posed improvement was of importance to the whole " W e s t e r n country . . .

as well as to the United S t a t e s generally." A law

passed in the same y e a r provided t h a t blocks of stock in the p r o j e c t e d c o m p a n y should be reserved f o r subscription by Kentucky itself, by other interested states, and by the federal government. 5 3

FROM BOSTON TO MOBILE

153

Twenty years later, there was strong support for the construction of the canal as a state enterprise; but the legislature defeated the proposal by a close vote and thus, according to the Governor, "threw away a source of revenue as lasting as that noble river." Instead a private company was chartered in the hope "to tempt the employment of foreign means in the undertaking"; and the canal was built by individual subscriptions supplemented by the national government. 64 In the year that the canal opened, 1830, another and more famous Kentuckian plea for federal assistance became the subject of the Maysville Road veto of Andrew Jackson. Kentucky's first railroad, which was also one of the first built west of the Appalachians, provided an early instance of municipal aid. In 1831, the city of Lexington subscribed $25,000 for stock in the Lexington and Frankfort, which was completed in 1835 after it had replaced its original horses and mules with a locomotive built by a Lexington mechanic. Extension of the line to Louisville proved to be more of a problem. The Louisville and Frankfort, which received state aid during the same decade, was taken over, put into condition and operated by the state government in the early forties. This was the state's principal activity in internal improvements, and further participation was precluded by the adoption in 1850 of a constitutional prohibition against the loan of the state's credit. The state's total expenditure on railroad development was less than $750,000, and in 1857 an organ of the industry declared that, "Of all the States, Kentucky has made the poorest show in the matter of internal improvements."

55

Yet the totals of county aid

(over $7,000,000) and of municipal aid (nearly $ 9 , 0 0 0 , 0 0 0 ) were both substantial;

58

and they played a considerable role in an ac-

tive program of construction during the fifties, which brought Kentucky's railroad mileage to 534. In this the leading role was taken by the ambitious city of Louisville, which contributed no less than $5,000,000. Of this about $800,000 represented an early investment in its eastern connection, the Louisville and Frankfort;

154

FROM BOSTON TO MOBILE

and $200,000 was its subscription to the Jeffersonville Railroad, which was building northward from a point across the river in the effort " t o draw away from Cincinnati the t r a d e of the fertile state of I n d i a n a . " 57 Much more important was the s u p p o r t given to the Louisville and Nashville, which was to become one of the principal railroads of the South. Its main line connecting the two cities was completed in 1859 at a cost of a little more than $7,000,000. Of this a p a r t had come from Kentucky counties and another p a r t from public aid on the Tennessee side, but $2,000,000 was contributed by the City Council of Louisville. 58 By c o n t r a s t with Kentucky, the neighboring state of Tennessee gave extraordinarily full s u p p o r t to internal improvements bv action a t every level of government. Aid was extended mainly during the late eighteen-thirties and the decade of the fifties. In the first period, which has been described in a book entitled Sectionalism and Internal Improvements,69 the principal role was taken by the state, and the largely abortive efforts were followed by a s h a r p revulsion against public aid. In the second period, when renewed state action was widely supported by county and municipal aid, Tennessee constructed in a single decade and largely with public funds one of the three largest railway networks in the South. Even before the Maysville Road veto, legislators in Andrew Jackson's own s t a t e drew from his national policy the moral of state responsibility f o r development. As the House Committee on Internal Improvements declared in J a n u a r y , 1830, " T h e States, secured from encroachments, are thrown back on themselves." 80 In the same year, a B o a r d of Internal Improvements was established and $150,000 a p p r o p r i a t e d for river improvement. With the $60,000 allotted to the eastern portion of the state, enough was done on the Tennessee River to permit the first steamboat to reach Knoxville. Meanwhile the enthusiasm for railroads, which a doubting Tennessean described as being "rode 'hobby-horsically' throughout the United States," 81 had already reached his own state. In 1831 and 1832, an "Association of Gentlemen" in the

FROM BOSTON TO MOBILE

155

mountain village of Rogersville published the twenty-six f o r t nightly issues of The Railroad Advocate, the first j o u r n a l of the American railway industry. As this suggests, the railroad interest was particularly strong in E a s t Tennessee; but there was also active agitation at the other end of the s t a t e : leading citizens of Memphis formed ambitious projects of railroad connections with Charleston in the southeast, by way of the Muscle Shoals, and to Baltimore by means of a road extending northeastward across the full length of the state. The more prosperous areas of central Tennessee, however, and particularly the city of Nashville, were on the whole hostile to railroad aid and looked instead to the improvement of their immediate area by turnpikes. The constitutional convention of 1834 adopted a provision laying upon the state the responsibility of encouraging internal improvement. Positive action, however, encountered formidable obstacles in the clash of local interests and the general shortage of local capital. An act of 1836 pledged the state to subscribe one third of the stock of any railroad or turnpike corporation a f t e r it had succeeded in raising the other two thirds by its own efforts, but the only companies that succeeded in meeting this condition were three turnpikes in Central Tennessee and the Memphis and Lagrange Railroad, which was organized to build the first link of the connection with the southeast. In 1838 a new measure was passed, mainly by the votes of legislators from E a s t and West Tennessee, which raised the proportion of the state's subscription to one half of the company's capital. Total aid under the act was to be limited to $.3,700,000—$1,300,000 in E a s t Tennessee, $1,500,000 in Central Tennessee, and $900,000 in the Western District, with an additional $100,000 allocated to river improvement in each of the districts. Of the allotment to E a s t Tennessee, half was to go to the great Charleston-Cincinnati p r o j e c t and half to the Hiwassee Railroad, which was to build toward the northeast from a junction with Georgia's state railroad. This extensive program, like those of many other states, failed

156

I-'ROM BOSTON TO MOBILE

t o survive the depression y e a r s . C e n t r a l Tennessee obtained the completion of its network of t u r n p i k e s r a d i a t i n g f r o m Nashville; b u t the Charleston d r e a m was abandoned, Hiwassee c o n s t r u c t i o n was long delayed, and no r a i l r o a d s were b r o u g h t i n t o o p e r a t i o n . T h e a c t was repealed in 1840, t h o u g h with the p r o v i s o t h a t the Memphis and L a g r a n g e subscription be b r o u g h t u p t o the

fifty

p e r c e n t s t a n d a r d . Some f u r t h e r aid was given to this r o a d l a t e r in the decade, b u t a governor summed u p the p r e v a i l i n g sentiment with the admonition : " I n the name of the h o n o r of the S t a t e , issue no more bonds."

62

R e t u r n i n g p r o s p e r i t y , however, a n d the continued lack of railr o a d communication b r o u g h t a b o u t a s h a r p reversal of policy. A law of 1852 provided f o r s t a t e loans t o r a i l r o a d s a t a s t a n d a r d r a t e of $8,000 per mile, and in 1854 the figure was raised to $10,000. T h e problem of sectionalism was met by m a k i n g this assistance available to a n y c o r p o r a t i o n , domestic or f o r e i g n , t h a t could raise the necessary

capital.

Loans

extended

under

this

legislation

b r o u g h t the t o t a l of s t a t e aid to more t h a n $ 1 7 , 0 0 0 , 0 0 0 , a n d this was almost universally supplemented by the resources of the local governments. Municipalities, led b y Memphis and Nashville, cont r i b u t e d nearly $ 3 , 5 0 0 , 0 0 0 ; and a n o t h e r $ 5 , 0 0 0 , 0 0 0 came f r o m no less t h a n seventy-seven counties. A t the end of t h e decade, the Louisville and Nashville and its branches h a d reached Memphis and Nashville; b o t h cities had connections with C h a r l e s t o n and S a v a n n a h ; the successor t o the Hiwassee h a d a t h r o u g h

route

f r o m C h a t t a n o o g a t h r o u g h Knoxville and into V i r g i n i a ; and the s t a t e had 1,254 miles of r a i l r o a d . T o this b u r s t of c o n s t r u c t i o n , public a u t h o r i t i e s had c o n t r i b u t e d nearly $ 2 6 , 0 0 0 , 0 0 0 of a t o t a l investment t h a t has been estimated as a b o u t $40,000,000. 6 3 In A l a b a m a , the s t a t e did little more t h a n p a s s on to p a r t i c u l a r companies the aid given by the federal government, b u t the city of Mobile provided a notable case of municipal r a i l r o a d p r o m o t i o n . As in neighboring G e o r g i a , early p r o j e c t s f o r a c a n a l to connect the Tennessee with s t r e a m s r u n n i n g directly to the Gulf of Mexico

FROM BOSTON TO MOBILE

157

were never carried out. Later agitation for railroad aid met the obstacles of a state credit impaired by the failure of the State Bank and the opposition of a "veto governor" elected to office on the program of restricting the role of government to the performance of "few and simple" functions. Like other "public land" states, however, Alabama received from the federal government five percent of the proceeds of public land sold within its borders. Of these funds, $135,000 were spent on river improvement, some $400,000 were devoted, in the forties and fifties, to attempts to secure railroad connections crossing the state from east to west and from north to south; and, just on the eve of the Civil War, an additional $850,000 were distributed as loans to eight railroads. A loan of $400,000 to the Mobile and Ohio was one of the few cases of aid extended from the state's own resources. The total of state aid was a little over $2,000,000. In addition, the state received and transmitted to the companies some 3,000,000 acres of land donated by the federal government under the railroad land grant legislation of the eighteen-fifties. 94 County aid in Alabama amounted to barely more than $500,000. Municipal authorities, however, contributed more than $3,000,000. Montgomery, Tuscaloosa, and Selma all invested substantial amounts; but more than half of the total came from Mobile, and of this the greater part was devoted to the Mobile and Ohio. In this project, launched in a public meeting in 1847, "the business men of a city of less than twenty thousand," as a local historian boasted, "undertook to build a railroad five hundred miles long." 6r' The "grand conception" was to intercept and bring to Mobile the trade of the Ohio and Tennessee rivers, and perhaps the Mississippi, by building a railroad across country to a point near their junction. 86 To finance construction, the business men of Mobile had to enlist public aid from a variety of sources. The Mobile and Ohio, together with the Illinois Central with which it was to connect, became the beneficiaries of the first federal land grant under the law of 1850. Loans from the state of Mississippi were added to

158

FROM BOSTON TO MOBILE

that f r o m Alabama, and aid was also secured f r o m Mississippi counties. Mobile itself made municipal subscriptions of $1,100,000, a f t e r the city's p r o p e r t y holders had agreed with only seven negative votes to a five-year tax f o r the purpose, under an 1851 law which permitted deductions f o r those who had already made p r i v a t e subscription and which provided f o r distribution of the city's stock t o individual stockholders. 67 W i t h all this aid, construction proceeded at a slow pace, and the road reached its destination at Columbus, Kentucky, only on the very eve of the Civil W a r . A substantial traffic in cotton had already developed, but the outbreak of hostilities deferred a test of the road's effectiveness in fulfilling Mobile's hope of " e m p t y i n g the Ohio and the Tennessee into her basin."

68

In Louisiana, a period of early aid was followed by a revulsion even more sharply marked than that of Tennessee; but a revival of state and local assistance in the fifties enabled N e w Orleans to outstrip Mobile in building a railroad to the N o r t h . Legislation in 1833 followed the conventional pattern of establishing a B o a r d of Public W o r k s , an Internal Improvements Fund, and a S t a t e Engineer. During the decade the Fund made railroad investments of about $1,450,000, mainly in the form of loans. M o s t of these sums were lost in defaults and foreclosures, and in 1845 Louisiana became one of the earliest states t o forbid state subscriptions and loans to internal improvement companies. T h e policy of abstention, however, did not survive the return of prosperity and the g r o w i n g realization of N e w Orleans leaders that the supremacy of its g r e a t river was threatened by railroad competition. 69 A law of 1852 permitted " p a r i s h police juries and municipal c o r p o r a t i o n s " t o subscribe to railroad

corporations,

with the taxpayers becoming "individually owners" of the stock. In the following year, the constitution, which the American road Journal

Rail-

had described as " a n t i q u a t e d , " was "remodelled, so

as to permit extension of aid to railroad p r o j e c t s . "

70

Under its

provisions, which permitted state subscriptions to the extent of

FROM BOSTON TO MOBILE

159

one fifth of the p a i d - u p c a p i t a l of a c o r p o r a t i o n , the l e g i s l a t u r e a p p r o p r i a t e d nearly $2,000,000. P a r i s h or c o u n t y aid a m o u n t e d to a b o u t $450,000, a n d the municipalities c o n t r i b u t e d

nearly

$5,000,000, almost all of which was f r o m the city of New Orleans. T h e two p r i n c i p a l enterprises bore the resounding titles of the New Orleans, Opelousas and G r e a t W e s t e r n and the New Orleans, J a c k s o n a n d G r e a t N o r t h e r n . T h e f o r m e r h a d the immediate obj e c t of serving the s u g a r regions a n d the l a r g e r ambition, t o w a r d which little p r o g r e s s was made b e f o r e the war, of building t o the T e x a s b o r d e r and becoming " t h e main t r u n k " of a Pacific railr o a d . I t received $ 1 , 5 0 0 , 0 0 0 f r o m the city a n d $ 7 0 0 , 0 0 0 f r o m the s t a t e , in addition t o local aid f r o m the s u g a r p a r i s h e s a n d a f e d e r a l l a n d g r a n t . Still l a r g e r s u m s — $ 2 , 0 0 0 , 0 0 0 f r o m the city and n e a r l y $ 9 0 0 , 0 0 0 f r o m the s t a t e — w e n t t o the G r e a t N o r t h e r n , which was t o build t h r o u g h the c o t t o n d i s t r i c t s of Mississippi to t h e same destination as the Mobile and Ohio. I t s New Orleans p r o p o n e n t s l e f t no d o u b t t h a t the p r o j e c t was l a r g e l y inspired b y t h e rival e n t e r p r i s e of their "little neighbor, Mobile."

71

W i t h aid f r o m the

s t a t e s of Mississippi a n d Tennessee, the " J a c k s o n R o a d " a n d its n o r t h e r n connections completed their t h r o u g h r o u t e

(which is

now the southern division of the Illinois C e n t r a l ) in J a n u a r y , 1860. B y a y e a r ' s m a r g i n , New Orleans h a d won the race with its smaller rival. 7 2 T h e g r e a t e r p a r t of Mississippi's r a i l r o a d mileage in the antebellum period was supplied by the rival r o a d s f r o m Mobile a n d New Orleans, each of which provided outlets f o r c o t t o n p r o d u c e d in a r e a s t h a t did not have the benefit of Mississippi River t r a n s p o r t a t i o n . T h e Mobile a n d Ohio received a s t a t e loan of $ 2 0 0 , 0 0 0 and generous subscriptions f r o m the e a s t e r n counties. T h e J a c k s o n R o a d received a s t a t e subscription of $ 4 3 0 , 0 0 0 and a loan of $200,000, and its n o r t h e r n extension, the Mississippi C e n t r a l , received a somewhat smaller loan. T h e two n o r t h - s o u t h lines were intersected b y the S o u t h e r n , a p u r e l y Mississippi e n t e r p r i s e built east f r o m Vicksburg.

160

FROM BOSTON TO MOBILE

A much earlier p r o j e c t , the Mississippi R a i l r o a d s t a r t i n g a t N a t c h e z , h a d been launched in the eighteen-thirties, and received s t a t e aid in bonds and also by g i f t of stock in the state-owned P l a n t e r s ' B a n k and by g r a n t of b a n k i n g privileges. B o t h b a n k and r a i l r o a d , however, went into b a n k r u p t c y , a n d the e n t e r p r i s e was a b a n d o n e d until a f t e r the Civil W a r . As in t h e case of A l a b a m a , the s t a t e ' s credit was weakened by the b a n k i n g failure, and most of the s t a t e ' s aid to r a i l r o a d s , which t o t a l e d a little more t h a n $2,000,000, represented reallocation of f u n d s received f r o m the f e d e r a l government. M u n i c i p a l aid was $ 4 2 5 , 0 0 0 . T h e s u b s t a n t i a l a m o u n t c o n t r i b u t e d by the counties, which was more t h a n $1,600,000, reflected the f u n d a m e n t a l l y r u r a l n a t u r e of the s t a t e ' s economy. 7 3 F l o r i d a obtained a b o u t 400 miles of r a i l r o a d before the Civil W a r , with two lines almost completed across t h e peninsula b u t none connecting with the r a i l r o a d s of other s t a t e s . S u p p o r t of the enterprises came almost entirely f r o m public sources, including land g r a n t s f r o m the federal government. In 1 8 5 5 , the s t a t e legisl a t u r e a d o p t e d an a c t " t o provide f o r a n d e n c o u r a g e a liberal system of I n t e r n a l I m p r o v e m e n t s . " T h e aid extended, as in A l a b a m a and Mississippi, consisted largely of f u n d s the s t a t e had received f r o m the federal government. T h e t o t a l assistance f r o m the s t a t e government a p p r o a c h e d $5,000,000, b u t more t h a n half of the figure represents the estimated value of land given by the s t a t e . T o this, local a u t h o r i t i e s added some $600,000. 7 4 I n f r o n t i e r A r k a n s a s , r a i l r o a d p r o j e c t s d u r i n g the eighteenfifties were stimulated by the hope of p r o v i d i n g the first link of a t r a n s c o n t i n e n t a l r o a d , b u t the only public aid a c t u a l l y given was $ 1 8 0 , 0 0 0 by the s t a t e . A t the o t h e r end of t h e p r o p o s e d route, Calif o r n i a h a d a l r e a d y a d o p t e d legislation a u t h o r i z i n g local aid ; b u t the only r a i l r o a d in o p e r a t i o n b y 1861 was built in the gold-bearing S a c r a m e n t o Valley entirely by p r i v a t e means. Oregon had as yet no r a i l r o a d s . T h e case of T e x a s is of somewhat g r e a t e r interest not so much

FROM BOSTON TO MOBILE

161

because of what was accomplished before the Civil W a r as because of the precedents established for later action. H e r e also there was lively discussion of routes to the Pacific, but most of the three hundred miles of railroad in operation by 1861 had the more modest p u r p o s e of connecting the interior of E a s t T e x a s with the various Gulf p o r t s . T o one of these, the Buffalo B a y o u , B r a z o s and Colorado, the city of Houston built a small connecting road, the H o u s t o n T a p . The purpose was a familiar one: the merchants of the city had begun " t o see some of their t r a d e going down the B a y o u to Galveston instead of u p the B a y o u to H o u s t o n . " financial

75

The

results were somewhat more unusual: the city was able

to sell its municipal enterprise for considerably more than the $ 1 3 2 , 0 0 0 it had invested. There were several other cases in which local government aid was given in more conventional forms, but the principal encouragement to internal improvements was given by the state. D u r i n g the first decade of T e x a s statehood, some of its principal political leaders, convinced that railroads were " t h e only K e y that T e x a s has to unlock her casket of costly g e m s , "

76

advocated the method of

s t a t e enterprise. In 1855, Governor E . M. Pease p u t before the legislature a comprehensive plan for a coordinated system of rail and water t r a n s p o r t a t i o n , to be built by the state and

financed

by borrowing on the security of the public lands which T e x a s had retained when it joined the Union. The legislature had, however, already adopted an alternative plan f o r a p p l y i n g this resource to the promotion of internal improvements. In 1852 two railroads were offered state land at the r a t e of eight sections a mile. In 1854 the principle was applied to all railroads, and the rate of subsidy was doubled. T h e governor of a neighboring state declared that T e x a s was acting "with a wisdom worthy her good f o r t u n e " in retaining control of these lands by bestowing them "bountifully f o r the purposes of internal improvement" and on terms more generous than those of the federal land g r a n t s of 1850. 7 7 Under the frontier conditions of the time, however, even this bounty appeared

162

FROM BOSTON TO MOBILE

insufficient to encourage railroad investment; and in 1856 the s t a t e added further aid in the form of loans at the rate of $ 6 , 0 0 0 per mile. B y 1861, s t a t e bonds to the amount of $1,800,000 had been issued to the railroads, and they had fulfilled the conditions f o r receipt of some 5,000,000 acres, though most of the land had not yet been patented. 7 8 T h e outbreak of war interrupted this prog r a m in its early s t a g e s , but the policies adopted foreshadowed later developments both in the s t a t e and in the nation. Public policy toward internal improvements varied g r e a t l y , as these Chapters 3 and 4 have shown, among the thirty-three states that were members of the Union in 1860. Though the figures that have been presented differ in a c c u r a c y and completeness, and provide only an a p p r o x i m a t e basis for comparison, they show that the total effort was a g r e a t one and that it was very unequally distributed among the various commonwealths. D u r i n g the period covered, s t a t e and local governments, in addition to g r a n t i n g aid in land and materials or in various privileges, a p p e a r to have made financial commitments for improvements amounting, a t least a t face value, to well over $400,000,000. Of this total almost sixty percent came from the seven states directly f a c i n g the Appalachian Barrier. Public expenditure approached $70,000,000 in New Y o r k and exceeded $50,000,000 in Virginia. T h e amounts spent in the two western states of Missouri and Tennessee are equally impressive if they are related to wealth and population. A t the other extreme, there were several states in which no public funds a t all were devoted to internal improvements. The various p r o g r a m s differed also in the p a r t s played by the different levels of government, in the emphasis placed on public works as a g a i n s t mixed enterprise, and in the nature of the improvements constructed. T h o u g h local governments a p p e a r

to

have contributed only about a quarter of the total, Baltimore's investment exceeded that of many state governments; and the cities of P o r t l a n d , Louisville, and Mobile each spent more than

FROM BOSTON TO MOBILE

163

its respective s t a t e . T h e three massive public works p r o g r a m s of New Y o r k , P e n n s y l v a n i a , and Ohio, devoted entirely or p r i n c i p a l l y to c a n a l building, a c c o u n t f o r a b o u t a q u a r t e r of the t o t a l o u t l a y . As the m a j o r interest t u r n e d f r o m canals t o r a i l r o a d s , much less reliance was placed on public c o n s t r u c t i o n ; and most of t h e remaining e x p e n d i t u r e took the f o r m of subscriptions or aid t o mixed or p r i v a t e c o r p o r a t i o n s . T h e sequence of p r o j e c t s , as would be expected, reflected technological changes. E a r l y e x p e n d i t u r e s in turnpikes and river improvements were soon overshadowed

by

the m a j o r o u t l a y on canals, a n d this in t u r n was s u r p a s s e d b y p u b lic e x p e n d i t u r e on r a i l r o a d development, which f o r the p e r i o d as a whole represented some sixty p e r c e n t of the t o t a l . T h e r e were also wide differences in the means chosen f o r the selection a n d a d m i n i s t r a t i o n of p r o j e c t s , as well as in t h e i r

finan-

cial results and their effectiveness in p r o m o t i n g development. I n some cases e f f o r t was c o n c e n t r a t e d on a single p r o j e c t of s t r a t e g i c i m p o r t a n c e t o the economic development of the s t a t e as a whole. New Y o r k ' s building of the original E r i e C a n a l and G e o r g i a ' s c o n s t r u c t i o n of the W e s t e r n and A t l a n t i c R a i l r o a d were t h e most notable examples, and this was the policy f o r which P e n n s y l v a n i a ' s " M a i n l i n e r s " contested in vain. M o r e f r e q u e n t l y s t a t e p r o g r a m s included a v a r i e t y of p r o j e c t s , often quite uneven in their economic i m p o r t a n c e , and reflecting the balance of political forces r e p r e senting different p a r t s of the state. I n o r d e r to minimize such logrolling and to place responsibility on individuals and localities, several s t a t e s , including Virginia in 1 8 1 6 a n d Tennessee a n d T e x a s nearly f o r t y years l a t e r , a d o p t e d the policy of aiding on equal terms all improvement p r o j e c t s within their borders. E q u a l l y s t r i k i n g were the v a r i a t i o n s in the position of the v a r ious p r o g r a m s a t the end of the period. A c c o u n t s of the h i s t o r y of i n t e r n a l improvements have stressed " a revulsion of s e n t i m e n t " in the early eighteen-forties which is said to have " t u r n e d all this business o v e r " f r o m s t a t e and local governments to individuals and c o r p o r a t i o n s . 7 9 C e r t a i n l y the record of those y e a r s shows the

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FROM BOSTON TO MOBILE

a b a n d o n m e n t of a n u m b e r of m a j o r p r o g r a m s , either because the u n d e r t a k i n g s h a d been completed

( a s in the case of the Ohio

c a n a l s ) , or more o f t e n ( a s in M i c h i g a n , I n d i a n a and Illinois) because newly u n d e r t a k e n p r o j e c t s h a d come to grief in the depression y e a r s following 1837 a n d 1839. Yet in a number of cases, the revulsion a g a i n s t s t a t e action was followed b y extensive reliancc on local government aid. Moreover, certain of the p r o g r a m s — those of M a s s a c h u s e t t s , Virginia and the city of Baltimore, as well as some in the western s t a t e s — w e r e a t their g r e a t e s t height in t h e decade of the

fifties.

T h e a m o u n t of aid extended by almost every improvement s t a t e , a n d indeed t h a t of each of several ambitious cities, exceeded the t o t a l a m o u n t devoted to i n t e r n a l improvements by the federal government d u r i n g the entire E r a of N a t i o n a l P r o j e c t s . Even on the routes which G a l l a t i n had m a r k e d f o r federal action because of their n a t i o n a l i m p o r t a n c e , s t a t e s and cities did the g r e a t e r p a r t of the work. Of the f o u r " n e c k s " of land t o be cut f o r the i n t e r c o a s t a l w a t e r w a y , the federal government h a d , to be sure, joined with s t a t e and p r i v a t e subscribers in completing two of the p r o j e c t s ; a t h i r d had been c o n s t r u c t e d b y p r i v a t e e n t e r p r i s e ; and a f o u r t h remained f o r p r i v a t e c o n s t r u c t i o n and federal p u r c h a s e in the twentieth c e n t u r y . B u t on the much more i m p o r t a n t problem of the A p p a l a c h i a n B a r r i e r , the federal c o n t r i b u t i o n was limited to the N a t i o n a l R o a d and an e a r l y subscription to the Chesapeake and Ohio Canal C o m p a n y . Of the improvements t h a t made such effective use of the M o h a w k - H u d s o n opening, the E r i e Canal was a s t a t e work and the New Y o r k C e n t r a l a p r o d u c t of p r i v a t e enterp r i s e with some municipal aid. On the Allegheny route, the

first

m a j o r improvement was also a s t a t e e n t e r p r i s e but it was superseded by the P e n n s y l v a n i a R a i l r o a d which was built by a mixede n t e r p r i s e c o m p a n y . Successful exploitation of the P o t o m a c r o u t e was by a c o r p o r a t i o n financed in the same way, namely, the Baltimore and Ohio R a i l r o a d ; a n d the still unfinished a t t e m p t to complete a m a j o r connection t o the W e s t by way of the J a m e s a n d

FROM BOSTON TO MOBILE

165

Kanawha Rivers had engaged the efforts of both mixed and state enterprise. 80 The principal achievements of interna) improvements had been the work not of the national government, as Gallatin and John Quincy Adams had wished, but of what the latter called "State legislature and private adventure."

81

Yet the federal gov-

ernment had begun to reenter the field in the decade before the Civil War, as has been indicated in the references to land grants to railroads during that period; and its contributions were soon to be greatly increased. It is necessary therefore to return to an examination of national debates and decisions.

F E D E R A L DEBATE AND DECISION 1850-1872

I t was a national work, originating in national necessities, and requiring national

assistance.

. . . T h e act itself was an experiment. I t must be considered in the nature of a proposal to enterprising men to engage in the work. United

States

in an 1875 Pacific

Supreme

decision

Railroad

Court,

on the Acts

5 A N E R A OF NATIONAL

SUBSIDY

A new era of n a t i o n a l action began in 1 8 5 0 with an extensive g r a n t of f e d e r a l lands t o aid in the c o n s t r u c t i o n of a system of r a i l r o a d s f r o m Mobile, A l a b a m a , to n o r t h e r n Illinois. T h e r e h a d , of course, been federal action in an earlier p e r i o d , as C h a p t e r 2 has indicated. Advocates of the new measure reminded Congress of the e n c o u r a g e ment given t o "Old Colonel Z a n e " back in 1796, 1 a n d t h e y could cite as a more direct p r e c e d e n t the g r a n t s t o Illinois, I n d i a n a , a n d Ohio in 1827 a n d 1828 which had introduced the p r a c t i c e of giving a l t e r n a t e sections of public land a l o n g the r o u t e of the p r o posed improvement. N o r h a d federal a c t i v i t y in the field ceased completely a f t e r the Maysville R o a d veto. A p p r o p r i a t i o n s were m a d e — t h o u g h a f t e r J a c k s o n ' s a d m i n i s t r a t i o n very f o r river and h a r b o r improvements. T h e N a t i o n a l

sparingly— Road

was

pushed slowly on into Illinois. T h e federal government retained its stock in the Louisville and P o r t l a n d C a n a l , which became a highly profitable u n d e r t a k i n g ; b u t the g o v e r n m e n t ' s unwillingness to assume positive responsibility was i l l u s t r a t e d by its acquiescence in the a r r a n g e m e n t by which the p r o f i t s were used to buy out the p r i v a t e shares and by its f a i l u r e t o t a k e over full control even when the process h a d been completed. 2 C e r t a i n concessions a n d privileges were g r a n t e d to the r a i l r o a d s . F r o m 1830 t o 1841, a f t e r an a g i t a t i o n begun on behalf of the B a l t i m o r e and Ohio, they were given either full or p a r t i a l rebates on the duties on iron i m p o r t e d

170

ERA OF N A T I O N A L S U B S I D Y

f o r rails. Moreover, the Tallahassee R a i l r o a d and three other companies in the Gulf states received free r i g h t of way t h r o u g h federal lands and the use of stone and timber f r o m them. More characteristic were forms of federal aid applied to internal improvements indirectly, through the agency of the several states and a t their discretion. F o r each new s t a t e formed from the public domain between 1802 and 1820, and again f o r Iowa in 1841, a f r a c t i o n of the proceeds of federal lands sold within its b o r d e r s was allotted to the s t a t e government f o r road building or other improvements. In 1836 additional sums were made available to A l a b a m a and Mississippi from the proceeds of the sale of the lands of the Chickasaw Indians. T h e federal government also continued to make g r a n t s of the land itself f o r internal improvement; b u t policy shifted from the national selection of p a r t i c u l a r p r o j e c t s , such as the Illinois and Michigan Canal, to a general distribution to the states f o r use f o r their own purposes. T h i s l a t t e r tendency triumphed in the a c t of 1841, which b r o u g h t u p to a t o t a l of 500,000 acres the improvements g r a n t f o r each of the public land states and established the policy of d i s t r i b u t i n g the same a m o u n t to each new s t a t e on its admission. 3 Sometimes, as has been shown, the g r a n t s were not in f a c t used for the p u r p o s e s intended. On the other hand, a large number of states applied to their internal improvement p r o g r a m s the substantial sums received from the distribution of the surplus federal revenue in 1837. T h e 1850 act was a s h a r p d e p a r t u r e from these precedents and f r o m the prevailing attitudes of the thirties and forties. In the first place, it represented federal aid on the g r a n d scale. T h e g r a n t was to consist of a l t e r n a t e sections of land in a belt six miles wide on each side of the railroad. Where p a r t s of this land had already been sold, the companies could take compensatory acreage within nine miles of the t r a c k . T h e amount finally g r a n t e d was about 3,750,000 acres. In the second place, it was the Congress t h a t established the termini and laid down the general direction of the route, though the a c t followed established f o r m s bv g r a n t i n g the

ERA OF N A T I O N A L S U B S I D Y

171

land to the states of Illinois, Mississippi, and Alabama for retransfer to the companies. Finally, the act was similar in character to a number of measures for aid to railroads, including one for the Illinois Central, which had been rejected during the two preceding decades. How, then, was this change of policy effected? Part of the answer no doubt lies in the mounting pressure of public enthusiasm for railroads in a period of exceptionally rapid construction. Much is clearly due to the strategy of Senator Stephen A. Douglas and other leaders who combined the southern project of the Mobile and Ohio with the northern project of the Illinois Central so that their proposal could offer "a continuous railroad communication from the Gulf to the extreme limit of the State of Illinois." This not only served to attract votes from the sections immediately concerned but also made it possible for the advocates of the improvement to base their arguments on its importance as "a great national thoroughfare." A representative from Alabama declared that a work of such preeminently "national character" would serve "to perpetuate

this glorious

Confederacy"; a

senator

from Illinois expressed the hope that it would bind the North and South "together so effectually that the idea even of separation" would be unthinkable. In the same debate Senator William H. Seward of New York attributed the financial difficulties of the newer states to "the circumstance that it was devolved upon [their] governments . . .

to make works of internal improve-

ment" while the resources best "applicable to that object," the public lands, "belonged altogether to the Federal Government."

4

In this argument revulsion against the failure of state programs like those of Illinois took the form of a return to reliance on the agency of the national government. The government's land resources figured in the constitutional as well as the practical aspects of the discussion. Defenders of the proposal derived part of their constitutional justification from the government's position as proprietor. Like any other land-

172

ERA OF N A T I O N A L S U B S I D Y

owner, they a r g u e d , it could dispose of p a r t of its p r o p e r t y to enhance the value of the p a r t t h a t remained. As evidence of this intention, the 1850 a c t , like earlier g r a n t s , provided t h a t the alternate sections reserved to the government should not be sold a t less than twice the minimum price. T h i s provision, however, drew a t tack f r o m those who were against raising the cost of land to a c t u a l s e t t l e r s ; and it failed t o remove the " r a d i c a l , abiding and constitutional o b j e c t i o n s " of a number of legislators, p a r t i c u l a r l y from the southeastern states, to any federal p r o g r a m f o r internal improvements. " W h e r e , " they asked, "is the power in this Government to make a donation to A in a manner t h a t presses B into p a y ing double p r i c e ? " Observing sadly t h a t constitutional scruples seemed g r e a t l y to depend " u p o n local p a t r i o t i s m " and to diminish as men moved toward the f r o n t i e r , the opponents of the measure went down t o defeat before the votes of the western states and their allies. 5 T h e p r o m o t e r s of the Illinois Central counted on bonds secured by land as their m a j o r source of funds f o r construction, and their desire t o avoid areas in which the land was already taken u p was a f a c t o r in the choice of a route t h r o u g h relatively thinly settled p a r t s of the state. T h e American

Railroad

Journal

expressed

doubt of the soundness of an enterprise in which "commercial considerations" were thus "sacrificed f o r the p u r p o s e of obtaining a large q u a n t i t y of l a n d . " In the event, however, the combination of the native richness of the prairie along the route and the vigorous colonization work of the Illinois Central gave to the enterprise a s t r o n g developmental impact. T h o u g h the Journal

considered the

Mobile and Ohio as by c o n t r a s t a work of "inherent s t r e n g t h " t h a t "would have been built without adventitious aid,"

8

the seven hun-

dred miles of the Illinois Central were in f a c t completed in 1856 well before the five hundred miles of the southern road. Meanwhile the federal government was already adding f u r t h e r aid to r a i l r o a d development. An act of 1850 turned over unsold swamp and overflowed lands t o the states within which they l a y ,

ERA OF NATIONAL SUBSIDY

173

and in some cases these so-called "refuse lands" were later disposed of for improvement purposes. An act of 1852 granted to railroads generally the privilege of right-of-way and the use of material on public lands. In 1852 and 1853, Missouri and Arkansas received land grants for five railroads ; and in 1856 and 1857, at the height of the railroad boom, the congressional barriers were lowered for a flood of measures intended to aid no less than thirty-five additional railway projects. These two sets of grants went to ten of the western and Gulf states; the total acreage offered was over 24,000,000. 7 In the tier of states from Minnesota to Louisiana, a number of the projects, like the Burlington and Rock Island roads in Iowa, were thought of as possible first stages of a transcontinental route. The 750,000 acres granted to the state of Michigan in 1852 for the Sault Canal resulted, as has been shown, in the construction of an improvement of importance to the entire Great Lakes region. Yet the number of these grants and the ease with which they were secured—until the movement was checked by the financial crisis of 1857—seemed to indicate that those who wished federal subsidy no longer needed to demonstrate that their projects possessed a uniquely national character. B y this time, however, the center of interest had been taken by a much greater project that was advocated with particular urgency on grounds of patriotism and national interest—the Pacific railroad. "Improvement of communication with the Pacific coast," as its historian has pointed out, had been "an issue in American politics" from the early days of the republic. 8 The first notable illustration was the Lewis and Clark expedition sent out by President Jefferson in 1803 to cross the Rockies from the Missouri River to the Oregon country. Jefferson's interests included the possibilities of both economic and territorial expansion as well as the increase of scientific knowledge, and the explorers were instructed to study trade routes not only for the Oregon fur trade but also "for the commerce of Europe, Asia, and America." Like the Gallatin Report which was presented five years later, the mis-

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sion of Lewis and Clark illustrated the determination to use a knowledge of geography in the service of economic development. In the decades that followed, western exploration was one of the functions of the Army, and a number of notable expeditions were made. The Army also did a substantial amount of road building in the West. The great early routes of travel to the west were, to be sure, for the most part discovered by private traders or trappers or by the "mountain men" who acted as guides to the emigrants' wagon trains. But Westerners had no difficulty in appreciating the economic fact that a road built by the Army for the transport of its own materiel would also serve for the carriage of settlers and their produce, and the political fact that it was easier to persuade the Washington authorities to build a road for "military" than for commercial purposes. 9 There were, however, some proposals for road making on a bolder and more frankly developmental scale; and Thomas H. Benton and others urged improvement of the Missouri and Columbia Rivers and the building of a turnpike between the two. If this project resembled Gallatin's proposals for his pairs of Appalachian rivers, other rival schemes recalled the "necks of land" which he wished to cut. The geography of Central America and southern Mexico offered isthmian alternatives to the long routes overland. In the year the Erie Canal was opened, the Ambassador of the Republic of Central America invited the United States to enter into negotiations over the building of a possible canal by way of Lake Nicaragua. Some twenty-five years later, a company controlled by Cornelius Vanderbilt held the concession for construction by this route; and, though the canal was not built, transit was provided during the eighteen-fifties bv a mixed land-and-water service. Another American company provided for a briefer period similar transit by way of the Mexican Isthmus of Tehuantepec, across which it hoped to build a railroad. More was accomplished on the Isthmus of Panama, which had provided one of the main routes of passage for the participants in the Cali-

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175

f o r n i a Gold R u s h ; and the P a n a m a R a i l r o a d r a n its first t h r o u g h t r a i n from the Atlantic to the Pacific in 1855, the same y e a r in which the Pennsylvania R a i l r o a d reached P i t t s b u r g h . T h e United S t a t e s government gave diplomatic s u p p o r t to these ventures and occasionally the services of an a r m y engineer, b u t they received no financial subsidy. 1 0 T h i s , indeed, seemed one of their g r e a t advantages to those who opposed the heavy governmental expenditures t h a t would be required on the overland r o u t e s ; and the shipp i n g interests interested in the isthmian p r o j e c t s with their backers in New Orleans and New Y o r k and other p o r t s , continued t o p l a y a p a r t in influencing federal policy. I t was the t r a n s c o n t i n e n t a l r a i l r o a d , however, which became the main o b j e c t of interest and political c o n t r o v e r s y . I n 1 8 4 5 petitions and memorials began p o u r i n g into Congress, and f r o m then on there was h a r d l y a time when one or more Pacific r a i l r o a d bills were not under consideration. T h e settlement of the Oregon bounda r y in 1846, the acquisition of California and the Southwest in 1848, the discovery of gold in 1849, and the c o n t i n u i n g g r o w t h of settlement in the F a r W e s t strengthened the political a n d economic arguments f o r national action. Of the many schemes p u t f o r w a r d , within Congress or outside, a number proposed the method of purely public enterprise. T o some Westerners it seemed as n a t u r a l f o r the government t o build a r a i l r o a d — a t least " a rough, r a p i d l y e x t e n d e d " one—as f o r it to build a post r o a d or military road. 1 1 S e n a t o r Benton u r g e d " a national h i g h w a y ; no s t o c k - j o b b i n g " ; u n d e r his plan the federal government would have built a r a i l r o a d and a common r o a d r u n ning side by side from the Mississippi t o the Pacific. 1 2 A p r o p o s a l f o r the construction of a government r a i l r o a d , using t h e services of p r i v a t e c o n t r a c t o r s , was before Congress in the 1857—58 session. Much l a t e r , a t the close of the Civil W a r , the American road Journal

Rail-

gave considerable space to a p r o p o s a l to build the

work under military auspices. I n s t e a d of disbanding the A r m y ' s s a p p e r s and miners, the government would keep them a t work

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under their own trained officers. As the railroad was completed, the men would be given land along the way, like Roman legionnaires in a border province, and contribute to the settlement of the a r e a . i s The editor of the Journal, Henry Varnum Poor, at one time suggested still another variant, namely, construction by a board of directors appointed by the states. His belief was that the national government must provide the resources but for the sake of efficiency "should have as little connection as possible with the construction and management of the road." 14 None of these various measures for public enterprise came close to securing majority support, and the prevailing opinion was that stated by President Buchanan: " I t would be inexpedient for this Government to exercise the power of constructing the Pacific Railroad by its own immediate agents." 15 On the other hand, there were few serious proposals for construction of the road as an unaided private enterprise, though at one point in the discussion Benton reversed himself and declared t h a t responsible capitalists would be prepared to build the railroad without subsidy. The great m a j o r i t y of plans were based on one form or another of partnership between the national government and private enterprise. Considering the vast stretch of unsettled country to be crossed and the physical obstacles of mountain and desert, it was the general opinion that no road could be built "without substantial aid, either in money or lands, from General Government." 18 And to most advocates, as to the Connecticut legislature in 1847, it appeared that the public lands were a fund peculiarly appropriate for defraying the expense of such an undertaking, as a small portion of them would furnish the necessary means, and the value of the remainder would be greatly enhanced thereby. 17 The most discussed of the early projects, that of Asa Whitney, claimed the merit of being "purely an individual enterprise," which asked not a single dollar from the public treasury and would therefore "disembarrass" the undertaking "from sectional and con-

E R A OF N A T I O N A L S U B S I D Y stitutional o b j e c t i o n . "

18

177

Yet the W h i t n e y p l a n rested, even more

t h a n most of the others, on the use of a g r e a t block of public land. W h a t he asked was the assignment by Congress of a s t r i p sixty miles wide f r o m L a k e Michigan to the Pacific Ocean. T h i s he would buy a t the price of sixteen cents p e r acre, or, in a l a t e r version, ten cents. T h e difference between this sum and the proceeds of the sale of the land would furnish the f u n d s f o r c o n s t r u c t i o n and the profit, if a n y remained, f o r W h i t n e y himself. T h e one element of subsidy lay in the sale of the land a t the low price, and the difference in value would largely be created b y the a c t of c o n s t r u c t i o n . T h u s , said an advocate, " t h e whole c a p i t a l required on the W h i t n e y plan, lies a t this moment sleeping in the land t h r o u g h which the r o a d is to p a s s . "

19

Once built, the r a i l r o a d , unburdened by inter-

est costs, would be r u n a t rates controlled by Congress and sufficient only t o cover the costs of operation. In a r g u i n g f o r the p r o p o s a l , W h i t n e y and his s u p p o r t e r s laid p a r t i c u l a r emphasis on the c a p t u r e of the t r a d e with China and the Indies and on the enormous profits to be made in the exchange of p r o d u c t s with the ingenious and industrious millions of Asia. A House Committee declared t h a t a d o p t i o n of the p l a n "would make the United S t a t e s the centre and axle of the commerce of the world," with the result—in a quick change of m e t a p h o r — t h a t E u r o p e would have to "bow to Asia, and Asia to E u r o p e , across our bosom."

20

W h i t n e y ' s campaign had an e x t r a o r d i n a r y effect

in a r o u s i n g interest in the Pacific p r o j e c t , and between 1845 and 1850 his p l a n was endorsed by eighteen s t a t e legislatures and many chambers of commerce and other civic bodies. Yet its chances of acceptance diminished as opponents on one side questioned the p r a c t i c a l i t y of c o n s t r u c t i n g a railroad by the means p r o p o s e d and opponents on the other side insisted t h a t the enterprise, if it should be successful, would p u t intolerable power in the hands of a single individual. A rival measure emphasizing p r i v a t e leadership was p u t f o r w a r d by a g r o u p of Boston capitalists who were p e r h a p s more realistic about costs and certainly f r a n k a b o u t the

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need for subsidy. T h e i r p r o p o s a l was t h a t the road be built by a company with resources of $ 1 0 0 , 0 0 0 , 0 0 0 , of which all but $2,000,000 was to represent a government loan. This received much less support than W h i t n e y ' s plan, and still less attention was paid to a suggestion t h a t the government might, as had been done in F r a n c e and India, s u p p o r t a p r i v a t e company by g u a r a n t e e i n g a five percent r e t u r n on its investment. As the debate continued, discussion centered mainly on proposals for construction by a p r i v a t e company or companies with s u b s t a n t i a l government aid. W i t h respect to subsidy there were two p r i n c i p a l issues: F i r s t , how much public land was to be given? Second, should a financial subsidy be added to the land g r a n t , and if so, how much? A series of measures considered between 1853 and 1859 g a v e somewhat v a r y i n g answers. Land g r a n t s were proposed of f o r t y sections per mile, twelve sections, and twenty sections, all on the a l t e r n a t e sections basis. In the first of these cases, there was to be no financial subsidy, except in T e x a s where the federal government held no lands. An amendment was proposed to substitute for the land g r a n t a loan of $30,000,000. T h i s was not accepted, but the l a t e r bills added loans to land. A f t e r earlier proposals of $ 2 0 , 0 0 0 , 0 0 0 and $15,000,000, a c a r e f u l l y drawn Senate bill of 1 8 5 9 provided for a land g r a n t of twenty sections per mile and a loan of $ 2 5 , 0 0 0 , 0 0 0 to be regarded as p r e p a y m e n t for the c a r r i a g e of government freight and mail. E a c h of these measures, for all their emphasis on p r i v a t e construction, provided t h a t , a f t e r a period of y e a r s , the road should revert to government ownership, in most cases without additional compensation. The r e c a p t u r e provision, however, was omitted from the Curtis Bill of 1860, which also proposed to offer to investors a l a r g e r financial inducement than a n y of the earlier measures. As originally put f o r w a r d , the measure offered a land g r a n t of only one section per mile; but the p r e p a y m e n t for t r a n s p o r t a t i o n was to be $60,0 0 0 , 0 0 0 , and even this figure was raised by amendments providing for additional lines.

ERA OF N A T I O N A L S U B S I D Y

179

A g r e e m e n t on t e r m s of very s u b s t a n t i a l subsidy o f f e r e d no g r e a t difficulty f o r t h e a d v o c a t e s of a t r a n s c o n t i n e n t a l r a i l r o a d . s t i c k i n g p o i n t was t h e selection of t h e r o u t e . J u s t as

The

Atlantic

s e a p o r t s h a d p r o j e c t e d rival v e n t u r e s f o r t h e p a s s a g e of t h e A p p a l a c h i a n B a r r i e r , a similar a r r a y of M i d d l e W e s t e r n

cities—on

t h e L a k e s , on t h e M i s s o u r i , a n d a l o n g t h e whole l e n g t h of t h e M i s s i s s i p p i — p u t f o r w a r d t h e i r claims t o p r o v i d e t h e e a s t e r n t e r m i n u s of t h e P a c i f i c r a i l r o a d . W h i t n e y ' s o r i g i n a l p l a n was f o r a r o u t e f r o m M i l w a u k e e t o P u g e t S o u n d , b u t t h e r e were m a n y rivals. I n a n u m b e r of s t a t e s , as t h e p r e c e d i n g C h a p t e r h a s shown, e a s t - w e s t r a i l r o a d s were b e i n g p u s h e d f o r w a r d in t h e h o p e t h a t t h e y m i g h t serve as t h e " f i r s t l i n k s " of t h e t r a n s c o n t i n e n t a l . T h e q u e s t i o n , according to a Wisconsin paper, was: "Shall the u p p e r W e s t or shall t h e lower W e s t be t h e g r e a t merce?"

21

a v e n u e of t r a d e a n d

com-

A s t h e Civil W a r a p p r o a c h e d , t h e b i t t e r e s t c o n t r o v e r s y

was between t h o s e who wished a r o a d t o serve t h e N o r t h a n d t h o s e who wished a r o a d t o serve t h e S o u t h . M i d w a y in t h e l o n g d e b a t e , an a t t e m p t was m a d e t o p l a c e t h e selection of a r o u t e on a more o b j e c t i v e b a s i s . T h e T h i r t y S e c o n d C o n g r e s s , as one of its last a c t s in M a r c h , 1 8 5 3 , a s k e d t h e S e c r e t a r y of W a r t o c o n d u c t surveys t o d e t e r m i n e t h e m o s t p r a c t i c a b l e and economical r o u t e f o r a r a i l r o a d f r o m the Mississippi to the P a c i f i c . O p p o n e n t s o b j e c t e d t h a t t h i s was a r e t u r n t o t h e d a n g e r ous p r e c e d e n t of t h e G e n e r a l S u r v e y A c t of 1 8 2 4 , 2 2 a n d it d i d indeed a p p e a r t o r e p r e s e n t t h e revival of a n a t t e m p t a t

national

p l a n n i n g on a b r o a d g e o g r a p h i c basis. U n d e r t h i s m e a s u r e p a r t i e s of t o p o g r a p h i c a l e n g i n e e r s were sent o u t t o m a k e r e c o n n a i s s a n c e s a n d e x a m i n a t i o n s of t h e five m a j o r r o u t e s a r o u n d which d i s c u s s i o n h a d p r i n c i p a l l y c e n t e r e d — t h o s e of t h e 4 7 t h a n d 4 8 t h

parallels

b y w a y of t h e M i s s o u r i a n d t h e C o l u m b i a ; t h e 4 1 s t a n d

42d

p a r a l l e l s f o l l o w i n g t h e p a t h of t h e w a g o n t r a i n s u p t h e P l a t t e Valley a n d t h r o u g h S o u t h P a s s ; t h e 3 8 t h a n d 3 9 t h p a r a l l e l s f a v o r e d b y S e n a t o r B e n t o n a n d his e x p l o r e r son-in-law, J o h n

C.

F r e m o n t ; t h e 3 5 t h p a r a l l e l by way of t h e S a n t a F e t r a i l ; a n d the

180

ERA O F N A T I O N A L S U B S I D Y

32d parallel by way of E l P a s o , T e x a s , and the Gila River. E a c h of the five exploring p a r t i e s p r e s e n t e d estimates of length, grades, altitudes, costs, a n d — t o some d e g r e e — o p p o r t u n i t i e s f o r settlement a l o n g its route. T h e s e findings were compared and critically examined by the professional officers in the C o r p s of T o p o g r a p h ical E n g i n e e r s , who modified the original estimates. T h e whole was presented to Congress in 1855 by the S e c r e t a r y of W a r , with his own s t a t e m e n t of the conclusions. T h e 3 8 t h - p a r a l l e l r o u t e , on which no pass was f o u n d a t less t h a n 10,000 feet, was p r o n o u n c e d t o o costly to be considered. E a c h of the other f o u r routes was r e p o r t e d as p r a c t i c a b l e . These b r o a d j u d g m e n t s have been confirmed by l a t e r developments. T h e N o r t h e r n Pacific, the Union Pacific, the S a n t a Fe, and the Southern Pacific all follow in general and o f t e n in close detail the four recommended routes, except t h a t the Union Pacific succeeded in finding

a b e t t e r a l t e r n a t i v e to S o u t h P a s s . On the other hand,

though the Denver and Rio G r a n d e crosses the Rockies a t about the 3 8 t h parallel, no r a i l r o a d has ever continued the line across the S i e r r a s a t this l a t i t u d e . M o r e debatable, and less fully accepted, was the R e p o r t ' s r a t ing of the merits of the p r a c t i c a b l e routes. T h e n o r t h e r n m o s t had the a d v a n t a g e of easy g r a d e s and the lowest " r e p o r t e d sum of the ascents and descents." T h e c e n t r a l route aimed directly f o r San F r a n c i s c o , the most i m p o r t a n t goal. T h e S a n t e F e route made use of the "interlocking t r i b u t a r i e s of the Mississippi, the Rio G r a n d e , and the Colorado of the W e s t " and a p p e a r e d to go " t h r o u g h or near more cultivable a r e a s " t h a n the others. Comparison of the f o u r , however, was said to show "conclusively . . . t h a t the route of the 32d parallel is, of those surveyed, the most p r a c t i c a b l e and economical." I t was the s h o r t e s t line to the C o a s t ; its highest p a s s was under 6,000 f e e t ; and much of the route lay over an almost level tableland. As a result, its estimated cost was "less by a t h i r d than t h a t of a n y of the other lines."

23

Since the S e c r e t a r y who presented the R e p o r t was Jefferson

ERA OF NATIONAL S U B S I D Y

181

Davis of Mississippi, this unqualified finding in favor of the southernmost route has often been a t t r i b u t e d to sectional prejudice. Yet almost all of the officers who led the surveys or reviewed their findings were N o r t h e r n e r s , and the charges of m a j o r distortion have not been proved. When the reviewing officers added twenty percent to the original estimates of cost by way of the Missouri and Columbia Rivers, it seems probable t h a t they were correcting r a t h e r than introducing a bias. On this route the explorations had been conducted by the enthusiastic Governor of the Washington T e r r i t o r y , I. I . Stevens, who had proclaimed his conviction t h a t N a t u r e had "indicated the northern p a t h w a y . " 24 When railroads were finally built, under changed technical conditions, it was found t h a t the a c t u a l distance was a little g r e a t e r by the Gila River route and a little less by the other routes t h a n the R e p o r t had estimated. T h e Secretary's final conclusions, moreover, emphasized the southern route's advantage in distances to " A t l a n t i c and Gulf s e a p o r t s " without mentioning the less favorable comparison of distance t o Chicago or St. Louis. 2 8 Yet these were hardly conclusive points, and the Surveys taken as a whole p r o vided a notable addition to the knowledge on which Congress might base a rational choice. W h a t is less clear is t h a t they had any substantial effect on congressional decisions, except to discourage proposals to build westward from the s t a t e of Missouri. While the exploring parties were in the field, the administration was already negotiating with Mexico to buy enough land to bring the Gila River route entirely within the borders of the United States, and the Gadsden P u r chase t r e a t y was ratified the year before the r e p o r t on the Surveys was presented to Congress. 2 6 If this indicated the strength of p r i o r commitment to the southernmost route, the p a r t i s a n s of the northern and central routes were by no means willing t o abandon their own schemes and accept Secretary Davis's recommendation. Remarking t h a t this " t r u e son of the S o u t h " had shown " a little Southern proclivity in his r e p o r t , " 2 7 they proceeded to

182

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SUBSIDY

draw from the surveys themselves arguments for the practicability and advantages of their own proposals. These divisions were reflected throughout the course of the debates. T h e earliest m a j o r bills proposed two railroads, one to the northwest following Whitney's plan and the other by a southern route. Senator Gwin of California suggested a single trunk line by way of T e x a s with a number of eastern branches. In 1854—55 S e n a t o r Douglas sponsored a bill providing for as many as three railroads, if proper bids were received, to start from the western boundaries of Wisconsin, Iowa or Missouri, and T e x a s respectively. An amendment reduced this to one trunk line by a central route with branches to Memphis and Lake Superior. In later Congresses, the characteristic p a t t e r n was the introduction of a bill for construction by the central route, an immediate countermove to add a southern road, and often an attempt by a smaller but highly persistent group to add a road by the extreme northern route. Thus in 1859—60, the Curtis Bill, which originally provided $ 6 0 , 0 0 0 , 0 0 0 for the central route but to which successive amendments added $ 3 6 , 0 0 0 , 0 0 0 for a southern road and $ 2 5 , 0 0 0 , 0 0 0 for a northern road, passed the Senate—but not the H o u s e — a f t e r six Southern states had already seceded. At no time was the Congress prepared to leave the choice of route either to the administration or to what its members called the " e a g l e " or " l y n x eye of capit a l . " Though a large m a j o r i t y of senators and representatives were for years in favor of some form of federal aid to a Pacificrailway, the conflicts of local and sectional interest continued to prevent agreement on any specific national plan. 2 8 Secession removed from Congress almost all the partisans of the southern routes, as well as the most consistent opponents of federal aid, and supporters of the central route now held a clear m a j o r i t y over those of the northern. Moreover, the old economic and political claims for the railroad were reenforced by new arguments for binding California more closely to the union and for protecting the Pacific Coast against dangers such as those sug-

E R A OF N A T I O N A L S U B S I D Y

183

gested by Maximilian's conquest of Mexico. Against these the argument that building a transcontinental railroad would represent a distraction from the war effort appeared to carry little weight. Yet the "wrangle of local interests" continued to make decision difficult, and the exasperated Delegate from New Mexico complained that the professed advocates of a Pacific railroad would not support any particular bill "unless it starts in the corner of every man's f a r m and runs through all his neighbors' plantations."

29

T h e final effect of the Pacific Railway Acts of 1862 and

1864 was to fix the eastern terminus of the main line at Omaha, Nebraska. This decision represented the victory of the "IowaChicago interest" supported by New Y o r k over the "Kansas—St. Louis interest" supported by Cincinnati, Baltimore, and Philadelphia. 3 0 B u t agreement on a single line could not be reached, and the legislation as adopted made the Omaha route only one of five eastern branches entitled to federal aid. T h e result, said one critic, was to turn an a r t e r y into a sprinkler. 3 1 The provisions of the two decisive measures are well known. T h e 1862 act provided for the organization of the Union Pacific Railroad Company to build the main line as f a r as the California border and one or more of the eastern branches, and it authorized the Central Pacific Company of California to build from S a c r a mento to the state line. In case one of the companies reached the meeting place before the other, it was entitled to continue building until the junction was made. The subsidy provisions followed in general the precedents worked out in the bills of the preceding decade. F o r the main line and the authorized branches, aid was to consist of ten sections per mile and a first mortgage loan of $16,000 per mile for the eastern and western p a r t s , of $48,000 per mile for 150-mile stretches in the Rocky and Sierra Nevada Mountains respectively, and of $32,000 per mile in the Great Basin between them. Some of these subsidy bonds were to be held back until the entire road was completed, and their total for the main line was not to exceed $50,000,000. All payment for services ren-

ERA OF N A T I O N A L S U B S I D Y

184

dered the government and at least five percent of net earnings after completion were to be applied to repayment and interest on the loan. Before subsidy could be extended for any section of the road, its satisfactory completion must be certified by government commissioners ; and the government was to appoint two of the fifteen directors of the Union Pacific. Under this act some construction was carried on by the Central Pacific and Leavenworth companies. The Union Pacific obtained subscriptions of a little more than $2,000,000, the sum required for the organization of the company, and the ten percent paid in cash was supplemented by short-term borrowing. Of the sums thus raised, a part was spent in s t a r t i n g construction from Omaha and a larger p a r t in the attempt to obtain more favorable terms in Washington. B y 1 8 6 4 it was clear that the conditions of the original grant were not sufficiently attractive to induce capitalists to build a railroad across the plains and mountains. Most members of Congress remained anxious to secure its construction, but they differed as to the appropriate means. A minority drew the conclusion that the government should build the road on its own account. Congressman Pruyn of New York estimated that capitalists would "contribute two percent only of the money, and no part, of course, of the real estate. In other words," he concluded, "the Government in fact built the road, and ought to control and own it." But the majority held to what one congressman described as the established principle "that the Government ought not to appoint their own Federal agents for any great work of public improvement." The alternative was to improve the terms offered to private enterprise. W h a t Congress proposed, it was said, was "to do enough, and only enough, to induce capitalists to build the Pacific railway."

32

The 1864 act was framed in the belief that these inducements should indeed be substantial. The land grant was doubled to twenty sections per mile. T h e provision for reservation of bonds was re-

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185

pealed, and the installments of subsidy were to be issued on conditions that would reduce the amount of working capital required. H a l f of the government's payment for services was to be made in cash and only half set off against the loan. Most important of all, the government's claim was reduced to a second mortgage, and the companies were permitted to sell their own first m o r t g a g e bonds to private investors in the same amounts and at the same times as the government bonds. Stock of the Union Pacific Company was to consist of $100,000,000 in shares of $100 apiece, which must be paid for in cash, and the books were to be kept open until the entire amount was subscribed. These 1864 proposals seemed to one congressman " t h e most monstrous and flagrant attempt to overreach the Government and the people" that had ever been made, and some though not all the participants in the debate were convinced that reducing the government's claim to a second m o r t g a g e meant that it would never be repaid. Under these new conditions, it appeared urgent to some legislators to provide additional assurance that the government's purposes would really be carried out. One representative

at-

tempted, without success, to provide that construction contracts made by the companies should require approval by the Secretary of the T r e a s u r y as a test of their good faith. Others regarded it as particularly important that the "gentlemen . . . representing the interests of the Government in this corporation should have very large p o w e r s . " 3 3 In response to this feeling, the 1864 act increased the number of government directors in the Union Pacific to five, in a board of twenty, and provided that one of these should be a member of each of its standing or special committees. The sequel is familiar, at least in its general outlines, to all students of American history. The nearly eighteen hundred miles of railroad connecting Omaha and Sacramento were completed in 1869. The advance of the Central Pacific's Chinese laborers from the west and the Union Pacific's Irish laborers from the east and the driving of the final gold spike at Promontory Point have be-

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come a permanent p a r t of American folk tradition. The p h y s i c a l achievement, in the face of Indian a t t a c k s , difficulties of s u p p l y , and all the obstacles of mountain and desert, was a remarkable one, and it included the notable discovery by the Union Pacific's engineer of a p a s s which provided an easier transition from the P l a i n s a n d easier g r a d e s over the Rockies than the South P a s s of the e m i g r a n t t r a i n s . T h e advances made by the government on the main line were eventually repaid, though only a f t e r y e a r s of litig a t i o n and controversy. As a developmental measure, the success of the u n d e r t a k i n g has never been seriously questioned. Though its i m p a c t on the economy as a whole was less than t h a t of the E r i e Canal and the trunk-line r a i l r o a d s , it has often been r e g a r d e d a s the g r e a t e s t , as it was certainly the most costly, of all the publicly supported improvements of the ninteenth century. The s t o r y of the Union Pacific's financing is also f a m i l i a r . The government bonds sold a t p a r or close to it, and the first m o r t g a g e bonds were disposed of a t small discounts. On the other hand, the amount of " v e n t u r e " c a p i t a l t h a t came f o r w a r d was very small indeed. T h e law's requirement t h a t subscriptions should be in cash only was evaded by the issuance of stock a s p a r t of the p a y m e n t on construction contracts. The same g r o u p of persons held the stock of the Union Pacific and the Credit Mobilier of America, a corporation organized to receive and distribute the profits of construction. Even before the road was completed, they managed to r e t u r n to themselves through the Credit Mobilier almost all the cash they had put in ; and within a brief period they paid themselves dividends in Union Pacific securities, which depended for their value on the prospects of the road but in current prices were worth three or four times their original investment. At the time when these profits were being made, shares of Credit Mobilier were distributed to a number of members of Congress, who made little or no cash payment on them and whose obligations were soon canceled by dividends g r e a t l y exceeding the p a r value of the stock. The same p a t t e r n of small initial investment, l a r g e

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profits through construction contracts to insiders, and the distribution of favors in Washington was repeated with variations in the case of the Central Pacific. Accounts of the episode have differed greatly, not so much by denial of any of these statements as in the assessment of the relative importance of the various points. From the point of view of national policy concerning internal improvements, the most significant questions may be stated as follows: Assuming that the considerations of economic development and political unification were sufficiently cogent to j u s t i f y government expenditure f o r building a Pacific railroad before it would be undertaken by unaided private enterprise, were such lavish terms of subsidy needed to secure private construction? In other words, did government policy meet the specification of doing "enough, and only enough, to induce capitalists to build the Pacific railway"? And if so, were these terms too high a price for the government to p a y to avoid having to do the work by its own "direct agency"? Analysis of the inducements to capital, and of their effects, must distinguish between loan capital and equity investment. With respect to the former, there was no serious difficulty. Private investors paid $ 2 3 , 7 1 8 , 0 0 0 for $ 2 7 , 2 1 3 , 0 0 0 of the six percent first mortgage bonds of the Union Pacific. This part of the

financing,

since it involved no scandal, has been little discussed; but it is evidence that reduction of the government's claim to a second mortgage had its intended result and that the investing community came to believe that the enterprise would not be a complete failure. Investors also paid more than $ 2 7 , 0 0 0 , 0 0 0 for the government's six percent bonds. Smaller sums were raised by seven percent bonds on the security of the land grant and by ten percent income bonds, both of which sold at heavy discounts. The amount raised by these various issues was about $63,500,000. Since the total cost of building the road was about $ 5 9 , 0 0 0 , 0 0 0 , including some $ 2 , 5 0 0 , 0 0 0 of discount and interest on short-term loans, 34 the contribution of equity capital was small indeed. Those

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who controlled the enterprise were able to do so on the basis of an investment of about $4,000,000 in the stock of the Credit Mobilier. A f t e r the process of construction was s t a r t e d , this money served as a revolving f u n d to tide over the period of p e r h a p s f o u r months f r o m the time work began on a section of the road until the bonds f o r t h a t section could be issued. M o s t of this sum, in addition to a large amount of the securities of the Union Pacific, was taken out within a year a f t e r the completion of the road. T h e t o t a l p a y ments from the railroad company to the Credit Mobilier, t a k i n g the securities a t face value, were well over $90,000,000. Since the construction company paid less t h a n $51,000,000 to the subcont r a c t o r s for building the road, its nominal profits were more t h a n $40,000,000. Most of this, however, was taken in common stock, which was currently worth p e r h a p s t h i r t j ' cents on the dollar though it was later to rise to p a r . In terms of c u r r e n t cash value, the profit has been conservatively estimated as $14,000,000 or $15,000,000. 3 5 Even this modest and well-rewarded a m o u n t of " v e n t u r e " capital, however, was difficult to raise. P r o m i n e n t r a i l r o a d men unconnected with the Credit Mobilier testified t h a t they h a d regarded the Pacific railroad p r o j e c t as "one of the maddest m a t e r i a l vent u r e s " and "beyond the range of o r d i n a r y prudence . . . except as a government measure."

38

On the other hand, an investigating

committee of the House of Representatives reached the conclusion t h a t the promoters "differed from other capitalists not in taking a risk, but in having discovered t h a t the road could be built a t vast profit without r i s k . " 3 7 Yet investors were slow to make or to credit the discovery. T h o m a s C. D u r a n t had the Credit Mobilier device ready a t the outset, having b o u g h t a convenient Pennsylvania c h a r t e r several months before the 1864 act was p a s s e d ; but he and his friends could not raise the first $2,500,000 f o r its stock without calling in Congressman Oakes Ames and a g r o u p of Massachusetts investors. By early 1867, the E v a n s P a s s route had been discovered and adopted, more t h a n three hundred miles of

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road had been built, and profits on the first construction contract were being distributed. Yet the final subscription of $1,250,000 could be raised, as Ames and his associates testified, "only with the aid of an enormous bonus" in Union Pacific first mortgage bonds. 38 On this point their behavior confirmed their testimony. If capital had been easy to obtain, they would hardly have sold land-grant bonds in 1866 a t a r a t e to yield over eleven percent or continued until the middle of 1867 to borrow short-term funds a t rates ranging f r o m one to one and a half percent per month. I t was not until the summer of 1867 t h a t they felt sufficient confidence in the market to begin sale of the first mortgage bonds. But by this time D u r a n t had fallen out with the Massachusetts g r o u p and was using the injunction weapon in an effort to block the action of the Credit Mobilier. Even when it became clear t h a t large profits could be made, there remained uncertainty as to which g r o u p would obtain them. Certainly there were no f u r t h e r doubts about profitability once the first mortgage began to sell and the two factions had agreed on the final contract. 3 8 Otherwise Oakes Ames would not have used Credit Mobilier stock so freely to win friends in Congress, at a time when no Pacific railroad legislation was under immediate question; and the financier J i m Fisk would not have attempted to obtain an interest in the company by bringing suit on slender legal grounds. A p p a r e n t l y , also, the prospect of large profits was recognized by suppliers and contractors in the later stages of construction ; and the president of the Credit Mobilier declared: " W e were plundered all along the line by everybody, who seemed to think t h a t we were f a i r game." 40 Construction costs were also increased by the provision in the legislation which allowed the Union Pacific and Central Pacific each to build on until it met the other. 4 1 Both companies were so eager to obtain the subsidy f o r additional mileage, and also to win the t r a d e of the Mormon settlements, t h a t they sacrificed economy to speed, working in the high mountains through the

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worst of the winter a n d sometimes even laying t e m p o r a r y t r a c k on the snow. T h e r e were, moreover, two hundred miles on which g r a d i n g was done by b o t h companies, on parallel lines, before the j u n c t i o n p o i n t was finally determined. In most respects the s t o r y of the Central Pacific parallels t h a t of the Union Pacific. T h e physical difficulties and the physical achievement were c o m p a r a b l e . T h e business community was no less skeptical of the p r a c t i c a b i l i t y of the enterprise, and venture c a p i t a l was p e r h a p s even more difficult to obtain. On the other hand, public aid was given on an even more generous scale. T o gether with the W e s t e r n Pacific, which continued the line westward f r o m S a c r a m e n t o to S a n J o s e , the Central Pacific received a t o t a l of nearly $28,000,000 in subsidy bonds and issued the same amount in first m o r t g a g e bonds. These totals were slightly higher than f o r the Union Pacific ; t h o u g h the mileage was less, more of it was in m o u n t a i n and Basin t e r r i t o r y . In addition, the two western roads received both s t a t e and local aid. The state of California, in spite of a c o n s t i t u t i o n a l provision against aid to c o r p o r a t i o n s , agreed to p a y interest f o r twenty years on $1,500,000 of seven percent C e n t r a l Pacific bonds. T h e companies received also as subscriptions or d o n a t i o n s $1,600,000 in city and county bonds. T h e y a p p e a r to have sold the federal bonds at a p p r o x i m a t e l y the same discount as the first m o r t g a g e bonds, but received about $41,500,000 f o r the t w o ; and they obtained an additional $2,000,000 by disposing of the local and state-aid bonds at about two thirds of their f a c e value. 4 2 In the construction of the Central Pacific, Charles Crocker and C o m p a n y , and later the C o n t r a c t and Finance Company, played a role c o r r e s p o n d i n g to t h a t of the Credit Mobilier. In this case ownership was even more closely held, and the entire control of the r a i l r o a d and the c o n s t r u c t i o n companies was in the hands of four men—Leland S t a n f o r d , C. P . H u n t i n g t o n , M a r k Hopkins, and Crocker himself. F o r this reason, and because the books of the C o n t r a c t and F i n a n c e C o m p a n y were reported lost at the time of

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congressional investigation, it is even harder than in the case of the Credit Mobilier to compare investment and return. Since almost no cash was paid in on the Central Pacific stock, and since the associates supported the contracting companies by personal loans rather than by subscribing to its stock, the total amount of bona fide equity capital was considerably smaller even than that of the Credit Mobilier. On the other hand, allowance must be made for the money loaned by the associates and, a t certain difficult times, borrowed on their personal credit. The government and the first mortgage bonds seem to have substantially covered the cost of construction. When this was completed, the associates appear to have been left with about $38,500,000 in Central Pacific stock, and possibly certain other assets, as clear profit. The stock was of course a speculative asset, depending for its value on the future of the r o a d ; but a careful student, suggesting a valuation of fifteen or twenty cents on the dollar, concludes that it represented, "on the most conservative calculation, 500 or 600 percent for an investment which probably did not exceed $1,000,000, over a period of six y e a r s . " 43 For all the railroads affected by the laws of 1862 and 1864, the government appointed commissioners whose duty it was to certify satisfactory completion of the sections of road on which subsidy was claimed. In the case of the Union Pacific, but not of the others, there were government representatives on the board of directors. It may therefore be asked how effective were these "gentlemen representing the interests of the government." Among the commissioners, one individual demanded and received from the Union Pacific a bribe of $25,000 for certifying a p a r t i c u l a r section. In a number of cases, commissioners insisted on changes in construction ; and officers of the Credit Mobilier complained t h a t some of these modifications, made to satisfy men inexperienced in railroading, were unnecessary or even harmful. 4 4 In 1869, after criticism of the companies had begun to mount, a "commission of eminent citizens" was appointed by the government to examine the com-

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pleted roads. T h e s e men suggested certain improvements, which were carried out d u r i n g the subsequent five y e a r s ; but their general conclusion was t h a t the two roads provided " a good and reliable means of communication between Omaha and S a c r a m e n t o . " W i t h respect t o the Union Pacific, they declared t h a t its location showed " a t h o r o u g h knowledge of the features of the c o u n t r y . "

45

T h e role of the government directors continued until the subsidy bonds were p a i d off in the reorganization of 1897. Some were men of competence and distinction, such as Charles F r a n c i s Adams ; others were clearly political appointees with no p a r t i c u l a r qualifications f o r the position. T h e i r annual reports to the S e c r e t a r y of the I n t e r i o r

46

show t h a t they exercised independent j u d g m e n t

on a number of occasions and played a somewhat useful p a r t in the negotiations over final settlement of the government's claims. Of g r e a t e r interest is their p e r f o r m a n c e d u r i n g the controversial period of c o n s t r u c t i o n . One of the early government d i r e c t o r s obtained a block of Union Pacific and Credit Mobilier securities, in the y e a r of most lavish distribution, a t much less t h a n m a r k e t price and in violation of the terms of his appointment. 4 7 On the other h a n d , a n o t h e r government director, himself an

engineer,

took an active p a r t in the work of the field p a r t i e s and in the decision to recommend the E v a n s Pass route. 4 8 T h e r e p o r t of the government d i r e c t o r s presented in June, 1956, contained some criticism of the original Credit Mobilier c o n t r a c t ; and f o u r of the five government directors were recorded as voting a g a i n s t one of the l a t e r c o n s t r u c t i o n c o n t r a c t s . One of them also claimed credit f o r i n i t i a t i n g a successful fight against a f r a u d u l e n t a r rangement f o r the purchase of coal from a company controlled by some of the p r o m o t e r s . Sometimes the government directors complained of their difficulty in obtaining information a b o u t the affairs of the railroad. 4 9 In any case it is clear t h a t they made no objection in principle to the device of the construction company and t h a t they had too little power in the board to prevent the lavish distribution of profits. N o r is it a t all certain t h a t they would

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have been supported by the Administration if they had protested on either point. Testimony given before the investigating committees contained criticism of the government directors from two points of view. Congressmen pressed the charge that they had shrunk from the exercise of the more unpleasant parts of their duty, and drew from one of them the admission that he had walked out of a special committee investigating certain "legal expenses" because he "did not want to know anything about i t . " " T h e Government directors," said a company witness, " a r e the most squeamish men that ever lived about taking any responsibility." On the other hand, spokesmen f o r the railroad regarded it as an imposition that the Union Pacific, unlike the other companies, should have to submit to the presence on its board of men who were "not likely to know anything about the construction of railroads" and who had no interest in the profits of the company. They said that this requirement was one reason for the reluctance of capitalists to invest in the enterprise. Even after the construction period was well over, the president of the Union Pacific described the arrangement as "a most unfortunate circumstance for this company."

60

A mixed

board of public and private directors, so common an arrangement in the early days of railroad building, was now regarded as an anomaly; and even critics of the company argued that settlement of its financial obligations would have as one advantage " a speedy and absolute divorce" permitting the government to "cut loose from all participation in railroad management." " T h e sovereign," said the Pacific Railway Commission of 1887, "should not be mated with the subject."

51

The 1864 act was the last to offer financial subsidy to a railroad, and the board of the Union Pacific was the last to which the federal government named directors. On the other hand, grants of land were made f o r each of the transcontinental roads which followed the three other routes found practicable by the Pacific Railway Surveys. The advocates of the northernmost route se-

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cured aid f o r the N o r t h e r n Pacific in a bill signed on the same d a y in 1864 as t h a t of the Union Pacific. F o r the route of the 35th parallel, an act of 1866 provided aid f o r the A t l a n t i c and Pacific, with the western end or " b r a n c h " to be built by the Southern Pacific of California, a company controlled by the same interests as the Central Pacific. I n 1871 the last of these g r a n t s was made for the T e x a s and Pacific to build on the route of the 32d parallel. Under these three measures land was given even more generously than before, whereas direct

financial

aid was refused. T h e new

provisions called f o r f o r t y sections p e r mile in the territories (double t h a t of the Union Pacific g r a n t ) and twenty sections within the states. 6 2 Neither these subsidies, nor the Union Pacific's demonstration t h a t a t r a n s c o n t i n e n t a l railroad could be built and operated, 0 3 resulted in r a p i d completion of the competing roads. As in the case of the s t a t e improvement p r o g r a m s of 1836, p a r t of the difficulty lay in the f a c t t h a t the enterprises were initiated j u s t before the onset of a m a j o r depression. T h e potential resource of its huge land g r a n t did not prevent the b a n k r u p t c y of the N o r t h e r n P a cific in 1875, and the road was not completed to the coast until 1883, only a y e a r before the Union Pacific reached the N o r t h west by means of the Oregon S h o r t Line. T h e Atlantic and Pacific also failed, leaving its grandiose name f o r l a t e r a p p r o p r i a t i o n in another field, a f t e r building from the end of one of Missouri's stateaided "first links" f o r a short distance into I n d i a n T e r r i t o r y . I t s rights to f u r t h e r land g r a n t s were eventually acquired by the Atchison, T o p e k a , and S a n t a F e R a i l r o a d , and in 1883 the S a n t a F e reached T h e Needles on the Colorado River, meeting the Southern Pacific there and completing a t h r o u g h connection by way of the 35th parallel. T h e story of the southernmost route is still more complex. Again the Southern Pacific preempted the western end, having built a line to Yuma, the only other p r a c t i c a b l e crossing of the Colorado, even earlier t h a n to T h e Needles. B u t a t the other end the T e x a s

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and Pacific, in spite of federal and state aid, was making very slow progress across the Texas plains. In this situation the Southern Pacific, though not entitled to land grants east of the California border, decided to build on across Arizona and New Mexico over the favorable tableland described by the engineers of the Pacific Railway Surveys. The junction of the two roads was finally accomplished east of El Paso, Texas, completing a route by the 32d parallel; and shortly afterwards the Southern Pacific built and acquired an independent line of its own to New Orleans. 54 Construction of these portions of the Southern Pacific without federal aid may well be taken as an indication that the difficulties of crossing the continent could no longer provide a cogent argument for national subsidy. Yet during this period, and for each of these three routes, attempts were made to add financial subsidy to the aid in land. The method proposed was that of a government guarantee of interest on the bonds of the companies. A House committee in 1869, noting that Louis Napoleon had used this form of subsidy successfully in France, urged its application on a second and a third transcontinental railroad. Among the many arguments for aiding in their construction, the Committee declared that "the North Pacific road will acquire for us the British possessions" and that "the Southern Pacific road will annex Northern Mexico."

55

A much more serious effort was made from 1874 on to secure a government guarantee for the bonds of the struggling Texas and Pacific. Under the vigorous leadership of its

president,

Thomas A. Scott, a popular campaign was conducted that rivaled Asa Whitney's, securing endorsements from almost every southern legislature and winning considerable support even in the North. A recent study has demonstrated that commitments by northern political and financial interests to support the guarantee played a part in the complicated negotiations as a result of which the Democrats accepted the seating of Rutherford B. Hayes in the

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disputed presidential election of 1876 and the Republicans agreed to the ending of Southern R e c o n s t r u c t i o n . Even this s u p p o r t , however, was not enough to c a r r y the measure, p a r t l y because S c o t t ' s T e x a s and Pacific lobby was opposed behind the scenes in Congress by H u n t i n g t o n and the S o u t h e r n Pacific

56

and p a r t l y

because of a general feeling t h a t the time had passed f o r obtaining financial

aid f r o m the federal government.

T h e time had passed, also, f o r what had seemed the less controversial practice of giving subsidies in land. T h e period in which g r a n t s were made directly to r a i l r o a d c o r p o r a t i o n s continued f o r ten years a f t e r its i n a u g u r a t i o n in 1862, and the t o t a l acreage authorized f o r distribution was more t h a n 116,000,000. Of this 24,000,000 acres were f o r the first t r a n s c o n t i n e n t a l r o a d and its branches, 44,000,000 f o r the N o r t h e r n Pacific, nearly 23,000,000 f o r the Atlantic and Pacific, 13,000,000 f o r the T e x a s and Pacific, and about 7,750,000 f o r the two western connections provided by the Southern Pacific. T h e rest of the t o t a l represented five other g r a n t s in the W e s t and F a r West. Meanwhile, the older p r a c t i c e of g r a n t s to the states f o r r a i l r o a d aid continued, though on a smaller scale. T h e list of measures from 1862 t o 1872 is a long one, but many merely reaffirmed or reassigned g r a n t s previously made f o r railroads t h a t had failed to meet the required conditions. T h e t o t a l of new authorizations was about 11,000,000 acres. Of this nearly 4,000,000 were g r a n t e d to the new s t a t e of Kansas, mainly f o r the benefit of the Atchison, T o p e k a and S a n t a Fe. Congressmen voting f o r the T e x a s and Pacific measure in 1871 announced t h a t they shared the general feeling of the c o u n t r y a g a i n s t f u r t h e r land g r a n t s to railroad c o r p o r a t i o n s but justified their action on grounds of belated justice to the South. I n the following y e a r the a p p r o p r i a t i o n of federal lands f o r r a i l r o a d construction terminated with a final s t a t e g r a n t , to Michigan f o r the use of the Chicago and N o r t h w e s t e r n / ' 7 These actions b r o u g h t to an end the era of national subsidy. T h e g r a n t s already made, however, continued for some decades to

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require f u r t h e r legislative and legal action. The subsidy bonds gave rise to a series of controversies and kept the government involved in railroad "management" until the time of repayment. The courts early held t h a t interest on the bonds, except in so f a r as it was covered by half the government's charges for t r a n s p o r t a t i o n and the five percent of net earnings, need not be paid until the principal fell due a t the end of the thirty-year period. Repayment of these large sums appeared highly doubtful, as the companies paid out earnings freely in dividends; legislation was adopted in 1878 in the a t t e m p t to force them to provide a sinking fund sufficient to meet these obligations. T h e final outcome was more favorable to the government t h a n many observers had expected. Reorganization of the Union Pacific system a f t e r receivership resulted in 1898 in the payment of principal and interest on the Union Pacific's own bonds and of principal but not interest—a difference of some $6,000,000—on the bonds of the Kansas Pacific, the successor to one of the eastern branches. In the following year, negotiations assured the payment, subject to brief delay, of both principal and interest on the bonds of the Central Pacific and the Western Pacific. 68 The land g r a n t s also required continuing oversight and a number of administrative and legislative decisions. Passage of a railroad land g r a n t did not automatically transfer title to the comp a n y nor even determine precisely the acreage involved. All g r a n t s were made subject to the p r i o r sale or homesteading of the land falling within the boundaries established by the law, though most of them permitted the companies to select compensatory or "lieu" lands within a wider belt of t e r r i t o r y . If this acreage was also preempted, the company received less land than its mileage had "earned." W i t h o u t this restriction, the g r a n t s would have covered an area t h a t has been estimated as between 180,000,000 and 215,000,000 acres r a t h e r than the figure of 155,000,000, which is customarily used. Of this the railroads in the end received 129,000,000 acres. The difference is explained by the f a c t t h a t the

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companies lost the benefits of the g r a n t s if they failed to c o n s t r u c t the mileage f o r which the g r a n t s were given or if they failed t o do so within the time set, though these limits were often extended. Sometimes the provisions were evaded, and the courts held t h a t f o r f e i t u r e under them required specific congressional a c t i o n ; b u t such measures became increasingly frequent a f t e r the first case in 1870. Finally, an a c t of 1890 made f o r f e i t u r e general f o r all g r a n t s t h a t remained " u n e a r n e d " by a c t u a l construction.

The

largest g r a n t revoked was one of 13,000,000 acres which had been given to the T e x a s and Pacific R a i l r o a d , and the only federal land actually received by this system was some 1,000,000 acres g r a n t e d to its eastern connection, the New Orleans Pacific. T h e S a n t a F e received the s u b s t a n t i a l amount of 10,000,000 acres, in addition to 3,000,000 t r a n s f e r r e d by the s t a t e of Kansas, b u t this was less t h a n the Atlantic and Pacific g r a n t had appeared to cover. On the other hand, the roads included in the Union Pacific act of 1864 received substantially the amount estimated; and the N o r t h e r n Pacific, in spite of its slow s t a r t , p a t e n t e d the largest amount of all, some 39,000,000 acres. 5 9 T h e era of national subsidy was not an era of national planning. T o say t h a t a measure tended to create a " s y s t e m " of internal improvements was still an effective a r g u m e n t f o r the opposition. In the Pacific Railway Surve3's and in other explorations, the government performed the more modest function of providing d a t a on which its own decisions and those of p r i v a t e p r o m o t e r s could be based. In the selection of p a r t i c u l a r p r o j e c t s f o r federal assistance, there were a variety of rationales and v a r y i n g degrees of rationality. T h e first railroad land g r a n t , t h a t f o r the Illinois Central and the Mobile and Ohio, could be defended as aiding an intersectional route of national importance. In most of the cases t h a t followed, no such claim could be made on behalf of the p a r t i c u lar enterprise, and the choice of roads and routes depended more on the pressures of local and regional interest t h a n on any consistent basis of j u d g m e n t r e g a r d i n g their merits. T h e y might,

ERA OF N A T I O N A L S U B S I D Y

199

however, be defended on the general ground that the public domain could well be used to encourage railway building by private enterprise in the newer and less developed states. For the transcontinental railroads, on the other hand, the case for federal subsidy was more specific and much more cogent. Since the routes lay mainly through the territories, the states could not take the responsibility. The great distances of sparse settlement or of none at all presented an economic difficulty which everyone recognized as formidable; the physical obstacles were greater than any previously encountered in the advance across the continent. If it is recalled that the most serious attempt at national planning, as well as some of the most successful cases of state and municipal promotion, took place when the Appalachian Mountains stood in the way of economic development, it should not be surprising that the most extensive use of national subsidy occurred when the physical barrier was that of the Rockies and the Sierras. T o overcome this barrier by the building of the first transcontinental railroad was an undertaking of major importance, and there can be no doubt that it accomplished its intended purpose in the promotion of economic development. "When the Government subsidized that road," said a Union Pacific president, "the Government did what any private party, under similar circumstances, would have afterwards considered the monumentally successful business operation of his life." 60 This was an ex parte claim; but it may well be conceded that the advance to the companies of some $60,000,000 in bonds and the large land grants were not too high a price to pay—if it was necessary—for the very great benefits obtained by the nation as a whole. It is, however, by no means clear that this particular price had to be paid, or that the means employed were essential to the results obtained. They served to get the roads built by private management, but they did so at heavy social costs. Small groups of insiders venturing very little capital of their own were able to build the roads with the money of the bondholders and the government,

200

E R A OF N A T I O N A L

SUBSIDY

and to pay themselves quick and extraordinary returns out of the profits of construction. In the case of the Union Pacific, they were able to take out large gains even before construction was completed. In that of the Central Pacific, a group of four men who had put up even less of their own money remained in sole control of a great railroad. As a result both companies were left with greatly inflated capitalizations, which reduced their ability to provide efficient service at reasonable rates. N o r can a judgment rest on economic factors alone without taking account of the effect on the national life of the notorious evasion of law in the financing of construction and the flagrant use of financial means to secure influence in Congress. Equity capital certainly could not have been attracted for investment in the transcontinental railroads without the prospect of very large profits. Y e t with what we know now of the costs of actual construction, it is clear that such prospects were in f a c t — if not in expectation—held out under the terms of the 1864 act, even if these terms had been strictly enforced, so long as they included the essential concession of reducing the government's claim to a second lien. I f the companies had dealt directly but at arm's length with the actual working contractors, they would presumably have secured lower prices than those charged when the Credit Mobilier appeared fair game to all. Consequently, the costs of construction would have been less, and the roads would have begun their transportation operations with a smaller debt and more adequate working capital. 81 Under these circumstances it appears probable that the investors would have been rewarded at least as generously and as promptly as those who in an earlier period contributed venture capital to the Pennsylvania or the Baltimore and Ohio. But since the terms of the act, which a court later described as " a proposal to enterprising men,"

62

offered a loophole for the

quicker profits of the construction contracts, they were hardly likely to call forth investors who looked f o r their returns to the more prosaic method of railroad operation. I t is, moreover, most

ERA OF N A T I O N A L

SUBSIDY

201

doubtful that a substantial amount of such investment would have come f o r w a r d in any case in the middle sixties, in view of the widely held belief that the undertaking was impracticable. But if such capital could not be obtained, and if the improvement was nevertheless regarded as a matter of national importance, it would appear that its construction as a public work, if the climate of opinion had permitted, would have been preferable to the terms on which p r i v a t e entrepreneurship was in f a c t secured. " I n any other c o u n t r y , " said Charles Francis Adams, an undertaking like the Union Pacific " w o u l d have been built by the Government as a military r o a d . "

63

T h e arguments f o r mixed enterprise, which had

played so l a r g e a p a r t in the earlier development of American improvements, could hardly be stretched to cover so g l a r i n g a disproportion between the contributions of government and of equity capital. A different set of judgments applies to the policy of land grants as it was applied both t o the transcontinental and to the other roads. F r o m the government point of view, this method of subsidy had certain obvious advantages. T h e argument that the government as a prudent p r o p r i e t o r might well dispose of p a r t of its holdings in order to enhance the value of the rest had the double merit of making economic sense, so long as the land was regarded as a fiscal resource, and of quieting constitutional doubts of federal authority

to assist internal improvements. A n

official in-

vestigator f o r the British government, Captain Douglas Galton, described the method as an admirable invention and recommended its adoption in the British colonies. I t seemed to him to have the particular merit of permitting the government to subsidize the railroad companies without imposing on them the penalty of interference with management. 6 4 On the other hand, the government's interest, which was to g e t the improvements made, could be protected by the conditions of the grants, provided that the measures were well drawn and effectively administered. T h e principal reason f o r the p o p u l a r i t y of the method, however, was a much simpler one.

202

ERA OF NATIONAL SUBSIDY

I t was a form of subsidy which appeared to be costless. B y its means, legislators could accede to the demands of promoters and localities without the unpleasant necessities of raising taxes or borrowing money or incurring current deficit. F u t u r e development, it appeared, could be promoted by using a resource which had little or no present value. U n f o r t u n a t e l y , however, the a d v a n t a g e of the method to the railroads was affected by the same consideration. How was a commodity which had no current value to the government to be transmuted into an asset which would make funds immediately available for r a i l r o a d construction? The alchemy was, of course, to be performed by the building of the railroad i t s e l f ; but the process was one in which the timing was f a r from perfect. T h e Illinois Central ran through an a r e a in which a l a r g e amount of land of high a g r i c u l t u r a l quality had remained unsettled; and the comp a n y was able to sell almost half of its lands during construction and the y e a r following for a total amount of over $15,000,000. On the other hand, land sales contributed only a little more than $100,000 to the nearly $50,000,000 raised f o r the construction of the Central Pacific. Of the two cases, that of the Illinois Central was the more exceptional. W i t h slender immediate returns from sales of land, most of the l a n d - g r a n t r a i l w a y s attempted to anticipate their value by floating loans with the land as a security. Of the total nominal capitalization of the Union Pacific, for example, a little less than a tenth consisted of land bonds; but these paid seven percent interest as compared to the six percent of the first mortgage and subsidy bonds and were sold a t much g r e a t e r discounts. A prudent investor had to take into consideration not only the f u t u r e value of land and the period within which it might be realized but also the uncertainties as to how much acreage the railroad would " e a r n " and how much it would finally receive. The amount that could be realized on the land g r a n t s at the time the funds were most needed was thus sharply limited. On the other hand, once the railroad was built and prospering, they would give

ERA OF N A T I O N A L

SUBSIDY

203

t h e c o m p a n y a d d i t i o n a l r e t u r n s a t a time when t h e r e was no l o n g e r a n y justification f o r subsidy.63 I n these r e s p e c t s , t h e effect of subsidy by l a n d g r a n t d i f f e r e d s h a r p l y f r o m t h e e f f e c t s of subsidy b y loan. I n a

financially

suc-

cessful i m p r o v e m e n t of t h e d e v e l o p m e n t a l t y p e , c o s t s exceed rec e i p t s u n t i l t h e i m p r o v e m e n t is c o m p l e t e d a n d h a s b e g u n t o h a v e i t s effect in p r o m o t i n g d e v e l o p m e n t , b u t a f t e r w a r d s

substantial

revenues a r e o b t a i n e d . T h e l o a n c o n f e r s its benefit in t h e f o r m e r p e r i o d when it is needed a n d p l a c e s m o s t of its b u r d e n in t h e l a t t e r when it can be b o r n e . T h e l a n d g r a n t , on the o t h e r h a n d , divides i t s benefits u n c e r t a i n l y between t h e two. T h e r a i l r o a d l a n d g r a n t s h a v e a l s o been criticized a n d

were

o f t e n deeply r e s e n t e d on t h e g r o u n d t h a t t h e y d e p r i v e d s e t t l e r s of l a n d which t h e y m i g h t otherwise h a v e received f r e e o r a t a lower p r i c e . T h e H o m e s t e a d A c t was also " a p r o p o s a l t o e n t e r p r i s i n g m e n , " t h o u g h o f f e r i n g less p r i n c e l y r e w a r d s , a n d t h e s a m e l a n d could n o t be used f o r b o t h p u r p o s e s . Y e t t h e conflict in i n t e r e s t was by n o m e a n s a c o m p l e t e one. T h e r a i l r o a d g r a n t s a n d f r e e l a n d were b o t h e x p r e s s i o n s of t h e p o l i c y of u s i n g t h e p u b l i c d o m a i n as a means f o r e n c o u r a g i n g r a p i d s e t t l e m e n t r a t h e r t h a n as a fiscal r e s o u r c e f o r t h e g o v e r n m e n t . U n d e r the t e r m s of t h e legisl a t i o n , t h e g r a n t s given t o t h e c o m p a n i e s consisted of l a n d which no s e t t l e r a n d no s p e c u l a t o r h a d y e t f o u n d it w o r t h while t o a c q u i r e . On the western f r o n t i e r , t h e p r e s e n c e of a r a i l r o a d would in gene r a l do m o r e t o m a k e s e t t l e m e n t possible a n d p r o f i t a b l e t h a n a p r i c e i n c r e a s e of a few d o l l a r s a n a c r e would d o t o m a k e it u n p r o f i t a b l e . W h e t h e r t h e i n c r e a s e would in f a c t be m o d e r a t e dep e n d e d , of c o u r s e , on t h e policies a d o p t e d by t h e i n d i v i d u a l comp a n y . T h e l a n d - d i s p o s a l a n d c o l o n i z a t i o n activities of a n u m b e r of t h e l a n d - g r a n t r a i l r o a d s have r e c e n t l y been t h e s u b j e c t of i n t e n sive s t u d y , a n d t h e choice f a c i n g t h e m h a s been s t a t e d in t h e f o l lowing t e r m s : " A s l a n d c o m p a n i e s t h e y were c o n c e r n e d t o sell t h e i r l a n d s a t t h e h i g h e s t possible p r i c e a n d with t h e l e a s t possible expense. B u t as t r a n s p o r t a t i o n c o m p a n i e s t h e y s o u g h t t o h a v e

204

ERA OF N A T I O N A L S U B S I D Y

their areas developed as speedily as possible by settlers who would provide traffic." 88 The latter consideration would impel them to seek out colonists and to offer them reasonably attractive prices and conditions of sale. Some of the laws attempted to strengthen this tendency to providing that the land must be sold within a given period or else forfeited; others tried to prevent further speculative gains by providing that it could be disposed of only in quarter-section lots. Other aspects of the laws and their administration, however, set up barriers to settlement that had no compensating advantages. This was particularly true of the cases in which companies failed to complete the roads and in which land withdrawn from entry at the time the railroad filed its orginal plans remained unavailable for settlement through the uncertainties and long delays of the process of forfeiture. 8 7 These conflicts could have been diminished by more careful drafting and more effective administration of the laws, and a government with a stronger fiscal base and a clearer definition of intentions could have afforded to make relatively more use of the instrument of loan subsidy and less of the blunter tool of the land grants. Yet this would have been a great deal to ask of the governments of the day, and a major reason currently given for acquiescence in the Credit Mobilier arrangements was that an attempt to construct the Union Pacific as a public work might have squandered even more money without getting the road built at all. 68 B y contrast with earlier periods, in which advocates of improvements had accepted public or private or mixed enterprise with relative indifference, the era of national subsidy was characterized by a settled conviction that the federal government was not to be entrusted with the construction or operation of internal improvements. "The spirit and aim" of the acts, as one of their beneficiaries pointed out, "was to establish railroad communication . . . without the direct agency of the nation."

09

The per-

formance of the period must be understood in terms of this limitation.

THE EMULATION OF STATES AND CITIES 1861-1890

. . . we can stand a p r e t t y good 'steal' if we can get railroads in the S t a t e . Fayette C H R O N I C L E , 1871

Resolved: T h a t J o h n s o n County donate half a million dollars r a t h e r t h a n this Rail Road should be made twenty miles east or west of us. A public meeting in North Liberty, Iowa, 1865

6 THE STATE

PROGRAMS

OF T H E RECONSTRUCTION

SOUTH

" O n t h e 22nd d a y of A p r i l 1 8 6 1 the b o a r d of public works, with a feeling of the most p a i n f u l r e g r e t , made an o r d e r f o r the suspension of work on the Covington a n d Ohio r a i l r o a d . "

1

In Vir-

ginia, as in the other s t a t e s of the S o u t h , the o u t b r e a k of the Civil W a r b r o u g h t a b o u t an almost complete cessation of action u n d e r the p r o g r a m s of public aid. A westerly extension of the Pensacola a n d Georgia R a i l r o a d , under the existing F l o r i d a system of subsidy, and the p u r c h a s e by N o r t h C a r o l i n a of stock in the C h a t h a m R a i l r o a d in 1862, were among the very few exceptions. T h e cons t i t u t i o n of the C o n f e d e r a t e S t a t e s of America, reflecting what h a d been the prevailing view of the S o u t h t o w a r d federal a c t i o n , contained a prohibition a g a i n s t giving aid t o p r i v a t e enterprise. Y e t the improvement of the railway network was vital t o m i l i t a r y operations, and in spite of opposition on c o n s t i t u t i o n a l g r o u n d s the C o n f e d e r a t e Congress a u t h o r i z e d as war measures loans t o f o u r r a i l r o a d s in the e f f o r t to fill s t r a t e g i c g a p s in the m a j o r lines of communication—$1,000,000

f o r a connection between D a n -

ville, Virginia, and Greensboro, N o r t h Carolina, to complete a t h r o u g h line in the Piedmont r e g i o n ; $ 1 5 0 , 0 0 0 to the A l a b a m a and Mississippi Rivers R a i l r o a d t o fill in g a p s in the line across central western A l a b a m a ; more t h a n $1,000,000 f o r a connection

208

PROGRAMS O F R E C O N S T R U C T I O N

SOUTH

between Rome, Georgia, and a point in n o r t h e a s t e r n

Alabama;

and $1,500,000 f o r a railroad t h a t would join Louisiana

and

T e x a s . T h e smallest of the operations, t h a t in central A l a b a m a , was completed under direct a r m y control before the end of 1862 —in time to be of considerable service to the military effort of the Confederacy. T h e more i m p o r t a n t link of the Piedmont R a i l r o a d , which had no difficulty in raising money but g r e a t difficulty in obtaining iron and labor, was not finished until 1864. On the Rome connection the work did not reach the stage of track-laying. New Orleans was c a p t u r e d before work was even begun on the road t h a t was to link T e x a s to the rest of the Confederacy. 2 In the N o r t h , the business of railroad promotion

continued

d u r i n g the conflict though a t a much lesser r a t e than in the p r e ceding decade. In the renewed wave of railroad building t h a t followed the end of the war, the p r a c t i c e of public aid was revived or expanded in many p a r t s of the c o u n t r y , not only in the South and in the f r o n t i e r states of the W e s t but also in some of the richer and more fully developed states of the E a s t and Middle West. T h e r e was, however, one marked regional difference in the n a t u r e of the p r o g r a m s . I n the N o r t h and the F a r W e s t , railroad aid in the post-bellum period was, with few exceptions, g r a n t e d by local authorities r a t h e r t h a n by the s t a t e governments. On the other hand, all but one of the states t h a t had formed the southern Confederacy gave s t a t e aid to railroads in the period of Reconstruction, and it is to these p r o g r a m s t h a t the discussion must now t u r n . T h e r e were several reasons f o r expecting an extensive resort to public assistance in the post-bellum South. I t s railroad network was less complete t h a n t h a t of the N o r t h before the war, and suffered much more d u r i n g the conflict. T h e r e a p p e a r e d , then, much more to be done, even though the federal government a t the close of the war restored much of the physical damage caused by its armies. T h e r e had been in the region, moreover, a s t r o n g tradition of public and especially of s t a t e action ; the various waves of revulsion against internal improvements had affected the South

PROGRAMS OF R E C O N S T R U C T I O N S O U T H

209

less strongly than the North. As a result, no Southern state entered the period with constitutional provisions making state impossible.

3

action

Finally, there were factors in the political situation

which were likely to make the legislatures more vulnerable to the persuasions of the railroad promoters. Under the provisions of the legislation providing for "reconstruction" and reentry into the union, large numbers of the leading citizens of the area were debarred from voting or holding office because of their participation in the conflict at the same time that these privileges were conferred on the masses of newly-emancipated Negroes. In each of the ex-Confederate states, control of the government was held, for varying periods of time, by a "Radical" or "Radical Republican" regime composed of adventurers from the North, their allies among the Southern whites, and minorities of legislators and officeholders chosen from among the ranks of the freedmen. Accounts of public aid in the post-bellum South commonly emphasize this last factor and indeed often seem to take the form of a drama in two acts. In the first, Radical Republican "carpetbaggers" and "scalawags"—to use their opponents' terms—join with the newly enfranchised Negroes in an orgy of extravagance, bad judgment, and corruption. In the second act, Democratic or Conservative "Redeemers"—to use their own term—throw out the Radicals, restore "white supremacy," and bring Southern governments back to ways of honesty and financial prudence. The difference between parties was in this case great enough to claim first attention in an analysis of public policy toward improvements. Yet a detailed comparison between the course of legislation and the political regimes in power shows that the two acts of the drama cannot in all cases be so sharply distinguished.' 4 In four out of the eleven states, the history of internal improvements conforms more or less closely to the pattern of Radical orgy and Conservative revulsion. This was conspicuously the case in Georgia: its post-war record was in marked contrast to its ante-

210

PROGRAMS OF R E C O N S T R U C T I O N

SOUTH

bellum policy which h a d placed m a j o r emphasis on a single successful and highly s t r a t e g i c improvement, the Atlantic and W e s t ern. Yet the change began before Reconstruction was complete. T h e Conservative legislature of 1866 a p p r o p r i a t e d $1,500,000 f o r r e p a i r of the A t l a n t i c and W e s t e r n , but, in addition, it passed measures offering assistance to a number of other railroads. T h e Governor, insisting t h a t the old policy of concentrated effort was still the wisest and safest, vetoed all these bills except t h a t f o r the Macon and Brunswick. B u t the legislature of 1868—69, which had expelled its N e g r o members and in which control was divided between Republicans and D e m o c r a t s , broke decisively with precedent and adopted legislation offering s t a t e guarantees, a t rates f r o m $8,000 to $15,000 per mile, to the bonds of seven railroads. T h i s was still modest, however, compared to the record of 1870. In this one year of full R e c o n s t r u c t i o n , a loan of $1,800,000 was made to the Brunswick and Albany R a i l r o a d , and the legislature voted endorsements f o r the bonds of no less than twenty-seven railroads, a t rates of $12,000 or $15,000 per mile, and in two cases increased the amounts previously authorized. D u r i n g the same year, the Governor endorsed certain of these railroad bonds to an amount of over $6,500,000, of which almost $3,000,000 was l a t e r repudiated by the s t a t e on the ground t h a t the companies had not complied with the requirements of bona fide investment and construction. An investigating committee appointed

after

the Democrats regained control noted t h a t a close business associate of the Governor's was the president of the three roads on which " t h e S t a t e ' s t r u s t " was thus abused; it also charged t h a t the measures themselves had been "pushed t h r o u g h this b a s t a r d Legislature, by the infernal force of gold."

5

In the case of the s t a t e road, it does not require the exclamatory rhetoric of a p a r t i s a n committee r e p o r t to demonstrate c o r r u p tion. 6 T h e financial record speaks f o r itself. On the eve of the war, the net earnings of the W e s t e r n and Atlantic, in which Georgians

PROGRAMS OF RECONSTRUCTION SOUTH

211

had taken such understandable pride, had reached $450,000 a year. It had been restored to good condition and through most of the year 1869 paid $25,000 a month into the S t a t e T r e a s u r y . Twelve months later, private interests contested eagerly for the privilege of leasing the road at a monthly rental at the same figure. Yet under the Radical administration in the y e a r 1870, the Western and Atlantic incurred and charged to the state a deficit of at least $500,000. At the end of this remarkable y e a r , the road was leased to a private company. There were two principal competing groups, one closer to the Governor, the other supported by Northern railroad and political interests, including Tom Scott of the Pennsylvania and the Texas and Pacific. The rivals managed to reach an agreement on the morning of the bidding, obtained the lease at the minimum rate provided by the law, and made a substantial profit over the twenty years of its operation. The willingness of the Radicals to negotiate the lease is p a r t l y explained by a recognition of the fact that their period of power was about to come to an end. When the Redeemers came into office in the following year, they reacted promptly against Radical recklessness in railroad finance. The flood of measures for state aid ceased abruptly, although some twenty statutes authorizing assistance by local authorities were passed in the years from 1871 to 1877. The legislature of 1872 condemned the manner in which the lease of the state road had been obtained but declared that the contract itself was "a most advantageous one, as it secures a f a i r sum certain for the treasury, and removes the road, with its business complications, from the politics of Georgia." 7 In the same y e a r the Democrats began the process of repudiating what they considered the fraudulent commitments of the previous regime. In 1874, the legislature repealed all earlier provisions for bond endorsement, excepting the few cases in which a vested right had been established by actual investment and construction. Dele-

212

PROGRAMS OF RECONSTRUCTION

SOUTH

g a t e s t o the Convention of 1877 declared t h a t one of its main obj e c t s was to p u t an end t o r a i l r o a d subsidies, a n d the c o n s t i t u t i o n as a d o p t e d prohibited b o t h s t a t e a n d local aid. Tennessee was never in the full sense a R e c o n s t r u c t i o n s t a t e , since it was restored t o the Union in 1866 before Congress h a d laid down the rules f o r r e o r g a n i z a t i o n . Nevertheless, its h i s t o r y provides one of the clearest c o n t r a s t s between Republican

and

D e m o c r a t i c policies t o w a r d r a i l r o a d aid. T h e Radicals in power a f t e r the end of the w a r inherited one of the most extensive of t h e ante-bellum systems of s t a t e aid and some 1,800 miles of r a i l r o a d badly in need of r e h a b i l i t a t i o n . T o assist in this process, the companies previously aided were excused f r o m interest p a y m e n t s on t h e i r s t a t e bonds until 1870, a n d new bonds to the a m o u n t of n e a r l y $3,500,000 were voted in J a n u a r y , 1866. Additional legislation before the end of the y e a r provided aid in no less t h a n twenty-six cases, mainly f o r new c o n s t r u c t i o n . Several other measures were a d o p t e d in 1867, and in December of t h a t y e a r the socalled "Omnibus Bill" g r a n t e d aid to fifteen r a i l r o a d s . A similar measure was defeated in the following y e a r , in p a r t because of the vigorous opposition of the Republican s t a t e c o n t r o l l e r ; b u t individual laws p r o v i d i n g f o r assistance to seven roads were enacted in 1868 and 1869. U n d e r the R a d i c a l regime, the companies received a t o t a l of n e a r l y $14,000,000 in s t a t e bonds. In violation of t h e provisions of b o t h the p r e w a r and the p o s t w a r acts, the bonds were generally disposed of by the companies a t less t h a n their p a r value, and the requirements of b o n a fide p r i v a t e subscriptions and of p r i o r cons t r u c t i o n were f r e q u e n t l y evaded. In one of the more extreme cases, the Tennessee and Pacific R a i l r o a d had u p to 1 8 7 0

received

$1,185,000 in s t a t e bonds and $600,000 in c o u n t y bonds as comp a r e d with p a i d - u p p r i v a t e subscriptions of less t h a n $17,000. 8 T h e m a j o r i t y of a committee of the D e m o c r a t i c legislature of 1879 looked back on all this as " a carnival of revelry and c o r r u p t i o n " and described the Omnibus Bill of 1868 as an " a s s a u l t on

PROGRAMS OF RECONSTRUCTION SOUTH

213

the T r e a s u r y " that had been perpetrated with the aid of recruits gathered "from the pulpit to the bagnio." A minority report conceded that there was "strong presumptive evidence of corruption." 9 There was no doubt of the reaction when the Democrats came into power in December, 1869. They repealed the state aid measure even before the end of the year, and the constitutional convention of 1870 adopted a provision forbidding future assistance. This was one of the sharpest and most immediate illustrations of revulsion against internal improvements. Yet the earlier Radical measures for railroad aid seem to have had very general popular support, and a Republican paper was able to demonstrate that about nine tenths of the bonds issued had gone into the hands of Democratic railroad presidents. 10 It should also be noted that the revulsion did not extend to action by local authorities, which had been authorized by the Radicals in some twenty cases. The same legislature which repealed the state aid program adopted ten measures authorizing local aid, and in 1870 the Democrats passed a general law liberalizing the conditions for such assistance and making it unnecessary to come to the legislature for a special law in each instance. In Alabama, the contrast between Conservative and Radical policy was somewhat less sharp. The pre-Reconstruction legislature of 1867, convinced that building railroads was the way to make "the hills and valleys of Alabama . . . vocal with indust r y , " 11 adopted a general law offering state endorsement of railroad bonds at the rate of $12,000 per mile. This provided the basis on which the Radical regime built a still more liberal program of assistance. The first Republican legislature, meeting the following year, amended the act by easing its conditions and raising the rate to $16,000 per mile. It also adopted a general measure providing for local aid. The next legislature authorized a number of additional endorsements and raised the rate to $22,000 per mile for one road through the mountains. It also voted a

214

PROGRAMS OF RECONSTRUCTION SOUTH

l o a n of $ 2 , 0 0 0 , 0 0 0 in s t a t e bonds to the A l a b a m a and C h a t t a n o o g a . B y September 3 0 , 1 8 7 1 , endorsements under these v a r i o u s a c t s h a d reached $ 1 3 , 1 2 0 , 0 0 0 , and $ 2 , 3 0 0 , 0 0 0 h a d been issued in s t a t e bonds. T h e stories of l o b b y i n g a n d c o r r u p t i o n center on the session of 1870—71. One l e g i s l a t o r l a t e r testified t h a t he h a d received a bribe of $ 6 0 but believed t h a t his more s o p h i s t i c a t e d c o l l e a g u e s h a d collected several hundred d o l l a r s each. T h e R a d i c a l Governor a d m i t t e d issuing bonds and s i g n i n g endorsements in violation of the conditions r e q u i r i n g p r i o r construction ; in one case he m a d e endorsements f o r a g r e a t e r m i l e a g e t h a n the r o a d was a u t h o r i z e d to build. T h e D e m o c r a t who succeeded him, in a p a r t i a l h i a t u s of R a d i c a l rule, was himself accused by a committee of the Democ r a t i c House of illegal endorsements and of l a x i t y in k e e p i n g the r e c o r d s of r a i l r o a d aid. No new s t a t e aid was a u t h o r i z e d a f t e r 1870. A R e p u b l i c a n a d m i n i s t r a t i o n a c q u i r e d the A l a b a m a and C h a t t a n o o g a R a i l r o a d in b a n k r u p t c y proceedings and sold it to p r i v a t e interests. In 1 8 7 3 a m e a s u r e was a d o p t e d to s u b s t i t u t e smaller fixed o b l i g a t i o n s f o r l a r g e r contingent ones bv offering the r a i l r o a d s $ 4 , 0 0 0 p e r mile in s t a t e bonds for the r e t u r n of $ 1 6 , 0 0 0 per mile in endorsements. U n d e r this a c t , more t h a n $ 5 , 0 0 0 , 0 0 0 in endorsed bonds were exc h a n g e d . C o n t e m p o r a r y opinion on the m e a s u r e was s h a r p l y divided. T h o u g h the a c t was c a r r i e d m a i n l y by R e p u b l i c a n votes, the official o r g a n of the p a r t y denounced it a s an iniquitous scheme of the rich c o r p o r a t i o n s who " p u t u p a poor mouth . . .

to suck

a w a y the life blood of A l a b a m a . " On the other h a n d , a Democraticp a p e r declared t h a t the a c t showed . . .

financial

acumen

"worthy

of the genius of a N e c k a r («