Today is the 150th anniversary of the pounding of the gold spike that represented completion of the first transcontinental railroad. Union Pacific, which now owns the complete route, plans to bring its newly restored Big Boy steam locomotive to Ogden to recreate, with 4-8-4 locomotive 844, the joining of the UP and Central Pacific in 1869. Numerous museums and history societies are planning exhibits and meetings.
While it would be fascinating to watch the Big Boy operate, you’ll have to excuse me for otherwise being unenthused about this event. As I see it, the first transcontinental railroad was the biggest boondoggle in nineteenth-century America, and one that – as later railroads proved – we could have lived without. Unfortunately, it is still being cited as an example of why twenty-first century America should do even more foolish things like build high-speed rail.
Railroads were the high-tech industry of the mid-1800s. They revolutionized both passenger travel and freight movement and mode it possible to farm and extract resources in remote locations. Yet, like today’s high-tech industries, many planned and some actual railroads were little more than securities schemes to separate naive investors from their money. The first transcontinental railroad did so on a grand scale, relying not on naive investors but a gullible Congress willing to give away tax dollars and resources.
The story is told in detail in Railroaded: The Transcontinentals and the Making of Modern America by Stanford University historian Richard White. To entice investors into building a continuous line from the Mississippi River to the Pacific shore, Congress agreed to give the railroads 10 square miles of land for every mile of track. In addition, it would loan builders $16,000 a mile for construction on flat lands and $48,000 a mile in the mountains.
The leaders of the Central Pacific (which built from California) and Union Pacific (which built from the Mississippi) quickly realized that immediate profits could be made by contracting construction out to themselves. They created separate companies that built the railroads as cheaply as possible, then billed the government the full amount of the available loans. The railroads were committed to eventually repaying the loans, but that responsibility belonged to a different set of investors, while a narrow inner circle of each railroad’s leaders owned the highly profitable construction companies.
The Central Pacific even went so far as to hire a geologist who claimed that the Sierra Nevada Mountains started just outside of Sacramento, many miles away from the real mountains, so they could collect the full $48,000 a mile for that segment. Using techniques like this, the people who owned the construction companies earned millions of dollars in profits before the railroads were even completed.