Canals do not appear to have developed any serious problems calling for public regulation of rates. A first simple legislative act fixing the rate of tolls for boats was sufficient. Charges were made by distance as on a toll road and the boats were owned by different private shippers or by common carriers among whom competition prevailed.
§ 5. #Rapid building of American railroads#. The canal was just reaching the peak of popular favor when the railroad in 1830, after a half-century of slowly accumulating technical improvements, burst into view as a demonstrated success as a means of transportation.[2] The railroad excels in adaptability any other agent of transportation; it can go over mountains or tunnel through them. It is markedly superior in certainty; it may be blocked for a day or two by floods and snows, but it suffers no seasonal stoppage of traffic. In speed, even the early railroad so far excelled that the canal could survive only by dividing the traffic, taking the lower grades of freight, and leaving to the railroad the passenger traffic and fast freight. Even in respect to cheapness, the unique virtue of waterways in favored localities, the railroad made rapid gains. Improvements in roadbed, rails, cars, engines, and other equipment soon reduced greatly the cost of conducting traffic on the main lines of roads. Because of these qualities railroads soon surpassed in importance every other agency of internal transportation. The miles constructed and miles in operation in the United States, by decades since 1830 were as follows (route mileage, not counting double tracks and sidings):
Miles constructed Total route miles in decade. in operation.
1830 …………………… 23 23 1840 …………………… 2,795 2,818 1850 …………………… 6,203 9,021 1800 …………………… 21,605 30,626 1870 …………………… 22,296 52,922 1880 …………………… 40,345 93,267 1890 …………………… 73,924 167,191 1900 …………………… 31,773 198,964 1910 …………………… 51,028 249,992 1915 (5 yrs.) …………… 13,555 263,547
The extension of railroads was so rapid that there was not time for a gradual adjustment of industrial conditions. In many places the resulting changes were revolutionary. The building of railroads in the Mississippi valley in the seventies lowered the value of eastern farms, ruined many English farmers, and depressed the condition of the peasantry in all western Europe.[3] With the lower prices that resulted when the fertile lands of the western prairies were opened to the world's markets, the less fertile lands of the older districts could not compete. Many other changes, of no less moment in limited districts, resulted from the building of railroads. Local trading-centers decreased in importance. Villages and towns, hoping to be enriched by the railroads, saw their trade going to the cities. Commerce became centralized. Enormous increases of value at a few points were offset by losses in other localities.
§ 6. #Reasons for governmental aid#. The growth of railroads in America was more rapid than in any other part of the world, but it did not occur without much help to private capital from governmental agencies. The railroad enterprise was uncertain, the possibilities of its growth could not be foreseen, and private capital would not invest without great inducements. In European countries the railways were built through comparatively densely populated districts to connect cities already of large size. Yet railroad extension was very slow there, even tho the states in many ways aided the enterprises. America was comparatively sparsely populated, and most of the railroads were built in advance of and to attract population, business, and traffic. In many cases railroad building in America was part of a gigantic real-estate speculation undertaken collectively by the taxpayers of the communities.
§ 7. #Kinds of governmental aid#. American states recklessly abandoned the policy of non-interference, and vied with each other in giving railroad enterprises lands, money, and privileges, in loaning bonds, in subscribing for stock, and in releasing from taxation. These fostering measures were expected to increase wealth and to diffuse a greater welfare through the community. Many states were forced to the point of bankruptcy by their reckless generosity, and some states repudiated the debts thus incurred.
The national government then took up the same policy and granted lands to the states to be used for this purpose. The first case of this kind was the grant to the Illinois Central road, in 1850, of a great strip of land through the state from north to south. Grants were made in fourteen states, covering tens of millions of acres of land. Then the national government, between 1863 and 1869, aided the building of the Pacific railroads by granting outright twenty square miles of land for every mile of track and by loaning the credit of the government to the extent of fifty million dollars,—a debt which was settled by compromise only after thirty years.
Counties, townships, cities, and villages then entered into keen competition to secure the building of railroads, projected by private enterprise. Bonds, bonuses, tax-exemptions, and many special privileges were granted. To obtain this new Aladdin's lamp, this great wealth-bringer, localities mortgaged their prosperity for years to come. The promoters bargained skilfully for these grants, playing off town against town, cultivating the speculative spirit, punishing the obdurate. Not the civil engineer, but the railroad promoter determined the devious lines of many a railroad on the level prairies of America. The effects of these grants were in many cases disastrous, and after 1870 they were forbidden in a number of states by legislation and by constitutional amendments. But before this era of generosity ended, probably the railroads in America had received more public aid than has ever been given to any other form of industry in private hands.
§ 8. #Emergence of the railroad problem#. In most charters and laws authorizing the building of railroads, either nothing was specified regarding rates, or maximum rates were fixed which proved to be so high that they were of little, if any, practical effect. But very soon began to appear some serious evils in the policy of railroads toward the shipping and traveling public in matters of rates and of service.