Railroads: Rates and Regulations

by William Zebina Ripley

Public land grants, [35].—Direct financial assistance, [37].—History of state aid, [39].—Federal experience with transcontinental roads, [40].

The possibility of a unified nation of ninety odd million souls, spread over a vast territory of three million square miles,—three-fourths of the area of Europe,—was greatly enhanced at the outset by the geographical configuration of the continent of North America. It was fortunate, indeed, that the original thirteen colonies were strictly hemmed in along the Atlantic seaboard, thus being protected against premature expansion. At the same time the north and south direction of this narrow coastal strip, with its variety of climates, soils, natural resources and products, brought about a degree of intercourse and mutual reliance of the utmost importance. The mere exchange of the dried fish and rum of New England, for the sugar, tobacco, molasses and rice of the southern colonies, paved the way for an acquaintance and intellectual intercourse necessary to the development of national spirit. Throughout the colonial period, the protected coast waters and navigable rivers as far inland as the "fall line," rendered the problem of long distance transportation relatively easy. For everything went by water. Population was compelled to develop the country somewhat intensively, by reason of the difficulty of westward expansion. But this population after the Revolution began to press more and more insistently against the mountain barriers; so that the need of purely artificial means of transportation at right angles to the seaboard became ever more apparent.

The period from the Revolution down to 1829, when Stephenson's "Rocket" made its first successful run between Liverpool and Manchester, attaining a speed of twenty-nine miles per hour, was characterized in the United States by increasing interest in canals and toll roads as means of communication. As involving less expenditure of capital, the highways were naturally developed first. In 1756 the first regular stage between New York and Philadelphia covered the distance in three days, soon to be followed by the "Flying Machine," which made it in two-thirds of that time. Six days were consumed in the stage trip from New York to Boston. But by 1790 a considerable network of toll roads covered the northern territory,—systems which, as in Kentucky by 1840, attained a length of no less than four hundred miles. Post roads linked up such remote points as St. Louis, New Orleans, Nashville, Charleston, and Savannah by 1830. Pennsylvania had made an early beginning in 1806; and by 1822 had subscribed nearly two million dollars to fifty-six turnpike companies and wellnigh a fifth of that sum toward the construction of highway bridges. Most of these roads throughout the country, however, were private enterprises, and, even where aided by the state governments, were imperfectly built and worse maintained, disjointed and roundabout.

The need of a comprehensive highway system, especially for the connection of the coastal belt with the Middle West, early engaged the attention of Congress. Washington seems to have fully appreciated its importance. Ten dollars a ton per hundred miles for cost of haulage by road, necessarily imposed a severe restriction upon the extension of markets. The Federal Congress in 1802 appropriated one-twentieth of the proceeds from the sale of Ohio lands to the construction of such highways. Gallatin's interest in the matter five years later, led to his proposal of an expenditure of $20,000,000 for the purpose. The Cumberland Road or "National Pike" was the result. This great highway started from near the then centre of population in Maryland and cut across the Middle West, half-way between the lakes and the Ohio river. From the upper reaches of the Potomac it followed Braddock's Old Road to Uniontown, Pennsylvania, then by Wheeling over "Zanes trace" to Zanesville, Ohio. From that point on it trended toward St. Louis by way of Columbus and Indianapolis, ending at Vandalia, Illinois. During the space of thirty years about $10,000,000 was expended upon it, and it undoubtedly did much to promote the settlement of the country. But the success of canals and railroads in the meantime sapped the vitality of the movement for further turnpike construction before St. Louis was reached. By the close of the war of 1812, in fact, it had become apparent that highways were destined to serve only as feeders after all; and not as main stems of communication.

Improved riverways and canals constituted the next advance in transportation method. So far as the latter were concerned, although the initial expense was great, the subsequent cost of movement as compared with turnpikes was, of course, low. Especially was this cheapness of movement notable in river traffic. Whereas it was said to cost one-third of the worth of goods to transport them by land from Philadelphia to Kentucky, the cost of carriage from Illinois down to New Orleans by water was reputed to equal less than five per cent, of their value. Hence the steamboat, invented in 1807 and introduced on the Ohio river in 1811, opened up vast possibilities for enlarged markets. But it was not until the generation of sufficient power to stem the rapid river currents about 1817 that our internal waterways became fully utilized.[2] From that period dates the rapid growth of Pittsburg, Cincinnati, and St. Louis. The real interest of the East in western trade dates from the close of the war of 1812. Even then, however, the natural outlet for the products of the strip of newly settled territory west of the Alleghanies, was still over the mountains to the Atlantic seaboard. Cotton culture in the South had not yet given rise to a large demand for food stuffs in the lower Mississippi valley. It was a long and wellnigh impossible way around by the Gulf of Mexico. Consequently the main attention of the people during the canal period between 1816 and 1840 was focussed upon direct means of communication between the coastal plain and the interior. A few minor artificial waterways, like the Middlesex canal from Boston to Lowell, completed about 1810, proved their entire feasibility from the point of view both of construction and profit. Even earlier than this the Dismal Swamp canal and one along the James river in Virginia had been projected and in part built. But the era of canal construction as such on a large scale cannot be said to begin until after the close of the war of 1812. The most important enterprise, of course, was the building of the Erie Canal to unite the headwaters of the Hudson river with the Great Lakes at Buffalo. This waterway, began in 1817, was completed in eight years and effected a revolution in internal trade. It was not only successful financially, repaying the entire construction in ten years, but it at once rendered New York the dominant seaport on the Atlantic. Philadelphia was at once relegated to second place. Agricultural products, formerly floated down the Susquehanna to Baltimore, now went directly over the Hudson river route. Branch canals all over New York state served as feeders; and flourishing towns sprang up along the way, especially at junction points. The cost of transportation per ton from Buffalo to New York, formerly $100, promptly dropped to less than one-fourth that sum. By wagon it was said to cost $32 per hundred miles for transport, whereas charges by canal fell to one dollar. Little wonder that the volume of traffic immensely increased, and that, moreover, the balance of power among western centres was at once affected. The future of Chicago, as against St. Louis, was insured; and the long needed outlet to the sea was provided for the agricultural products of the prairie West.

The instant and phenomenal success of the Erie Canal immediately encouraged the prosecution of similar enterprises elsewhere. Philadelphia pushed the construction of a complicated chain of horse railroads, canals and portages in order to reach the Ohio at Pittsburg. In 1834 an entire boat and cargo made the transit successfully. The cost of this enterprise exceeded $10,000,000; but it was expected to provide a successful competitor for the Erie Canal. The latter in the meantime had been linked up with the Ohio river by canals from Cleveland to Portsmouth, from Toledo to Cincinnati, and from Beaver on the Ohio, to Erie on the Lake. By the first of these routes in 1835, no less than 86,000 barrels of flour, 28,000 bushels of wheat and 2,500,000 staves were carried by canal on to New York. Boston and Baltimore were prevented from engaging in similar canal enterprises only by the advent of the railway. Meantime the Chesapeake and Ohio Canal was started in 1828 as a joint undertaking of Maryland, Virginia, and the Federal government, to connect the Potomac with the Ohio. It was not completed in fact until 1850, long after its potential usefulness had ceased. Besides these through routes, canals for the accommodation of local needs were rapidly built in the East. Boston was connected with Lowell; Worcester with Providence; New Haven with the Connecticut river. In Pennsylvania, especially, the anthracite coal industry, developing after 1815, encouraged the building of artificial waterways. The Delaware and Hudson, the Schuylkill, Morris and Lehigh canals were built between 1818 and 1825 along the natural waterways leading out from the hard coal fields. New Jersey connected New York and Philadelphia by the Raritan Canal in 1834-1838 at a cost of nearly $5,000,000; and another canal to connect Delaware and Chesapeake bays was with difficulty, and only by the aid of the Federal government, finally completed about 1825 at a cost of nearly $4,000,000. Further south, many small canals and river improvements were made. The Dismal Swamp enterprise had already connected Chesapeake Bay and the coast waters and sounds of the Carolinas; but provision for slack water navigation of the Tennessee river at Mussel Shoals in Alabama, and of the various branches of the Ohio river in Kentucky was not made until the middle of the thirties.

The open prairies of the West offered the most inviting prospects for canal construction, both because of the dearth of roads and the ease of construction of artificial waterways. Not only through routes to the East, as already described, but local enterprises of various sorts abounded on every side. Chicago was connected with the Mississippi system by way of the Illinois and Michigan Canal; a route across the lower peninsula of Michigan, and many feeders in Indiana and Ohio were built. The demands upon the capital of the country for these purposes during the twenty years after 1815 were enormous; and it was only by resort to state subventions and grants from the Federal government out of the proceeds of sales of public lands, that so much was actually accomplished. State debts aggregating no less than $60,000,000 for canal construction were incurred prior to 1837. Much of this investment proved ultimately unproductive; extravagance and fraud were rife. But the economic results were immediately apparent and highly satisfactory, as witnessed in the higher prices obtainable for all the products of the interior for transportation to the seaboard. Flour, which could be had at three dollars a barrel at Cincinnati in 1826, rose to double that figure by 1835; and corn rose from twelve to thirty-two cents a bushel. The panic of 1837 and the subsequent depression, of course, put a severe check upon further canal building. But an even more potent force was the proved success of the newly invented mode of carriage by railroad. Before 1840 the era of canal construction was definitely at an end. Almost the only exception was the Erie Canal, which continued to prosper by reason of its strategic location. Rates were reduced in 1834; and two years later the canal was widened and deepened to accommodate the ever increasing traffic. Surplus revenues enabled the amortization of its debt; and by 1852 the revenue exceeded three million dollars annually. Although the pressure of railway competition was increasingly felt; as late as 1868, practically all the grain into New York was brought by canal barge. The movement of this canal tonnage, year by year, is shown by the diagram on page [25]. As will be seen, it was not until the trunk line rate wars of 1874-1877 that the inferiority of the canal to the railroad, even in this favored instance, was finally demonstrated. The revival of interest in the Erie Canal which has occurred in recent years, leading to the expenditure of millions of dollars by the state of New York in still further enlarging it, is due to an effort to insure the supremacy of the port of New York in export trade against the growing competition of the Gulf ports, which it originally gained when the canal was constructed.

The first serious attempt at railroad operation in the United States was on the Baltimore & Ohio line in 1830. The company, although chartered in 1821, did not begin construction for seven years. It was three years later than this when Peter Cooper's "Tom Thumb" made a trial run out from Baltimore with a record of thirteen miles per hour. A road from Albany to Schenectady was opened in 1831; and a series of connecting links was rapidly pushed westward across New York state, finally reaching Buffalo in 1842. But prior to 1840, activity in railroad construction was most noticeable in Pennsylvania: partly because of its lack of so admirable a water route to connect it with inland markets as was enjoyed by New York, and partly because of the growth of the coal business which caused the main lines of the Reading Railroad to be laid down as early as 1838. The state of Pennsylvania was busily engaged in improving her existing route over the mountains by replacing the canal and portage portions with rail lines. Pittsburg, which formerly had been five and a half days distant, was thus connected by railroad in 1834. Cars built in the form of boat sections were to be transferred from the rails to canals along part of this route. The Pennsylvania Railroad aiming to provide continuous railway communication over the mountains, was not chartered until 1846; but, nevertheless, as early as 1835 Pennsylvania had over two hundred miles of railway, about one-quarter of the mileage of the United States. New York and New Jersey had about one hundred miles between them, while South Carolina had one hundred and thirty-seven miles. The Baltimore & Ohio during this time was being slowly pushed westward; although it did not reach the Ohio river until 1853, two years after the Erie had, by liberal state aid, been carried to the lakes at Dunkirk, N.Y. Thus it appears that during the decade to 1840 railroad building had progressed unchecked by the panic of 1837. This panic, in fact, by rendering the state construction of canals impossible, may actually have increased the interest in railroad building. The railways of this time were still mainly experimental. They were local and disconnected, serving rather as supplementary to, than as actual competitors of the existing water routes. In Massachusetts and Connecticut the lines radiating out from seaports were intended to serve only as feeders to coastwise traffic; just as short lines were built along the Great Lakes during the decade to 1850 to bring products out to a connection with the natural water routes. A notable exception was the continuous line which by 1840 was in operation lengthwise of the Atlantic coast plain from New York south to Wilmington, North Carolina. The Camden and Amboy between Philadelphia and New York was operated early in the thirties; about the same time that the Philadelphia, Wilmington & Baltimore was completed. Much interesting history centres about the first named road. It seems to have been a notoriously corrupting influence in New Jersey politics from the outset. Public opinion became so roused over its exactions, that a memorial from the merchants of New York to the Thirtieth Congress resulted. The enterprise was the most profitable of all the earlier companies, its net earnings in 1840 amounting to $427,000. In 1855 it paid a twelve per cent. dividend. From Washington south by way of Fredericksburg and Richmond, the southern states could be reached without undertaking the perilous passage round Cape Hatteras. By 1840 the only portions of the original colonies still isolated were New England, at one end, which was still obliged to depend upon Long Island transit to New York by boat; and in the Far South, the back country behind Charleston and Savannah.

Several important economic causes conspired to stimulate railroad construction at a very early time in the southern states.[3] They welcomed the new means of transportation even more eagerly than the wealthier, commercial and more densely populated North. Ever since the invention of the gin in 1793, the production of cotton had grown apace. Profits were so high that all interest in other forms of agriculture waned. Cotton production until about 1817 was mainly confined to the long narrow strip of Piedmont territory, lying between the sandy "pine barrens" along the coast and the mountains in the rear. This fertile strip—the seat of the plantation system—thus geographically isolated, had only one means of communication with the outer world, namely the coast rivers debouching upon the sea at Charleston, Savannah, or, later on, upon the Gulf at Mobile. But these seaports were not conveniently situated to serve as local trade centres. They were separated from the cotton belt by the intervening pine barrens. The local business of buying the cotton from the planters, and in return supplying their imperative needs for supplies of all sorts, including even foodstuffs which they neglected to raise, was concentrated in a series of towns located at the so-called "fall line" of the rivers. From Alexandria and Richmond on the Potomac and James, round by Augusta, Macon, and Columbia to Montgomery, Alabama, such local centres of importance arose, each one just at the head of navigation. For some years profits were so large that heavy charges for transportation to the sea were patiently borne. But after the opening of the western cotton belt along the Mississippi bottom lands after 1817, the price of cotton experienced a severe decline, greatly to the distress of the older planters. For this reason an insistent demand for improved means of transportation had already brought about great interest in turnpike and canal building. South Carolina at a very early date had expended about two million dollars for these purposes. Steamboats on the smaller rivers were also used. Immediately upon the successful demonstration of traction by steam the aid of the states, cities and individuals was invoked; so that a well planned system of railroads resulted even as early as 1843. The South Carolina Railroad between 1829 and 1833 most successfully operated a pioneer line, its securities being quoted at twenty-five per cent. above par. The Charleston & Hamburg line opened in 1833, one hundred and thirty-seven miles long, was said to be the largest system under one management in the world. Augusta & Columbia were linked up with the coast. Savannah also penetrated inland to the Piedmont belt by a line finished in 1843 as far as Macon. The interest in a through route to connect Cincinnati and Louisville with Charleston was very keen; and had it not been for the tremendous fall in cotton prices in 1839-1840, the project might have succeeded. As it was, a great railroad convention at Knoxville in 1836 was attended by no less than four hundred delegates from nine different states. It was not so much the mileage of these roads which rendered them notable, as the fact of their intended reliance upon through freight instead of passenger business. Roads in other parts of the country were as yet depending in the main upon passenger traffic or upon the carriage of what we would now call local or parcel freight. These southern lines were built to accommodate traffic in great staple agricultural products—cotton out and foodstuffs in. Unlike the northern roads, also, they early adopted a uniform gauge and sought to promote long distance business. Later developments in the South especially in the direction of improved service were very slow. The northern states speedily outstripped them; but the enterprise of this region in railroad building and operation at the outset has not been fully appreciated.

The decade 1840-1850 was marked by slow growth of the railway net,—everywhere except in New England, where the main lines were being rapidly laid down. The doom of the canal as a competitor had been sealed, to be sure; but the dearth of private capital, except in New England, rendered progress slow until aid from the government was invoked. Until this time private enterprise had been the main reliance. Several important undertakings were now launched. The Pennsylvania Railroad was chartered in 1846, but was not completed to Pittsburg till 1852. The Boston & Albany line was built; and Buffalo had been reached. But neither the Baltimore & Ohio, nor the Erie had yet been pushed to completion. The possibilities of the great Northwest had not dawned upon the people. At the opening of the decade, St. Louis was still almost three times as large as Chicago. Cincinnati was the most important western centre, its prestige being enhanced by the first all-rail line to the Great Lakes at Sandusky, opened in 1848. The relative importance of these inland centres is indicated by their populations. In 1850 these were as follows: Cincinnati, 115,000; Chicago, 30,000; St. Louis, 78,000; and Louisville, 43,000. Cincinnati retained its preëminence until after the Civil War; but by 1880 had dropped to a low third in rank, only half the size of Chicago and two-thirds the size of St. Louis.[4] During the decade to 1850, the Ann Arbor line from Detroit also was pushed on to Chicago in 1852, to cut off the roundabout trip by lake;[5] but St. Louis was still isolated; Indianapolis was barely connected with the Ohio river. The river trade thus still dominated the western situation. In the South one important enterprise monopolized all attention, namely the construction by the state of Georgia of the Western & Atlantic road over the mountains from Atlanta to Chattanooga on the Tennessee river.[6] Atlanta was to become the western terminus of the coast roads, built, as has been said, to provide an outlet to the sea for the Piedmont cotton belt. This new enterprise was to open up a direct route, not alone to the new western South but to the entire Northwest by connecting with a navigable branch of the Ohio. It is an odd fact that at this time the southern ports were nearer the West than the cities of the North Atlantic. Part of the first rush of the Forty-niners to California was by way of Charleston and thence west over the Charleston & Hamburg line. From 1837 on, the Western & Atlantic line was under construction. In the meantime Atlanta had been reached from the east; so that at the beginning of the next decade, two at least of the main arteries of the southern net were ready for business.