THE DEVELOPMENT OF RAILROADS 11^ THE UNITED STATES 
 DURING THE QUARTER OF A CENTURY SUCCEED- 
 ING THE CIVIL WAR 
 
 BY 
 
 TEH HSI CHEO 
 
 A. B., UNIVERSITY OF NANKING, 1915 
 
 THESIS 
 
 SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS 
 FOR THE DEGREE OF - 
 
 MASTER OF ARTS 
 IN RAILWAY ADMINISTRATION 
 
 IN 
 
 THE GRADUATE SCHOOL 
 
 OF THE 
 
 UNIVERSITY OF ILLINOIS 
 
 1921 
 

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The Development of Railroads in the United States 
 
 during the quarter of a century succeeding the 
 Civil V/arv' 
 
 Contents 
 
 Chapter I 
 
 Chapter II 
 
 Chapter III 
 
 Chapter IV 
 
 Chapter V 
 
 Introduction. 
 
 (A) Brief Summary of Railroad Construction 
 preceding the Civil War. 
 
 Railroad Construction. 
 
 (A) The period from 1365-1370. 
 
 (B) The period from 1870-1880. 
 
 (C) The period from 1880-1 Sop. 
 
 Consolidation of Railv/ays . 
 
 (A) Causes of Consolidation. 
 
 (B) examples of Varieties of Consolidation. 
 
 (C) Result. 
 
 Railroad Capital . 
 
 (A) Expansion of Capital and Methods of 
 Financing. 
 
 (B) Relation to Costs. 
 
 (C) Return to Capital. 
 
 Development of Railway System and its relation 
 to the general economic growth of the country. 
 
1 
 
 CIIAPTER T 
 
 A Brief Summary of Railroad Construction preceding 
 the Period 
 
 The railway in the United States came suddenly, in the 
 midst of turnp*ike and canal building. In 1326 the first railv/ay 
 was built in this country , It vjas a granite carrier, connecting 
 tne quarries in the tovm of Quincy, I^flassachusetts , with the Nepon- 
 set River, a distance of about three miles. This road was built 
 
 for a patriotic purpose; its main object was to sunnly granite for 
 
 1 
 
 the erection of Bunker Hill Monument. Three years later, several 
 
 ot'ier roads were partially completed, and the introduction of the 
 
 steam locomotive engine inaugurated. Among the first steam roads 
 
 which were built for general public use were the Baltimore and Ohio, 
 
 2 
 
 the South Carolina and the Mohav/k and Hudson. The total mileage, 
 at the end of I 83 O was about thirty?" miles. 
 
 The success of these roads satisfied the public mind that 
 the nev7 means of transportation was a necessity to the country and 
 they v/ere looked upon as the most efficient instrument to aid in 
 the settling and developing of the vacant interior. Their progress 
 v;as consequently rapid. In 1840, ten years later, the total mileage 
 reached 2,818. The roads constructed during this period radiated 
 xrom several Atlantic seaports, of which Philadelphia was the most 
 
 1 , Johnson and Van Metre . Principles of Railroad Transportation, p20 
 
 2. Jhld. , 
 
 p22 . 
 
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 impoi’tant . 
 
 In the year 1350 the length of the railways had increased 
 to 9,021 miles, of which but a small portion was located in states 
 
 4 
 
 west of the Alleghenies, In Nev/ England, where the country was 
 .most densely populated, the progress was greater, so that by the 
 year I85O nearly all the present trunk lines in that section had 
 been completed. 
 
 During the succeeding decade the great lines west from 
 
 the Hudson, the Delaware and the Chesapeake were brought into use, 
 
 and the rail had been spread over a large nart of the country/' lying 
 
 eastward of the Mississippi; the total length in this neriod being 
 
 something mere than 50,626 miles. In the midst of this period the 
 
 Mississippi had been reached and crossed, and railroads built in 
 
 Missouri ( chief ly by state loans) and Iowa, Tennessee, Kentucky 
 
 (state aid) and the states south to the G-ulf had been liberally 
 
 5 
 
 furnished with railroads. The Civil War, from I86I-I865, brought 
 construction almost to a standstill, but even during this period of 
 agitation, the national legislature found tiiae to plan and encour- 
 age the construction of taose great worses which now connect v/ith 
 the Pacific Coast. Through the agency of these roads commercial 
 connections with China and Japan have been successfully developed. 
 
 5. Raper, C. L., Railway Transportation , ppl 82-85. 
 
 4 . Johnson and Van Metre, Principles of Railroad Transportation , 036 
 
 j • 
 
 Raper, C. L., Railway Transportation , pl 8 y. 
 

 
 
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3 
 
 CHAPTER II 
 
 Railroad Construction 
 
 In order to deal with the develo^-’ment of railroad constru- 
 ction in the United States during the quarter of a century succeed- 
 ing the Civil War, it is most convenient to divide the railway 
 system of the country into six groups. These groups are the Eastern 
 Central, Southern, Northwestern, and Pacific. This division is in 
 ever 3 ’’ respect identical v/ith those divisions adopted by the United 
 States Census Office and the Interstate Commerce Commission, save 
 
 for the fact that several of the ten grouns which they enumerate are 
 
 1 
 
 here combined in order to reduce their numbers. These grov.ps Vvill 
 be successively'' dealt with in the following "oages . 
 
 (A) The Period from 1865-13?0 
 ( 1 ) Nev/ Construction in the Eastern Q-roup 
 
 In 1365, there v/as completed a branch line of the Pennsyl- 
 vania Railroad from Blairsville to Freeport, on the Allegheny River. 
 At Freeport, it connected v/ith that of the Allegheny Valley Railroad 
 running thence to Eittanning and then to the oil region. This 
 branch vras used by the Penns yrlvania Railroad Company as an avenue 
 for the coal, iron and petroleum trade betv/een the Allegheny and 
 Philadelphia. Previously all these sta'^les had to go to Pittsburgh 
 to find shinning hither but now the commerce floating down the 
 
 2 
 
 Allegheny River might find a place for shipment east at Freeport. 
 
 1 . Van Oss, American Railroads as Investments , pi 83. 
 
 2. American Railroad J ournal , I865, p 845 . 
 

 
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4 
 
 In the same year, another branch line, known as the 
 Chicago and G-reat Eastern Railway, from Chicago to Richmond, Indiana , 
 a distance of 223 miles, v/as onened. This road made possible a 
 through traffic to the Atlantic cities. Connection was made at 
 Richmond, via the Little Miami and Central Ohio Railroad to Balti- 
 more or over the Stuenbenville road, via Pittsburgh to Philadelphia 
 and New York, It opened a fourth trunk line from Chicago to the 
 
 East, and v/as the most important connection for the western roads 
 
 3 
 
 v/hich centered at Chicago. It did not, at first, become a branch 
 
 line of the Pennsylvania Railroad, In 1868, it was taken over by 
 
 the Columbus and Indiana Central Railway Company. The consolidated 
 
 line embraced 738 miles of track which viere distributed as follov'js: 
 
 Chicago and G-reat Eastern, 223 miles; Indiana Central, 188 miles; 
 
 Peoria, Logansnort and Burlington, 133 miles; Union and Logansport, 
 
 4 
 
 93 miles. At the close of the seventh decade, the Pennsj^’lvania 
 
 Railroad had secured the control of the Columbus and Indiana Central 
 
 5 
 
 Rail\Yay; thus the Chica,go and G-reat Eastern Railway v/as involved. 
 
 In 1867 , the road operated by the Baltimore and Ohio Rail- 
 road Company comprised three distinct parts: the main stem, the 
 'Washington Branch and the Northv/estern Virginia Railroad, which at 
 
 this time was under lease to the Baltimore and Ohio Railroad. Company , 
 
 6 
 
 The length of these several lines were as follows: 
 
 3 . American Railroad Journal . I 865 , p227 . 
 
 4. Ibid . 1868, pi 45. 
 
 5 . Ringwalt , J . L . , Development of Transport a tion Systems in the 
 
 United States, ~o18b , 
 
 6. Americ a n R i ilrnsd dmimal ^ 1867, P338 • 
 

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 Total length 
 
 5U. ' 
 
 miles 
 
 An extension of the Erie Railroad was completed in 1368. 
 
 The extension was from Buffalo to Niagara Palls. The route of this 
 
 road v/as considerably shorter than the present line of the Nev/ York 
 
 Central Railroad to the Falls. It was a very important extension, 
 
 not only for the Erie Company but for the G-reat Western Railway of 
 
 Canada and for the city of Buffalo. It gave the Erie another route 
 
 to Chicago, independent of its connection with the Lake Shore Line; 
 
 it gave the G-reat Western another route to Nev/ York and the East, 
 
 independent of its connection y:ith the Nev; York Central, and it gave 
 
 the city of Buffalo the advantage of another route to the Falls and 
 
 brought a great increase of rail traffic which had hitherto gone by 
 
 7 
 
 the way of Suspension Bridge and by Dunkirk. 
 
 (2/ Nev/ Construction in the Central Group 
 
 In 1365, the so called "Lake Shore Line" was made up of 
 the state line railroad, 63,34 miles in length; the Erie and North 
 East, 18 . 5 c* miles; and the Cleveland, Painesville and Ashtabula, 
 95.49 miles. These roads extended from Buffalo, New York, to Cleve- 
 land, Ohio. To this might be added the Cleveland and Toledo, 112.50 
 miles and the Michigan Southern and Northern Indiana Railroad, 246 
 miles. These made up a total length of "Line" from Buffalo to 
 
 7. American Railroad Journal . 1368, p333 . 
 
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 Chicago of 54^.74 miles. 
 
 (;;) New Construction in the Southern G-roup 
 
 The Chesapeake and Ohio Railroad, as it is nov; known, v;as 
 a consolidation of _ the. Virginia Central and the Covington and Ohio 
 Railroads. This road was at that time completed and in operation 
 from Richmond to the celebrated '^fnite Sulphur Springs of West 
 '/irginia, 227 miles, and there remained but 2 ^^ miles to be complete 
 
 i 
 
 to carry it to the proposed terminus on the Ohio River at or near 
 the mouth of the Big Sand^?” River, I 50 miles above Cincinati, and 350 
 miles belovif Pittsburgh. This road, when completed, would be one of 
 tae great trunk lines bety/een the seaboard and the Mississippi Valle ^ 
 Its principal traffic was the transnortation of the iron ores which 
 were found in vast quantities and su-^erior quality'’ near the center 
 of its route, and the famous canned and splint varieties of coal 
 whicn were found in the Kanav/ha Valley. Besides the coal traffic, 
 its advantages of low grades, cheap fuel and equable clim’ate would 
 enable it to carry the surplus breadstuffs and provisions of the 
 Ohio Valley to their destination on the sea-board. It made very 
 direct and easy connections vvith the 16,ooo miles of inland navi- 
 gation, and also with the 20,000 miles of v/estern railroads. 
 
 (4) New Construction in the Northwestern Group 
 
 The extension of the Chicago and Northv/estern Railway Com- 
 pany from Green Bay to Shawano v/as energetically carried forward. 
 
 The Peninsula Railroad from that point to Marquette, on Lake Super- 
 ior, was completed and regular trains were arranged. 
 
 3. American Railroad Journal . 1365 , pi ' 039 . 
 
 9. Ibid 
 
 137^, P223 
 
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7 
 
 Its extension in the state of Iov;a v/as now corapleted with- 
 in tvjenty five miles of the Missouri River at Omaha v;here it con- 
 nected with the main stem of the G-reat Union Pacific road, vvhich 
 already carried freight and passe^'gers three hundred miles "beyond 
 the Omaha frontier. In 1367 the Iowa division of the Chicago and 
 NorthY/e stern Railroad was finished as far as Council Bluffs, thus 
 
 comnleting the link "between the seaboard and the North Platte, three 
 
 1 1 
 
 hundred miles west of the Missouri River. 
 
 In 1369, the lines of road o\7ned and leased by this com- 
 pany Yvere as follows: Chicago to Clinton, Iowa, I 83 .I miles; Clinton 
 to the Missouri River, opoosite Omaha, 352.9 miles -total 491 miles. 
 Junction to Freeport, 91 miles; Elgin to Ric’imond, 33 miles; Bel- 
 videre to Madison, 67.6 miles; Kenosha to Rockford, 72.4 miles; 
 Chicago to MilYvaukee, 35 miles; Chicago to Fort Hov/ard, 342.2 miles; 
 Escanaba to Lake Angeline Mines, 59 ,miles--total length of main line^ 
 
 1156 miles. Total length of main lines owned by the Company, 303.1 
 
 12 
 
 miles. The length of different divisions was as follov/s: 
 
 Wisconsin Division, 314.6 miles. 
 
 Galena 
 
 loYva 
 
 Madison 
 
 Peninsula 
 
 Milv;aukee 
 
 261 
 
 354 
 
 M 
 
 n 
 
 67.6 
 
 73.3 " 
 
 85 " 
 
 Total as above 1156 .^ miles. 
 
 1 ^ . American Railro ad Journal , 1 865 , p 1 1 89 . 
 
 1 1 . Ibid . , 
 
 
 1867, p 93. 
 
I 1 1T~1 — 
 
 
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 In I 667 , "by the completion of the road from Cresco to 
 Owatonna, about eighty-five miles known as the Iowa and Minnesota 
 Divisions of the Milv/aukee and St. Paul Railvj'ay, continuous rail- 
 road communication had been established between St. Paul and Mil- 
 waukee and the entire system radiating from Chicago. The length of 
 the entire road from Milwaukee to St. Paul was about 420 miles, of 
 which about 220 miles on the virest, and 200 miles on the east side of 
 the Mississippi. This portion of the road was formerly known as the 
 Milwaukee and Prairie du Ghien Railroad. 
 
 The Milv/aukee and St. Paul Railv/ay Company now owned 825 
 
 to 
 
 miles of railway in full operation-this mileage was include the 
 
 A 
 
 mileage of the Minnesota Central and the McG-regor Western through 
 consolidation. Every mile of this road was a productive property. 
 The public had novi a connected line of railway from the city of NeYir 
 York, via the Milwaukee and St, Paul Railv;ay to Minneapolis, St. 
 
 Paul and St. Cloud, a distance of more than miles, about one 
 
 third of v;hich was over the MilvTaukee and St. Paul Railway. The 
 vTinona and St. Peter, the St. Paul and Pacific, the Minnesota Valley 
 the Minnesota Southern, the La Crosse, Tremplean and Prescott and 
 the Tomah and Lake Superior Railroad Companies, which v/ere tribu- 
 taries or connecting roads, v/ere all near completion. This new line 
 of road passed through the most fertile and densely populated coun- 
 ties of Northern Iowa and Minnesota. It had undisputed possession 
 of the trade of an immense region, unsurpassed for the richness of 
 
 13 . American Railroad Journal. 136?, p 1/^34 . 
 
9 
 
 its soil and the industry and enterprise of its people, from v;hose 
 
 immense granaries a golden stream of wheat and other products v/ould 
 
 14 
 
 he sent forth over this railroad. 
 
 In 1368, the lines of this Comnany would he known and 
 designated as follows: 
 
 1 . rrom iviilY/aukee to Prairie du Chien and from 
 Llilton to Monroe, as the Prairie du Chien Division. 
 
 2. From Milv/aukee to La Crosse via V/atertown, 
 and from Watertown to Sun Prairie, as the La Crosse Division. 
 
 3» From North Milwaukee to Portage, and from 
 Haricon to Berlin and Omro, as the Northern Division. 
 
 4. From McSregor to Minneapolis, as the Iowa 
 and Minnesota Division. 
 
 The lollov;ing table shows the length of each of the four 
 
 .. . . 15 . 
 
 divisions mentioned above. 
 
 La Crosse Division 
 Prairie du Chien Division 
 Northern Division 
 Iowa and Minnesota Division 
 
 222 Miles, 
 
 235 
 
 148 
 
 T Op ” 
 
 Total length 825 Miles. 
 
 (5) Mew Construction in the Pacific Group - 
 
 The great enterprise of the railroad history of the 
 United States during the seventh decade was the building of the firs 
 
 -^^ePican Raili^ oad -Jourr-^l , 1365, P.169. 
 
 ^5. Ihi^., 0.169. 
 
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transcontinental line, known as the Union Pa.cific. This road was 
 hiiilt to unite the Atlantic and the Pacific by its iron bonds. The 
 main line built bjr the Union Pacific Kailroad Company was from 
 Omaha to Ogden. This company was chartered in 1362 and rechartered 
 in 1864. In order to build this road, the G-overnment gave the com- 
 pany the assistance. The company received from the G-overnment a 
 land grant of 12 , 6 <^^ acres for every mile of road completed, and, in 
 addition to this, received a large loan fund, amounting to 16 , 000 , 
 
 ^ 32,000 and ) 48 , 0 !^o per mile, the amounts var 5 '’ing with the changing 
 
 1 6 
 
 cost of construction in the mountains, desert .and prairie. 
 
 In 1365* Ike v/ork on the eastern division commencing' at 
 
 Omaha, Nebraska, and striking due west for the passes of the Rocky 
 
 fountains was so far advanced that 1^0 miles of the road were com- 
 17 
 
 pleted. In 1866, it had been completed from Kansas City, up the 
 valley of the Kansas River to the vicinity of Manliattan, for a 
 distance of loo miles on the main line, while the track from Man- 
 hattan to Fort Reiley, a distance of 40 miles, had been nearly 
 
 completed. Two hundred miles of track from Kansas City were onened 
 18 
 
 in 1867. By the end of the same year, the Union Pacific Railroad 
 extended, a distance of 525 miles vjest from Omaha to the eastern base 
 of the Rocker Mountains. In 1863, the mileage v/est of Omaha had 
 increased- to 698 miles. Not long afterwards, the Union Pacific had 
 rea.ched to the Med.icine Rov/ River, in '/Wyoming Territory, and the 
 construction v/.as pushed forv/ard so energetically^' that the line was 
 
 16. Van Oss, American Railroads as Investnents . p.627. 
 
 17 . American Railroad Journal . I 865 , p. 531 . 
 
 1867, p. 243 . 
 
 1 8 . Ibid . , 
 

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 operiGcl on May 10 , 1869 . the time of its completion the Union 
 
 Pacific had a length of 1,040 miles, and ran from Omaha to Ogden, 
 vdiere it connected with the Central Pacific for San Francisco. 
 
 (B) The Period from I870-I8S0 
 
 ( 1 ) New Construction in the Eastern Oroup 
 
 In 1374 the first division of the Chicago extension of tiae 
 Baltimore and Ohio Railroad Company?' was opened. This line embraced 
 the road from Centreton, on the Lake Erie division to Deshler, on 
 the Cincinnati, Hamilton and Dayton Railroad., a distance of sixty- 
 three. miles. Bj means of this extension the increased, grain business 
 centered, in Toledo together with the traffic d.rained by the Cincin- 
 nati, Hamilton and. Dayton Railroad, were made tributary to Baltimore. 
 This line passed through the flourishing towns of Republic, Tiffin 
 and Fostoria. xlt Tiffin it intersected with the Cincinnati, Sandu- 
 sky and Cleveland Kailway, and at Fostoria with the Lake Erie and. 
 
 Louisville Railway, both of which v/ere expected, to nrove valuable 
 20 
 
 grain feeders. The remaining 306 miles of the line to Chicago, were, 
 to be finished at an early date. When the whole line to Chicago was 
 complete, it gave the Baltimore and Ohio a continuous road betvjeen 
 that city and Chicago, a distance of 811 miles. 
 
 (2) New Construction in the Southern Group 
 
 The great line of railroad upon which the Chesaneake and 
 Ohio Railroad v/as based v/as already completed and opened for traffic 
 from Richmond to the T/hite Sulphur Springs, a distance of 327 miles. 
 
 IS’. Van Oss, American Railroads as Investments , p.629 
 20. American Railroad Journal . 1874, p.35 
 
Ot ‘r S ,L 3 ll" fifkC.r ^0 
 
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12 
 
 The portion between the Ohio River and the coal deposita of the 
 Kanawha Valley, 1<^0 miles distant, v/as nearly ready for business. 
 
 The intermediate section of about 1*^0 miles was also vigorously 
 advanced and would be completed within a very short time. When the 
 ?7hole line v/as brought into completion, it woLild form a continuous 
 
 trunk line from the navigable waters of the Atlantic to the Ohio 
 
 21 
 
 River . 
 
 Happily, this road from the capacious, ever-open, Ghesa- 
 pea^-ce n3,vigation to the center of the Ohio Valley, was comnleted in 
 1373. formed the G-rand Central Trunk Line of the railroad system 
 of this country. It possessed peculiar advantages for through traf- 
 fic of v;estern products for consumption and shipment to the Eastern 
 seaboard states. It had a special advantage as a direct, attractive, 
 and speedy passenger line betv/een a large number of the western and 
 southwestern cities and Y/ashington, Baltimore, Philadelphia and Hew 
 York . 
 
 It v/as also advantageously situated to become a cheap and 
 favored route for both immigrants and merchandise between Europe and 
 the v;est. Vessels of the largest class would be able to land along- 
 side the wharves at its deep-water terminus and transfer their pass- 
 engers and cargoes directly from shipboard to the cars, thus avoidin- 
 the annoyance, expense, and delay incident to other routes. 
 
 At Richmond connection was made Y/ith the railroads leading 
 north and northeast via the Richmond and Frederiscksburg Railroad to 
 Alexandria and v/ashington and also with the railroad lines leading 
 
 2 J • American,. Railroad Jnnr 1 3? 1 , p , 1 207 . 
 

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 south of Petersburg, Norfolk, Wilminston, Charlatte, Augusta, 
 
 Charleston, Savannah and Ivlacon. 
 
 At G-ordonsville , by means of this Orange and Alexandria 
 
 Railroad,^ regular connections were made for Washington, Baltimore, 
 
 Philadelphia, and New York by continuous all-rail routes. 
 
 Connections at the western terminus, Huntington, v/ere made 
 
 witn regular packet lines of steamers to Ironton, Portsmouth and 
 
 Cincinnati, and through them with the United States mail line of 
 
 steamers to Louisville, or the short line of road leading southv/est 
 
 oi northwest, Tne trip to Cincinnati, 175 miles, was made downv/ard 
 
 in fifteen hours, and upward in twenty-four to thirty hours. Boats 
 
 stopf^ing at Huntington on their v/ay to and from New Orleans, St, 
 
 Louis, Cairo or intermediate points, could easily transfer freight 
 
 22 
 
 bound in either direction. 
 
 In 1371 , the Illinois Central Railroad brought under its 
 control the section of the Iowa Falls and Sioux City Railroad be- 
 tween Fort Dodge and Sioux City. This completed the company’s leased 
 line from Dubuque to Sioux City, a line 326 miles long and which in 
 connection with the Galena Division of the Northwestern formed a 
 very direct route between Chicago and Sioux City, 5 I 4 miles. 
 
 A link of 85 miles between Cairo, Illinois, and Jackson, 
 Tennessoe, was built by the Illinois Central and the Southern Rail- 
 road Association. This link was to establish close connection with 
 the entire Southern Railroad System, ' avoiding a water transfer of 
 
 22. American Railroad Journal . 1373, P . 1 59 
 
 23 . The Railroad Gazette, 1371, p.60. 
 

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 24 
 
 tv/enty miles "betY/een Cairo and Columbus, Kentuc>y.. Lloreover, this 
 road rendered Chicago an uninterrupted railv/ay service to Mobile 
 and New Orleans by the Illimois Central Railroad over vYhich passen- 
 ger trains could run v/ithout any change of cars whatever. 
 
 In 137'S, the Kanl^akee and Southwestern branch of the 
 Illinois Central Railroad, thii^^-^- seven miles in length, v/as fini- 
 shed, It traversed the terrirory from Kankakee to Chatsworth, 
 Illindis, and in the same year, the company took possession of the 
 Dakota Southern Railv/ay, sixty-tv/o miles in length. It extended 
 from Sioux City, Iowa, to Yankton in the Dakota Territory, It 
 passed through a fertile, v/heat-grov/ing country, and Southern 
 Dakota and Northern Nebraska v/ere its tributaries. 
 
 '.Tnen the extension of the Illinois Central Railroad 
 reached Nev/ Orleans in 1880, it had increased its traffic in carry- 
 ing fruits and vegetables from the Southern States and the southerr; 
 
 I portion of the state of Mississippi to Chicago and the North. Its 
 
 I 
 
 line from the city of New Orleans to the sout lern extremity of 
 Illinois traversed yog miles, Cairo, at the end, being almost as 
 far south as the north line of Tennessee, vYhile its main line from 
 Chicago to Cairo vYas no less than 453 miles long. From the latter 
 point the Chicago, St, Louis and New Orleans road, ovYned by the 
 Illinois Central, ran straight on to the Oulf at New Orleans, 5pC 
 miles, so that the entire line from Chicago to NevY Orleans vYas 900 
 miles long. So when the vYinter still reigned at the northern ter- 
 
 24 . American Railroad Journal , 18733 P»115. 
 
 25. Ibid ., 1378, p.l249. 
 
1 
 
 
 k • •• - 1 • V »• -. ,. 
 
 »s 
 
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 -aiiin 
 
minus, gardens and orchards v/ere in bloom at the opposite end of the 
 route and as the season advanced the line of ripened vegetation 
 moved northv/ard until the autumn harvests were ripe on the shore of 
 
 26 
 
 Lake Michigan. 
 
 (3) New Construction in the Northv/e stern Group 
 
 In I867, the Chicago and North-western Railway had acquired 
 by purchase the ownership of the La Crosse, Trempealeau and Prescott 
 and the V/inona and St. Peter Railroads. The La Crosse, Trempealeau 
 and Prescott Railroad consisted of a linl-: of tv^enty-eight miles of 
 road completed in This line extended from a point opposite 
 
 the cit3'‘ of V/inona, dov;n the eastern side of the Mississippi River 
 to a point about three miles east of the city of La Crosse. At 
 Winona, a bridge was built to connect the Winona and St. Paul Rail- 
 way. At its southern terminus it nov/ connected v/ith the Milv/aukee 
 and St, Paul Railroad, but its ultimate connection v/as to be made 
 Y/ith tne new Madison Extension Line, which v/as being constructed, 
 from Ivladison to a junction with this road. 
 
 ■iinother branch of the Chicago and Northv/estern Railroad, 
 knov/n as the Menominee Extension, a distance of 120 miles, was com- 
 pleted in 1372. It gave the Chicago and. Northwestern Railroad a 
 direct all-rail line between Chicago and Lake Superior. Chicago 
 was thus brought into direct rail communication with the very heart 
 of the great lumber region of Wisconsin, The extension, together 
 with new new lines completed during the year, added miles 
 
 26. Rallv/ay Axe. ISS'^, p. 592 . 
 
 to the 
 

 
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 27 
 
 Nortliv/estern , giving it a total of about 2 , 0 ^^ niles of road. 
 
 In 1378 , the Chicago and No rthVi’e stern Railv/ay Coiapany 
 
 operated the Nev/ Llaple River Railway in ’Western lov/a, fifty-nine 
 
 miles, and the Nenoninee River Railv/ay twenty-six miles in the 
 
 uoner Peninsula of Michigan, just v;est of G-reen Bay. This made the 
 
 28 
 
 total worked by the company 2,978 miles. 
 
 The Chicago, Milv/aukee and St. Paul Railroad, as is now 
 
 knovm, was a consolidation of the St. Paul and Chicago and the St. 
 
 00 
 
 Paul and Milwaukee, In 1374, it possessed 1,413 miles of com- 
 pleted road, situated in the follov/in;^ states, viz: in Wisconsin, 
 677 miles; in Minnesota, 351 miles; in Iowa, 337 miles; and in 
 Illinois, 47 miles. 
 
 The Milv^aukee and Portage Railroad was brought under con- 
 trol by the Chicago, Milv/aukee and St. Paul Railroad in 1878 
 through the purchase of lands owned by that corporation. A majo- 
 rity of the stocks and bonds of the Dubuque and Southwestern Rail- 
 road was also purchased. This latter purchase afforded the Chicago 
 Milwaukee and St. Paul Railroad a direct line from Milwaukee to 
 Cedar Rapids, Io¥^a via the Western Union, the Sabula, Ackley and 
 Dakota, and the Dubuque and Southwestern Railroads. All of these 
 roads were important in increasing the traffic of the Chicago, 
 
 30 
 
 Milwaukee and St. Paul Railway Company. 
 
 The Chicago, Milwaukee and St. Paul Railway had gained 
 
 27 . American Railroad Journal , 1872, p.l604. 
 
 28. Ibid^ , 1378, p.202. 
 
 29* Van Oss, American Railroads as Investments . p,463 
 
 30 . American Railroad Journal j 1878, p.546. 
 

17 
 
 acquisition of the Chicago, Clinton, Dubuque and Minnesota and 
 
 Wisconsin Valley Railroads and were formally transferred under their 
 
 control in 1880. These roads were operated as the Dubuque Division 
 
 31 
 
 and the Wisconsin Valley Railroad as the Wisconsin Valley Division. 
 The former ran from Clinton, Iowa, to La Crescent, Minnesota, a dis- 
 tance of 420 miles and the latter ran from Toma, Wisconsin, to Jenney 
 
 32 
 
 Wisconsin, a distance of 108 miles. 
 
 The Wabash, St. Louis and Pacific Railroad was a consolida- 
 tion of the Wabash and the St. Louis, Kansas City and Northern Rail- 
 road Companies. This company in 1376 controlled about 2,000 miles 
 of road which extended from Toledo, Detroit and Chicago in the east 
 to St. Louis, Kansas City and Omaha in the west. The lines of the 
 
 33 
 
 consolidated road v/ere as follov/s: 
 
 1 . Wabash Lines Miles 
 
 Toledo to East Louis 
 
 Chicago and Paducah 157 
 
 Chicago and Strawn 9b 
 
 Eel River 94 
 
 Decatur to Quincy and Hannibal 201 
 
 Other branches o8 
 
 Tota,l miles 104d 
 
 31. American Railroad Journal, 1880, p. 1,289. 
 
 32. Ibid. . 
 
 33. Ibid. . 
 
 1 880 , p . 1 , 038 . 
 1876, p.386. 
 
2. St. Louis, Kansas City and Northern Lines Miles 
 
 St. Louis and Kansas City 275 
 
 Moberly and Ottumwa 
 
 Brunsv/ick to Pattersburg 81 
 
 Pattersburg to Council Bluffs 146 
 
 Lexington Junction to St. Joseph 76 
 
 Quincy, Missouri and Pacific 192 
 
 Other branches 37 
 
 Total miles 848 
 
 Total length of lines. I896 miles. 
 
 The extension of the Eel River Railroad from Butter to 
 Detroit, and the acquisition of the Pekin and Southv/estern Rail- 
 road, would give the nev/ company a control of more than 2,000 miles 
 
 34 
 
 of road. 
 
 The Indianapolis, Peru and Chicago Railway v/as purchased 
 
 in 1881 by the Wabash, St. Louis and Pacific Railroad Company. It 
 
 extended from Indianapolis north to Michigan City, on Lake Michigan 
 
 crossing the main line at Peru, and the Logansport and Detroit line 
 
 35 
 
 at Denver, Indiana. The length of this road was 161 miles. Another 
 300 miles of road was thus added to the Wabash, St. Louis and 
 Pacific Railroad. 
 
 In I872, the Wisconsin Central Railroad had leased the 
 road of the Milwaukee, Lke Shore and Westei^n Railroad Company. This 
 
 34. American Railroad Journal , 1876, p. 1,263. 
 
 35. IL.1^, 
 
 1881 , p.997. 
 
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 company v/as a consolidation of the Milwaukee, Ifenitov^oc and G-reen 
 Bay, and the Appleton and New London Railroad companies. This 
 leased road extended from Appleton to Mianitowoc, thence to Milwau- 
 kee, and passed througli a densely settled country. This lease 
 completed the line of the Wisconsin Central Railroad from Lake 
 Superior to I\Iaiiitowoc on Lake Michigan where it connected by boat 
 across the lake v/ith railroads which ran directly to Detroit and 
 New York. It thus afforded the shortest line from Lake Superior. 
 
 It had also a short line from 1 /Ianitowoc through Sheboygan to Mil- 
 waukee, where it connected directly with the Chicago and Northwes- 
 tern to Chicago. This line from the termination of the Northern 
 Pacific to Chicago, was about 100 miles, and shorter than any other 
 route. The country through which this road passed comprised some 
 of the very best farming lands in the United States, The pine and 
 
 hard-vvood timber, and the iron property were not to be surpassed in 
 
 36 
 
 value by any other section in the country. 
 
 ( 4 ) New Construction in the Southwestern Group 
 
 The most important construction in this period was the 
 Atchison, Topeka and Santa Fe Railroad. The charter of this road 
 v/as granted in 1863. The route prescribed was from Atchison, on 
 the Missouri River, to the western boundary of Kansas, in the 
 direction of Santa Fe, New Mexico, a distance estimated at 500 miles, 
 The importance of this road was the fact that it formed a link in 
 the great line between the Atlantic and Pacific, passing through the 
 
 36. American Railroad Journal. 1872 , p.969. 
 
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20 
 
 most valuable and productive mining regions of Colorado and New 
 Mexico . 
 
 In consideration of the building of this road, Congress 
 endowed the company with a valuable land amounting to 6,400 acres 
 for every mile of road constructed, on condition, that the entire 
 
 railway should, be com.pleted within the ten years exniring in March, 
 
 37 
 
 1873* This clause nearly deprived the company of its land grant, 
 for the depression following in the wake of the v;a,r rendered cons- 
 truction an impossibility, and six years elapsed before a start was 
 
 38 
 
 made. In 1869, 28 miles v/ere constructed; in 1370, 54 miles. In 
 
 1871, the company had 106 miles in operation from Topeka to Florence, 
 
 and the v7ork from Florence to Nevjton on the south, a distance of 50 
 
 39 
 
 miles, was pushed rapidly to completion. The section between 
 Topeka and Atchison, was comnleted as late as Ivlay I 5 , 1872. A mea- 
 ger ten months remained before the expiration of the period stipu- 
 lated under the Land G-rant Act, and the company had built barely one- 
 fourth of its line; yet so energetically did its managers push work 
 forv7ard that the requisite miles vrere completed, v/ithin seven 
 
 months, the eastern boundarv of Colorado being reached December 28, 
 
 40 
 
 1872. 
 
 The line of the Atchison, Topeka, and Santa Fe Railroad was 
 extended to Pueblo, Colorado, in 1874. And. at the same time, the 
 local line, known as the Pueblo and Salt Lake Railroad, v/as rapidly 
 
 37 • 7an Oss, American Railroads as Investments. p ,558 
 
 38 . Ibid, , p. 553 . 
 
 39. American Raulroad Journal, 1871, p.713* 
 
 40, Van Oss, American Railroads as Investments , p.559. 
 
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21 
 
 built eastv/ard, to connect with the Atchison, Topeka and Santa Fe at 
 Grenada, the nresent terminus of the latter road. The section v;as to 
 a.fford a continuous line of ra'.lvray under one direction, from the 
 iViissouri River, at Atchison, to the foot of the Rocky Mountains. 
 
 The extensions of the Atchison, Topeka and Santa Fe Rail- 
 road were destined to open up a large section of country'", rich in 
 mineral and agricultural resources. The Pueblo and Arkansas River, 
 about 20 miles west of Ft. Lyon, and ran southwesterly via Trinidad 
 and the Raton passed to the south line of Colorado. This extension 
 was a distance of 95.5 miles. 
 
 The Nev/ Mexico and Southern Pacific Railroad started from 
 the north line of New Mexico, at the terminus of the Pueblo and Ar- 
 kansas Valle 3 / Railroad, Southern Division, and ran on the east side 
 of the Rocky Mountain range in a southv/esterl^'’ direction to Las Vegas, 
 118 miles, and thence to the Rio Grande River, a.t or near Albuquerquej 
 about 129.5 niiles. The whole extension in this direction v/as about 
 34 j 5 miles. The resources of this part of the country v;ere very great 
 They consisted in part of coal, timber, (from the Raton Mountains), 
 live stock, wool, hides, ore, and bullion, and as a further business 
 for the road there was a large amount of general traffic, such as 
 grain, machinery and the like. 
 
 The mining business at this time was quite limited, ov/ing 
 
 to the fact that ores had in many cases to be hauled hundreds of mile£ 
 
 42 
 
 by ox teams before thej’’ reached the railroad terminal. Thus it v/as 
 4 1 . American Railroad Journal . 
 
 42. Ibid 
 
 1374, p. 1 ,083. 
 1878, p. 874-75 
 

 
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22 
 
 difficult for the road to increase its traffic. However, the ad.vent 
 of the road made attempts to decrease the distance of hauling by ox 
 teams and to induce interested parties to open nev; mines. 
 
 ( 5 ) Nev/ Construction in the Pacific G-roup 
 
 The Northern Pacific Railroad v/as chartered by the Act of 
 Congress of July 2 , 1864. It received a land grant of 12,600 acres 
 
 for every mile constructed in states and twice that area for every 
 mile completed in territories. Construction begun in 1869, and the 
 section from Duluth, the extreme v/esterly end. of Lake Superior, to 
 Bismarck, on the Missouri River, to Tacoma, on Puget Sound, a dis- 
 
 43 
 
 tance of 1^5.5 miles, was completed in 1373. Tacoma, communica- 
 
 tion was extended a d.istance of 400 miles to the Columbia River by 
 means of the Oregon Steam Navigation Company. This afforded direct 
 means of communication and transportation betv/een the territories of 
 Idaho and Washington and the state of Oregon and the navigable waters 
 of the Pacific, Tacoma was the terminus of the Northern Pacific Rail 
 road. It was finely situated at Commencement Bay, an excellent harbo: 
 in Puget Sound, 
 
 In 1874 the company was una.ble to withstand the strain of 
 the financial crisis and defaulted on the interest of its bonds, as a 
 result of v/hich its affairs v/ere temporarily entrusted to the manage- 
 ment of a receiver, until the property was sold, in foreclosure in 
 I875 and. purchased by a new company, organised in the interest of the 
 bond and stock holders of the old. The completion of this road was 
 
 43 . American Railroad Journal , 1873, P.5C1 . 
 
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23 
 
 verj important. It was not only of great comraercial consequence nc. 
 the means of bringing into immediate connection ;vith the eastern 
 markets, an immense and verj valuable agricultural region, hitherto 
 unimproved; but it was of vast importance as a powerful lever to 
 aid the government in cont.rolling many thousands of Indians. 
 
 In 1880 the Northern Pacific Kailroad Company operated ?1d 
 miles of main track, divided as follows: Duluth to Brainerd, 115 
 miles; Brainerd to Fargo, I 38 miles; Fargo to Bismarck, 194 miles; 
 
 Bismarck to G-lendive River, I 03 miles; Brainers to St. Paul, 136 
 
 44 
 
 miles. 
 
 (C) The Period from I 88 O-I 89 O 
 
 The nev; construction from 1330-1390 consisted chiefly of 
 short lines. These were used to expand old systems or to create 
 new ones. More than sixty per cent of the new construction of the 
 ninth decade was instates lying v/est of the Mississippi River, Four 
 important new transcontinental lines leading from the Missouri or 
 states west of the lov/er Mississippi to the Pacific Coast v;ere 
 completed. 
 
 ( 1 ) New Consti-'uction in the Central G-roup 
 
 In 1832, the New York, Chicago and St. Louis Railroad was 
 completed. It closely paralleled the main line of the Lake Shore 
 along its entire system, -more than five hundred miles, from Buffa- 
 lo to Chicago. Soon after the road v;as finished a controlling 
 interest in the stock of the comnany was purchased by the Lake 
 
 45 
 
 Shore. 
 
 44. American Railroad Journal . 1880, p.843. 
 
 ( 
 
 45 . Ringwalt, Development of Transportation System in the U. S.,P34 
 

24 
 
 (2) Nevj Construction in the Southern G-roup 
 
 The Louisville and Nashville, durins the ninth decade, built 
 a number of extensions or branches in Kentucky, Alabama and Tennessee 
 In 1887 it had under construction an extension of the Bardstov/n 
 branch, 22 miles, the Indiana, Alabama and Texas branch, 57 miles, 
 and an extension from Corbin to Pineville, Kentucky, yO miles. When 
 completed, several hundred miles of ne\v road v/ere added to its system 
 
 ( 3 ) New Construction in the Northv/estern G-roup 
 
 The Chicago and Northwestern’s new Dakota line was completed 
 in 1883 . The extension was from Hawarden, lov/a, northwest to Iroquoi 
 Dakota, a distance of 12o miles. It completed a line extending from 
 the northern Iowa Division at Eagle G-rove, Iowa, \Yest to Harwarden 
 and thence northwest to the Dakota Central line at Iroquois, a dis- 
 tance of 283 miles in all. It did not only open a new country, but 
 
 also afforded the Dakota Central lines a new outlet east by way of 
 
 46 
 
 the Northeix- lov/a Division, 
 
 At the end of 1880, the Chicago and Northv/estern ovnied and 
 operated 2,513 miles. In 1338, it operated 4,101 miles of its roads 
 and controlled 1,339 miles of the Chicago, St. Paul, Minneapolis and 
 Omaha, 723 miles of the Fremont, Elkhorn and Missouri Valley, 77 
 miles of Wyoming Central, and IO 7 miles of Sioux City and Pacific, 
 the total owned a,nd controlled being 6,3^7 miles. 
 
 In 1381, a branch line of the Wabash, St. Louis and Pacific, 
 known as' the Chicago and >^i.i'awn road, v/as completed. The whole 
 length of this road was 92 miles. Its chief value v/as to give the 
 
 46 , Railroad Age G-azette, I883, p.596. 
 
f£T 
 
 t 
 
 
 
 
 ■i 
 
 I 
 
25 
 
 V/abasli through lines from Chicago as f ollov/s : To Burlington, Iov;a, 
 261 miles; to Kansas City, 513 miles; to Keokuk, 2?0 miles; and to 
 
 47 
 
 St. Louis, 286 miles. 
 
 In 1832, Council Bluffs' extension of trie Chicarjo, Hil- 
 
 v/aukee and. St. Paul was finished. Regular trains had nov/ begun to 
 
 run to Coon Rapids, Iov;a, ,175 miles from the beginning of the ex- 
 
 48 
 
 tension at Marion. In the same year, the tv/elve-mile extension of 
 the Hastings and Dakota Division from Frederick, Dakota, to Rllen- 
 dale, and the Stillwater branch from Hastings, Minnesota, eighteen 
 miles north to Lakeland, were completed. 
 
 The last rail on the new branch of the Chicago, Milwaukee 
 and St. Paul, from Cedar Rapids, lov/a, south by v/est through Sigour 
 ney to Ottumv/a, v/as laid in 1384. The new branch was ninty miles 
 long, and carried, the company into a section of Iowa south of any 
 heretofore reached by its lines, giving it access not only to 
 several large and important towns, but also to a country rich in 
 coal . 
 
 The length of the lines owned and operated in 1830, by the 
 Chicago, Milwaukee and St. Paul v;as 2,251 miles in Illinois, Wis- 
 consin, Iowa and Minnesota. The total number of miles at the end 
 of 1337, was 5 , 665 . A large peicentage of this increase of 5,418 
 miles consisted of new lines, located chiefly in txie group Ox 
 Northwestern states, but one important branch extended through 
 
 47 . Railroad Age G-azett.a , 
 
 i 
 
 48 . Ibid . , 
 
 1881 , p.48 
 
 1882, P.275 
 
J. 
 
49 
 
 L'lissouri, v;Iiile others v/ere in Wisconsin. The mileage of this 
 system v;as especially large in Wisconsin, Iowa, Minnesot"’. , and 
 Dakota . 
 
 In 1330, the length of lines operated by the Chicago, Bur- 
 lington and Quincy v/as 1,356 miles. The system was greatly expanded 
 during the ninth decade. In 1881 , it acquired the Burlington and 
 i-issouri Hiver Railroad in Nebraska and the Kansas City, St. Joseph 
 and Council Bluffs; in 1883 ike Kansas City and St. Joseph wa_. ■ 
 absorbed; in I 885 a traffic agreement was made with the Burlington 
 and Northern, vdiich company came under complete control in I 89 O, 
 through purchase of a majority of stock. At the end of 1389, its 
 system included 2,063 miles in Illinois, Iowa and Missouri and 2,736 
 
 miles of the Burlington and Missouri River Railroads in Nebraska. 
 
 e 
 
 These lines combined, rached Chicago on the east, St. Paul on the 
 north, St. Louis on the south, Cheyenne, Denver, and more v/estern 
 
 50 
 
 points in Colorado on the v;est. 
 
 (4) New Construction in the Southwestern G-roup 
 
 The Atchison, Topeka and Santa Fe’s Ifenhattan, Alma and 
 Burlington branch was finished in 1381, It extended from a Junction 
 with the main line at Burlington, Kansas, 76 miles southwest from 
 Atchison and 26 miles from Tooeka, then northwestv/ard 56.5 miles to 
 
 51 
 
 the Kansas Pacific at Manhattan. 
 
 One year later, this compaii 3 ?’’s Nev/ Mexico and Arizona line, 
 
 49 . Railroad Gazi - ttO r 1387, p. 1 ^ 2 . 
 
 3 ^ • Van Oss, American Railroads as Investments. p495-97 • 
 
 187-1 , p .49 
 
 51 . Riilroad Ar;e Gazette, 
 

27 
 
 whicli ran from Benson, Arizona, on the Southern Pacific, 1?^ miles 
 
 52 
 
 west of Demins, to G-uayraas on the G-ulf of California v/as completed. 
 
 The Kansas City and Emporia branch, which started from Emporia, 
 
 Kansas, on the main line eastward to Ottawa, southward a distance 
 
 53 
 
 of 53 miles v/as co.;iuleted in 1804. This branch, in connection 
 v/ith the Southern Kansas main line, completed an additional line 
 from Kansas City to Emporia, 114 miles long or some IJ miles short- 
 er than the present main line. 
 
 A branch from Jamez to Bernalillo v/as completed in 1385. 
 it was considered one of the most important new lines because of 
 the excellent territory it traversed. Besides opening up a large 
 area of grazing land, it opened up a mining region. . This branch 
 also skirted the wooded country lying upon the edge of the Rio 
 G-fande Valley and rendered accessible the valuable sup;!^ly of lum- 
 ber from that region. 
 
 In 1S79i iA. operated 1,167 miles of main line and bran- ■ 
 ches. In 1889 it ovmed 7,3^4 miles of railv/ay, distributed as 
 follows: Atchison system, Southern Kansas system, 935. 5^i 
 
 Sonora system, 35^.19; sundry lines owned entirely or controlled, 
 including the Chicago, Santa Fe and California, 493. 25 J Chicago, 
 Kansas and V^estern, 9^3.18; G-ulf Colorado and Santa Fe, California 
 Southern, California Central, and other roads, 2,974.83; Atlantic 
 angL Pacific, controlled jointly with the St. Louis and San Fran- 
 
 52. Railroad Age G-azette , 1882, p.414. 
 
 53. Ibid . , 1334, p.385* 
 

 
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 ■ ■'*^- jtai 
 
 
I cisco, 918.36. A large portion of the increased mileage v/as cons- 
 
 , tructed after 1880, It represented numerous extensions in Kansas, 
 
 leading on the v/est into Colorado and New Mexico, and thence thi'^ough 
 Arizona, by the Atlantic and Pacific, into Southern California, with 
 , a branch leading into northwestern Mexico, and a close connection 
 at El Paso with the Mexican Central, v/hile from eastern Kansas a 
 
 line(the G-ulf , Colorado, and. Santa Fe’) was constructed through the 
 
 I T 54 
 
 Indian Territory and Texas to G-alveston, Texas. 
 
 In 1382, the nev/ Omaha Extension of the Missouri Pacific 
 v/as completed. This extension started from Atchison, Kansas, and 
 ran by Hiawatha, Falls City, Nebraska, IXinbar, Sherid.an, Weeping 
 Water and Louisville to House Junction, 145 miles. From House Jun- 
 ction to Omaha, 17 miles, the Union Pacific track vms used, making 
 the distance from Atchison to Omaha 162 miles. By this route it was 
 
 209 miles from Kansas City to Omaha, and 492 miles from St. Louis 
 
 55 
 
 to Omaha . 
 
 By the lease of the Wabash, St, Louis and Pacific Road, 
 the Missouri Pacific added the 3»518 miles of road v/orked by that 
 company to the 5 >896 miles which it already controlled, making a 
 total of 9»414 miles of road under one management. The extent of 
 this system may be shown by the fact that it extended from Toledo on 
 _ the east to Omaha on the west, and from Toledo and Chicago on the 
 northto G-alveston and to Laredo on the Rio G-rande in the south, and 
 
 54 . Ringwalt , Development of Transportation System in the United 
 States , P.354. 
 
 pp . Railroad Age G-azette . 1882, p.3G'9* 
 

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 ■ -JJf.U »)? al t^te yS iicjif ,l>.o.y < ~ ^.lJn«BqoI<T»M ,/I«^j|oi;i. . 
 
to El Paso on the southwest. 
 
 Besides the length or lines of the Wabash, St, Louis and 
 
 Pacific, the Missouri Pacific in 1888 operated 7»043 miles of road 
 
 classified under the following heads: Missouri Pacific, 2,357 miles 
 
 St. Louis, Iron Mountain and Southern, 1,144; Fort Scott, Wichita 
 
 and Western, 306; Missouri, Kansas and Texas, 1,611; Central Branch 
 
 Union Pacific, 307; other lines, 403 miles. Aside from the main 
 
 lines of the system, the increase of mileage was largely through 
 
 57 
 
 construction after 1879 , 
 
 ( 5 ) New Construction in the Pacific Group 
 
 In 1881, the Denver and Rio Grande system was extended 450 
 miles to Durango, This extension traversed a rich valley, popu- 
 larly known as Animas Valley, where immense coal deposits were 
 found. The valley was also the natural southern outlet for the 
 rich mining district of San Juan County on the east and north, a 
 
 region covering an area equal in extent to the state of Massachu- 
 
 58 
 
 setts, and intersected by various mountain regions and many rivers. 
 In 1882, the Pueblo and San Juan Division was completed to 
 Silverton, Colorado, in the center of the San Juan mining region, 
 from which a large business had already reached the road. Silver- 
 ton was 45 miles northward from the old terminus at Durango, 375 
 miles from South Pueblo, and 495 miles from Denver. 
 
 In 1883» the Denver and Rio Grande completed a line 73^ 
 miles in length from Denver to Salt Lake. Of this section from 
 
 56 . Railroad Age Gazette . 1882, p.309. 
 
 57 . Kingwalt , Development of Transportation System in the United 
 
 States , P.357 
 
 58 . American Railroad Journal , 1883» P.51» 
 
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30 
 
 Salt Lake to the Colorado line, 272 miles was owned by the Denver 
 and Rio G-rande Western Company, a separate orsanization, but which 
 was entirely controlled by the Denver and Rio Grande* 
 
 In 1880, the length of lines operated by the Denver and 
 Rio Grande was 500 miles. By 1888, it had 1,68? miles. The West- 
 ern terminus of the Denver and Rio G-rande extension was at Ogden, 
 Utah, where a connection with the Central Pacific was made, and a 
 new through route from the Missouri River to Ogden was formed dur- 
 ing the ninth decade by this combination and a close connection on 
 the east with the Chicago, Burlington and Quincy system. 
 
 The entire length of the Northern Pacific Railroad between 
 
 Lake Superior and Puget Sound was completed in 1883- This main 
 
 59 
 
 line was 1,911 miles long. In the same year, the Palouse Branch 
 
 of the system was finished and opened for business as far as Colfax 
 
 Washington Territory, 89 miles eastward from the main line at 
 
 Palouse Junction, This branch passed through a section of eastern 
 
 Washington, which was growing rapidly in population. In 1886, the 
 
 Cascade Division, extending from Pasco Junction to Ellensburg, a 
 
 distance of I 30 miles, was completed, and in 1887, 95 miles of road 
 
 60 
 
 were built in Dakota extending from G-rand Forks to Pembina. 
 
 In 1880 the average number of miles it operated was 722, 
 
 - and in 1886 it was 2,718. In 1889i it had 2,170.4 miles of main 
 line and 1 , 091.1 miles of leased lines in operation. 
 
 59 . American Railroad Journal, I 883 , p.51* 
 
 60. Railroad Age Gazette , I 887 , p.725. 
 
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 41 
 
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31 
 
 The Southern Pacific during these years practically 
 completed a line of railroad from San Francisco to New Orleans, 
 
 The line between these two points--the waters of the Pacific and 
 the Gulf of Mexico, was designated by eastern men as the "Sunset 
 route". The entire length from San Francisco to New Orleans was 
 2,470 miles. The length within the boundaries of Arizona was over 
 400 miles. Since the building of the road, many towns and mining 
 camps had sprung up in the country adjacent; an army of traders 
 and speculators had filled the southern counties and the steadily 
 increasing volume of bullion which was finding its way out of the 
 country, was suggestive of the response other portions of the 
 territory would give to rail communication. Therefore, the com- 
 pletion of the Southern Pacific Railroad across Arizona marked a 
 new era in the history of the territory. Since the construction 
 of the Southern Pacific was so important to the economic develop- 
 ment of Arizona, it would be equally advantageous to the other 
 territories which it traversed. 
 
 In 1885, a consolidation of the southern Pacific with its 
 
 61 
 
 controlled lines and extensions east El Paso was completed. - 
 The consolidated line was composed of the following roads: The 
 Southern Pacific of California; Southern Pacific of Arizona; South- 
 ern Pacific of New Mexico; Galveston, Harrisburg and San Antonio; 
 Louisiana, Western Texas and New Orleans, and Morgan’s Louisiana 
 
 61. Railroad Age Gazette . 1885, P.160 
 
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32 
 
 and Texas Railway and Steamship lines. The lines were consolidated 
 
 under the name Southern Pacific Company, with headquarters at San 
 
 Francisco, California. It was divided into two divisions; all west 
 
 of El Paso would be known as the Pacific System, and all east there ■ 
 
 of as the Atlantic System. At the end of 1886 the mileage of its 
 
 Pacific System had climbed to 3,138.98» and its Atlantic System to 
 
 62 
 
 1»607,55, a total of 4,846.53. In March, 1889, the reported 
 length of its lines was 4,976,23. 
 
 The Union Pacific expanded its system during the ninth 
 decade partly by purchases or consolidations, and partly by cons- 
 tructing, The average length of lines operated by its system was 
 2 , 706.30 in 1880 and 4,518.13 in 1886. The reported mileage of its 
 system in May, I 889 , was 5 >134.3 miles, subdivided as follov/s: 
 
 Nebraska division, 8,933; Wyoming division, 687.2; Kansas division, 
 
 n 
 
 1,019,4; Salt L^ke and Western, 57-2; Mc^tana Union, 61; Utah 
 Central 285.5; Utah and Neveda, 37. 
 
 62 . Ringwalt, Development of Transportation System in the United 
 States , p. 357 . 
 
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33 
 
 CHAPTER III 
 
 Consolidation of Railways 
 
 (A) Causes of Consolidation 
 
 One of the causes of railway consolidation was seen 
 through out the whole business world. Railway corporations, like 
 other industrial concerns, found that where the large and strong 
 
 organization supplanted the small one, greater business might be 
 
 1 
 
 expected, expenses reduced, and profits increased. In compliance 
 with this economic principle, railway companies have striven for 
 wide expansion. Within limits of efficient control the larger they 
 are and the wider their territory, the safer and more reliable is 
 their business. 
 
 The second cause of railway consolidation was the aboli- 
 tion of excessive competition. Competition led to most of the evils 
 that befell American railways. It caused constant rate wars. There 
 were too many railroads, too many hostile interests; and it is quite 
 natural that reduction of their number was attempted. Whenever one 
 company begins underbidding another in the matter of rates, compe- 
 tition is extremely ruthless, and the consequences are disastrous 
 to both parties. If the competiton among them is to be restrained, 
 they must either co-operate or consolidate. If they cannot agree 
 upon, and work in accordance with business methods that will effec- 
 tually restrain fhe forces which lead to reckless competition, they 
 
 1 . Johnson and Van Metre, Principles of Railroad Transportation , 
 
 p . j)\6 . 
 
TIX 
 
 
 
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must consolidate under a single ownership. There is no other 
 alternative. The most notable instance of this sort was the conso- 
 lidation of the Galena and Chicago, and the Chicago and Milwaukee, 
 
 2 
 
 in the Chicago and Northwestern in I865, The fundamental purpose 
 of this consolidation was the elimination of competition. The New 
 Jersey Railroad, operating between Jersey City and New Brunswick, 
 was im competition with the Camden amboy. For the purpose of eli- 
 minating competition, the Jersey Railroad was taken over in 186? as 
 
 3 
 
 a constituent in the United Railroads of New Jersey, 
 
 The their cause of railway consolidation was the thirst 
 after power, which characterizes most railway managers. In order 
 to secure business, war was not only conducted openly by means of 
 competition, but it was also carried on secretly; and railroad 
 managers schemed one against the other with the object of obtaining 
 power. Every railroad manager was permeated with a desire to make 
 his system great, to oust his rivals; and this desire prompted his 
 every action. Consequently railroad presidents were always attack- 
 ing others and defending themselves. There was a constant struggle 
 not only for life, but also for supremacy. An instance of this 
 kind was found in the Gould's combination for the control of trans- 
 continental lines. In 1879» before this consolidation, Gould con- 
 trolled only the Union Pacific. Subsequently he practically owned 
 over twenty western lines. He held in his hands the destinies of 
 
 2. Robinson, M, H. The Holding; Corporation , pp, 15-^6, 
 
 3 . Cleveland and Powell, Railroad Finance, p.289» 
 

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35 
 
 the Union Pacific, Kansas Pacific, Wabash, St. Louis, Kansas City 
 and Northerr, Missouri Pacific, St, Joseph and Denver, Colorado 
 Central, Utah Southern, St, Louis and San Francisco Co., Paris and 
 Danville, Peoria, Pekin and Jacksonville, Chicago and Paducah, 
 Chicago and Strawn, Denver and South Park, Denver and Rio G-rande, 
 Hannibal and St. Joseph, Denver Pacific, Detroit and Eel River, and 
 others of minor importance. The primary cause of this combination 
 was evident. It was the decision to crush out all competition 
 against the Union Pacific, and to prevent the construction of other 
 lines to the Pacific Coast not controlled by himself. His tactics 
 were directed principally against the Boston syndicate which con- 
 trolled the Chicago, Burlington and Quincy, Burlington and Missouri 
 River in Nebraska, and Atchison, Topeka and Santa F4, and which was 
 pushing the latter rapidly to the Pacific Coast. The assumption of 
 control of the Denver and Rio G-rande was to prevent the Atchison, 
 Topeka and Santa F^ from entering Leadville and other important 
 Colorado mining points. Furthermore, G-ould permitted Vanderbilt 
 to gobble up the Erie and obtain control of the Canadian lines and 
 in return Vanderbilt aided Gould in getting control of all the 
 western roads east of California and the Pacific Coast. Gould 
 
 would give his business in the East to Vanderbilt, and Vanderbilt 
 
 4 
 
 was to give the western to Gould, Such was the method of a rail“ 
 road manager in ousting a rival. 
 
 4. American Railroad Journal. 1879» P*t»3l8 
 
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3b 
 
 The final cause of railroad consolidation was the law 
 
 enactment of 1866. After the difficulty experienced by the federal 
 
 government in obtaining continuous transportation of troops and 
 
 military supplies, Congress had passed a law which granted to every 
 
 railroad the right to carry persons and any property from any state 
 
 into another state, "and to connect with roads of other states so af 
 
 to form continuous lines to the nlace of destination" unham- 
 
 5 
 
 pered by state laws. This law had an undoubted influence in usher- 
 ing in the period of trunk line development. The immediate cause 
 
 was the increasing rivalry for through traffic between the Pennsyl- 
 
 6 
 
 vanla, the Erie, and the New York Central. In 1869, therefore, the 
 Columbus, Chicago and Indiana Central was leased by the Pittsburgh, 
 Cincinnati and St. Louis in the interest or the Pennsylvania, which 
 thereby gained control of a through line to St. Louis and Chicago. 
 In 1872 a second route to St. Louis was acquired through the lease 
 of the St. Louis, Vandalia, and Terre Haute by the Terre haute and 
 Indianapolis, in which the Pennsylvania had a half interest. In 
 1869» also, Cornelius Vanderbilt united the several lines connect- 
 ing Buffalo with Chicago in the Lake Shore and Michigan Southern 
 Railroad, and consolidated the New xork Central with the Hudson 
 River Railroad, thus establishing a through route from New York to 
 Chicago. The Erie, between 1868 and 1874, took over the Atlantic 
 and Great Western under various leases, thus extending its control 
 as far west as Dayton, out it did not get an independent entrance 
 
 5. Statute at Lar^e XIV . p.6b. 
 
 6. Cleveland and Powell, hallroad Finance , p.276. 
 
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7 
 
 Into Chicago until I 883 when t-he Chicago and Atlantic was opened. 
 
 While the movement had been inaugurated with a view to tacilita- 
 
 ting transportation, tne system thus created soon found a much 
 
 stronger motive to consolidation in tne suppression of competition 
 
 The consolidation 01 competing railroads, wnether parallel or 
 
 otnerwise, had gone on very rapidly. The New xork, New haven and 
 
 Hartford may be cited as a system which has been ouilt up through 
 
 8 
 
 the consolidation of lines many of virhich were natural competitors. 
 The New lork Central in I 885 found it necessary to get control of 
 tne West Shore as it was a direct competitor of the system; and 
 for the same reason, the Laice Shore, in 188? took over the New 
 York, Chicago, and St. Louis, which paralleled its line throughout 
 its entire length. 
 
 (B) Examples of Varieties of Consolidation 
 
 The consolidations have been brought about by various 
 ways. The most common form is tne merger, or tne absorption of 
 one or more corporations by another which retains its corporate 
 existence unchanged save through modifications ordered in tne en- 
 abling act. The typical example of this kind was the taking-over 
 in 1885, by the Galena and Chicago Union of the Mississippi and 
 Rock River Junction Railroad, The shares of these two companies 
 
 tf » 
 
 were blended into one capital stock in the name of the Chicago 
 
 9 
 
 and Galena Union. Another instance which may be cited is in 1880 
 
 7. Cleveland and Powell, Railroad Finance , p.277. 
 
 8. Ibid. , p.277 
 
 9. Ibid., p. 291 . 
 
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38 
 
 the Kansas Pacific and the Denver Pacific were merged in the Union 
 Pacific . 
 
 Another form of railroad consolidation was share -owner ship, 
 A railroad company may hold shares of another company either for 
 purposes of investment or to secure control of subsidiary properties • 
 Shares 'for control may be obtained in various ways. They may be 
 purchased upon the market or directly from individual share-holders, 
 or they may be taken over in accordance with a formal agreement 
 providing for the exchange of securities. Through the purchase of 
 
 the shares of the Alton and St. Louis, the Chicago and Alton finally 
 
 10 
 
 in 1867 gained full control of that company. In 1881 a contest for 
 the control of Philadelphia, Wilmington, and Baltimore was engaged 
 between the Baltimore and Ohio, and the Pennsylvania, but the 
 contest, at last, was won by the Pennsylvania at a cost of about 
 sixteen millions in cash. Part of this sum was subsequently made 
 up by means of a bond issue, and part through the sale of new 
 
 shares. When control is acquired by means of an exchange of shares, 
 
 1 1 
 
 an increase of capitalization is necessary. 
 
 Acquisition of control is simplified in cases where a largd 
 block of shares may be purchased from a single holder. The Richmonc . 
 and Danville acquired control of the Northwestern of Georgia in 188 
 T through a purchase of the majority interest held by the city of 
 Athens. In 1883, the Chicago, Burlington and Quincy obtained from 
 
 10. Cleveland and Powell, Railroad Finance . p.293« 
 
 1 1 . Ibid . , p .299 • 
 
f ttclrV cl *ihV[^Ci till -oiltlaA^^ st iniJl jirt^ 
 
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39 
 
 Jay G-ould a controlling interest in the Hannibal and St, Joseph; 
 and in 1889 a syndicate representing the Cleveland, Cincinnati, 
 
 Chicago and St. Louis purchased control of the Chesapeake, and Ohio 
 
 12 
 
 from Collis P. Huntington. 
 
 Owing to the popular opposition to actual consolidation, 
 which, has been active in such states as Texas and Minnesota, con- 
 solidation has taken place by means of lease. The period for which 
 a lease may run varies. The term may be for only a few years; it 
 may extend to the end of the corporate exestence of the lessee; or 
 it may be specifically without limit as to time. Some leases sti- 
 pulate that a fixed annual rental shall be paid, and others fix a 
 progressive rental, or make it proportionate to either gross or 
 net earnings of the leased line. An instance of this kind v/as the 
 
 lease of the Jeffersonville and Indianapolis Railroad including the 
 
 13 
 
 Madison Branch by the Pennsylvania Railroad Company in 1871; and 
 
 in 1879» by means of lease, the Indianapolis and Vincennes Railroad 
 
 14 
 
 was brought under the control of the Pennsylvania Railroad Company. 
 Some lines, such as the Philadelphia and Erie, the Harrisburg and 
 
 Lancester, were leased by the Pennsylvania Railroad Company with a 
 
 15 
 
 term of 999 years. 
 
 It is undeniable that long term leases are frequently 
 succeeded by mergers; the lessee thereby surrenders its corporate 
 identity, as in the case of the merger of the Beloit and Madison 
 
 12. Cleveland and Powell, Railroad Finance , p.298. 
 
 1 3 . American Railroad Journal , 1 87 1 > p . 8 1 8 . 
 
 14. Ibid . . 1879, P.25. 
 
 15. Cleveland and Powell, Railroad Finance . p.300 
 
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40 
 
 by the Chicago and Northwestern in 1871. In 1879 the Chicago, Mil- 
 waukee, and St. Paul came into possession of the entire share 
 capital of the Western Union Railroad, in which it had owned a 
 majority interest for ten years. Under the laws of Illinois it was 
 
 unable to take over the property by direct conveyance, it executed 
 
 16 
 
 a lease for a nominal consideration for a term of 999 years. 
 
 (C) Results 
 
 By the process of consolidation, the principal results 
 have been economy and a decrease of hostilities. It was apparent 
 that consolidation would effect great savings to railways. Hov; 
 different matters would be if a large number of small companies 
 continued to lead separate corporate existences instead of being 
 united into one homogeneous system. Could economy be effected? In 
 the matter of consolidation, instead of scores of main offices with 
 a corresponding number of sets of officials there is but one larger 
 it is true than any of the small companies would require, but con- 
 siderably cheaper than the total that would have been required by 
 numerous smaller companies. Furthermore, there must be an impor- 
 tant saving in the purchase of supplies; they are bought in large 
 quantities, and the large company can have its own coal mines, its 
 own workshops, and its own locomotive works, while it can maintain 
 permanent staffs of laborers and employees. All of this is im- 
 possible for small companies. 
 
 16. Cievelana ana Powell, Railroad Finance . p.3l6. 
 
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41 
 
 In the second place consolidation produces harmony. Rate 
 war between great systems is not a trifling matter. Hostilities 
 between the two great systems knovm as the Pennsylva,nia and Van- 
 derbilt lines naturally are far less frequent than they v;ere in the 
 
 days when over a hundred small lines occupied the places of the 
 
 17 
 
 present tv70 , 
 
 Consolidation, like every form of combination, by exclud- 
 ing competition, prevents discriminations. The elimination of the 
 power to compete eliminates the inducement to discriminate. When 
 a railroad controls all the traffic, there is no necessity for 
 granting rebates or preferential rates to the shippers. Consoli- 
 dation, therefore, tends to make rates Just and reasonable. 
 
 Greater facility in the v/orking of railroads is also one 
 of the results of consolidation* Formerly many a small railroad 
 had either too much rolling stock or not enough, and the result as 
 a rule was extravagant expenditure. As in matter of consolidation, 
 the condition is defferent. On a large railroad system business 
 varies according to seasons, divisions and periods; but staff and 
 rolling stock can always be profitably employed somewhere and the 
 strain sometimes placed upon special parts can be relieved without 
 extra expense or loss of business. Thus a waste of energy is pre- 
 vented, a better service maintained, and great savings are the 
 result. 
 
 17. Johnson and Van Metre, Principles of Railroad Transportation . 
 
 p.176. 
 
iTSU; 
 
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 • ■ * ** 
 
 ^iSS 
 
 '*i -■ 
 
 
42 
 
 CHAPTER IV 
 Railroad Capital 
 
 (A) Expansion of Capital and Methods of Financing 
 
 The mileage of the railroad system of the United States 
 at the end of 1870 was 5 » 000 ; the permanent investment was esti- 
 mated at less than |275>000,000, though it must be admitted that a 
 
 1 
 
 considerable portion of this was foreign capital. The expansion 
 of the railroad system during the eighth decade was 87»801.42 miles 
 the reported cost of the permanent investment of this property was 
 ■^5*425»722,559.64 which was represented by § 2 , 6 1 3 , 6 o 6 , 264 .45 of 
 
 ,200, 893. 
 
 capital stock, |2,390,915>401 .63 of funded debt, and 
 
 2 
 
 of unfunded debt. The increased mileage during the first five 
 years of the ninth decade was 40,759 miles, while the capital in- 
 vestment increased to ^2,804,381 ,537 » this increase consisting of 
 an increase of 57.1 per cent in capital stock, 58.2 per cent in 
 funded debt, and 56 per cent in other forms of indebtedness. In 
 the five years ending with I 89 O railroad mileage increased 39 » 670 
 miles, the capital Investment increased ^^2,446 , 236 ,846 , this in- 
 crease in investment consisted of an increase of 19.5 per cent in 
 capital stock, 31.6 per cent in funded debt, and 46.1 per cent in 
 other forms of indebtedness. 
 
 1 , Railroad G-azette . 1872, p.375* 
 
 2. Ringwalt, Development of Transportation System in the United, 
 
 States , p .241 , 
 

 i' 
 
 
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 r 
 
 5 
 
 VI OTMLAF.O 
 
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 1 
 
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 E< 
 
 
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43 
 
 The following statement shows the increase in share 
 
 capital, funded debt and unfunded debt of the railroads of United 
 
 3 
 
 States. from 1880-1890. 
 
 Year 
 
 I 
 
 Capital 
 1 stock. 
 
 $ 
 
 Stock 
 
 Increase. 
 
 $ 
 
 Per- 
 cent . 
 
 , Funded 
 debt. 
 
 $ 
 
 Funded 
 
 debt 
 
 Increase . 
 $ 
 
 Per- 
 cent . 
 
 1880 
 
 2, 708,673, 375 
 
 313,026,082 
 
 11.50 
 
 2, 530, 874,943 
 
 211, 385, 771 
 
 8. 35 
 
 1881 
 
 3, 177, 375, 179 
 
 468, 701,804 
 
 14. 70 
 
 2, 878,423, 606 
 
 347, 548, 663 
 
 12.10 
 
 1882 
 
 3, 511,035, 824 
 
 333,660,645 
 
 9.50 
 
 3, 235, 543, 323 
 
 357, 119, 717 
 
 11.10 
 
 ! 1883 
 
 3, 708,060, 583 
 
 197,024, 759 
 
 5. 30 
 
 3, 500, 879,914 
 
 265, 336, 591 
 
 7.60 
 
 1884 
 
 3, 762, 616, 686 
 
 54, 556, 103 
 
 1.45 
 
 3, 669, 115, 772 
 
 168, 235, 858 
 
 4.60 
 
 1885 
 
 3, 817,697, 832 
 
 55, 081, 146 
 
 1.44 
 
 3, 765, 727,066 
 
 96, 611, 294 
 
 2.60 
 
 : 1886 
 
 3,999, 508, 508 
 
 181,810,676 
 
 4.50 
 
 3, 882, 966, 330 
 
 117, 239, 264 
 
 3.00 
 
 : 1887 
 
 4, 191, 562,029 
 
 192,053, 521 
 
 4. 60 
 
 4, 186, 943, 116 
 
 303, 976, 786 
 
 7.30 
 
 ' 1888 
 
 4, 438, 411, 342 
 
 246,849, 313 
 
 5.60 
 
 4,624,035,023 
 
 437,091, 907 
 
 9.50 
 
 ’ 1889 
 
 4,495,099, 318 
 
 566,879,976 
 
 13.00 
 
 4, 828, 365, 771 
 
 204, 330, 748 | 
 
 4.20 
 
 1890 
 
 i L 
 
 4,640,239, 578 
 
 145,140, 260 
 
 3.10 
 
 5, 105, 902,025 
 
 277, 536, 254 : 
 
 5.40 
 
 Year 
 
 Unfunded debt. 
 
 Unfunded debt Per- 
 Increa.se. cent. 
 
 Total 
 Increase . 
 
 Per- 
 
 cent. 
 
 
 $ 
 
 $ 
 
 
 1880 
 
 162, 489, 939 
 
 5,608, 887 
 
 36.00 
 
 1881 
 
 222, 766, 267 
 
 60, 276, 328 
 
 27.00 
 
 1882 
 
 270, 170,972 
 
 47,404,695 
 
 17.50 
 
 1883 
 
 268, 925, 285 
 
 1, 245, 677 
 
 0.46 
 
 1884 
 
 244, 666, 596 
 
 24, 258,649 
 
 9.90 
 
 1885 
 
 259, 108, 281 
 
 14, 441, 685 
 
 5.60 
 
 , 1886 
 
 280, 673, 814 
 
 21, 565, 533 
 
 7.70 
 
 1887 
 
 294, 682,071 
 
 14,008, 257 
 
 4.75 
 
 1888 
 
 306, 952, 589 
 
 12,*270, 578 
 
 4.00 
 
 1889 
 
 357,477, 160 
 
 50,524,571 
 
 14.00 
 
 1890 
 
 376, 494, 297 
 
 19,017, 137 
 
 5.05 
 
 3. Poor's Manual of Railroads, 1890, pp. 12-13 
 
 $ 
 
 530, 
 
 020, 
 
 740 
 
 9. 
 
 .80 
 
 876, 
 
 526, 
 
 795 
 
 13, 
 
 99 
 
 738, 
 
 185, 
 
 057 
 
 10, 
 
 50 
 
 461, 
 
 115, 
 
 673 
 
 6. 
 
 .16 
 
 198, 
 
 533, 
 
 272 
 
 2, 
 
 55 
 
 166, 
 
 134, 
 
 125 
 
 2, 
 
 .12 
 
 320, 
 
 615, 
 
 473 
 
 3. 
 
 93 
 
 510, 
 
 038, 
 
 564 
 
 5, 
 
 88 
 
 606, 211, 738 I 6.48 
 
 311, 543, 295 | 3.21 
 
 441, 693,651 J 4.36 
 
P |<1 s«rU»»»l aiSi f.nfiTit .volwailo^ ■«iiTg 
 
 tc fi&BOlUftt syTt )o idBb bflB id^b. d«o>aot 
 
 ' P' ' 
 
 fcrA 
 
 ti . 
 
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 k 
 
 '■‘^s.na.ec ;a«' .^i't,--f.;-; iib.* j -i.t,i 80 . 6 a 
 '-■..?« ,VU k, » .•■^'■. ,* !‘;.5.jc6.; ^ 'sir. .2^-1 ,6jW‘.S 
 
 p.f'f f r •:• *,0 ■ * ‘‘ ' - ■ J ■ ■- V I 
 
 
 8 lifT ^ 
 
 --.v**? jiPdfi 
 
 . ? 0 -J I 
 
 J 
 
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 I 
 
 ^ O.T^ 
 
 .vUtaeifrdi, 
 
 44 
 
 '• 1 
 
 vee.^’ 
 
 ,? 1 i» • n 
 
 
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 vv'i .*'v:r 
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 tu »S80 .ojt,e 
 
 
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 > • 
 
 
 ^ i wo ,. 
 
 XV .r 
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 150; !•/ 
 
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 ' rdf",6^t,sR: ’ 
 
 ^ tvfil . 4*5 £ ;qtsV? - 
 
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 i. 
 
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 i i*i>t 
 
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 $4‘. , ^VS 'vl® ■ 
 
 
 
 
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 ■a*' .l 1 
 
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44 
 
 The means for the construction of the railroads of the 
 United States were originally supplied from sales of, or subscrip- 
 tions to, their shares and bonds, in pretty equal proportions. The 
 capital stock of American railroads are of two general classes. 
 Preferred stock and Common stock. Preferred stock is issued to 
 secure additional capital when the original shareholders are unable 
 to furnish the full amount of capital necessary to complete the 
 work of construction and equipment. It offers a special inducement 
 to investors. Although therb is no limit to the variety of prefer- 
 ments which may be offered, there may be said to be three general 
 classes, (1) preferment as to dividend; (2) preferment as to re- 
 turn of capital upon dissolution; and (3) preferment as to voting 
 
 4 
 
 power at shareholder’s meetings. To any or all of these classes 
 
 • 
 
 of shares there may be granted in addition, certain privileges as 
 to the conversion of shares into bonds, or as to the subscription 
 to additional issues of shares or convertible bonds at lower 
 prices than are available to outsiders. 
 
 Common stocks constitute by far the largest part of rail- 
 road capital of American railroad companies. Holders of common 
 stock are the "residual claimants" to the surplus income of the 
 corporation. Having no claim to a stipulated return, they receive 
 
 dividends only after all interest charges and dividends on pre- 
 
 5 
 
 f erred stocks have been met. 
 
 Besides capital stocks, various classes of bonds are issued 
 
 4, Cleveland and Powell, Railroad Finance , p.40, 
 
 5. Sakolski, A. M., American Railroad Economics , p.29. 
 
 ! 
 

 
 •-‘■'I 
 
 
 .t 
 
 i 
 
 F #/!4 lo filijjo'ili:^**! to nolrfotrt^aaoo iol enucriti ddT 
 
 I » ^ * ■ i " 
 
 'io ,lo aoX^a moit bellqquii ©law G©*^*<te b^^laV 
 
 * m 
 
 i 
 
 •iC: .onoi^toqofici Xiiiip# al ,eimo<f /»nA TCiarij .o^ anoi.^ 
 
 fOaseaXo la^a/tios owj lo •'ija al>#»OTj;ijar£ naoXtaiiA to :Cdo4a XiftJlciAO 
 
 oj fmi/aai 3i ^oo.t® l)®»nat#f£^ ,^oo^a itoaiffloO £>xxii 2(ooia 
 
 *■ iCr' 
 
 fldsiOii r>^ bntoiSXoxlo'iiiiiB Xmlaiio nariw Xa^X<iao^X>c^QX^iii»j^e 
 
 ’ ad^ oJaX«?B03 o.t yi'saaaaobiT X^xqjio to ^auo<fia XX«1 aiU x^«Jt.tnl;l oi 
 
 k * 
 
 ^sictooi/bfii Z&L^qe M a'lotlo Jl .^noi&qiiTpa ^riit aoXiJ'oin^axjoo^ to jiiow 
 to t£fv ari^ o^ (flffiXI on el €?xa<i»t rtsocvcf^XA .a*io^aavxtX o*f 
 
 . <j ■ 
 
 lOT«iTOS otf Oi |ilfi€ o<< .ha-rallo ocf doldw a^nofi 
 
 -•T oj ea JfWHt’ieloTtq (Sf) ;X^^j^XVIJb cX »» Jfidun.ata'iq (t) ineeh^Is 
 
 anXJ’ov 0,1 oe Jneanotajq (<.) ;noi^yx'oa9Xl» ao-if lAlXqao 
 
 tee«4TXo Ic Xle io oT .o3f;l*laaffi 9 ’•xoMofla'tijrfr 'A .^awoq 
 
 Bij EbSoXivl'iq aXB,j-roo ,ijci.T lfJ!>A n atf ©iwfj' «a«tBdc to' 
 
 ^ - ' «- 
 floX^<lX'’.OB€/i/a arCt oi ta -lo ,«JC>n..cj ojrri ao'xftfi . to nola'xevnoo exix 
 
 ’19’NroX J’A Eluio<f oXcfi4l*iavn^o to fiotj^rla to t»LrotJt XiiaoX^iJbljW otf 
 
 r’- t "* 
 
 I' “ * laAXiXt^o oX oXcTaXIsyo oodk oaiIX sabltci 
 
 -XX At l:o >l8»ax£l odj" xst «J^o.tXclpxto'o cXooX’e aotanoO / 
 
 noaaoo to ataf XoH .aeXfxaqar.o l>AO'iXXjrt aooXtOfliA to raJiqjeo i>aot 
 •15,1 to aaoortl 8x/X<nt/a ol "tt,^aii»XFXo Jj&iJbXaeV ate jjboX^ 
 •a^Xaoot I>ojBXuqiX« a o4 alifXj mi anlTwl . uoXMtoqtoo 
 
 I -••xtT■ no Gf)aeX)ivii> tns oosi^ilo ,lBota,Xc]rl XXa tolta vXtso oAnoJbXvXJb 
 
 • > 5 
 
 . lOE noe<f avari s^oosle £>at*iat 
 
 bouBtS ei* einorf lo aossajo auoltiv ,B<oo;r« Xa^figap aaJWeaS 
 
 .iXoap^ iwa wicoviXO 
 • ea.q ,:;.3,„F.:,no^ l.toiXXag ppo^lryf . M .A .'xiaXojfaa 
 
45 
 
 by railroad companies to secure capital. They are the mortgage bond?, 
 collateral trust bonds, convertible bonds, debenture bonds and in- 
 come bonds. The mortgage bond is an obligation secured by a lien 
 on some specific and tangible property. It usually bears a fixed 
 rate of interest and matures after a definite period. The mortgage 
 bonds are variously named as Prior Lien, First Mortgage, Second Mort- 
 gage, Third Mortgage etc. The difference between a first mortgage 
 and second mortgage is readily understood. The investors may be 
 misled through the names of bond Issues, Thus the Toledo, St. Louis 
 and Western Railroad had a 3.5 per cent Prior Lien Bond issue of 
 ^9,500,000 and a 4 per cent First Mortgage Bond issue of 16,5*^0,000. 
 The latter, " however, constitutes an inferior mortgage on the property 
 securing the Prior Lien Bonds. 
 
 Collateral Trust Bonds differ in one essential particular 
 from mortgage bonds. It is a mortgage secured, not by any real 
 property or franchise but by the deposit of stocks or bonds of other 
 companies with a designated trustee. The investment value of colla- 
 teral trust bonds depends, first, upon the intrinsic value of the 
 
 pledged securities, and secondly, upon the general credit and finan- 
 
 7 
 
 cial standing of the company pledging the security. In case the 
 bondholder fails to receive his Interest and principle, the trustee 
 is authorized to sell the securities pledged. The first use of the 
 collateral trust bond was by the Union Pacific, the proceeds of 
 
 6. Sakolski, A, M., American Railroad Economics , p.35. 
 
 7 . ^bid . , p .39. 
 

 
 
 
 j. 
 
 . ■■ . i v.-'fl 
 
 f;floo 9t(^ 9'i2 vorfT 9*ufi»B oJ B^laeqjKOQ. bt>crLllin x* 
 
 -ni f’xT.fi efc/to<f o»iv«tnd<fifc ,ai>ii6f< QjjSLi'iB^fjoU \^baoa Jairt^ LA'vJttllOi 
 
 i. 
 
 Q9ll « ^Cf t'S'iuoe® ttolite^Icfo ilb si fiao<f aaa^JiOiD ©rfT .al)nod‘ iJROi 
 tuxi'i e a«iile^ ^ / tisw* u si 6n^ ollioeqa ‘#aK>t *a' 
 
 «£kCO< 
 
 . -S^SJno® dsiT ,tol*v9^ 941tii*tBb r *wyt^ fica JeanaJfti lo ej 
 
 » ^ ^ 
 
 ,«a#^'XcK .la'tif toli^ e« t^aubltinr e»W5' 
 
 *v 
 
 A naov^a<f a^aa^a'S’ltZfc »rlT .0^0 aaaa^TLoM l>alrfT ,eji 
 dcf ^i0fi e*x<i-lB«vni acCT . &oqJ sicaibmr xllbR^’Ti ci.e££a<Moa Jtocoaa ^ 
 
 Rii/Ocf'^^S jObaXoT arl^ «i/xlT *-*uaci £trt«kf to o^ttisa 9(fS d^uo^utS boXcJ^ 
 
 
 ^o^e*i/£.ci iflo0 n*l*l ^rraa isq e Jb«ii nici’iiaW ^^ 
 
 .000 , 005, lo airseX l\fio6 aaaaJ^ol^ .reii'i ^ttoo 'tocj ♦ A / rti 000,00^* 
 
 a I,' 
 
 ;JT[aqo’r(i edS no 'toi'telcf iiii e'®»^wiX^enoo ,":e^fawptf, \*i 9 f^AL . 
 
 ^ . ■ ' V- 
 
 I -■ ' .Bt«nc >3 rfaXJ aaX'XJUo^^ 
 
 *xkXi/^>X^'L£«? laXX^nQBea sno nl aftnoff JB;rtX Jjsna^^'iXoO ’ 
 
 f?" l£«*x >fcf ^o« .ftatyoee oa*a^^*lo^n k aX ^I. .eJbnotf ®sjaa^0*i isool 
 
 ncMrf.ro !^o a6nocf *10 B:iQoSQ to XXao^ob Tjcf j-jud” ©olrfono^l 'lo 
 -alloa lo awlav iaeauXuov.^X orfT .aa.Teii'xX A rf*fXw ooJUiRQLOi 
 
 
 9tU lo ouLirr otLS noqjt/ ,cf>aa> 7 ob abno^ X<rit 
 
 hciB ^Xfteno Xe%ace 3 ©rii aoqu ,yX6noaaa tnk~ ,a»iiX'iiiuaa- bofiXe 
 "T 
 
 9di saAo nl .'^^Xnroea exlJ srrlabeXcr octr lo airibo^a X/f 
 
 
 oovBirti ruQ lOlq/cul'iCi Jluiis iTaaieXcti •Irf o^* eXXal, toAXoiibrsv 
 Ij 9iiS lo ea.jj Xaiil erfT »btt^9lq eold’iuroae edS Xlaa oS b^si'XOii&UB a. 
 •Jo aboaooncr oils noXatJ asiS \d qs^ brtod ^feinJ Xanro^AlXoc 
 
 ^ -Vi.. ^ 
 
 . goXJ^oo5_bAo^Bg_ 
 
 ■ «*>i 
 
 • H .A ,^iaXo]ClsS . 
 ■ et.q .. Mrfl 
 
 . a.- 4 
 
 
 
 
46 
 
 8 
 
 which were used to construct branch lines or extensions. 
 
 Convertible bonds are similar to other railroad bonds. 
 
 They are a direct obligation of the issuing company maturing in a 
 certain period of time and bearing a fixed rate of interest. The 
 holders, in addition, have the privilege of exchanging them for a 
 class of capital stock of the issuing company under prescribed 
 conditions and terms. 
 
 Debenture bonds issued by railroad companies are without 
 
 i 
 
 specific property pledged for their securites. The issuance of 
 
 A 
 
 these bonds is to depend upon the faith and general credit of the 
 company. Because of no definite pledge of property, debenture bond i 
 are issued and sold mainly by the richest and strongest of the 
 railroad companies. 
 
 Income bonds are generally known as "adjustment" bonds, 
 from the fact that they are generally created at reorganizations in 
 which a financial adjustment is accomplished by reduction in fixed 
 charges. Holders of second or junior lien bonds may then be per- 
 mitted to exchange their holdings for income bonds. Unlike other 
 classes of bonds, income bonds are based on the earnings of a 
 corporation. They have preference over stock, but the interest 
 does not have to be paid if it is not earned. These bonds, there- 
 fore, as a claimant of profits are in much the same way as pre- 
 ferred stocks, 
 
 (B) Relation to Costs 
 
 In an early portion of 1866 the American Railroad Journal 
 published the following estimate of the mileage and cost of the 
 
 8. Ripley, W. Z., Railroad glnance and Organization , p,145. 
 
8 _ ■ '1 , 
 
 VO e»niX /ioaintf ^oirt^enoo o4 bmui (iaap' dolttw^ 
 
 E? 
 
 .^boKxS •xaaso oj t^LHaia ♦'is •X*^l^'i«vatoO . •# . 
 
 * ni XfLSQCLO? an^iueei »jfJ lo noXJs^icfo •^os'ijti) s «is 
 
 sifT Ic o^6n l)«il s bas lo boiisii nlitf^co 
 
 /J lol aaii.t arlanarfox# lo ©£ioXivJt»T<| ail^ ovsft ,noXJXi>bff nj> ;e%*£Xoit- 
 , fcocfiioce-at? tsbiii; tn^^oo snXuatJ «<S^ lo JsoJi Is^Xqso lo 'aBsX&l 
 
 U/I . 
 
 .aa'Xd^ fiaf BrtOi^XJbfloo' 
 
 cfiiorLf^*t SOS 4 i©i/is^oo X^so'tXism bsiiaeX eXuio^ vx^ 4 riwrfsCl 
 
 -i. . ■ i ^ ■ •: . ■ *^ 
 
 lo soziiL-rstfl a/lT .a^X'H/?5«B "lisdi fol 'bdg.lMiXq SX1:lo»q( 
 
 
 to J-XX't?*io X^*jOii«»8'’l»n^ xi.ii«l''ori3. noq*/ Qbao<f 
 
 CsaorT oti/cr/tt^oiv tX^fqo'ics lo s^XiiXtsb on ^BO-oaOl .^eyeqfSQo 
 
 to tBO|^ioT«re fjnr tfa^jioX*! wf.t 'tf ^Xniivai ^*oe bans o'^i 
 
 ||4 ** P ' r 
 
 ; bxH>rtXi//t 
 
 : '*■ ’ / ' /j 
 
 ,<ibntxf •fneaJ^atfj'^bs" es ntrcojf XXXstonBg t is B*:aorf sao:mX 
 U cnoiJSi-brtfia'ioe*; Is bo^cono icXtoiaiiea bis iiMW" Soet ntJJ m<yA 
 
 bexlt til aoXJ^oubs*! ^cf bodeXXqeooos Bi^-neccfeuftbs XaXo<!4«ri s xfolffi 
 -"loq cKf nodj- aJhnocT noil loXiu/C. to bnocon to s-isMoHa rasaisxfo 
 ' 1 ;.£-J '0 sjainU ,ebnod ©moani.'iot eanlfiXort B3d£riaij|« oj boj^Xa 
 
 10 asnXd'ijp® Oi,x no bsascf ots abnotf omo'onl , alnod?, to aooabX#'] 
 
 i* -.< ’ ■ 
 
 •fit Xi«t ,ioo^a 'XOTO oonooetf^c^- ovfiff ^odT ; .noiXsTogrtooj 
 . . . T, ^ 'i^ 
 
 -O iOfL’ .ebnocf oaoijT .. ->wiaPo Xon «X Jl ll nlsq od oX^ovsd ton aoob^i 
 
 -s-iq £.,^ 03i£a onx rfown nX o-xs e X XI to rfnsciXaXtT a as- ,^o^' 
 
 • .BjtoOXs' fisna!^ 
 
 ' *J 
 
 aXaoO ot noxxsXsH‘'‘(a) 
 
 * ?« 
 
 -LwnqoL b^XXail ^isoi-xanA oxUj. od8f to noX^oq ^I'lse ns 
 
 
 ♦fit to ^«oo bris^ QgseXXa .edj to sXjBcixXes anX^oXXot adj twlsJpXdiii 
 
 ur; 
 
 5 ^f.q tnoX 
 
 bgs eoimi ijl bso-rIXsH .,S .W ,toXqj 
 
 I dij 
 
47 
 
 railways of the United States shortly after the close of the war. 
 
 Th6 total mileage at that period including projected or partly 
 
 finished lines was 51»234,87; completed lines, 35,316.40; the 
 
 total cost of road was | 1 , 388 , 555, 268 and the average cost per 
 
 9 
 
 mile was $38,998. By the end of 1869 the mileage operated in the 
 United States ha,d increased to 43,510.43 and the total cost of thei 
 railroads was estimated at about $2,212,412,719, and the average 
 cost per mile, $45,998.90. The total length of the railroads in 
 the United States at the end of 1880 was 92,147 miles. The aggre- 
 gate cost of these roads was $5,402,037,257, and the average cost 
 
 10 
 
 per mile was $59,709.35. 
 
 The total length of the railroads in the United States, 
 in I 89 O, was reported 163,420 miles against 92,149 miles in 1880, 
 43 , 510.43 miles for I 869 , and 35,318.49 for 1866, The cost of 
 the railroads of the country would average $61,942.45 to the mile, 
 the total for the 163,420 miles, being in round numbers, $10,122, 
 639 , 500 . The increase of the year over that for 1880 was $4,720, 
 598 , 643 , while that of 1880 over 1870 was $3,189,624,438; of the 
 total cost $ 4 , 640 , 239,578 was made up of share capital, and $5,10f, 
 902,025 of funded debt and $376,494,297 of other debt. The aver- 
 age cost per mile of all the roads was $61,942.45 against $59,709i 
 
 1 1 
 
 35 per mile in I 880 , $45,980.90 for I 869 and $38,998 for 1866. 
 
 11. Poor * s Manual of Railroads , I 89 I , P31 
 

 
 ij 
 
 E- 
 
 a;tt \o fmc.lt) pnj 'toJlit ^I^rio/iA te^iaU stii io/fivjarliai .1 
 
 m m 
 
 4 
 
 \Uzjtq %o ' b.to*tg yxihujota boli9q .fttW ^£,Sos •iiT 
 
 tiiJ jOA.;- tUc.TiX tm$^gc;mof^ *i5^ itafiiX Bsriftlxxil 
 
 '^i. 
 
 nsq j-?o» ' tj bus :i5i:,e22,J5et ,H. BJiK 5*o^x lo .iboo ii^cj 
 
 tnU Hi XaJ*T.«<To 97^10 ilsL la ,;j ^ .6^,8^$ eait oXlic 
 
 |r- • 
 
 io isoo 9iU1 Oil l«*iir( iQiii %atl 99^^^4&^o’^laty 
 
 i3^-x>va Lc/t i^rv.^f A,srs,^^‘ ,n?ooji qhv 
 
 ai ^^»i>o'iIiWai::^ ti^^l ii^oi a/fT '.Oo.a^©.^^ ♦©ilo ^aoo 
 
 •dT3B^ 'flT .a>rie vi>9 08CI lo *cia wdJ JC>«iJLBU eiU 
 
 Jcoo e^iyiovi tstU' £>cx »T§*^ t T<t^.‘^0^,c ^ aJbfQi eaacf^ ^o ,teoo ©cf«a 
 
 or ^ '' .' 
 
 *3a<r 
 
 ,20’.L:.jd ftOiJiclf iiaj> aiyuortlj. - &s£^->^q li^Saal ^b^oj & 
 
 1 4. 
 
 I al n»Lla ,t;«3 ^/ania^jti eail??. C*rt.t*ioQei euw ,OQ8f ni 
 
 IT ''■' * 
 
 l9 ieoo ©jtT . '581 'lal biU Icd6f lol oaXia C^»Of5,^^4^ ' 
 
 [, ©Tij* Oil fd| liX/jx-fB ^^xiiiooo ofLf ’to aX>«oari^ ^ 
 
 .crIo<^al^fl ^auot: oi ,^Xim OS^^.C^f od.r 'lol. Xa^ToJ-, ©ri^ 
 
 ea» a&et "lot JiidJ aero aeoit ad*? lo ©a£©-tonX ex^T .005,^68 
 
 adj :o l8^>, ?rw OTof aevo OSCr lo oXXi^ 
 
 tS- ♦lAiliqao •'X«4o lo qa aOfUs *evr 6T^,QC.S,Oi^d,>4 ,^oo X£lW'^ 
 
 -TevB edT 
 
 V 
 
 V 
 
 '■" 1^ 
 
 OUb 
 
 . tdol> n^Jo lo TCS , jftfeb fyatoj/l lo 2SQ.SOC5 
 
 " ' ?‘*.5K’,I0| «jw oi>eonL oi?j iCt lo aXXa -laq ;Taoo ea© ^ 
 
 i .d86f lot 8^?,Brf bna q86f tol ,OS8r oX eXla oaq ! 
 
 . . " v'l • j 
 
 
 S»- 
 
 
 rC7 ttOSf. :, fl4><QtXgiifi lo lnu . 
 
 Ml^- 
 
 dl 
 
 •' * 
 
 . • 
 
 .* ■ :. 
 
 I j 
 
48 
 
 The table shows the length of lines owned, share capital 
 
 fund'ed and other debts, and the average cost per mile from 1871- 
 12 
 
 1890. 
 
 Year 
 
 Length 
 of lines 
 owned. 
 Miles 
 
 Capital 
 
 stock. 
 
 $ 
 
 Funded debt. 
 
 Other 
 
 Debt 
 
 13 
 
 $ 
 
 Average 
 cost per 
 mile . 
 
 $ 
 
 1871 
 
 — 
 
 51, 445 
 
 2,664,627,645 
 
 1, 119, 915,389 
 
 
 59,726 
 
 1872 
 
 57, 323 
 
 1,647,844,113 
 
 1, 511, 578,944 
 
 
 55, 116 
 
 1873 
 
 70,361 
 
 1,947, 638, 584 
 
 1,836,904,450 
 
 
 57,134 
 
 1874 
 
 72,623 
 
 1,990,997,486 
 
 2, 230, 766, 108 
 
 
 60,425 
 
 1875 
 
 74,096 
 
 2, 198, 601, 281 
 
 2,459,607,349 
 
 
 62, 752 
 
 1876 
 
 76, 305 
 
 2, 248, 358, 375 
 
 2, 165, 141, 368 
 
 55, 092, 192 
 
 53, 558 
 
 1877 
 
 79, 208 
 
 2,313, 278, 598 
 
 2, 255, 318, 650 
 
 237, 604, 774 
 
 59,045 
 
 1878 
 
 80, 832 
 
 2, 292, 257, 877 
 
 2, 297, 790,916 
 
 182, 284, 556 ’ 
 
 56, 548 
 
 1879 
 
 84,393 
 
 2, 395,647,293 
 
 2,319,489,472 
 
 156, 881,052 
 
 57, 730 
 
 1880 
 
 92, 147 
 
 2,708,673, 375 
 
 2,530,874,943 
 
 162, 489, 939 
 
 58,949 
 
 1881 
 
 i03,593 
 
 3, 177, 375, 179 
 
 2, 878,423, 606 
 
 222, 766, 267 
 
 57, 730 
 
 1882 
 
 114,461 
 
 3, 511,035, 824 
 
 3, 235, 543, 323 
 
 270, 170,962 
 
 61, 342 
 
 1883 
 
 120, 552 
 
 3,708,060,583 
 
 3,500,879,914 
 
 268, 925, 285 
 
 61,800 
 
 1884 
 
 125, 152 
 
 3,762,616,686 
 
 3,669, 115, 772 
 
 844, 665, 596 
 
 61,400 
 
 1885 
 
 127, 729 
 
 3,817,697,832 
 
 3, 765, 727, 066 
 
 259, 108, 281 
 
 62,584 
 
 1886 
 
 133,606 
 
 3, 999, 508, 508 
 
 3, 882, 966, 330 
 
 280, 673,814 
 
 61,099 
 
 1887 
 
 147, 999 
 
 4, 191, 562,029 
 
 4,186,943, 116 
 
 294, 682,071 
 
 58, 603 
 
 1888 
 
 154, 276 
 
 4,438,411, 342 
 
 4, 624,035,023 
 
 306, 952, 589 
 
 60, 782 
 
 1889 
 
 160, 544 
 
 4, 495,099,318 
 
 4, 828, 365, 771 
 
 357, 477, 160 
 
 60,309 
 
 1890 
 
 163,420 
 
 . 4,640, 239,578 
 
 5, 105,902,025 
 
 276, 494, 297 
 
 61,942 
 
 12. EoorJ^ ivlanual of Railroads, 1889, 1891, pp. 4-5. 
 
 IS. No data can be obtained for the item on "other debt” beginning 
 from 1871-1875. 
 

 *: 
 
 ■ ' • . 
 
 r: " 
 
 tqjo •jTitt's acRiX U rtijiepX.arii /s«uslf sid'ai #(i 
 
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 %t--. • 
 
49 
 
 (C) Return to Capital 
 
 The earnings of the railroads of the state of Massachu- 
 setts in 1867, were 1 12, 927 P©r mile, those of New York 15,000 
 per mile and those of Pennsylvania, 12,600 per mile. The earn- 
 ings of the leading railroads in the West v/ere estimated at |l 0,000 
 to 1 16 , 000 per mile. The Pittsburg, Fort Wayne and Chicago earned 
 at the close of the fiscal year, | 15,464 per mile; the Chicago, 
 Burlington and Quincy, | 15, 2 18; the Cleveland, Painesville and 
 Ashtabula, ^|19,247; the Michigan Central, ^ 15,000 and the Chicago 
 and Alton, $14,000. It was, therefore safe to estimate the earn- 
 ings of the railroads of the Eastern, Middle, Western and Pacific 
 States at $10,000 per mile, which, for the 29,146 miles in opera- 
 tion, would give a total of $ 29 1 , 460 , 000 . The earnings of the 
 railroads in the Southern States were estimated at $ 5,000 per mile, 
 for 10,000 miles of road, or a total of $ 50 , 000 , 000 . The aggregat€ 
 earning for the whole country, consequently, would be about $340, 
 0u0,00o, 
 
 The ratio of gross earnings to cost for the whole coun- 
 try was equal to about 21 per cent; for the northern states, 23 
 per cent. The cost of the railroads of Massachusetts was $64,983, 
 771 . Their earnings were $18,279,102, a sum equalling 28.13 per 
 cent of their cost. The earnings of the railroads of New York wer( 
 $ 50 , 000,000 upon a cost of $170,000,000 or 29 per cent. Those of 
 the Pennsylvania railroads were $52,000,000, on a cost of $222, COO 
 000 or 23.7 per cent. 
 
" ' XclIqjBO (0) 
 
 0.^51 "to e^&d^B ttiS lo afrctriXlari «*rti >c. a^Xo'^jCft odT 
 oou.qU 3ir£0X wBti lo BBoitf laq ••low .TdSt ixi aiJi»8 
 
 -H'1410 «rfr .5Xia aodiSt . ,*iX/t«vXx8mi«<I *;o ©eoui Lai* ©Ilo'ioq 
 
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 m 
 
 tOBMoXati BiU ;oXim naq Ieoa‘X:t edtf lo eeolo edX Jj^J 
 
 ftna .fcaivXaveXU edx ;8t«5,c^^r ,t05cZx;P iicw aa^anlXauG; 
 
 os£;6fii0 'oilJ (X5o,^lf .XfciJdoO nj?3X4pi’/ #rfx ,4Rli«fBXxfcA 
 
 -iTXJsa erfX »X«fflXXa« oX ©lao ,q^w Yl .000, ^|| I)ftj3 
 
 
 oZOXoa^ otoXo<*9 lOXj^ill ,n'ie^&r;i ©dX ^o cft/oxCXj^ orU 'to a 3 di^ 
 -eriQqo nl 9©Xiffl dAf ,s>S ©dX ‘lOl .dpiifw ,«Xlff T&q OOO.Olfc 
 
 ■ -4 
 
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 I Ua -ra-j rWiel ,ru b»t«BStc9 *•<*» «3J«je'(ina/lJirt>e vtt at abeorUjri 
 Ja^o 135£ .000,00 ,0^1 7u XaXOi/ e 'lo /to .os/Xai OO^^Ot 'XOl 
 
 * /; ■ ■ P 
 
 ©o >XUGW ,^lJir9«p©8noo tXoifw ©dX 
 
 ■4v 
 
 ,goo,<x?o 
 
 ' i 
 
 K 
 
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 •* sTaoTC »«W to aXieax:;/, ad,-* to Baniniio odT .»*oo tloiu io M»0" 
 
 PI 
 
 '.Jo OKoifr . -ata aaq qg -to 00<J,000,'5Vf I to JoOo r nocfu 304, 000.ee* 
 9Ci ,S£lt to Jooo a no ,030,000,55® ot*» e6«o'U/jrt ■liiW!»I^enrt»?'»tii 
 
 f 
 
 . Xn©o Twq w V . {[ft ^ 10; top 
 
 v^.. •» 
 
50 
 
 The earnings of the railroads of the eastern states, in 
 
 1871 > including Nev/ England, Nev/ York, New Jersy, rennsylvania , 
 
 Delaware and Maryland, covering a mileage of 17,278 miles, were 
 
 "fl1,500 to the mile, or an aggregate of 1 197 ,897 ,000; of the v/est- 
 
 ern states, having a mileage of 28,388 miles, •'1^6,500 to the mile, 
 
 or an aggregate of t 184,522,000; of the southern states, having a 
 
 mileage of 13,421 miles, ^4,500 to tne mile or an aggregate of -^60, 
 
 394,500; of the states on the Pacific slope, having a mileage of 
 
 1,765 miles, |7,ooo to the mile, or an aggregate of $12,355,000. 
 
 The total earnings for the whole country were $454 ,969,Oou ; the 
 
 earnings, per mile, for the whole were $7,500. Of the earnings, 
 
 about two thirds were received for transportation of freight and 
 
 14 
 
 one third for the transportation of passengers. 
 
 The earnings of the railroads in the United States in 
 actual operation in 1861 were $130,000,000; and in 1871, $454,969, 
 000. The total increase from 1861 to 1871 was about $320,000,000, 
 Of $32,OuO,OCO annually. 
 
 In 1880 the total capital investment of the railroads of 
 the United States, measured by the amounts of their share capital, 
 funded and unfunded debts, was $5 , 108 , 24 1 , 906 . Their gross earn- 
 ings in that year equalled $615,401,931, or 12.4 per cent on capi- 
 tal investment, while net earnings amounted to $255, 193,437, being 
 4.9 per cent on capital invested. 
 
 14. Poor's Manual of Railroads , 1872-1873i p.28. 
 
1 
 
 0^ 
 
 --i 
 
 til n<idd’t£e 0tiJ ais»dtXi*»i IC ftac^n'trs^ • 
 
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 " I 
 
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 AiU /tr,t:nj BdltBS lo a salviuf , 0 d>fA,r& jrtd 
 
 ' *■ D ' ■ 
 
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 nl f. jtxv.r£ huJinU Hi *Xur 4 >i£'f^- ,.,-.f tP , 
 
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 ^ .iXXiiiwiaa OoO,(W,S:5| 'io 
 
 ■;- a5fiu»i^£i -? .7 to in^c ti^vnl 0881, nl ’ 
 
 9u 
 
 ,X:.u rA0 O'tartf ae*Di<j to t^smimu: £ra*xxr-^©xa .aoial'c Xo^lnli oii.i 
 
 88 wic. , f ‘ ^ , dot , 8 ^ » 4 jif ,ai<f©j!i 6 *ii>fTi^'ixu/ boM 
 
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 ,.!>*?AoynJt i#lX<jao nO leq 
 
 1 ^-' 
 
 ’‘^•a ,t" 6 t-S.? 8 f ,gi 57 o' ijpx&^ ^o m * -too^ .uttU 
 
 ^ - S. •• 1 ’ V- ^ 
 
 
 
51 
 
 In 1885 the total capital investment of the railroads of 
 the United States measured by the amounts of their share capital, 
 funded and unfunded debts, was ^7 >852 ,535, 179. Their gross earn- 
 ings in that year equalled 1772 , 568,833 or 9.9 per cent on capital 
 invested, while net earnings amounted to 1269,493,931 being 3.4 
 per cent on capital invested. In 1890 tne total investment was 
 110 , 122 , 635 , 900 , gross earnings were -^1,097,847,428, equal to 10.8 
 per cent on investment, and net earnings l34o,92l ,318, or 3.4 per 
 
 15 
 
 cent on capital. 
 
 15 . i'oor's Manual of Railroads , 
 
 1891, 
 
 p.5. 
 

 lo dil.^ lo ^a»a^«^vaj: iajxqao »dS 286< nl, „ % 
 
 \ 
 
 o»tBda 'itmU lo a;^niio«fi uitr \,6 l>aiiie 4 ?aoi ^XlxiU 
 
 oeoT3 r.?C5.2e6rTt a»w .a^oei' 5a5fj*rlmi bna -1 
 
 i‘. ^■- 
 
 XaJiq/o ao ^fltio tea «3.r f :i^ , 5d<> ,STV| t>^XlJUfpet xaa^ ^jaxU" (xFiUsnl 
 
 ♦ .£ Ijol^ Aj aa^irrtBe aXXriw ,f>a;rBftvaI 
 
 » 5 
 
 aiw .tflatE^eavjii ,;. oj ;5#^ooi«S^4«^Xq^B no •wx^l 
 
 6. Of o»f XeufW ,0^fr , I* a*i»if iOOQ,g^d,SS f .Ofi ’ 
 
 *i©q*^,C to rof<C t f i:€' ,. <34.^1 n^4-.'ruM9 li'wi 102 ,JnonJa9vai ao Jnoa ' 
 
 - ■ S" . 2f A ‘ 
 
 f . f :* ? * ^ ‘ . t^aXqao .flo aaoo , 
 
 0 -” M 
 
 ’ I i3 ^ 
 
 • 5.q , ^4<go ^JC J> H to e * to o'i .^r; 
 
52 
 
 The following statement shows the length of lines oper- 
 ated, gross and net earnings, and interest and dividend paid by all 
 
 1 6 
 
 the railroad companies of the United States from 1871-1890. 
 
 Year 
 
 Length 
 of line 
 oper- 
 ated 
 
 1 
 
 i 
 
 Miles 
 
 Gross 
 i traffic 
 earnings 
 
 $ 
 
 1 Net 
 traffic 
 earnings 
 
 .+1 
 
 Interest 
 
 ;paid 
 
 17 
 
 $ 
 
 Per- 
 
 'cent 
 
 1 
 
 1 
 
 1 
 
 1 
 
 Dividend 
 
 paid 
 
 $ 
 
 Per- 
 
 cent 
 
 1871 
 
 44614 
 
 403329208 
 
 141746404 
 
 
 
 56456681 
 
 39.80 
 
 1872 
 
 57323 
 
 465241055 
 
 165754393 
 
 
 
 64418157 
 
 38.80 
 
 1873 
 
 66237 
 
 526419935 
 
 183810562 
 
 
 
 67120709 
 
 36.60 
 
 1874 
 
 69273 
 
 520466016 
 
 189570958 
 
 
 
 67042942 
 
 35.40 
 
 1875 
 
 71759 
 
 b03065bOo 
 
 185506438 
 
 
 
 74294208 
 
 39.50 
 
 1876 
 
 73508 
 
 497257959 
 
 186452752 
 
 93559573 
 
 18.85 
 
 68039668 
 
 36.58 
 
 1877 
 
 74112 
 
 472909272 
 
 170976697 
 
 98820927 
 
 20.80 
 
 58556312 
 
 34.38 
 
 1878 
 
 78960 
 
 490103351 
 
 187575167 
 
 103160512 
 
 21.04 
 
 53629368 
 
 28. 60 
 
 1879 
 
 79009 
 
 525620577 
 
 216544999 
 
 112237515 
 
 21.14 
 
 61681478 
 
 28.50 
 
 1880 
 
 82146 
 
 613737610 
 
 255557555 
 
 107866328 
 
 17.45 
 
 77115371 
 
 30.20 
 
 1881 
 
 92971 
 
 701780982 
 
 272406789 
 
 128587302 
 
 18.29 
 
 93344.190 
 
 34.20 
 
 1882 
 
 104971 
 
 770209899 
 
 280316696 
 
 154295380 
 
 20.001102031434 
 
 36.40 
 
 1883 
 
 110414 
 
 829772924 
 
 293367285 
 
 173139064 
 
 20.851102052548 
 
 34.80 
 
 1884 
 
 115672 
 
 770684908 
 
 268064496 
 
 176694302 
 
 22.85 
 
 93244835 
 
 34.80 
 
 1885 
 
 123320 
 
 772568833 
 
 269493931 
 
 187426035 
 
 24.20 
 
 77672105 
 
 28.80 
 
 1886 
 
 125185 
 
 829940836 
 
 300603564 
 
 189036304: 
 
 22.85 
 
 81654138 
 
 27.20 
 
 1887 
 
 137028 
 
 940150702 
 
 334989119 1 
 
 203790352' 
 
 21.60 
 
 91573458 
 
 29.40 
 
 1888 
 
 145387 
 
 960256270 
 
 301631051 
 
 207124288; 
 
 21.60 
 
 80243041 
 
 26.60 
 
 1889 
 
 152745 
 
 1003736596 
 
 322284986 
 
 219877150 
 
 21.88 
 
 81264029 
 
 25 .25 
 
 1890 
 
 158037 
 
 1097847428 
 
 346921318 1 
 
 229101144 
 
 21.00 
 
 83863632 
 
 24.2 
 
 16.. Poor' 3 . Manual of. Railroads, 1889, 1891, pp.4-5 
 17. Mo data can be obtained for "interest" item beginning from 
 1871-1875. 
 
" f 
 
 Kaiiu 
 
 ■AW 
 
 
 ■ 
 
 •7^ 
 
 
 fiiDftdi IrfOrfi lQ9tf»i4ElB-Jia ^'VOiicl 
 
 “ ■ -j . - ''^jor^ ”■ i.. • 
 
 ! 
 
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 ^ijs /a Dlne-bmdirH Ir.i boa ta^«aoib \b4/ 
 
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 .1- 
 
 JllC« 
 
 bls^ 
 
 bit ' 
 
 '' = 9 
 
 •i. 
 
 it# 
 
 > t Itfll 
 
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 VI - 
 
 etOT? i .fJJioeJ 
 otnsi^’tinU 
 
 O^r^i-e '"''I^i_fflJi<|h1 ^t«^.'i|’'^ 
 
 
 
 I , 
 
 C -^.'r-.-u ,V'>tbIrb5 ^ 
 ,Ccr.^> i^vruv^ ' 
 04, \^'^ii‘OV.* 
 
 Cd.~3|«C?>f;*T I 
 
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 |mo-vac;T v:^-^ » v?.u.4V,5CTi i 9v^*^ ''9sVb j srm ^VV4i 
 
 •K. 1^#* i‘Sfe«2dS3 ! ico.gOtCjfb 
 
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 • I ■ 
 
 (» »> 
 
 . ve9^ : 
 
 
 ‘ 8V98b ■ 
 
 1 . 
 
 ' 9aw 
 
 
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 9V"*^ '9sVb 
 
 j srm 
 
 1 _ 
 
 K.,c } ..n..V,.-,. * ♦ 
 
 svaa^r 
 
 evyi^’ 
 ivet. 
 
 ■f^..-<; i^VbiaeiB ;aMv [ mcswilriii wefl 
 
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 ev6i 
 
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 ivif .-: j:i 'uyB^)C'U5lU’t''“^fv06s 
 
 or 3«:tiy©Tt bi.^2 ii<?ctsbvnx! 
 
 ov . • ■ bvb’^ceei I ^^hOL^ic ' 
 
 A'C .a-i IS, , 2C?C6iCA9^ 
 
 ii>- .Vi ?r.r: ; Gv^to'esci^'el 
 
 ■ .:i>v4>ac ,1^ .oejvv5^t2]cMsvbBngV%.d«2d8VW)r 
 
 bSffSVVttSB blbOil 
 
 : e09*-83cv'? ( sva-atj: J >Bisj 
 ’^■isBdagvv' losegsi 
 
 6sovi5r-,'va^‘' 
 
 vaaaM- 
 
 , -, .- ■ - T- .*•« , v.'W4 1 v%»'j !.« fv« L Cr»&WO^ ’bVSSt ( 
 
 . JLC: , I > 1- i ‘ si ; ta Ccl‘S f b ? j^8V«?<)X, 0^ 
 
 
 Juiafliged •iro-it^nb'* .jp^ 6«rjhi«o ed 'iiao "1 . ab’ 'o^. ,v^ 
 
 -4 ■’ ., , , ' [ 
 
 .ev8jr-bV8x l:; 
 
53 
 
 CHAPTER V 
 
 Development of Railways System and its Relation 
 to the General Economic Growth of the Country 
 
 One of tne characteristic features of the economic growtl 
 of countries is easy communication and cheap transportation. From 
 the very hesinning, tne prosperity of a nation has been measured 
 by the extent to which it has enjoyed the means of travel and in- 
 tercourse. In nearly every part of the world economic progress 
 has sprung up first along the seacoast and has been gradually 
 extended to the Interior, For lack of cheap transportation and 
 easy communication, the economic progress in the interior has been 
 very slow. 
 
 The coming of the locomotive opened a new era of economi ! 
 prosperity. Advancement in wealth has been more rapid within the 
 last hundred years than in any period of economic history. Com- 
 modities can be widely distributed and markets are open to every 
 one. Industries become national and commerce international. 
 
 There was never a railroad built in this country, said 
 
 Poor, where the people along its line did not make ten dollars 
 
 1 
 
 out of it, where its owners made one. In the first place, they 
 get their products transported for one dollar, where, before the 
 railroad was opened, they paid twenty. They get their products 
 moved by rail as far in one hour as they used to move them by 
 horses in twenty-four hours. Therefore there can be small econo- 
 
 1. Poor’s Manual of Kallroads, 1881, p.41 . 
 
i 
 
 V 5 J 3 T'IAH 0 
 
 0 
 
 iJni/oD lo tUvctyt^ ®Jawri^J>a £<rxox1«-& wW Ovt 
 
 W-it 
 
 , * . -V 
 
 , oXcc*apOi» oriJ 'io' a«»lw^Ael to bav 
 
 i20^‘ ,ttoU^Jroqaafi%i <5ebi;o nolJmohufljmog x«e® ti aBXTJfu/<>D"lo ^ 
 
 aB^ er/3 «oi.?jai ^ lo ^rio* ,saliio4a©<f T»»v 
 
 ^ “ 
 
 -ni ftrtf. lo chBBci erW he\oia^ a#^ ji ijdirlw o4^ \iS 
 
 fl«o%5o^q oi;at>flono M^ow \p S'l&ii x XL'l^a fa . ^ ' 
 
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 eifliXafc no» BUM jon Bx» »/txl bjX aiWi ertX 
 
 X*/u_ ,»o<iX(T X«iiX‘»aj at .•ao.pft^ npiiiio sxi •latiw ,jl lo rfue 
 edJ >.Kil«x ^leiXOib Pag aoX C«l^to^ana%x 
 
 ajoaxioao. aXPrij i*ai-' .- b;^ ,fio„,qo ••w’JSaoxajrs 
 
 .voo «J toeu x,ux ea>ni/ori aao^ixX -tax •« IXe<i xrf Bpvif 
 |-<.agg. 4,x«.-, »tf ‘.■we »-toX»iptfX. .«.u,orf Bosaoa 
 
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54 
 
 mic progress in any district without good roads, a phrase which, at 
 this day, means railways. The mining, manufacturing, and mechanical 
 developments, which form the vital essence of modern life, could not 
 exist in the absence of the iron rails of the present day. 
 
 The railroads of this country have an importance in the 
 
 economic development of its people possessed by those of no other 
 
 nation. They are, in fact, the markets to every portion of it. Wheajji, 
 
 which will bear transportation 2,500 miles over railroads, will not 
 
 bear transportation for more than one-tenth that distance over ordi* 
 
 nary highways. Wherever railroads are constructed, they give immedij|- 
 
 ately a high commercial value to the products of labor. The value 
 
 and the influence tney so generally exert is well Illustrated by the 
 
 2 
 
 follov/ing statement. 
 
 In I860, there were 30.626 miles of railroad in the United 
 States. At |?4,000 per mile of line, their earnings were | 153 »^ 75 »OC 
 or |4.90 per head. In 1870, there were 50,000 miles in operation, 
 the earnings of which, at .;^9,000 per mile, were |450, 000,000 or 
 1 11.75 head. In 1880, there were 93 » 000 miles in operation, the 
 earnings of v/hich, at 6,600 per mile, equalled !|6l3i800,000 or ^I2.f|0 
 per head. In 1890, there were 163 jOOO miles in operation, the earn- 
 ings of which, at $6,5oO per mile, equalled $ 1 , 059 » 5 t>u ,000 or |l3»75 
 per head. Such an Increase of earnings measures accurately the in- 
 crease of the wealth and commerce of the country due to development 
 of the railroad systems. In other words, without them the commerce 
 
 2. i'oor’s Manual of Railroads. 1870-71 » P.35J 1BbO-81, p.39. 
 
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55 
 
 wealth of the country could have had no existence. 
 
 Due to the development of railroad systems in this coun- 
 try, various forms of western agriculture were practically revolu- 
 tionized. It became possible to cultivate with profit a large 
 amount of wild and tenantless land that could not before be utili- 
 zed. 
 
 The most remarkable gains were on the Pacific Coast, and 
 the western, northwestern, and southwestern states. Various causes 
 helped to create this wonderful increase of wealth, and in some 
 localities it was only due in a slight degree to railway constru- 
 ction. But in many other sections the new railways were leading 
 causes of the great advance, 
 
 A positive advantage which all departments of agriculture 
 have derived from the development of railway systems lies in the 
 giving to the farmer the benefit of the best markets and the high- 
 est prices. We have already shown that this increased production, 
 or ratner its surplus, could not nave been carried to market with- 
 out the aid of railroads, more than two-thirds of the whole being 
 carried off by that means. Let us now reverse this statement. We 
 find, on the other hand, that railroads have stimulated and in- 
 creased production. 
 
 The influence of railroads on agriculture is most obvious 
 
 in the western and northwestern states. The following table, taken 
 
 from the United States census, shows the rapidity with which the 
 
 3 
 
 farming interest has been progressing; 
 
 3. Ringwalt, Development of Transportation System in the United 
 States , P.261, 
 
TV 
 
 VfX . 
 
 
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 oa x>>\il «v/ir{ I>Xifoo •i'xJ'aifoo arW' lo d^Jiaon 
 
 ‘ * fn'" 
 
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 1 
 
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 ”■' ■■ '*? • . St 
 
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 .4^ofi^94i^4e sixl4 oei^sY^T woo ti? toJ .jnaofii Jb 44 xcf llo 5eXa^o 
 
 ■ Q: 
 
 -al b£i& he4fiXiJ^4a «V£4 st»<nUJBn .f£dt ,I>no4 'ro44o aii4 no ,fcail 
 
 .noi4ojx6oi:q boeas so 
 
 si/ol7rfo 4a«o aX a'xi;iXiroI'i 3 £ ao Bfeao^XXJE-x lo aoaouXlni «rff 
 
 if3Xi54 , «>ACf snXwoIXol «ilT .aajc4e atta^BawiiJncia baa aio^aow d44 ttl 
 
 oc(4 xtoXxlr 44I» x4XbXqa*x ©4/ swoda ,ei/aa#o 894*46 i>«»4.\qU utU sfy'i' 
 
 Z , ' ‘.■^:r ■• 
 
 io^fiXahOTginq n.9hd a Ad Jae'ts^^xX ^'tXaraal ^ 
 
 ^ ^ s> 
 
 
 
 :s. 
 
 ©fU floX4iKti^ q^xT Ic w iooiqolftv^a ,4XWsoi«r:q 
 
 '-r.:rfBC 
 
 ■ i j^jr i m 
 
r 
 
 56 
 
 1870 
 
 1880 
 
 Total land in farms, acres 
 Improved land, acres 
 Total number farms 
 Farms under 100 acres 
 One hundred to 50 O acres 
 Five hundred to 1000 acres 
 One thousand acres and over 
 
 407,735,041 
 
 188,921,999 
 
 2,b59,985 
 
 2 , 075,338 
 
 565,054 
 
 15,873 
 
 3,720 
 
 536 , 091,835 
 
 284,771 ,042 
 4 , 008 , 907 
 2,208,374 
 1,695,983 
 
 75,972 
 
 28,578 
 
 Comparison of the product of some leading staples shows the 
 following: I 870 I 880 
 
 Wheat 
 
 Corn 
 
 Hay, tons 
 Tobacco, pounds 
 Butter, pounds 
 Cheese, pounds 
 
 287 , 745,626 
 
 760,944,549 
 
 27,316,048 
 
 262,735,341 
 
 514 , 092,683 
 
 27,772,489 
 
 459,483,137 
 1 , 754 , 591 ,676 
 35,205,712 
 472,061,157 
 777,250,287 
 
 53,492,153 
 
 If the effect on t»he western and northwestern states has been cor- 
 
 rectly stated, it is true also of those states which are not 
 included here. 
 
 There is another respect in which the influence of the 
 
 development of railroad systems is favora,ble to agriculture. The 
 
 influence on the value of farming lands is too striking not to have 
 
 been noticed by all observant persons. We have, moreover, some 
 
 remarkable instances of the specific effect of certain railroads. 
 
 We have, for example, the immediate effect produced on the lands of 
 
 Illinois by the Illinois Central Railroad. That company received 
 
 from the government a large amount of land at the time when the 
 
 government could not sell it az a dollar and aquarter per acre. 
 
 Since then the company has constructed its road and sold a large 
 
 4 
 
 part of those lands at an average of eleven dollars per acre. Not- 
 
 4. Ringwalt, Development of Transportation System in the United 
 States, P.I85. 
 

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57 
 
 “ 
 
 withstanding the rapid growth of population, the large part of this 
 advance is due to railroads. 
 
 If the effect of the railroad system has been so great on 
 the western states, it is still greater in those states which lie 
 beyond the Mississippi, They are still further from market, and 
 will be enriched in a large ratio by the facilities of transpor- 
 tation, Indeed, railroads are the only means by which the distant 
 parts of this country could have been commercially united, and thus 
 the railroad has become a mighty means of wealth, unity, and 
 stability. 
 
 For the creation of what is known as the factory system, 
 with its teeming industrial populations aggregated into busy urban 
 centers, the railways are certainly far more responsible than the 
 earlier modes of transport. Suffice it to say that as soon the 
 railways had allowed great quantities of raw material to be con- 
 veyed, at especially low rates, to particular districts; machinery 
 to be set up, also at lower cost than before; labor from the rural 
 districts to be brought in and concentrated in the same localities, 
 and the making of an efficient and less costly distribution of 
 commodities produced on a large scale under the economical condi- 
 tions--it was inevitable that factories should supplant home in- 
 dustries, that manufacturers should succeed small masters, and that 
 great towns should grow up in proportion as rural centers declined. 
 
 The towns and the industrial centers expanded farther 
 as rail transport afforded Increased facilities for the conveyance 
 of raw materials to works v/hich could be set up in any part of the 
 
 I 
 

 
 
 
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 to oiiJt ,iol.f«Xx/qt«i tcv xl^c^ LXcrirx 6riJ“ iiJbtiBi 
 
 .Bbxcnlltn. o^* ox/fi bX •ooovXji! 
 
 r: o& ii£.-^cf a«ri mo^eiii bronllR'i ^ Ic d'a^lta a.-lX ‘tl" 
 
 ®il iioXXiii* ^aoil,^ ftl XXi<X® sX ,cbX^£i noeXaev arlj? 
 
 '^. m * 
 
 liif uarf^i/l XXX*H «xa x*xfT , i<?qXftaX8aXJI erix fifiox 
 
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 to i20XXt/dXtX8XX> ^IXeoo eeal £rtn XtiaXoilta'iiB to 3 iiXaC« ^^X 
 
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 naiiXti!^: tahaaciXB t .ry^nao lai'ifBifhnJt %ax hUM anwoX ©rlT ® 
 
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 3 
 
 atiX to XT£c ina rt^ ^, jea a<? bjuon doXtw edaow oX ilaXiaXai aai t 
 
58 
 
 country, regardless of the once indispensable water power; and the 
 procuring of these raw materials not only greatly expanded nationa] 
 wealth but led to the opening up to industrial activity of many a 
 district previously isolated and undeveloped. 
 
 All things considered, railroads are the cheapest workers 
 of the country, and if the theory favored by all influential school 
 of political e&onomists that transportation is one of the most 
 important elements of production, is correct, they are, substan- 
 tially, leading producers of all classes of bulky mining, manu- 
 facturing and agricultural staples. 
 

 
 
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 l«jfr tT<T j'lowoq efrf-*iiMieifcai * 0^10 exist to eaeX&'u&s^’i 
 
 It* » 
 
 s4iioivJ5a i/t>i>T£cpcfi \clJa9i^ 'iLao ^oa mljel-zmiSM wje^ to* £fll'ti;ooTtj 
 
 D* . " 
 
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59 
 
 CHAPTER VI 
 Railroad Rates 
 
 (A) Movement of Rates 
 
 In order to trace the movement of rates through a 
 series of years, it was necessary to do something more than merely 
 compile a mass of figures. Differences in the nature of the traffic , 
 and in the conditions under which it is moved, make averages unre- 
 liable. Yet changes in average rates indicate to some extent the 
 movement of actual rates. Examining together the movement of aver- 
 age rates, and of some particular rates, we may approximate the 
 general course taken by actual changes. 
 
 During the quarter of a century following the close of 
 the Civil War there was a marked downward movement in freight rates 
 
 in this country. The decline of freight rates was far more than 
 
 1 
 
 passenger fares. Now let us treat all the railroads in the United 
 
 States as one system* , Freight rates on the average per ton per 
 
 mile were, in 1867, 1.92 cents; in 1870, 1,88 cents; in 1880, 1.23 
 
 2 
 
 cents and in 1890, 0.94 cents. These figures show that the average 
 freight rate in this country in the period from 1867 to 1890 
 declined fifty per cent. Traffic in this period, has not remained 
 of the same nature, so the accuracy of the conclusion drawn from 
 these figures is also weakened. The average earnings per ton per 
 
 1. Ripley, W. Z.., Railroad Rates and Regulation , p.429. 
 
 2. Noyes, W, C,, American Railroad Rates , p.l61. 
 

 
 
 
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 < «£iU sia* lit “i-ojfi .i:Q$Xs;st to «aiXo4l> oriT .%*xinpoo^BX/iJ 
 
 j . 
 
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 T»q DO^ »toq da^'iaTB oiU -no boJbt . .aa^oxe •no ca^B;J3^j 
 
 . .v; * • '-J 
 
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 S . -' ‘ -■' y 
 
 ©vtnox’^ a/v XBHX ifcxlB B«ii/aXt oeerfT .aXnoo >0.u ,(3<28r aX 8na aifno: 
 
 : ■ . ’I 
 
 i^bf t 661 »oit X^oX^©q ariit nX xk^m^o eltiS nJt dSttn XilsX«*tti 
 
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 •■•< Q i< 
 
 niTB-L^ r.oXBi/XcfToo to x^^auoon sti,i , a li >aa ©aia wlX to' 
 
 "i ♦ 'i 
 
 *t«C £T0J 't«rq e^fiXin-o© ©bb^vb ©rfT .i>*n©2{iiow o«Xb aX eso^Xt ©©©n^ 
 
 
 IB 
 
 ‘ ■■> 
 • Xi-. 
 
 -eXBil fraoTliB^ »..S .« ,teI<TXK. . A 
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 fBB3V-3r— raocwaoi 
 
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60 
 
 mile are manifestly determined by the nature of the traffic as well 
 as by the rate charged. Changes in receipts may result from chan- 
 ges in tariffs. Receipts per ton per mile may, of course, decline 
 when rates decline. But they may decline likewise if rates remain 
 unchanged. However, from our examination we noticed that there was 
 a most marked decline in freight rates in this country from 186? to 
 I890, The decline is graphically shov/n by a diagram on page 62 . 
 
 Let us now see what results can be obtained by noting 
 the movement of actual charges. New York and Chicago are the most 
 important commercial centers in this country. The rates betv/een 
 these cities are not only of importance in themselves, but they 
 form the basis for rates upon traffic moving between other points 
 and in other directions. First let us notice the movement of rates 
 upon classified traffic for a period of more than twenty years. 
 

 sr fifvt lo «ii^ t:<f fiwaJf oaa aXi. 
 
 ji.7a'&oo p'thU flJcrJteo»»i fii ,jb9s^i^s> a.ft'x oxi4 «*■; 
 
 enlloef' ,v ,'U?oc,Jlc ,xac; eXXjp «rx ^vmi oSqla^fi .allZiAj nX eo^ 
 t r nZfie!‘>'t Ti aniXcegb #i^ .oalXoajfe 'harfw^ 
 
 S'laoJ- ^«lUf £^0/jOil nC^ZJir»ifl‘4Krvft TajO «t»V«iroH . 
 
 ’ ^ ■ -^1^ s. 
 
 0.3 >oi^; t/O lZ 'C'lJoiiOO &iii.t u.' u'i an/XoeJS ieoia 6; 
 
 i*o fi, rrvT-’rfe ^rfaoiifqA^' ti biilXoa£i ailt^ 
 
 >^XJon ©<f i*9 3aii«* a«o wofl qi; 
 
 3g<S 4S 3‘is Oiji'oiiiC a^.oY wo’’ iruSoh 'to ^aotaov om ©rlZj 
 
 ''■* - ■ ..- \ 
 
 nooW'f^d ^ioXaix aiiT .vtJ’xiuoo ill •ttJliiao lelo'iarjcoo J^fowhtCKjail^ 
 
 . / < 
 
 ijaiil xu^J ,a9v£eaai©rfl crl t:rTrtAhio<mi lo tXffo e6i.lio aaoi^jj 
 
 sd:aloq 'tetfXo neowjad ^ivoa olTlji'W aoqti ar,T©-t *iol sleM sW oioll 
 lo Irtocovoir. oiiX oiSlj'oit ei; .yeTCiH .tu^ol^oo%kb 'lOtUo tU Jmnj 
 
 6'TOc lo £>-''i^aa » *xol olTiaTUJ • 5alllflaixp 
 
 * 
 
 o£ 
 
 Ef'-V 
 
from 
 
 b1 
 
 Rates on Classified Traffic from New York to Chicago 
 3 
 
 1865 - 1888 . 
 
 Classes 
 
 Date 
 
 
 (Rates 
 
 in cents 
 
 per 100 
 
 pounds . 
 
 ) 
 
 
 1 
 
 2 
 
 3 
 
 4 
 
 5 
 
 6 
 
 1865-Oct. 
 
 215 
 
 180 
 
 90 
 
 82 
 
 11 
 
 11 
 
 1 866-Mar . 
 
 188 
 
 160 
 
 127 
 
 82 
 
 1! 
 
 1? 
 
 1 867-No V. 
 
 202 
 
 170 
 
 138 
 
 86 
 
 11 
 
 11 
 
 1868-Sept . 
 
 188 
 
 160 
 
 127 
 
 82 
 
 11 
 
 It 
 
 -Dec . 
 
 202 
 
 170 
 
 138 
 
 86 
 
 n 
 
 11 
 
 1 869-Aug . 
 
 25 
 
 25 
 
 25 
 
 25 
 
 25 
 
 11 
 
 -Nov. 
 
 150 
 
 130 
 
 100 
 
 80 
 
 55 
 
 11 
 
 1870-^uly 
 
 50 
 
 50 
 
 50 
 
 45 
 
 25 
 
 40 
 
 -Dec . 
 
 180 
 
 150 
 
 120 
 
 80 
 
 60 
 
 It 
 
 187 1- June 
 
 100 
 
 90 
 
 70 
 
 55 
 
 45 
 
 It 
 
 -Dec . 
 
 125 
 
 30 
 
 30 
 
 30 
 
 24 
 
 It 
 
 1 87 2-Aug . 
 
 75 
 
 70 
 
 60 
 
 54 
 
 35 
 
 It 
 
 -Oct, 
 
 125 
 
 1 10 
 
 85 
 
 65 
 
 50 
 
 If 
 
 1873-Apr . 
 
 100 
 
 90 
 
 75 
 
 60 
 
 45 
 
 11 
 
 1874-Jan. 
 
 100 
 
 90 
 
 75 
 
 60 
 
 45 
 
 H 
 
 1 875-May 
 
 40 
 
 40 
 
 35 
 
 35 
 
 25 
 
 11 
 
 1876- Jan. 
 
 75 
 
 70 
 
 60 
 
 45 
 
 35 
 
 U 
 
 -July 
 
 15 
 
 15 
 
 15 
 
 10 
 
 10 
 
 ft II 
 
 1877-Ito. 
 
 75 
 
 75 
 
 60 
 
 45 
 
 35 
 
 11 
 
 1878-Feb. 
 
 75 
 
 60 
 
 50 
 
 40 
 
 H 
 
 11 
 
 1879 -Aug, 
 
 45 
 
 32 
 
 26 
 
 19 
 
 t! 
 
 11 
 
 1 88 1 -Nov . 
 
 60 
 
 50 
 
 40 
 
 28 
 
 11 
 
 11 
 
 1882-Jan 
 
 45 
 
 32 
 
 26 
 
 19 
 
 tl 
 
 11 
 
 -Nov. 
 
 75 
 
 60 
 
 45 
 
 35 
 
 n 
 
 11 
 
 1883- June 
 
 75 
 
 60 
 
 45 
 
 35 
 
 25 
 
 11 
 
 1 885- June 
 
 50 
 
 40 
 
 30 
 
 25 
 
 18 
 
 tl 
 
 -Nov, 
 
 75 
 
 60 
 
 45 
 
 35 
 
 If 
 
 25 
 
 1887 -Apr. 
 
 75 
 
 65 
 
 50 
 
 35 
 
 30 
 
 25 
 
 1 888 - Jan , 
 
 75 
 
 65 
 
 50 
 
 38.5 
 
 33 
 
 27.5 
 
 -Nov. 
 
 50 
 
 40 
 
 35 
 
 30 
 
 25 
 
 20 
 
 3. This table is abridged from Reports of Interstate Commerce 
 Commission for 1902, Appendix-, ra.rt 2. 
 

 k* 
 
 If 
 
 , f 
 
 M 
 
 . C 
 
 C # I 
 
 3’t«r>iao0 
 
 ■*. • ' t 
 
 ■- t‘" 
 
 4 ^ 
 
 4 * 
 
 9! 
 
 <3GX0 
 
 ; «./l 
 
 . -p 
 
 ’’•■ J 
 
 •' «o4t 
 
 • V 
 
 p>y 
 
 *tp 
 
 - f 
 
 
 w I 
 
 • Is. 
 
 '-.'it 
 
 •c • • 
 
 ’ 3 
 
 ^os 
 
 .ds 7 - 
 
 **. 
 
 ■ 
 
 es ’ 
 
 . ^ * O r. '. > 
 
 • . 1 ^ 
 
 
 I* ' 
 
 
 , -■ 
 
 ^ , 
 
 
 f* 
 
 Y-Lyv-‘ 5 '' ! 
 
 '■-. * 
 
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 * 
 
 OQ 
 
 
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 nr 
 
 
 .':• . 
 
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 . ■ •. A-s 7 ^;- 
 
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 • . - f 
 
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 . j ' 1 
 
 Jr 
 
 
 4 
 
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 tpf-' 
 
 » » 
 
 i 
 
 
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 . » 
 
 
 
 — 
 
 •. 1 
 
 Sni 
 
 rtr - ‘ 
 
 • , ■* 
 
 
 ’ ,0d 
 
 3' 
 
 
 
 
 ,4 
 
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 •'i fffOil ,r 
 
 to'i nt ! f — »f<el 
 
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 f- 
 
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 f 
 
 Ti 
 
 4 
 
 m 
 
 f 
 
 4 
 
 'n 
 
63 
 
 This table is of interest not only as shov/ing the course 
 
 of rates, but also indicating the effect of rate wars and periods 
 of depression. We can see clearly that it was due to lake com- 
 petition, that rates in the summer months were, as a rule, lower 
 
 than in the winter months. However this table is also somewhat 
 unreliable as a comparison sheet because of changes in classifi- 
 cation. rerhaps we shall obtain better results by comparing rates 
 between the same points upon several important commodities. 
 
 Rates on different commodities from New York to Chicago, 
 
 4 
 
 1867-1890, 
 
 
 Commodities 
 
 (Rates 
 
 in cents 
 Nails 
 
 per 
 
 100 pounds 
 Beer 
 
 .) 
 
 Date 
 
 Dry Goods 
 
 Tea L 
 
 . C ,L . C ,L . 
 
 L.C.L. 
 
 C.l. 
 
 1867-Nov, 
 
 202 
 
 202 
 
 86 
 
 86 
 
 127 
 
 138 
 
 1868 -Aug . 
 
 149 
 
 149 
 
 82 
 
 82 
 
 127 
 
 120 
 
 Oct . 
 
 70 
 
 70 
 
 50 
 
 50 
 
 127 
 
 55 
 
 1869-Reb. 
 
 45 
 
 45 
 
 45 
 
 45 
 
 45 
 
 45 
 
 July 
 
 188 
 
 188 
 
 82 
 
 82 
 
 127 
 
 127 
 
 Aug. 
 
 25 
 
 25 
 
 25 
 
 25 
 
 25 
 
 25 
 
 1870- July 
 
 50 
 
 50 
 
 45 
 
 45 
 
 50 
 
 50 
 
 187 1 -Sept , 
 
 30 
 
 30 
 
 30 
 
 30 
 
 30 
 
 30 
 
 Dec , 
 
 125 
 
 125 
 
 65 
 
 65 
 
 85 
 
 85 
 
 187 2 -Aug. 
 
 75 
 
 75 
 
 45 
 
 45 
 
 60 
 
 60 
 
 1873 -Apr. 
 
 100 
 
 100 
 
 60 
 
 60 
 
 75 
 
 75 
 
 Aug. 
 
 27 
 
 27 
 
 18 
 
 18 
 
 18 
 
 18 
 
 1874-Jan. 
 
 100 
 
 100 
 
 60 
 
 60 
 
 75 
 
 75 
 
 1875-Jan. 
 
 100 
 
 100 
 
 60 
 
 60 
 
 75 
 
 75 
 
 1876-Jan. 
 
 75 
 
 75 
 
 45 
 
 45 
 
 60 
 
 60 
 
 July 
 
 15 
 
 15 
 
 10 
 
 10 
 
 15 
 
 15 
 
 1877-Oct . 
 
 100 
 
 100 
 
 45 
 
 45 
 
 45 
 
 45 
 
 1878-Feb. 
 
 75 
 
 75 
 
 40 
 
 40 
 
 40 
 
 40 
 
 1881 -Aug, 
 
 45 
 
 45 
 
 19 
 
 19 
 
 19 
 
 19 
 
 1882-Jan . 
 
 45 
 
 45 
 
 19 
 
 19 
 
 19 
 
 19 
 
 Nov. 
 
 75 
 
 75 
 
 35 
 
 35 
 
 35 
 
 35 
 
 1883- June 
 
 75 
 
 75 
 
 35 
 
 35 
 
 35 
 
 35 
 
 1885-Jan. 
 
 50 
 
 50 
 
 25 
 
 25 
 
 25 
 
 25 
 
 Nov. 
 
 75 
 
 75 
 
 35 
 
 35 
 
 35 
 
 35 
 
 1886 -Aug, 
 
 75 
 
 75 
 
 35 
 
 35 
 
 35 
 
 35 
 
 1887 -Apr. 
 
 75 
 
 75 
 
 35 
 
 30 
 
 50 
 
 30 
 
 1888-Jan . 
 
 75 
 
 75 
 
 38.5 
 
 33 
 
 50 
 
 33 
 
 Nov. 
 
 50 
 
 50 
 
 30 
 
 25 
 
 35 
 
 25 
 
 Dec , 
 
 75 
 
 75 
 
 35. 
 
 30 
 
 50 
 
 30 
 
 4, This table is abridged from Reports of interstate Commerce 
 Commission for 19^2, Appendix G-. Part 2. 
 
rw J 
 
 I »s c i *»'. . • 
 
 
 i.rt :'I' 
 
 •'V 
 
 , o ‘ m l a 
 
 I eifi.t > . — UUif t1^ CU Hj ^ 
 
 o . n->( ■"'’i*tTitoo a.r*' ’ ! 
 
 \ 4 , 
 
 C, . Ta r!rfJ&ii'lC“ . 1| 
 
 ' '-’.T'. .1 ■; iPTMiYea rro'"*^ arnlo.t; -^tc-r *^y»- |j 
 
64 
 
 Rates from I'^ew York, N.Y. to Chicago, 111. 
 
 (In cents per loo pounds.) 
 
 L.C.L, C.L, 
 
 Class Rate Class Rate 
 
 Commodities 
 
 Acids, in iron drums, O.R, 
 
 Boots and shoes 
 
 Bags, cotton, grain, or 
 
 salt, in bales 
 
 Canned fish, fruits, and 
 
 vegetables 
 
 Coffee, in sacks 
 
 Drugs and liedicines 
 
 G-lass, window, 80 united 
 
 in. and under 
 
 G-roceries, N.O.S. 
 
 Hardware, N.O.S, 
 
 Leather 
 
 Macnines, sewing, K.D. 
 Paint, in oil in barrels 
 Paper, newspaper, in^. rolls 
 Soap, common 
 
 Carpeting, N.O.S., O.R.C. 
 Blankets, N.O.S., in 
 bales, 0. R, C. 
 
 Brass, wire, nails, bolts, 
 screv/s, and rivets 
 Chairs, K.D. 
 
 3 
 
 1 
 
 4 
 
 4 
 
 1 
 
 4 
 
 2 
 
 2 
 
 2 
 
 2 
 
 4 
 
 2 
 
 4 
 
 1 
 
 4 
 
 1 
 
 4 
 
 4 
 
 1 
 
 4 
 
 2 
 
 3 
 
 3 
 2 
 
 4 
 
 3 
 
 4 
 
 1 
 
 2 
 
 2 
 
 1886 
 
 1890 
 
 1885 
 
 1890 
 
 1885 
 
 1890 
 
 45 
 
 35 
 
 4 
 
 5 
 
 35 
 
 30 
 
 75 
 
 75 
 
 1 
 
 1 
 
 75 
 
 75 
 
 60 
 
 65 
 
 2 
 
 3 
 
 60 
 
 50 
 
 35 
 
 35 
 
 4 
 
 5 
 
 35 
 
 30 
 
 35 
 
 35 
 
 * 
 
 6 
 
 25 
 
 25 
 
 75 
 
 75 
 
 1 
 
 1 
 
 75 
 
 75 
 
 35 
 
 60 
 
 35 
 
 65 
 
 4 
 
 2 
 
 5 
 
 2 
 
 35 
 
 6u 
 
 30 
 
 65 
 
 60 
 
 50 
 
 2 
 
 3 
 
 60 
 
 50 
 
 60 
 
 50 
 
 2 
 
 4 
 
 60 
 
 35 
 
 60 
 
 65 
 
 2 
 
 4 
 
 50 
 
 35 
 
 35 
 
 35 
 
 4 
 
 5 
 
 35 
 
 30 
 
 60 
 
 50 
 
 4 
 
 5 
 
 35 
 
 30 
 
 35 
 
 35 
 
 4 
 
 5 
 
 35 
 
 30 
 
 75 
 
 75 
 
 1 
 
 1 
 
 75 
 
 75 
 
 75 
 
 75 
 
 1 
 
 1 
 
 75 
 
 75 
 
 60 
 
 65 
 
 2 
 
 4 
 
 60 
 
 35 
 
 75 
 
 65 
 
 T 
 
 4 
 
 75 
 
 35 
 
 fully equal to 
 
 that 
 
 indicat- 
 
 ed by the movement of ton-mile receipts. Like the preceding one, 
 these tables include only competitive rates. 
 
 5* Reports of Interstate Commerce Commission, 1890, P206, This 
 table only shows the movement of rates for a short period, bi 
 but it indicates a general reduction of rates on such com- 
 modities as cotton, salt, glass etc. 
 

 4 
 
 . 'I 
 
 I 
 
 * ,','ver 
 
 £f 
 
 .lT- 
 
 c r 
 
 . , ■ ' ■ i .'ll . , ■ A 
 
 t: .'l ibna aJ’o > 
 
 "H»> ,11'^v ‘ue ,Ly. 
 
 c. a l ad fil ' , 1 Lf. a 
 ■V-.' l>eu.'.- 0 
 
 . f. ft '•.r • / 
 
 ca-'T/: 
 
 tN-.tp ,1- :•>>, 
 
 ‘ 'nl;v 
 
 ■ . ' .ff|3 
 
 . . , , S & t'tODo'ii 
 
 . . .K , ©*trwb rrH/. 
 
 LSllJ Jf 
 
 fxl I* nl y^.^t j 
 
 ■ '-'n .-• ,-,’.i If 
 
 ; :>'!iE • 
 
 I • v< , 
 • • 
 
 « r. 
 
 (li a ticy'x £.»)■, 
 
 
 'r-f 
 
 , ^ I Lj it'L 
 
 - -- j I ^ a tt 
 ,. TtiiirlO 
 
 -‘ X £ii, .fi'il _oab * ?; ■ j.a ?;,. ’ll. 
 
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 •'i 
 
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 k Q‘-'‘ O'o / ' r^l lo 
 
 ■i J I.'-'.OiiQo 
 
 h r. 
 
 , ■’T ! A# 
 
 -i lixf 
 
t>5 
 
 Here are tables showing the movement of local freight rates 
 
 upon an eastern and a western railroad. 
 
 Local Freignt Rates upon Pennsylvania Railroad, 18 y 6-1890. 
 Stations from Classes (Rates in cents Per 100 pounds) . 
 
 New lork to 
 
 xear 
 
 1 
 
 2 
 
 3 
 
 4 
 
 5 
 
 6 
 
 Trenton, N.J, 
 
 1876 
 
 20 
 
 17 
 
 15 
 
 12 
 
 It 
 
 n 
 
 
 1886 
 
 17 
 
 17 
 
 14 
 
 12 
 
 II 
 
 If 
 
 
 1887 
 
 20 
 
 16 
 
 13 
 
 9 
 
 8 
 
 7 
 
 Harrisburg, Pa 
 
 1890 
 
 20 
 
 16 
 
 13 
 
 9 
 
 8 
 
 7 
 
 .1876 
 
 45 
 
 30 
 
 25 
 
 20 
 
 f! 
 
 1 
 
 If 
 
 
 1886 
 
 35 
 
 30 
 
 23 
 
 17 
 
 11 
 
 If 
 
 
 1887 
 
 33 
 
 28 
 
 22 
 
 17 
 
 15 
 
 12 
 
 
 1890 
 
 33 
 
 28 
 
 22 
 
 17 
 
 15 
 
 12 
 
 Pittsburgh, Pa 
 
 .1876 
 
 45 
 
 30 
 
 25 
 
 29 
 
 ft 
 
 It 
 
 
 1886 
 
 43 
 
 35 
 
 26 
 
 20 
 
 11 
 
 11 
 
 
 1887 
 
 45 
 
 39 
 
 30 
 
 21 
 
 18 
 
 15 
 
 
 1890 
 
 45 
 
 39 
 
 3u 
 
 21 
 
 18 
 
 15 
 
 Erie, Pa., 
 
 1876 
 
 40 
 
 35 
 
 30 
 
 25 
 
 T! 
 
 II 
 
 
 1886 
 
 43 
 
 35 
 
 26 
 
 20 
 
 H 
 
 11 
 
 
 1887 
 
 45 
 
 39 
 
 30 
 
 21 
 
 18 
 
 15 
 
 
 1890 
 
 45 
 
 39 
 
 30 
 
 21 
 
 18 
 
 15 
 
 Local Freight Rates 
 
 A 
 
 upon Chicago , Milwaukee 
 
 and 
 
 , St . Paul 
 
 Railroad, 
 
 1883-1890. 
 
 
 
 
 
 
 
 
 
 
 
 
 Distance 
 
 Stations 
 
 from 
 
 
 Glasses (Rates 
 
 in 
 
 c^nts 
 
 per 
 
 loo pounds 
 
 Miles 
 
 Chicago 
 
 to 
 
 xear 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 2 
 
 3 
 
 4 
 
 5 
 
 A 
 
 B 
 
 C 
 
 D 
 
 E 
 
 228 
 
 Marion, 
 
 la . , 
 
 1883 
 
 70 
 
 55 
 
 45 
 
 35 
 
 28 
 
 33 
 
 28 
 
 25 
 
 20 
 
 If 
 
 
 
 
 1887 
 
 60 
 
 50 
 
 37 
 
 25 
 
 20 
 
 25 
 
 20 
 
 16 
 
 13 
 
 11 
 
 
 
 
 1890 
 
 55 
 
 45 
 
 32 
 
 22 
 
 16 
 
 20 
 
 16 
 
 13 
 
 12 
 
 10 
 
 309 
 
 Melborne 
 
 , ia . 
 
 1883 
 
 75 
 
 60 
 
 45 
 
 35 
 
 30 
 
 35 
 
 30 
 
 25 
 
 20 
 
 II 
 
 
 
 
 1887 
 
 73 
 
 58 
 
 43 
 
 28 
 
 20 
 
 25 
 
 20 
 
 16 
 
 15 
 
 12 
 
 
 
 
 1890 
 
 62 
 
 52 
 
 37 
 
 25 
 
 19 
 
 24 
 
 19 
 
 16 
 
 14 
 
 12 
 
 487 
 
 Council 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Bluffs , 
 
 la . 
 
 1883 
 
 90 
 
 75 
 
 50 
 
 32 
 
 28 
 
 38 
 
 32 
 
 23 
 
 23 
 
 It 
 
 
 
 
 1887 
 
 90 
 
 75 
 
 52 
 
 35 
 
 30 
 
 33 
 
 30 
 
 23 
 
 26 
 
 16 
 
 
 
 
 1390 
 
 70 
 
 58 42 
 
 28 
 
 21 
 
 28 
 
 23 
 
 18 
 
 16 
 
 1 5 
 
 . The first table was Joint Merchandise Classification before 
 1887; Official Glassification after 887. The second table was 
 governed by "Western Classification . 
 
 6 
 
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 t Its S 4^0,80 0£<X .v6f f rtoiJaoitXaexjXO laXoinO ;T88f 
 
 . . ''?diX£0i!tX0B/XD ii'toJ’serff" £>0rt^dTu8 !jj| 
 
 
66 
 
 These two tables indicate that local rates have declined 
 less rapidly than competitive cnarges, and tnat decline in local 
 rates nave been more remarkable in tne western taan in the east- 
 ern states. 
 
 Now we can see that upon the basis oi ton-mile receipts 
 average rates declined fifty per cent from 186 ? to 1690; that the 
 particular competitive rates examined have declined to an equal 
 extent; and that local rates have d.ecreased to a limited extent. 
 Without going furtner into details, we may draw a conclusion that 
 rates on an average in I890 were less tnan half what they were 
 more than twenty years oefore. 
 
 (B) Development 01 Rate-making 
 
 When railroads were first projected in tne united States, 
 ihere was no definite oasis upon which to establish their tariffs. 
 Cost of maintenance and operation were of uncertain estimate and 
 the economic relations of tne transportation function were simple. 
 Some of the state legislatures, at the time of granting charters, 
 assumed that a railroad could furnish transportation at a lesser 
 price than the wagons along the turnpike and, therefore, arbitr- 
 arily decided that the freight charge should be a greater or less 
 proportion of that customary by wagon. In some parts of the 
 country the wagon toll was 20 cents per cubic foot for articles 
 light in weight, and per 100 pounds for articles heavy in 
 weight, per lOO miles. The charter granted by South Carolina, in 
 I827, to the South Carolina Railroad, serves as a good example. 
 
 The provisions as to the rates in the charter were that the frei- 
 
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 oiU lio ®d'XA<T »i(oa al .ua^iiw d*4d to no'id‘*xoqon<j 
 
 - a©£oidi.u iol dfool jXduo edriao OS XXoJ itOS 4 i ;9 aftd 
 
 nX \;vaoxl etXoid'xi 'xol ef?rtuc*q OOl naq f| Xjcib ,dit2jlai» nX dfl^IX 
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 r.'xld d»/id 0 trtd jti eadAi odd od a£ afloXaXvo't<i‘#ilX. 
 
67 
 
 ght charge should not exceed 10 cents per cubic foot for articles 
 
 light in weight, and 50 cents per 100 pounds for articles heavy 
 
 in weight, per 100 miles; this arbitrarily making the railway tolls 
 
 7 
 
 one-half the wagon tolls. 
 
 The practice of the wagoners to charge by the cubic 
 
 j| foot for articles light in weight and by the 100 pounds for arti- 
 
 j cles heavy in weight was followed by the railroads; but it quickly 
 
 i developed that it was not easy to assign certain articles to one 
 
 or another of these broad classes. This difficulty was increased 
 i by the fact that the railroads brought about an increase not only 
 
 ! in the volume but in the diversity of commodities offered for 
 
 1 transportation; things differed, not only in bulk and weight, but 
 in value, and the way in which they were packed. A more elaborate 
 grouping was obviously necessary. The initial steps of this 
 development, as it pertains to the railroads of the United States, 
 i are lost to record, but much progress was made within thirty years 
 I is manifest from a document issued by the South Carolina Railroad 
 
 j in 1855, copies of which are extant. At the top, four classes of 
 
 j articles are specified, the first including "hats, bonnets, saddles, 
 
 j furnitures, piano, tea, and other light articles," for which the 
 
 i charge was made per cubic foot, ranging from 4 cents for 7 miles 
 |i ^ to 10 cents for I 36 miles. As pianos and furniture are not exact- 
 
 I ly light in v/eight, they are probably placed in the first class 
 
 , because of their high value. 
 
 7. Mcpherson, L.G., 
 
 Railroad Freight Rates in relation to the 
 Industry and Commerce of the United States , 
 
 p . 148 . 
 
1 
 
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 lo aeeti«Xo ‘lijoi ,qo,y tcX XX* ,JazSx6 s^ne rioiriw lo,aeXqoo fli J 
 
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 eaXia f noTuiinQO tsont iiuXstiKi ,^bo1r ctduo n^<i bbem nxm ©s^cno 
 -^'■oaxa >toB aoa •itfXXa'tul XtftV eofsalq eii .c«XXa 8j|K( lol BXnao ot oX 
 
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 .^ufjiY d^td nletU Ic eBxrsomr 
 
68 
 
 The second class embraced ’’dry goods, shoes, glass, paint, 
 glassware, drugs, raisins, figs, dates, spirits, turpentine, 
 feathers, stoves, hollow ware, bows and shafts, pepper, spice, 
 ginger." For these articles the charge was per 100 pounds, rang- 
 ing from 25 cents for 25 miles to 50 cents for I36 miles. Here 
 again, the inclusion of feathers and stoves in the same class 
 implies that commercial as well as transportation conditions 
 received consideration. 
 
 The third class included "butter, peas, lard, rope, 
 tobacco, leather, dry hides, tin, copper, cast steel, machinery 
 in boxes, coils of wire, carriage springs and axles, rice, soap, 
 candles, oil v/heat, lead, wool, dressed marble, mahogany bed-steads 
 old furniture." The charge was applied per 100 pounds ranging from 
 18 cents for 25 miles to 40 cents for I36 miles. 
 
 The fourth class comprised "bacon, coffee, sugar, nails, 
 spikes, ice, steel, pig and bar iron, grind and mill stones, coal, 
 potash, iron railings, stone, hay, railroad wheels and axles, car 
 springs, copper ore etc." Here again the charge was applied per 
 100 pounds, ranging from I5 cents for 25 miles to 39 cents for I36 
 miles . 
 
 The development of the classifications and rate adjust- 
 ments outlined above is that which took place, generally speaking, 
 between the building of the first railroads and the development of 
 through traffic succeeding the Civil War. During the initial stepe 
 of this development, the practices of one railroad had no immediate 
 

 
 
 
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69 
 
 and direct effect upon those of another. Each railroad developed 
 
 its own individual classification applicable to local traffic. With 
 
 the growth of long distance traffic and of the need for through rate , 
 
 through routes and through way-bills, an expansion of classification 
 
 was needed. By 1886, in the East, there had come to be about 1,000 
 
 items. In the following year, the first Official Glassification 
 
 increased to 2,800 items. The same thing was true of the Western 
 
 Classification. The number of commodities classified by name had 
 
 3 
 
 increased to 1,658 items. In 1890, the Official Classification 
 
 9 
 
 included 5»747 items, and the Western, 3 , 859 , and the Southern, ^ ,851 
 Making the classification is a part of making the charge, 
 as we know from the very beginning of the railway enterprises. A 
 classification by itself is of no use. Grouping commodities into 
 defferent classes serves no purpose except to prepare a basis for 
 the application of charges. Making the classification is merely 
 the first step in rate making, and the second is the determination 
 of what the charges per hundred weight shall be for each class of 
 goods. Therefore, every company must prepare a large number of 
 "Class tariffs and "commodity tariffs," 
 
 Class tariffs based upon classifications as distinguished 
 from tariffs upon specific commodities, are of two kinds-Local and 
 Joint. Local class tariffs are issued by an individual railway com- 
 pany for the rates upon the different classes of traffic between 
 stations upon the same road. Joint class tariffs are issued by the 
 
 8 . Ripley, W.Z., Railroad Rates and Regulations . p.3C9. 
 
 9. Dewsnup, E.R., Freip^ht Classification , p.3 
 
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 ■■ 7 S ; 
 
70 
 
 
 agreement of two or more connecting lines and give the rates 
 ^ between stations upon different roads. 
 
 Commodity tariffs contain the charges upon specific 
 
 11 
 
 :• commodities. They are entirely outside the classification, each 
 : railroad company reserves the right to give certain articles com- 
 
 ; modity rates which as a general rule apply to heavy or bulky com- 
 
 I modities, such as grain, lumber, coal, iron, fertilizers, live 
 stock, and oil, 
 
 ! Commodity rates are usually lower than would be the case 
 
 II under class rates. This is due to a variety of reasons. Compe- 
 tition with water routes may necessitate consessions in charges. 
 This is especially so in the case of transcontinental traffic. 
 Railroads desire to promote the interests of manufactures within 
 their territory and commodity rates enable such manufactures to 
 reach out into nev/ markets. Commodity rates may also be granted 
 
 1 to enable a new industry along the line of the railroad to estab- 
 
 11 
 
 I lish itself in competition with established industries elsewhere, 
 jl. Rates in this country are not, in form, upon a mileage 
 
 basis. They are seldom so in fact. In making tariffs, the deter- 
 mining factor^s differ from those governing the making of classi- 
 fications. The classifications govern the relation of charges; 
 
 ' the tariff, the specific charge. Rate”making in this country has 
 '| presented many difficult and complex problems. In the first place 
 
 ■ the country possesses a wide variety of geographic, social and 
 
 I economic conditions which have influenced materially the evolution 
 
 Johnson and Van Metre, ir'rinciples of Railroad Transportatioi u. 
 
 PP. 333-34. 
 
 L 
 
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 Jt v:- W: 
 
71 
 
 of rate structures. Secondly, the dissimilar conditions prevailing 
 in the eastern, v/estern trans-Mississippi and southern sections of 
 the country have brought into existence in all of these sections 
 peculiar rate systems, and lastly the effect of international com- 
 petition on foreign trade has made the creation of a system of rates 
 
 for export and import traffic different from the rates applying to 
 
 12 
 
 domestic traffic. In a word, owing to the physical and commercial 
 conditions, different railroads within the same classification must 
 make very different rates for similar services and prevent them 
 from making the same charge for the same haulage. 
 
 The freie;:ht-rate system of the Trunk Line Territory 
 demonstrates certain principles in railway economics. Here the 
 traffic has been the most dense and at the same time the most diver- 
 sified; and here competition, industrial and transportational , has 
 been the keenest. It is in this territory, that the best thought 
 has been directed to a solution of the problems of operation and 
 traffic, A uniform classification and schedule of rates were for- 
 mulated by the Joint Esecutive Committee, who, as early as 1879, 
 
 13 
 
 began to enter this enormously difficult task. It was here that 
 the application of a practical distance basis was completely made. 
 The system was that railway charges should be proportioned to the 
 length of haul. The rates on the east-and-west bound traffic of 
 this territory are based on the rates of the shortest route between 
 
 12. Johnson and Van Metre, Principles of Railroad Transportation , 
 
 p.354. 
 
 13 . Raper, C.L,, Railway Transportation , p.232. 
 
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72 
 
 New York and Chicago; and all the through rates have, with some 
 comparatively slight exceptions, been percentages of this basal 
 rate, the percentage being roughly the ratio which the distance 
 
 between any two points in question bears to the distance between 
 
 14 
 
 Nev/ York and Chicago . 
 
 The structure of rate-making in the Southern Territory 
 
 is known as the basing-point system. The origin of this system is 
 
 due to certain natural features of soutnern territory. The first 
 
 15 
 
 of these is its scattered and relatively thin settlement. Density 
 of population varies between one-third and one-fourth of that in 
 the northern states. This greatly limits the volume of local busi- 
 ness. In the second place, agriculture, especially the cultivation 
 of cotton, has been the absorbing enterprise of the southern states 
 The business is largely seasonal in character; and the profits of 
 the carriers, in the early days, had to be made between September 
 and January, This concentration of interest in the movement of the 
 cotton crop has been changed as it was being supplanted by a gen- 
 eral movement of traffic. But the rate system in force is an out- 
 growth of the conditions prevalent in tne early days. The wide- 
 spread existence of water competition is another complication in 
 the rate-making of the southern states. Its entire territory is 
 threaded with a series of more or less navigable watercourses which 
 penetrate from the seaboard or the Mississippi River, far into the 
 interior. There was active competition between the railv/ays and 
 
 14, Ripley, W.Z,, Railroad Rates and Regulation , p.36o. 
 
 13 . ^bid . . p. 384 . 
 
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73 
 
 the waterv;ays for the tranaportation of the products that were 
 collected in these interior centers. In order to secure a portion 
 of the traffic the railroads were forced to meet the rates of the 
 water lines at competitive points, while at non-competitive points, 
 they were able to charge higher rates. 
 
 The principle of the basing-point system is this; ’’Cer- 
 tain cities are established as basing points, and rates to all 
 other places in that neighborhood are made by adding to the through 
 rate into the basing point, the local from that city to the final 
 destination. Since local rates in the South, based upon slender 
 local traffic, are always exceedingljr high, this appears to confer 
 a very great advantage in the matter of charges on the cities thus 
 favored." This system of rates is most certainly not one of abso- 
 lute justice and fairness to all places. From this point of view, 
 it cannot stand comparison with the distance principle. As it is 
 applied more and more the "basing -point" rate system in the south 
 will no longer be needed. 
 
 In the region west of Lake Michigan and of the Mississi- 
 ppi River south of Wisconsin a third general system of railway 
 charges has oeen established. It is a system or differentials basec 
 upon the rates from Nev/ York to Chicago and St. Louis. This system 
 was created because of the rivalry of Chicago and St. Louis as dis- 
 tributing centers for the trade of rhe Mississippi Valley and the 
 central west. Thus it has a marked effect on the rate structure in 
 this region. On the traffic which moved westward from the two cen- 
 
 15 . Ripley, W.Z., Railroad Rates and Regulation , p.384. 
 
I 
 
 
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74 
 
 ters, St. Louis and Chicago, to the Missouri River cities, the 
 railroads iixed such rates as would enable products moving from or 
 through either of tnese centers to be marketed in the Missouri 
 River towns at practically equal prices. Such a system of rates 
 made it possible for the Missouri River cities, Chicago and St. 
 Louis, to compete as market centers for the commodities of a vast 
 territory to the west and south of them. 
 
 The rates applying to the transcontinental lines has been 
 in many ways like fnat in tne territory of the Southern Classifi- 
 cation. Their traific has been strongly influenced by the compe- 
 tition of water carriers, as it could move westward by way of tne 
 Istnumus of ranama and around South America; likewise for the east* 
 ward traffic. To meet this water competition, fhe transcontinenta; 
 
 railways have been compelled to make low through rates in order to 
 
 16 
 
 enable them to secure a portion of the business. Secondly, most 
 
 of the transcontinental lines, except the Southern Pacific with iti 
 
 eastern terminus at New Orleans, nave had a special interest in 
 
 ouilding up botn manufacturing and jobbing business at fheir east- 
 
 17 
 
 ern terminals at Chicago or Missouri River points. Such a policy 
 enabled them to secure the whole traffic for tne transportation^bf 
 commodities to the Pacific coast, without tne necessity of a pro- 
 rating division, as when goods are hauled from the Atlantic sea- 
 board cities. The situation as such resolved itself into a compe- 
 tition of markets, Chicago, St. Louis, and St, Paul v/ere pitted 
 against New fork, Philadelphia , and other Atlantic cities in ri- 
 
 16, ' Johnson, Principles of Railroad Transportation . p,360. 
 
 17. Ripley, W.Z., Railroad Rates and Rep;ulatlon , p.397. 
 
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75 
 
 valry lor tiie trade of tne Pacific coast, in order to benefit the 
 cities in which tney had a peculiar interest, the all-rail lines 
 have made a rate system with the following features: (1) Blanket 
 rates are given for botn class and commodity shipments, on the 
 westward haul from most points east of the Mississippi River to the 
 racific coast. As a consequence, every city east of the Mississipp., 
 for some years, has been obliged to ship goods to San irancisco at 
 the same rate which is paid from Boston and New York, which may be 
 more than a thousand miles farther away. (2) On the traffic which 
 moved v/estward to Intermediate points in the Rocky Mountains, the 
 railv/ays fixed a charge higher than the through rates, the higher 
 charge being fixed by the addition to the through rate of either 
 fixed amounts or the local rates back from the Pacific terminals. 
 
 The defence of the railways for this situation was that the lov/ 
 
 18 
 
 through rates were compelled by water competition. 
 
 On many commodities imported into, and exported from 
 the United States, the railway charges between seaports and inter- 
 ior markets are less than the charges on the same commodities 
 shipped on domestic trade. The outcome of this situation was due 
 to the keen competition among the railway carriers, the lo¥/ chargej 
 of ocean transportation and the trade rivalry of seaports. 
 
 (C) Pooling and Rate-making 
 
 The railway business in the United States, as in 
 Ureat Britain, was for a number of years, regarded as entirely 
 
 18. Ripley, W.Z, Railroad Rates and Rep;ulatlon, p4uu. 
 
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76 
 
 ordinary. It was assumed to be, like any other branch of business 
 enterprise, a thing which competition could efficiently regulate. 
 
 It was thought by the public that railway charges could be reduced 
 by the force of competition. The assumption that competition re- 
 gulates charges does not hold good with respect to direct railroad 
 competition. As we saw in examining its underlying principles, a 
 railroad represents a permanent investment. Competition may force 
 dov/n rates, and the road go into bankruptcy, but it does not cease 
 operation. Its ownership may change hands through foreclosures, 
 but the struggle for business goes on. The deeper a railroad is 
 involved the more vigorously will it endeavor to obtain traffic 
 and the lower will it cut rates. Unrestrained competition among 
 
 railroads instead of acting as a regulator of rates often produces 
 
 1 
 
 rate wars, discriminations, and insc^vency. 
 
 Such being the nature of competition in railway affairs , 
 some means for regulating its action are necessary if the service 
 of railroad transportation is to be performed with profit to the 
 companies having it in charge and in .accordance with the best 
 interests of the public. With these points in view, competition 
 among railroads must be stopped. But they cannot stop unless by 
 common consent. Thus agreements to maintain rates among railroad 
 carriers come into existence and serve as an alternative for com- 
 petition. During the early seventies these agreements were com- 
 mon and were entered into openly. They were generally executed by 
 the general freight agents of the competing roads. These agree- 
 ments in many cases worked well because rates were maintained and 
 
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77 
 
 disastrous competition avoided. But on the other hand, many were 
 failed. They failed because there was too much inducements to 
 break them, and no authority to enforce them. They were wholly 
 based upon confidence, ^"^hen they believed that other roads were 
 making concessions to secure traffic, they made concessions them- 
 selves. An agreement which each party fails to live up to is of ter 
 worse than no agreement. Its result is to substitute secre^t com- 
 petition for that Y/hich is open, and the former is worse than the 
 latter . 
 
 If agreements to maintain rates could be made enforceable , 
 many of the difficulties attending them would be obviated. But 
 the difficulty with all rate agreements, whether enforceable or un- 
 enforceable, is that they do not remove the incentive to competi- 
 tion. The railroad officials soon recognized this in the case of 
 the early rate agreements. They saw that the railway, in order to 
 avoid the effect of railway competition, was to remove the induce- 
 ment to compete. With this object in view, they resorted to pool- 
 ing. 
 
 A railroad pool, as defined by Noyes, is an agreement 
 between competing railroads to apportion competing business. More 
 precisely, it is an agreement made by several railroads competing 
 for business to allot to each a stated percentage of the whole com- 
 petitive traffic , or of the receipts thereof , together with a mu- 
 tual guaranty that each road shall receive its share. The purpose 
 of pooling is to maintain rates and remove the incentive to com- 
 petition. 
 
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78 
 
 Railroad pools are of two kinds: (1) traffic pools; (2) 
 money pools, 
 
 A traffic pool is an agreement whereby each member is 
 assured of receiving only a stated percentage of the competitive 
 traffic. The percentage of this competitive traffic is determined 
 by the share of total traffic which each railroad carries under 
 normal and peaceful conditions of rivalry. If any member of the 
 pool has received less than its allotment of the traffic, the organ 
 ization having the management of the pool in charge requires the 
 railroads hauling more than their alloted share of the traffic to 
 pay a stipulated portion of the receipts from the excess to those 
 roads hauling less than their alloted percentage, 
 
 A money pool is an agreement whereby each member is assu- 
 red of receiving only a stated percentage of the receipts from 
 competitive traffic. It may be based either upon gross or net e*arn 
 ings. The percentages of the members are determined by past earn- 
 ings. But as one road might incur extra expenses in moving a far 
 greater bulk of traffic than its proportion of the earnings called 
 for, it v;as customary for each road to retain a third or a half of 
 the revenue it derives from that traffic, and to turn the remainder 
 of the receipts into the pool, to be distributed periodically among 
 
 the pooling roads in accordance with the percentages stipulated in 
 19 
 
 the agreement. 
 
 The first important railroad pool was established in 1870. 
 The Northwestern, the Rock Island and the Burlington Roads which 
 
 19, Noyes, W.C., American Railroad Rates , p.l39. 
 

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79 
 
 connected Chicago and Omaha, v/ere not far different in financial 
 
 means and had about equal facilities for hauling the traffic. 
 
 Accordingly a pooling agreement was made allot ing to each road a 
 
 third of the business. This pool was successfully maintained for 
 
 fourteen years. In 1884 it was merged into the Western Freight 
 20 
 
 Association, 
 
 Another railway pool in this country was the Southern 
 Railway and Steamship Association, established in 1873-75. This 
 came later to cover the terrirory east of the Mississippi River and 
 south of the Ohio and Potomac . The pool covered only the cotton 
 business of the roads. Its members were both railroads and steam- 
 ship lines. Under such a pool, all rates for the competitive tra- 
 ffic were directly controlled by a general commissioner with large 
 
 21 
 
 pov/ers acting under the supervision of an executive committee. This 
 association continued its power until it was declared illegal in 
 1887. 
 
 The traffic betv/een the Atlantic seaboard and the Middle 
 West was ruinous to all competitors. Its pooling was by far the 
 most difficult to make and enforce. After three years of strife, 
 much of v/hich consisted of violent rate v/ars, there followed the 
 failure of the Saratoga Conference; a pooling agreement was finally 
 effected between the chief lines of this territory. An executive 
 committee of the Trunk Line Association, composed of the Pennsyl- 
 vania, the New York Central, The Erie and the Baltimore and Ohio 
 
 20, Johnson and Van Metre, ■t'rinciples of Railroad Transportation , 
 
 pp. 294-95. 
 
 21, Noyes, W,C,, American Railroad Rates . p,143. 
 

 
 
 
 
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80 
 
 was created. In 1877 the westbound traffic from New York was 
 
 apportioned between these four lines and in 1879 eastbound traffic 
 
 was included. During this year a Joint Executive Committee was 
 
 founded to supervise the pooled business and to apportion the 
 
 "differential "rates which Philadelphia and Baltimore should have 
 
 22 
 
 as compared with New York and Boston on the v/estern business. In 
 1885, it, was reconstructed as a money pool with monthly deposits 
 and settlements. The Joint Executive Committee continued as 
 effective pooling organization until 1887 when pooling feature was 
 necessarily eliminated. 
 
 V/hile the pools mentioned v/ere the most important, many 
 other pools existed in the United States in the year preceding 138' , 
 the Southwestern Association came in 1876; and from 1876-1887 
 there were formed the Nor thv;e stern, the Colorado, the Western, the 
 Pacific Coast, and the Transcontinental, Associations. 
 
 The result of pooling agreements to railroad rates is 
 this. It is not designed to increase charges. The purpose of a 
 pool is merely to make rates uniform as well as stable. In the 
 seventies and early eighties, as we know, vjhen pools were most 
 prevalent in this country, rates steadily declined. Can a pool, 
 then, check the decline in rates? In so far as direct competition 
 tended to accelerate the decline, pooling, by eliminating that 
 competition, tended to stay it. However, direct competition was 
 not an important factor in making the general decline in charges. 
 
 22. Raper, C.L., Railway Transportation , p.209. 
 
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81 
 
 It acted only upon competitive rates and tended rather to make 
 local charges up than dov/n. Rates steadily declined under the 
 pooling agreements and cannot be safely asserted that they would 
 have declined much faster if the pools had not existed. In fact, 
 the pools by eliminating ruthless competition enabled the railroads 
 the better to avail themselves of those physical improvements which 
 were the most important factors in bringing about the decline in 
 
 charges . 
 
lil^- -idvCi '...odr iTyv.* 
 
 »'• L i . 4 ^ ^ ^ f 
 
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82 
 
 CHAPTER VII 
 
 Competition or Railways with Y/aterways 
 
 (A) Origin of rail ana water competition 
 
 Before the introduction or railways in tne United 
 States, tne rivers and lakes were the main highways of traffic be- 
 tween the interior and the seaboard, and the chief centers of trade 
 were the seaports and cities located on navigable waters. When 
 the early railroads were constructed, they were naturally made to 
 connect the ports with inland markets. In order to secure a portior 
 of the traffic the railroads were compelled to compete with the 
 rival water routes, thus the carriage of coal by the Reading Rail- 
 road from the Schuylkill regions to tide water in competition with 
 the Schuylkill Canal, and the carriage of flour over the New York 
 Central in competition with the Erie Canal, and the Illinois 
 
 Central in comoetition withethe Mississippi for a thousand miles 
 
 1 
 
 and all over the south as a freight carrier. 
 
 (B) Reasons why Waterways could not successfully compete with 
 Railways 
 
 An important reason why the rivers and canals of the 
 United States have been unable successfully to compete with the 
 railways has been the natural inconvenience of the service rendered 
 by the boats. When a shipper requires rapid transit for his 
 freight or for the continuation of all classes of freight move- 
 ments, the railroad is favorable, especially in the winter months 
 when the rivers and canals were closed by ice or when freshets 
 
 1 . Ringwalt , Development of Transportation System in the United 
 States , p . 1 13» 
 
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83 
 
 damased canals, A vivid picture of this state of affairs is fur- 
 nished in an article advocating the construction of the Erie rail- 
 road. It says: " It would prevent a recurrence of the state of 
 things. which now exists in the city of New York. There v/ould not 
 then be, as there now are, thousands of barrels of flour and other 
 kind of produce in proportion, frozen up in canal boats and in 
 sloops of the Hudson; salt would not be nov/ selling in Albany for 
 ^ 2.50 per bushel and pork at $2.00 per hundred for want of salt to 
 save it, whilst pork is worth from to |7.00 in this city. 
 
 Coal would not then sell here for | 15*00 or |16,00 per ton; nor 
 oak wood at |9.00, and hickory at I 13 .OO per cord, as has been the 
 case for two or three weeks past, if railroads were in general use, 
 but all kinds of business would move on regularly and be more 
 equally divided through out the year. Produce could come to market 
 as well in January as in July; and the farmer would not be obliged, 
 
 in order to get his crop to market in the fall, to neglect pre- 
 
 2 
 
 paring for the next . " 
 
 Another important reason, undoubtedly, v/hy the 
 waterway could not successfully compete with the railway v/as that 
 there had been almost no improvement in river or canal boats or 
 terminal facilities for a long period of time; while at the same 
 time, the railroad had made a progress in the physical factors, 
 the improvements of rolling stock and the increase of tne power of 
 locomotives. These things led to the belief that it could move 
 
 2. Ringwalt, Development of Transportation System in the United 
 States . P.106. 
 

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84 
 
 freisiit in large quantities over long distances at the rate of 1.5 
 cent per ton per mile. Moreover, the railroad runs through certain 
 territory where it has scores of stations supplying it with traffic, 
 and many of them are so situated that they control freight that 
 can find nouother outlet. The steamship line that serves one port 
 or two, as many of them do, must find its freight there or nov;here, 
 and in the port where competition is free, the freight may go to 
 any rival. 
 
 No one will deny that transportation by rail is 
 faster and better than by water. The freight car can move into a 
 shipper’s v/arehouse to get goods as well as on the road’s main 
 line. All goods shipped by water, on the other hand, must in some 
 way be hauled to and from the water’s Side and be transferred to 
 and from the boat. Therefore, to compete successfully with rail- 
 ways, boats must make rates to shippers not only as low as, but 
 lower than those of railways. 
 
 The water carries freight more cheaply, but under 
 normal conditions, the railways deliver it more quickly. Shipping 
 is confined to routes where water runs or is made to run, but the 
 railway climbs hills, skirts mountains, tunnel ridges, and goes 
 everywhere . 
 
 The last, but not the least reason why the water 
 carriers of the United States cannot successfully compete with 
 rail carriers is the comparative inefficiency and inconvenience oT 
 the service rendered by the boats. The railways not infrequently 
 have soliciting staffs engaged in beating the country adjacent to 
 their lines for traffic. Most of the large systems have traffic 
 
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 representatives in all large cities. If a shipper has a consign- 
 ment of freight to send he can always find a solicitor of the road 
 over which he wishes to route it. When he delivers his goods to 
 the railway, it issues to him a merchantable and bankable bill of 
 lading which protects him against loss of, and damage to, his goods 
 But if a shipper v/lshes to make a shipment by an independent line 
 on the G-reat Lakes, he has first to hunt up a captain who may or 
 who may not have two or three bbats available. On delivering his 
 goods he gets a receipt which affords him little or no protection 
 against loss or damage. Conditions such as these have put water- 
 ways at still greater disadvantage in competing with the railways. 
 
 Competing with some of the American railways 
 are some of the most flourishing lines of water traffic known, but 
 does any one recall a case where the railway has been injured by 
 it? Take the New York Central and connecting linrs to Chicago, for 
 example. It has vigorous water competition all the way, and it 
 has had to build three or four tracks to take care of its tonnage. 
 The most prosperous railway lines in Nev; England compete with Long 
 Island Sound, one of the greatest inland waterways in the United 
 States. And the Atlantic coastlines compete with the Atlantic 
 ocean. Mr. James J. Hill once saidi'*No vessel of one thousand 
 tons burden can compete with a box car.” This statement, as it 
 now proves, is true. 
 
 3. Quick, A., American Inland Waterways, p. 63 
 

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86 
 
 (C) The Waterway a regulator of railway rates 
 
 The competition of the American railways with other 
 routes brought out most emphatically the necessity for lov/ charges. 
 From their very beginning, railways have been compelled to compete 
 wlthwater routes in order to secure a larger traffic . Railways 
 between cities that were connected by water were obliged to reduce 
 their charge between subpoints to a level that could attract at 
 least a portion of the traffic to the rails. THerefore, the water- 
 way is a good freight rate regulator of railways. By this it is 
 meant that it should reduce the rate of competing railways. Rail” 
 way rates in all ports of the United States have been considerably 
 affected by thecompetition not only of the Qoastwise and Great 
 Lake routes, but also the rivers and canals. For instance, along 
 the Mississippi River, all the way from New Orleans to St, Paul, 
 rates were lower than they could be tf uninfluenced by the river. 
 The rates between Buffalo and New York have also been considerably 
 affected by competition via the Ejbie ^anal and the Hudson River, 
 Between innumerable other ports, particularly in the southeast, 
 
 freight of railways are greatly influenced by minor streams which 
 
 4 
 
 parallel the railways. 
 
 The public estimation of the value of competition 
 of waterways with railroads was stated in 1867 in the report pre- 
 paredly a Senate oommittee , of which Hon, Shelby M, Cullom was 
 
 4. Dunn, S. 0., American Transportation Question,, p. 316 
 
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87 
 
 chairman. The report stated that " the evidence before the com- 
 mittee accords with the experience of all nations in recognizing 
 the water routes as the most efficient cheapness and regulators of 
 railway charges. Their influence is not confined within the limits 
 of the territory immediately accessible to water communication, but 
 extends further, and controls railroad rates at such remote inter- 
 ior points as have competing lines reaching means of transport by 
 water. Competition between railroads sooner or later leads to com- 
 bination or consolidation, but neither can prevail to secure unrea- 
 sonable rates in the face of direct competition with free natural 
 or artificial water routes. The conclusion of the Committee is, 
 therefore, that natural or artificial channels of communication by 
 water v/hen favorably located, adquately improved, and properly main 
 tained afford the cheapest method of long distance transportation 
 now known, and that they must continue to exercise in the future, 
 as they have invariably exercised in the past, an absolutely con- 
 trolling and beneficially regulating influence upon the charges 
 
 "5 
 
 made upon any and all means of transit. 
 
 (D) Co-operation and Combination of Water and Rail Carriers 
 
 Waterways are both competitors of and co-operators 
 with the railroads. As competitors of the railroads, waterways 
 place a limit on the maximum charges which the rail carrier may 
 impose. The most conspicuous instance of this fact is the effect 
 
 5. Quick, A., American Inland Waterways , p.3?6. 
 
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88 
 
 of the rates on the Great Lakes upon the charges of the railroads 
 that compete for the traffic free to move either by the lakes or 
 by rail. The Erie ^anal, in the past, has placed a very definite 
 
 ( 
 
 maximum limit upon railroad charges between the lakes and tide wate 
 The constant interchange of a large volume of rtraffic compels water 
 and rail carriers to co-operate. The cheapening in cost of trans- 
 protatlon during recent decades hasjenormously increased the tonnage 
 of International commerce. The markets for even heavy commodities 
 have become world wide, and the organization of trade upon the 
 basis of a world market renders more and more necessary a close co*| 
 ordination or the service of rail and water carriers* 
 
 Therefore, there is no reason why the two systems ofl 
 transportation should be unfriendly, and it is natural that the 
 necessity of the co-ordination of both steamship and railroad line£| 
 should develop unity of service. The railroad line with steamship 
 feeders would be benefited thereby and at the same time steamship 
 lines with railroad alliances would be better served. There is 
 a common want and a mutual advantage- each can help the other in 
 its desired extension of service. 
 
 6, Johnson, E. Qcean and Inalnd Water Transportation^ p. 153 
 
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89 
 
 CHAPTER VIII 
 
 Railroad Regulation 
 
 (A) Causes of State Regulation and Its Action 
 
 The ideal of state regulation is to center all of 
 its force in tne efficiency of management, it is concerned mainly 
 with matters of safety and the reasonableness of rates. 
 
 Since the state nad the right tnrough its legisla- 
 ture to charter a corporation to construct and operate a railroad 
 within its oorder, it is natural that the state was in a position 
 to exercise and control over the railroads, hov^ever, the exercise 
 of such control was very sligiit, for the charter failed to regulate 
 traffic. This failure was due to the inadequacy of the provisions 
 
 in the charters, whicn had granted to the companies unlimited right 
 
 1 
 
 and privileges, inus during the period 1870-77, tne abuses of dis- 
 criminatory rates became acute, and since the railway was assumed 
 to be a public carrier, the state legislature had therefore the 
 rightjto regulate its operation and rates, irrespective of the 
 charter . 
 
 3 
 
 During the period from 185^ to 187^^, the cnief 
 
 interest centered in the question of building, rather than in the 
 
 2 
 
 question of regulating railroads. i‘he confidence of the public at 
 
 1. Raper, C. L., Railway Tramsportation, p.247 
 
 2. Dixon, F. H. , State Ra ilroad Controls p.7 
 

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90 
 
 this time was based on the theory that unrestrained interrailway com* 
 
 3 
 
 petition would serve as a regulator of the railway business. The 
 public rested upon the assumption that competition would guarantee 
 fair treatment and just prices. But the railroads, impelled by the 
 desire to increase traffic, entered upon the policy of discriminatioi 
 between persons and places; thus appeal was made from the public to 
 the government for protection. 
 
 It was at first the state government rather than the 
 federal government, that undertook to deal with the question, the 
 protection of the public from the arbitrary rulings of the railroad 
 corporations. The policy of the railroad regulation in this country 
 was the policy of control through commissions. There are tv;o kinds 
 of commissions; the one of which has been called the v/eak commission 
 the other, tne strong commission. The Massachusetts commission ser- 
 ves as a type of the former; the Illinois, of the latter. The chief 
 difference between these is that a commission of the I^lascachu setts 
 type, establisned in I 869 , sometimes called an "advisory commission" 
 
 confines its activity to supervision, either of construction or of 
 4 
 
 capitalization. It possesses only the power of investigation of rat 
 
 and of recommendation of changes. Such a commission relies mainly 
 
 upon public opinion for the enforcement of its decisions. In the ca 
 
 of Massachusetts, the commission enjoyed the confidence of the publij 
 
 5 
 
 and was very successful in regulating the railways. Several commis- 
 
 3 . Johnson, E.R., Principles of Railroad Trans-portation . p,468. 
 
 4. Ripley, W.Z., Railroad Rates and Regulation , p. 628 . 
 
 5 . Johnson, E.R., principles of Railroad Transportation , p.473. 
 
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 sions of this type were established in other states, such as New 
 
 York, Connecticut and Vermont, though none of these had any au“ 
 
 6 
 
 thority over finance. 
 
 A commission of the Illinois type, on the other 
 hand, in addition to the general functions of an advisory commis- 
 sion, is clothed with some degree of authority respecting the de- 
 termination of rates. In 1871* and 1873, a law was passed empower- 
 ing the commission to prescribe " a reasonable maximum rate of 
 charges for the transportation of passengers and freight." It had 
 the power to compel the railway companies to obey the commission" s 
 
 decisions or to force them to obey the laws regulating railway 
 7 
 
 transportation. > 
 
 Other states in the West and South passed laws 
 
 similar to the Illinois statutes just described. In 1874 Iowa 
 
 and Wisconsin passed maximum rate laws. The same year, Minnesota 
 
 established a commission clothed with power to prescribe rate 
 
 schedules. In 1879 a law was passed in G-eorgla by which a commis- 
 
 8 
 
 sion was instituted with power to fix rates, 
 
 (B) Causes of Federal Regulation and Its Action 
 
 Shortly after the state began actively to regulate 
 railroad charges an agitation was begun for the regulation of 
 railroads by the federal government . Several of the economic 
 
 6. Ripley, W.Z., Railroad Rates and Regulation, p. 628, 
 
 7. Johnson, E.R. . -Principles of Railroad Transportation , p. 476. 
 
 8. Johnson, E.R. , Principles of Railroad Transportation , p. 
 
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92 
 
 causes led to the Act to Regulate Commerce of 1887. Foremost 
 
 among these was the rapid expansion of the railway net; more new 
 
 mileage was laid down in the year of ^ the act than in any other 
 
 9 
 
 similar’ period. 
 
 Of equal significance was the development of long- 
 distance traffic for the through carriage of live-stock and 
 
 other products to the East and a corresponding movement of manu- 
 
 10 
 
 factured goods to the Middle West. In the expectation of 
 
 securing this traffic, rate wars were engaged in by the big sys- 
 tems, which brought with them abusive discriailnations on a very 
 large scale. An appeal was therefore made to Congress ‘for legis- 
 lation and in response to this call, a committee was appointed to 
 investigate the question ” of securing cheaper transportation of 
 the constantly inpresing western and southern products to the 
 Atlantic seaboard." The chairman of this committee was Windom , 
 of Minnesota, and the report made in 1874 maintained that the 
 through rates on traffic from the Central West to the East were 
 too high, and that the federal governemnt had the right to make 
 reductiohs in them. The suggestion made by this committee was 
 to secure cheap rates by means of water and rail competition. 
 
 The committee had neglected the main ooints. "I^he chief abuse 
 was not in the size of these rates bTit in their discriminations 
 
 9, RlPlev. >W.Z. , Railroad Rates and Regulation, p. 442, 
 
 10. Johnson, 3.4.. Principles of ftailroad Transnortation .p .492 . 
 
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93 
 
 especially in the discrimination in favor of the long distance 
 competitive traffic over the non-competitive traffic. 
 
 During the twelve years of the report of the Windom 
 committee, many things happened. By 186b, according to the Cullom 
 committee, " the paramount evil chargeable against the operation 
 of the transportation system of the United States, as now conducts L, 
 is unjust discrimination between persons, places, commodities, or 
 particular descriptions of traffic.” Purely economic events had 
 brought about this change of opinion. The rate wars of the seven- 
 ties, a revival of general prosperity in 18?9» and great mechani- 
 cal improvements and economies in operation, had brought about the 
 
 11 
 
 desired decline of freight rates. In a word, the public de* 
 
 mand for cheap transportation was now altered to a demand for the 
 
 abolition of unreasonable discriminations. The Cullom committee, 
 
 consequently brought in a bill, the distinctive feature of which 
 
 12 
 
 was provision for a permanent administrative commission and the 
 
 13 
 
 publicity of rates as a primary remedy of the evils of the time. 
 
 An immediate cause for the demand for federal regu • 
 lation of the railroad business was the inefficiency of control by 
 the states, for the states could not extend th^ir control to cover 
 entirely the operation and traffic of the railways. Almost as 
 much as seventy per cent of all the traffic in the United States 
 
 11. Ripley, W.Z., Railroad Rates and Repculation . pp.22 and 411. 
 
 12. Ibid., P* ^51. 
 
 13. Ibid., P- 
 

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 1 
 
 moves across the borders of states. In 1886 the Supreme Court, in 
 the Wabash decision, limited the authority of the state strictly to 
 the intrastate traffic and excluded the movement from one state to 
 another. This decision of the Supreme Court greatly limited the 
 
 Jurisdiction of each state over railway charges, and increased the 
 
 14 
 
 need for congressional action. 
 
 The Interstate Commerce Act of 188? applied to all 
 
 interstate transportation by rail aione, or by rail and water and 
 
 to an extent to the transportation between the United States and 
 
 foreign countries. It did not apply to intrastate traffic nor to 
 
 interstate or foreign traffic carried entirely by water. 
 
 Following is a brief summary of the provisions of 
 15 
 
 the Act to Regulate Commerce: 
 
 Section 1 . Applies to freight and passengers by land; 
 or by land ana water in cases of continuous or through shipment, ever 
 to foreign countries. All charges shall be reasonable and Just; and 
 every unjust ana unreasonable charge is prohi cited. 
 
 Section 2. Rebates and personal discrimination of 
 every sort forbidden. 
 
 Section 3* Local discrimination forbidden; equal 
 facilities for interchange of traffic with connecting lines pre- 
 scribed. 
 
 14. Johnson, E.R. , Principles of Railroad Transportation , p.495. 
 
 15, Ripley, W.Z., Railroad Rates and Regulation, pp. 452-53. 
 
ill 
 
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Section 4, Long and short haul clause: " That it 
 shall he unlawful for any common carrier subject to the provisions 
 of this act, to charge or receive any greater compensation in the 
 aggregate for the transportation of passengers or of like kind of 
 property, under substantially similar circumstances and conditioni 
 for a shorter than for a longer distance over the same line, in tl . 
 direction, the shorter being included within the longer distance 
 but this shall not be construed as authorizing any common carrier 
 within the term of this act^ to charge and receive as great com- 
 pensation for a shorter as for a longer distance i Provided, how- 
 ever, That upon application to the Commission appointed under the 
 provisions of this act, such common carrier may, in special cases 
 after investigation by the Commission, be authorized to charge 
 less for longer than for shorter distances for the transportation 
 of passengers or property; and the Commission may from time to 
 time prescribe the extent to which such designated common carrier 
 may be relieved from the operation of this section of this act," 
 
 Section 5, All pooling and traffic agreements 
 
 prohibited. 
 
 Section 6. All rates and fares to be printed and 
 posted for public inspection at all stations; and filed with the 
 commission at Washington, No advance in rates except after ten 
 days notice. All charges, other than published, forbidden. 
 
 Section 9. Procedure by complaint before the 
 commission or federal courts. Power to compel testimony and 
 production of papers . 
 

 i 
 
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96 
 
 Section 10. Penalty of §5,000 for each offence in 
 
 violation. 
 
 Section 11. Interstate Commerce Commission of five 
 members established; by presidential appointment; terms six years. 
 
 Section 12. Powers of commission to inquire, with 
 
 right to obtain full information necessary to exercise of its 
 
 Id© 
 
 authority. Power over witnesses and production of papers, to sus- 
 
 A 
 
 tained by United States Circuit Courts. 
 
 Sections 13-14. Procedure before commission by com- 
 plaint. Parties competent to appear. Decisions to include findings 
 of fact upon which based, for courts on appeal. 
 
 Section 15- Duty of commission to notify carriers to 
 ” cease and desist " from violation, or to make preparation for 
 injury done. 
 
 Section 1b. To enforce obedience, procedure by peti- 
 tion of commission in federal courts, which may issue writs. 
 
 Section 20 . Annual detailed reports from carriers as 
 to finance, operation, rates or regulations in prescribed forms as 
 desired by the commission. 
 
 Such is the substance of the statute which marks the 
 real beginning of subjection of the railroads to control by the 
 federal government. 
 
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97 
 
 CHAPTER IX 
 
 Development of Railway Organization 
 
 During tne early period of railway enterprise, its organ- 
 ization of management was very simple. H. S. Haines, in refering 
 to tnis subject says: "Tnere are those among us whose memory goes 
 back to the patriarchal stage of management, vmen most corporations 
 owned not more than fifty or hundred miles of track; when the 
 treasurer sold the tickets at tne principal passenger station on 
 the road, and the freight agent at the same station was virtually 
 the head of the transportation department; wnen no bill was paid 
 
 except upon the order of the president, and periodical reports and 
 
 "1 
 
 statistical statements were unknown. 
 
 V/ith the increase of mileage and the growth of business, 
 enlarged systems of organization were necessary, in tne management 
 of a first class road, two grand departments were established. One 
 related to financial affairs controlled by president, secretary, 
 treasurer, attorney and directors. The other was tne operating 
 department, attached by a commercial branch and a mechanical branch 
 They were, in turn, subdivided under tne direction of general super 
 intendent. The principal officers consisted in tne sub-group were, 
 a superintendent of road, with road masters as his leading assis- 
 tants. In tne second, thex e was a superintendent of machinery, 
 v/hose chief assistants were a foreman of a blacksmith shop and 
 blacksmiths, a foreman of a car shop and carpenters, a foreman of a 
 paint shop and painters, engineer (not on trains) and fireman, and 
 

 
 
 
 
 
 
 
 
 
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 ■ ■4*i 
 
98 
 
 car masters who directed operations of oil men and cleaners; a 
 
 general passenger agent whose chief assistants were conductors and 
 
 mail agents who directed the laborers of brakemen and ticket agents 
 
 station agents, express agents, and police, a general freight agent 
 
 whose principal assistants were conductors who directed laborers of 
 
 brakemen and engineers on freight trains, freight station agents, 
 
 weigher, gaugers and yard masters; a supply agent and a fuel agent, 
 
 2 
 
 each of whom had appropriate assistants. 
 
 In the period of I89O, a highly specialized organization 
 was elaborated. The railroad company, like other common corpora- 
 tions, has in its organization departments and officials for the 
 management of its financial and legal affairs. The stockholders, 
 who are the owners of the company, choose directors serving as a 
 govering body, and the directors, in turn, select a president, 
 secretary, comptroller, treasurer and a legal counselor. Within 
 this corporate orgainzation, a specialized organization to perform 
 the function of transportation service is formed. 
 
 The president of a railroad has general supervision and 
 direction of all departments. Under his immediate control are the 
 secretary’s office and the legal department. The function of the 
 secretary is to give notice of all meetings of the board of direc- 
 tors and to keep a record of its proceedings. He signs all stock 
 
 certificates and has custody of all leases and contracts made by 
 3 
 
 the board, 
 
 2 . Ringwalt, J. L. , Development of Transportation System in the 
 
 United States , p.362. 
 
 3, Peabody, James, Railway Organization and Ito-nasement . p. 15 . 
 
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99 
 
 At the head of the legal department is the general coun- 
 sel, who with the solicitors under his direction looks after the 
 
 4 
 
 legal business and the general charge of all its litigation. 
 
 The financial department is concerned with the financial 
 affairs of the company and is the custodian of all the company’s 
 funds and its pay-master for all departments. It is responsible 
 for all securities and for the proper form of all stocks, bonds, 
 and notes. The principal officer in this department is the trea- 
 surer who keeps a set of books showing the receipt and disbursement 
 of all funds he handles. His books are audited monthly by the 
 
 comptroller, who, at the end of each fiscal period reports to the 
 
 5 
 
 board of directors. 
 
 The part of the railroad organization most directly 
 concerned with transportation is the operating department. This 
 department performs three general duties; it provides and maintains 
 the roadway; it supplies and maintains the locomotives and cars; 
 it runs the trains and conducts the service at passenger and 
 freight stations. Each of these three duties is constituted as a 
 distinct part of the service. 
 
 The principal official of the operating department is 
 the general manager, who is tne most responsible and usually the 
 hardest subordinate officer in the organization. His duty is 
 different in scope on different roads. On all roads he is in 
 direct charge of operation and receives reports from the general 
 
 4. Morris, R., Railroad Administration . p.30. 
 
 5. Byer, M. L., Economics of Railway Operation , pp.23-'28. 
 
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 superintendents, who, in turn, act through the division superin- 
 tendents. Thus he controls all train movements, and is the res- 
 ponsible authority in cases of delays, or of wrecks, or of special 
 
 6 
 
 demands on the company’s facilities. 
 
 The first of the three divisions of the operating depart- 
 ment is the construction department, the head of which is the chief 
 engineer, who is responsible for construction on the railroad, such 
 as roadbed, track, bridges, culverts, buildings and numerous other 
 structures. Subordinate to the chief engineer are engineers in 
 
 charge of maintenance of way, and maintenance of bridges and 
 7 
 
 buildings . 
 
 The next division of the operating department is the 
 mechanical department, vrtiich is charged with the design, operation, 
 and maintenance of all the equipment--locomotives, cars, wrecking 
 tools etc. Its work is broadly divided into a motive power depart- 
 ment, in charge of locomotives, and a car department, in charge of 
 cars. The whole department is under the charge of a general super- 
 intendent or chief engineer of motive power, with a master machinis' 
 and a master car builder as his assistants. 
 
 The last division of the operating department is the tram 
 portation department, which performs the actual work of moving per- 
 sons and freight. The head of this department is the general super' 
 intendent of transportation, who, under the direction of the G-enera! 
 
 6. Dewsnup, E. R. , Railway Organization and Operation , p.141. 
 
 7. Johnson, E. R*, Principles of Railroad Transportation , p.244. 
 
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 li<Ianager, has general supervision of all station, train and yard 
 service and of the distribution and use of locomotives and cars. It 
 is his duty to enforce proper rules to secure as prompt, safe and 
 economical service practicable. Under his Immediate direction are 
 a superintendent of transportation, and the superintendent of tele- 
 graph. The principal duty of the superintendent of transportation 
 is to aid the general superintendent of transportation in all ma,tter£ 
 relating to the prompt movement of the equipment, and the prompt 
 movement of live-stock and other matters connected with train service . 
 The superintendent of telegraph is to supervise and control the 
 
 management of the railroad telegraph and telephone lines and the 
 
 8 
 
 construction and repair of all lines of telegraph and telephone. 
 
 The most important department in the organization of a 
 railway corporation is the traffic department, for it is the medium 
 through which the relations of the carrier and its patrons are ad- 
 justed. It solicits business; classifies the traffic, determines 
 
 charges and settles the claims of passengers and shippers for lost 
 
 9 
 
 baggage and freight. This department, as was the case in the 
 operating department, is devided into two main branches. These two 
 branches are the passenger traffic and freight traffic, both of 
 which are under the direction of one of the vice presidents of the 
 company. Let us discuss each separately. 
 
 The most important duty of the freight traffic department 
 
 8. Byers, M. L., Economics of Railway Operation . Pp.37-39. 
 
 9. Morris, R., Railroad Administration , p.33. 
 
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102 
 
 is the sale of transportation and the procuring of revenue-pro- 
 ducing business. It is this department which has the closest 
 relationship with the shipping public, as its entire intercourse 
 is with the shippers and receivers of the freight. Although the 
 vice president has general supervision over all traffic matters, 
 both passenger and freight, the actual charge of all freight 
 matters is under the immediate direction of a freight traffic 
 manager. He assigns duties to his various assistants as to the 
 general freight agent, the division freight agents and the mana- 
 gers of the fast freight lines. Their duties, assigned by the 
 freight traffic manager, are incicated by their titles. 
 
 The passenger traffic department has charge of all 
 matters relating to passengers, including baggage, mail, and ex- 
 press. The duty of the passenger traffic manager is to hold him- 
 self responsible for passenger train service and for all traffic 
 that is handled by it. Under the passenger traffic manager are 
 the general passenger agent, and the division passenger ticket 
 agents. The general passenger agent is the representative of the 
 passenger traffic manager in certain designated territory, be 
 has charge of the employees and work of the passenger department. 
 The baggage agents are to make rules for handling baggage, col- 
 lecting for excess baggage, and adjusting claims for loss or 
 damage to it. 
 
 The railroads are very large owners of real estate, the 
 purchases and transfers of which are in charge of a real estate 
 agent, who is the custodian of all original copies of deeds, 
 
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 103 
 
 10 
 
 releases, leases, maps and records of real estate. 
 
 There is another department in the railway organization 
 which is called the purchasing department. The work performed by 
 this department is to supply material required by various depart- 
 ments. The purchasing agent is at the head of the department, and 
 subordinate to him are the store keepers, wno distribute the suppli 
 es upon the presentation of properly authorized requisitions. 
 
 However, the organization of a railroad company up to the 
 period of 1890 seems very much complicated. It would be better to 
 illustrate them by means of a diagram showing the main departments 
 and the principal sub-divisions in the organization of all large 
 railroad companies. 
 
 10. Peabody, J., Railway Organization and Management , p.222 
 

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104 
 
 CHAPTER X 
 Conclusion 
 
 In rf 90 , the population of the United States was not 
 more than four million while in 1890, it was estimated at sixty- 
 five million. Enormous as was this increase in the population of 
 the country within the short period oi a hundred years, the in- 
 crease of material prosperity resulting from the rapid development 
 or the v/onderful resources of the country were in even greater 
 ratio; it had, in fact, no parallel in the history of tne world. 
 These wonderful results, as we know, were due chiefly to tne rapid 
 expansion or the railroad system of the United States, What con- 
 ditions would he without railroads it is impossible to say, 'what 
 they have become, having them, ia a permanent tribute to their 
 value . 
 
 Of the total railroad mileage of the world, the United 
 States in I 890 , had nearly one-half. At the close of 1890, the 
 aggregate length of the lines in the country was 163,597 miles, all 
 built in sixty years. The average mileage constructed per year was 
 nearly 2,730 miles. But this record of sixty years, wonderful as 
 it was, faded into insignificance wnen compared with the achieve- 
 ment of the twenty-five years since the close of the Civil War, 
 
 The total length of the railroads at the end of I 865 was 
 35,085 miles. In the twenty-five years since there they had been 
 constructed 131,000 miles of new road, an average of 5»260 miles 
 

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105 
 
 per annum, twice the annual average of the whole period of sixty 
 years, and 5«3 times tne annual average of the first period of 
 thirty-five years. During these twenty-five years the country 
 encountered txiree great v/aves of railroad construction which v/ere 
 checked only by extraordinary financial revulsions. 
 
 The first of these great construction waves occured 
 witnin the eight years intervening between the close of the Civil 
 V/ar and the panic of 1873« In that time the length of lines con- 
 structed increased 35»C85 miles in 1865 to 70,268 in 1873. The 
 first transcontinental line, the Union Pacific, was completed in 
 this period. The cash cost of the 35,000 miles of road constructed 
 in these eignt years was to excel | 1 ,400 ,o00 ,uOu , and the panic, 
 which began in the fall of 1873, was probably due to tne transfor- 
 mation of this vast sum from floating into fixed capital. 
 
 The depression extended through the period from 1873 
 to 1878. During 1879 matters began to improve throughout the coun- 
 try and the activity of railroad construction was again vigorously 
 advanced. 
 
 During the following seventeen years there were con- 
 structed 95 >865 miles of railroad, an increase of 26,066 miles of 
 railroad beyond the road constructed in the preceding forty- five 
 years. The first five of these seventeen years comprised a period 
 of depression; the next four years were years of unexampled acti- 
 vity, although the three years of 1883> 1884 and 1885 were years 
 of hesitancy, in which no nev7 railway enterprise of great magnitude 
 
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 f. 
 
106 
 
 was begun, as was natural, after the completion in a single year 
 (1862) of 11, bio miles of road. In 1836 there were constructed 3, 
 
 128 miles; in 1887, 12,98^ miles; in 1880, 7,023 miles; in 1889, 
 
 7,170 miles and in 1890, 9,725 miles. 
 
 Since the revival of railroad construction in 1879 
 there had been completed three additional through transcontinental 
 lines, the Northern -Pacific, the Atlantic and Pacific, and the 
 Southern Pacific; while the Union Pacific by the construction of 
 its Oregon Short Line northv/est to a connection with a branch of the 
 Oregon Railway and Navigation Company’s system, the Atchison by the 
 construction of its line to a connection V7ith the Southern Pacific, 
 and the Chicago, Burlington and Quincy, bj’’ the construction of its 
 Denver extension had added three other important routes to the 
 Pacific , 
 
 This period was not only remarkable for the constructior 
 of new lines but also for a development of the larger transportatior 
 units. Up to 1870, 100 miles in length constituted the maximum for 
 
 efficient operation. The Illinois Central, with 700 miles of lengtl , 
 
 1 
 
 was considered one of the longest railroads in the world. From 187C 
 to 1890, the maximum length of a single railroad was about 5,000 
 miles. The Pennsylvania first reached the length of about 4,000 
 miles in 1380. Two years later the Lake Shore and Michigan South- 
 ern absorbed its parallel line, the ’’Nickel Plate" road. In 1885 
 the New York Central, by consolidation the West Shore and the Van- 
 
 1. Ripley, W. Z., Railroad Finance and Organization , pp. 456-57. 
 
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107 
 
 derbilt System under common control first attained sizable pro- 
 portions. Even west of Chicago, the Vanderbilt interest v/as 
 already strong in the Chicago and Northwestern which by 1886 had 
 about 3 1 500 miles of line. By 1389 the Union Pacific, besides 
 2,000 miles of line it ovvned, controlled nearly 4,000 more. There • 
 fore, the process of consolidation has given each of the several 
 companies the ownership of more than 5 >000 miles of road, Collis 
 P. Huntington held advanced ideas upon the subject of consolidatio 1 , 
 In 1887 > before the railway commission, he said: "It has been my 
 view for a good many years that there ought not to be more than 
 three or four transportation companies in the United States,,,. 
 
 In fact, it would be better, I think, if there was but one.... 
 
 It would serve the people a great deal better, and do business 
 2 
 
 cheaper . 
 
 The total mileage of the railroads in the United States, 
 in 1890 , was reported as 163,420; the cost of the railroads of 
 the country would average '^61,942.45 to the mile, the total for 
 the . 163,420 miles, being in round numbers, 110,122,639,500, It 
 v;ould at this time be interesting to inquire into the effect of 
 so great a withdrav/al of the active wealth of the country from 
 immediate circulation, and its permanent investment in a form 
 both unprofitable and inaccessible. But, on the other hand, the 
 importance of railway construction cannot be stated with absolute 
 accuracy, inasmuch as it touches such factors as the increase of 
 population at given points, advances in the prices of property 
 
 2, Cleveland and Powell, Railroad Finance . p,283. 
 
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108 
 
 belonging to private ovmers, and development of new enterprises. 
 The economic prosperity of this country was undoubtedly due to tbe 
 expansion of the railway system. 
 
 From 1870- 1890 was a period of pooling activity among 
 the railway companies. The object of this activity was merely to 
 pool competitive business, but, during the time, a strong public 
 sentiment arose against pooling. It was believed that pools kept 
 up rates and, in avoiding competition, injuriously affected the 
 public. Laws were enacted in several states prohibiting pooling 
 and finally in 188? Congress, after much hesitation, inserted an 
 anti-pooling clause in the Act to Regulate Commerce. As we know, 
 the prohibition of pooling b^r the Interstate Commerce Act was a 
 failure. The railways were driven to other means to avoid the 
 effects of competition, if any could be found. After 1887, the 
 traffic associations, with the pooling arrangements eliminated, 
 continued in existence. 
 
 For the protection of commercial and industrial inter- 
 ests, government regulation of transportation rates is necessary. 
 The exercise of power over transportation companies is shared by 
 the state and the nation. The states have power over intrastate 
 transportation, and the federal government has pov/er over inter- 
 state traffic and rates. The states exercise their constitutional 
 powers of control over railroads and railroad rates through com- 
 missions. The Interstate Commerce Commission is the correspond- 
 ing agent of the federal government. This commission has authorit 
 over all important interstate carriers except those operating 
 
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I 
 
 109 
 
 solely by water. Its authority extends to their rates, classifi' 
 
 cations, regulations, and practices. The federal law, v/hen it 
 
 was passed, was very successfully interpreted by the railway 
 
 companies. They sought to obey its mandates both in letter and 
 
 3 
 
 spirit. The commission reported in 1888 that the railroads “con 
 formed promptly” to their orders; although in the south and west 
 they were "moving more slov/l^f. 
 
 Z. 
 
 3. Ripley, Vf 
 
 Railroad Rates and Regulation , p.456. 
 
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BIBLIOGRAPHY 
 
 American Railroad Journal , 1865-1886. 
 
 Byer, M, L., Economics of Railway Operation . New York, I 9 O 8 . 
 
 Cleveland and Powell, Railroad Finance , New York, 1909. 
 
 Dewsnup, E. R,, Frelp;ht Classification . Chicago, 1913. 
 
 Dewsnup, E. R,, Railway Organization and Working . Chicago, I 906 . 
 
 Dixon, F, H, , State Railroad Control , New York, I 896 . 
 
 Dunn, S. 0,, American Transportation Question , New York, I 9 I 2 . 
 
 Interstate Commerce Commission, Report . 1890» 1902. 
 
 Johnson and Van Metre, Principles of Railroad Transportation , 
 
 New York, I 9 I 6 . 
 
 Johnson, E. R., Ocean and Inland Water Transportation . 
 
 New York, 1906, 
 
 Mcpherson, L, G., Railroad Frei/ 2 ;ht Rates in Relation to the 
 
 Industry and Commerce of the United States , 
 New York, 1909. 
 
 Morris, R., Railroad Administrati on, New York, 1919. 
 
 Noyes, W. C,, American Railroad Raten . Boston, 1905. 
 
 Peabody, J., Railway Organization and Manap;ement , Chicago, 1919 
 Poor’s Manual of Railroads of the United States . 
 
 Quick, H., American Inland Waterway . New York, 1909. 
 
 Railway Ap;e . 1880, 
 
 Raper, C, L,, Railway Transportation , New York, 1912, 
 
 Railroad Ap;e Gazette . 1883, New York,