Iron Horse and Gilded Age

Iron Horse and Gilded Age

The Transcontinentals and the Making of Modern America

by Richard White
W. W. Norton and Company, 2011, 634 pp.

FOR A generation now, historians have been reluctant to write about capitalism. Cultural history has been the rage, even as developments in the Second Gilded Age (1980–2008)—the unleashing of private economic power, the dismantling of government regulatory controls, and the deepening of income inequality—were making clear the need for a new reckoning with capitalism as a historical force.

Against this background, it is significant that one of the most distinguished historians of our time, Richard White, has written a book about an epic story of the First Gilded Age: the building of the transcontinental railroads between the 1860s and the 1890s. From the moment the first of these railroads was finished at Promontory Summit, Utah, in 1869, these immense undertakings became an American obsession, eliciting both marvel and anger. The marvel was about the technological and organizational feats required to build these roads across vast and often difficult terrain and the profound ways in which these projects transformed America—economically, geographically, and politically. The anger was about the power accruing to the men who built these roads and their consequent ability to hoodwink investors, bribe congressmen, exploit farmers and other small shippers, and engage in speculative activities so dangerous that they periodically brought the entire U.S. economy crashing to the ground. No industry did more to galvanize anticapitalist fury or to generate movements for economic regulation during the First Gilded Age than the railroads.

The afterlife of railroad marvel and anger lasted well into the twentieth century and shaped the writing of nineteenth-century history into the 1960s. Then the obsession with the railroads dissipated, its demise hastened by the rise of new transportation systems—cars, trucks, and planes—that made these iron horses seem nothing more than clunky relics. A modern age of capitalism had seemingly swept the railroads into the dustbin of history. A fresh look at the era when railroads were king is thus long overdue.

White comes to this project as a leading figure in the “new western history,” a radical school that, for twenty-five years, has been debunking as myth the notion of the West as virgin land in which the great American ideals—freedom, individuality, democracy—found their fullest realization. White and others have brought to life a different West, one full of diverse Indian tribes, whose expulsion or decimation everywhere became a condition of American freedom. These historians have portrayed the early West not as a place where individuals went to be free but where different imperial nations, Britain and then the United States among them, jostled for power and control. When writing about the modern West, new western historians have emphasized not the independence of the settlers and entrepreneurs but their dependence on government-built or -subsidized infrastructure and support: dams, irrigation, roads, railroads, and land for crop growing, cattle grazing, and mining.

White’s work has been more than iconoclastic, however. He has been sweeping away old idols so as to open our eyes to new ways of thinking about the American past. In recent years, he has pioneered the Spatial History Project at Stanford University, an ambitious venture to persuade historians to make space, in addition to time, an important unit of historical analysis. One of his most inventive books was The Organic Machine, a story of the power unleashed by the Columbia River and how that power shaped the societies of animals and humans who resided in the region. And his concept of the “middle ground,” the title of a book he published twenty years ago, has done more than any other to reshape the study of early America. White conceived of the middle ground as territory in seventeenth- and eighteenth-century North America jointly inhabited by Indian tribes and imperial European powers. Neither side could control this ground, meaning that negotiation rather than conquest, and hybridity rather than purity, defined relations between the two groups, with far-reaching ramifications for politics, economics, and culture. Only in the nineteenth century did the middle ground disappear and did the more familiar and subsequent narrative of “Anglo-Saxon” triumph and Native American defeat and decline kick in. Historians and social scientists now apply White’s concept of the middle ground to zones of contact between indigenous peoples and European settlers everywhere in the world.

SO WHAT happens when this creative historian turns his attention to the building of the transcontinental railroads? White does not find much at which to marvel. He acknowledges that these railroads vastly accelerated the settling of the trans-Mississippi West, ended whatever chance the Indians had of living an independent life, enhanced American sovereignty, and turned the principal geographical axis of the United States from North-South to East-West. But he is an unrelenting critic of the entrepreneurs and financial speculators who built these roads. The “Associates” of Sacramento, a group of shopkeepers who fashioned themselves into the potent Central Pacific, the first corporation to lay track across the forbidding Sierra Nevada, come in for particular drubbing. Collis Huntington, “their driving force,” was “as narrow,” White writes, “as the upstate New York world that produced him.” Leland Stanford’s “preference in any crisis was to do nothing. Actually, at any time, his preference was to do nothing.” A charge of small-mindedness, boorishness, or haplessness seems to accompany every appearance of an Associate in White’s book.

Rejecting the contention made fifty years ago by Alfred Chandler, then dean of American business history, that the railroads made the modern corporation into a superb tool of capitalist accumulation and management, White argues instead that poor organization and profit-making bedeviled the transcontinental companies for the entirety of the Gilded Age. Indeed, he alleges that these railroads were “astonishingly mismanaged” enterprises, perpetually in financial trouble and driven by constant crisis to embrace dubious financial practices—watering down their stock, engaging in fraudulent accounting practices, taking on unsustainable levels of debt, setting up insider construction companies—in order to survive or, at least, to make themselves appear to the government as though they were “too big to fail.”

That these corporations repeatedly secured government assistance only deepens White’s anger. The bailouts, White alleges, succeeded principally in allowing the CEOs of these railroad corporations to become fabulously wealthy, to set up universities (Stanford) and humanities centers (the Huntington Library) to cleanse their family names, and to escape the economic penalty and social censure that should have come their way. The transcontinental railroads were not, in the final analysis, a mechanism for economic growth and transformation; rather they were merely “corporate containers for financial manipulation and corporate networking.” America would have been better off, White argues, had these railroads not been built when they were and with the financial chicanery and corruption that their establishment and sustenance required.

White’s larger target is the romance of growth through capitalist enterprise, always a strong element in American life and utterly dominant since the Reagan Revolution of the 1980s, and especially so in the gilded precincts—Seattle, Washington, and Palo Alto, California—in which White has spent the last twenty years living and working. He sees a direct connection between the railroad scandals of the nineteenth century and the and Wall Street scandals of the twentieth and twenty-first centuries: in both cases “corporations failed, but very often the people behind them succeeded. The celebrated creative destruction of capitalism is, it seems, gentle with the rich. . . . Certain kinds of failures impose more public than private costs. In failure as much as success, the modern [capitalist] world takes shape.”

This insight is important, but, in his eagerness to deliver a general indictment of capitalist practices, White may have gotten sidetracked. White knows that some railroads succeeded during the First Gilded Age. Indeed, he praises the regional railroad lines in the Midwest and California that supported robust agricultural and industrial development in their areas and turned profits while receiving nowhere near the level of government privilege bestowed on the transcontinentals. These regionals themselves were built and managed by capitalist corporations, and quite frequently by powerful ones. If one grants that the regionals enjoyed success, one cannot then argue that capitalism was unequal to the task of building railroads; rather, one must explain why capitalism failed in the particular case of the transcontinentals.

White does draw our attention to the biggest economic challenge that the transcontinentals faced: they were built far ahead of demand. When the first trains began to run, settlement, commerce, agriculture, mining, and manufacturing in the trans-Mississippi West had not developed to the point at which they could support one transcontinental line, let alone the six that were being built. The hope was that these roads would rapidly stimulate the economic activity that had been missing, and thus bring the railroads, within five to ten years of existence, the volume of traffic necessary for them regularly to turn a profit. But men of money knew that this scenario was utopian, which is why none of them attempted to build one of these railroads out of their own reserves or with funds raised exclusively through financial markets. The government, for whom building a continent-spanning railroad had become an imperative, decided that its only recourse was to lavish extravagant incentives and subsidies on the Central Pacific Associates and their ilk.

White is brilliant in documenting and reconstructing the precise ways in which the Associates and others feasted on the opening the government gave them. He demonstrates how small groups of private moneymen got access to the government, formed alliances with “friends” in Congress, and conspired in the notorious Willard Hotel in Washington and elsewhere to gain favors, buy votes, and steer legislative debates to desired outcomes. White’s portrait of an American government overwhelmed by corruption is breathtaking to behold and devastating to ponder. It alone is reason to read this book.

White is not as good, however, in explaining why a democratic state, a “government by and for the people,” proved itself to be so vulnerable to the moneyed interests. Some would say, of course, that America’s political system then was democratic in name only, given that more than half the people in the United States lacked the right to vote—women did not possess it, nor did most African Americans, except for the brief ellipsis of Reconstruction (1868–1877). But even as we acknowledge these restrictions on the franchise, we must also grant that in America more people were voting, both in absolute and relative terms, than in any other polity on the face of the earth. The number of offices subject to the will of this electorate and the frequency with which elections occurred also had no parallel in the nineteenth-century world. White male Americans of modest means, in other words, had ways of making their voices heard.

WHAT DID these people want? The political movement that White himself would have joined—one opposed to the building of government-subsidized transcontinentals—never coalesced. The dream of a continent-spanning republic, and of the free land and the promises of affluence and independence that went along with it, was simply too strong and too widely shared among Americans of European descent to resist. There was some support in Congress for the “public option” of the time, namely that the government would itself build and manage the transcontinentals until such a time that they would become profitable enough to turn over to private hands. But then as now, those who supported such an approach, which would have entailed the government taking on a construction project of daunting size and complexity, found themselves hemmed in by a powerful anti-statist ideology that was a legacy of the American Revolution. That ideology compelled Congress to delegate important tasks to the private sector, which is what the 1860s enabling legislation for the railroads undertook to do.

The “people’s” voice was nevertheless present in that early legislation (1862), as Congress balanced the incentives it gave to capitalists with a regime of strict public oversight. Congress was determined to make the transcontinental corporations serve the public purpose. Indeed, most capitalists regarded the obligations initially imposed on them by the government as too onerous, and they stayed away. A worried Congress, its hands already full with a Civil War, panicked, passing in 1864 new legislation that scaled up private incentives and scaled back public regulation. Only then did the moneymen come aboard. The “great barbecue” quickly ensued.

The hastiness of congressional retreat in the face of capitalists’ recalcitrance exposed a chronic shortcoming in America’s democracy: its voracious need for money. The huge number of elected officials and the frequency with which they had to run for office made this democratic electoral system expensive. The Constitution had made no provision for funding this system. Thus the political parties that arose to get their members elected and make public policy also became, by necessity, money-gathering machines. The private organizations and individuals to which the government turned for assistance in accomplishing its railroad-building aims were the same ones in a position to supply funds for congressmen and senators in need of reelection. The promise of delivering such funds—or the threat of withholding such funds or giving them to a rival candidate—deeply affected the process through which Congress awarded contracts (which companies would get them) as well as the content of the contracts themselves (how lavishly these companies would be rewarded for their willingness to do the government’s work). These are the circumstances in which the Central Pacific Associates and other circles of financiers and elected officials got rich and in which the government ceded its authority and privilege to private corporations. The corrupting effects of the transcontinentals, then, arose not exclusively from capitalist practices but from the intersection of those practices with a democratic system structurally vulnerable to moneyed influence.

IF WHITE slights the reasons for American democracy’s susceptibility to money, he provides us with the best account I have read of popular efforts in the 1880s and 1890s to free the republic from railroad and corporate rule. Everywhere one looked, Americans were mobilizing against the corporations: in the Grange, the Knights of Labor, the Farmers’ Alliance, the People’s Party, the American Federation of Labor, the American Railway Union, and even in Edward Bellamy’s Nationalist Clubs. The common charge levied at the railroads was that they constituted a “monopoly” and that they had used the special privileges granted them by the state to abuse the public good. Restoring the republic meant stripping the railroads of their privileged status or else forcing them to submit to special forms of regulation, including nationalization.

Historians have not always been kind to these anti-monopolists, variously depicting them as “woolly-headed,” opportunistic, Indian- and Asian-hating, and indulging in an exaggerated manliness that from today’s vantage point is easy to mock. White notes several of these shortcomings, but he refuses to ridicule the protesters in whom they resided. To the contrary, he admires them for their democratic principles, for their steadfastness, and for the risks they took. White’s recounting of the confrontation between the American Railway Union and the federal government in the Pullman strike of 1894 is particularly moving. This is the moment when an obscure labor official by the name of Eugene Victor Debs burst onto the national stage and, in the course of his imprisonment (for having led the strike), turned to socialism. Most nineteenth-century protesters did not follow Debs into the Socialist Party of America. But their actions, White argues, laid a foundation for a more humane, democratic, and regulated capitalism that would be at the heart of Progressive and New Deal reform.

One mystery haunts White throughout his book: how clever but not very talented men were able in nineteenth-century America to amass large fortunes and power even as their capitalist enterprises failed and engulfed large numbers of Americans in economic crisis. After reading White’s book, I am haunted by a different mystery: why the popular resistance that took shape during the First Gilded Age has been so absent from the Second. To the extent to which populist fury has surfaced in our own time, it is concentrated on the right, in the Tea Party and allied organizations. The disastrous 2010 BP oil spill generated no lasting anti-corporate sentiment, not even in Louisiana, once the dominion of “Share the Wealth” populist Huey Long. No new Debs or William Jennings Bryan has emerged even now, more than twenty-five years into this Gilded Age. The aversion of historians to reckoning with capitalism turns out to be the ruling idea of our age. No one, it seems, has escaped capitalism’s influence. Perhaps the labor stirrings in Wisconsin, and White’s remarkable attempt to resurrect the spirit of the First Gilded Age, are signs that something new is afoot.

Gary Gerstle teaches American history at Vanderbilt University and is writing a book on the state and democracy in America.