Mark Pribonic decided to take an excursion to a place in American history, Promontory Summit, Utah. It is literally in no-man’s-land of the western plains. This isolated spot on the map is the place where the railroads of the Central Pacific and the Union Pacific met completing the transcontinental rail line. What was to be a walk through American history trivia turned out to be an economic lesson in the absurdity of government subsidies. FULL ARTICLE
Source link: http://blog.mises.org/6473/the-myth-of-the-great-railroad-meetup/
The Myth of the Great Railroad Meetup
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Your daughter has learned a lesson most of my professors of economics still haven’t. Good for the both of you.
Ah, so once again the problem is laid at the door of the wrong party. The Government is to blame. Not the lying stealing thieves in Central and Union Pacific Railroad companies.
This country astounds me in its blind faith that all corporations are honorable and that all government is bad when time after time we see evidence that the government and Corporations work hand in glove to rip off the tax payers.
The trouble with human beings is we’re all corrupt. We all want our “share†and preferably a larger share than the other guy. The Government has a mighty big piggy bank the problem is that too many folk want LESS government oversight of projects so that they can dip their grubby mits into the pot and not be caught.
IF the government had had honorable auditors and politicians watching over the RR companies shoulder that huge fraud would never have happened – BUT if the corporations were not headed by greedy self serving crooks, but honorable men who made a contract and intended to live up to it then the honorable politicians and auditors would not be necessary.
So the blame lies squarely on the shoulders, not of the government subsidy program, but on the people who abused it.
From my perspective, as the descendant of a people whose lands were taken for the “greater civilizing purpose of building railroads for mankind,” I want to point out that there had been enough corporate corruption to create the nation-state of the United States to go around for a long time. It had become a many-millennia mind-set for both corporate government and those private corporations formed, hand in glove, to build those railroads as a government/ private corporate alliance. Iron horses were needed to bind the United States together — and had not the land been gotten almost for free!
Time is swift and lives are short, and human beings have adapted shorthanded ways to think and write. Even some of our most intelligent libertarians, who mean only to enlighten (and more often than not do enlighten), conflate individuals acting together in government as a corrupt government at work; while coalescing the work by individuals forming a private corporation as honorable!
As far as this railroad building went: everyone was on the government payroll, all of them adhering to a congressionally devised government system of subsidy. I, like Adrian Smith, once believed that government programs, given the best and well studied consideration, could be set up with integrity so they would automatically work out that way — until I have now had the experience of working under such a plan for four years. Mr. Smith wrote: “So the blame lies squarely on the shoulders, not of the government subsidy program, but on the people who abused it.” But I say he must be unknowingly wrong. The trouble lies in the unbending statutes and the rules and regulations, which are set in stone by government to put a subsidy program in place to force compliance, no matter who is in charge.
Mr. Smith wrote: “If the government had had honorable auditors and politicians watching over the RR companies shoulder that huge fraud would never have happened. BUT if the corporations were not headed by greedy self serving crooks, but honorable men who made a contract and intended to live up to it then the honorable politicians and auditors would not be necessary.
But what about those members of congress who put this project together (bu using as one land planning means the relocation of Native Americans on reservations out of the way)? And why were four Sacramento shopkeepers — Leland Stanford, Mark Hopkins, Collis Huntington, and Charles Crocker — chosen above all other Americans to benefit from such largesse? They certainly were not railroad men and they did not have the financial means to build the Central Pacific and the Union Pacific railroads.
Don’t you see? What Americans have always been so blindly caught up in is the building of their nation-state’s government greatness — greatness over any other nation-state’s government. Think back to the old saying of our childhood: “All is fair in love in war?” If that is true, could that not mean the American citizen’s love of his or her nation-state’? Where, then is the individual’s place in this scheme? But if the individual is merely a subsidiary to this working out, does is really mean anything whether he or she is corrupted or not — for the greater good of all?
What is needed is compliance for nation-state greatness! Not a conglomeration of who knows what kind of individuals acting patriotically out of love, even if they call themselves American citizens of a free nation!
Oscar Lewis’ “The Big Four” is a must read about why governments favor some men over others and how they comply.
From my perspective, as the descendant of a people whose lands were taken for the “greater civilizing purpose of building railroads for mankind,” I want to point out that there had been enough corporate corruption to create the nation-state of the United States to go around for a long time. It had become a many-millennia mind-set for both corporate government and those private corporations formed, hand in glove, to build those railroads as a government/ private corporate alliance. Iron horses were needed to bind the United States together — and had not the land been gotten almost for free!
Time is swift and lives are short, and human beings have adapted shorthanded ways to think and write. Even some of our most intelligent libertarians, who mean only to enlighten (and more often than not do enlighten), conflate individuals acting together in government as a corrupt government at work; while coalescing the work by individuals forming a private corporation as honorable!
As far as this railroad building went: everyone was on the government payroll, all of them adhering to a congressionally devised government system of subsidy. I, like Adrian Smith, once believed that government programs, given the best and well studied consideration, could be set up with integrity so they would automatically work out that way — until I have now had the experience of working under such a plan for four years. Mr. Smith wrote: “So the blame lies squarely on the shoulders, not of the government subsidy program, but on the people who abused it.” But I say he must be unknowingly wrong. The trouble lies in the unbending statutes and the rules and regulations, which are set in stone by government to put a subsidy program in place to force compliance, no matter who is in charge.
Mr. Smith wrote: “If the government had had honorable auditors and politicians watching over the RR companies shoulder that huge fraud would never have happened. BUT if the corporations were not headed by greedy self serving crooks, but honorable men who made a contract and intended to live up to it then the honorable politicians and auditors would not be necessary.
But what about those members of congress who put this project together (bu using as one land planning means the relocation of Native Americans on reservations out of the way)? And why were four Sacramento shopkeepers — Leland Stanford, Mark Hopkins, Collis Huntington, and Charles Crocker — chosen above all other Americans to benefit from such largesse? They certainly were not railroad men and they did not have the financial means to build the Central Pacific and the Union Pacific railroads.
Don’t you see? What Americans have always been so blindly caught up in is the building of their nation-state’s government greatness — greatness over any other nation-state’s government. Think back to the old saying of our childhood: “All is fair in love in war?” If that is true, could that not mean the American citizen’s love of his or her nation-state’? Where, then is the individual’s place in this scheme? But if the individual is merely a subsidiary to this working out, does is really mean anything whether he or she is corrupted or not — for the greater good of all?
What is needed is compliance for nation-state greatness! Not a conglomeration of who knows what kind of individuals acting patriotically out of love, even if they call themselves American citizens of a free nation!
Oscar Lewis’ “The Big Four” is a must read about why governments favor some men over others and how they comply.
Without government subsidies, Union Pacific went bankrupt within three years of the meetup. The obvious solution, then, is without government subsidies and other government interference, corrupt and evil corporations and executives cannot long continue their practices. The market is self-regulating in a way that government could never match even if they actually tried to.
Let’s not also forget the example of Enron, which received numerous subsidies from the Federal Government with the passage of the Kyoto Protocal, of which it was a chief supporter. Had the government not intervened in the economic affairs of men, then Enron also would not have grown to be a corrupt behemoth that fell apart.
Mr. Huh I think you are writing the future history had Kyoto been passed. Today Enron would be one of the most powerful corporations in America, rivaling GE, Exxon, and Microsoft. Instead the company went bye-bye, and some of their executives are in jail.
Of course the people running corporations are no less corrupt than government officials. They are basically the same people. But corporations by themselves do not have the power to forcibly take money from people. They have to earn it through voluntary trade. In a cosmic sense, perhaps they are no more moral. But in a practical sense, they are limited in the amount of power they wield over us.
I live here in Utah and I could not agree more.
Corruption can exist in and out of Government.
The simple truth is that if Government stayed
out of subsidizing anybody, which it only can do by first unjustly taking earnings from the producers and then distributing the takings to friends of Politicians, this type of corruption could not take place.
It’s difficult for me to believe that the crooks
in Washington were not aware of the corruption in the field given the long time span of the project.
“The trouble with human beings is we’re all corrupt.” Adrian Smith. You bare your soul, you can only speak for yourself. I trust you will never become a Politician, unless of course until you see the light. Human beings are basically good.
[QUOTE]You bare your soul, you can only speak for yourself. I trust you will never become a Politician, unless of course until you see the light. Human beings are basically good. [/QUOTE]
I am currently working on a field project. The team eats out every night. Two nights ago the tab was picked up by the program manager. He encouraged us to order whatever we want and we all did. All of us ate far more than we normally do, to a man.
It is indeed human nature to want more than we currently have. When the price is lower, we buy more plain and simple. In the case of the dinner, the ‘cost’ was free to all involved so the amount purchased was greater than usual.
Hiya. Good article on the parallel grading of the transcontinental railroad.
I only want to point out one thing – the route over the sierras was chosen by Theodore Judah, a Central Pacific railroad engineer very much removed from the politics of the day. It was the only practicable northern route that could be found through the sierras and Judah searched for many years before finding a workable solution.
Now, to balance that out, it should be discussed as to why the railroad was laid along the northerly route at all – if it weren’t for the civil war, congress would have never been able to come to a consensus on the placement for the railroad. It was the worst of the worst of self interested politics. When the south succeeded, the southern obstructionists went with it and they were able to pass the railroad act which stipulated the northerly route.
I highly recommend to anyone “Empire Express!” by David Howard Bane as an excruciatingly detailed account of the building of the road, very impartial, with lots of new research and uncovered personal letters that detail the poltical and social goings ons. It lays bare the entire political process, with great insight as to the amount of bribery and payoff that capitol hill required – very much more blatant and outward than today’s shenannigans in D.C.
As your article points out, the payment per mile of rail laid evolved all of the bizarre circumstances that followed – including building as many miles as possible as fast as possible at the expense of everything else. It should be noted however that the Central Pacific built an extremely good road over the Sierras, and only got caught up in the money race towards the end across Nevada and Utah. It was a matter of survival, faced against the extremely aggressive and morally corrupt Thomas Durant of the Union Pacific. Durant deserves most of the credit for the ‘robber baron’ image of the railroad builders.
–Mike (A railfan and libertarian)
“‘The trouble with human beings is we’re all corrupt.’ Adrian Smith. You bare your soul, you can only speak for yourself. I trust you will never become a Politician, unless of course until you see the light. Human beings are basically good.” – Matt
Well, I will disagree with you there. It becomes more and more clear from the actions of the fickle and stupid masses (as well as their Washington slave drivers) is that they are basically weak. Not naturally good or evil, but simply weak and fragile.
“IF the government had had honorable auditors and politicians watching over the RR companies shoulder that huge fraud would never have happened [...]”
IF the government just had been populated by uncorrupted angels or sinless superhumans, then that huge fraud would never have happened . . .
… the addition of a simple map (graphic) of that small area in Utah would have greatly enhanced the
essay.
A picture is worth a 1000 words, but the old photo of the Gold-Spike joining ceremony was much less helpful than a map would have been.
Adrian Smith wrote:
Let’s break your argument down into its premises.
1. Government subsidies are healthy stimuli for growth.
2. The railroad companies abused the subsidies, wasting the money offered for greater profit.
3. Government did not establish adequate control over how subsidies were used, due either to poor management or corruption.
Would it surprise you to learn that libertarians agree with you on premises 2 and 3? Yes, it’s true that the railroad companies abused their privelege and acted unethically. Yes, there were bad men also in the government who allowed this to happen.
However, take a closer look at premise #1. Libertarians will tell you that #1 is flat out wrong, and there is plenty of evidence on our side. Now, who is it that collects the money and then hands out these subsidies? Who is setting up this whole scenario? I think you’ll find that our position makes more and more sense if you really and truly think it through.
Consider a person who keeps a filthy house with perpetually dirty dishes and bits of food on the floor. Do we condemn the rats and cockroaches that are attracted to this mess, and then go on to campaign against the insect and rodent worlds for their greed? Government keeps a very dirty house.
“Mr. Huh I think you are writing the future history had Kyoto been passed.”
My bad, it was actually federal agencies such as Ex-Im (Export-Import Bank), and OPIC Overseas Private Investment Corporation) that subsidized Enron, according to SEEN (the Sustainable Energy and Environmental Network)
“IF the government had had honorable auditors and politicians watching over the RR companies shoulder that huge fraud would never have happened”
When, in the history of the world, have there ever been honorable auditors and politicians?
I was going to say something, but the only option for posting is “Post an intelligent and civil comment”.
Never mind.
Of course government should not have handed out taxpayers money for this project. And as J.J. Hill of the Great Northern proved a railroad would have built without such subsidies. Interestingly it was the Union Pacific (under later ownership – F.D.R.’s backers the Harriaman family being important) who were the great foes of the J.J. Hill first using direct violence to attack the Great Northern (forceing Great Northern men to defend themselves with violence) and then (when the direct attacks failed) using the Federal government (via “anti trust law” ) to attack J.J. Hill.
However, it is also true that the Central Pacific (corrupt as it was) was not nearly as bad as the Union Pacific.
Nor is it just a matter of taking taxpayers money. For example, the Central Pacific made deals with various indians – the Union Pacific tended to have indians killed.
Of course in the great race to be first to get to the meetup point the Union Pacific was defeated by its own corruption.
The building work on the track and bridges was so poor that a lot of it fell apart (after some bad weather) before the project was completed – so the Union Pacific had to go back and lay the track (and so on) again.
Thus the Central Pacific got to the meetup point first and was there for quite some time before the Union Pacific turned up.
The Union Pacific owners were unvirtuous but not immoral (at least with their taking advantage of the govornment subsides) They in no way forced anyone to do anything or violated any contract. Taking advantage of a situation is unvirtuous but not immoral. The line between morality and virtue is when a natrual law is broken. We need to diferentiate between the two as it shows true criminals and unvirtuous people.
About the railroad…disregarding all previous comments made. I remember correctly, the steam engine was replaced by the rail road. Steam engines used to run up canals often times pulled by the strenth of people. Transporting goods on a steam engine used to be very costly. The rail road caused for the steam engine to be almost obsolete because the rail road was more efficient and less costly in transporting cargo. Because transportation cost were greatly reduced, people imported goods from other parts of the nation, in the early 1800′s. This allowed for specialization and in turn allowed for growth of this great nation.
In my opinion, the rail road was an investment in nation.
While the overall impression that your daughter received that government distorts incentives causing absurd results is undoubtedly correct, the historical details in the story are not quite right because actually there was no federal subsidy. Instead, the federal government ultimately received a billion dollar windfall as discounted transportation costs as a result of their involvement in the first transcontinental railroad. The per mile dollar amounts cited were for the issuance of bonds that had to be and were repaid by the railroads in full with interest, and were not government grants.
The lies about business needs to stop they did pllot a single inch of that track. The track was plotted by the gov and they were told were to build and how to build it they did so at the behest and the control of state “planners” aka idiots acting on political motives not market motives hence the economic stupidity.
Much like the interstate overpass game of the 1950′s-60′s the companies doing the work were not liars, you iars, merely people doing a job they were paid to do.
Union pacific went bankrupt not because of bad leadership but because of the civil war inflation going bust.
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