The Great Railroad Revolution

by Christian Wolmar

  Largely thanks to the idealistic enthusiasm of men such as Plumbe and Whitney, a series of railroad conventions was held in various cities across the country to explore the project and lobby for particular routes. There was, of course, one major obstacle to the building of the transcontinental about which little was said—the Native Americans, or Indians, as they were then known. As Dee Brown notes, “During the lively debates over all these various routes, no mention was ever made of the native Americans, the Indians who had lived for centuries on the lands into which the Iron Horses must intrude.”6 Uniquely among early supporters of the transcontinental, Whitney did at least give some consideration to the issue. It was not, though, that he had any more regard for Native American rights than the politicians who did not even trouble to mention them. Not at all. He was simply keen to ensure that their land titles would be extinguished and that they would be forced to settle permanently like white men or move far away from the iron road. It was not the presence of Native Americans that killed off Whitney’s idea but the politics of the North-South divide. Southern legislators had no truck with talk of a route in the Far North, running along the southern shores of the Great Lakes and then west from Milwaukee, while the Northerners could not accept the idea of the line going through the South. Whitney, who even went to England in 1851 to try to raise financing for the project, gave up, and the transcontinental scheme disappeared into the government machine. It was not totally inactive, though. The Army Corps of Engineers produced surveys for five possible routes from the Missouri River to California that covered everything from geology to flora and fauna. They provide a remarkable and beautiful compendium of the virgin West before the arrival of the iron horse, but proved to be of little practical value, as the Southern interests blocked any move toward legislating for the line. The transcontinental was thus put on hold until the secessionists left Congress to the Northern interests they so despised.

  Whitney, Plumbe, and various other early dreamers, however, had not wasted their time. They had established the idea of the transcontinental as a topic of popular debate and ensured the concept took hold in the public mind. When the Southern states seceded from the Union in 1861, Lincoln, himself a true railroad visionary, wasted little time in indicating that a bill to build the line was now likely to be blessed with favorable passage through Congress, given the absence of the troublesome Southerners. The strongest lobbying now came from the West in the shape of another visionary, Theodore Judah, who has the best claim to be called the father of the transcontinental. Judah, for whom the epithet fanatic might have been devised, had been the engineer on the first California railroad, the Sacramento Valley Railroad, a twenty-one-mile line completed in 1852. He was convinced that it was possible to build a railroad through the Sierra Nevada, even though they appeared to be an insuperable barrier when viewed from the valleys below. He had the talents of both engineer and lobbyist, and he spent several years shuttling between the West, where he surveyed the potential route, and the East, where he labored tirelessly to convince politicians of the need for the transcontinental railroad.

  As the bill was being prepared in 1862, he was back in Washington as the official representative of the Pacific Railroad Convention. Remarkably, despite the fact that there was a war going on, with battles breaking out at times within earshot of Washington, both houses of Congress found time to debate the bill in great detail. It was no walkover, but the result was not in doubt, provided the various potentially hostile interests—principally states that might be bypassed and rival railroads—could be appeased. Ultimately, the Pacific Railroad Act of 1862 passed through both houses with ease and gave the concession for the construction of the line to two companies, the Central Pacific, which was to start building eastward from Sacramento, California, and the Union Pacific, which would begin at Council Bluffs, Iowa—a confusing nomenclature since it was the Union Pacific that started in the center of America. One simple statistic illustrates the scope of the project: the Union Pacific and the Central Pacific would become the biggest two corporations in the country. This also helps to explain the sheer, almost unbelievable, scale of corruption and graft that would accompany the construction of the first transcontinental.

  The act completely ignored the interests of the Native Americans. Indeed, it was worse than that. The act clearly contradicted previous efforts to protect their territory. The 1851 Treaty of Fort Laramie between the US government and seven Plains Indian nations recognized that the Cheyenne and Arapaho held a vast territory between the Rockies and western Kansas, including what is now southeastern Wyoming, southwestern Nebraska, eastern Colorado, and the far-western part of Kansas. The deal gave the Indians the right to clearly defined territories in exchange for stopping their attacks on settlers headed west on the Oregon Trail, while the US government offered money to the signatories of the treaty and pledged to deter US citizens from entering Native American territory. Clearly, building a railroad right through Native American territory was a breach of this pledge and ended any meaningful attempt to pay heed to their rights.

  In contrast, for the railroad builders, the terms of the initial act were not ungenerous, but when they were improved upon two years later, they offered an astonishing level of federal funding, given that the war effort was taxing government resources to the limit. The companies benefited from two forms of state aid: for every mile of line they completed in the plains, they would receive $16,000 in government bonds, double that in the more difficult terrain of the Nebraska prairies or the Sacramento Valley, and triple the amount, $48,000 per mile, in the mountains. In total, that represented a potential loan of $60 million to the companies, but there was also a generous land grant ultimately representing a total of more than thirty-one thousand square miles, equivalent to an area the size of South Carolina. This was to be distributed on the basis of ten square miles per mile of track in strips alternating on either side of the right of way—which itself was a substantial four hundred feet wide. The meeting point of the two railroads was not specified, giving both companies an incentive to lay track over as many miles as quickly as possible.

  Certain restrictions, placing obligations on the companies, were imposed by the federal government. Most notably, no government funding was available until the companies had each raised millions of dollars and built forty miles of track. However, much of the legislation was poorly worded, and details of the precise requirements, such as the sums required and the repayment terms of the loans, were unclear. The two railroad companies, for whom the term rapacious is an understatement, would take every opportunity to exploit these loopholes. Each company had been given two years to build the first fifty miles, but thereafter only fifty miles per year were required, which suggested the near two-thousand-mile railroad could have taken two decades to build. In the event, it was completed far more quickly, thanks to the financial incentives and the competition between the two companies.

  The act was signed into law by Lincoln on July 1, 1862, and tradition— but perhaps not historical accuracy—has it that Judah, who had continued his lobbying as a clerk to the bill committee, sent a telegram to his Central Pacific colleagues back in Sacramento saying, “We have drawn the elephant. Now let us see if we can harness him up.” It was not the only crucial piece of legislation passed that year that would help bring about the transcontinental. The Homestead Act, which enabled settlers to claim land that they had farmed and developed for five years—a kind of legal guarantee to squatters—encouraged the migration westward that would be essential in making the new line viable.

  Having secured the passage of the act, Judah headed back west by boat with large amounts of equipment, as none was available in California; virtually everything had to be imported via a railroad that crossed the Isthmus of Panama or by sea around Cape Horn. The war was far away, and there was nothing to prevent work from starting on the line. For Judah, it was a moment to savor, a triumphant outcome to an exhausting two years spent first surveying the Sierra Nevada in
search of a route for the transcontinental and then canvassing support for the new railroad. To force through a railroad against the myriad of obstacles generally requires an element of obsession, bordering on fanaticism, a common characteristic of railroad pioneers both in America and elsewhere. Judah had worked on various engineering projects in the East when he traveled west to be the engineer of the first railroad in California, the 21-mile Sacramento–Folsom line. The railroad was a financial failure, as the gold mines it was designed to serve soon became exhausted, but that did not stop Judah from exploring the possibility of a line farther eastward through the mountains. He had tried to get a bill for a Pacific railroad through Congress but, having failed, managed to persuade the California legislature to permit the construction of a line from Sacramento to the state line with Nevada, 115 miles away. Ostensibly, it was to serve the recently discovered silver mines of Nevada, but, in fact, Judah’s eyes were always on a line right through to the East.

  With promises of access to that wealth, Judah was able to sell the idea of a railroad to a key group of local businessmen. Judah’s breakthrough in his search for investors had come at a seminal meeting in Sacramento in November 1860, probably the most famous gathering ever to take place above a hardware store, though many of the later accounts have undoubtedly been embellished through the rose-tinted glass of hindsight. Judah had been touring the state, seeking to sell the idea of his railroad to any local notables with a few hundred dollars to spare, but he found few of the richer members of the state were forthcoming. At the meeting in the hardware store, however, a quartet in Judah’s audience famously responded to his entreaties, a decision that they would never regret. Four rather unprepossessing local merchants—Leland Stanford, Charles Crocker, Mark Hopkins, and Collis P. Huntington—came forward to invest in what would become the Central Pacific, and by doing so would join the ranks of the richest men in the United States. They were to become the Big Four—or Associates, as they called themselves—of the Central Pacific, turning themselves from humble small-town businessmen into directors of one of the two biggest companies in the land. Stanford was a wholesale grocer (though, more usefully, he was soon to become governor of California), Charles Crocker dealt in dry goods, while Hopkins and Huntington were the proprietors of the hardware store in which the meeting took place. A 1930s biographer of the Big Four wrote with brutal candor of the meeting, “In later life, four of his [Judah’s] listeners accepted easily the roles of men of vision, who had perceived a matchless opportunity and grasped it with courage. It was a role none of them deserved.” Indeed, at the meeting Judah had sold the line not on the basis of a great project that would transform America but, rather, as a short-term opportunity to make a quick buck by tapping into the silver and other mineral wealth of the mountains. He had told the merchants what they wanted to hear: “how to sell more of their goods, how to make their property more valuable, how to expand their businesses and stifle competition.”7

  Therefore, immediately on Judah’s return to California following the passage of the 1862 act, the Central Pacific was formally constituted with Stanford as president, Huntington as vice president, Hopkins as treasurer, and Crocker as the construction supervisor—and, crucially, president of the construction company that was a subsidiary of the Central and bore his name. That company was to be the mechanism through which the illicit part of their fortunes would be made and eventually led to Judah’s falling out with the Big Four and, as an indirect consequence, to his premature death.

  Despite the war still raging in the East, the passage of the act and the prospect of government subsidies meant there was nothing to stop work from beginning in California. Judah had brought much useful equipment with him, and the first sections of the line, on the eastern side of California’s great Central Valley, were relatively easy to construct. Too easy, though, for the money-grabbing Associates, who fell out with Judah over the question of precisely where the rise into the Sierra Nevada began. This was an important and potentially lucrative matter. The cash-strapped Central Pacific was desperate to get its hands on the cheap loans it would obtain by starting construction. And, as we have seen, for each mile of track built in the mountains, the company stood to receive three times the amount it received per mile of track built in the plains. So Stanford and Crocker decided that the rise began at a place called Arcade Creek, despite the fact that the mountains, a good fifteen miles away, were barely visible from there. It would have been all too easy to pull the wool over the eyes of the bureaucracy, three thousand miles away in Washington, but Judah was having none of it. As he had personally undertaken the survey, he knew that the true beginning of the gradient was some twenty miles farther east, a difference of some $640,000 to the company.

  This was the point at which the visionary, as Judah saw himself, came up against the hard-nosed “gang of corner-cutting merchants he saw the Associates to be.”8 There were other sources of friction between the Associates and Judah, notably over his survey fee and his suspicions that some of the money being spent on the first section of line was actually being diverted to a road project that was one of the Associates’ other commercial ventures. These swindles had not gone entirely unnoticed in the press, thanks to the machinations of a pair of equally corrupt brothers, John and Lester Robinson, who had worked on the Sacramento Valley Railroad and leaked the story, since they were eager to obtain the contract on the Central Pacific themselves. Judah wanted nothing to do with the Associates’ sharp practices.

  Work on the Central Pacific had started on January 8, 1863, after the ceremony of turning the first shovelful of earth. Heavy rains had turned the streets into mud, onto which the prominent lady guests of the town refused to venture, as they sought refuge on the balcony of a local hotel. The main speakers were Crocker, styling himself as the “general superintendent” of the railroad, and Stanford, now both president of the Central Pacific and governor of California. The straw laid out to absorb the mud made the ritual of turning the first sod rather more difficult than usual. It was somehow apt, given the fraud and deception that would attend every stage of the building of the line, that even the groundbreaking ceremony was an act of deceit, with a wagonload of earth dumped expressly for the purpose.

  The inaugural part of the Central was built by Charles Crocker’s eponymous company and illustrates precisely the sort of financial shenanigans that became routine on both railroads. On this first section stretching eighteen miles out of Sacramento, costs soon exceeded estimates, and Crocker’s cash ran out. No matter. The extra money required, $150,000 on a contract originally estimated at $275,000, was made up from Central Pacific’s coffers, a clear breach of normal accounting rules that amounted to “a polite form of embezzlement,” but since the other three were all silent partners in Crocker’s outfit, they benefited personally, too.9

  It was through this type of contracting arrangement that the promoters of both the Central and the Union railroads would make most of their money. There was in fact plenty of straight money to be made, given the generous terms of the legislation, but as historian John F. Stover suggests, “none of the participants wished to be satisfied with a modest profit.” Crocker’s company had the contract to build the railroad only as far as the state line, at which point another contractor, the Contract & Finance Company, took over. The move away from using Crocker’s company was prompted by a realization on the part of the Associates that such a patently dubious arrangement—between Crocker of the Central Pacific and Crocker & Company as the contractor—would not stand up to any scrutiny. Crocker, who incidentally had no previous contracting experience but ultimately did see the project through, later cheerfully admitted that there was no “& Company” in his organization, as he had sole charge of it. The new arrangement was no less dishonest. It was merely a subterfuge, since the Contract & Finance Company was owned by the Associates, who “managed to get their accounts into such a shape that no outsider had a chance of understanding them.”10 They were able to use the con
tracting company as a cash cow, given it was responsible for acquiring all the material and building the line at prices that could easily be inflated, to the detriment of the Central and its shareholders, as there was no external scrutiny of what were internal transactions.

  It was this arrangement that led to Judah’s disillusionment. Judah had not even been at the opening ceremony, and after a couple of difficult board meetings he understood clearly that the Associates were trying to push him out. They paid him off with $100,000, and Judah decided to try to obtain alternative financing, possibly with the intention of buying out the Associates. He headed back east in the autumn, but the journey proved fatal, as he contracted yellow fever in the tropical climate of Panama and died in New York a few days after his return, aged just thirty-seven. His death left the Associates completely free to use the railroad company to plunder the government’s coffers and, through the medium of the contractor, to cheat the unwitting investors. Indeed, they were so intent on enriching themselves first that initial progress on the line was painfully slow, despite the expenditure of considerable sums of money. It was so slow, in fact, that the Union Pacific, despite starting two years later, had soon built as much mileage as the Central.

  Work on the Union Pacific had been delayed not only by the proximity of the war, which sapped both men and materials, but also by its more diffuse structure. The Union Pacific did not have an obvious set of champions like Judah and the Big Four. In an attempt to ensure that ownership of the railroad was widely spread, the first Pacific Railway Act had created a group of nearly a hundred “commissioners” who were supposed to first create, and then fund, the company.

  Enter Dr. Thomas Durant, the man who would become Mr. Union Pacific. A measure of the fellow can be gleaned from the fact that he had originally qualified as a doctor but had never practiced because he had become bored with medicine and turned, instead, to speculating in stocks. He had railroad experience also, as he had promoted and built the Mississippi & Missouri, the line that connected with the Rock Island Railroad through the ill-fated bridge over the Mississippi. Although many of the other characters involved in the Union Pacific, which has been aptly described as “a curious mixture of the noble and the ignoble,” were every bit as corrupt as Durant, most at least demonstrated a genuine and commendable interest in pushing the project through and believed it would transform America. Not so Durant. He was the complete opposite of Judah, seeing the making of money as the only reason to involve himself in railroad construction: “Pride of accomplishment, the excitement of opening up new frontiers, and fulfilling society’s need for transportation meant nothing to him.”11