February 6, 2014
Although not related in quite the heroic terms it once was, the transcontinental railroads retain their place as one of the great alleged success stories of nineteenth-century America. According to the popular myths, the railroads, these great monuments to the ingenuity of American industrialists, united East and West by bringing together the economies of the West coast and the East coast, while setting the stage for the massive economic growth and national greatness that would occur in the United States during the early twentieth century.
And yet, few claims about the necessity or success of the transcontinental railroads are true. While none would argue that transcontinentals would become economically feasible in the private market at some point, during the 1860s, as the first transcontinentals took shape, there was no economic justification. This is why the first transcontinentals were all creatures, not of capitalism or the private markets, but of government. There simply were not enough people, capital, manufactured goods, or crops between Missouri and the West coast to support a private-sector railroad.
As creatures of government and of taxpayer-funded schemes to subsidize the railroads and their wealthy owners through cheap loans and outright subsidies, the railroads quickly became scandal-ridden, wasteful, and contemptuous of the public they were supposed to serve.