Fundamental Contradictions of Railroads

Americans and Europeans began in the railroad business with two different backgrounds. In the US the concept of a corporation was almost a new thing. The antecedent was the corporate body, but in America those bodies were small and weak, and American industrial corporations grew with few restraints. In Europe, corporate bodies were of long standing, and any new proposal had to pass a long vetting process by cities, kings, parliaments, churches, and capital markets.

In both systems, railroads survived the first and one of the greatest shocks to their philosophy, the discovery that they couldn't function at all as they had been planned. The plan had been for the corporation to build a way, install rails, and then, when you wanted to use the way, you put your vehicle on the rails and went where you wanted to go. The railroad, in short, would function as a sort of improved toll road.

In just a few years, this was seen to be wrong and fallacious. To function properly, railroads needed to own and control all the vehicles using the rails. So managed, their fantastic improvement of transportation would obviously impact any society they came in contact with.

In America in the 1830s, this was hardly a problem. Virtually the entire continent could be developed by new railroads without impacting an existing business or king. The demand for transportation was so strong that it became the central fact of political and financial life for the states of the 'Old Northwest' in the 1830s.

In Europe, every constriction applied, from the competition of ports and waterways, to the belief that the monarch possessed as a right the granting of the corporate existence. The long practice of these constraints, however, also provided a framework for the gathering of funds and the building of the hugely capital-intensive railroads.

The later follow-on of these differences emerged in the 1880s and 1890s in America, when every strong railroad believed that with sufficient effort they could 'capture' a territory. Americans started thinking that if one railroad went broke, another would soon buy the line or build a new one, and, in fact, the railroads became so over-built that in 1918 the USRRA was able to slice tens of thousands of miles from the map and radically improve service.

In Europe, more of what we might call 'central planning' had built lines which had reasons, and would not be allowed to go broke and abruptly cease service. Nor, after a few disastrous experiences, were the European companies allowed to build without supervision. European railways entered the 20th century encumbered by the requirements of society, but by the end of the century the European roads were, with the sole exception of long-haul freight, vastly superior to our own.

How could this happen?