Further exploitation of land resources by private interests resulted from the government’s policy of subsidizing western railroads. Here was a clear illustration of the conflict between the idea of the West as a national heritage to be disposed of to deserving citizens and the concept of the region as a cornucopia pouring forth riches to be gathered up and carted off by anyone powerful and determined enough to take them. When it came to a choice between giving a particular tract to railroads or to homesteaders, the homesteaders nearly always lost out. On the other hand, the swift development of western railroads was essential if farmers, miners, and cattle ranchers were to prosper.
Unless the government had been willing to build the transcontinental lines itself—and this was unthinkable in an age dominated by belief in individual exploitation—some system of subsidy was essential. Private investors would not hazard the huge sums needed to lay tracks across hundreds of miles of rugged, empty country when traffic over the road could not possibly profit for many years. It might appear that subsidizing construction by direct outlays of public funds would have been adopted, but that idea had few supporters. Most voters were wary of entrusting the dispensing of large sums to politicians. Grants of land seemed a sensible way of financing construction. The method avoided direct outlays of public funds, for the companies could pledge the land as security for bond issues or sell it directly for cash.
In many cases the value of the land granted might be recovered by the government when it sold other lands in the vicinity, for such properties would certainly be worth more after transportation facilities to eastern markets had been constructed. “Why,” the governor of one eastern state asked in 1867, “should private individuals be called upon to make a useless sacrifice of their means, when railroads can be constructed by the unity of public and private interests, and made profitable to all?”
Federal land grants to railroads began in 1850 with those allotted to the Illinois Central. Over the next two decades about 49 million acres were given to
Chinese work on a railway in the Far West. "Without them,” Leland Stanford, president of the Central Pacific Railroad said, "it would be impossible to complete the western portion of this great national highway.” Some Chinese were drawn from the gold fields farther north, and others were imported from China, under five-year contracts with the railroads, which paid them $10 or $12 a month.
Various lines indirectly in the form of grants to the states, but the most lavish gifts of the public domain were those made directly to builders of intersectional trunk lines. These roads received more than 155 million acres, although about 25 million acres reverted to the government because some companies failed to lay the required miles of track. About 75 percent of this land went to aid the construction of four transcontinental railroads: the Union Pacific-Central Pacific line, running from Nebraska to San Francisco, completed in 1869; the Atchison, Topeka, and Santa Fe, running from Kansas City to Los Angeles by way of Santa Fe and Albuquerque, completed in 1883; the Southern Pacific, running from San Francisco to New Orleans by way of Yuma and El Paso, completed in 1883; and the Northern Pacific, running from Duluth, Minnesota, to Portland, Oregon, completed in 1883.
The Pacific Railway Act of 1862 established the pattern for these grants. It gave the builders of the Union Pacific and Central Pacific railroads five square miles of public land on each side of their right-of-way for each mile of track laid. The land was allotted in alternate sections, forming a pattern like a checkerboard: the squares of one color representing railroad property, the other government property. Presumably this arrangement benefited the entire nation since half the land close to the railroad remained in public hands.
However, whenever grants were made to railroads, the adjacent government lands were not opened to homesteaders—on the theory that free land in the immediate vicinity of a line would prevent the road from disposing of its properties at good prices. In addition to the land granted the railroads, a wide zone of “indemnity” lands was reserved to allow the roads to choose alternative sites to make up for lands that settlers had already taken up within the checkerboard. Thus, homesteading was in fact prohibited near land-grant railroads. More than twenty years after receiving its immense grant, the Northern Pacific was still attempting to keep homesteaders from filing in the indemnity zone. President Cleveland finally put a stop to this in 1887, saying that he could find “no evidence” that “this vast tract is necessary for the fulfillment of the grant.”
Historians have argued at length about the fairness of the land-grant system. No railroad corporation waxed fat directly from the sale of its lands, which were sold at prices averaging between $2 and $5 an acre. Collectively the roads took in between $400 million and $500 million from this source, but only over the course of a century. Land-grant lines encouraged the growth of the West by advertising their property widely and by providing cheap transportation for prospective settlers and efficient shipping services for farmers. They were required by law to carry troops and handle government business free or at reduced rates, which saved the government millions over the years. At the same time the system imposed no effective restraints on how the railroads used the funds raised with federal aid. Being able to lay track with money obtained from land grants, the operators tended to be extravagant and often downright corrupt.
The construction of the Central Pacific in the 1860s illustrates how the system encouraged extravagance. The line was controlled by four businessmen: Collis P. Huntington, “scrupulously dishonest” but An excellent manager; Leland Stanford, a Sacramento grocer and politician; Mark Hopkins, a hardware merchant; and Charles Crocker, a hulking, relentless driver of men who had come to California during the gold rush and made a small fortune as a merchant. The Central Pacific and the Union Pacific were given, in addition to their land grants, loans in the form of government bonds—from $16,000 to $48,000 for each mile of track laid, depending on the difficulty of the terrain. The two competed with each other for the subsidies, the Central Pacific building eastward from Sacramento, the Union Pacific westward from Nebraska. They put huge crews to work grading and laying track, bringing up supplies over the already completed road. The Union Pacific employed Civil War veterans and Irish immigrants, while the Central employed Chinese immigrants.
This plan favored the Union Pacific. While the Central Pacific was inching up the gorges and granite of the mighty Sierras, the Union Pacific was racing across the level plains laying 540 miles of track between 1865 and 1867. Once beyond the Sierras, the Central Pacific would have easy going across the Nevada-Utah plateau country, but by then it might be too late to prevent the Union Pacific from making off with most of the government aid.
Crocker managed the Central Pacific construction crews. He wasted huge sums by working through the winter in the High Sierras. Often the men labored in tunnels dug through forty-foot snowdrifts to get at the frozen ground. To speed construction of the Summit Tunnel, Crocker had a shaft cut down from above so that crews could work out from the middle as well as in from each end. In 1866, over the most difficult terrain, he laid twenty-eight miles of track, at a cost of more than $280,000 a mile. Experts later estimated that 70 percent of this sum could have been saved had speed not been a factor. Such prodigality made economic sense to Huntington, Stanford, Hopkins, and Crocker because of the profits they were making through its construction company and because of the gains they could count on once they reached the flat country beyond the Sierras, where costs would amount to only half the federal aid.
Crocker’s Herculean efforts paid off. The mountains were conquered, and then the crews raced across the Great Basin to Salt Lake City and beyond. The meeting of the rails—the occasion of a national cele-bration—took place at Promontory, north of Ogden, Utah, on May 10, 1869. Leland Stanford drove the final ceremonial golden spike with a silver hammer.22
The Union Pacific had built 1,086 miles of track, the Central 689 miles.
In the long run the wasteful way in which the Central Pacific was built hurt the road severely. It was ill-constructed, over grades too steep and around curves too sharp, and burdened with debts that were too large. Steep grades meant that heavier, more expensive locomotives burning more coal were needed to pull lighter loads—a sure way to lower profits. Such was the fate of nearly all the railroads constructed with the help of government subsidies.
The only transcontinental railroad built without land grants was the Great Northern, running from St. Paul, Minnesota, to the Pacific. Spending private capital, its guiding genius, James J. Hill, was compelled to build economically and to plan carefully. As a result, his was the only transcontinental line to weather the depression of the 1890s without going into bankruptcy.
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