railroad: Abuses and Regulation

Abuses and Regulation

Starting with the Panic of 1837, which was precipitated by the collapse of the railroad boom in England, overexpansion and unsound financing of the railroads had affected the national economy. During the turnpike- and canal-building booms the federal and state governments had done much of the financing; consequently, during the panic many states found it necessary to repudiate the debts thus incurred. That experience discouraged government participation in the railroad boom that was just beginning and accounted in large part for private instead of public ownership of railroads in the United States.

Growing sectionalism and the conflict between the North and the South before the Civil War had tended to block large-scale projects (e.g., that of Asa Whitney), but the war itself gave tremendous impetus to railroads (e.g., the Pennsylvania RR), which aided in the transportation of troops and supplies. After the Civil War the great battles of the railway financiers began. Cornelius Vanderbilt consolidated the New York Central RR system, but he, like others—e.g., Jay Gould, Daniel Drew, and James Fisk—was accused of acting with complete disregard for the American public. The 1880s saw the revival of Southern railway construction and the last period of feverish expansion, attributable in part to such financiers as James J. Hill and Henry Villard. One of the greatest financial battles over American railways was fought by Hill and Edward H. Harriman.

In 1887 the Interstate Commerce Commission (ICC) was established to cope with the abuses that had resulted in part from the rapid expansion of the railroads, whose steadily increasing political power, excessive rates, and rebate policy had caused much popular discontent. For years the ICC sought to establish adequate controls over the railroads but lacked the necessary power. Its authority was accordingly increased by additional legislation until, in 1906 the Hepburn Act gave it, among other powers, that of fixing rates. Subsequent acts further expanded federal regulatory powers.

In 1917 the federal government took over the railroads for the duration of World War I. Although the Transportation Act of 1920 returned the railroads to their private owners, it also granted the ICC general control over the lines, including the right to mediate labor disputes, which had become an important factor. Organization of railway labor began with the unionization (1864) of locomotive engineers; by 1900 railroad personnel were organized on an almost nationwide basis. The many unions were headed by the Big Four—the brotherhoods of the engineers, the firemen and enginemen, the conductors, and the trainmen.

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