The Age of Gold (64 page)

As the construction crews of the transcontinental railroad raced toward their Utah meeting, Jessie and John Frémont traveled to St. Louis for the unveiling of a statue of Thomas Benton. Jessie’s father had died some years earlier, still at odds with many Missourians regarding slavery, but now that the Civil War was over his former constituents recalled the unifying aspects of his legacy. “There were more than forty thousand people in the park, hundreds of public school children, both boys and girls, dressed in white and carrying bunches of red roses, father’s favorite flower,” Jessie told a friend after the ceremony. Speaker after speaker recounted the accomplishments of the distinguished senator. Yet one accomplishment stood out, in Jessie’s mind and in the minds of those who commissioned the monument. “Though the sun shone bright, I looked through a mist of tears at the bronze image of my father facing westward with the words carved below: ‘There is the East. There lies the road to India.’”

At the golden-spike ceremony, one of the speakers recited Benton’s prophecy that California was the way to India. Listening, Leland Stanford certainly hoped it was true. Stanford and his associates intended for their railroad to corner the traffic between the American East and the Asian East, which heretofore had traveled around Cape Horn or the Cape of Good Hope. But they were disappointed, for as important as the Pacific
railroad was in the history of transportation, it shared top billing that year with the Suez Canal. The French-sponsored Egyptian canal shortened the water route to the Far East by thousands of miles, undercutting the railroad men. “We were very much disappointed with regard to the business with Asia,” Stanford said. “We were very busy building our road, and we had not taken much account of what was going on in the matter of the construction of the Suez Canal. I think the whole country anticipated that when this road was built there would be a great business with Asia, but the opening of the Suez Canal during the very season that we completed our road disappointed us in that anticipated business.”

Yet if the Pacific railroad failed to capture the wealth of Asia, it accomplished something far more wonderful. It afforded continental scope to the productive powers of the American people. At once, of course, the railroad linked the mines of the American West to the markets of the American East. No more would the nation’s finances be at the mercy of storms like that which sank the
Central America
; the rail line to California became an artery coursing with financial liquidity, the lifeblood of commerce. And the line to California was merely the start of a larger, more elaborate continental network that carried America into the modern age of industry, an age and an arena in which the United States soon outstripped all other nations. The secret of America’s ascent to economic primacy was neither the cleverness of its inventors (England’s were as smart) nor the richness of its resources (Russia’s were richer). Rather, the secret of America’s success was its vast domestic market, the largest single market in the world. The Constitution of 1787, by forbidding interstate tariffs, established the legal framework for the American market; the railroad of 1869, and the lines that followed it, by speeding traffic across the length and breadth of the continent, laid the physical framework. Now manufacturers in any part of the country could build plants big enough to serve every part of the country, confident that their wares could be shipped to the farthest districts swiftly and cheaply. The railroads were equally adept at transporting agricultural produce, allowing the different farming districts to specialize and thereby exploit their comparative advantages—the South for cotton and tobacco, the Midwest for corn and wheat, Texas for cattle, California for
fruits and vegetables—and further freeing the industrial regions to concentrate on manufacturing.

The results were little short of miraculous. Between 1869 and the end of the nineteenth century, the American economy grew as no economy had ever done before and very few did after. From a laggard in the race to industrialize, trailing Britain, Germany, and France, the United States became the leader of the pack, with a manufacturing output that, by 1900, surpassed the three European powers combined. Iron and steel production multiplied ten times between the commencement of construction of the Pacific railroad and the beginning of the twentieth century. The production of oil—whose discovery in western Pennsylvania in 1859 sparked a rush remarkably akin to the rush for California gold—multiplied more than twenty times during the same period. Agricultural output boomed as well. Cotton and wheat doubled in the two decades after Promontory, and continued to climb through the end of the century. So bountiful was the harvest, and so tremendous the production of America’s shops and factories, that although the country’s population doubled between 1870 and 1900—which fact itself attested to the power of the American economy, in providing the jobs that attracted the tens of millions of immigrants— American producers fed, clothed, and housed all the new people (fed, housed, and clothed them better, on average, than Americans had ever been supplied before) and dramatically increased American exports besides. The growth wasn’t uniform over time: wrenching recessions in the 1870s and 1890s briefly set the economy back. But in each case the hiccup gave way to renewed growth, and the engine of national prosperity roared again to life, hurling the nation ahead faster than before.

W
ITH THE UNPRECEDENTED
economic growth came an unprecedented concentration of economic power. Leland Stanford was hardly the master monopolist of the age—John D. Rockefeller held that dubious distinction—but Stanford’s Central Pacific was sufficiently powerful to inspire fear in its competitors and loathing in many of its customers.

After its rocky start—that is, after Congress amended the original
railroad law—the Central Pacific became a money machine. The federal, state, and county subsidies of lands and loans, besides underwriting construction, encouraged investors regarding the future of the Central and made the share holdings of Stanford and his partners almost as good as gold. Stanford and the others also benefited directly from the construction of the railroad, having formed a second, closely held corporation, Crocker & Company—subsequently called the Contract and Finance Company— to serve as general contractor. The Central Pacific paid the Contract and Finance Company to build the railroad, funneling profits to Stanford and his associates long before the Central itself began to pay. (In sending Jane some stock certificates of the Contract and Finance Company, Stanford confided, “These shares of stock are very valuable.”)

The cozy relationship between the Central and the Contract and Finance Company raised questions among Stanford’s critics, a group that grew as the power of the Central Pacific increased. The questions were nowhere near as pointed as those directed at the Union Pacific and its counterpart to the Contract and Finance Company, an entity called the Crédit Mobilier, which became the subject of journalistic exposés, the focus of congressional inquiries, and a watchword for collusion between private corporations and public officials; but the questions did require Stanford to respond. His answers were characteristically unemotional and, for that reason, often effective. During one difficult election in California, a hostile Sacramento paper accused the Central Pacific of interfering in politics; more in sorrow than in anger Stanford denied the accusation. “It is the well settled policy of the company to keep the railroad out of politics,” he explained. He went on to say that the railroad had friends enough among fair-minded persons to guarantee fair treatment by government; any effort to ask more would rightly risk a backlash. “The Pacific Railroad [that is, the Central Pacific] seeks to be on good terms with every one. There is no interest in the State whose prosperity can by any possibility be prejudicial to the Pacific Railroad.”

On another occasion a reporter queried Stanford regarding his political role, a role that was commonly judged to be uncommonly large. “You have been accredited with controlling state politics and with being deeply
interested in political affairs,” the reporter said. Did the governor—the title by which Stanford still enjoyed being addressed—care to respond?

Stanford disavowed not only the influence ascribed to him but also any compelling interest in politics. “I suppose you will scarcely credit me when I answer you that I know but little of political matters and that I care less. I am so absorbed in railroad concerns and so entirely employed in business affairs that the details of politics do not interest me, and if they did I have no time to devote to them.” Questioned further, Stanford explained that popular perceptions lagged present reality. “When our enterprise was a new one, we had many things to ask and many favors to solicit. We had to demand necessary legislation in order to protect ourselves and carry out our undertaking; we felt the necessity of at least not having our enemies in power to obstruct us by unfriendly laws. This necessity no longer exists, and we now only desire just legislation; we only demand our legal rights, and we do not doubt that they will be accorded to us by any party that shall succeed to power in this state.”

This interview took place on California Street in San Francisco, just down the hill from where builders were constructing a magnificent new mansion for the Stanford family. Gesturing toward the unfinished structure, Stanford told the reporter:

It was an entrancing vision, and one that promised to multiply Stanford’s fortune still further, for all those trains and ships would operate under the unified control of Stanford and his associates. From the time Stanford had crossed the Sierras to warn Nevada against encouraging competitors of the Central Pacific, he and the other Central directors had bent every effort of wit, guile, and influence to preserve their monopoly. In 1865 a group of investors in San Francisco incorporated themselves as the Southern Pacific Railroad Company and announced plans to build a line from San Francisco to San Diego. Before long the new company’s larger aim appeared: to build east from San Diego and connect with a line coming west from Missouri. In 1866 this project won the approval of Congress, on terms akin to those offered to the Central and Union Pacific railroads.

Stanford immediately understood the threat. As he admitted to a congressional committee afterward, he viewed the new line as “a dangerous rival,” one that would compete with the Central Pacific not only in California but across the country. “It was of paramount importance,” he added, “that the road should be controlled by the friends of the Central Pacific.” Here Stanford was skimping on the truth. The Southern Pacific was shortly snapped up not by friends of the Central Pacific, but by the Central itself, with Stanford et al firmly in charge. “
We must name those directors, and they must be ours and no one’s else
,” Stanford insisted to Edwin Crocker, regarding a crucial election to the Southern Pacific board. “There is too much at stake to do otherwise.” Stanford and his associates got their directors, and
got control of the Southern Pacific. For popular consumption, however, a certain separation between the two lines was allowed to appear to continue, and, when convenient—as in deflecting charges of monopoly— Stanford and his associates spoke of the Central Pacific and the Southern Pacific as distinct entities.

Their monopoly involved more than rail travel. Even after completion of the transcontinental lines (the Southern Pacific linked up with the Santa Fe in 1881 and with the Texas Pacific in 1882), passengers and freight traversing the continent still had the alternative of steamship travel via Central America or Cape Horn. To neutralize this competition, the Central Pacific group organized a steamship line, the Occidental and Oriental Steamship Company. The purpose was not so much to displace the dominant line—the Pacific Mail Steamship Company—as to intimidate it and force it to come to terms favorable to the railroad. Indeed, the Central Pacific ships weren’t even sailing before the Pacific Mail struck its flag and sued for peace. The treaty included a provision whereby the Central Pacific set prices on freight carried by the Pacific Mail between New York and San Francisco. The prices, as they were established in practice, allowed the Pacific Mail to continue to exist, but not to threaten the Central’s transcontinental traffic.

Meanwhile, Stanford and his partners moved to consolidate their hold on traffic within California. Purchase of the Southern Pacific gave them control of nearly all significant land transport, but river steamers—serving Sacramento and Stockton from San Francisco, most notably—afforded shippers an aquatic alternative. This dried up when the Central purchased the California Steam Navigation Company. A few wildcat shippers remained on the Sacramento and San Joaquin Rivers, but they were no more than a nuisance to the great railroad.