The Iron Road in the Prairie State

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In 1836, Abraham Lincoln and Stephen Douglas agreed on one thing: Illinois needed railroads. Over the next fifty years, the state became the nation's railroad hub, with Chicago at its center. Speculators, greed, growth, and regulation followed as the railroad industry consumed unprecedented amounts of capital and labor. A nationwide market resulted, and the Windy City became the site of opportunities and challenges that remain to this day. In this first-of-its-kind history, full of entertaining anecdotes and colorful characters, Simon Cordery describes the explosive growth of Illinois railroads and its impact on America. Cordery shows how railroading in Illinois influenced railroad financing, the creation of a national economy, and government regulation of business. Cordery's masterful chronicle of rail development in Illinois from 1837 to 2010 reveals how the state's expanding railroads became the foundation of the nation's rail network.

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1 Preliminaries

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The topography of Illinois is particularly conducive to railroading. Trains move best over flat land, and the state has few hills of any size and nothing that could be mistaken for a mountain. Its 56,400 square miles vary from a low of 279 feet above sea level to the 1,235 feet of Charles Mound on the Wisconsin border near Galena. The glaciated north boasted extensive prairies dotted with stands of timber, while in the heavily wooded south, coal deposits lay concealed beneath the surface. The hilliest section of the state is in the northwest. Here the lead-mining region of Galena escaped the graze of the glaciers, as did Calhoun County in the south. The south offered numerous engineering trials, especially around Cairo, strategically placed at the confluence of the Ohio and Mississippi Rivers but swampy and subject to frequent flooding, while much of far-southern Illinois was viewed as “a hilly extension of the Ozark highland.”1 The state’s rivers provided obstacles to emigrants and challenges to bridge builders, while bluffs at Peoria and Alton restricted railroad development at those two important towns. Generally, however, the gentle prairies presented few insurmountable or even challenging hindrances except distance: Illinois is larger than England, birthplace of the railroad industry.

 

2 Development Delayed

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The earliest attempts to build steam-powered railroads in Illinois failed miserably. Several private projects laid a few miles of track before going bankrupt; two short coal lines used animals to haul wagons; and an ambitious state-funded network fell victim to an economic depression—called a “panic” at the time—in 1837. But the seed blown across the Atlantic Ocean from Britain fell on fertile soil. Railroads offered relatively fast, all-weather transportation for people and commodities. Engineering challenges, especially safely and reliably harnessing steam power, proved surmountable, and investment capital became available, but the development of the industry was neither smooth nor simple. The demand was fueled in part by roads so poor that Illinois became a notorious “mud state” when the weather turned foul. In the winter of 1848–49, for example, the people of McLeansboro found themselves isolated. Bereft of “coffee, sugar and other necessaries of life,” they survived on what they had stored from previous harvests until the roads dried out the following spring.1 This was a common occurrence in the harsh Illinois climate, and town and country alike needed a dependable, all-weather mode of transportation to combat snow, ice, and mud.

 

3 Optimism Revived

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Travelers in Illinois during the 1840s may have paused to puzzle over sporadic strips of artificially flattened ground, mute testimony to the recent infatuation with railroads. In Bureau County, for example, work on the original Illinois Central Railroad (ICRR) got no further than “cutting away strips of timber” and leveling small stretches of territory for rails that never arrived. The Jacksonville & Savannah Railroad used land between Canton and Farmington flattened for the Peoria to Warsaw line. Stone culverts and bridge abutments also remained as a memory of the 1837 Illinois Internal Improvements Act. At the southern tip of the state, ribbons of graded land and a lengthy embankment near Cairo, remnants of “the wild State internal improvement craze,” reminded people of how “the State and whole communities were left bankrupt—stranded upon dirt embankments.”1

Disillusionment lasted barely a decade, however. The passion for railroads reignited in the 1850s, and Chicago emerged as a major commercial center. Trains from the east brought in new inhabitants and departed with grain from the prairies. Developments downstate signaled the temporary prominence of Alton and the permanent rise of St. Louis. On a national scale, the ICRR set an important precedent by using federal land grants to stimulate interest and investment.

 

4 Cultivating the Prairie

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In the beginning, railroads needed land and the federal government had it. For settlers, it seemed in plentiful supply. The earliest European immigrants entered an apparently empty territory rich in resources and potential. Initial colonization—despite charters from British monarchs—was haphazard and small-scale. Violence against indigenous peoples was commonplace, squatting widespread, and ownership frequently a matter of dispute. Early national land policy was, in the words of historian John Mack Faragher, a matter of “Extinguish Indian title, survey, and sell.”1 Only when the federal government turned to the orderly settlement of the frontier did systematic landownership develop, and only with the arrival of railroads could mass migration occur.

Public land sales in Illinois began in 1814. Land offices in Kaskaskia and Shawneetown did a brisk business and a third office opened in Edwardsville in 1816, all in the southern third of the state. The federal government began planning for settlement north of the Illinois River by setting aside approximately 3.5 million acres—the “military tracts” from which the Central Military Tract Railroad would get its name—between the Illinois and Mississippi Rivers for veterans of wars up to and including the War of 1812. Only after a delegation of territorial leaders, including Governor Ninian Edwards, obtained title in 1816 from the Native Americans living there did land offices make 160-acre plots available to veterans. Purchasers were not required to live on the land, and many veterans sold their allotments to speculators for as little as ten cents an acre. Soon Illinois land was trading on the open market in New York City for prices ranging from 50 cents to $1.50 an acre. As much as a quarter of the total acreage in the military tract sold that way, violating the principle of establishing small farms to settle the region.2

 

5 Financing Railroads

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Railroads drew Illinois into a global network of capital and capitalists. Fewer than 50 miles of track existed in the state in 1850; by 1860 the Prairie State’s 2,500 route miles connected it with a world marketplace, thanks primarily to foreign money and the growth of Chicago. The iron for all that track was scarce, and much of it had to come from overseas, primarily Great Britain. Rails told only part of the story: railroads needed rolling stock and buildings, workers and coal, managers and paper, bridges and lumber, land and customers. Finding these required capital, raised in the form of stocks and bonds sold in exchanges far from the state and trading outside of local control.

Railroad financing became increasingly complex as capital needs expanded. The experience of the Galena & Chicago Union Railroad—funded in part by progressive artisans and exuberant farmers—was unusual, as was that of the land-grant sustained Illinois Central. There was no such thing as purely private or purely public funding during the first two decades of railroading, if private excludes support of any kind from government entities. Confident assertions like that of Swedish emigrant Gustav Unonius, who wrote “Neither the state nor the city has spent a single dollar” building railroads, bolstered the prevailing laissez-faire ideology but were patently false. The promoters of America’s earliest railroad, the Baltimore & Ohio, created a joint-stock company in which the state of Maryland bought five thousand shares worth $500,000, one-sixth of the initial $3 million offered. The South-Carolina Canal and Rail-Road Company built the first line in the South using state guarantees and municipal monies to stimulate interest and investment in the line between Charleston and Hamburg. And the company destined to be the largest corporation in the world during the nineteenth century, the Pennsylvania Railroad, mixed guarantees that government entities would purchase half of its stock with private investment.1

 

6 Conflagrations and Expansion

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The railroad-building surge of the 1850s made Chicago into an international marketplace and would help the North win the Civil War. Railroads transformed Illinois by bringing in people and capital, mechanizing and growing the grain trade, and dramatically expanding the labor force. A national financial downturn in 1857 caused an immediate drop in traffic volume, brought expansion to a halt, and tipped many railroads into bankruptcy, but local services temporarily kept them running and allowed the system to adjust to the new mileage.

The 1860s and 1870s witnessed the trauma of Civil War and the excitement of transcontinental railroading. The war caused little direct injury to Illinois railroads, though the closure to civilians of the Mississippi River and additional wartime traffic meant deferred maintenance, damaged track, and worn-out rolling stock. Illinois was the fastest-growing state in the Union during the Civil War because of its network of railroads, migrants entering from the Confederacy, and the increased importance of Chicago as a transshipment center. When the conflict began the industry seemed ready to contribute, though few could have predicted how much the railroads had to offer the war effort.

 

7 Illinois Railroad Labor

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As Confederate forces were winning the Battle of Chancellorsville and Union troops prepared to lay siege to Vicksburg, a group of disgruntled railroad engineers met secretly in Marshall, Michigan. Unhappy about the treatment they were receiving at the hands of their supervisors, they decided to assert their republican rights and defend themselves from arbitrary rule. They formed the Brotherhood of Locomotive Engineers (BLE), a fraternal order fighting for decent working conditions and offering insurance protections. Firemen, conductors, trainmen, and other groups created their own organizations in the 1860s, challenging the conventional belief that capital and labor shared a common interest in the profitable operation of railroad corporations.

A period of often dramatic conflict on the railroads followed formation of the brotherhoods. Wage cuts and layoffs led to strikes but owners and managers fought back. The proud industrial peace of the railroads was shattered by walkouts and murders. Financial panics and technological change led to violence and confrontation in Illinois, most notably in 1877, 1888, and 1894. These were the visible manifestations of a seemingly limitless well of unhappiness and subterranean conflict. But the railroads could bring the nation’s economic activity to a virtual standstill, hastening the quest for alternatives. Worse for the industry, federal regulators responded to public complaints about monopoly power by restricting managerial autonomy. The peace of pioneer railroading had been shattered.

 

8 A Kaleidoscope of Regulations

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Strikes alienated customers, angered politicians, and fomented a climate of mistrust. Passengers and shippers began to feel that railroad corporations wielded too much influence. Politicians at every level—from municipal to federal—created regulations to address their concerns. Legal precedents based on US Supreme Court cases originating in Illinois gave the federal government the authority to establish minimum and maximum prices for transporting people and products. These regulations restricted railroad managers’ power to set the prices (“rates”) or negotiate with customers from the 1870s to the 1980s. Lowering or raising rates was painfully slow, hurting railroads’ ability to respond to market conditions and contributing to the ossification of the industry in the twentieth century.

By 1870 three railroads—the Chicago & North Western, the Rock Island, and the Burlington—were crossing Illinois and Iowa and preparing to converge on Omaha, the eastern end of the original transcontinental. They earned increased traffic from the new connection, augmenting the grain, pork, and beef they hauled into Chicago from the rich agricultural region they served. But cutthroat competition among the three lines lowered rates and profits, putting pressure on other parts of the systems to compensate. To dampen the competition, the three railroads agreed to share the traffic across Iowa. This informal “pool” collapsed in the face of economic depression, but after 1874 formal, regional associations emerged to share revenues and eliminate competition.1 From the perspective of the railroads, pools were a rational response, but shippers thought they deliberately stifled competition in the name of higher profits. Regulation ensued.

 

9 Panic and Innovation

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Regulators could do little to help the railroad industry in the face of global economic downturns, though their strictures did not help the bottom line. The capital needed to build railroads came from the Netherlands and Great Britain, from New York and Rock Falls. Financiers and farmers proffered their savings in hopes of earning a profit, but sometimes disaster struck. Connecting with a transatlantic economy could prove painful, as events in 1873 would demonstrate. In that year another of the recurring crises of capitalism forced numerous railroads into bankruptcy, demonstrating the dangers of relying on the invisible and far-flung forces of capital accumulation.

The vulnerability of railroads to financial forces they unleashed but could not control was stunningly demonstrated in 1873. Railroad construction virtually stopped and operations were threatened when the New York office of the country’s largest private banker, Jay Cooke, suddenly closed its doors. This unexpected catastrophe was the culmination of a series of smaller failures and precipitated a downturn lasting on and off to the end of the century. The Panic of 1873—which initiated a frenzied effort to convert stocks, bonds, and savings into cash—revealed the dangers of overcapitalization and overbuilding. The cultural scale tipped against speculators again, and a new round of corporate consolidations kicked off.1

 

10 Bridge Building and “Overbuilding”

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Illinois railroad expansion began to fall behind national growth rates in the 1870s and 1880s. For the decade of the 1870s, railroads built 3,095 route miles in Illinois, adding 64 percent compared with 76 percent nationally, but in the 1880s, Illinois’s 26 percent fell dramatically behind the nation’s 79 percent of added mileage. The reasons were simple: railroads continued to push farther west, while the development of new lines slowed in the Prairie State as it did elsewhere east of the Mississippi River. Nationally, more track was laid during the 1880s than in any other decade in US history. The 73,741 route miles built between 1881 and 1890 represented a two-thirds increase over all rail laid in the United States before 1880.

By 1880 some observers began to complain of “overbuilding” east of the Mississippi, by which they meant that newly constructed lines duplicated existing routes and, consequently, neither could be profitable. In Illinois approximately two thousand route miles were built in the 1880s, still an impressive amount. In northern Illinois the “Little Grangers” made tentative forays into the state, while the Atchison, Topeka & Santa Fe finalized its long-awaited entrance into Chicago. Though the construction of new lines slowed, the railroads themselves grew in importance. Trains became longer and faster, passenger travel became more comfortable, and direct services across new bridges helped to center Illinois in the railroad network.

 

11 Excursions and Interurbans

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Railroads created new markets by advertising special excursion trains for vacationers. Long-distance holiday services gained in popularity as Niagara Falls, the Florida coasts, and other locales became fashionable destinations for escape-minded Illinoisans. Growth in this area did not hinder the development of locally oriented interurban railroads around the turn of the twentieth century. Usually powered by overhead electrical wires and using lightweight equipment, interurbans attracted capital and customers in the first twenty or so years of the new century by offering speedy trips between towns. Illinois was home to two of the nation’s largest interurban networks, including one audacious but unsuccessful attempt to link Chicago with St. Louis. Interurbans signaled the desire for fast, frequent, comfortable services and, ultimately, for the types of freedom and mobility automobiles would offer.

Taking a vacation of any distance in the nineteenth century involved riding a train. Railroads catered to a growing taste for travel by operating popular and inexpensive excursions, giving rise to the somewhat exaggerated saying “it was cheaper to travel than to stay at home.” Excursions—literally, to run out—provided cheap vacations for people whose horizons might otherwise remain restricted to their immediate surroundings. Group outings were commonplace and often garnered positive press coverage, serving as early tourist advertisements. An account of a trip to Madison, Wisconsin, for example, described the destination as “the most attractive point for an excursion . . . the prettiest city in the northwest,” where the visitors were treated “with great cordiality.” Methodists created camp-meeting grounds across Illinois and hired trains to get there, highlighted by the Des Plaines gathering of 1860, which attracted twenty thousand people. The CRI&P offered Illinois Oddfellows special fares to Denver between September and October 1887, for example. The Chicago & Alton sold “excursion tickets” to any station within two hundred miles of its line, offered in cooperation with nine other railroads serving Kansas City. Organizations booked round-trip journeys to special events, as with the Chicago-area teachers’ “Grand Excursion” on the Michigan Central for the 1896 National Education Association convention in Buffalo, New York. This included a stop at Niagara Halt “overlooking the grandest panorama in the country.”1

 

12 Coal and Competition

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Coal lies beneath two-thirds of Illinois and has been mined at one time or another in three-quarters of the state’s counties. More than 7,400 mines have operated within the Prairie State’s borders. Illinois is in a bituminous (soft coal) field also covering much of Indiana, Ohio, and western Pennsylvania, providing a source of power for individuals and industries along the East Coast and into the Midwest. The price of Illinois coal fluctuated with national demand trends and regulatory shifts, creating periods of boom and bust over which mining companies had almost no control.1 Railroads were likewise at the mercy of the marketplace until they built lines into coal fields, contracting directly with the mines for the resource.

Coal was vital to the financial health of the railroads, but the operational and commercial problems of finding and transporting it were not the only challenges the railroads faced at the beginning of the twentieth century. In 1915 between three-quarters and four-fifths of total rail revenue came from freight, but the rates being charged in 1915 were virtually the same as they had been in 1900 despite prices rising by 30 percent. The Interstate Commerce Commission (ICC) refused to grant anything other than minimal rate increases.2 This situation, coupled with a disastrous takeover, led to the Rock Island’s first bankruptcy.

 

13 Progressive Regulation

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The perceived excesses symbolized by the Reid-Moore syndicate’s bleeding of the Chicago, Rock Island & Pacific Railway contributed to a political and social climate conducive to further regulation. Behind this renewed regulatory fervor was a fear of dependence on enormous economic entities. Corporations appeared to be getting too big, too powerful, and too likely to control an entire industry. Democratic republics were not supposed to give rise to monopolies dominating entire sectors of the economy, but that is precisely what seemed to be happening. When Minnesota-based railroader James J. Hill and Wall Street banker J. P. Morgan merged the Chicago, Burlington & Quincy into a holding company already containing the Northern Pacific and the Great Northern Railroads, the government called foul. President Theodore Roosevelt, spurning Morgan’s gentlemanly offer to “send your man to see my man and tell him to fix it up,” instead mobilized the might of the federal government and established a precedent for future trust busting.

 

14 World War I and the 1920s

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The First World War—or the “war to end all wars,” as President Woodrow Wilson called it—nearly brought private ownership of the railroads to an end. Refusing to cooperate and unwilling to coordinate train movements, the lines became so congested in the East and so empty in the West that the federal government took them over. Plans were prepared, and seriously considered, to leave the trains in government hands at war’s end. But the probusiness Republican Party regained power in 1920 and the owners regained their property. The 1920s witnessed a massive program of railroad improvements when as much total capital was expended on railroad physical plant and rolling stock as had been the case during the entire history of the industry up to 1920. Yet even as the railroads improved, public policy turned slowly toward highways. During the 1920s the state of Illinois ranked first in the nation for miles of concrete roadways, and a vibrant auto-building industry developed.1 The Good Roads movement continued to gain adherents, and traffic switched slowly but surely from rail to truck, car, and bus with devastating long-term effects for Illinois railroads.

 

15 Depression, Dieselization, and Another War

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The Great Depression prepared the railroad industry for another world war. The twin pains of unemployment and lost revenues forced railroads to reexamine their operations. Investment in building projects enhanced capacity, which, combined with new equipment, gave many companies the ability to respond quickly and positively to American entry into the war in 1941. Unlike World War I, the railroads performed admirably in the nation’s hour of need. The coordinated, responsible actions of railroad leaders and workers staved off a repeat of the dreaded government control exerted during the earlier conflict. Railroad workers again benefited from wartime wage increases and resented the resumption of postwar “normalcy.”

The collapse of share prices on October 24, 1929, was an unprecedented economic calamity, but it did not appear to be so at the time. Railway Age called it “a mild recession in business,” and the stock market leveled off after the initial plunge. Many financiers continued as before, assuming they could weather the storm. Samuel Insull, for example, saw in the misfortunes of others an opportunity to expand his Chicago-area interurban empire. But consumer buying declined, industrial output tumbled, and the demand for railroad transportation collapsed. Auto sales plummeted from 4.6 million units in 1929 to 1.3 million only four years later, and rail equipment suppliers likewise suffered. The American Locomotive Company (ALCO), which sold an annual average of six hundred locomotives during the 1920s, sold one in 1932.1 The financial sector contributed to the crash: investors had been encouraged to purchase shares on margin—borrowing against the presumed perpetual increase in the value of their holdings—but found themselves unable to repay their loans when the value of their stock tumbled.

 

16 Postwar Challenges

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World War II was the last golden age of railroading in the United States. Between 1935 and 1945 in Illinois, freight revenues more than doubled, passenger income increased by over 300 percent, and the network operated as smoothly as could be expected given the emergency conditions prevailing. Things would deteriorate after 1945, but that could not be known at the time and railroad executives exuded optimism following V-J Day. A bright postwar future appeared to beckon as new technological and safety developments promised to retain customers and grow traffic. To capture the festive postwar mood and commemorate a century of Chicago railroading, the Windy City hosted a lakefront Railroad Fair in 1948.

As joyful as the event proved, celebrating could not solve looming problems. Increased competition from other modes, deteriorating labor relations, and falling revenue posed massive challenges. Unlike the 1893 World’s Columbian Exposition, which generated new traffic for and excitement about railroads, the majority of Railroad Fair attendees arrived by car. Passenger numbers declined as people drove locally and, increasingly, flew long-distance. The automobile returned with a vengeance after World War II, when gas and rubber rationing ended and creeping prosperity released pent-up demand. Factories shifted from producing tanks to making cars, suburban living encouraged auto ownership, and optimism in the future was reflected in a desire to take to the open road.1 In the meantime, Illinois railroad passenger revenue plummeted by 36.7 percent in the ten years between 1945 and 1955, pointing to a grim future.

 

17 National Solutions?

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The age of the private railroad passenger train finally ended in 1971. Declining revenues, customers siphoned off by other modes, and bad service precipitated the transfer of most common-carrier passenger trains from the railroads to the federal government. Railroad corporations, which had precious little time for celebrating glittering pasts, saving famous trains, or reducing large deficits, could then put all their energies toward surviving. Chicago remained the hub of the American railroad network, principally by default because no other city could be bothered to mount a serious challenge for a crown no one particularly wanted anymore. The state government of Illinois would step forward to contribute to saving and creating regional passenger services, and a few long-distance trains endured into the 1970s, but the romance and luxury of rail travel seemed the relic of a bygone era.

Government regulation came under renewed attack in the 1970s. The Interstate Commerce Commission botched merger after merger, finally losing the plot completely in the case of the attempt by Union Pacific and Southern Pacific to purchase and divide the Chicago, Rock Island & Pacific. That effort began in 1962, but opposition from other railroads slowed the process to a crawl. Moving at a snail’s pace, the ICC failed to render a timely decision, which, along with the added costs of deferred maintenance, meant UP and SP became less interested with each passing year. The Rock Island died amid renewed calls for dismantling the rate-making regime.

 

18 Salvation

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The collapse of the Rock Island and the failure of Penn Central sent shockwaves throughout the railroad industry and beyond. The former suggested that recovery would be a slow process, while the latter indicated that mergers alone could not save the trains. A dramatic shift was needed or they would vanish completely. The ICC paid attention to the consequences of delaying merger proposals, and a period of consolidation followed. Then, in 1980, reacting to the continued decline of the industry, the federal government passed legislation to deregulate railroads. The new law, called the Staggers Act in honor of one of its House sponsors, generated an immediate and positive upswing in virtually all railroad indices. The number of railroad corporations and route mileage in use continued to shrink, but the survivors enjoyed a renaissance, competing effectively with long-distance trucking, creating new markets for their services, and finding favor with Wall Street. Profitability followed.

 

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