How much money did the federal government save shipping over land-grant railroads?
Here is the statement I'm asked to verify.
RAILROADS RECEIVING LAND GRANTS HAD TO HAUL GOVERNMENT CARGO AT REDUCED RATES. WHEN THIS AGREEMENT ENDED IN 1946, THE RAILROADS HAD REPAID AN ESTIMATED TEN TIMES THE VALUE OF THE LAND.
The land grant part is relatively easy. From Richard Orsi's Sunset Limited (2005) p.74-81, we learn that Central Pacific, Southern Pacific and associated lines acquired about 18 million acres of land (the government was so slow in issuing patents that some of that land was not actually received until the 1940s). Because the railroad sold the land off as rapidly as possible (to generate business through development of farms) they never owned more than about five million at one time – and generally much less than that. Even the good agricultural land was sold for less than $5 per acre, and most of the land was sold for much less than that. In short, the railroad company probably earned something in the area of $50 million off of their land grants.
But, what remains is the question of revenue lost to the railroad because they had to carry federal cargo at reduced rate (or was it for free?) between 1860s and 1946.
(I know that the original statement applies to all land-grant railroads. I'll be happy for a take on merely the CP/SP's portion of it.)
—Wendell
posted from CPRR Discussion Group at 11:09 PM
6 Comments:
From: "Chris Graves" caliron@cwnet.com
Subject: Government tariff
Lynn D. Farrar, Retired Valuation Engineer of the SPRR tells me that from 1869 thru the mid 1940's, the United States government paid 50% of standard tariff for goods shipped on the SPRR.
—G J Chris Graves, NewCastle, Cal.
"Certain revisions were made in 1940 but not in the provision that troops, military equipment and supplies be moved for 50 per cent less than standard fares and rates. These reductions on government business skyrocketed during World War II. By end of the war it was estimated the land grant rate reductions for all railroads reached a total in excess of one billion dollars, or more than eight times the $123,000,000 value of the lands at the time they were granted to the railroads. December 12, 1945, President Truman signed a bill repealing the remaining rate provisions of the land grant law."
—Seventy-Five Years of Progress. An Historical Sketch of the SOUTHERN PACIFIC 1869-1944 by Erle Heath, Editor, The Southern Pacific "Bulletin"
Note that CP/SP actually retained a great deal of land grant land – a big reason why they were the largest private landowner in California until the SP-Santa Fe merger fiasco (when the corporations merged, but the railroads did not). SF-SP created a new corporation, Catellus, which just was acquired by another, larger international company [ProLogis]. CSRM has just received most of the remaining Southern Pacific land records from the company, as they close their San Francisco office. Many records for SP and subsidiaries (including Oregon & Califonria, for instance) back to 1906, and in some cases even earlier. Uncataloged – just received.
—Kyle
From: Bob_Spude@nps.gov
I wish someone would do a thorough study of CP/SP grants, something on the order of Greever's study of the Santa Fe land grant in AZ and NM ("Arid Domain"). Greever shows that it was no boon to the railroad (and CP's grant across Utah and Nevada and the Sierra's is not the most marketable land – the UP's in Nebraska is another matter). The lands (or promise of lands), however, did provide security for critical loans for construction and covering other debts. I like econometrician / cliometrician Robert Fogel's conclusion that the UP railroad provided increased returns for government land along the line, which more than paid for the construction of the UP – his table of "social profit" by 1880 on p. 314 is pretty revealing. Again, someone needs to do a serious study of the CP grant.
—Bob
P. S. I should note that Fogel believes that the transcontinental could have been built without any government aid (but then he didn't calculate in Civil War era emotions)
Bob Spude – Historian – Cultural Resources Management – National Park Service – Intermountain Region – 505.988.6770 Voice – 505.988.6876 Fax
The National Park Service cares for special places saved by the American people so that all may experience our heritage.
From: KyleWyatt@aol.com
My other complaint with Fogel's early piece, Premature Enterprise is that in calculating the economic rational of the Union Pacific (and concluding that it was premature), he solely looked at revenue generated on line, and completely left out transcontinental traffic – the primary reason the railroad was built. Fogel's conclusion may or may not be valid, but as with so much of his work that I have read, he selectively picks his data, and/or strains to make available data speak to something it was never collected to address, so his available evidence, as presented, is incapable of actually proving the point he claims it does.
You may gather that I don't think much of his work. He has a toy – modeling tools developed for economics, and he gets so excited playing with his "powerful" tool (known by the name "econometrics") that he forgets to do basic, fundamental historical work to support his research.
My conclusion: Fogel is worth looking at, but use him like any set of statistics – by carefully assessing exactly what his information is in fact capable of saying, and discount anything else he has to say. FYI – Statistics tell very narrow, selective truths. Many people, including many historians, get caught using such narrow specific statistical evidence to "prove" grand sweeping conclusions. Statistics can only be validly used in conjuction with a lot of traditional historical information and analysis to reach conclusions. What they cannot tell is the all-important context and relationships of events – and people.
I'll get off my soapbox now.
—Kyle
From: kylewyatt@aol.com
Land Grant railroads were required to give the Federal Government reduced rates in return for having received the land grants. This was finally abolished after WW II, in recognition that the Government had received in value many times the value of the lands they had turned over to the railroads.
Note that this reduced rate only applied to Federal Land Grant railroads, and only to the portion of the lines that had benefited from the land grants. Most railroads were not land grant lines, and even land grant railroads such as Central Pacific, Southern Pacific, Union Pacific, Northern Pacific, and Atlantic & Pacific (Santa Fe) had extensive lines that were not built with land grants.
Common Carrier status (which gave railroads the right of eminent domain, among other things) required that the railroads carry mail.
—Kyle
[from the R&LHS Newsgroup.]
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