Date of this Version
Great Plains Quarterly Vol. 3, No. 3, Summer 1983, pp. 157-170.
The North American Great Plains experienced rapid settlement and economic growth from 1870 to 1914. The advance of settlement and the development of local economy, while generally contiguous, were by no means uniform. Soil conditions, underground water supplies, the network of rivers and streams, rainfall, and growing season are all attributes of the physical environment that vary across the plains both longitudinally and latitudinally. In addition, the extent of effective settlement in the Mississippi River valley, the natural starting point for westward expansion onto the plains, varied considerably in 1865. Given these economic and environmental preconditions, it is not surprising that settlement on the Great Plains after 1870 varied in timing and degree.
Although the physical geography of the area must be taken into account, the differences in the timing and amount of economic development of the region were largely due to the uneven expansion of the railroad network after 1870. Some areas were heavily over endowed with railroad facilities, while others received barely adequate, or even niggardly, treatment at the hands of railroad businessmen and entrepreneurs. The construction and operation of railroads on the plains were governed in part by strategic, managerial, financial, and institutional forces that produced a transport system with no necessary relationship to the contemporary or potential economic landscape of the Canadian and American Great Plains.
This article examines the process of corporate railroad decision making in the larger context of investments, developmental strategies, and operational considerations, and explores the spatial evolution of four major railroad systems from their origins to 1915. These railroads, two American and two Canadian, demonstrate various strategies of system development. Generalizations drawn from a brief historical overview, combined with insights from other analyses of entrepreneurial and business practices of nineteenth-century railroads and their leaders, suggest a hypothetical sequence of railroad system development at the level of the corporation in nineteenth century North America.
Within the context of railroad systems, from both an investment and an operational point of view, several concepts and terms have been developed by business and economic historians to facilitate the understanding of investor and corporate decision making. As these ideas will be applied to the development of the four Great Plains railroads considered here, some brief definitions are warranted.
First, in order to understand the investment strategies pursued by individual capitalists and entrepreneurs, it is useful to differentiate, as Arthur M. Johnson and Barry E. Supple have done, between developmental and opportunistic investments and investment strategies in the nineteenth-century railroad business. A developmental investment strategy is one in which an 'investor looks to long-term growth in a booming region for the economic rewards from capital investment. Opportunistic investments, on the other hand, have "relatively shorter time horizons, the context of which was not so much future income growth as the securing of profits from available markets whether for goods, for railroad services, or for stocks and bonds."
There is a continuum from developmental to opportunistic investment, and while any individual's current motives can be placed somewhere along this continuum, those motives, or the criteria for subsequent investment decisions, could easily change with time or with changes in other financial and economic factors not necessarily bearing directly on railroading. Local merchants and farmers committed their capital to early local railroad companies as a means of increasing their business profits. Distant investors often purchased railroad bonds and debentures with a view to stable, long-term developmental profits. By the late nineteenth century, many railroads had come under the control of strictly financial, large-scale capitalist interests. Often located at some distance from their railroads, financiers used their properties for much broader strategic purposes, manipulating the securities, freight rates, connections, and through routes almost at will. As often as opportunistic profits were made-through financial wizardry, shady construction contracts, or dealings in railroad lands-great fortunes disappeared overnight in the aftermath of bank failures, overextension, or bankruptcy and receivership.