Early 20th Century Railroad Competition
Competition is expected to be keen in a free-market society, but railroads prior to the turn of the century were engaged in a particularly cutthroat version. Railroad mileage was expanding, but particularly in the East and Midwest -- where the railroad network by 1900 was densely packed -- this new mileage was often built at the expense of competing lines. "The day of high rates has gone by; got to make money now on the volume of business" said W. H. Vanderbilt, eldest son of "Commodore" Vanderbilt and head of New York Central.
Controlling costs was one way of helping make railroads more profitable, and the many improvements in technology around the turn of the century helped to accomplish just that. At the same time, the American railroad system was going through a period of consolidation that was unprecedented. By 1906, seven major interest groups controlled approximately two-thirds of all railroad mileage in the United States.
The Harriman lines -- Union Pacific, Southern Pacific, and Illinois Central -- comprised 25,000 miles; the Vanderbilt roads -- New York Central and Chicago & North Western -- 22,000; the Hill roads -- Great Northern, Northern Pacific, and the Chicago, Burlington & Quincy -- 21,000; the Pennsylvania group -- the Pennsylvania Railroad, Baltimore & Ohio, and Chesapeake & Ohio -- 20,000; the Morgan roads -- Erie and Southern systems -- 18,000; the Gould roads -- Missouri Pacific and several other southwestern systems -- 17,000; the Rock Island group -- Chicago, Rock Island & Pacific system -- 15,000.
Consolidation, interestingly, went largely hand-in-hand with a trend toward less expansion. By 1910, the nation's railroads aggregated 240,293 miles; by 1916, the total reached 254,037 -- America's all-time record for railroad mileage.
Railroad employment grew as well, to a 1916 peak of 1.7 million persons, but the trend would be downhill from there. The era of the big-name "empire builders" was also coming to a close; the last, James J. Hill, died in 1916.
Increasingly, business managers and bankers -- rather than entrepreneurs -- would assume the challenges of running the nation's railroads. And difficult though it may be to comprehend today, a number of forces were at work to drastically alter the competitive picture -- just as the railroads, it seemed, had reached some kind of equilibrium.
Those forces had actually been at work for some time.