Monday, March 14, 2016

You should read the whole thing

Brad DeLong has an excellent piece of long form economic history up at his blog. I'm going to try to revisit this in future posts if I have time (there's a lot here to talk about), but for now, here's a samplee presented without comment.

From Robber Barons by J. Bradford DeLong (1998)
First draft October 13, 1997; second draft January 1, 1998.
In the 1860s, on the western slope of California's Sierra Nevada mountain range, Colis Huntington and Leland Stanford won a government contract to build a railroad from San Francisco to the east. The government offered them, in incentives, $24 million in government financing and 9 million acres of land. They had then negotiated with the cities and towns of central California: if a town did not contribute funding to the railroad, the railroad would avoid that town--and it would in due course disappear.

It was claimed that Huntington, Stanford--then also Governor of California--and their partners had built the railroad without putting up a dime of their own money (see U.S. Congress, 1873).

By 1869 they had built the Central Pacific Railroad was built, from San Francisco out to Ogden, Utah, where it met the Union Pacific. The stockholders of the Central Pacific then discovered that the railroad was in horrible financial shape.

Some $79 million of stocks and bonds (including the $24 million from the government) had been floated, and the cash had been expended. $79 millon in cost of materials and payment for construction had been paid to the Central Pacific Credit and Finance Corporation. The Central Pacific Credit and Finance Corporation had spent some $50 million in wages and materials costs to build the railroad, and its shareholders had pocketed the remaining $30 million.

Who were these shareholders? Colis Huntington, Leland Stanford, and two of their other partners. Who were the Central Pacific executives who had approved this arrangement with the Credit and Finance Corporation? Colis Huntington, and Leland Stanford...

Stanford University, in Palo Alto, California, is today a very nice place indeed.

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