How did railroad owners make huge undeserved profits?
How did railroad owners use Credit Mobilier to make huge, undeserved profits? Answer: By charging too much for railroad construction and paying off government officials.
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Railroads Were at the Forefront of Political Corruption“Railroads need monopoly franchises and subsidies, and to get them, they are more than willing to bribe public officials,” White says. The Central Pacific Railroad, for example, spent $500,000 annually in thinly disguised bribes between 1875 and 1885.
To encourage development of rail lines westward, the government offered railroad companies massive land grants and bonds. Railroads received millions of acres of public lands and sold that land to generate money for the construction of the railroads.
Jay Gould Infamous for manipulating stock, Jay Gould was the most notoriously corrupt railroad owner. He became involved in the budding railroad industry in New York during the Civil War, and in 1867 became a director of the Erie Railroad.
Cornelius Vanderbilt (May 27, 1794 – January 4, 1877), nicknamed the Commodore, was an American business magnate who built his wealth in railroads and shipping.
Railroads are considered a natural monopoly. Because of the extremely high start-up costs, it is not profitable to start a railway if there is already a railway line serving the same route.
Monopolies as unfairly subsidizedRailroads had the ability to condemn land to build their routes. They got subsidies of land, loans, bonds and other financial aid from federal, state and local governments. Their political contributions and favors secured them supporters in legislatures, Congress and the courts.
Initially, Chinese employees received wages of $27 and then $30 a month, minus the cost of food and board. In contrast, Irishmen were paid $35 per month, with board provided. Workers lived in canvas camps alongside the grade.
But the Depression, and the switch to automobiles after World War II, dealt a blow from which the railroads still have not recovered. A deadly cycle set in. As the number of passengers using the trains decreased, causing revenues to fall, the railroads tried to survive by cutting back on maintenance and service.
Misguided railroad regulation was a major factor behind the rail industry's decline. For example, the ICC set maximum and minimum rates for rail shipments, with rates often unrelated to costs or demand.
The completion of the transcontinental railroad shortened a journey of several months to about one week. Congress eventually authorized four transcontinental railroads and granted 174 million acres of public lands for rights-of-way.
Government Operation of Railroads in WartimeThe United States and Great Britain are the only two important countries in the world which do not own at least a part of the railroad mileage within their borders.
Accordingly, on December 26, 1917, President Wilson took possession of the railroads by proclamation, under the authority of a provision in the Army appropriation act of 1916.
The largest rail company in the world is Deutsche Bahn, with a revenue of $47.72 billion. As of 2021, the global rail industry has a market size of $295.80 billion.