Flutterby™! : The Associates 2009-02-10 20:01:50.272861+00

The Associates

2009-02-10 20:01:50.272861+00 by Dan Lyke 5 comments

I didn't know anything about Leland Stanford beyond the oft-told story of the founding of Stanford University, where Leland and his wife Jane were talking with the president of Harvard, who pulled some extremely high number out of his head as to what it cost to start a university, and it didn't phase them.

So last week when I was in Copperfields and stumbled across The Associates: Four Capitalists Who Created California, by Richard Rayner, I grabbed it. It's a quick look at the lives of Collis Huntington, Leland Stanford, Charles Crocker and Mark Hopkins, the founders of the Central Pacific railway, the railroad that went from the west coast over the Sierra, to meet up with the Union Pacific in Ogden, Utah.

It's a fascinating look at graft, greed, theft, murder, and corruption. The various sub-contractors of the Central Pacific railroad were set up explicitly to take federal money spent on the CP and skim large portions directly into the pockets of the four "Associates". Records disappeared. Lots of bribes were paid, and those receipts got saved so that the politicians could then be blackmailed. Ted Judah, the engineer who mapped out the route and worked to raise public awareness, and therefore public financing, of the project died on a trip to the east coast.

Well worth a read. The overall story, and the discussion of the crash of 1873, put a lot of the graft and corruption of the current TARP and "economic stimulus package" into perspective. And the reminder that, in many people's minds, government exists primarily as a mechanism to focus wealth into the pockets of a few, is a a good one in these times when we look to the government for solutions.

#Comment Re: made: 2009-02-10 21:33:48.969665+00 by: jeff [edit history]

After passage of the 1862 Pacific Railroad Act, the Big Four increasingly marginalized Judah and they put Crocker in charge of construction.

Historians have been sharply divided over his (Judah's) legacy. There is no disagreement that he was an incurable optimist who popularized the remarkable plan of building a transcontinental railroad, convinced the Big Four to finance it, and was instrumental in securing Congressional passage of the 1862 law.

Some historians speculate that if he had been in charge the political situation of the late 19th century would have been less corrupt, but they have no evidence one way or the other. These historians tend to agree with Judah's allegations that Judah stood for quality, whereas the Big Four were more interested in speedy development at "maximum profit to themselves."

So, that begs the question, "where and how (and to whom) is our wealth being redistributed during the current economic crisis?"

Jeff, I don't think the political situation would have been less corrupt, I think that's largely a supply and demand thing, but this book (and a few other things I've now tracked down) paint Judah as a competent engineer, not a political campaigner. As the guy who actually figured out how and where to run the line, I like to think he'd be a little less sleazy than the others.

Capitalism and Communism, each considered without regard to human corruptibility, are wonderful systems. Throw in human corruptibility, and they're both terrible systems.

A joke attributed (probably apocryphally) to a Soviet general trying to calm the meeting during the Cuban missile crisis (you know, the one the W administration didn't remember) went like:

We've got Capitalism - to make it work as a social instrument, it has to be tempered by some agreements, like "no Ponzi schemes" and "no cheating" and some squishier stuff like "whatever is hateful to you, do not do to another", ... We'll probably never make it.

The quality vs. speed issue is dealth with in Stephen Ambrose's Nothing Like it in the World. The point is this: until you get a railroad in place, shipping all the supplies is insanely expensive, like rails sent to California via Tierra del Fuego. It's easier to get a minimal railroad in place, using locally found but poor quality wood. Then you can replace the ties at leasure with Wisconsin hardwood at a vastly lower delivery cost, to say nothing of sending rails direcly from Pittsburgh instead of via South America.

BTW, Judah died of yellow fever caught while transiting at Panama. Your writeup makes it sould like Crocker had him whacked.

Petronius, agreed on the quality vs speed, and that's actually an argument that could be made for the UP's behavior on their section of the line. Although mostly, since they were getting paid by the U.S. government for distance, money which they didn't have to repay for 30 years (and, in the end, didn't repay at all), I think there's argument on the right thing to have done there.

On the causes of Judah's death, yeah, I should clarify that. I was trying to not mis-type and was too lazy to go check the freakin' index for the details. Died in New York of Yellow Fever.

Dad, agreed. The tale in this book, and I guess I'm going to have to look a bit further to corroborate the story, is that these guys went in with the express desire to make as much money from government subsidies (T. Boone Pickens, anyone?), did so, and then died with pretty darned close to the amount that they were supposed to have owed the government in bonds. I think a lot of the answer is "don't let the government do big public works", but I think there are pragmatic reasons why that'll never fly.