Without Government Funds, No Strings!

“Build it, and they will come.”

This statement often is cited as mere wishful thinking. All business people, especially those intent on growing their businesses, know that a market must exist and want what is about to be offered. So they would say that James was getting his cart before his horse.

But James wasn’t your typical businessman. While other businessmen were coveting and clamoring for help from the government to start or expand their businesses, James was relying on common-sense business principles: self-reliance, saving, hard work, persistence, and visionary thinking. When hard economic times came, the other businesses went bankrupt, but James’s thrived because he founded it on those principles.

Journalists and historians hail the building of the first transcontinental railroad, praising the work of the Union Pacific and Central Pacific Railroads and their linkup at Promontory Point. Somewhat less enthusiastically (unless they have a socialistic, anti-capitalistic bent, in which case their treatment is avid) they relate the corruption involved in those and other railroad enterprises of the era. But they are strangely silent when it comes to James’s venture into the railroad industry.

James J. Hill was born on September 16, 1838, in Eramosa, Ontario, Canada. He wanted to be a sea captain, but he lost an eye in a childhood playing accident. Then he was forced to drop out of school after only nine years of formal education when his father died. He was forced to take a job as a bookkeeper for a steamboat company instead. But in that job he began to learn the various aspects of the freight transportation and transfer industry. He saved his money and eventually started his own transportation company. He also began buying struggling and bankrupt businesses, restoring them to profitability, and then reselling them for even greater profits.

After years of careful research, he and some other investors bought a number of failing small railroads, strengthened and even expanded their operations, reinvesting profits back into them. He soon became president of the company, the Great Northern Railroad. Between 1883 and 1889, he extended the line from eastern Minnesota eastward to Chicago and westward to Montana. By 1893, it reached Seattle, completing yet another transcontinental railroad.

But Hill’s line was vastly different. First, Hill was hands-on in his company’s operations. He himself rode by horseback, scouting out the best route. “What we want,” he said, “is the best possible line, shortest distance, lowest grades, and least curvature we can build.” The other transcontinentals didn’t worry about such things. They were paid to finish quickly and were paid by the mile; quality and cost didn’t matter.

Second, Hill encouraged immediate settlement of the areas through which his line ran. He bought tracts of farmland from the government and then sold them cheaply to hard-working immigrants from Northern Europe. He encouraged agricultural experiments, even setting up model farms and introducing pure-bred cattle, and taught the settlers how to produce more and better crops. Then he offered reasonable freight service to get their goods to eastern markets. He knew that if the settlers profited, he would profit too.

Perhaps most importantly and the factor that made his railroad the most radical then and now, he built his line without any help from the government, the first and only such transcontinental railroad to do so. He neither sought nor received government grants or subsidies. Whereas all of the other railroads did demand government help and ended up going bankrupt, Hill’s line thrived. “Those who got federal aid,” Folsom wrote, “ended up being hung by the strings that were attached to it.”

In 1880, Hill’s company was worth $728,000, and it increased in value to $25 million in 1885. By Hill’s death in 1916, his net worth was about $56 million (equivalent to $2.5 billion today). His wife inherited more than $16 million; each of his ten children got $4 million.

But more people than his family benefited from Hill’s hard work and business wisdom. He gave large sums to advance conservation, agricultural and livestock experimentation, libraries, and educational institutions, including a seminary. These causes were in addition to the thousands of individual farmers and other small businessmen who were aided in making a life for themselves in the rugged wilderness of America’s borderland with Canada. “It has always been our policy,” Hill declared, “to hold up the hand of the man who is cultivating the land.” And he set them a fine example for how to succeed: “Work, hard work, intelligent work, and then more work.” That’s what Hill said were the elements of success.

But Hill recognized the danger of not only government “help” but also the desire of both some people to get “something for nothing” and of politicians to manipulate that desire for their own empowerment. He warned, “The wealth of the country, its capital, its credit, must be saved from the predatory poor as well as the predatory rich, but above all from the predatory politician.”

Recommended reading: Burton Folsom, The Myth of the Robber Barons (Young America’s Foundation, 2010) and Uncle Sam Can’t Count (Broadside, 2014); and Thomas DiLorenzo, How Capitalism Saved America (Three Rivers Press, 2004).

[Copyright (c) 2017, Dennis L. Peterson]