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1 âRailpolitikâ
An introduction
Keith Neilson and T.G. Otte
The locomotive was the greatest thing of the age. With it man conquered space and time.
Stephen E. Ambrose1
With the railway came the modern age. The advent of the railway had a greater and more immediate impact than any other technological or industrial innovation before or since. Railways, Max Weber noted in the early twentieth century, âhave been the most revolutionary instrument that history records as regards the economy, and not merely transportâ.2 In the wake of the fast growth of the railways from the 1840s onwards, there came the development of modern capitalism, and the formation of modern societies and nations. The railways transformed, redefined and expanded the limits of the civilized world.
The economic impact of the nineteenth-century steam-powered transport revolution has been the subject of numerous academic studies, and it also gave rise to the original counterfactual approach to the study of history.3 The introduction of railways followed different paths in different countries, though certain common pattern emerged which had a bearing on the political and strategic utility of the railways. It will suffice to concentrate here on the three most significant cases, Britain, Germany and Russia.
Britain played a pioneering role in the development of modern railways. The new mode of transport boosted the concentration of British industry.4 Railways provided the most significant stimulus for the metal producing and processing branches of industry. But they also marked an important new departure. As metal and coal producing industries grew, so their heavier investment needs contributed to the formation of corporations and joint stock companies. Engineering, machine and tool-making firms made important inroads into the great industrial cities. Especially during the ârailway maniaâ in the mid-1840s, railway-building projects became the object of great financial speculations â and failure, as the case of the Yorkshire ârailway kingâ George Hudson illustrated. The ârailway boomâ of 1844â7 was far more volatile than earlier booms, and probably played a decisive role in the cyclical fluctuations of the British economy.5 Parliament passed the necessary legislation for the construction of 270 new railway lines in the peak year 1846 alone. During these years a total railway capital of â¤133 million was raised. In 1847 over â¤40 million was invested, about 7 per cent of Britainâs national income. This tide of capital investment was slowed down by a significant credit crisis. Railways already had the potential to influence the international economic situation through the London financial market.6 British railway building in those years even spread across the Channel to Belgium and northern France, so much so that the liberal Belgian Prime Minister Jean-Baptiste Nothomb warned: âWe are going to become a province of England.â7
Construction proceeded at a brisk pace. Between 1846 and 1848, 2,600 miles of railway lines were opened; by 1851, 6,300 miles were in service; and by 1870 the total mileage had reached 13,400. In 1900, Britainâs railway network extended to some 18,700 miles.8 The fact that, in mid-century, over 100 Members of Parliament had substantial financial interests in railway concerns is indicative of the overall importance attributed to the development of railways by the countryâs elite.9 This attraction continued throughout the nineteenth and twentieth centuries. Large aristocratic landowners and politicians, like the Earl of Derby or the Duke of Devonshire, derived a significant portion of their income from railway properties. Others, like the Marquis of Salisbury, augmented theirs through directorships of railway companies, while the seriously wealthy W.H. Smith made his by exploiting station platforms and foyers.10 In the second half of the 1840s railway investment amounted to some 55 per cent of gross capital formation. In the years following the âboomâ, the railways ceased to be an engine of growth, but they remained an important supporting sector. In the 1850s and 1860s the share of railway capital as a percentage of British gross capital had sunk to between a fifth and a quarter, though between 1863 and 1866 Parliament still authorized some â¤150 million to be spent on the railways.11
The growth of the railway network facilitated the rise of industrial centres in the provinces and of the great international seaports. Crewe and Swindon emerged as railway towns where engines and rolling stock were built. Middlesborough and Barrow-in-Furness rose from tiny rural communities to become the mid-Victorian âboomâ towns, made possible by a combination of natural resources, rail transport and access to the sea. The railways transformed Britainâs landscape and society. Rail transport determined Victorian urban development, especially the growth of the suburbs. Conversely, once thriving rural market towns fell into decay if they remained unconnected â something neatly illustrated in one of Trollopeâs Barchester novels by the fate of the market town of Courcy, whose centre shifted from the old market to the new railway station some distance away.12
The Victorian railway station was one of the âkey buildings of the ageâ. In newly incorporated Barrow, the Corporation met in the railway offices, until the new town hall was built. Railway stations were the cathedral buildings of the nineteenth century, monuments to industrial and social progress. As the Yorkshire Post commented in 1866: âRailways and the electric telegraph have established a frequency of locomotion and circulation of ideas which rob country society of all its inertness and stagnation which were once its peculiar characteristics.â13 Yet, the spread of railways also stoked fears of change. In Cambridge, the Universityâs vice-chancellor insisted that the new railway station be built at exactly one mileâs distance from Senate House, lest the city be invaded by Sunday trippers!
If Britain was a pioneer in the development of railways, there were similar developments in other countries. But there were also significant differences. While the British railways were financed by private investors, state governments played a more important role in continental Europe. In Germany ârailway development was effecting a mighty transformation in economic lifeâ, as the nineteenth-century historian and prominent nationalist propagandist Heinrich von Treitschke observed.14 Already in 1828, the Prussian finance minister Friedrich Christian Adolph von Motz, the creator of the German Zollverein, had considered the scheme for a railway line connecting the Rivers Rhine and Weser, and thence to the North Sea, thereby avoiding the Dutch Rhine tolls.15 The railway era started fitfully in the second half of the 1830s. Ministerial coolness and official suspicions of private enterprise eased only in the 1840s. Following the consolidation of her state finances in 1842, Prussia gave government guarantees to construction companies. As a result the length and the density of the Prussian railway network grew rapidly. If in 1840 there were a mere 115 miles in service, by 1847 the network had grown to 1,506.3 miles. By 1850, 1,834.7 miles were operational, and in 1860, 3,580.5 miles. At the beginning of the so-called Great Depression in 1873, Prussian railways extended some 8,986.1 miles; on the eve of the First World War they had reached 22,744.5 miles.16
Eighteen forty-six was a âboomâ year also in Germany. The railway sector was the âpace makerâ of economic growth in this early stage of German industrialization, and surpassed all other sectors until the 1880s. As in Britain, large corporations and joint stock companies played a major role in railway construction. Prussian railway capital accounted for more than half of Germanyâs total gross capital; and the railways remained the lead sector in Prussiaâs industrialization.17 Net investments in the railways in Germany were constant at about a fifth to a quarter of the total German gross capital from 1850 until the late 1870s, a figure roughly comparable to the figures for Britain after the ârailway boomâ.18 And, as in Britain, railways became the objects of financial gamblings, as the spectacular rise and fall of Prussiaâs own ârailway kingâ, the British-trained Dr Bethel Henry Strousberg, illustrated.19
In contrast to the development of railways in Britain, the Prussian government exercised close supervision over all construction projects to avoid wasteful competition and to provide adequately for economic and strategic necessities. The latter consideration grew steadily in importance.20 Still, the efforts to gain control over all lines running through Prussian territory did not always succeed in reducing wasteful competition. A dispute with the Saxon government in 1860â1, the so-called Eisenbahn-Krieg, led to the creation of two railway hubs in close geographical proximity at Leipzig and Halle, where one would have sufficed.21 Initially, the government in Berlin had encouraged the building of essential lines through guarantees of interest or financial devices, but had relied on private enterprise to raise the capital necessary for the construction of the lines and to carry their business management. In the 1850s, under the commerce minister August von der Heydt (1848â62), the Prussian government sought to gain direct possession of or control over as many railways as possible. By 1860, more than half of Prussiaâs railways had either been nationalized or placed under some form of government supervision. This policy was reversed in the early 1860s under Prime Minister Otto von Bismarck. In order to finance the 1866 war, von der Heydt, by now finance minister, sold off some 4.5 million Thalers of railway stocks and shares in government ownership during the war and a further 13 million after the war. Such sacrifices paid off, for the Prussian government increased its rail network after the successful war by taking over the railways in the annexed territories.22
Economic and military strategy remained blended in Prussian railway policy. After 1866, the government began to search for ways of bringing the railways on Prussian territory under its control. Bismarck saw in them the sinews of Prussiaâs economy in peacetime and of her armed might in times of war. He was determined that they should belong to the state.23 It was a reflection of the central role of the railways in Germanyâs industrial development, but also during the wars of 1866 and 1870â1, that German state governments began to purchase privately owned lines. Still, the full nationalization programme was not passed into law until December 1879.24 While in the 1870s the majority of lines were in private ownership, there were hardly any private lines left by 1890. The Prussian state railways operated a model system, reliable, efficient and economical. In this fashion, the Prussian state (but also the other larger German states) acquired effective instruments of state intervention in the economy; they als...
