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day, the Governor had been authorized to negotiate for a State loan of not over five million dollars, at five and one-half per cent for twentyfive years.
In November the rate was raised to six per cent. It was made allowable to raise the loan in Europe as well as in the United States. This loan, later increased by $200,000, constituted the Internal Improvement Fund of the State, from which appropriations were to be made by law. The financial operations connected with these enterprises do not, in detail, fall within the scope of this paper. They led as elsewhere to most serious difficulties and losses.
On the basis of the enactments already described, Michigan undertook those varied enterprises which seemed essential to her prosperity. Up to January 24, 1837, the Detroit and St. Joseph Railroad Company had expended $102,000, according to the Committee on Internal Improvement, which had been in conference with the directors of the Company regarding a purchase by the State. The Company had bought one locomotive, one passenger car, wheels and iron for six freight cars, spikes and rails for thirty miles of track. According to Berrien, chief-engineer of the railroad, no work had been done beyond Ypsilanti, but between that place and Detroit the roadway had been "cut out" and grubbed, and eleven miles were graded and ready for the superstructure. The rest of this section was under contract, and the right-of-way had been secured to a point three miles west of Ann Arbor. It appears from the report of the Auditor of the Board of Internal Improvement under date of February 1, 1838, that on May 11, 1837, there was paid to the Detroit and St. Joseph Railroad Company $116,902.67, being the amount expended by that company up to date.14 In addition the State paid claims against the Company amounting to $22,800.12.
The Board of Internal Improvements located the Southern Railroad from Monroe through Adrian, Hillsdale, Coldwater, Branch, Centerville, to the St. Joseph River at Bertrand, to its Lake Michigan terminus at New Buffalo. At Adrian, the Southern “Cut" the old Erie and Kalamazoo Railroad which extended from Toledo to Adrian and was already in operation. This Adrian-Toledo line, being a foreign corporation and deflecting traffic into the “odious” state of Ohio, was hateful to Michigan's enterprise. The prospect that Ohio and Indiana would construct a railroad from Toledo to Michigan City urged Michigan to push her southern line. By January, 1838, the sills, ties, and rails were in place on the Michigan Central from Detroit to Ypsilanti, and twenty-one miles of rail were laid. The Northern Railroad was located from the mouth of the Black River through Lapeer, Owosso, and Corunna, to the mouth of the Maple River, thence to Grand Rapids, the head of navigation on the Grand River. At the same time, canal and river surveys as required by law had been made, so that in its first report, the State Board which had all these works in charge bad occasion to feel gratified. Contracts had been let for the work on the Southern and Northern Railroads, as well as the Central. And for all undertakings the Board of Internal Improvement had expended $415,000 up to January 1, 1838. Beginning with 1838, the construction of the public utilities which have been described was actively engaged in. Progress was too slow for the impatient people. It was necessary to supplement general contracts with special engagements and to employ men by the day.15 As financial difficulties increased, as they were bound to increase following the panic of 1837, and in view of the very nature of some of the undertakings in which the Commonwealth had engaged, the projects which promised no immediate return lapsed, and labor was concentrated on the Central, and to a less degree, on the Southern railroads. By 1846 the State had extended the Central line to Kalamazoo, and its Southern line to Hillsdale, and these roads were not carried beyond these points under state auspices.16
1* House Documents, Mich., 1838, pp. 322, 137, 110.
From the westward-moving terminal of the Michigan Central the stage ran to St. Joseph on Lake Michigan, where it connected with the boats for Chicago.
The effective railway construction promoted by the State government and to a lesser degree by private corporations, markedly affected the development of Michigan. Between 1837 and 1845, Michigan nearly doubled her population; and an analysis of the census figures for local units indicates very clearly the effect of improved transportation. As the Central Railroad progressed, its earning power increased. Thus the extension of the line to Jackson early in 1842, raised its annual earnings from $71,000 to $114,000 in less than eight months.17 When Kalamazoo was attained, the Central was earning $239,663.73 in nine months.18 Stage lines reached out from the railroads. Thus Grand Rapids was reached by stage from Battle Creek.19 But of all the works of internal improvement, the Central Railroad alone was remunerative. In other enterprises $660,000 were buried.20 In this same waste must be reckoned 65,000 acres of land which was part of a grant of 500,000 acres received by the State from Congress. The sixteen miles of the great trans-state Canal that had been opened on its eastern end, were leased for water power, while the bed of the Northern Railroad became a highway.21
15Mich. House Docs., 1840, I., p. 54.
20 Ways and Means Committee Report, 1846, Table A., Senate and House Docs.,
2Campbell's History of Michigan, p. 496.
In 1846 public opinion in Michigan was demanding that Michigan withdraw from all the enterprises in which she had engaged. The legislative Ways and Means Committee in that year following the AuditorGeneral, reported the debt of the State at $4,121,000, and the cost of the Internal Improvements system $4,392,593.43 in money, and 305,000 acres of land donated by the United States. The Finance Committee of the Senate put the internal improvement debt still higher, that is, at $4,481,720.79. The same committee computed the interest on this debt at $240,000.22 It put the “taxables” of the State in 1846 at $28,922,097.50; so a tax of approximately one per cent would be needed even to pay the interest on the above debt.23 Since the State tax in that year stood at $507,311.42, it seemed obvious that, even to maintain interest charges was certain to cripple the finances of the Commonwealth. The Senate Committee estimated that to put the Central Railroad in condition fit for business would cost $2,532,500.24
The House Ways and Means Committee found “the obvious defect in our system has arisen from an eager desire to push on our railroads before we had funds to complete substantially what we had commenced or even to develop their capacity for business.” “While we have been constructing railroads at one end, they have been gradually dilapidating at the other.” The Finance Committee of the Senate uttered the same opinion: “At the commencement of our internal improvements," it said, "the whole community shared, in some measure at least, in the errors and mistakes which time has since disclosed."
It was calculated that interest charges would amount to $600,000 in 1849. The State had other obligations than those arising from its internal improvement schemes, and both interest and principal were unpaid, and numerous dubious shifts for the most essential funds were resorted to. “The impatience of our energetic citizens to have the locomotive at their doors,” which brooked no delay, changed to a desire to free the State from the whole business; accordingly, March 28 and May 9, 1846, acts were passed for the sale of the Central and the Southern Railroads to the Michigan Central and the Michigan Southern Corporations, established by these statutes. These two roads were the only available assets of the State for the partial liquidation of its debts. The sale price of the Central Railroad was two million dollars, which was fortyfive thousand dollars less than its stated cost to the State; that of the Southern line was five hundred thousand dollars, not half of its cost.26
2Rpt. Senate Finance Com., 1846, pp. 14, 15. (Doc. 8.)
Rpt. Senate Finance Com., 1846, p. 15. 24 Rpt. Senate Finance Com., 1846, p. 19. (Doc. 9.) *House Docs., 1846; Doc. 1, p. 8. Report Senate Finance Com., 1846, No. 9, p. 21.
20In his message of 1849, the governor stated the cost of the Southern Railroad to have been $1,200,000. p. 24.
It was stipulated that both railroads should be extended substantially on the line originally planned by the State.
To some it may seem regettable that various considerations did not allow the State government to regard Chicago as the terminus for the State railways. When the railroads had been extended to Chicago, and within nine years of Michigan's relinquishment of them, the Michigan Central's dividend-earning power was ten per cent. A return approximating this might have induced the State to give to public ownership of railroads a fairer trial than it has yet received in this country. It is not a warrantable conclusion that the later prosperity of the Michigan Central Railroad and the Michigan Southern was due solely to the substitution of private for public control. Economic conditions sufficiently explain the situation. For some years these roads had a monopoly of the eastern overland traffic of Chicago, and always a goodly share of it; and this became the fact just at the moment when Chicago was made the great railway and shipping center of the northwestern United States. As it was, the corporations which took possession of the Michigan railways were rivals in reaching Chicago, a new terminus adopted after the taking over of the state enterprise. Both roads attained Chicago in 1852, the Michigan Central by using the right-of-way of the New Albany and Salem (Indiana) line from Michigan City to the Indiana west line, and the tracks of the Illinois Central Railroad into Chicago. The Michigan Southern reached the same point (Chicago) by arrangement, and then consolidation, with the Northern Indiana Railroad. It was four years before a third eastern connection, that of the Pittsburg, Fort Wayne, and Chicago line with the Pennsylvania Railroad, was established between Chicago and the East. The eastern terminus of the Michigan Central Railroad was Detroit, while the Michigan Southern by combination with the old Erie and Kalamazoo line from Adrian to Toledo, and the railway from Detroit to Toledo, obtained access to Toledo and to Detroit. This per se was an important gain for Chicago and the northwest, for it at once saved the long detour to the north by the all-water route. At the moment, Lake Erie formed the nexus between the
western railroads and the New York Central and the New York and Erie, both of which connected with the seaboard; and the Michigan Central railroad
its own line of steamers between Detroit and Buffalo. But within three years after Chicago was reached by rail from the East, as has been described, this water connection by Lake Erie was supplemented by railroads to the north and to the south of that Lake. The Great Western Railway of Canada joined Windsor opposite Detroit, with Suspension Bridge at Niagara, and thus with the eastern roads; while the Lake (or South) Shore lines brought the Michigan Southern into connection
.with the Erie at Dunkirk, and with the New York Central and its Hudson River rail connection, at Buffalo. Thus it resulted that, by 1855, two all rail routes joined Chicago and New York.27
The economic signifiance of the facts just stated is not capable of calculation, but it is very great, and was so recognized then as now. The belief that “that there would never be traffic enough to maintain two competing lines" from Chicago, 27a arose from immaturity in the field of railway economics. The true causal sequence runs thus: The establishment of all-rail transportation between Chicago and the seaboard, by its saving of time and money, stimulated immigration into the Northwest; this and reduced freight charges to the seaboard stimulated and increased the aggregate of production in this region, thus affording increased business for the railroads. The great service afforded by the improvements in transportation which have here been described and in which Michigan had a share, lay immediately in the saving of these costs, time, labor, capital, etc. Some comparisons will show this. Ring. walt, quoting Henry C. Carey, finds the cost to a person of getting from New York to Chicago in 1838 to have been $74.50.28 This was after the opening of the Erie Canal and of steam navigation, but before the establishment of rail connection. Professor Turner quotes Tucker of Virginia, who says of the year 1818: "Even in the country where I reside, not eighty miles from tidewater, it takes the farmer one bushel of wheat to pay the expense of carrying two to a seaport town."29 January 24, 1837, the Committee on Internal Improvements of the Michigan Legislature stated that the rate per passenger by stage was six to eight cents per mile, and for merchandise between Detroit and Marshall, $2 per hundred pounds.30 In 1854, the cost of carrying freight in wagons was estimated to be fifteen cents per ton-mile.31
When we relate these statements with respect to the cost of trans
On the foregoing points see the following: J. L. Ringwalt, Development of Transportation Systems in the United States; Philadelphia, 1888. Silas Farmer, History of Detroit and Michigan, etc.; Detroit, 1884. Hunt's Merchant's Magazine and Commercial Review, Vol. 34, p. 494ff. Similar but fuller information is contained in "An Address to the Merchants of the N. West," etc., Chicago, August, 1856. Robert E. Roberts, Sketches of the City of Detroit; Detroit, 1855. The Michigan Commercial Register and Citizens' Almanac for 1855; Detroit. Resources and Industrial Interests of Michigan, and Commerce of Detroit, by Ray Haddock, Commercial Editor of the “Detroit Tribune,” Detroit, 1860. An interesting and confirmatory railroad map of this region and period accompanies a land prospectus issued by the Illinois Central Railroad; New York, 1856; and a tentative map of the same purport forms the frontispiece of a “Plan for Shortening the Time of Passage between New York and London,” etc.; Portland, 1850. See also Colbert and Chamberlin, Chicago and the Great Conflagration; Cincinnati and New York, 1871. Charles Lanman, The Red Book of Michigan ; Detroit, 1871.
ara Chicago and the Great Conflagration, p. 75f. Ringwalt, Development of Transportation Systems in the United States, p. 130. 2oTurner, Rise of the New West, p. 100. *° Report of the Com. on Internal Improvements; Detroit, 1837, p. 17. 31 Ringwalt, p. 129.