Reconstruction Era - Railroad Subsidies and Payoffs

Railroad Subsidies and Payoffs

Every Southern state subsidized railroads, which modernizers felt could haul the South out of isolation and poverty. Millions of dollars in bonds and subsidies were fraudulently pocketed. One ring in North Carolina spent $200,000 in bribing the legislature and obtained millions in state money for its railroads. Instead of building new track, however, it used the funds to speculate in bonds, reward friends with extravagant fees, and enjoy lavish trips to Europe. Taxes were quadrupled across the South to pay off the railroad bonds and the school costs. There were complaints among taxpayers, because taxes had historically been low, since there was so little commitment to public works or public education. Taxes historically had been much lower than in the North, reflecting a lack of public investment in the communities. Nevertheless thousands of miles of lines were built as the Southern system expanded from 11,000 miles (17,700 km) in 1870 to 29,000 miles (46,700 km) in 1890. The lines were owned and directed overwhelmingly by Northerners. Railroads helped create a mechanically skilled group of craftsmen and broke the isolation of much of the region. Passengers were few, however, and apart from hauling the cotton crop when it was harvested, there was little freight traffic. As Franklin explains, "numerous railroads fed at the public trough by bribing legislators ... and through the use and misuse of state funds." The effect, according to one businessman, "was to drive capital from the State, paralyze industry, and demoralize labor."