Tuesday, November 2, 2010

Popular History Ignores Government Created Subsidy Distortions

From Mises Daily, "The Myth of the Great Railroad Meetup" by Mark A. Pribonic:
[Promontory Summit, Utah] is the place where the railroads of the Central Pacific and the Union Pacific met completing the transcontinental rail line.
It has been well noted in history that these two railroads were given land grants, low interest-rate loans, and direct subsidies by the federal government. The subsidies were graduated according to the difficulty of the terrain being traversed with $16,000 paid for construction over an easy grade and up to $48,000 for grades in the mountains.
...the perverseness caused by the subsidies was in full view. At that moment we were standing on the grade built by the Central Pacific and there less than fifty yards below was the grade built by the Union Pacific. The grades did not meet but ran parallel to each other and had continued that way for 250 miles — almost a year's work.

...these two railroads had no intention of meeting. The purpose of grading and laying tracks was not to meet the demand for transcontinental passenger service, but simply to collect, risk-free of any market forces, the federal subsidies.
Read the complete article here.

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