In the early forties the commercial importance of Philadelphia was menaced from two directions. A steadily increasing volume of trade was passing through the Erie Canal from the Central West to the northern seaboard, while traffic over the new Baltimore and Ohio Railroad promised a great commercial future to the rival city of Baltimore. With commendable enterprise the Baltimore and Ohio Company was even then reaching out for connections with Pittsburgh in the hope of diverting western trade from eastern Pennsylvania. Moreover the financial prestige of Philadelphia had suffered from recent events. The panic of 1837, the contest of the United States Bank with President Jackson, its defeat, and its subsequent failure as a state bank, the consequent distress in local financial circles — all conspired to shift the monetary center of the country to New York.
p48 It was at this time that Philadelphia capitalists began to bestir themselves in an attempt to recover their lost opportunities. Philadelphia must share in this trade with the Central West. The designs of the Baltimore and Ohio Company must be defeated by bringing Pittsburgh into contact with its natural Eastern market. To this end, the Pennsylvania Railroad was incorporated on April 13, 1846, with a franchise permitting the construction of a railroad across the State from Harrisburg to Pittsburgh. An added incentive to constructive expansion was given by an act of the Legislature authorizing the Baltimore and Ohio to extend its line to Pittsburgh if the Pennsylvania Company failed to avail itself of its franchise.
In order to avoid the heavy cost of constructing a road between Philadelphia and Harrisburg, the Pennsylvania Railroad entered into arrangements with the Philadelphia and Columbia — a railroad opened in 1834 and owned by the State — which ran through Chester and Lancaster to Columbia. This road was primitive in the extreme and used both steam and horse power. As late as 1842 a train was started only when sufficient traffic was waiting along the road to warrant the use of the engine. Belated trains were hunted up by p49 horsemen. Yet the road was in those days famous for the "rapidity and exceptional comforts of the train service." Between Columbia and Harrisburg passengers westward bound had to use the Pennsylvania Canal.
Construction of the main line westward to Pittsburgh began at once and progressed rapidly. By making use of the Alleghany Portage Railroad from Hollidaysburg, the Pennsylvania Railroad eventually secured a continuous line from Harrisburg to Pittsburgh. But between Philadelphia and Harrisburg passengers were for a long time subjected to many inconveniences. Finally in 1857 the Pennsylvania Railroad bought the Philadelphia and Columbia from the State, rebuilt it, and extended it to Harrisburg. At the same time the Pennsylvania bought the main line of the Public Works, which included the Alleghany Portage Railroad. On July 18, 1858, the first through train passed over the entire line from Philadelphia via Mount Joy to Pittsburgh without transfer of passengers. At the same time the first smoking car ever attached to a passenger train was used, and sleeping cars also soon began to appear.
The railroad genius identified with the history of the Pennsylvania Railroad during the following p50 decade is J. Edgar Thomson. A man of vision and of great shrewdness and ability, he was more like the modern railroad head of the Ripley or Underwood type than of the Vanderbilt, Garrett, or Drew type. His interest was never in the stock market nor in the speculative side of railroading but was concentrated entirely on the development and operation of the Pennsylvania Railroad system. His dreams were not of millions quickly made nor of railroad dominance simply for the power that it gave; his mind was concentrated on the growth and prosperity of a vast railroad system which would increase with the years, become lucrative in its operations, and not only radiate throughout the State of Pennsylvania but extend far beyond into the growing West.
Under the Thomson management, which lasted until 1874, the record of the Pennsylvania Railroad was one of progress in every sense of the word. While Daniel Drew was lining his pockets with loot from the Erie Railroad and Commodore Vanderbilt was piling up his colossal fortune through consolidation and manipulation, J. Edgar Thomson was steadily building up the greatest business organization on the continent. In 1860, the entire Pennsylvania Railroad system was represented p51 merely by the main line from Philadelphia to Pittsburgh, with a few short branches. By 1869 the road had expanded within Pennsylvania alone to nearly one thousand miles and also controlled lines northward to the shores of Lake Erie, through the State of New York.
But the master accomplishment of the Thomson administration was the acquisition of the Pittsburgh, Fort Wayne and Chicago line in 1869. This new addition gave the Company its own connection with Chicago and made a continuous system from the banks of the Delaware at Philadelphia to the shores of Lake Michigan, thus rivaling the far-flung Vanderbilt line, a thousand miles long, which the industrious Commodore was now organizing. Shortly thereafter the Pennsylvania began to expand on the east also and obtained an entry into New York City by acquiring the United Railroad and Canal Company, which owned lines across the State of New Jersey, passing through Trenton.
In the latter years of the Thomson management it became more and more evident that it was important for the Pennsylvania Railroad to have further Western connections which would reach the growing cities of the Middle West. While the p52 Fort Wayne route made a very direct connection with Chicago and included branches of value, yet the keen competition which was developing in the expansive years following the Civil War made actual control of the Middle Western territory a matter of sound business policy. The Vanderbilt lines were reaching out through Ohio, Indiana, and Illinois; the Baltimore and Ohio was steadily developing its Western connections, and now Jay Gould had come actively on the scene with large projects for the Erie. To offset these projects, early in 1870 a "holding company" — probably the first of its kind on record — known as the Pennsylvania Company was formed for the express purpose of controlling and managing, in the interest of the Pennsylvania Railroad, all lines leased or controlled or in the future to be acquired by the Pennsylvania Railroad interests west of Pittsburgh and Erie. This Company took over the lease of the Fort Wayne route and also acquired control by lease of the Erie and Pittsburgh, a road extending northward through Ohio to Lake Erie.
After this date the expansion of the system west of Pittsburgh went on rapidly. In 1871 the Cleveland and Pittsburgh Railroad, which had been p53 opened as early as 1852, came under the Pennsylvania control. Soon after this, many smaller lines in Ohio were merged in the system. The most important acquisition during this period, however, was the result of the purchase of the great lines extending westward from Pittsburgh to St. Louis, with branches reaching southward to Cincinnati and northward to Chicago. This system — then known as the "Pan Handle" route and later as the Pittsburgh, Cincinnati, Chicago and St. Louis — was a consolidation of several independent properties of importance which had been gradually extending themselves over this territory during the previous decade. This new system, which embraced over fourteen hundred miles of road, gave the Pennsylvania a second line to Chicago, a direct line to St. Louis, a second line to Cincinnati, and access to territory not previously tapped.
While the achievements of the Pennsylvania Railroad Company during these years of consolidation and expansion are not to be compared with those of more modern times, it is well to realize that even as early as the seventh decade of the last century this railroad was always in the forefront in matters of high standards and progressive practice. It was the pioneer in most of the improvements p54 which were later adopted by other roads. The Pennsylvania was the first American railroad to lay steel rails and the first to lay Bessemer rails; it was the first to put the steel fire-box under the locomotive boiler; it was the first to use the air brake and the block signal system; it was the first to use in its shops the overhead crane.
In these earlier years also the Pennsylvania had established its enviable record for conservative and non-speculative management. No railroad wrecker or stock speculator had ever had anything to do with the financial control of the company, and this tradition has been passed on from decade to decade. The stockholders themselves, even in those days of loose methods and careless finance, had the dominating voice in the affairs of the company and were also factors in the approval or disapproval of any proposed policies. In the matter of its finances the Pennsylvania developed and established an equally clean record. The company began almost at the beginning to pay a satisfactory dividend on its shares and continued to do so right through the Civil War period. Since the through line from Philadelphia to Pittsburgh was opened, not a single year has passed without the payment of a dividend — a sixty-year record p55 which can be duplicated by no other American railroad system.
The Pennsylvania still continued to forge ahead even during the exciting period from 1877 to about 1889, when the trunk lines were aggressively carrying on that policy of cutthroat competition between Chicago and the Atlantic seaboard which resulted in so severely weakening the credit and position of properties like the Baltimore and Ohio and the Erie. The Pennsylvania, too, indulged in rate cutting, but the management was equal to the situation and made up in other directions what it lost in lower rates. It gave superior service, developed a high efficiency of operation, and steadily maintained its properties at a high standard. During these years the president was George B. Roberts, who had succeeded Thomas A. Scott in 1880.
Roberts's management spanned the period from 1880 to 1897 and embraced a decade of comparative prosperity for the country as a whole and nearly a decade of panic and industrial and financial depression. During the earlier decade the business of the Pennsylvania was continually benefited by the industrial development and growth which marked the period. It was at this time that p56 the Pittsburgh district took its permanent place as the great center of steel and iron manufacture. The discovery of petroleum in western Pennsylvania, creating an enormous new industry in itself, proved to be an event of far-reaching significance for the Pennsylvania Railroad. The extensive opening up of the soft coal sections of western Pennsylvania, Ohio, and Indiana, also meant much for this great system of railroads.
Still further developments in other directions accrued to the benefit of the Pennsylvania Railroad. In this period, by obtaining the control of a line to Washington, the system acquired a Southern artery running through Wilmington, Delaware, and Baltimore to Washington. Afterwards, with other roads, the Pennsylvania acquired control of the Richmond, Fredericksburg and Potomac Railroad and thus obtained a line to Richmond, Virginia. On the north and to the east the expanding movement also went on. In addition to the development of its main line from Philadelphia to Jersey City, the Pennsylvania acquired many other New Jersey lines, including the West Jersey and Seashore, a road running from Camden to Atlantic City and Cape May.
During the whole of the aggressive administrations p57 of both Thomas A. Scott and George B. Roberts the great system continued to spread out steadily until it had penetrated as far as Mackinaw City on the north and Chesapeake Bay on the south. Its network of lines stretched across the Eastern section of the continent from New York to Iowa and Missouri, while the intensive development of shorter lines in the State of Pennsylvania and to north was unceasing. The Northern Central running south from Sodus Bay on Lake Ontario through central Pennsylvania to Baltimore, the Buffalo and Allegheny Valley extending from Oil City northward and joining the main system to the east, the Western New York and Pennsylvania operating north from Oil City to Buffalo and Rochester — these lines the Pennsylvania Railroad acquired and definitely consolidated in the Roberts régime.
After the retirement of Roberts, Frank Thomson, a son of the earlier president of the same name, was placed at the head of the system for three years. But in 1899 Alexander J. Cassatt, who had for many years been identified with the Pennsylvania as officer, director, and stockholder, took the helm, and a new chapter and probably the greatest in the history of this remarkable railroad began.
The name of Alexander J. Cassatt will always p58 be linked with the comprehensive terminal developments in the region of New York City which were begun almost immediately on his accession to the presidency and which were carried forward on bold and far-reaching lines. Perhaps more than any other one person, Cassatt foresaw the approach of the day when New York City as a commercial center would outstrip both in density of population and in amount of wealth all the other cities of the world. He and his predecessors had for many years witnessed the great industrial development of the Pittsburgh district, where property values had grown by leaps and bounds and where the steadily advancing development of industry and material resources had been so unmistakably reflected in the increasing earning power and value of the Pennsylvania Railroad properties.
But while at Pittsburgh the road had everything to favor it as far as terminals and rights of way through the heart of the great industrial district were concerned, in the great Eastern metropolis the Pennsylvania Railroad was at an obvious disadvantage, particularly as compared with the New York Central, which had its splendid terminal rights penetrating to the heart of the city. Cassatt saw that his company must without delay p59 take a number of bold and, for the time, enormously expensive steps toward the development of terminal facilities in Greater New York or else forever abandon the idea of getting nearer the heart of the city than the New Jersey shore and thus run the risk, in the keen contest for commercial supremacy, of ultimately falling behind other more advantageously situated lines.
There were still further incentives to immediate action on the part of the Pennsylvania Railroad. While the New York Central was in an ideal position for handling all traffic destined for the New England States, the Pennsylvania could control practically none of this business, as its terminals were on the wrong side of the Hudson and necessitated not merely the inconvenient transfer of passengers but also the much more expensive handling of freight. Other disadvantages from which the Pennsylvania suffered were involved in its inability to make the most economical terms for foreign shipping, as a large proportion of such freight had to be constantly transferred on lighters to the New York and Brooklyn sides of the harbor. Thus any comprehensive plan for terminal development on the part of the Pennsylvania must necessarily include not only a tunnel system into p60 New York City but also an outlet through the city to Long Island and a connection with the New England railroads.
The first move in the development of this terminal system was the acquisition in 1900 of the control of the Long Island Railroad, embracing all the steam railway mileage on Long Island, with lines extending along both the north and south shores to Montauk Point. This acquisition added extensive freight yards and terminals on the Brooklyn side of the East River. The Company then obtained franchises and began the construction of its great tunnels under the North and East Rivers and entirely across New York City, with a mammoth passenger station at Seventh Avenue and Thirty-second Street. A great railroad bridge was planned to cross from Long Island to the mainland, connecting with the New York, New Haven and Hartford system, in the stock of which the Pennsylvania at this time purchased an interest.
The terminal construction occupied a period of many years and cost over one hundred million dollars, besides the added costs involved in building up and developing the old, worn-out Long Island Railroad. Only recently has the project p61 been rounded out and completed through the final construction of the important connection with the New England railroad systems. But the realization of this plan is undoubtedly the greatest achievement in all the long career of the Pennsylvania Railroad. Had the project been delayed for another decade, it probably could not have been accomplished because of the growing expense of operation and the difficulties of getting franchise rights and rights of way through and under the metropolis.
While the tunnel development is the notable achievement of the Cassatt régime, this remarkable man's name is also closely identified with the "community of interest" idea already explained. This "community of interest" scheme was pushed aggressively by Cassatt in coöperation with Harriman, Hill, and Morgan. Large stock purchases were made in the Norfolk and Western, the Chesapeake and Ohio, and the Baltimore and Ohio. As the latter road had in its turn acquired, jointly with New York Central interests, a working control of the Reading Company, and the Reading Company had secured majority ownership of the New Jersey Central system, it is apparent that the domination which the Pennsylvania had obtained over the p62 entire Eastern seaboard south of New York City and north of Baltimore was made nearly complete.
The "community of interest" plan held sway with the large railroads of the country and was very effective for perhaps half a dozen years, until the interstate commerce laws were amended in such a way as to give the Government complete control over railroad freight and passenger rates. In 1906 the Pennsylvania began to dispose of the bulk of its holdings in competing properties, the most notable transactions being the sale of its entire interest in the Chesapeake and Ohio to independent interests and a substantial part of its Baltimore and Ohio holdings to the Union Pacific Railroad. A few years later, when the Union Pacific was forced by the Federal courts to dispose of its control of the Southern Pacific Company, a trade was made between the Pennsylvania and the Union Pacific whereby the latter took from the Pennsylvania the remainder of its Baltimore and Ohio investment and gave in exchange a portion of its own large holding of Southern Pacific stock.
To get a fair idea of the meaning and magnitude of the great Pennsylvania Railroad system today one must do more than scan maps and study statistics. One should travel by daylight over its p63 main line from New York to Pittsburgh. Although the route is over the same ground which the road followed a generation or two ago, a four-track line runs practically all the way, with long stretches of hundreds of miles of five, six, and eight tracks. Where mountains were climbed thirty years ago, one will now find them bored by tunnels; where sharp curves were necessary before, straight trackage only will be encountered today. Grades have been eliminated everywhere and the whole route has been modernized and strengthened by the laying of one hundred to one hundred and fifty pound rails.
Undoubtedly the fortunate location of the Pennsylvania lines in the half dozen States which represent the financial and industrial heart of the continent has had much to do with its vast growth and the expansion of its business; but its high reputation can be explained only by the long record of its superior methods and management. One of the primary objects of Pennsylvania Railroad policy has been to keep pace with the growth of the country. Instead of following in the wake of industrial progress and making its improvements and extensions after its competitors had made theirs, its management has usually had the foresight to prepare well in advance for future needs.
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