Leland gave up drink, fitting in with the abstemious Associates

The difference between the Central Pacific cabal and all the other fly-by-night railroad concerns that collapsed in the panic was not that the Sacramento shopkeepers were financially scrupulous. They were at least as overleveraged as their peers; their books were obvious bullshit; and they had taken advantage of the exact same scams that felled the Union Pacific’s directors the year before, in the Crédit Mobilier scandal. Rather, the difference was that they persuaded their bankers to persuade their bankers to play it cool. With the interested parties denying anything was amiss, the Associates were in place to snatch up failed lines at a discount. For capitalists at the end of the nineteenth century, it paid—as it has ever since—to have several corporate shells to switch between, just in case. They funneled money into the construction of their Southern Pacific line, another Associates-controlled railroad that subsumed the Central, earning the budding monopoly the nickname the Combine.

“Believe this, young man,” exclaimed Shelgrim, laying a thick powerful forefinger on the table to emphasise his words, “try to believe this—to begin with—THAT RAILROADS BUILD THEMSELVES. Where there is a demand sooner or later there will be a supply. Mr. Derrick, does he grow his wheat? The Wheat grows itself. What does he count for? Does he supply the force? What do I count for? Do I build the Railroad? You are dealing with forces, young man, when you speak of Wheat and the Railroads, not with men. There is the Wheat, the supply. It must be carried to feed the People. There is the demand. The Wheat is one force, the Railroad, another, and there is the law that governs them—supply and demand. Men have only little to do in the whole business. Complications may arise, conditions that bear hard on the individual—crush him maybe—BUT THE WHEAT WILL BE CARRIED TO FEED THE PEOPLE as inevitably as it will grow. If you want to fasten the blame of the affair at Los Muertos on any one person, you will make a mistake. Blame conditions, not men.”

[...] Shelgrim presents himself as a bundle of social forces, the embodiment of impersonal currents—and he is, but not of the currents he claims. Because it wasn’t demand for wheat that built the speculative railroad lines. Supply and demand determine commodity prices—though not nearly so directly as we’ve been led to believe—and if someone orders a loaf of bread, you can’t tell the hungry customer to hold on while you build a railroad, a farm, a mill, and a bakery. Capital and capitalists built the lines, under logic much closer to “If you build it they will come” (or even “There’s a sucker born every minute”) than to “Give the people what they want.” As Richard White explains in his book Railroaded: The Transcontinentals and the Making of America, many if not all of the railroads were nonsensical from a consumer supply-and-demand perspective. The impersonal drive animating those big men in suits wasn’t the people’s hunger for bread; it was capital’s hunger for profit.

[...] Financiers wanted a way to access the potentially unlimited western gains they read about. Like the forty-niners who chased easy, transformative wealth, speculators were looking to get their hands on yields that weren’t yoked to the magnitude of the investment, all without having to do any actual work. Here again is the real impersonal demanding force that built the West—not hunger for bread but hunger for increased profits. Of course they could buy businesses, or invest in founding their own firms the way the Associates themselves had, but ownership was so restrictive. Converted to productive capital, money ceased to be liquid; it was tied up in machinery and other concrete assets. To make the best use of the opportunities to finance settlement in the fourth quarter of the nineteenth century—in California in particular, but also throughout the colonized world—capital needed a middle road between a bonded loan and a partnership, an instrument with the tradable liquidity of the former and the speculative upside of the latter. The answer was the joint-stock corporation.