Serving the Public Interest Through Competition: British Railroads

  • <em>The Inception of the World's Railroads</em>. Kress Collection of Business and Economics, Baker Library Historical Collections. Gift of J.P. Morgan.

Through comparative analysis of railroads in the United States and Europe, where the industry had an equally transformative role, recent scholarship underlines the impact the state had on the development of the industry. In England, where the industrial revolution was already well under way, the British made early contributions to railroad technology, introducing the first steam locomotive-run public railway in 1825. Both the United States and Germany would borrow from and improve upon English engine design.

  • William John Gordon. Our Home Railways: How They Began and How They are Worked. London and New York: F. Warne & Co., [1910].  Baker Old Class Collection, Baker Library Historical Collections.
  • The [British] railway system developed within a distinctive institutional context in which government sought to foster competition whilst securing private profit for socially beneficial schemes.

In Britain, railroad entrepreneurs needed the right of eminent domain, which only Parliament could grant, to purchase land owned by aristocrats and landed gentry. Local towns and regions desired routes leading into London, and as various companies subsumed these and other lines, they came to dominate a geographic area. Companies competing for territory would sometimes build duplicate tracks, resulting in an inefficient system of surplus lines.

  • South Durham Railway. Prospectuses, etc. London, 1835-1836. Kress Collection of Business and Economics, Baker Library Historical Collections.
  • London and Birmingham Railway. “Prospectus.” Prospectuses of British Railways. 1825-1847. Kress Collection of Business and Economics, Baker Library Historical Collections.

By the 1860s, as the London capital markets funded larger and larger mergers, Parliament began to regulate the level of capital and the number of acquisitions permitted. William Gladstone, political leader and Christian socialist philosopher, believed the state had moral responsibilities to the public good. In 1844, the Select Committee on Railroads, of which Gladstone was chairman, issued a report that noted, “As railways multiply, the collision of interests between them becomes sharp and violent, and where the combatants on all sides are so powerful and opulent, a more than ordinary vigilance and firmness is demanded from Parliament for the protection of the public interests.”9 It was leading political figures like Gladstone, economist Mark Casson contends, who “believed that the right of a railway to interfere with private property, in the interests of merchants and industrialists, could only be defended if the railway, once built, served the interests of workmen and the public as a whole.”10 Thus, while Parliament supported railroad entrepreneurs’ efforts to purchase private land, it also fostered competition and restricted regional monopolies as a way of serving the public good.

  1. Mark Casson, The World’s First Railway System: Enterprise, Competition and Regulation on the Railway Network in Victorian Britain. New York: Oxford University Press, 2009, p. 314.
  2. Fifth Report of the Select Committee of 1844, p. 6 in Casson, p. 233.
  3. Casson, p. 322.