In this week’s lecture video Dr. Patrick Newman discusses how cronyism was a very big part of our nation’s first big business. It was surprising to me to hear everything Dr. Newman talked about. I began to realize the truth to all his words and thoughts though. The government has always had a sense of corruption to it, especially when getting involved with new organizations. Entrepreneurs without government help can be the key to success for all new organizations though. I personally saw how this is true throughout Dr. Newmans’s lecture.
America's first big business can be found in 1850 with the railroad system. The transcontinental railroad system included a lot of decision making based on personal connections and political favors. The “Big Four” Sacramento Merchants were a group consisting of the men LeLand Stanford, Collis P. Huntington, Mark Hopkins, and Charles Crocker. These men were eagerly on board for the creation of the transcontinental railroad. These men were also all very shady and corrupt. Their intentions were to make money from the building of the railroad rather than the operation of the railroad. They used lobbyist and bribes for the government as incentive to “get the job done”. This resulted in a very overpriced production and very poor-quality structure for the transcontinental railroad.
In the midst of the production for the Central Pacific transcontinental railroad the Union Pacific happened. This was congress deciding to charter its own railroad. The Union Pacific fell into the hands of a man by the name of Oak Ames and his brother became the president. Something interesting is that the Central Pacific built eastward from Sacramento, but the Union Pacific built Westward from Omaha and Council Bluffs Nebraska which was determined by Lincoln who owned real estate in Council Bluffs. Before his presidency Lincoln did legal work involving railroads and owned the real estate mentioned previously. This probably had a large effect on Lincoln's decision for starting production of the Union Pacific there which means he was no less guilty of using personal connections and gain when making government decisions.
Eventually all the schemes and manipulation were uncovered. The tide turned on the transcontinental railroad. This was known as the Credit Mobilier scandal, which happened in 1872. The public became furious and started to call Oaks Ames Hoax Ames. A very fitting name in my opinion because of his participation in the schemes of Credit Mobilier to overcharge the government and do it all to make pocket profits. During all of this the big four managed to get out due to a “very convenient” burning of their office building and all of their paperwork. In 1873 there was panic in the U.S. due to 2 party systems coming back and the unsustainable railroad boom.
How could all of this have gone differently though? With every story there is always at least two different paths that could be taken. Dr. Newman talked about the Great Northern Railroad. In 1878 a man named James J. Hill purchased the St Paul and Pacific Railroad. Everyone told him this was a huge mistake and that he would never be able to succeed. A true entrepreneur as Dr. Newman pointed out never gives up though. They take others disbelief as even more motivation to succeed. True entrepreneurs never back down from a challenge, they endure until the very end. Hill proved himself to be a true entrepreneur because he never gave up and, in the end, he was successful. Hills lack of subsidies helped him build more efficiently and he was disciplined by any profit losses. Hill used quality rails, encouraged farmers to settle nearby, and developed a shorter route. Ultimately Hill didn’t need congress to make his vision possible. He demonstrated that entrepreneurs with no reliance on government help can make more positive and higher quality impacts in society.
So, what is cronyism? It is government intervention that benefits special interests at the expense of the public. I think that definition sums up perfectly what happened with the transcontinental railroad. Cronyism didn’t stop there though sadly. We saw it happen with standard oil monopoly, the teapot dome scandal, and even Covid-19. During the pandemic certain businesses received a PPP while small businesses more in need did not receive the same help. I find this so criminal, especially the fact that it is still happening in today’s society. As someone who grew up thinking the government was truly there to benefit the people and make decisions to better the community we live in, I was very disheartened to hear the truth from Dr. Newmans’s lecture topic. While I may hope that one day our government will be free from corruptive acts, I know this will most likely never be true. I am thankful though to be someone who knows the truth and is not blinded by false advertisement from the government.
