Government partnership comes with a high hidden cost.

‘T his is where government can really be a catalyst.”

So spoke Wesley Edens in 2024 of Brightline West, a $12 billion high-speed rail project to connect Las Vegas to Southern California. Edens even underscored the importance of government involvement in his private project, public-private being what he called “the blueprint,” with “local government, state government, and the federal government participating.”

Edens was talking in the Biden era. In the Trump era, he is pushing again and is even seeking an additional $6 billion in funding for Brightline West from the federal government.

Edens, as close as we come these days to a railroad titan, started out leaning more toward the private with his original rail undertaking, Florida’s Brightline, which back in 2023 advertised itself as “the first new privately funded passenger rail service in a century.” Brightline drew inspiration from Florida’s ur-titan, Henry Flagler, whose largely private railroad and hotels along Florida’s Atlantic Coast transformed marshy wilderness into an American Riviera, and, eventually, the powerhouse metropolises of Miami and Palm Beach.

Brightline’s ride reminds us that the line between public and private is itself never truly bright. There’s always some subsidy or tax break involved. Even the mighty Flagler chose to get “catalyzed,” accepting land available via the federal government and the state’s Swamp and Overflowed Land Act.

But Edens’s great government partnership may cost him and Brightline West. For there’s hidden benefit in staying clear of government — or clear as you can. For the railroad industry, touching government for money amounts to touching a third rail. That at least is what the long record of this industry suggests.

The rail story starts back in 1862 with one of most flamboyant efforts at government catalysis in American history. The Great Catalyzer back then was Abe Lincoln, who determined to connect West with East through a transcontinental railroad. President Lincoln’s law, the Pacific Railway Act of 1862, provided powerful incentives — loans and land — for railroads to take up what was then viewed as a near impossible challenge. Then Washington tapped two lucky companies, the Union Pacific and the Central Pacific to do the work. A third line, the Western Pacific, also became part of the deal. These favored three received, or were then able to buy, land amounting to 175 million acres, or more than the size of Texas.

The land sure came in handy as collateral. In America, the phrase “robber baron” was first popularized by German railway workers, whom the rail titans reminded of feudal Raubritter, plundering knights.

Lincoln’s law placed its premium on speed and miles of track laid, with builders working at a furious pace toward a meeting point, Promontory Summit in Utah Territory. The splendid result was that Leland Stanford of the Central Pacific was able to drive the legendary connecting “golden spike,” connecting West to East a mere six years after the railroads broke ground — a about the same amount of time that Edens’s Fortress Investment Group has already spent on Brightline West. Fifteen years after the golden spike, not one but four railroad lines crossed the continent, if you include a Canadian line.

The 1862 law’s emphasis on speed and footage cost the country dearly, however, for the quality of the lines themselves was poor. A number quickly fell into disuse. To squeeze out more subsidy, the rail barons gamed the system: The Union Pacific rails curved through Nebraska, rather than running straight, so that Union Pacific could build up more mileage, as historian Burton Fulsom points out. The result was (rail)roads to nowhere, “an apple tree without a limb” (the phrase of the Union Pacific’s Sidney Dillon), or, to use the era’s pejorative, “two streaks of rust and right of way.”

The failing government concessionaires appealed for yet more funds. Congress turned against them. As Folsom details in his discerning chronicle of this era, The Myth of the Robber Barons, the power to subsidize became the power to destroy. As for the financing, that proved so wasteful, and occasionally corrupt — rail men funneled the profits back to themselves, as in the Credit Mobilier scandal — that rail subsidy earned a bad name, even, eventually, in the Party of Lincoln.

What is forgotten, however, is the story of the fifth transcontinental.

The Great Northern, as it eventually came to be called, sprang from the brain of James Jerome Hill of St. Paul, Minn. Hill arrived on the national rail scene too late for subsidy, in the 1870s, and so, whether out of conviction or necessity, built logically. “What we want is the best possible line, shortest distance, lowest grades, and least curvature that we can build,” he later summed up.

Hill did what he said. Where his predecessors curved, Hill built straight. Where predecessors had used cheap wrought iron and wood, Hill imported Bessemer steel from Britain. Building across North Dakota, Montana, Idaho, and on to Washington, Hill laid thousands of miles in track.

The symbol that Hill chose for his Great Northern was the mountain goat, which captured his own nimble approach. Expertly managed, in good measure by Hill himself, an Elon Musk–scale control freak, the rail made profit. The Panic of 1893 slowed or wrecked many railroads, including the Northern Pacific and the Union Pacific. The Great Northern powered forward.

How Hill managed this feat repays close study, for he was truly a network visionary, even more Brin than Musk. “Supply creates its own demand,” goes the maxim, but as investors know, sometimes the long wait for that demand proves fatal. Hill moved early to ensure demand by launching a massive campaign to encourage settlement along his roads. In one year alone, he lured 42,000 immigrants, mostly from Northern Europe, to populate and farm the Red River Valley (Minnesota, North Dakota, and Manitoba). Hill even went so far as to import livestock for “his” farmers from far and wide, including Europe.

Progressive historians such as Michael Hiltzik emphasize the fact that a bidding war over the Northern Pacific Line between Hill and Edward H. Harriman of the Union Pacific triggered a stock market crash in 1901. What such historians neglect to point out was that Hill’s effort was, again, based on service to a rational imperative: Chicago was the hub. Hill needed to retain control of companies at that hub to connect his western lines with the East.

Further serving his network god, Hill set about expanding beyond American borders. “Across the Pacific Ocean,” as he noticed, “nearer than it had ever been by several hundred miles” — thanks to his own rail line — “lay the trade empire of Asia.” Angry farmers in the Midwest wanted better prices or bigger markets for their grain. One Progressive response to that anger was regulation of freight rates.

Hill had another idea: Why not enable Midwest and Western farms to grow by enabling them to export? After all, as he observed, Japan could not “feed her own people. They would buy very largely for us if we could sell to them.” Why not offer wheat to the Japanese? Hill, so often a contrarian, wagered that“a people once accustomed to the wheat loaf are slow to give it up.” Cotton from the South might also find buyers in Asia. Hill set long-haul freight rates low enough that farmers or loggers would be willing to send grain, cotton, or lumber to Puget Sound. He also built 28,000-ton ships, the Dakota and the Minnesota, the largest in the world, to ferry the goods over.

By the turn of the century, Hill could record his success: “In the ten years between 1893, when the Great Northern reached the coast, and 1903, the exports of the Puget Sound customs district increased from $5,085,958 to $32,410,367, or nearly 540 per cent.”

Hill the globalizer of course ran into trouble from time to time. He got in a nasty fight with union leader Eugene Victor Debs, though fortunately he was enough of a pragmatist to settle. When drought wrecked the farm regions of the Northwest that Hill had done so much to people, he, like the subsidized railroad barons, became the villain of the hour.

Twixt “Hell” and “Hill”
There’s But One Letter
Were Hill in Hell
We’d All Feel Better

But the worst blows to the Great Northern came from a politician: President Theodore Roosevelt. TR’s better-known assault involves an issue timely today: antitrust. Railroading is a capital-intensive industry. In order to prevent Wall Street takeover wars like the one in 1901, Hill and his opponents built up their capital another way by creating a giant holding company, Northern Securities. Harriman, Hill, and J.P. Morgan, another investor, reckoned that the ambiguities in America’s then-most-important antitrust law, the Sherman Act of 1890, would save them if the government litigated. They guessed wrong. President Roosevelt and his attorneys made a monopoly bogeyman of Northern Securities, and the Supreme Court ruled against the holding company, forcing dissolution.

For an analysis of the role of politics in the 1904 finding, check out the dissent of Justice Oliver Wendell Holmes. Holmes noted that “immediate overwhelming interest” — political pressure — “distorts the judgement.” Yes, indeedy.

With less capital and more pointless competition among themselves, the railroads weakened.

But a second Roosevelt blow mattered perhaps more — especially to Hill’s vision of global trade networks. Preoccupied with fairness to an extent worthy of Elizabeth Warren, Roosevelt backed an Interstate Commerce Commission campaign to challenge the discounts that Hill had given long haul freight. Rates, TR said, must be “reasonable and just.” Roosevelt codified his price controls via the 1906 Hepburn Act, according to which the freight from one American site to another must be the same as the through rate “from Chicago to Yokohama,” as the shocked Hill observed.

At higher government-set rates, the farmers could not afford to ship their grain to Asia. A promising export pathway would then became those “two streaks of rust.” “Destructive” was the title Hill put on this disappointment in his memoir, Highways of Progress. As he noted, the perverse actions by the federal government not only impaired trade but endangered all relations with Japan, including political. “The favouring moment,” he commented, “has passed.”

Another area where Hill proved visionary.

For those who want to learn more about Hill, this author recommends not only Burt Folsom but the outstanding multi-episode biopic, The Empire Builder.

In any case: Hill passed away in 1916, not long after his Asian defeat. Next time I’m in Minnesota, I plan to swing by Resurrection Cemetery in Mendota Heights to pay my respects. For even after Hill’s death, his railroadrolled on. The bright line between public and private did sometimes blur, as it had with Flagler, under Hill — rail stretches that Hill acquired from the favored crowd came with lucrative, federally granted, land. Still, the Great Northern stands as a model of the merits of success without that government catalyst.

Edens and Brightline West, we imagine, might here interject with the argument that their challenges are larger than James J. Hill’s, for Hill operated well before the advent of commercial trucking. One response might be that further pulling back regulation — Brightline West has already secured exemption from some of California’s perverse rules — would free Brightline of the need for so much public money. Another answer might be laws that allow Brightline to escape the clutches of labor unions — labor costs are among the challenges that Brightline West has cited for seeking more financing recently. Brightline West et al. might also strengthen the chances of commercial success by looking West across Pacific, as Hill did, and partnering with Japan to bring a crowd accustomed to high-speed trains, Japanese tourists. That’s not as loopy as it sounds, given the fact that the star power of Shohei Ohtani of the Los Angeles Dodgers has been credited with increasing Japanese visits to the City of Angels by 90 percent in 2023. But there are still other options. Brightline West could even team up with a domestic company in another area.

That makes sense — but only if Brightline West and partners can stomach the possibility that such a giant venture might make them vulnerable to another kind of trouble.

Which kind of trouble comes after trouble? The kind that so often comes when businesses try to grow without government, the kind James J. Hill would be happy to sit up in his plot in Resurrection Cemetery to tell you about: antitrust.