"Among our major railroads, the most scandalous histories were those of the Union Pacific and the Central Pacific (now called Southern Pacific). These were the two lines built with a federal government subsidy. The Union Pacific collapsed into bankruptcy soon after its construction, with what was, perhaps, the most disgraceful scandal in the history of any railroad; the scandal involved official corruption. The road did not become properly organized and managed until it was taken over by a private capitalist, Edward H. Harriman.

The Central Pacific — which was built by the “Big Four” of California, on federal subsidies — was the railroad which was guilty of all the evils popularly held against railroads. For almost thirty years, the Central Pacific controlled California, held a monopoly, and permitted no competitor to enter the state. It charged disastrous rates, changed them every year, and took virtually the entire profit of the California farmers or shippers, who had no other railroad to turn to. What made this possible? It was done through the power of the California legislature. The Big Four controlled the legislature and held the state closed to competitors by legal restrictions—such as, for instance, a legislative act which gave the Big Four exclusive control of the entire coastline of California and forbade any other railroad to enter any port. During these thirty years, many attempts were made by private interests to build competing railroads in California and break the monopoly of the Central Pacific. These attempts were defeated—not by methods of free trade and free competition, but by legislative action.

This thirty-year monopoly of the Big Four and the practices in which they engaged are always cited as an example of the evils of big business and free enterprise. Yet the Big Four were not free enterprisers; they were not businessmen who had achieved power by means of unregulated trade. They were typical representatives of what is now called a mixed economy. They achieved power by legislative intervention in business; none of their abuses would have been possible in a free, unregulated economy.

The same Central Pacific is notorious for a land deal which led to the dispossession of farmers and to bloody riots in the late 1870’s. This is the incident which served as the basis for the anti-business novel, The Octopus, by Frank Norris, the incident which caused great public indignation and led to hatred of all railroads and of all big business. But this deal involved land given to the Big Four by the government—and the subsequent injustice was made possible only by legislative and judicial assistance. Yet it was not government intervention in business that took the blame, it was business.

At the other side of the scale, the railroad that had the cleanest history, was most efficiently built in the most difficult circumstances, and was responsible, single-handed, for the development of the entire American Northwest, was the Great Northern, built by J. J. Hill without any federal help whatever. Yet Hill was persecuted by the government all his life—under the Sherman Act, for being a monopolist (!)."

From the chapter "NOTES ON THE HISTORY OF AMERICAN FREE ENTERPRISE"

- www.amazon.co.uk/Capitalism-Ideal-Ayn-Rand-ebook/dp/B002OSXD6E/

Historical evidence of the stated events mentioned in the excerpt could be found on

- https://en.wikipedia.org/wiki/History_of_the_Southern_Pacifi...

- https://en.wikipedia.org/wiki/Central_Pacific_Railroad

- https://en.wikipedia.org/wiki/Great_Northern_Railway_(U.S.)