Bonding, Spending, and Collapsing: American Passenger Rail in the 1920s

By the turn of the 20th century, the American railroad industry had created the largest network of rails on Earth. Yet, by the middle of the 1920s the passenger rail industry as a whole was in such dire financial straits that public opinion fell toward billions of dollars of capital bailout being the only viable solution to keep American passenger rail afloat. Several decades later, throughout the 60s and 70s, the degradation of the rail network reached its peak, with companies across the board declaring bankruptcy, lines across the continent going defunct, and vital services being permanently shuttered. The financial situation of these railroads in the 1910s and 1920s deserves investigation as one of the turning points in American railroading history and as a potential beginning to the slow decline into obsolescence faced by the industry.

The results of this investigation will be presented visually so as to show a chronological decline of the passenger rail industry. This study will rely heavily on financial records acquired from corporate archival sources, and financial information from these records benefits heavily from being shown across a series of charts that can highlight and track financial conditions through specific figures. Additionally, railroad network maps are vital for providing an immediate, visual impact to the loss of track-miles throughout this time of crisis. Posterboard information will be presented in a “railroaded” manner, that is, along a “track” with key information as stops on the route. This will be supported by aforementioned visualizations, but also ideally by an interactive digital map created and brought on an external device. One railroad in particular will serve as the focal point of the study: the Milwaukee Road.

A major class one passenger railroad and a road famous equally for its breadth of service and innovation on the tracks, the Milwaukee road serves as a prime example of the problems plaguing the entire passenger industry at this time. The company experienced four bankruptcies over the course of its lifespan. The first of these, in 1925, was characterized by a preceding period of rapid expansion including the construction of new lines and a network electrification conversion. These projects consumed an immense amount of capital which, combined with the company’s reliance on unsuitable modes of fundraising typical to the industry at the time, joined a flurry of extenuating factors that led to the ultimate collapse of the company’s finances. The Road’s subsequent reorganization was followed by two more bankruptcies in short succession.

This study claims, as demonstrated through the first major bankruptcy of the Milwaukee Road, that the American rail industry by 1920 had been supported by decades of terribly outmoded financial practices, including fundraising methods, spending habits, and expansion plans, that mixed with a natural low period to create disaster for the industry as debts climbed and revenues fell. This disaster, and the industry's poor recovery from it, ultimately contributed significantly to the collapse of the industry by the 1970s.