Urban Investment versus Local Enterprise: Railroad Financing in Pennsylvania and Virginia, 1830-1860

Scholars have long recognized the important differences between the northern and southern rail networks. Business historians focusing on northern enterprises have documented an impressive list of accomplishments: railroads pioneered modern accounting methods; railroads introduced new management techniques and organizational structures; and railroads helped transform national and international capital markets [3, pp. 79-121]. While historians have credited northern roads with nothing less than a transformation of the economy, they have castigated southern roads in the antebellum era as "colonial-style" ventures [10, p. 50; 24, pp. 22-24]. Southern roads generally had less traffic, fewer stations, fewer employees, and less rolling stock than their northern counterparts [21, pp. 13-14; 13, p. 13]. Even more important was the lack of integration in the southern system. By the 1850s, northern leviathans uch as the Pennsylvania Railroad had begun integrating entire systems built around great runk lines. The southern roads, lacking central trunk lines, did not complete a single intersectional connection. Even Robert William Fogel, who has depicted a growing and prosperous outhern economy, contrasts "the great railroad trunk lines connecting the cities of the Midwest and the East" with the conspicuous absence of "railroad links between the Midwest and the South" [9, p. 304]. A comparison of the railroads in Albemarle county, Virginia and Cumberland county, Pennsylvania, suggests why each region developed ifferent railroad systems. More than 30 years ago Lance E. Davis argued a "shortage of finance" hindered the growth of the antebellum southern textile industry [5, p. 293]. The same might be said of southern railroads. Lacking a major urban center which could supply needed funds, the Virginia Central (eventually running from Richmond to Charlottesville and then to Staunton) relied on local investors and the state government for its capital. Connecting Chambersburg with Harrisburg via Carlisle, the Cumberland Valley Railroad, on the other hand, raised its capital from Philadelphia financiers. When the company sold new preferred stock in the early 1850s, a few well-connected families purchased the