The national government then took up the same policy and granted lands to the states to be used for this purpose.  The first case of this kind was the grant to the Illinois Central road, in 1850, of a great strip of land through the state from north to south.  Grants were made in fourteen states, covering tens of millions of acres of land.  Then the national government, between 1863 and 1869, aided the building of the Pacific railroads by granting outright twenty square miles of land for every mile of track and by loaning the credit of the government to the extent of fifty million dollars,—­a debt which was settled by compromise only after thirty years.

Counties, townships, cities, and villages then entered into keen competition to secure the building of railroads, projected by private enterprise.  Bonds, bonuses, tax-exemptions, and many special privileges were granted.  To obtain this new Aladdin’s lamp, this great wealth-bringer, localities mortgaged their prosperity for years to come.  The promoters bargained skilfully for these grants, playing off town against town, cultivating the speculative spirit, punishing the obdurate.  Not the civil engineer, but the railroad promoter determined the devious lines of many a railroad on the level prairies of America.  The effects of these grants were in many cases disastrous, and after 1870 they were forbidden in a number of states by legislation and by constitutional amendments.  But before this era of generosity ended, probably the railroads in America had received more public aid than has ever been given to any other form of industry in private hands.

Sec. 8. #Emergence of the railroad problem#.  In most charters and laws authorizing the building of railroads, either nothing was specified regarding rates, or maximum rates were fixed which proved to be so high that they were of little, if any, practical effect.  But very soon began to appear some serious evils in the policy of railroads toward the shipping and traveling public in matters of rates and of service.

As the ownership of the wagons, ships, and canal-boats of a country is usually divided, ocean ports and points along the lines of turnpikes and canals enjoy competition between carriers.  In the early days of the railroads it was believed that a company or the government would own the rails and charge toll to the different carriers, who would own cars and conduct the traffic as was done on the canals.  Experience soon showed the impracticability of this scheme and the need of unified management.  An operating railroad company, therefore, has a monopoly at all points on its line not touched by other carriers.  This, like any other monopoly, is limited, for the railroad, to secure traffic, is led to meet competition of whatever kind—­that of wagons, canals, rivers, or of other railroads—­wherever it occurs.  The railroads in private hands early began to “charge what the traffic would bear,” high where they could, and low where they must, to get the business.  Thus developed the various forms of discrimination which are now to be described.