IntroductionAcross the Borders - Ashgate

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                     Across the Borders
                      Ralf Roth and Günter Dinhobl

The Importance of the topic

The railway system came into life in the nineteenth century and rose as the
modern nation states were rising. So it was not by accident that, for a long
time, railway history was written as separate histories of national railway
systems. There is no lack of railway studies for each country in Europe, or
indeed for many other countries in the world. These national railway histories
are rich in details, and rewarding for all who are interested in railways in
particular countries. Some of these studies are excellent, groundbreaking
works; their authors include historians like François Caron for France,
Michael J. Freeman and Michael Robbins for the United Kingdom, Michel
Laffut for Belgium, Augustus J. Veenendaal for the Netherlands, Francisco
Wais San Martín for Spain, Michèle Merger for Italy, Rainer Fremdling,
Lothar Gall and Manfred Pohl for Germany, Robert William Fogel and John
F. Stover for the United States, Robert F. Leggett for Canada, Brian Fawcett,
P. Lacoste, and Ian Thomson for the Andean states in South America, Ian J.
Kerr for India, John C. Decker for Russia, Yakub N. Karkar for the Ottoman
Empire, and Édouard de Laboulaye for China.

    See F. Caron, Histoire des chemins de fer en France, 2 vols (Paris 1997); M. J.
    Freeman, The Railway and the Victorian Imagination (Yale 2000); M. Robbins,
    The Railway Age (London 1962); M. Laffut, Les Chemins de Fer Belges 1830–
    1913. Genèse du réseau et présentation critique des données statistiques
    (Brussels 1998); A. J. Veenendaal Jr., Railways in the Netherlands. A Brief
    History, 1834–1994 (Stanford, Calif. 2001); A. J. Veenendaal Jr., Spoorwegen
    in Nederland van 1834 tot nu (Amsterdam 2004); F. Wais San Martín, Historia
    de los ferrocarriles españoles (Madrid 1974); M. Merger, ‘Les chemins de fer
    italiens: leur construction et leurs effets amont (1860–1915)’, Histoire Economie
    et Société, 11, issue 1, 1992, 109–29; R. Fremdling, Eisenbahnen und deutsches
    Wirtschaftswachstum 1840–1879 (Dortmund 1975); L. Gall and M. Pohl, eds, Die
    Eisenbahn in Deutschland. Von den Anfängen bis zur Gegenwart (Munich 1999);
    R. W. Fogel, Railroads and American Economic Growth (Baltimore 1964); J. F.
    Stover, American Railroads, sec. ed. (Chicago 1977); R. F. Leggett, Railways in
    Canada (Newton Abbot and Vancouver/Toronto); B. Fawcett, Railways of the
    Andes (Norfolk 1997); P. Lacoste, El ferrocarril trasandino (Santiago 2000); I.
    Thomson, El Ferrocarril Transandino (Santiago 2005); I. J. Kerr, Engines of
    Change. The Railroads That Made India (Westport 2006); J. C. Decker, ed.,
    Russian Rail Transport 1836–1917 (Danville, Pa. 1999); Y. N. Karkar, Railway
xxiv                       ACROSS THE BORDERS

    But these studies were separate; each provided us with knowledge of only
one part of the network. They regularly compared investments in railways
with investments in other fields of particular national economies. But the
international background for these investments was not developed, and the
research did not shed light on the neighbouring processes across the borders.
Every network is more than the sum of its parts. Histories of the national
networks of Germany, Portugal, Russia and so on provide no understanding
of the railway network as a Europe-wide and even global communication
    In the last 200 years, efficient networks developed that not only increased
the possibilities of freight traffic but also broadened human mobility. The
first direct consequences of the worldwide revolution in transport included
drastic reductions in travel time and decreases in the costs of journeys. This
made it easier for people to reach distant regions from every locality in the
world and take advantage of the possibilities inherent in those regions. This
happened long before automobiles, long before airplanes, and it had far-
reaching consequences.
    As long as products from Asia, Africa and South America were traded in
Western Europe as colonial products, as an exotic broadening of the spectrum
of goods, they did not compete with the products of the national economy.
But after the lowering of transport, communication and transaction costs
between the different production areas in the world, the situation changed
fundamentally. On the world market, when business people compare goods
of similar quality, only the cost counts. The cost depends on things like
productivity, wages, exchange rates, tariffs, government subsidies and last
but not least transportation costs. International trade networks and the
worldwide synchronisation of timetables changed the world into a single
marketplace, where the raw materials and all goods for production are bought
where they are the cheapest. This development began in the nineteenth
    The global economic interrelationship was and is accompanied by
gigantic continental and transcontinental migration. In the nineteenth century,
migration was mainly across the Atlantic Ocean, but also took place in many
other regions of the world at the same time. To consider the evolution of a
compact globe in space and time filled with dynamic processes has many
practical consequences. The historically developed norm of our current
working and living conditions is set into relief, as are the traditional systems
of prices and the spectra of goods we are accustomed to consuming. Social
standards collide with the competition for the best production site, and the
social dynamic of globalisation is a controversial conversation topic in all the

    development in the Ottoman Empire, 1856–1914 (New York 1972), and E. de
    Laboulaye, Les Chemins de fer de Chine (Paris 1911).
    See. J. Brecher and T. Costello, Global Village or Global Pillage. Economic
    Reconstruction from the Bottom up (Boston 1994).
                                 INTRODUCTION                                     xxv

regions of the world. At the same time we are experiencing the beginnings of
a debate on economic and social standards for the world as a whole.
    In the reality of a global economy, and in the discussion of a new social
policy, the differences between national societies have vanished, as norms,
values and models of economic and social regulation have been standardised
internationally. Not very long ago one spoke of German society, British
society, American society, or Japanese society. But nowadays one
distinguishes between Rhenish capitalism, Atlantic capitalism, and Asian
capitalism. The world is more and more shaped by a ‘rational’ system that
started its triumphant progress in the wake of the great discoveries in the
sixteenth century. This rational system tends to equalise all qualities and
distinctions, and to subjugate them to one conformity, a reductio ad unum. In
this process, the global networks of communication and transport have
played a key role.
    These worldwide processes in society also have effects on history: For a
long time in the nineteenth and twentieth centuries, history was written in a
national style, primarily as history of politics, but in later times, since the
1950s, it has been written also as history of societies. In many nations, like
Germany, England, USA, France, Italy, for example, history was
conceptualised as the history of each single country. This obsession
dominated for many decades and any idea of a trans-national view of history
had been rejected.
    Change did not come until the end of the twentieth century. In the late
1980s, the writing of history in a nationally separated style collapsed.
Numerous books and periodicals appeared which were dedicated to European

    See M. Albert, Capitalisme contre Capitalisme (Paris 1991).
    See W. Woodruff, ‘Die Entstehung einer internationalen Wirtschaft 1700–1914’,
    in C. M. Cipolla and K. Borschardt, eds, Europäische Wirtschaftsgeschichte, vol.
    4: Die Entwicklung der industriellen Gesellschaften (New York 1977), 435–73; J.
    Pinder, ‘Europa in der Weltwirtschaft 1920–1970’, in ibid., vol. 5: Die
    europäischen Volkswirtschaften im zwanzigsten Jahrhundert (New York 1980),
    377–412, and H. Kierzkowski, ed., Europe and Globalization (Basingstoke 2002).
    At the Tenth International Congress of Historians in Rome in 1955, Jaques
    Godechot and Robert R. Palmer together presented a paper on the historical
    relationship in the transatlantic world. They referred to Fernand Braudel’s
    breakthrough study on the Mediterranean world and its rise to world economy.
    There the French author argued that the history of the Mediterranean region was
    very closely interwoven with the history of the continents which this space
    includes. See F. Braudel, Sozialgeschichte des 15. bis 18. Jahrhunderts. Aufbruch
    zur Weltwirtschaft (Frankfurt am Main and Vienna 1986). Godechot and Palmer
    took the conclusion and proposed something similar as Braudel did for the history
    of the Atlantic world. Their proposal was strongly criticised as nonsensical; Eric
    Hobsbawm was of the opinion that such a theme should never be discussed at a
    congress of historians. See A. Eckert, ‘Großraum Atlantik. Eine neue methodische
    Idee der Geschichtswissenschaft’, Frankfurter Allgemeine Zeitung of 15 June
xxvi                        ACROSS THE BORDERS
history, multinational history, world history. These attempts seem pompous
and self-important today. For example, the 36-volume Fischer World
History, published in Frankfurt am Main in 1965, claimed to present the
‘totality of world affairs’, to give ‘Asian and African countries and people
their full importance’, to point out ‘culture and economy as history builders’,
and finally to demonstrate ‘how humankind awoke in its history to
consciousness of itself’. A closer look in any of these works brings
disillusionment: they fall apart into single studies of particular national
histories; the links between them are missing. The question remains: What
could a world history be, beyond each varying national and cultural
    It’s the connections that should come into focus in writings on the history
of the early modern age up to the twentieth century, not the separations. But
in what particulars can this be shown? If we look at the global processes of
the last 200 years, the answer lies in the processes of communication and
exchange between the countries. There we find the effects of international
division of labour and the worldwide flow of capital; there, too, we find
international transport of people and goods, international communication, and
cultural exchange. This short list relates to processes in today’s societies
which rose to powerful dimensions at the beginning of the twenty-first
century, and depict – even if incompletely – fundamental facets of the
emergence of a world society.

Some suggestions concerning railway history as part of world history

The world’s societies have grown together because of global trade, traffic and
transport; because of the mobility of the masses, including migration within
and between continents; and because of the worldwide transfer of knowledge
and culture. In this context, transport history is an important field, if not the

    These works include Fischer Weltgeschichte (Frankfurt am Main 1965); G. Mann
    and A. Heuß, eds, Propyläen Weltgeschichte. Eine Universalgeschichte, 20 vols
    (Berlin and Frankfurt am Main 1986); Welt- und Kulturgeschichte. Epochen,
    Fakten, Hingtergründe, 20 vols (Hamburg 2006), and Lexikonredaktion des
    Verlages F. A. Brockhaus, ed., Weltgeschichte der Neuzeit (Mannheim 2006). Six
    years ago the Zeitschrift für Weltgeschichte appeared; and the London School of
    Economics and Political Science have recently founded the Journal of Global
    History. See Zeitschrift für Weltgeschichte, ed. by Hans-Heinrich Nolte, and
    Journal of Global History, ed. by William Gervase Clarence-Smith.
    Fischer Weltgeschichte, blurb.
    See R. Roth, ‘Ist die Geschichtswissenschaft auf das Zeitalter der globalen
    Prozesse vorbereitet? Zur Bedeutung der Mobilitätsrevolutionen im 19. und 20.
    Jahrhundert’, Pytannja istorii Ukrainy: Sb. Nauk. st. T. 9. (Tscherniwtzi 2006)
    (Fragen der Geschichte der Ukraine. Sammlung der wissenschaftlichen Artikel,
    vol. 9 (Czernowitz 2006), 212–15.
                               INTRODUCTION                               xxvii

most important of modern world history. That means not the rationality
(Vernunft) or teleological processes of a world spirit (Weltgeist), as the
universalistic historians thought at the end of the eighteenth and beginning of
the nineteenth century, nor class struggle or structures of longue durrée, as
historians in the nineteenth and twentieth centuries argued are key terms of
world history, but communication, traffic, mobility, migration, transfer and
exchange. Hence the topic of this anthology: the gestation and birth of the
first real worldwide traffic network of modern history – railways. The
railways are seen here as a worldwide web; the traditional understanding of
this transport system as an isolated product of each national economy is put
into doubt.
    To illustrate the difference between traditional and contemporary
approaches, let us take the German example. In 1935, during the Nazi period,
the German national railway company Deutsche Reichsbahn celebrated the
anniversary of the German railways and published a big volume entitled
Hundert Jahre deutsche Eisenbahnen (One Hundred Years of German
Railways). In it, the authors characterised the German network as a purely
German innovation, and mentioned only one small exception: the
locomotives for the first German railway line from Nuremberg to Fürth had
been supplied by the English locomotive company of Robert Stephenson.
The rest of the story is a tale of how speedily the lack of knowledge and
engineering capacity had been overcome by German energy and innovation.
English technological knowledge was quickly assimilated by German
engineers, English steelworks and railway factories were replaced by German
factories, and finally the German state itself became involved, forming what
became the largest railway company in the world, with nearly one million
employees in the 1930s. The authors asserted the railway’s role in supporting
nationalist thinking: ‘The aim that German railways have served for one
hundred years is to be the instrument for a deeply rooted feeling of
community of all Germans.’
    But this story left out serious parts of the construction of the German
railway network. It was not only the work of German engineers, German
entrepreneurs, German workers, German investors and German state
authorities, it was also heavily supported by foreign innovations and foreign
    There are many further reasons to interpret railway history as world
history. First, the railway system of each country was, in most cases, an open
system with connections to the railway networks of the neighbouring
countries. It was possible to run through-going trains between the nations. In
the middle of the nineteenth century, various European railway companies

     Hundert Jahre deutsche Eisenbahnen. Jubiläumsschrift zum hundertjährigen
     Bestehen der deutschen Eisenbahnen (Berlin 1935).
     Ibid. 39.
xxviii                      ACROSS THE BORDERS

were proud of having created the first central European traffic axis from Paris
to Warsaw. For that purpose, since the beginning, there have been
international treaties on technical standards, proposed, prepared, and
controlled by international organisations that were formed in the first decades
of the railway history – above all the Union internationeau de chemin de fer
(UIC) founded in 1922. Second, we have to consider the internationality of
technical knowledge. Many innovations have been taken from one country to
another. Third, and this is our main subject, foreign capital played a much
greater role in creating the national railway networks than the authors of the
German anniversary book and many railway historians in other countries
believed – a greater role than many historians assume even today. In fact,
investors and railway companies were energetically engaged in exporting
knowledge and capital into foreign countries in Europe and all over the
    One of the first large-scale projects – the railway line from Cologne to
Aachen and onwards to Antwerp – was financially backed both by the
Belgian state and by foreign investors. This enabled the Belgian state to plan
what was one of the most ambitious railway networks in Europe at that time.
Among the providers of foreign investment for this project was the banking
house of N M Rothschild in London, which had been founded by Nathan
Rothschild, son of Mayer Amschel Rothschild of the German banking city of
Frankfurt am Main. A second example is the case of Germany itself. The first
decades of the construction of the German railway network were
characterised by the presence of private railway committees in many German
cities. As local organisations, they planned city to city connections, applied
for concessions, and collected money for their projects. For that purpose, they
set up shareholder companies and traded their shares with the help of bank
houses that operated Europe-wide; quite a lot of the investment money
therefore came from abroad – across the borders.
    Railway history provides many further examples. It is well known that the
German Deutsche Bank was involved with a railway line from the Balkan
states through the Ottoman Empire to Baghdad; this line’s influence on the
troublesome imperialistic politics of the European states around 1900 is well
documented. Based on files that came from Russian archives after the end of
the Cold War, Manfred Pohl has written about this railway line and its
German financing and political background. In Frankfurt, the German
banking centre, to bring up a fourth example, many private banking houses
were heavily involved in railway financing in the United States of America in
the second half of the nineteenth century. One such success story is that of
Charles Hallgarten, who began his career financing railways in the United
States and then emigrated back to Frankfurt as a wealthy banker. Another

     M. Pohl, Von Stambul nach Bagdad. Die Geschichte einer berühmten Eisenbahn
     (Munich and Zürich 1999).
                                  INTRODUCTION                                   xxix

Frankfurter-American was Wilhelm Bonn. At the age of 20, Bonn was sent to
New York to familiarise himself with the American financial market and to
sell American war bonds on the German market. He speedily built up his
career in New York and became the director of the banking house of Speyer
& Co., a subsidiary of Lazard Speyer-Ellissen. Later on he founded his own
banking firm, Ruette & Bonn, which successfully financed American
transcontinental railway lines.
    The most important banker in this small sample was Jakob Schiff, born in
Frankfurt in 1847. He studied business and trade and then emigrated to
America in 1865. There he became an employee of the New York banking
firm Frank & Gans. Two years later, together with Henry Budge, another
Frankfurt and Hamburg banker, he founded the banking firm Budge, Schiff
& Co. His career really took off when he entered the banking house of
Abraham Kuhn and Salomon Loeb, recognised the tremendous importance of
traffic for the industrial development of the United States, and entered the
railway business. Soon he controlled half a dozen big railway companies.
Under his leadership, Kuhn & Loeb became the second largest investment
banking house in America. The international scope of these men’s operations
was not unusual. We can find similar stories everywhere where the railway
industry flourished.
    When the Austrian state-owned railways were privatised in the 1850s,
two companies were founded which pumped a great deal of foreign money
into the country. These were the Imperial Royal and Privileged (IRP)
Austrian State Railway Company (k.k. privilegierte österreichische
Staatseisenbahn-Gesellschaft) and the k.k. privilegierte Südbahn-Gesellschaft
(Southern Railway Company). The first one, the State Railway Company,
was founded in 1855. The company bought up several railway lines which
had been built by the state, including the Northern lines from Brünn (Brno,
nowadays Czech Republic) to Prague (Praha) and to the border with Saxony
at Bodenbach, and some other lines which had been built by private
companies, such as the line from Vienna to Raab (Györ) in Hungary. Later
on, new lines were built which joined the lines together into a single railway
network. By 1870, this company’s network comprised more than 1,300
kilometres of track in the Northern and Eastern regions of the Habsburg
    The initiative to set up the State Railway Company and its financial
backing actually came from France. It was a plan of the Pereire brothers.
While the administrative council had its headquarters in Vienna, the strategic
steering committee was located in Paris. In 1870, this committee was
decidedly international. It was headed by Isaac Pereire, the vice-president

     See R. Roth, ‘Amerika – Deutschland. Folgen einer transatlantischen Migration’,
     Historische Zeitschrift, 281, 2005, 621–57, and P. Arnsberg, Jacob H. Schiff. Von
     der Judengasse zur Wallstreet (Frankfurt am Main 1969).
xxx                           ACROSS THE BORDERS

was Raffaele de Ferrari, Duke of Galliera, and members included Adolf von
Eichenthal, Baron Heeckeren, Carl Mallet, Casimir Salvador and, of course,
Emile Pereire. At the time when the Southern Railway Company was
founded, a new fiscal instrument was introduced in the railway politics of the
Habsburg Empire. It was the first railway company that received a state
guarantee for the rate of interest. The rate was fixed at 5.2 per cent each
year. Nationalisation efforts begun in 1884 reached fruition in 1908, ending
the reign of the international board. The nationalised railway was named
kaiserlich-königliche Staatsbahnen (Imperial Royal State Railways) and
included nearly 30 railway companies.
    1858 saw the founding of the Southern Railway Company, which took
over the Southern state railway line from Vienna to Austria’s single harbour
in Trieste at the Adriatic Sea. The Southern Railway Company built several
lines of its own, such as the Alpine crossing at Brenner in Tyrol, a railway
link from Budapest to the Vienna-Trieste trunk line at Pragerhof, and a
branch line to Fiume, a military port at the Adriatic. After the turn of the
century, the poet Peter Rosegger was so impressed by the extent of the rail
network – more than 2850 kilometres in length – that he wrote in 1908:

         Today steam-horse of the Southern Railway blows its clouds of smoke up to
         the masts of the circumnavigators of the globe, and tomorrow it whistles with
         the chamois in the high mountain regions. (...) While at the eastern end of the
         Southern Railway the sun rises on the Hungarian Paris on the Danube,, at its
         western end, the last stars of night shine above the towers of Bozen and

Like the State Railway Company, the Southern Railway Company was
heavily supported by foreign capital, especially by James de Rothschild’s
French banking house. The organisational structure of the Southern Railway
Company was also similar to that of the State Railway Company. The
administrative council had its headquarters in Vienna, while the strategic
committee was located in Paris. In 1870 the committee included Alphons
Baron de Rothschild, Lionel Baron de Rothschild, Gustav Baron de
Rothschild, Raffaele de Ferrari, Duke of Galliera, Johann Franz Bartholony,
Edouard Blount, Cornelio de Witt, and Eugen de la Rosière. In contrast to
the State Railway Company, the Southern Railway Company resisted the

      I. Kohn, Eisenbahn-Jahrbuch der Österreichisch-Ungarischen Monarchie
      (Vienna 1870), 43.
      M. Klenner, Eisenbahn und Politik. Vom Verhältnis der europäischen Staaten zu
      ihren Eisenbahnen (Vienna 2002), 168.
      J. Stockklausner, Dampfbetrieb in Alt-Österreich. 1837–1918 (Vienna 1979),
      K. k. priv. Südbahn-Gesellschaft, ed., Die Südbahn und ihr Verkehrsgebiet in
      Oesterreich-Ungarn (Vienna, Brünn and Leipzig 1908), vi.
      Kohn, Eisenbahn-Jahrbuch, 67.
                                 INTRODUCTION                                   xxxi

state’s efforts to nationalise it. Finally, the First World War and its shifted
borders brought this company to an end. The division of the Habsburg
Empire after 1918 created numerous new states, while some other territories
were given to existing countries, for example the region around Trieste to
    These examples demonstrate that international investments played an
important role in the establishment of ‘national’ railway networks. That is
why we have to dig out these forgotten, ignored and covered parts of railway
histories as we seek to achieve a broader understanding and contribute to the
international history of railways in the nineteenth and twentieth century.
    This ignored chapter of railway history is re-examined in our anthology.
In a 1957 article, Michael Robbins asked the question: ‘What kind of railway
history do we want?’ Robbins enquired further where the expensive national
railways managed to get their funding. Our answer is clear: across the
borders. We would like to contribute to the body of knowledge related to
international financial transactions that have taken place across national
borders. It is this aspect that continues to attract our attention and is of
greatest importance in Europe and throughout the world. It is the intention of
the anthology to discover the financing of the world’s railways in the
nineteenth and twentieth centuries, to take the first step in leaving behind the
national(ist) perspective in railway history, and to explore the railway system
as an international communication network. For these reasons we seek to
understand railway lines as international communication systems that came
into being as a result of complex international activities. The contributions to
our anthology provide compelling answers to many questions. When, where
and why were railway investments from foreign investors of great
importance? How difficult was it for foreign investors to realise their
interests in the light of national laws and government policy, as well as the
economic and cultural barriers that existed at that time? And what were the
economic and political consequences of railway investments across the

Summary: Financing the world’s railways

The researchers whose work is featured in this book bring with them deep
insights into international railway financing gleaned from in-depth case
studies from all over the world. The anthology brings together experts on

     There are some exceptions to the national orientation of railway history. See N.
     Faith, The World the Railways Made (London 1990); O. S. Nock, Railways in
     Western Europe (London 1977); Klenner, Eisenbahn und Politik, and R. Roth and
     M.-N. Polino, eds, The City and the Railway in Europe (Aldershot 2003).
     M. Robbins, ‘What Kind of Railway History Do We Want?’, Journal of
     Transport History, 3, 1957, 65–75, here 72.
xxxii                      ACROSS THE BORDERS

economic, social, transport and railway history. The 21 authors come from 14
countries and present contributions which are of interest to researchers, for
experts at railway museums and railway archives, and for all others who are
interested in the history of railways, international commerce, and world
history in general.
    The articles are grouped in three sections. Part One, ‘Individual Across-
Border Investors’, investigates the characteristics of individuals who operated
on a Europe-wide level of railway investment. Part Two, ‘Cross-Border
Investments in Europe’, collects contributions that analyse the role of
international investments in a number of European countries. Part Three,
‘From Europe into the World: Overseas Investments’, details the worldwide
activities of European railway investors.
    Part One begins with a piece by Melanie Aspey, director of The
Rothschild Archive in London. In ‘Making Tracks: Promoting The
Rothschild Archive as a Source for Railway History’ she introduces the
archive and discusses sources which are relevant for railway history. The
core of the archive is made up of the business records of N M Rothschild &
Sons in London; there is much to find relating to their domestic and
international activities on the European continent and all over the world. The
history of railway construction in Europe and overseas is intimately
connected with the Rothschilds’ activities in Austria, France, Belgium, Spain,
Italy, and even in Russia, India and Brazil. The construction of railways was
supported in all these places by money provided by the Rothschild banks.
Beside business records, the archive also features the correspondence of the
Rothschild family’s pan-European business network, plus miscellaneous
documents such as prospectuses, bonds and contracts, all of which give an
indication of the vastness of the flow of money and information across the
    Another very important family of railway investors is examined by
Christophe Bouneau of the University of Bordeaux in his contribution ‘The
Pereires’ International Strategy for Railway Construction in the 1850s and
1860s’. The success of the Pereires was based on the Crédit mobilier, which
Bouneau explains as a model system for financing railway and economic
development anywhere. Up to the late 1860s, when the Pereires left the
Crédit mobilier, they invested in railways in France, in Austria, in Spain, in
Russia and in Italy. Bouneau points out that despite their numerous failures,
the Pereires played an essential role in the conception, structure and
development of the European railway network during the 1850s and 1860s.
    Michèle Merger, of the National Centre for Scientific Research in Paris,
investigates the international investments undertaken by ‘Raffaele de Ferrari,
Duke of Galliera, an Investor of European Stature’. The Duke of Galliera
continued the business activities conducted by his father and expanded into
railway investments in the late 1830s. At first he invested in France, and
afterwards also in Italy, Austria, Spain and Russia. Until the late 1860s, he
                               INTRODUCTION                                xxxiii

held important positions on the boards of numerous railway companies of
different countries, and was involved in negotiations between governments
and investment groups. Finally, Merger points out his talent in manoeuvring
between the various financial groups which were key players in transnational
railway investment, like the Pereire group, the Rothschild group, and the
Bartholony group.
    An individual cross-border investor from Germany is presented by Ralf
Roth of the University of Frankfurt in his article ‘Difficulties of International
Railway Investments in Germany: The Example of the ‘Railway King’
Bethel Henry Strousberg, 1855–1875’. Roth gives an overview of the
activities of Bethel Henry Strousberg and sketches his brilliant rise as a
‘railway king’ and his precipitous fall in the early 1870s. His investments
started in Prussia, and later he became involved in railway construction in
other countries including Russia and Romania. The case of Strousberg shows
how transnational investment innovations could fail. After the setup phase in
the early 1860s, Strousberg successfully managed half a dozen railway
companies, mines, steel works, and locomotive manufacturers, which, for
several years, formed the biggest trust in Germany, with a total of 100,000
employees. His comprehensive management style was called the ‘Strousberg
System’. But in the early 1870s, his railway empire collapsed, because of
personal miscalculations, because of the Franco-Prussian War, and because
of the multiple difficulties which national laws and government policies
presented to foreign investors. Strousberg’s collapse clearly demonstrated the
limitations of his system, and was one reason for the Prussian state’s decision
to nationalise the railways in Germany.
    The coming of the railway network to the Eastern parts of Europe can not
be separated from the person of Leon Sapieha. His persistence in promoting
the building of railways is the topic of the essay ‘Leon Sapieha – a Prince and
a Railways Entrepreneur’, by Ihor Zhaloba of Kiev International University.
Born in Poland in 1802, Sapieha was educated in Paris and Edinburgh. In
1839 he began to work towards the creation of a railway in Galicia, at that
time a part of Austria. More than twenty years later, the first section of the
railway line Sapieha had suggested was opened for business, from Przemysl
to L’viv, Brody and Czernowitz, and he became chairman of the board of the
Carl Ludwig Railway. In the late 1860s he headed a British-Austrian
consortium which built and operated railway lines in Romania. His
international activities positioned him perfectly as an entrepreneur and made
it possible to compete effectively against his rivals.
    A very different kind of cross-border investment is the subject of the
contribution by Rocío Robles Tardio of the Madrid Complutense University.
In her ‘Economic Investors and Railway Advertising: The Influence of
Photography in the Railway in Modern French and Spanish Painting in the
Second Half of the Nineteenth Century’ she demonstrates that investors like
the Rothschilds and Pereires were forward-thinking supporters of modern
xxxiv                      ACROSS THE BORDERS

technologies for railway advertising. In the middle of the nineteenth century,
photography was of special interest, having been invented only a decade
    In our second part we turn to international investments in particular
European countries. Railway history is not only made up of success stories.
In ‘Spanish Society of Secondary Railways: The Failure of a Major
International Project to Create an Additional Railway Network in Spain’,
Francisco de los Cobos Arteaga, Professor at the University of Castilla-La
Mancha in Spain, and Tomás Martínez Vara, Professor at the Madrid
Complutense University, relate the history of the Spanish Society of
Secondary Railways (Sociedad Española de Ferrocarriles Secundarios, or
SEFS). This company was set up after a law had been passed which granted
generous subsidies to railways established in Spain under Spanish boards of
directors. The main administration of the SEFS was located in Paris and its
financial backing also came from abroad. The paper describes the efforts
made by members of its board to build an additional railway system in Spain,
and shows that, in the end, its reach of operations was limited to some
provinces in the North of Spain.
    Belgium played an important role in the transfer of technology from
Britain to the continent. Julien van den Broeck and Hans Willems, a
professor and a researcher respectively at the University of Antwerp, and
Frans Buelens, Professor of Economics at Belgium’s Hoger Instituut Voor
Vertalers En Tolken, argue in their paper ‘British and French Investments in
the Belgian Railway Sector During the Nineteenth Century’ that Belgium’s
institutional framework was unique. Soon after the Belgian state had
inaugurated the first state railway company of the world, there followed a law
on concessions which allowed the investment of foreign capital for railway
construction. Another adaption led to increasing influence by French capital
in the middle of the nineteenth century. The paper gives detailed insights into
the institutional framework of the Belgian state and the geopolitical situation
of the region as the basis of both foreign and internal investments in the
development of the Belgian railways.
    In her essay, ‘Railway Investments in Italy During the Nineteenth
Century’ Daniela Felisini of Rome’s University of Tor Vergata gives an
overview of the investments in Italian railways during the nineteenth century.
Felisini depicts the role of the railways in Italy in the process of national
unification, and stresses the importance of foreign capital in Italian railway
investment. Financial guarantees and grants paid by the state per kilometre of
track attracted foreign investors, but also involved a huge transfer of public
resources to these private railway companies. Felisini addresses the issue of
Italian capital in other countries and gives the example of Alessandro
Torlonia. In the late 1840s, this Roman banker and entrepreneur became a
large shareholder in railways in Germany, England and France. Felisini
                               INTRODUCTION                                xxxv

demonstrates how the railway served as a means for the diffusion of new
forms of investment.
    Financial relationships between Portugal and France are the topics of the
article ‘The French Investors in Portuguese Railways from 1855 to 1884:
Three Cases’ by Magda Pinheiro of the Higher Institute of Business and
Labour Sciences in Lisbon. With the help of a wide range of sources,
including documents related to French diplomatic activities, business records
of companies, and administrative records of the Portuguese government,
Pinheiro demonstrates the inherent complexity of investments across the
borders and examines three particular cases of French investments in
Portugal. Although these examples led to different results, Pinheiro points out
some common characteristics. She explains the difficulties of the investors in
relation to economic problems within Portugal, and also shows that the
investors had the opportunity to become a part of the political landscape of
the country.
    Augustus J. Veenendaal, a former member of the Institute of Netherlands
History at The Hague presents a dual perspective on Dutch investors in his
article ‘The Dutch as Investors in Railways at Home and Abroad’. He sheds
light on the role which the Dutch banks, stockbrokers and investors played in
the railway world. While they were involved in railway construction in
Russia, Austria and America, they played a much smaller role in the
investment in their own railways and in the railways of Dutch East India.
Veenendaal argues that the returns on foreign railway investments were
higher than the returns on domestic railway investments, while the risks were
acceptable to the Dutch investors. In particular he provides evidence that
investors from the Netherlands were the second most important group of
foreign investors in railways in the United States.
    In the third part, the view is broadened, and a global perspective of the
overseas investments in railway building and operation is presented in seven
papers. The first paper, ‘European Investment in American Railways’ by
Augustus J. Veenendaal, shows the significance of European investments for
the construction of the railway network in the USA. He details aspects of the
construction process. Numerous states gave subventions, either in form of
exemption from taxation or by giving federal land along the lines to the
railway company. Foreign investments came primarily from Britain, but
countries like the Netherlands, France and Germany also contributed to the
fact that almost one-third of all US railway securities were held by foreigners.
This high proportion was facilitated by networks of communication. Beside
networks in which bankers and brokers were directly involved, there were
also networks of agents, while the daily press, periodicals and printed
investor’s guides provided the general public with information. On a personal
level, immigrants and travellers wrote letters and sent reports on US railways
to Europe. Finally, Veenendaal tells how the numerous bankruptcies and
reorganisations of American railway companies were handled.
xxxvi                      ACROSS THE BORDERS

    In ‘European Investments in the Ottoman Railways, 1850–1914’ Bülent
Bilmez of the Istanbul Bilgi University details cross-border investment in the
Ottoman Empire. Railways have always served various purposes, including
military ones; in the Ottoman case, the government thought to make use of
railways for the control of the periphery, as well as for commercial purposes.
Serious, well-established businessmen and companies appeared on the scene,
as did many adventurers and opportunists. Bilmez relates how numerous
investor groups, mainly from France, Germany and the United Kingdom, and
also some minor ones from Belgium and Austria, divided up railway
construction in the Ottoman Empire in an environment of competition and
corruption. The railway question in the Ottoman Empire is an exciting
example of the combination of foreign money with foreign technology and
foreign engineering, but also an example of the rivalry between the foreign
    It is a commonplace that railways began in Britain. This country also
played an important role in the establishment of investment markets and
financing overseas railways. In her contribution ‘Sustained British
Investment in Overseas Railways, 1830–1914: The Imperial Dream,
Engineers’ Assurances or an “Investment Hungry Public”?’, Diane K.
Drummond of the University of Leeds examines both the amount and the
geographical distribution of British investments in railway construction.
Interestingly, two-thirds of British investment in overseas railways was not
dedicated to Britain’s own colonies or to British India. The lion’s share,
around 40 per cent in 1914, was devoted to railways in the USA. Beyond
these investigations to identify the amount and importance of investments,
Drummond gives us a comprehensive picture of motivations for investing in
railways across the borders.
    In his paper ‘John Chapman and the Promotion of the Great Indian
Peninsula Railway, 1842–1850’, Ian J. Kerr, of the University of London,
describes the inception of the Great Indian Peninsula Railway, and its tireless
promoter, who travelled to England to acquire investment capital. This
fascinating international and comparative dimension is added to the story of
where, how and by whom railways were financed and promoted in Europe in
the early time period of railways.
    Robert Lee, of the University of Western Sydney, shows the influence of
French investments on railways of Northern China in his article ‘French
Finance and Railway Construction in Northern China, 1895–1905’. Although
this region of China was remote from France’s colonial or leased possessions
in East Asia, after 1897 some major railways in Northern China were built
and operated largely with French capital. These were China’s first major
railway networks. The Beijing-Hankou Railway was supported by the French
and Belgian governments; the Chinese Eastern Railway across Manchuria
and the Kaifeng-Taiyuen Railway were backed by a Franco-Russian
institution. These cross-border experiences demonstrated to the French the
                              INTRODUCTION                               xxxvii

limits of the Franco-Russian alliance’s usefulness to France’s heavy
engineering industry, whatever its strategic and financial benefits may have
    Maria Teresa Ribeiro de Oliveira, of the University of Brasília, gives
another example of the reach of the Rothschilds’ railway investments. In her
paper ‘The Establishment of Railways in the Nineteenth-Century Brazil and
the Rothschilds’ she presents both the improvements in the performance of
the export sector and the framework of legislation which finally enabled
foreign investments in railway building. In particular, the system of interest
guarantees attracted foreign capital, but resulted in the increase of Brazilian
external debt during the second half of the nineteenth century; that brought
serious problems of external insolvency which finally led the government to
contract a funding loan in 1898 with the Rothschilds’ British bank.
    In ‘The Transandine Railway: A Hundred Year Long Financial Disaster
that Still Attracts Investors’, the transport economist Ian Thomson, of Chile,
gives insights into the long story of a setup of the rail link between the
Centre-West of Argentina and central Chile. Early concessions dated back to
the 1870s but the railway did not go into service until 1910. Many difficulties
had to be surmounted, both physical and institutional. Beside the physical
these were mainly institutional ones. The line was operated by two separate
companies, which were both owned by British subjects. Natural disasters
destroyed the line in the time of the world-wide recession in the 1930s, and it
was not reopened until the railway on both sides of the border had been taken
over by the national governments. Around fifty years later, the highway and
increasing international truck traffic created further competition, and in 1984
an avalanche put an end to this line. In 2001, though, some proposals argued
for the re-opening of this line; they should not to be taken too seriously,
Thomson maintains.
    All in all, the papers create a detailed image of a network of large-scale
investors operating internationally, together with a multitude of smaller
investors who contributed to the stream of capital that flowed from country to
    We can distinguish two different periods in our survey, the first from the
beginning of the railway era to the 1880s, and the second from the 1880s to
the beginning of the twentieth century. In the first period Europe was the
focal point of international railway investments; in the second period, the
whole world became a playground for financing railways. The most
important non-European country for investors was the United States; India,
China and the nations in South America each received somewhat lower
investment volumes.
    Foreign investments seem to have been riskier than domestic investments.
Political and administrative problems, and in some cases logistical problems,
hindered cross-border railway development projects. Some papers describe
the breakdown of ‘railway kings’ who underestimated the difficulty of
xxxviii                    ACROSS THE BORDERS

constructing railways in less developed countries. All these men played for
high stakes, and some suffered great losses. But there were also great
possibilities, and great successes. However, the papers presented in this
anthology are a strong collection and especially the high number of
interrelations from one paper to another which are highly fruitful has made
them interesting to be presented to a wider public.
    The present work, Across the Borders – Financing the World’s Railways
in the Nineteenth and Twentieth Centuries, will open the door for
fundamental new insights resulting from its international vision, and will
contribute to further breakthroughs in the study of transport history and in the
study of the evolution of the modern world.

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