Hill, James J.
James J. Hill
Born September 16, 1838
Rockwood, Ontario, Canada
Died May 29, 1916
St. Paul, Minnesota
Canadian-born American railroad magnate
"The wealth of the country, its capital, its credit, must be saved from the predatory poor as well as the predatory rich, but above all from the predatory politician."
James J. Hill was a Canadian-born visionary who built not only a railroad linking the upper Midwest of the United States with the Pacific Ocean, but he helped populate the region with farmers recruited from Scandinavia. His career encompassed the whole range of events that comprised the Industrial Revolution, a period marked by the widespread replacement of manual labor by machines that began in Great Britain in the middle of the eighteenth century, including technology, population shifts, and political struggle. Although he was one of the most successful railroad builders of his era, Hill tangled with President Theodore Roosevelt (1858–1919; see entry) over the issue of his railroad monopoly—and lost.
As a railroader, Hill was highly successful. He insisted on using quality materials and careful surveys to build the most efficient routes possible. He combined his engineering know-how with the understanding that railroads serve customers, not merely places, and so he built a population base of immigrant farmers to go along with his railroads. His companies were often financially successful even as other railroads were declaring bankruptcy.
Hill was a tough business competitor. He managed to gain control over railroad transportation in the United States linking upper Midwestern farms and eastern factories with ocean ports on the West Coast, enabling him to dictate the cost of shipping farm produce to market and manufactured goods to farmers. It was this monopoly, or exclusive control of the regional industry, that brought him into direct conflict with President Roosevelt.
Despite his success in building a business in what was still considered the American wilderness, Hill's reputation in the end was linked to his losing legal battle with Roosevelt, which ended Hill's monopoly. Hill's was the first trust (a group of companies acquired by a single owner intent on discouraging competition in an industry) that Roosevelt, "the Trust Buster," busted.
Birth and childhood
James Jerome Hill was born in Canada, in the small town of Rockwood, Ontario, in 1838. He was the descendant of a Scottish family that had immigrated to British North America. He was the fifth son named James, and decided later in life to give himself a middle name to distinguish himself. Legend has it that he wanted to name himself after Napoléon Bonaparte (1769–1821), the French emperor, but decided that would seem too self-important and instead settled on the name of Napoléon's brother, Jerome.
Hill's father died when Hill was young, forcing him to drop out of school to help support his family. As a boy, he lost sight in one eye as a result of an accident with a bow and arrow.
During the summer before his eighteenth birthday, Hill took a steamboat to the town of St. Paul, Minnesota. St. Paul is on the Mississippi River, at the northernmost point where it is navigable. It was a popular gathering point in 1856 for fur trappers launching their annual treks. It was Hill's plan to become a fur trapper himself, but he arrived just a few days after the last group of trappers had left for the year, meaning that he would have to wait a year for his next chance.
In the meantime, Hill got a job working for the Mississippi River Steamboat Company as a shipping agent. It was a fateful choice since it placed Hill at the center of the freight business—a business he was destined to transform.
Although he was Canadian, Hill tried to enlist in the Union Army (that of the Northern states) during the U.S. Civil War (1861–65), but he was rejected because of his partial blindness. Instead, he spent the war years learning about the freight business. In 1866 Hill became an agent (local representative) for the St. Paul and Pacific Railroad. While working as an agent, Hill concluded that coal was a more efficient fuel than wood to power steam engines, and he formed a business to supply the railroad with coal—on an exclusive basis.
Always eager for new business opportunities, in 1872 Hill and a fellow Scot, Norman Kittson, organized a steamship company that operated on the north-flowing Red River, linking St. Paul, Minnesota, to Fort Garry, Manitoba (which is now the city of Winnipeg). Hill thought the land north of St. Paul would be good for agriculture, and that there was a good business opportunity in extending a railroad line north to Fort Garry. From Kittson, Hill learned the techniques of defeating the competition by reducing rates and even, on one occasion, ramming a competitor's steamboat
The era of the railroads
Hill had launched his steamboat business just as trains were on the verge of replacing riverboats as the principal means of long-distance travel and shipment of goods in the United States. The years following the U.S. Civil War saw a boom in railroad building all over the United States. In 1862 the Pacific Railway Act had granted a handful of railroad companies huge tracts of land to extend railroads to the Pacific. With the end of the war, railroad construction picked up steam, resulting in the "golden spike" driven at Promontory, Utah, on May 10, 1869, marking the completion of the first rail line to cross the country.
At the same time, streams of European immigrants were flocking to the United States in search of inexpensive land and new opportunities. This mass migration of Europeans was largely the result of a three-way cooperation between the U.S. government, the railroads, and the immigrants. For the most part, the states of the U.S. West were occupied only by native Americans in the years just after the Civil War. The federal government claimed title to vast stretches of territory and was eager to populate the country with Europeans to solidify control of the continent for the United States government. To accomplish its goal, the government turned over ownership of millions of acres to companies willing to finance the construction of railroads. In turn, these companies were able to sell this land at very low prices to settlers from Europe who wanted to own their own farms. These sales not only served as a source of cash to build the railroads, they also created a business opportunity. The railroads would have customers to ship grain and other agricultural goods to the cities in the East as well as potential customers for manufactured goods in the newly settled West.
One of those building on this proposition was Jay Cooke, a banker who received forty-seven million acres of land in the Northwest United States to help build the Northern Pacific Railroad. But in 1873, in the midst of trying to raise $100 million to complete the line, his firm went bankrupt. The failure of Cooke's well-known and well-respected firm resulted in a panic on the New York Stock Exchange, which was forced to close for ten days. Subsequently, the financial panic resulted in the failure of thousands of other businesses, including the St. Paul and Pacific Railroad, Hill's old employer and customer for coal.
Empire builder of the Northwest
The national financial crisis in 1873 gave Hill his chance. When the stock market plunge and failure of the St. Paul and Pacific Railroad suddenly put the company on the market, Hill found three partners, including the Bank of Montreal, and bought the St. Paul and Pacific for $280,000 (about $4.2 million in 2002 prices). Hill thought the financial panic had reduced the price of the railroad to about one-fifth of its value. It was not the last time that Hill took advantage of a crisis in the U.S. financial markets to expand his business empire.
Among the four partners, Hill was the most knowledgeable about the railroad business, and he set about extending the line and making it profitable. Hill's companies received from the federal government two million acres of land in Minnesota in exchange for extending the railroad to connect with the Canadian Pacific Railroad at St. Vincent, Minnesota. The year was 1879. The completion of the link coincided with two years of successful harvests, which resulted in more business for the railroad. The abundant crops also attracted immigrants from Norway and Sweden, who were willing to pay between $2.50 and $5.00 an acre for family farms carved out of the land that was given to Hill and his partners.
Hill was a hands-on manager of his railroad. Not content simply to direct operations from afar, he often worked around the clock, examining the proposed route of tracks and attending to scores of details. He studied fields alongside his railroads, making sure the line was being built on the flattest tracts of land. If needed, Hill directed workers to move tons of earth to smooth out the land, knowing that this would pay off in the long run in saving fuel and enabling his trains to run faster.
Just a year after buying the St. Paul and Pacific, Hill launched plans to extend his railroad west to the Pacific Ocean, even though there were already three other competing railroads: the Union Pacific, Central Pacific, and Northern Pacific, all built with enormous grants of public land.
In 1886 Hill's railroad, the Great Northern, had reached Minot, North Dakota. While the competing Northern Pacific line, with tracks south of Hill's, ran through land unsuitable for agriculture, Hill engineered his railway through land that would support farmers who could become future customers, paying to ship their crops to the East. His construction techniques were superior, and he was careful to avoid steep hills that would slow trains and use more fuel. By October 1887 the tracks had reached Great Falls, Montana. Eight thousand men and thirty-three hundred teams of horses were employed in pushing the tracks westward.
A key business strategy of Hill's involved populating the territory that his railroad was serving. He gave immigrants a discount on rail travel if they promised to settle along the railroad's route. His representatives recruited tens of thousands of Europeans to take advantage of his offer; in the process, these immigrants became future customers of Hill's railroad. It was Hill's conviction that he was building a railroad to serve people, not places, and that it was in his interests to bring in people along with the railroad. Hill and his agents traveled to Europe, especially Scandinavian countries, to encourage people to immigrate to the United States and buy farms near his railroad. It was a business philosophy unique in the golden age of railroads.
Hill sold lumber at low cost along his routes to help encourage the building of new towns. He imported cattle and gave away cows to farmers, also to encourage economic growth. In some respects Hill was wildly successful. In Montana, for example, more than six million acres were settled in a period of just two years. (Later, however, drought—very little to no rainfall for extended periods of time—and the deep plowing of the land that resulted from the settlement caused severe soil erosion in Montana and the Dakotas. As a result, wheat production plunged by 90 percent between 1916 and 1919. Many farmers originally encouraged by Hill to settle in this part of the United States were forced off the land as a result.)
Hill was always eager to build business for his railroad and to expand his holdings in areas where businesses needed railroad transportation. He dispatched agents to Asia to study its imports and exports, looking for goods he could ship across North America in the era before the Panama Canal allowed ships access from the Pacific to U.S. ports on the Atlantic. Similarly he searched New England and the southern states looking for goods that could be shipped by rail to the Pacific for transport to Asia.
In 1893, Hill's railroad reached the Pacific, at Everett, Washington, providing the port city of Seattle with a much-needed rail link to the East Coast.
The panic of 1893
Another nationwide financial panic in 1893 forced most of the giant transcontinental railroads into bankruptcy, including Hill's most obvious competitor, the Northern Pacific. Hill's railroad, on the other hand, survived the economic slowdown that resulted. To stay in business, Hill fired a thousand workers and slashed the pay of those who kept their jobs. He became the target of bitterness and hatred from these workers, who blamed him for their economic woes in an era that knew nothing of unemployment insurance and government assistance.
As in 1873, Hill moved quickly to profit from the situation by taking control of the Northern Pacific, again with help from the Bank of Montreal. When the attorney general of Minnesota objected—on the basis of a Minnesota law banning the merger of parallel, competing railroads—Hill entered into an alliance with the New York financier J. P. Morgan (1837–1913; see entry). Morgan acquired and reorganized the Northern Pacific, then entered into a business alliance, in 1896, with the Great Northern, the Northern Pacific's chief competitor. Under terms of the deal, the companies formed "a permanent alliance, defensive, and in case of need offensive, with a view of avoiding competition."
Practically speaking, the two companies operated as one. The arrangement was a prototype (working example) of the sort of monopolistic practices carried out in many industries in the 1890s. The deal gave Hill control over shipping to points all across the northern tier of the United States. He could dictate freight rates to farmers, lumber companies, and manufacturers wanting to ship their goods to market, or to bring in raw materials.
Hill was also bent on acquiring the Chicago, Burlington and Quincy railroad line in order to have a link between the Great Lakes and the Rocky Mountains. With J. P. Morgan, Hill arranged to buy the line, beating out another railroad ty-coon, Edward H. Harriman (1848–1909), head of the Union Pacific, who also had wanted the route.
A trust, busted
Not easily defeated in his quest to dominate railroad traffic to the West Coast, Harriman determined to get his revenge by quietly buying shares in Hill's main firm, the Northern Pacific Railroad, in order to wrest it away from Hill and Morgan (who were the largest stockholders, but who did not own all the shares). Harriman's purchases drove up the cost of stock in Northern Pacific, and Hill suspected what was happening. He rushed to New York to meet with Morgan and jointly start a bidding war for the shares in Northern Pacific that he did not already own.
In just three days, shares in the Northern Pacific soared from $114 to $1,000 as Hill and Harriman battled for control of the line by offering more and more money to stockholders willing to sell their shares. Soon, representatives of the two sides negotiated a truce and organized a new company called Northern Securities Company, which was designed to oversee the management of Hill's interests, including the Great Northern Railroad; the Northern Pacific; and the Chicago, Burlington and Quincy. Harriman was given a seat on the board of directors and shares in the new company, but Hill and Morgan had controlling interest.
To outsiders, the Northern Securities Company looked like a trust—a company that buys other firms in an industry in an effort to limit competition, in this case, the competition between the Northern Pacific and the Great Northern.
To Hill, the Northern Securities Company was a reasonable way of making railroad service more efficient by eliminating redundant (unnecessary doubling) resources. But to President Theodore Roosevelt, the company not only looked like a trust, but also looked like a violation of the 1890 Sherman Antitrust Act, which had outlawed companies designed to stifle competition. On February 20, 1902, it became the first—but far from the last—target of Roosevelt's trust-busting campaign designed to enforce the 1890 law. The federal government sued to break up the Northern Securities Company.
Morgan rushed to Washington to meet Roosevelt and try to head off the government's suit, offering to "fix it up" if he had done something wrong. But Roosevelt was not interested in negotiating with Morgan; he wanted to establish a new principle in dealing with trusts. The president felt an offer to "fix it up" would do little to discourage the practice by Morgan and others of buying up competing companies in order to control whole industries. It was a subject that worried Morgan, who had organized a similar trust for the steel industry by acquiring Andrew Carnegie 's (1835–1919; see entry) steel company. Hill, on the other hand, was convinced that competition was wasteful and prevented railroads from operating efficiently. He was sure he would win in court.
Hill found out differently a year later, in April 1903, when the U.S. Court of Appeals ruled against him and for the government. A year after that, the U.S. Supreme Court, in a 5-4 vote, upheld the appeals court ruling and insisted that the Northern Securities Company be broken up into its original companies—effectively returning to the situation that existed before Hill's bidding war with Harriman over the Northern Pacific.
One more battle
Hill fought one more battle with Harriman: for domination of railroad traffic in Oregon. Starting in 1905, Hill decided to begin laying track south from Washington State into Oregon. It was an area that Harriman considered his operating territory, since he owned Union Pacific and Southern Pacific, which served the state. Hill built a rail line along the Deschutes River through a sparsely populated part of the state. Harriman was convinced that Hill planned to lay track right on south to San Francisco, California, and was determined to stop him by laying track along the other side of the river. The two sides worked feverishly side by side. Eventually, both companies reached a narrow pass with room for only one set of tracks. Harriman managed to buy the right of way, stopping the competition—for a time. Later, Hill put steamships into service to ship freight from the coast of Oregon to San Francisco, in competition with Harriman's freight line.
End of the road
In 1907, at age sixty-nine, Hill went into semiretirement and appointed his son Louis to lead the Great Northern. In May 1916 Hill became ill with an infection that doctors could not control, and he died on May 29. At the time of his funeral two days later, all the trains on the Great Northern line came to a stop for five minutes in his honor.
For More Information
Holbrook, Stewart H. James J. Hill: A Great Life in Brief. New York: Knopf, 1955.
Malone, Michael P. James J. Hill: Empire Builder of the Northwest. Norman, OK: University of Oklahoma Press, 1996.
Martin, Albro. James J. Hill and the Opening of the Northwest. Oxford, U.K., and New York: Oxford University Press, 1976.
Morse, Minna. "The First Empire Builder of the Northwest." Smithsonian, October 1999, p. 130.
Schutz, Howard. "Giants in Collision: The Northern Pacific Panic of 1901." American History Illustrated, September 1986, p. 28.
"James J. Hill." University of Houston.http://voteview.uh.edu/jjhill.htm (accessed on February 13, 2003).
Muller, Christopher. "James J. Hill." Rail Serve: The Internet Railroad Directory.http://www.railserve.com/JJHill.html (accessed on February 13, 2003).