Railroad fever

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In the mid-nineteenth century, in the midst of the second industrial revolution, the railway underwent a process of expansion. At this time, equipping themselves with a railway line became one of the great objectives of the main European cities.

In this context, companies dedicated to the construction of this type of infrastructure multiplied. Many of them, moreover, were owned or promoted by public administrations. This expansion and the entire bubble that was generated around it, is known as the railroad fever.

The emergence and development of the railway

The basis on which the birth of the railway was sustained was the steam engine. The first steam locomotive was patented in 1769 by James Watt. However, it was not until 1804 that a locomotive could be used to haul a train.

The first time a locomotive was used to haul trains as public transport was in 1825. And in 1830 the first intercity railway line was inaugurated, linking Manchester and Liverpool. From this moment on, the expansion of this means of transport advanced in an unstoppable way, while new advances were introduced, such as electrification or dieselization.

The expansion of the railroad

Throughout the 19th century, the expansion of the railway took place, in parallel with the development of the second industrial revolution. With this, industrialization reached new European countries, such as France, Germany, Belgium, and others beyond Europe: Japan and the United States.

The expansion of the railroad, which became one of the symbols of the expansion of industrialization, is notably reflected in some comparative data. If in 1840, only nine countries had a railway line in Europe and the line did not exceed 4,000 kilometers, in 1870 they had exceeded 100,000 kilometers of rail in Europe and 70,000 kilometers in the United States.

With these figures, the importance of the railroad as the main means of transport can be easily intuited from the middle of the 19th century. The repercussions of this phenomenon were remarkable, especially in the aspects related to trade. Never before have distances been so shortened. In this way, national, but also international trade, suffered a strong impulse that allowed the consolidation of a capitalism that was beginning to be global and, consequently, conditioned the politics and international relations of the moment.

The railroad bubble

The railway fever can be considered the first bubble created around technological innovation. The bubbles that occurred earlier, on the other hand, had a primarily commercial character: the tulipomania in the Netherlands or the mirage of the South Sea are some examples.

In the process of expanding a technology that was presented as the basis of future trade, companies in the railway sector drew attention to the assumption that it would be a safe business. In the United Kingdom, this idea was combined with the liberalization of the sector, which is why there was a real fever linked to the development of new lines.

Given the large influx of investors to the railway sector, the shares of these companies increased in value. This encouraged companies, in an atmosphere of optimism about the sector, to plan large projects that required large investments. Projects were designed that were unviable or, in the best of cases, very difficult to execute. In this context, speculators took positions to invest large sums while waiting to sell their shares at much higher prices, in some cases, even before the projected lines were finalized.

In this scenario, in which speculation and unviable projects went hand in hand, the bubble ended up bursting. This happened when it became clear that the large sums invested were not going to recover, in many cases, the investments. This dragged many companies and shareholders who expected a return on their investment with a high profit margin, which did not happen.

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