Confederate Railroad Finances
Financially, it was not feast and famine – it was hunger, famine, and starvation.
Immediately after succession, business activity throughout the South came to a near halt. Uncertainty about possible trading barriers, unsettled financial questions, and general fear of the unknown caused most activity to stop, and with it, most rail shipments stopped. This translated into reductions of income of some 25% compared to the previous year. The railroads, unable to see the future, laid off a large portion of their work force. These laid off men quickly, patriotically, joined army units and were mostly lost to the railroads for the remainder of the war.
After Ft. Sumter, mobilization caused a huge increase in traffic, but little increase in revenue since the railroads choose to carry this traffic for free. By summer, it was clear that the railroads would have to charge the government for shipments. In another patriotic move, the railroads agreed to charge at a lesser rate than commercial shippers were charged. These rates were raised several times, but never provided the income needed to allow the railroads to maintain themselves.
The railroads now fought several problems at the same time:
The railroads were aware that their apparent prosperity was false. Several annual reports warn the stockholders that the dividend paid would have been used to keep the road and equipment in better condition, if the required supplies could have been found at any price. At least one road printed that the stockholders would loose less money if the road shut down than if it continued making such a “profit” because the road and equipment would stop deteriorating if the traffic stopped.
From the fall of 1864 until the war ended, the South’s railroads were devastated by Union military activity. Sherman’s march through Georgia, South Carolina, and part of North Carolina is the best-known destructive force, but raids into western Virginia, western North Carolina, eastern North Carolina and eastern Alabama destroyed a great deal of property and equipment. Confederate destruction in the face of Union advances added to the losses.
At the end of the war, most Southern railroads were essentially bankrupt. The assets they held were worthless Confederate bonds, unpaid Confederate government bills, worn out track, rotted ties, exhausted and damaged locomotives, worn out rolling stock, and burned out stations, shops and bridges. Their liabilities were plain – the need to refurbish or replace almost all of their property while paying the interest on pre-war bonds using income derived from a devastated economy. The result was a complete restructuring of the Southern railroad picture during the 10 years after the close of the fighting as northern money bought up and consolidated the weak and bankrupt Southern roads.