The Central Pacific, which was built by the “Big Four” of California, on federal subsidies, was the railroad which was guilty of all the evils popularly held against railroads. For almost 30 years, the Central Pacific controlled California, held a monopoly, and permitted no competitor to enter the state. It charged disastrous rates, changed them every year and took virtually the entire profit of the California farmers and shippers, who had no other rail road to turn to. What made this possible? It was done through the power of the California legislature.
The Big Four controlled the legislature and held the state closed to competitors by legal restrictions, such as, for instance, a legislative act which gave the Big Four exclusive control of the entire coastline of California and forbade any other railroad to enter any port. During these 30 years, many attempts were made by private interests to build competing railroads in California and break the monopoly of the Central Pacific. These attempts were defeated, not by method of free trade and free enterprise, but by legislative action.
This 30 year monopoly of the Big Four and the practices they engaged in are always cited as an example of the evils of big business and of free enterprise. Yet the Big Four were not free enterprisers; they were not business men who had achieved power by means of unregulated trade. They were representatives of what is now called a “Mixed Economy”. They achieved power by legislative intervention in business; none fo their abuses would have been possible in a free, unregulated economy.
For a good, factual history of the Central Pacific, see The Big Four by Oscar Lewis
Notes on the History of Free Enterprise – Ayn Rand (1959)