Abstract: Nationalization and Private Shareholders: Not Such Strange Bedfellows

Jim Cohen

Abstract

Private railways in France and the United States were subject to varying forms of national control in the 1930's. In France, private railways were merged into the newly created National Railway Company (SNCF) in 1937, with the government taking 51 percent of stock and private shareholders, 49 percent. At the same time in the United States, the federal government bought railway shares held by both insolvent banks and railways. But, American shareholders maintained majority control. Also, whereas the French government guaranteed amortization of railway stock at par value, American stockholders remained fully at risk in financial markets. Thus, in France, SNCF was created essentially as a mixed, public-private stock company, while U.S. railways remained mostly private, with government stock participation, but no management control. Subsequently, during World War II and under Nazi control, SNCF continued to pay dividends even to Jewish stockholders. Then, after the war, SNCF led Europe into the era of high-speed rail. In the United States, railways regained profitability during the war and government shares were sold back to private shareholders, but thereafter neither the government nor private shareholders were able to lead U.S. railways toward high-speed transport.