My paper examines the diverging histories of two railroad corporations that were owned and controlled by the same cohort of investors from the American northeast: The Mexican Central Railway, the largest corporation in late-nineteenth-century Mexico, and the St. Paul, Minnesota, and Manitoba Railway, a rapidly growing Midwestern system in the 1880s that eventually reached the Pacific and became known as the Great Northern. Although driven by the same financial priorities, the impact of the two roads on their adjoining regions was profoundly different. The Mexican Central provided excellent long-haul transportation to Mexico’s extractive frontiers, including the country’s rich silver mining districts, but it had little depth and density of traffic at the regional level. Like other roads in Latin America, it was profitable but nevertheless reinforced patterns of economic specialization and dependency. The Manitoba, on the other hand, expanded in large part by ‘branching about.’ It constructed many short branches that fed traffic into the main trunkline, providing service to thousands of farmers and dozens of small and medium-size towns. Although situated in a resource rich region, the Manitoba helped the Midwest spawn a diverse and decentralized economic base.
How could we account for this divergence? The paper uses the history of the two corporations to re-assess the nature and effects of profoundly different legal and regulatory environments. I examine the strategic decisions made by corporate leaders in light of the constraints and incentives offered by government institutions. Re-reading the American story in light of the Mexican one, I argue that whereas both states offered generous aid and support, the US state (most importantly on the subnational level) was also able to discipline corporations. It enforced terms and conditions that promoted public priorities in ways that proved developmental over time. The paper thus attributes the atypical path of US capitalism in the nineteenth century to an American version of a ‘developmental state,’ analogous in some ways to modern developmental states such as South Korea, Japan, and China.