PLAYER WITH RAILROADS, AND STACKER OF DERIVATIVES. The Economist offers a favorable survey of Chicago. The full text is behind a firewall. I purchased a copy the old-fashioned way. Dan Drezner has observations and some recommended reading. Let me focus on the rail content.

A town of 20,000 souls with not a mile of railway in 1847 had ten years later become the centre of the country's entire rail system.

Yes, and the first miles of railway (the Galena and Chicago Union) were laid from Chicago west with the expectation of moving minerals and the reality of moving agricultural products to the Lakes. The eastern trunk lines that became the Baltimore and Ohio, Erie, New York Central, and Pennsylvania reached the Lakes in the late 1850s to connect with an existing railroad network that was the beginnings of the Chicago and North Western, Chicago Burlington and Quincy, Chicago Rock Island and Pacific and the Wabash. (The Illinois Central was projected as a Freeport to the Ohio River and ultimately New Orleans -- those minerals again -- with the Mattoon to Chicago segment an afterthought.) And thus The Economist's interpretation of history misleads.

The antitrust laws that stopped any one railroad from carrying goods from coast to coast ensure that Chicago is still the place where freight is transferred to other carriers. Logically, St. Louis would have made a better transfer point, but the people there were loth to pay for railway bridges across the Mississippi, so Chicago grabbed its chance and became the nation's entrepot.

Bad history. Rate regulation became national policy in 1887, with the Sherman Antitrust Act signed by President Cleveland three years later. The reluctance of St. Louis to permit bridges is a matter of record, but the bigger problem confronting the eastern trunk lines was that an alliance, say, of the New York Central with the North Western would subject the Central to the vagaries of the harvest in northwest Illinois and Wisconsin as well as putting the Central at a disadvantage soliciting traffic off the Burlington or the later-developing Milwaukee. The eastern trunk lines preferred to compete for the long-haul traffic out of Chicago and leave the hard work of soliciting the agricultural traffic to the existing railroads running west. That choice was not without consequence; for many years the nation's "railroad problem" was the weakness of the farm-belt railroads, with the Burlington, North Western, Milwaukee, Illinois Central, Wabash, Chicago Great Western, and Rock Island all offering occasionally tenuous connections between the Union Pacific at Omaha and the eastern trunk lines around Chicago.

Thus, a location somewhere near the Great Lakes is the best location for a connection between the farm belt railroads and the eastern trunk lines. Had that connection been established near Hammond, Indiana, or Hegewisch, Illinois, the traffic might have avoided a thirty-mile jog around the foot of Lake Michigan. A thirty-mile mistake using the information available to railroad promoters in 1857 isn't much of a mistake.

St. Louis as the gateway instead? The Nickel Plate and Wabash attempted to combine agricultural and long-haul traffic out of St. Louis with varying degrees of success, but the Baltimore and Ohio, New York Central, and Pennsylvania lines to St. Louis via Terre Haute and points south were at least two lines too many.