Divergent Paths, United States and France: Capital Markets, the State, and Differentiation in Transportation Systems, 1840–1940


Why do the United States and France, both capitalist economies that were dominated by private railways in the 19th and early 20th centuries, have very different transport systems today? After World War II France developed 200 mph high speed trains, while railways in the United States declined to near irrelevance. This paper argues that cross-national divergence was caused by private and public actions that structured capital markets and controlled planning. In the United States private financial institutions used capital markets to shape rail development. In France, by way of contrast, the state directly intervened in financial markets and controlled planning. Both systems thrived until World War I. But, then, faced with growing competition from cars, buses and trucks and burdened by excessive debt, they declined towards bankruptcy. The Great Depression became a defining moment as a Socialist-dominated government in France nationalized railways while in the United States, President Roosevelt’s New Deal failed to enact policies to ensure the competitive viability of rail in relation to motorized transport. Rarely used archival sources provide much of the evidence for this argument.