In his recent State of the Union speech President Barack Obama commented favourably on Beijing’s infrastructure projects. Bullish analysts like to compare the rapid development of China’s transport network to the westward expansion of American railways in the nineteenth century. If they bothered to dust off their history books, they would find this comparison a source for concern rather than complacence.

The economic development of the western United States was driven by its railways. Between 1865 and 1873, 28,000 miles of track were laid at an estimated cost of $1.4bn. The new railways were supported by massive land grants and subsidised credit. An estimated three-fifths of the cost of the new railways was funded by the public.

A real-estate frenzy was deliberately encouraged by the railway promoters. A publicist for the Northern Pacific Railroad, which had a land grant of nearly 50m acres, described its properties as a “vast wilderness waiting like a rich heiress to be appropriated and enjoyed”. Settlers were enticed with the promise that $50 lots would soon rise 100-fold in price. Property in Chicago, a railway hub and the gateway to the West, attracted wild speculation. Land values climbed by 500 per cent in the five years to 1873 on the general belief that the Windy City would shortly become the world’s largest metropolis. Subdivisions alongside new branch lines soared in value.