TOPIC: The development of a nationwide railroad ne

twork and the effectit had on American economic life.

The dynamic combination of business leadership, capital, technology,
markets, labor, and government support is especially evident in the
development of the nation’s first big business-railroads. After the Civil
War, railroad mileage increased drastically from 9,000 miles of track in
1850 to more than 250,000 miles of track during the early 1900’s. (Dickason
More than any other technological innovation or achievement of the
19th century, the development of a nationwide railroad network had the
greatest impact on American economic life. Railroads created a market for
goods that was on a national scale, and by doing so encouraged mass
production, mass consumption, and economic specialization. The resources
used in railroad building promoted the growth of industries, especially
coal, steel and oil. Railroads also affected the routines of daily life.

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After the American Railroad Association divided the country into four time
zones in 1883, railroad time became standard for all Americans. And one of
the most important innovations of the railroads may have been the creation
of the modern stockholder corporation and the development of business
management, and the regulation of competition.

The first primitive form of the railroad evolved in Europe during the
1500’s. Miners pushed wooden carts filled with coal out of the mines along
wooden rails.

The problem with the wooden rails was that they wore away from constant
abuse. In 1776, metal plates were placed on top of the wooden rails to
protect them from wearing down. In 1789, a man named William Jessop
introduced cast iron rails soon followed by wrought iron rails. During the
mid-1800s steel rails were introduced which revolutionized the railroad
industry. These steel rails soon took the form of an upside down T when
scientist Robert Stevens demonstrated the strength and efficiency of his
design. (Dickason 57-58)
Before the Civil War, during the early stages of the railroads, the
building of many separate local lines had resulted in different gauges and
incompatible equipment. These inefficiencies were reduced after the Civil
War through the consolidation of competing railroads into integrated trunk
lines. (Gordan 151) Cornelius Vanderbilt used his millions earned from a
steamboat business to merge local railroads into the Central Railroad in
1867, which ran from New York City to Chicago. (Anonymous) Other trunk
lines, such as the Pennsylvania Railroad, connected eastern seaports with
Chicago and other Midwestern cities.

The building of railroads played a crucial role in the settlement of
the last frontier. They promoted the settlement on the Great Plains as well
as providing a link between the East and the West creating one great
national market. Recognizing that western railroads would lead the way to
settlement, the government provided railroad companies with huge loans and
land grants. The land was given in alternate square-mile sections along the
proposed route of the railroad. (Gordan 151) The government expected the
land to be bought up by many new settlers, increasing the value of the land
and that the railroads would be used for the mail and transporting troops.

On July 1, 1862, president Abraham Lincoln signed the Pacific Railroad
Act, which designated two companies to construct a railroad that would link
the East and West coasts. Between the two companies, a capital of
$100,000,000 was set and a telegraph line had to be run along the route of
the railroad. (Holbrook 166) On December 2, 1863, construction began in
Omaha, Nebraska. The Union Pacific workforce mainly consisted of Irish
immigrant workers. (Holbrook 167) On January 8, 1863, the Central Pacific
railroad company began construction in downtown Sacramento, California and
built eastward using Chinese immigrants to complete the project. (Holbrook
166) On May 10, 1869, the two railroads came together at Promontory Point,
Utah, where a golden spike was ceremoniously driven into the ground to mark
the linking of the Atlantic and Pacific coastlines. The whole project was
completed over the time period of just 5 years. (Holbrook 170)
The land grants and huge financial loans often promoted poor
construction and widespread business corruption. Many railroads frequently
suffered from mismanagement and outright fraud. Speculators like Jay Gould
went into the railroad business for quick profits and made millions by
inflating the value of the corporation’s assets and profits before selling
its stock to the public. (Dickason 61) Many railroad companies would
overstate the price per mile of track and share in the extra profits from
the government. (Gordan 152) The railroads would not have survived without
tremendous competition for corporate contracts and the offering of rebates
and kickbacks to favored shippers. Many major railroad companies could
afford this by charging exorbitant freight rates to smaller customers to
cover the cost. Many companies joined together and agreed secretly and
informally to fix shipping rates.

During the financial panic of 1893, a quarter of all railroads were
forced into bankruptcy. J. Pierpont Morgan and other bankers quickly moved
in to take control of the bankrupt railroads and buy them out. (Picture
History) With the competition virtually eliminated, they could stabilize
and reduce rates as they pleased. On the negative side, the majority of the
railroads were now owned by just a few powerful men who dominated the
competing railroad corporations through interlocking directories. The
railroad service was now provided by regional monopolies.

During the 1850s, a man named William Kelly held a patent that was “a
system of air blowing the carbon out of pig iron” to produce steel. Kelly
unfortunately went bankrupt and sold his patent to Henry Bessemer. In 1855,
Bessemer patented “a decarbonization process, utilizing a blast of air”
that produced high-quality steel in large quantities. (Bellis) Andrew
Carnegie used this invention and started the steel industry. The steel
industry was extremely important to the railroads just as the railroads
were to the steel industry. Carnegie employed a business strategy known as
vertical integration. He controlled every aspect of the manufacturing of
steel from the mining of the raw materials to the transportation of the
finished product. To do this he chartered railroad companies to transport
the iron ore from the mines that dotted the Great Lakes region to the
factories in Pittsburgh. (Faulkner 229) The steel produced by Carnegie was
also very important to railroad companies for the construction of the
railroads and locomotives. During the year 1870, the repairing of the
railroads accounted for one fifth of all the steel produced in the United
States. Railroad companies absorbed nearly 40% of all the rolled steel
produced and were the biggest consumers of iron and steel. (Faith 130)
Not only was the steel industry greatly influenced by the development
of railroads, the cattle business, the oil industry, and the farming
community all benefited tremendously. With the construction of railroads
into Kansas, Eastern Markets were opened up for Texas cattle. At a rail
stop in Abilene, Kansas, Joseph McCoy built stockyards to ship out cattle
to Chicago along the railroads. Millions of cattle were transported with
the use of the railroads. In the Oil industry, John D. Rockefeller’s
Standard Oil Company was located in a favorable location in Cleveland, a
railroad haven eventually making him billions. (Faulkner 137) The new
railway system now allowed farmers to have an even broader market and sell
their produce from coast to coast. Newly developed refrigerator cars let
fresh produce grown in the Great Plains and Deep South to reach the
Northeast and still be fresh.

The railroad industry not only helped the industries grow, it helped
drop unemployment rates in the United States by providing thousands of jobs
for the public. In 1865, the railroads had 163,000 workers employed and by
the year 1917 that number grew to over 1,700,000. Many of these employees
began to join labor unions to fight for higher wages, shorter work hours,
and better working conditions.( Dickason 63) Many unions fought for these
benefits in some sort of a strike but were often unsuccessful.

One of the most remembered strikes in railroad history was the Pullman
Strike of 1894. During this year, George Pullman announced a cut in wages
that drove the workers to strike. Eugene V. Debs. The strike tied up rail
transportation across the country. The railroad companies decided to hook
Pullman cars to mail trains and then appealed to President Grover
Cleveland, persuading him to use the army to keep the mail trains running.

The Supreme Court issued an injunction forbidding the interference with the
mails and ordered the workers to end the strike. For failing to respond to
the injunction, Debs was arrested and sentenced to six months in prison.

This showed how much power the railroads possessed and the extent of its
importance to the United States. (Dickason 45)
The rapid growth and development of the Western Frontier was due to
the efficiency of the railroads. With the federal land grants issued,
railroad companies sold land along the tracks where many towns began to
emerge. (Gordan 158) They became known as railroad towns. (Gordan 156) Soon
these towns were booming with people that traveled across the country in
search of economic prosperity by escaping the brutal life of the yeoman
farmer. The West was now tamed and the geography had been conquered.

With the development of the railroads America saw a revolution in just
a period of fifty years. Not only did the country evolve economically, it
evolved socially becoming a world industrial superpower. The railroads
showed mankind’s ability to conquer space and the power of industry. The
economy the railroads created is still very much alive today. The business
techniques and strategies used then are still present throughout the
business world now. The development of the a nationwide railroad network
gave America its economic power and gave countless Americans the means to
capture that ever so sweet American dream.

Works Cited:
Anonymous, “Cornelius Vanderbilt”
Bellis, Mary, “Henry Bessemer – The Steel Man.”
Dickason, Elly. “Railroads, History Of.” MacMillan Encyclopedia of
vol. 4. New York, NY. Gale Group, 2000, pp. 57-64.

Dickason, Elly. “Pullman Strike.” MacMillan Encyclopedia of
Transportation, vol. 4 New York, NY. Gale Group, 2000, pp. 45-46.

Faith, Nicholas. The Worth the Railways Made. New York: Grafi Publishers,

Faulkner, Harold. American Economic History. New York: Harper & Row, 1976.

Gordan, Sarah. Passage to Union. Chicago: Ivan R. Dee, 1997
Holbrook, Stewart. The Story of American Railroads. New York: Crown
Publishers, 1948.

Picture History, “J. Pierpont Morgan.”