The dynamic combination of business leadership, capital, technology,markets, labor, and government support is especially evident in thedevelopment of the nation’s first big business-railroads. After the CivilWar, railroad mileage increased drastically from 9,000 miles of track in1850 to more than 250,000 miles of track during the early 1900’s. More than any other technological innovation or achievement of the19th century, the development of a nationwide railroad network had thegreatest impact on American economic life. Railroads created a market forgoods that was on a national scale, and by doing so encouraged massproduction, mass consumption, and economic specialization. The resourcesused in railroad building promoted the growth of industries, especiallycoal, steel and oil. Railroads also affected the routines of daily life.
After the American Railroad Association divided the country into four timezones in 1883, railroad time became standard for all Americans. And one ofthe most important innovations of the railroads may have been the creationof the modern stockholder corporation and the development of businessmanagement, and the regulation of competition. The first primitive form of the railroad evolved in Europe during the1500’s. Miners pushed wooden carts filled with coal out of the mines alongwooden rails.
The problem with the wooden rails was that they wore away from constantabuse. In 1776, metal plates were placed on top of the wooden rails toprotect them from wearing down. In 1789, a man named William Jessopintroduced cast iron rails soon followed by wrought iron rails. During themid-1800s steel rails were introduced which revolutionized the railroadindustry. These steel rails soon took the form of an upside down T whenscientist Robert Stevens demonstrated the strength and efficiency of hisdesign. Before the Civil War, during the early stages of the railroads, thebuilding of many separate local lines had resulted in different gauges andincompatible equipment. These inefficiencies were reduced after the CivilWar through the consolidation of competing railroads into integrated trunklines. Cornelius Vanderbilt used his millions earned from asteamboat business to merge local railroads into the Central Railroad in1867, which ran from New York City to Chicago. Other trunklines, such as the Pennsylvania Railroad, connected eastern seaports withChicago and other Midwestern cities.
The building of railroads played a crucial role in the settlement ofthe last frontier. They promoted the settlement on the Great Plains as wellas providing a link between the East and the West creating one greatnational market. Recognizing that western railroads would lead the way tosettlement, the government provided railroad companies with huge loans andland grants. The land was given in alternate square-mile sections along theproposed route of the railroad. The government expected theland to be bought up by many new settlers, increasing the value of the landand that the railroads would be used for the mail and transporting troops.
On July 1, 1862, president Abraham Lincoln signed the Pacific RailroadAct, which designated two companies to construct a railroad that would linkthe 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 ofthe railroad. On December 2, 1863, construction began inOmaha, Nebraska. The Union Pacific workforce mainly consisted of Irishimmigrant workers. On January 8, 1863, the Central Pacificrailroad company began construction in downtown Sacramento, California andbuilt eastward using Chinese immigrants to complete the project. On May 10, 1869, the two railroads came together at Promontory Point,Utah, where a golden spike was ceremoniously driven into the ground to markthe linking of the Atlantic and Pacific coastlines. The whole project wascompleted over the time period of just 5 years. The land grants and huge financial loans often promoted poorconstruction and widespread business corruption. Many railroads frequentlysuffered from mismanagement and outright fraud. Speculators like Jay Gouldwent into the railroad business for quick profits and made millions byinflating the value of the corporation’s assets and profits before sellingits stock to the public. Many railroad companies wouldoverstate the price per mile of track and share in the extra profits fromthe government. The railroads would not have survived withouttremendous competition for corporate contracts and the offering of rebatesand kickbacks to favored shippers. Many major railroad companies couldafford this by charging exorbitant freight rates to smaller customers tocover the cost. Many companies joined together and agreed secretly andinformally to fix shipping rates.
During the financial panic of 1893, a quarter of all railroads wereforced into bankruptcy. J. Pierpont Morgan and other bankers quickly movedin to take control of the bankrupt railroads and buy them out. With the competition virtually eliminated, they could stabilizeand reduce rates as they pleased. On the negative side, the majority of therailroads were now owned by just a few powerful men who dominated thecompeting railroad corporations through interlocking directories. Therailroad service was now provided by regional monopolies.
During the 1850s, a man named William Kelly held a patent that was “asystem of air blowing the carbon out of pig iron” to produce steel. Kellyunfortunately 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. AndrewCarnegie used this invention and started the steel industry. The steelindustry was extremely important to the railroads just as the railroadswere to the steel industry. Carnegie employed a business strategy known asvertical integration. He controlled every aspect of the manufacturing ofsteel from the mining of the raw materials to the transportation of thefinished product. To do this he chartered railroad companies to transportthe iron ore from the mines that dotted the Great Lakes region to thefactories in Pittsburgh.
The steel produced by Carnegie wasalso very important to railroad companies for the construction of therailroads and locomotives. During the year 1870, the repairing of therailroads accounted for one fifth of all the steel produced in the UnitedStates. Railroad companies absorbed nearly 40% of all the rolled steelproduced and were the biggest consumers of iron and steel. (Faith 130)Not only was the steel industry greatly influenced by the developmentof railroads, the cattle business, the oil industry, and the farmingcommunity all benefited tremendously. With the construction of railroadsinto Kansas, Eastern Markets were opened up for Texas cattle. At a railstop in Abilene, Kansas, Joseph McCoy built stockyards to ship out cattleto Chicago along the railroads. Millions of cattle were transported withthe use of the railroads. In the Oil industry, John D. Rockefeller’sStandard Oil Company was located in a favorable location in Cleveland, arailroad haven eventually making him billions. (Faulkner 137) The newrailway system now allowed farmers to have an even broader market and selltheir produce from coast to coast. Newly developed refrigerator cars letfresh produce grown in the Great Plains and Deep South to reach theNortheast and still be fresh.
The railroad industry not only helped the industries grow, it helpeddrop unemployment rates in the United States by providing thousands of jobsfor the public. In 1865, the railroads had 163,000 workers employed and bythe year 1917 that number grew to over 1,700,000. Many of these employeesbegan to join labor unions to fight for higher wages, shorter work hours,and better working conditions.( Dickason 63) Many unions fought for thesebenefits in some sort of a strike but were often unsuccessful.
One of the most remembered strikes in railroad history was the PullmanStrike of 1894. During this year, George Pullman announced a cut in wagesthat drove the workers to strike. Eugene V. Debs. The strike tied up railtransportation across the country. The railroad companies decided to hookPullman cars to mail trains and then appealed to President GroverCleveland, persuading him to use the army to keep the mail trains running. The Supreme Court issued an injunction forbidding the interference with themails and ordered the workers to end the strike. For failing to respond tothe injunction, Debs was arrested and sentenced to six months in prison.
This showed how much power the railroads possessed and the extent of itsimportance to the United States. The rapid growth and development of the Western Frontier was due tothe efficiency of the railroads. With the federal land grants issued,railroad companies sold land along the tracks where many towns began toemerge. They became known as railroad towns. Soonthese towns were booming with people that traveled across the country insearch of economic prosperity by escaping the brutal life of the yeomanfarmer. The West was now tamed and the geography had been conquered.
With the development of the railroads America saw a revolution in justa period of fifty years. Not only did the country evolve economically, itevolved socially becoming a world industrial superpower. The railroadsshowed mankind’s ability to conquer space and the power of industry. Theeconomy the railroads created is still very much alive today. The businesstechniques and strategies used then are still present throughout thebusiness world now. The development of the a nationwide railroad networkgave America its economic power and gave countless Americans the means tocapture that ever so sweet American dream.
References
- Works Cited:Anonymous, “Cornelius Vanderbilt”Bellis, Mary, “Henry Bessemer – The Steel Man.”Dickason, Elly. “Railroads, History Of.” MacMillan Encyclopedia ofTransportation,vol. 4. New York, NY. Gale Group, 2000, pp. 57-64.
- Dickason, Elly. “Pullman Strike.” MacMillan Encyclopedia ofTransportation, vol. 4 New York, NY. Gale Group, 2000, pp. 45-46.
- Faith, Nicholas. The Worth the Railways Made. New York: Grafi Publishers,1994.
- Faulkner, Harold. American Economic History. New York: Harper & Row, 1976.
- Gordan, Sarah. Passage to Union. Chicago: Ivan R. Dee, 1997Holbrook, Stewart. The Story of American Railroads. New York: CrownPublishers, 1948.
- Picture History, “J. Pierpont Morgan.”2003
