Development of the Industrial U.S. Reference Library

Railroads: The First Big Business

Railroads: The First Big Business

An increase in railroad construction between 1860 and 1900 changed the United States, helping make it the industrial nation it is today. As the chief system of transportation of goods and people, railroads were essential to American industry. Where railroads went, towns and cities with bustling new commerce arose, all dependent on the railways for shipments of food and goods. The construction of the railroads spawned huge new industries in steel, iron, and coal. No other business so dramatically stimulated and embodied the industrialization process. In The Rise of Industrial America: A People's History of the Post-Reconstruction Era author Page Smith comments: "In retrospect it appeared it had been the lack of adequate transportation, above all else, that had kept civilization moving at a mere camel's pace, or a mule's or ox's pace, prior to the railroad era … the railroads accelerated the process to a degree that the mind could hardly comprehend."

The race to build railroads in the last four decades of the nineteenth century was dramatic but not graceful. Early railroad magnates (powerful and influential people in the industry) found many opportunities to get very rich. Some methods were legitimate, others questionable, and many were downright illegal. The railroad tycoons engaged in destructive competition with each other and exploited their laborers. Still, even though the government did offer some help, the tremendous expansion of the railroads in the second half of the nineteenth century was accomplished mainly through the active private enterprise of the railroad magnates.

Words to Know

bankruptcy:
A state of financial ruin in which an individual or corporation cannot pay its debts.
bond:
A certificate of debt issued by a government or corporation that guarantees repayment of the original investment with interest by a specified date.
capital:
Accumulated wealth or goods devoted to the production of other goods.
gauge:
Distance between the rails of a railroad track.
grant:
A transfer or property by deed or writing.
magnate:
A powerful and influential person in an industry.
monopoly:
The exclusive possession or right to produce a particular good or service.
patent:
A legal document issued by a government granting exclusive authority to an inventor for making, using, and selling an invention.
transcontinental railroad:
A railroad that spans a continent, from coast to coast.

The transcontinental railroad

By the 1850s most Americans recognized that westward expansion and industrial growth depended on a transcontinental railroad—one that spanned the continent from the East Coast to the West Coast. Many thought building such a railroad was impossible because of the great distance to be covered and the engineering obstacles to be overcome, especially the tremendous amount of money required for the project. The transcontinental railroad was clearly going to cost more than any previous American businesses, and by 1850 most people agreed that the federal government should provide aid to railroad companies to start the process. That year Congress authorized its first federal grant (a transfer or property by deed or writing), which consisted of public land to help promote and finance railroad construction. More land grants to the railroads occurred throughout the decade, but the greatest land grants were the result of the Pacific Railroad acts of 1862 and 1864.

Pacific Railroad Act

The Pacific Railroad Act of 1862 called for building a transcontinental railroad from Omaha, Nebraska, to Sacramento, California. Under the act, two companies, the Central Pacific and the Union Pacific, were to build the railroad. Construction on the Central Pacific lines was to begin in Sacramento and work its way east. The Central Pacific Company had been organized in California by railroad engineer Theodore Dehone Judah (1826–1863), who had long dreamed of building a railroad that would cross California's Sierra Nevada Mountains and travel eastward. …