Prompt: Impact of the Transcontinental Railroad system on American economy and society in late 19th century
Thesis: The transcontinental railway system impacted the American economy through creating a national market, enabling mass production, and exponentially stimulating industry while it greatly impacted American society through stimulating immigration, and urbanization
ECONOMIC EFFECTS
- Railroad companies promoted by government
o Generous land grants, prompted investors to invest in railroad building.
o Railroad prospectors hungry for land bounties
§ Often overreached goals and built rails “from nowhere to nothing” and led to numerous bankruptcies.
§ AR age characterized by new organizations and merges.
o Often required governmental loans due to high risk and cost.
- Economic benefits for the government.
o Liberal loans favored two-cross continental companies in 1862 and enormous donations of acreage used to paralleling tracks
§ Were the Union Pacific from the East and the Central Pacific from the West.
§ Grant would end this in 1887 by making unclaimed public portions of land-grant areas open for settlement, stimulating land speculation.
o Governments were able to avoid new taxes for direct cash grants and had increase in land worth as land around railroad suddenly worth more than previously.
- Great boost to economy due to creation of jobs
o Union Pacific Railroad starting in Nebraska
§ Would grant 20 mi square land for every mile of track constructed
§ Builders also received generous federal loans for every mile built, stimulating economic progress.
o From California, Central Pacific Railroad were supported by the Big Four, the chief financial backers of the enterprise and included Leland Stanford and Collis P. Hungington (lobbyist)
- Creator of millionaires
o James J Hill (Northern Pacific)
§ Very effective railroad builder as he believed that prosperity of railroad depended on prosperity of area it served.
o Distributed bulls to farmers in area to make enterprise very soundly organized.
o Commodore Cornelius Vanderbilt (New York Central), and William Vanderbilt (The Public be damned!)
§ Cornelius Vanderbilt popularized steel rail as he replaced tracks of New York Central with steel.
§ Greatly improved efficiency of railroad system as it was safer and could bear a heavier load.
- Improved efficiency of transport, which led to boost in supply and demand exchange in economy.
o Made sure that standard gauge of track eliminated to prevent expenses
§ Lead to competitive measures in economy to survive in the economy.
o Westinghouse air brake and Pullman’s Palace Cars increased efficiency and increased demand for railroad production, stimulating production of railroads, the biggest industry of the time, and as a result economy.
- The railroads connected America and created a national market, for both raw materials and manufactured goods
o The enormous National Market was a huge draw for investors
o Lead to a specialization in industry, as regions moved to focus on specialties which could be carried by railroad nationwide
o The Iron Horse or railroad industry also helped establish and rejuvenate many industries
§ Coal and steel were needed for fuel and rails respectively.
§ Raw materials could be sent to factories quicker
o Mining and agriculture was expanded in the West as the products could be delivered quickly to where they were needed
o Clusters of farm settlements formed parallel to railroads for easier delivery of goods
- The railroad network made all other monopolies and trusts such as those of steel, oil, and meatpacking possible by providing the transportation and national market to deliver the goods.
o Amor and Swift in meat-packing business
o Andrew Carnegie, the Steel Giant
o John D. Rockefeller and his Standard Oil Company, the nucleus of a large oil industry trust.
§ Justifies domination through American Beauty Rose.
o Allowed large nationally centralized operations that were vertically integrated and maximized efficiency on a vast, continental scale
o Indirectly raised the amount of capital available in the United States
- Millionaires entered defensive alliances to protect profits.
o Earliest form of combination was a pool where millionaires agreed to divide the business in a given area and share the profits.
o Was railroad plutocracy.
- Beginnings of economic injustice
o Depression of 1870s made farmers protest to being “railroaded” into bankruptcy.
o The exploits of the railroad companies led to the first organizations for the protection of Midwest farmers, such as the Grange. Many Midwestern legislatures tried to regulate railroads, these interests would foreshadow the Populist Party.
- Vital role in making United States go from a middle industrial nation to one of the top 3 by 1894.
o Key role in rise of heavy industry which concentrated on making capital goods.
SOCIETAL EFFECTS
Led to question of power of monopolists or state governments.
- Railroads began to “pool” and establish a monopoly where they could hold on to all their profits without competition
- Involved secret rebates or kickbacks to friendly corporations and shipping companies
o Supreme Court ruling in the Wabash Case (1886) prevents states from regulating interstate commerce. Instead, it set up the Interstate Commerce Commission to enforce new legislation.
§ However supervision over railroads largely nominal.
o This was the first attempt by national politicians to regulate business in the interest of society.
o It stabilized the business system and slowed down freewheeling business practices.
o Would soon lead to Sherman Act in a struggle between government and millionaire power (as a result from massive industry railroad brought about).
§ Sherman Act largely ineffective as it did not distinguish between “good” trusts and “bad trusts”.
- Corruption in the government
o Credit Mobilier Scandal
§ Federal government would grant liberal loans to build railroads, where Credit Mobilier was construction company that would skim money off the top through overcharging and overhiring workers
o Cornelius Vanderbilt
§ “Law! What do I care about the law? Hain’t I got the power?”
· Millionaires abuse the public by bribing governmental officers and electing their own “creatures” to high office.
- Led to millionaires and their philosophies
o Social Darwinism – Oil industry also immediately profited from the railroad industry leading to Rockefeller and other monopolists in industry abusing power
§ Justified through the “American Beauty Rose” theory
o Gospel of Wealth – Stephen Carnegie of steel industry (one of immediate beneficiaries from railroad industry) believed that the “man who dies rich dies disgraced”
o Would donate more than $250 million to society
Creator of millionaires
- Jay Gould and his use of stock watering would inflate claims about railroad’s assets and sold stocks far in excess of railroad’s actual value.
o Railroad managers would have to pay off exaggerated financial obligations.
o Would continue to play for nearly 30 years w/ inside information of stocks of Erie, Kansas, Union Pacific and other railroads.
- Stimulated the influx of immigration into the United States
o Land cheap and available for purchase to farms.
o Generous federal loans granted to every mile of track built by the Irish (Union Pacific Railroad) and Chinese (Central Pacific Railroad) led to mass influx of immigration.
o Would often transport newcomers to new land for free (often land grants sold for a profit).
- AR Increased the boom of cities by easing the deliverance of food to a central location and expanding raw materials and markets
o Marked decline of Westward expansion and contradicted the “frontier is closed” theory by Frederick Jackson Turner.
- Created time zones as rapid travel from city to city in tight schedules required them. 4 time zones were declared across the continent.
o Would soon be adapted by countries across the world.
- New railroad aristocracy, railroad millionaires. They replaced the bankrupt southern aristocracy.
o More direct control over Americans than the President of the United States
o They bribed judges, legislatures, lobbyists, journalists, politicians, and elected ‘creatures of their own” to high office.
o Much of this aristocracy was disrespectful to government and the people. “Law! What do I care about the law? Hain’t I got power?” Cornelius Vanderbilt. “The public be damned!” William Vanderbilt.
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