Chapter 14 – Section 2The Railroads

Linking the NationRailroad boom began in 1862

• Abraham Lincoln signs the Pacific Railroad Act, made possible by secession

- Union Pacific

- Central Pacific

Bill was set up to create competition between the two companies. Where they managed to construct their railroads, they would receive:

• Public lands

• Public money

Union Pacific and Grenville Dodge

Grenville Dodge – engineer and former Union GeneralWorked for the Union Pacific

Union Pacific Line started from Omaha, NE in 1865

10,000 animals8,000 – 10,000 laborers

Workers included Civil War veterans, displaced farmers and workers, Irish immigrants, Chinese immigrants

The Big Four and the Central Pacific

Theodore Dehone Judah – convinced California’s legislature to organize a state railroad convention

• Result was the Central Pacific Railroad Company

“Big Four” were those who bought stock in the Central Pacific Railroad Company

• Leland Stanford• Charley Crocker• Mark Hopkins• Collis P. Huntington

Central Pacific line started in Sacramento, California

Railroads Spur GrowthLinking the nation creates a larger market for products

Investment in railroads delivers a great deal of stimulus to the economy

Railroads must purchase:• steel• coal• timber• tools• animals• food for animals• etc…

First big business, first large investment opportunity for large financial markets, and first industry to develop large-scale management bureaucracy

Linking Other LinesMost railroads had been built piecemeal, by various companies for specific purposes

• Eventually, linking them becomes the next logical step

From 1865 to 1900, railroads consolidate

• Go from many hundreds of small railroad companies to approximately seven

Cornelius Vanderbilt – created first direct service between New York and Chicago, built Grand Central in NY

Benefits of a National System

Our four time zones came from the American Railway AssociationCongress made them law in 1918

Why?• Need standardized time to

avoid railroad accidents

Connecting the entire nation made everything cheaper, including travel, food, products, etc.

Also began to knit the many distinct regions of America into a more unified nation

The Land Grant SystemDifficulty with building a railroad line is the difficulty of procuring capital

capital – (n) wealth in the form of money or assets

land grant – giving government land to another entity, in this case railroad corporations

Approximately 148 million acres of public land were given to railroad companies between 1850 and 1870

In general, highly successful in getting railroads built

Robber BaronsDerogatory term for those who made fortunes in the railroad industry

Widespread belief that these people had cheated investors, taxpayers, their own customers, and bribed government officials

Jay Gould – known for “insider trading”, using information to which he had access to manipulate stock prices• Worth $100 million at his

death• Vast majority of his businesses

failed

Government involvement in the railroad industry made bribery pay very well

Crédit Mobilier ScandalFinancial scam involving Transcontinental Railroad see p. 446

• In the simplest terms, congressmen used government money to pay themselves for building the Transcontinental Railroad

• Investors made several million dollars, and included:− Vice President Schuyler Colfax− Speaker of the House James G.

Blaine− Future president James Garfield

• Congressman Oakes Ames was considered the mastermind

The Great Northern• Created by James J. Hill

• Railroad from St. Paul, MN to Everett, WA

• Built with no federal land grants or subsidies

• Offered low fares to homesteaders who would settle next to the railroad

• Most successful of the transcontinental railroads, and the only one which did not eventually go bankrupt