4.3 Railroad Expansion and Economic Impact

Railroad expansion revolutionized American business, transforming the nation's economy and landscape. From 1850 to 1890, track mileage exploded from 9,000 to over 150,000 miles, connecting cities and opening new markets.

This growth spurred industrial development, reduced transportation costs, and created national markets. Railroads became major consumers of coal, iron, and steel, driving innovation in manufacturing and finance while reshaping urban centers and agriculture.

American Railroad Development

Early Growth and Expansion

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• Baltimore and Ohio Railroad began operations in 1830 initiated the American railroad era
• Explosive growth occurred from 1850 to 1890 track mileage increased from 9,000 to over 150,000 miles
• Pacific Railway Act of 1862 authorized construction of first transcontinental railroad completed in 1869 by Union Pacific and Central Pacific
• Regional networks developed including trunk lines in Northeast and Midwest (New York Central, Pennsylvania Railroad)
• Standard gauge tracks adopted in 1880s allowed more efficient long-distance travel and shipping
• Five transcontinental railroads connected East and West coasts by 1900 facilitated national economic integration (Union Pacific, Northern Pacific, Southern Pacific)

Peak and Decline

• Railroad dominance in American transportation peaked in early 20th century
• Competition emerged from automobiles and airplanes led to gradual decline in rail dominance
• Passenger rail services decreased as personal car ownership increased
• Freight rail remained important for bulk goods transport (coal, grain, manufactured goods)

Technological Advancements for Expansion

Locomotive and Track Improvements

• Steam locomotive development particularly George Stephenson's "Rocket" in 1829 provided power for long-distance travel
• Track design progressed from wooden to iron to steel rails increased durability and load capacity
• Air brake invention by George Westinghouse in 1869 improved train safety and control
• Bessemer process for steel production in 1850s enabled mass production of stronger cheaper rails and locomotive components
• More efficient locomotive designs developed such as 4-4-0 "American" type increased speed and pulling power
• Advancements in bridge and tunnel engineering using iron and steel allowed railroads to overcome geographical obstacles (Eads Bridge, Hoosac Tunnel)

Communication and Coordination

• Telegraph lines built alongside railroad tracks improved communication and train movement coordination
• Time zone standardization in 1883 by railroad companies coordinated train schedules and business operations across country
• Block signal systems implemented improved safety by dividing tracks into sections
• Development of railroad-specific tools and maintenance equipment increased efficiency of track laying and repair (track laying machines, steam shovels)

Railroads' Economic Impact

Industrial Growth and Market Expansion

• Transportation costs and time significantly reduced enabled growth of national markets and stimulated industrial production
• Railroad industry became major consumer of coal iron and steel spurring growth in these sectors
• Symbiotic relationship developed between heavy industry and rail transport (Carnegie Steel Company, Baldwin Locomotive Works)
• Large-scale agriculture in American West facilitated by connecting isolated regions to national markets
• New urban centers arose and existing cities transformed into major commercial and industrial hubs (Chicago, Kansas City)
• Meat-packing industry growth enabled by transport of livestock and refrigerated meat products across long distances (Swift & Company, Armour & Company)

Business and Financial Innovations

• Modern management techniques developed to handle complex railroad operations (organizational hierarchies, cost accounting)
• Financial instruments like corporate bonds became widespread for railroad financing
• Stock exchanges grew in importance as platform for trading railroad securities
• Commercial paper market expanded to provide short-term financing for railroad operations
• Investment banking firms rose to prominence by underwriting railroad securities (J.P. Morgan & Co.)

Railroad Monopolies vs Regulation

Monopoly Formation and Practices

• Consolidation of railroad companies led to powerful monopolies (Cornelius Vanderbilt's New York Central, Jay Gould's Union Pacific)
• Discriminatory pricing practices favored large shippers and certain regions led to public outcry
• "Pools" and rate agreements formed between railroads to control competition and maintain high prices
• Vertical integration strategies adopted railroads acquired coal mines, steamship lines, and other related businesses
• Financial manipulation techniques used such as stock watering and insider trading

Regulatory Responses and Labor Issues

• Granger movement in 1870s represented farmers' organized resistance to railroad monopolies led to state-level regulations
• Interstate Commerce Act of 1887 established Interstate Commerce Commission to oversee railroad practices and rates
• Sherman Antitrust Act of 1890 provided legal basis for breaking up trusts and monopolies including railroad conglomerates
• Labor disputes highlighted tensions between workers and railroad companies (Great Railroad Strike of 1877, Pullman Strike of 1894)
• Progressive Era reforms influenced by debates over railroad regulation (Elkins Act of 1903, Hepburn Act of 1906)
• Labor organizations in railroad industry grew in strength and influence (Brotherhood of Locomotive Engineers, American Railway Union)