Chapter 5 Section 2 Big Idea: The growth of the railroad encouraged / allowed growth in the Plains and the West

1865 = 35,000 miles of R.R. track (most east of Mississippi) 1900 = 200,000 miles of track Pacific Railway Act- 1862, signed by Abraham Lincoln- provided for the construction of a transcontinental RR- land given to RR companies along the right-of-ways, competition grew between the two large railroad companies, Union Pacific and Cetral Pacific.

Central Pacific Started in Sacramento through Rockies to Utah, all equipment came from East Coast (through isthmus in Panama or around Cape Horn), labor shortage so they hired about 10,000 Chinese at $1.00 per day. 4 Main Investors: 1.Leland Stanford (grocer), later governor of CA and started Stanford University 2. Charley Crocker- shop owner 3. Mark Hopkins- hardware store owner 4.Collis Huntington Engineer = Theodore Judah

Union Pacific Started in Omaha, Nebraska in 1865, all supplies had to be shipped on Missouri River- Mixture of workers including veterans, farmers, etc and Irish immigrants. Multiplier effect- whenever a new technology becomes widely used, it creates new jobs in other industries that are needed to support it – textiles, glass, brass, laborers, firemen, lumber, coal – all needed for trains.

Each mile of track = 400 rails, each rail = 20 spikes time zones created by American Railway Association ratified in Air brakes- increased safety, allowed longer and heavier trains to be put on the lines. By more than 1 million people worked for a R.R = 36,000 people were coal miners 1889 = 290,000 people were coal miners May 10, transcontinental R.R completed Last spike driven in Promontory, Utah Central Pacific = 688 miles of track Union Pacific = 1,086 miles of track Railroad Facts

Cornelius Vanderbilt Railroad tycoon who had a fortune valued at over $100 million purchased and merged 3 smaller NY lines to form NY central, 1873 = had railways to Chicago started to build Grand Central Station

James Hill Built and operated the Great Northern RR from WI to MN in the East to Washington in the West Planned RR routes to go through established towns Offered low fares to farmers who homesteaded along his route Identified products (U.S.) that were in demand in China Allowed goods to be shipped East and West (often trains ran empty going West and returned full) Only RR not to go bankrupt

Land grants- a grant of land by the federal government, especially for roads, railroads, or agricultural colleges. Railroads sold land to make money for R.R. 1850’s-1860’s- government gave RR more than 120 million acres of public land- most companies got enough land to cover the cost of the RR.

Jay Gould- RR investor, manipulated stock prices Credit Mobilier scandal, construction company set up several stockholders of the Union Pacific RR- signed contracts with themselves and overcharged. When RR was finished, stockholders rich but RR almost broke Oakes Ames- Union Pacific stockholder and member of congress, sold stocks below market value in order to get more land grants angry opponent of Ames sent names of the stockholders to newspaper- including speaker of the house and representative James Garfield (future president) and v.p- no criminal chargers were filed. Corruption

Chapter 5, Section 3 Big Idea : business people such as Andrew Carnegie developed new ways to expand business – corporations could produce goods more efficiently, which allowed use of big business

Prior to civil war – most businesses were small and privately owned Corporation- an organization owned by many people but treated by law as though it were a person- could own property, pay taxes, make contracts, sue and be sued. Stockholder- people who own shares in a corporation Stock- money or capital invested for buying and selling stocks in corporations- allows corporations to raise large amounts of money for big projects while spreading out the financial risk

1830’s- legislation allowed companies to be incorporated. With money reused from sale of stock a company could: Invest in new technologies Hire large workforces Purchase machinery Increase their efficiency

Economics of scale : The cost of manufacturing is decreased by producing goods quickly, and in large quantities. All businesses had two kinds of costs: Fixed (mortgages, loans, rent) and Operating (wages, supplies, etc). Small businesses- (before civil war) – low fixed costs but high operating costs – if sales dropped they would temporarily close. Big manufacturers- high fixed costs and low operating costs- would continue running even in a recession. Big business could produce more goods cheaply and efficiently allowing them to operate in a poor economy. Cutting prices to increase sales was also a strategy used by big business. Pools- agreements among companies to keep prices at a certain level- could not enforce pools in court- short term

Andrew Carnegie- B orn in Scotland, in 1848 came to America at age 12, started in a textile factory making $1.20 per day Started investing in companies associated with the RR (iron mills, factories, etc) opened steel company (Carnegie Steel) in Pittsburgh after traveling to Europe and seeing steel being made cheaper in England. One of America’s great philanthropist.

John D. Rockefeller ( )- born in NY, moved to Cleveland with family, made $ during civil war selling grain and livestock Bought oil refineries instead of drilling for oil. His company – Standard Oil- became the largest refinery by 1870, bought up competitors. By 1880, controlled 90% of the oil- refinery market- became a monopoly. Known as ruthless- used tactics to get better shipping rates on the RR One of the richest men in America- donated much $ to philanthropic causes and education Rockefeller’s worth in 2008 dollars is estimated to be $318.3 billion

J.P. Morgan ( )- John Pierpoint Morgan- dad owned bank- would finance RR companies- insisted they reorganize, combining smaller RR into larger, more coordinated lines and RR had to agree to allow a Morgan Rep to make future decisions- during depression (1890’s) Helped U.S government by financing depleted gold reserves organized first $1 billion deal- merged Carnegies U.S steel with other steel companies

Vertical Integration- the company owns all the different businesses on which it depends to operate- saves money and allows business to grow- own all the companies used to supply your manufacturing plant- instead of buying coal from a different company, your company buys the coal mine- Carnegie arranged his business this way. Horizontal Integration- Combining firms in the same business into one large corporation. Took place as companies competed- as a company began to lose market share, it would sell out to competitions to create larger organizations. When a company buys out its competition. Rockefeller used horizontal integration.

Monopoly - when a single company achieves control of an entire market Monopolies- Positive= kept prices low to drive out competition. Negative = Once competition was gone they could change what they wanted 1800’s- in an effort to stop monopolies- many states made it illegal for companies to hold stock in other companies. Trust- way around the states effort at stopping monopolies- a legal arrangement that allows one person to manage another persons property- person who manages it is called a “trustee” don’t own the company outright but control the business in exchange for the trust’s profits- didn’t violate laws standard oil (Rockefeller) had 1st trust

Holding company- does not produce anything- owns the stocks of companies that do produce goods, manages the companies it owns Investment banking- J.P. Morgan, first $1 Billion deal when it bought Carnegie Steel Companies would sell large blocks of stocks to the bank at a discount and the bank would find a buyer Retailers - companies that sell directly to the consumer $90 Million a year spent on advertising Department Stores and chain stores begin.