1. Chapter 14 Industrialization
Section 2
The Railroads

2. Linking the Nation
1862 – Pres. Lincoln signed the Pacific Railway Act. Provided for the construction of a transcontinental railroad by the Union Pacific & Central Pacific RR companies.
Gov’t offered each land along its right of way.

3. Linking the Nation
1865 – Greenville Dodge (Union Pacific) pushed west from Omaha, Neb.
Weather, money, labor hampered the project.

4. “Big Four” Four merchants invested in the Central Pacific RR.
One, Leland Stanford, later became Gov. of CA & founded Stanford University, & then became a senator.
Due to a labor shortage, C.P. RR hired 10,000 workers from China.

5. Railroads Spur Growth
RR linked the nation and increased the size of markets.
RR industry stimulated the economy by spending large amounts on steel, coal, and timber.
Eastern capitalists wanted to create a single rail transit system.
Eventually 7 systems controlled most of the RR traffic.

6. Cornelius Vanderbilt Most famous RR consolidator.
Merged 3 short NY RR to form NY Central in 1869.
1st to offer direct service from NY to Chicago.

7. Benefits of a National System
1883 – rail service became safer and more reliable when the American Railway Association divided the country into time zones.
National system provided:
increased efficiency
decrease in travel time
united Americans from different regions

8. Land Grant System
Land grants were given to RR companies by the federal gov’t to encourage construction.
RR companies like Union Pacific and Central Pacific were able to cover all their building costs by selling the land to settlers, real estate agencies, and other businesses.

9. Robber Barons
Wealth of RR entrepreneurs led to accusations that they acquired wealth through illegal means.
Jay Gould had the worst reputation.
He used info he obtained as a RR owner to manipulate stock prices to his benefit.

10. Jay Gould

11. Robber Barons
RR investors realized they could make more money through land grants than running a RR, so many investors bribed members of Congress to vote for more land grants.

12. Credit Mobilier 1872 – corruption in the RR system became public.
Several stockholders of the Union Pacific set up the Credit Mobilier, a construction company.
Investors signed contracts with themselves.

13. Credit Mobilier
The company greatly overcharged Union Pacific, and the RR agreed to pay the inflated bills.
When the RR was completed, the investors made a fortune, but the railroad was almost bankrupt.
Congress agreed to additional grants after several members were given shares in U.P. at a price well below market level.

14. Credit Mobilier
The investigation implicated several members of Congress, including James Garfield, who later became president.

15. The Great Northern
James J. Hill built the Great Northern without any federal land grants or subsidies.
It was the most successful and the only one not to go bankrupt.

16. Next: Section 3 Big Business
End of Section 2
Next: Section 3
Big Business