History of rail transport in North America

History of rail transport in North America 1865 to 1914

Much how the clock at the local railroad station was used to set the time for the area, railroad use and development set the pace of industrialization and the United States economy during 1865 to 1914. Of course, the rise of American industrialized society during this period cannot be attributed solely to this one factor. The transformation of the American economy, due to the railroad industry’s influence and interaction with other areas made it central to economic growth during this period. While railroads created clear transportation improvements, they also influenced population center shifts, politics, business and agriculture. Technological improvements also played a major role.The first practical development towards a railroad was accomplished in 1829 by George Stephenson in England, who named this first engine, the “rocket”. Lightweight compared to earlier models, and powerful, his design needed only wood or coal and water for power. This made the feasibility of cost effective rail production a possibility. In 1860, there was only approximately convert|30000|mi|km of rails, which predominantly existed in the Northeast, South and Midwest.1 Overall development and expansion slowly began, mainly more west, and greatly increased in the following decades. By 1865, there was convert|35100|mi|km of main-track in operation, ten years later, the number more than doubled to convert|74100|mi|km of track, and doubled again by 1890 with convert|166700|mi|km, slowing to convert|253800|mi|km in 1915.2 In fact, by 1910, there were convert|352000|mi|km of track in existence, with convert|266000|mi|km classified as main track.3 Fishlow’s studies show 3 major waves of construction: 1868-1873, 1879-1883 and 1886-1892, and that the end of these “booms” were directly tied to the market crashes of 1873, 1882 and 1893. 4A major part of the expansion was a push west, or “western expansion”, which opened the west for agriculture. The creation of the Transcontinental Railroad, a plan to link the eastern United States with the west in a continuous rail line was undertaken by the Central Pacific and Union Pacific railroads. Started in 1865 and completed at Promontory Summit in 1869, the new line was initially done as a plan to link the United States for military reasons during the civil war. The economic impact of access to new areas of mainly agricultural production fueled the economy.An increase in land under cultivation, and an increase in agricultural production, was led by the development of the railroads. This occurred due to several important events, mainly the Homestead Act of 1862, but also the Timber Act of 1873, the Desert Land Act of 1877, and the Timber and Stone Act of 1878. The land grants were given to the railroads by the federal government, which was then used primarily for rail development and later sold as farmland. Originally, almost convert|200000000|acre|km2 were given, but due to the inability to develop and other factors, shrunk to a still impressive 130 million acres.5 Obviously, this acreage greatly contributed to the increase in acres under cultivation, which rose 225 million from 1870 to 19006. As the railroads spread across the Continental United States, large industrial cities and population centers spread and moved from the northeast to the Midwest. At the same time, agricultural production moved from the Ohio River Valley and northeast and shifted west, and became focused in the Midwest. This increased production allowed for increased population growth since more food was available, and produced by a fewer number of people. United States estimated population grew from 35,188,000 in 1865 to 99,111,000 in 1914.7 West of the Mississippi, population grew from “4.5 million in 1860 to 16.4 million in 1900 and to 27.2 million in 1910.”8 The agricultural output increases also allowed for further industrial expansion since incoming workers, whether they were former farm workers or immigrants, had a relatively cheap source of food. Obviously, the shift towards industrialization and industrial work could not have happened without adequate food supplies. Real Gross Domestic Product estimates show a growth from approximately 93 billion in 1865 to over 490 billion in 1914.9It is important to understand that before railroads, previous trading centers, manufacturing centers, and areas of industry were typically locations tied to water, typically rivers, oceans or lakes. This was due to the use of water transport as the major form of transportation. Of course, this limited development, since adding access to an area not served by natural waterways meant the development of a canal. Railroads, while capital and labor intensive, did not have the same limitations. Development and access into a new area, while needing to deal with some degree of natural obstacles with the construction of bridges and tunnels, were relatively less costly. This also led to changes in the distribution of goods from numerous small sellers in local markets, to large, unified sellers selling to distant markets. As Nasaw puts it best when discussing this shift of production and shipping in his biography of Carnegie, “everything from Texas steers to Nebraska corn to Massachusetts boots and Pennsylvania glass could now efficiently and effectively be produced in one location and sold in another, thousands of miles distant.” 10Due to money and influence, railroads and railroad development drove politics. The manipulation of the government, which was considered “already dangerously powerful and meddlesome in political affairs”11, led to increasing public concern, and by the 1890s, was used to attempt to regulate and legislate controls. It was felt that the government during this time was a slave to policy. Attempts to address these issues are The Sherman Antitrust Act in 1890 and the Elkins Act in 1903, which both dealt with ensuring a fair charge for freight and controls over monopolistic and oligopolistic inclinations. The creation of the Interstate Commerce Commission grew out of this need as well. A good example of the ineffectiveness of the government during this era is how the railroad companies dealt with an increasingly problematic time standardization issue. This was done by the creation and use of time zones that was implemented, not by the federal government, but by the railroads. Before 1883, noon occurred almost twelve minutes apart between Boston and Manhattan, a distance of less than convert|250|mi|km. This was due to each local area setting a clock so that noon was when the sun was at its highest in the sky. Understandably, this caused a great deal of confusion and problems once high speed and long distance travel occurred. This clock regulation was spurned by the railroad companies. Since rail stations prominently displayed clocks, for the use of passengers, freight, rail workers and as a public courtesy, they became the providers and keepers of the local time. In 1882 the American Society of Civil Engineers and the American Association for Advancement of Science joined to push time zone standardization, saying that “mistakes in the hour of the day are frequent”12, and need to be addressed. In 1883, without government oversight or regulation, the rail companies, working in tandem, were able to set, enforce, and most importantly, get public buy in, for the use of set time zones and the use of a centralized time. 13Technological improvements were also a major factor of railroad development. The availability of cheap steel, which was more durable and could take heavier loads, meant lower maintenance costs, as well as the ability to increase loads when compared to iron rails14. Refrigerated cars meant perishable goods could be shipped longer distances and to previously unreachable markets without spoilage. Standardized track width meant better interoperability as well as making the merger and connection of rail lines feasible. Other improvements, such as air brakes, improved signaling equipment, better couplers, more efficient locomotives, and refined methods for the laying of track, as well as others contributed to the overall efficiency and Railroad companies employed the first real corporate organizations, and used them effectively. Much of this structure was borrowed from the military, and implemented by the large numbers of former military men available after the end of the Civil War. In fact, by the 1870s, these competitive private structures employed hundreds of thousands workers–managers, engineers, lawyers, conductors, support staff, and laborers. The Railroad system was also expanded into a national network, from its beginnings as short, local routes. Railroad companies also were the first to nationalize into central and regional divisions for sales, freight, passenger and legal divisions. This removed overhead, and made for a more efficient, profitable company. Largely due to these improvements, rates halved from 1865 to 1914. The early rail companies were private entities with public capital, with a focus on a market driven, capitalist bent that helped drive competitiveness and a goal for larger markets and growth. These new companies, these entities, were referred to as “models of a new modern machine”15. On a similar note, the railroads were the first big businesses, as were their major customers. Steel companies invested heavily in the railroads, and as such, had an interest in the railroads being profitable. As time went on, the steel producers become the railroads largest freight customers16. The corporate structuring of these large companies was also significant. The railroads soon followed a basic recipe for success- construction and expansion, followed by consolidation of lines under single ownership or operating control, then a refinement of design and construction, and finally, a unification and standardization of constructive and operative elements.The railroads themselves, which often grew out of a myriad of financial schemes, went through years of boom and bust, splits and consolidations. Further development occurred throughout the latter part of the 1800s, leading to a handful of major rail companies by the turn of the century. The main companies were the Central Pacific, Union Pacific, and Great Northern. Lesser railroads of note during this period were the Pennsylvania, Atchison, Topeka, Santa Fe, Kansas Pacific, Texas, Wabash, St. Louis, and Illinois Central. Many of these, such as the Southern Pacific that was absorbed into Central Pacific in 1870, merged into larger entities. In 1890, approximately 1000 railroads were in existence; by 1917 the survivors were taken over by the government. In accordance with the changing railroad markets, it is important to note how the rail service was priced and its impacts on consumers. Early development mainly competed with canals or carts, and small rail lines could provide a cheaper alternative, but did not control the market. Later development created situations where rail transport was the only real option. These monopolistic situations, where the railroad was the only option or seller, created situations where railroads engaged in price discrimination, charging more for areas with no competition, and competitively where there was. After consolidation, the market had only a few major railroads, which led to an oligopolistic situation, one where the decision of one company greatly influenced the others, and the others are aware of and react to those actions. This creates a tendency towards market collusion, whether to stabilize a market or through profit concerns. Outcry from consumers led to government regulation in the 1870s, and with the “Granger” cases, became subject to permanent regulation.On the negative side, the rail industry had a gamut of issues. Railroad companies, as mentioned, were the first real mega corporations and created unprecedented personal wealth and unchecked power. This age of “Robber Barons”, and its key figures, all had some involvement with the rail industry. Rockefeller’s Standard Oil used collusion on rail shipping rates for his oil over others to control pricing. These ‘rebates’ as they were called, as well as other monopolistic policies were made illegal with the passing of the Sherman Antitrust act in 1890, and the Elkins Act in 1903. Carnegie’s steel monopoly was directly related to rail use, even though they both dealt in unrelated industries, oil and steel. The existence of railroad monopolies was very powerful. These groups were known to set rates, create traffic arrangements to control traffic, bribe lobbies, buy public officials, and sponsor legislation in their favor.The years after the end of the Civil War leading up to World War I are considered by many to be the golden age of railroads and transportation, and considered the engineering wonder of the industrial age. Based on this, it is easy to overestimate the importance of the railroad. As Fogel said in Railroads and American Economic Growth: Essays in Econometric History, the actual importance of railroads was “much less than is usually presumed”, and the biggest benefit was in the increased “economic accessibility of raw materials”. Fogel also argued that without railroads, done by calculating the known impact, and removing several states and their associated output, that the per capita numbers reached in January 1890 moved out only 3 months. Another point of argument is the effects of the rail industries use of coal and steel, has been overrated. It is currently generally accepted that iron production and coal production only used 5 percent of available iron and coal production during this time 17.In conclusion, the nation’s economy by 1914 was clearly bound and intertwined with the railroad industry, creating a more unified, cohesive market. The push west, and opening of new land and markets, spurned growth and development. Rail development also provided stimulation to basic industries, such as agriculture, steel, coal, machinery, and timber production. The rail industry also drove secondary industries in its consumption of coal, iron, and labor. Economically, these factors add up to cheaper transportation costs, growth in more efficient and profitable agricultural development, leaner corporate entities, population shifts from eastern ports to the landlocked Midwest, and a general increase in the industrialization of America and growth of the United States economy.

References

Notes1. Louis P. Cain and Jonathan Hughes. American Economic History (7th Edition) (Addison-Wesley Series in Economics) (Toronto: Addison Wesley, 2006), 287.2. Cain and Hughes, 288.3. Cain and Hughes, 287.4. Cain and Hughes, 289.5. Sidney Ratner, James H. Soltow, and Richard Sylla. The Evolution of the American Economy: Growth, Welfare, and Decision Making (New York: Macmillan Publishing Company, 1993), 259.6. Ratner, Soltow, and Sylla, 263.7. Lawrence H. Officer and Samuel H. Williamson, "Annualized Growth Rate of Various Historical Economic Series", http://www.measuringworth.com/growth/8. Ratner, Soltow, and Sylla, 259.9. Officer and Williamson10. David Nasaw. Andrew Carnegie (New York: Penguin Press HC, 2006), 99.11. Richard Rayner. The Associates: How Four Capitalists Created California. (New York: W. W. Norton/Atlas & Company, 2007), 85.12. Alan Trachtenberg. The Incorporation of America: Society in the Gilded Age (New York: Hill & Wang, 1982), 60.13. Trachtenberg, 59-60.14. Ratner, Soltow, and Sylla, 339.15. Trachtenberg, 83.16. Nasaw, 169.17. Cain and Hughes, 292.

Bibliography

Cain, Louis P., and Jonathan Hughes. American Economic History (7th Edition) (Addison- Wesley Series in Economics). Toronto: Addison Wesley, 2006.

Fogel, Robert William. Railroads and American Economic Growth: Essays in Econometric History. Baltimore: The Johns Hopkins University Press, 1970.

Nasaw, David. Andrew Carnegie. New York: Penguin Press HC, The, 2006.

Ratner, Sidney, James H. Soltow, and Richard Sylla. The Evolution of the American Economy: Growth, Welfare, and Decision Making. New York: Macmillan Publishing Company, 1993.

Rayner, Richard. The Associates: How Four Capitalists Created California. New York: W. W. Norton/Atlas & Company, 2007.

Trachtenberg, Alan. The Incorporation of America: Society in the Gilded Age. New York: Hill & Wang, 1982.