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The Railroads


    Chapter 9

   Railroads 9.2
Pacific Railway Act creates a transcontinental railroad.
Union Pacific & Central Pacific build it.
Union Pacific – Run by Grenville Dodge
Began building westward from Omaha Nebraska, 1865
Workers: (10,000) civil war veterans, immigrants, ex-
convicts, adventurers
Daily Life: rough, blizzards, desert heat, problems with

Central Pacific – Started by Theodore Dehone Judah in
Workers: were in a shortage in CA, so they hired
10,000 from China.
Supplies: Shipped (boats) from the east.
Railroad Expansion Spurs Industrial Growth
 steel, coal, timber, services
 Opens up markets in new towns for new
  products and services – cattle & other

Railroad Consolidation – create single rail system
  to link all disconnected rails to one
  transportation system.
Ex: Cornelius Vanderbilt - centralized New York
  rail lines and extended it to Buffalo then
National Rail System -
 Safety – setting of 4 times zones across
  the country to avoid collisions on the
  tracks from scheduling errors.
 Speed up long distance transportation
   Average price per mile for a ton of freight went from
    two cents in 1860 to ¾ a cent in 1900.
 Technology: airbrakes allowed for
  longer/heavier trains = more efficient.
 Unites Americans in different regions and
  promotes mixing of cultures.
Land Grants - large tracts of land given by the
  federal government to the railroad companies to
  promote growth.
 Railroads would then sell the land to settlers,
  real estate companies and business to raise
  money to continue building.
Ex: 1850’s & 1860’s the Gov’t awarded 120 million
  acres of land.

Robber Barons – Railroad entrepreneurs amassed
 great wealth in this time and were often accused
 of using unethical means when making their
 Robber Barons vs. Captains of Industry
 Credit Mobilier: Construction company
 created by Union Pacific. Exploited
 government funds.

 The Great Northern: The Great Northern
 was the first transcontinental built without
 public money and just a few land grants. In
 1893, when the government-subsidized
 railroads went bankrupt, Hill’s line was able
 both to cut rates and turn a substantial
              Big Business

 Ch. 9, Section 3
         The Rise of Big Business
Major change in economic structure:
  small businesses and farming
           => huge, complex corporations

 The Role of Corporations
 Corporation – organization owned by many people
  but treated by law as though it were a single person.
 Can: own property            make contracts
          pay taxes            sue and be sued.
 Stockholders – owners of the corporation.
 Stock – shares of the ownership in the corporation
  that can be sold while spreading the financial risks
  involved in corporate ownership.
         Economies of Scale
Corporations produce goods more cheaply because
they produce quickly using new manufacturing
• Fixed Costs – business has to pay these whether
or not it is operating. Ex: rent, loans, taxes.
• Operating Costs – occur when running a company.
Ex: wages, shipping charges, raw materials.
     Which companies benefit based on cost:
               small vs. large?
 Small:
    fixed –

    Operating –

    Production -

 Large:
    fixed –

    Operating –

    Production -

Small corporations have difficult time competing with larger
           Consolidation of Industry

  With the large number of companies competing,
  prices were falling.

Companies form pools agreeing to maintain prices at a
  certain level.
 Were not supported by courts and the U.S. legislature.
 Often broke up easily because of infighting and lack of
  legal protection.
 By 1870’s only a select few large highly efficient corps.
 Vertical and Horizontal Integration
 Vertical Integration - company which owns all of
  the different businesses on which it depends for
  it’s operation.
 Horizontal Integration - company which
  combines many firms engaged in the same type
  of business into one large corporation.
 Result of these effective strategies for corporate
  growth: BIG Business!

  Ex: Standard Oil controlled approximately 90%
  of the oil refining industry by 1880.

See graph on page 321
Monopoly – when a single company has control of an entire
 Feared by people – who controls price?
 Legislation in some states made it illegal for one
  company to own stock in another without permission
  from state legislature.

Trust – business merger allowing one person to manage
  another person’s property as a “trustee”.
 Way for business to get around the laws against 1
  company owning another.

Holding Company – Does not produce anything itself, but
  just owns the stock of companies that do produce goods
  and controls all of the companies it owns.
 Basically merging all into one (huge giant super rich all
  powerful) enterprise.

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