Railroads and Conflict in the West

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How did railroads affect America's economy in the 1800s?

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The economy of the United States was directly affected by the growth of railroads in a number of ways. With the completion of the transcontinental railroad in 1869, new markets and resources were open to businesses on both coasts. Businessmen were able to travel more quickly between sources of raw materials, refinement, and markets than ever before. This allowed for an improved knowledge of business and production, thus leading to an overall improvement in a company's efficiency. Goods could cheaply make their way to expanded markets nearly anywhere in the country at speeds and in quantities previously unheard of. By the end of the 1870s, $50 million worth of freight was being shipped annually. This was far beyond anything accomplished before the widespread construction and use of railways.

Also, the success of the railways led to new innovations in the way capital was invested by businesses in the US. Railway companies became the instruments for the flow of money around the country. Rail construction was too expensive for the government to fund. Capital came in the form of outside and internal investment. Railroad bonds issued to private investors became a major part of the economy. The railroads went beyond just the business of transportation and became large financial institutions. By the late nineteenth century the use of railroads as holding companies was widespread. Investors from Britain heavily invested in American railroads, thus inserting a lot of foreign capital into the economy.

The railroads were also one of the biggest employers in the country during the latter part of the 1800s. By employing such a large part of the work sector, the railroads pumped a large amount of income into the working class. That, coupled with easier access to manufactured goods, was a real boom to the economy overall.

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