Railroads and Conflict in the West

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How did railroad expansion impact the US economy?

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Railroad expansion affected the US economy by creating jobs, establishing a national market, establishing a cattle industry on the Plains, and allowing certain people to acquire great wealth through investing in the railroad.

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Railroad expansion allowed the United States to ship goods without having to use canals and rivers. Railroads were also more reliable than state and national roads at the time, though rail accidents killed hundreds every year. The railroad allowed raw materials to reach factories in the East and consumer goods to reach all parts of the United States in a timely manner. Railroads helped to create the cattle industry on the Plains immediately after the Civil War. Cattle brought low prices in Texas, but demand was higher on the East coast. Cowboys would drive the cattle to rail heads in towns such as Dodge City. The railroad was also instrumental in bringing precious metals such as silver and gold to the East. Many towns would not exist if not for the railroad.

Indirectly, the railroad had a profound effect on the economy through investment. Many people such as Leland Stanford were able to make millions through railroad investing. These investments were unregulated, however, as companies could print as many shares of stock as the market could support. An excess of speculation sparked an economic depression in the United States in 1873.

Not only did railroads link the United States in terms of transporting people, but they were also influential in linking the nation's Western resources with Eastern factories. Railroads were one of the major engines in driving economic growth in the United States during the nineteenth and twentieth centuries.

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The expansion of the railroads in the late 1800s was instrumental in helping the US economy boom.   It did this in two ways. 

First, the railroads created a tremendous amount of demand for goods and labor on their own.  As the railroads were being built, they needed huge numbers of people to build them.  They also, of course, needed enormous quantities of steel for rails and rolling stock and wood for things like railroad ties.  This demand, particularly for steel, helped the US economy to boom.

Second, the railroads created a huge national market.  Before the expansion of railroads, it had been very hard to get goods from place to place on land.  Moreover, the whole western United States was essentially worthless to the national economy because goods could not be easily transported from there to the rest of the US (particularly because there was no Panama Canal in those days).  The railroads tied the whole US together.  Now, crops and cattle from the West could become part of the economy as could the things produced by mines in the West.  Now, anything could be transported anywhere in the country.  This allowed companies to become much bigger and allowed the economy to boom.

In these ways, the railroad expansion allowed the US economy to expand rapidly in the late 1800s. 

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

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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