The Benefits of the Transcontinental Railroad - Term Paper Example

? Transcontinental Railroad Strength of the economy of a country determines the strength of the countryitself. It is very important for a country to strengthen its economy. If the economy of a country is strong, it would be prosperous. There would be employment, business opportunities and high standard of living for the citizens of the country if the economy of the country is strong. There are a number of factors that affect the strength of the economy. Such factors can be the policies designed by the authorities such as; fiscal policies and monetary policies. Such policies are implemented by regulatory authorities through budgets and other rules and regulations. However, there are some factors that affect the economy on the very basic level. One of those factors is infrastructure of a country. Infrastructure of a country can play an important role in the strengthening of the economy of a country. This paper analyses one such example of the effects of infrastructure on the economy. The example is that of the First Transcontinental Railroad. This railroad is said to be the first communication revolution of America. The railroad reduced the time of travel between east and west costs from six months to one week and it was indeed a huge achievement. This paper examines the problems faced by the entities engaged in the construction of the railroad and the effects of the railroad on the economy of the country (Heintz, 2009). Infrastructure can enhance the growth of the economy of a country at a very fast pace, specifically in case of developing countries. Developing companies usually have weak economic environment because of lack of sufficient infrastructure. Infrastructure can boost trade in a country which results in accelerated economic activities in the country. This scenario can best be explained with the example of the First Transcontinental Railroad that was constructed between the years 1863 and 1869 in the United States of America. The railroad was built by the Central Pacific Railroad of California and Union Pacific Railroad. These two entities were chartered by the Pacific Railway Act, 1862. This railroad connected the already developed railway network of the Eastern cost with California that was in its developing stages. The railroad was completed in May, 1869 when it changed the economic scenario of the American West for good. The railroad initiated a new series of trade and communication that triggered the economic growth in the USA. Planning for Construction of the Transcontinental Railroad In the year 1862, it was determined that the companies that would carry out the construction of the Transcontinental Railroad would be Central Pacific Railroad and Union Pacific Railroad. The companies started construction from their respective points. Central Pacific started building the railroad eastward from Sacramento, California and Union Pacific started building the railroad westward from Council Bluffs, Iowa. Although the companies had been assigned the task and they had started constructing the railroad, the point where both the railroads would meet was not determined. There were a number of problems that hindered the construction of the railroad resulting from the lack of adequate planning. The construction also slowed down due to the Civil War between the years 1861 and 1865. This factor also added to the problems already present due to the lack of planning. However, a point in the Mormon territory of Utah was determined to the Promontory Point where the railroads being constructed by the two companies would meet. The construction completed on 10 May, 1869 when the two railroads met at the Promontory Point. Problems Faced in Construction A railroad connecting the east and west cost of the USA had always been a dream but it was shaped into reality by the President Abraham Lincoln. However, the railroad was completed after four years of his death. The construction of the railroad was not independent of any problems. There were a number of problems such as; conflicts between the two entities building the railroad as to the ownership of the land, monopoly by some of the individuals involved in the construction of the railroad, and manipulation of the scenario by some of the individuals involved. The companies building the railroad were financed in such a manner that there was a confusion regarding the land where they had to build the railroad. Both the companies had conflicting opinions regarding the land at which the companies had to build the railroad and due to this confusion, it is said that the companies sabotaged each other’s tracks as well. Another one of the main problems that caused hindrances in the way of construction of the railroad was that of its financing. The construction of railroad was such an extensive project that a reliable estimation of the cost of the complete project could not be made. Since the costs were unfathomable, many Americans did not believe that the transcontinental railroad was possible. However, Abraham Lincoln and a number of other Americans thought that the transcontinental railroad was not only possible but it was a necessity. The issue of financing the project was one of the most debated issues before the initiation of the construction of the railroad. Some of the politicians were of the view that the construction of infrastructure should be left for states and private sector, however some of the politicians believed that in order to execute a project of such magnitude federal government will have to step in. It became clear ultimately that the financing of such a project could not be handled by any individual, any group of individuals or any corporate entity, therefore it was decided that federal government would account for a portion of the total cost. This step did not only make the project look realistic but it also attracted funding from the private sector. Another problem was the manipulation done by some of individuals such as Thomas Clark Durant. He was the controlling partner of the Union Pacific that was building the railroad westward. The deception done by Durant did not only bring the construction to an almost halt, it also caused significant loss to Union Pacific. The financing of the project of this magnitude was already a significant problem, and corruption scandals like this further intensified the problems of financing of this project. White Collar Crimes According to the legislation followed by the Union Pacific, no partner was entitled to hold a share equaling more than 10% of the total stock however Thomas Durant took advantage of the lack of the oversight by the government and illegally purchased more stock than what he was entitled for. Ultimately, Thomas Durant held as much as half of the stock of the Union Pacific. Thomas Durant took extreme advantage of this scenario and made the company construct the railroad on the land that was owned by him. The company kept building the railroad around the land and it merely built the track that went as far as 40 miles from Omaha. In this manner, he acquired high premium by the authorities for the land and continued taking advantage of this scenario for a period of two and a half years. When strict government oversight was reinitiated after the Civil War, the authorities handed over the construction of the railroad to another company named Credit Mobilier which was also controlled by Thomas Durant. The formation of the company was actually a part of the deception created by Thomas Durant who wanted to provide the government and the general public with an impression that the company had been disinterestedly chosen by the officers of the Union Pacific Railroad. Union Pacific was paying Credit Mobilier for the costs of the construction, however in reality Durant was paying himself without any oversight by a third party. This deception went on for a long time and the costs of construction kept mounting (Ambrose, 2000). The investors acquired stock in the Union Pacific and one of those investors was Thomas Durant. He manipulated the whole project by acquiring excessive stock illegally and then created Credit Mobilier which brought the project to a halt. Durant did not only fill his pockets through Credit Mobilier but he also involved some individuals from the highest level of the American government into the scam. On one hand, Credit Mobilier was giving out exceptional returns to its stockholders while on the other hand Union Pacific was on the verge of being bankrupted due to the apparent high costs of the construction project. The Credit Mobilier scandal is considered to be one of the greatest white collar crimes in history. The scandal came out in public in the year 1872 but it was too late by then (Blashfield, 2001). Most of the records had been burnt and to decide who were responsible for the crime was undeterminable by the court. According to some of the analysts, Credit Mobilier scandal was merely an insignificant proportion of the total wreckage done by the corrupt officials. There were a number of sub-contracts, high interest loan agreements and land speculations that were not accounted for in the determination of the magnitude of the corruption. Economic Benefits of the Transcontinental Railroad The Transcontinental Railroad spurred a number of economic benefits that strengthened the economy of the country. It was a significant step towards the economic growth of the country. It accelerated trade in the country and helped increase the overall rate of employment, it created opportunities for business and it strengthened the communication within the country. The country progressed at an unprecedented rate because of rail travel. The economic growth in the country was faster than any other country and the transcontinental railroad was one of the major contributing factors. Following are the major economic benefits that spurred from the transcontinental railroad. Industrial Growth One of the major economic benefits brought about by the transcontinental railroad was the industrial growth throughout the country. There were a number of industries that grew at an exceptional rate after the completion of the railroad. One of those industries was the steel industry. The production of steel increased significantly after the completion of the railroad. This impact was because of the fact that the raw materials could easily be transported from the remote locations to the manufacturing units. Transportation of raw materials was one of the biggest limitations that caused hindrances in the growth of the steel industry, but this hindrance was removed soon after the completion of the transcontinental railroad. According to some analysts, the increase in the production of steel was as much as 26% and it required additional mining of coal and other resources. Thus, the steel industry saw tremendous growth afterwards which added to the subsequent economic growth in the country. Another industry that saw tremendous growth was that of fruits and vegetables. The transcontinental railroad made it possible to transport goods in a remarkably less period of time. Before the construction of the railroad, it took six months to transport goods however after the completion of the railroad it took merely one week. The production of fruits and vegetables increased at a significant pace. This was because fruits and vegetables could be transported in their fresh state to a number of areas along the railroad. The production increased at such a pace that it changed certain local businesses into nationwide industries. In this manner, the introduction of new industries in the country helped in strengthening the economy of the country. Another one of the industries that saw tremendous growth was that of livestock and cattle. This industry grew because of the accessibility of new markets for the producers. Producers of the livestock and cattle were limited to their local markets before the completion of the transcontinental railroad but once the railroad was completed, the producers of livestock and cattle were provided with numerous opportunities to expand their business. Producers could easily bring their cattle to markets that were previously inaccessible for them and sell their cattle to a wide range of buyers. This scenario also balanced the supply and demand situation for livestock and cattle throughout the country (Houghton, 2003). There were a number of small business entities that had been operating at local level but they grew out into nationwide entities after the completion of the transcontinental railroad. Some of those entities were; Armour Meats, Deal Monte Produce, Pacific Fruit Express and Carnegie Steel. Therefore, it can be inferred that the transcontinental railroad spurred the industrial growth in the country at such a pace as it was never observed before. This rapid industrial growth turned into the revolution of economic growth. Growth in Trade The completion of transcontinental railroad brought growth in trade as well due to the introduction of new markets. Trade is one of the most significant factors that determine the strength of the economy. The transcontinental railroad reduced the time of shipment significantly therefore goods that could not be shipped otherwise due to their perishable nature could be shipped easily. Fruits and vegetables could easily be sold in a number of new markets along the railroad. Farmers could easily bring their produce to markets where demands for the fruits was high and could make high profits. A number of cities where certain fruits were never available before were made available due to the facility of the railroad. Apart from fruits and vegetables, a number of other products that were crucial for industrial development throughout the country were also made available. Mine ore could be shipped to Chicago from Montana much more easily. On the other hand, Timber from Washington State could also be shipped to other parts of the country. Such growth in trade did not only create opportunities for traders, it also introduced certain products in a number of markets that were scarce before the completion of the railroad (Davis). Since trade in a country represents the economic strength of a country, the growth in trade due to the railroad caused significant impacts on the economy of the country. Due to the growth in trade, the economy in the country grew at a rapid pace and it also created a number of new employment and business opportunities. Growth in Markets Due to the railroad, new towns and cities started to build up around the areas of the railroad. In this manner, people could easily execute trade with people in other cities and towns along the railroad. Thus a number of new markets spurred up which accelerated the growth of trade and thus affected the economy in a positive manner. Origination of new markets also created opportunities for small businesses to grow at national level and it also enhanced the rate of employment in the country. Advancement in Communication The First Transcontinental Railroad brought significant improvements in the communication as well. At that time, the primary mode of communication was through letters. The Transcontinental Railroad made it easier for the people to send and receive letter over long distances. It was a great convenience for the people. The profession that was positively affected by the improved communication was journalism. Journalists could easily acquire news and updates regarding the happenings around the country. Another method of communication was through Morse code telegraph. The railroad also helped in improving the telegraph system by connecting the telegraph lines along the railroad. This was also a revolutionary improvement because telegraph lines were the fastest modes of communication in that era and development of telegraph lines at remote areas lessened the communication gaps. Apart from improving communication by way of letters and telegraph, the railroad also made it convenient for people to travel easily. Distances across which traveling was considered to be a very difficult and time consuming task were lessened by the railroad. The railroad brought convenience for the people and brought them closer. This factor nourished the cultural aspects of the country. Conclusion It can be inferred that the First Transcontinental Railroad proved the fact that strong infrastructure can bring phenomenal changes in a country. The First Transcontinental Railroad spurred economic growth in the country at an unprecedented rate. The rapid growth in the economy was due to a number of factors such as; introduction of new industries in the country, growth in trade throughout the country, accessibility of goods at remote places, transport of goods from remote places to urban areas and growth in business opportunities. The transcontinental railroad also improved the communication throughout the country. It brought the people of east and west coasts closer and this added to the cultural development in the country. Works Cited Ambrose, Stephen E. Nothing Like It in the World: The Men who built the Transcontinental Railroad 1863-1869. New York: Simon and Schuster, 2000. Print. Blashfield, Jean F. The Transcontinental Railroad. Minneapolis: Compass Point Books, 2001. Print. Davis, J. P. The Union Pacific Railway. The ANNALS of the American Academy of Political and Social Science. Web. April 13, 2011. Heintz, James. How Infrastructure Investments Support the US Economy: Employment, Productivity and Growth. Alliance for American Manufacturing. January 2009. Web. April 13, 2011. http://www.americanmanufacturing.org/wordpress/wp-content/uploads/2009/01/peri_aam_finaljan16_new.pdf Houghton, Gillian. The Transcontinental Railroad: A Primary Source History of America’s First Coast-to-Coast Railroad. New York: The Rosen Publishing Group, 2003. Print. Read More