Gilded Age industrialization had its roots in the Civil War, which spurred Congress and the northern states to build more railroads and increased demand for a variety of manufactured goods. The forward-looking Congress of 1862 authorized construction of the first transcontinental railroad, connecting the Pacific and Atlantic lines. Originally, because railroading was such an expensive enterprise at the time, the federal government provided subsidies by the mile to railroad companies in exchange for discounted rates. Congress also provided federal land grants to railroad companies so that they could lay down more track.
With this free land and tens of thousands of dollars per mile in subsidies, railroading became a highly profitable business venture. The Union Pacific Railroad company began construction on the transcontinental line in Nebraska during the Civil War and pushed westward, while Leland Stanford’s Central Pacific Railroad pushed eastward from Sacramento. Tens of thousands of Irish and Chinese laborers laid the track, and the two lines finally met near Promontory, Utah, in 1869.
Big businessmen, not politicians, controlled the new industrialized America of the Gilded Age. Whereas past generations sent their best men into public service, in the last decades of the 1800s, young men were enticed by the private sector, where with a little persistence, hard work, and ruthlessness, one could reap enormous profits. These so-called “captains of industry” were not regulated by the government and did whatever they could to make as much money as possible. These industrialists’ business practices were sometimes so unscrupulous that they were given the name “robber barons.”
As the railroad boom accelerated, railroads began to crisscross the West. Some of the major companies included the Southern Pacific Railroad, the Santa Fe Railroad, and the North Pacific Railroad. Federal subsidies and land grants made railroading such a profitable business that a class of “new money” millionaires emerged.
Cornelius Vanderbilt and his son William were perhaps the most famous railroad tycoons. During the era, they bought out and consolidated many of the rail companies in the East, enabling them to cut operations costs. The Vanderbilts also established a standard track gauge and were among the first railroaders to replace iron rails with lighter, more durable steel. The Vanderbilt fortune swelled to more than $100 million during these boom years.
As the railroad industry grew, it became filled with corrupt practices. Unhindered by government regulation, railroaders could turn enormous profits using any method to get results, however unethical. Union Pacific officials, for example, formed the dummy Crédit Mobilier construction company and hired themselves out as contractors at enormous rates for huge profits. Several U.S. congressmen were implicated in the scandal after an investigation uncovered that the company bribed them to keep quiet about the corruption. Railroads also inflated the prices of their stocks and gave out noncompetitive rebates to favored companies.