How did the U.S. government encourage the growth of the railroad industry in the late 1800s

Since its beginning in February 1827 with the Baltimore & Ohio Railroad, the U.S. rail industry has had a seemingly symbiotic relationship with the prevailing governments.

During the late-19th and early-20th centuries, railways were a major contributor to the country's economic growth, both from their own profits and share price appreciation as well as through the utility they provided other industries and the general public. They radically improved access to raw materials and provided the first reliable cross-country transportation. Much of the history of the United States is deeply intertwined with the history of the railroad sector.

Key Takeaways

• During the 19th century, the railroad companies comprised one of the largest and most influential industries in the United States.
• Railroad expansion to the West and into major cities was helped in great part due to incentives and support from the federal government.
• With the creation of Amtrak in 1971, America's interstate passenger rail service was essentially federalized.
• The 2021 infrastructure bill grants a record $66 billion to Amtrak to improve infrastructure and modernize its service.

Government Regulation That Impacted Railroads

Two early examples of government regulation that impacted railroads are the Pacific Railroad Acts of 1862 and 1864. These provided financial aid to companies in the form of land allowances and mortgage bonds based on the amount of westward track laid. The bonds were valued at $16,000, $32,000, and $48,000 at the time, with the price increasing for track laid progressively further west. In 2022, these amounts amount to around $415,000, $830,000. and $1,250,000, respectively, when adjusted for inflation.

Another example of government regulation impacting the railroad sector was the Department of Transportation Act of 1966, which created the Federal Railroad Administration (FRA). The newly formed administration was primarily charged with ensuring the safety of both commercial and passenger trains.

Blue Sky Laws

In the early 1900s, blue sky laws were put into effect by individual states to protect investors from fraud by requiring securities issuers and brokerages to register and abide by certain reporting requirements. The Uniform Securities Act, first promulgated in 1930 and revised in 1956, provided a model for states wishing to enact laws to prohibit securities fraud on investments that are not regulated at the federal level and do not fall under the jurisdiction of the Securities and Exchange Commission (SEC). However, certain securities issuers, including railroads, are exempt from these state laws.

Government Support of Railroads

Amtrak has received subsidies ranging from hundreds of millions to billions of dollars since the early 1970s under the Rail Passenger Service Act. In the 1960s, after the introduction of the FRA, it became evident that passenger railway service was unprofitable. However, the utility it provided as a public service was deemed imperative to the well-being of the country by both Congress and President Nixon.

The American Recovery and Reinvestment Act of 2009 allocated $8 billion toward the development of a network of high-speed rail lines connecting major American cities. President Obama was a strong advocate of the initiative and signed it into law.

Because the consequences of railway mishaps are substantial, the FRA has a significant budget devoted to safety and operations, approximately $222 million in FY 2019. Railway accidents can be caused by both malfunctioning equipment and human error. The FRA is charged with investigating accidents and implementing measures to ensure steps are taken to prevent avoidable accidents from reoccurring and negatively impacting the railroad sector.

America's railways received another boost of $66 billion in federal spending resulting from the 2021 Infrastructure and Jobs law signed by the Biden Administration. This amounts to the largest investment in passenger rail since the creation of Amtrak in 1971, handing the agency billions of dollars to address its repair backlog, modernize its fleet and reduce trip times. It can also help with rail line expansion into new cities and routes across the U.S.

Although the period of Reconstruction (1865-1877) had resulted in Florida rejoining the United States, many Floridians found themselves cut off from the rest of the country. Florida had few roads and needed to build more railroads. Unfortunately, the state was in debt from the Civil War and had no finances with which to expand.

Northern businessmen, however, did have money and saw investment opportunities in Florida. In 1881, a man by the name of Hamilton Disston bought 4 million acres of land from Orlando to Lake Okeechobee for 25 cents an acre. This single investment helped get Florida out of debt and back on the road to building!

A year later, Henry B. Plant began building railroads throughout the state of Florida. He also connected Florida's railways to Georgia, opening the way for interstate trading and travel. He constructed many hotels along the railways. His most famous hotel was the Tampa Bay Hotel, which was built at a cost of nearly 3 million dollars. It was the most modern hotel in Florida at the time with 500 rooms and electric lights. Plant also owned and operated many steamboats and he continued building in Florida throughout the late 1800s.

An entrepreneur by the name of William Chipley built railroads that linked the Panhandle region with the rest of Florida. This enabled the goods being shipped to the Pensacola ports to be sent to the rest of the state by rail.

Henry M. Flagler settled in the east coast town of St. Augustine. He built its first big hotel, the Ponce de León, which was the most luxurious of its time. To encourage people to visit, he built railroads to help connect St. Augustine and Daytona Beach to railways that could bring guests all the way from New York. Flagler also developed the resort town of Palm Beach and connected it, of course, by railroads.

By 1900, Florida had more than 3,000 miles of railroad and its transportation problems had been solved. Its economy thriving, Florida's growth had only just begun.

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