How did land grants affect the railroad industry?

The railroad grants helped companies raise the capital they needed to build lines into sparsely settled areas like Nebraska. In exchange, the railways agreed to carry the mail at rates set by Congress and to transport US soldiers and freight without charge.



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At the same time that homesteaders were getting free land from the government, large tracts of land were granted to railroads by both the states and the federal government. The goal was to encourage the railroads to build their tracks where few people lived, and to help settle the country.

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Railroads, as private companies, needed to engage in profitable projects. So the federal government passed the Pacific Railroad Act that provided land grants to railroads. This provided public lands to railroad companies in exchange for building tracks in specific locations.

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The states were to transfer land to the railroads upon the completion of each twenty-mile section of track. The railroad company would then receive alternate sections (a square mile each), six miles on both sides of the track. The price for the alternate sections kept by the government was doubled.

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The Railroad Act of 1862 put government support behind the transcontinental railroad and helped create the Union Pacific Railroad, which subsequently joined with the Central Pacific at Promontory, Utah, on May 10, 1869, and signaled the linking of the continent.

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The completion of the Transcontinental Railroad dramatically catalyzed the development of the West, a process that both extended settlement and mining into otherwise unreachable areas and caused desertification (or, dry and arid conditions) in places along the route.

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Who Had a Monopoly in the Railroad Industry? In the United States, the most famous railroad monopoly was launched by Cornelius Vanderbilt, an early investor in railroads and water transportation. Starting with a single boat, the Vanderbilts eventually controlled an enormous empire of shipping and railway routes.

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At first, the farmers wanted the government to control prices on the railroads. Later, the farmers began to demand that the government own the railroads. The farmers decided they had to have an organization. They formed several organizations.

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To encourage rapid construction, the government offered each company land along its right-of-way. (About 1-5 miles on either side of the tracks) The railroads sold the land on either side of the tracks to settlers to pay for the cost of building the railroad.

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Teachers should understand that most of the people who worked to build the transcontinental railroad were immigrants from China and Ireland. These immigrants faced discrimination in the U.S., but their labor made this national achievement possible.

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The rail line was built by three private companies over public lands provided by extensive US land grants. Building was financed by both state and US government subsidy bonds as well as by company-issued mortgage bonds.

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