Why did the government offer subsidies to the railroads?

Many countries offer subsidies to their railways because of the social and economic benefits that it brings. The economic benefits can greatly assist in funding the rail network. Those countries usually also fund or subsidize road construction, and therefore effectively also subsidize road transport.



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Source: Association of American Railroads, Bureau of Railway Economics. Railroads received extensive subsidies in the form of land grants, mostly in the years 1850–70. In the 1862–66 period alone, more than 100 million acres of public land were turned over to railroad companies.

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To entice investors into building a continuous line from the Mississippi River to the Pacific shore, Congress agreed to give the railroads 10 square miles of land for every mile of track.

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In the end, the federal government gave 134 million acres of land as incentives to the railroads. To further assist the railroad companies, the federal government offered the companies bonds.

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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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How does the federal government pay for the railroad? They give federal land to the companies for every mile of track laid.

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The railroad opened the way for the settlement of the West, provided new economic opportunities, stimulated the development of town and communities, and generally tied the country together.

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Although these figures are immense and would appear to suggest that the American railroad system was built largely on the basis of government aid, this is actually not the case. In fact, only 18,738 miles of railroad line were built as a direct result of these land grants and loans.

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How did government grants to build railroads result in large-scale corruption? Government grants to build railroads resulted in large scale production because many of the great wealth the railroad entrepreneurs got, led to bribery and greediness. To get more grants some investors began bribing congress.

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