Why did the government provide subsidies to railroad companies?

To encourage development of rail lines westward, the government offered railroad companies massive land grants and bonds. Railroads received millions of acres of public lands and sold that land to generate money for the construction of the railroads.



People Also Ask

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.

MORE DETAILS

The second half of the nineteenth century was the era of railroad land grants. Between 1850 and 1872 extensive cessions of public lands were made to states and to railroad companies to promote railroad construction.

MORE DETAILS

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.

MORE DETAILS

This act provided for the construction of a transcontinental railroad by two corporations, the Union Pacific and the Central Pacific railroad companies. 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)

MORE DETAILS

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

MORE DETAILS

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.

MORE DETAILS

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.

MORE DETAILS

Operating without government subsidies or land grants, the Great Northern became the most successful transcontinental railroad and the only one that was not eventually forced into bankruptcy.

MORE DETAILS

This act, passed on July 1, 1862, provided Federal subsidies in land and loans for the construction of a transcontinental railroad across the United States.

MORE DETAILS

Funding came from financiers throughout the Northeast, and from Europe, especially Britain. The federal government provided no cash to any other railroads. However it did provide unoccupied free land to some of the Western railroads, so they could sell it to farmers and have customers along the route.

MORE DETAILS

The railroad industry stimulated the economy by spending large amounts of money on steel, coal, and timber.

MORE DETAILS