The Railroad Era and Economic Growth
Stacey Moore
HIS/305
February 8, 2016
Charlotte Lopez-Schermer

The Railroad Era and Economic Growth
The Central Pacific Railroad was originally meant to make it easier for people from the East Coast to travel to the West Coast. In reality the Central Pacific Railroad made it easier for four men, Collis P. Huntington, Leland Stanford, Charles Crocker and Mark Hopkins, to be greedy and deceitful, while trying to control the government.
Central Pacific Railroad
The Central Pacific Railroad was the vision of Theodore D. Judah but he could not finance it himself so he went looking for financial backing in both San Francisco and Sacramento. In Sacramento there were four men that were interested in Judah’s idea but were afraid to invest until the project had Congresses backing. Those four men were Collis P. Huntington, Leland Stanford, Charles Crocker and Mark Hopkins, and they came to be known as the “Big Four”.
The “Big Four” were willing to finance the Central Pacific Railroad by any means possible. There were a total of 1530 stocks sold at $100 a share to get the railroad started. Huntington, Stanford, Crocker, Hopkins and Judah bought 150 shares each and were able to start their company with only ten percent down which equaled $15,800. Thanks to the help of Judah the Congress passed the Pacific Railroad Act of 1862 and President Lincoln signed it. Just two short years later the Act was amended so that it would be even more generous to the railroads. The Central Pacific and Union Pacific Railroads received federal loans and land grants. “Those who supported land grants to pioneer railroads argued that the grants would be beneficial to society.” (Mercer, L.J. 1970). The loans were 60 year bonds at 6 percent interest. The Act of 1862 had a built in security with the government having a first mortgage on the railroads property. In 1864 a second mortgage was taken so that the companies could sell their own bonds. “To the public of the 1860’s, federal loans and land grants to the pioneer Pacific railroads represented aid necessary to secure and economically and politically desirable technological feat, tot he public of the 1870’s they represented plunder.” (Fleisig, H. 1975).
To continue financing the railroad Stanford used his office as California’s Governor to get more funding. While he was governor some counties where able to buy Central Pacific Stock. When the constitutionality of certain legislation became a dispute the courts said that it would be upheld. To Big Four organized a new corporation to finish to railroad, called the Contract and Finance Company, where they were basically in a contract with themselves.
The Big Four were always looking for ways to cut back costs while building the railroad. One way they did this was using Chinese workers when White workers demanded more money. This caused huge tension between the Chinese and White workers when there was little work. “Chinese immigrants, whose labor had been essential to the construction of the railroad, became scapegoats for the disgruntled white working men.” (Bean & Rawls, 2008). The Workingmen’s Party baned together to fight the power of the rich and along with others called for a new state constitution.
“Anti-Chinese sentiment, as well as anger at the growing power of the railroad, led to the drafting of a new state constitution in 1879.” (Bean & Rawls, 2008). The Constitutional Convention addressed the greed of the railroad and decided that the best way to regulate it was to form a state railroad commission that would consist of three elected members that would change every four years. The members were able to decide on the rates and fines of the railroad and imprison any violators. The convention also decided to include a section that made it illegal for corporations or public works to employ Chinese.
The Railroad and State Politics
Californians started to call the railroads the “Octopus” because they realized that they had a monopoly on transportation and was able to control the state in many ways. The Railroad figured out how it could control politics through its fare rates by rewarding its friends and ruining its enemies. Rate manipulation was used by the “Octopus” to get politicians on their side. The Railroad did not only corrupt politics at the state level but also at the federal. A lawyer that held a public office would receive money for “legal services” from the railroad and others would get money for “campaign expenses” People viewed this as, “the charge that the State’s charter has handed the State’s government over to special interests to the people’s detriment.” (Rolston, A. 2011).
Conclusion
The building of the Central Pacific Railroad was supposed to be a great economic boost to the west coast. What it really did was make the “Big Four” very wealthy and powerful. Their reach really was like that of an “Octopus” that went in many different ways to benefit them, both financially and politically.

References
Fleisig, H.. (1975). The Central Pacific Railroad and the Railroad Land Grant Controversy. The Journal of Economic History, 35(3), 552–566. Retrieved from http://www.jstor.org/stable/2119557 Mercer, L. J.. (1970). Rates of Return for Land-Grant Railroads: The Central Pacific System. The Journal of Economic History, 30(3), 602–626. Retrieved from http://www.jstor.org/stable/2116908
Rolston, A. (2011). Capital, corporations, and their discontents in making california's constitutions, 1849-1911. Pacific Historical Review, 80(4), 521-556. doi:http://dx.doi.org/10.1525/phr.2011.80.4.521
Bean, W., & J. J. Rawls. (2008). California: An interpretive history (9th ed.). New York, NY : McGraw-Hill.