The Great Railroad Revolution

by Christian Wolmar

  The most significant and profound impact of the railroads was on the economy, where there was both a direct and an indirect effect. Quite simply, the railroads were by far the biggest business, and their need for basic materials was a stimulant for several other industries. Whole forests were cut down to provide millions of ties for the tracks, massive amounts of ballast on which they rested were quarried, unprecedented amounts of coal were mined to fuel the locomotives, and huge quantities of ore were needed to produce the iron for rails. Indeed, the whole method of production was transformed as a result of the huge demand for iron. Integrated mills were created where all the processes were carried out on one site, and the principal output of these early factories was rail. Other materials in great demand included copper, glass, and india rubber. The machine-tool industry also expanded rapidly to provide increasingly sophisticated tools required by the railroads.

  The indirect effect was even broader. By bringing down the cost of transportation, the railroads stimulated demand for both manufactured goods and raw materials. Mass-production techniques had been constrained by the lack of constant supply and the cost of transportation. By ensuring that the supply of materials and parts was both cheaper and more reliable—since railroads, unlike the canals that froze up, operated year-round— manufacturers could now rely on a regular supply of parts and materials, revolutionizing the production process that, therefore, moved from small workshops providing for the local neighborhood to larger factories serving a state or even the whole nation: “These techniques [of factory production] were adopted to mass produce shoes, clothing, clocks, watches, locks, sewing machines, harvesters and other agricultural implements, and also guns and revolvers.” The railroads changed the nature of agriculture, encouraging the production of cash crops by reducing the cost of transportation and allowing produce to be carried over much greater distances to both domestic and export markets. Although economists have long argued about the precise impact of these changes, it is undeniable that “the railroad was a significant force in the growth of the American economy during the second half of the nineteenth century.”17

  The railroads were also responsible for the development of modern business methods. The post–Civil War boom in the railroads brought with it a change in their nature that was to have a lasting effect on the way that America conducted business. Indeed, the early large railroad companies were the nation’s first modern corporations, and they were as expensive and complicated to run as they were to build, especially when they consolidated into far larger businesses. The many tasks of running a railroad necessitated a vast array of skills, a requirement that increased as train services became more frequent, faster, and more complex. To mention but a few of these: railroads needed technical expertise to maintain the infrastructure and provide the locomotive power, operating skills to establish and keep detailed timetables, sophisticated management techniques to deal with the scattered workforce, and, of course, a wide variety of financial skills, whether it was assessing capital needs or determining freight rates and ticket prices.

  The very notion of management grew symbiotically with the expansion of the railroads. No other businesses of the mid- to late nineteenth century were so complex nor spread over such a vast geographical area. None, either, employed so many people. At the time, manufacturing concerns were located on a particular site, with none of the difficulties entailed in running an organization extending hundreds or sometimes thousands of miles across the country. The assets the railroads had to manage were also extremely varied, ranging from bridges and tunnels to workshops and stations. The numbers of people required to carry out these tasks was also on a scale never previously encountered anywhere in the world, except, perhaps, for vast one-off construction exercises such as the building of the pyramids or the other “wonders of the world.” While factories of the time employed at most a few thousand people, the labor requirements of the railroads were far greater and more diverse. There were customer-facing people such as porters, conductors, and ticket clerks—the railroads were effectively the first mass service industry—and swaths of behind-the-scenes men (they were almost entirely male until the First World War) such as track workers, mechanics, engineers, signalers, and armies of clerks. To give an example, as early as the mid-1850s the Erie employed more than four thousand people, probably the largest workforce of the day in any industry, whereas a mere thirty years later the ever-growing Pennsylvania, which controlled around seven thousand route miles, had nearly fifty thousand workers on its books. Again, no other company could match that figure. This gave rise to a host of new management techniques, especially given the fact that telephone communication did not become routine until the last fifteen years or so of the century: “Every day railroad managers had to make decisions controlling the activities of many men to whom they rarely talked or even saw.”18

  Uniquely, running a railroad involved a myriad of vital and often safety-critical decisions to be made daily, often by quite junior staff. Working out the requirements of each station and freight depot and allocating the right resources and monitoring performance were new tasks that required both detailed management decisions and an overall strategic perspective. Even before the Civil War, the big trunk railroads of the East such as the Pennsylvania and the Baltimore & Ohio had begun to create sophisticated management structures involving, for example, the separation of sums of money allocated to investment, the capital account, from those relating to train operation, the revenue account. This may all sound banal, but was, in fact, the genesis of the corporate arrangements that are the basis of all modern-day business.

  As the railroad industry became more competitive in the 1870s, there was a far greater emphasis on cost analysis, which suggests that the dominance of “bean counters” in modern business practice has far deeper origins than is generally realized. All this depended on much more sophisticated flows of information to enable managers to make informed decisions, rather than relying on instinct or experience. Statistics on all aspects of the business, whether the amount of tallow being used as a lubricant or the cost per mile for an engineer and fireman, were collected for the first time as the railroad companies strove for efficiency. In this respect, American practice was far ahead of contemporary European methods. As an illustration of the modern corporate thinking of the railroads, in 1856 Daniel McCallum, the general superintendent of the Erie who, as we have seen, would later play a key role in the North’s railroad management during the Civil War, wrote to the president of the company, emphasizing the need for the collection of statistics on at least twenty different measures. He stressed that the real value of such information was “in its practical application in pointing out the neglect and mismanagement which prevail, thus enabling us to remedy the defect.”19 One can almost hear today’s management studies lecturers echoing such thoughts. These tasks, of course, became even more complicated and demanding when the great series of amalgamations and consolidations took place toward the end of the nineteenth century, creating even bigger organizations. The big railroads, therefore, were the first companies to develop modern business accounting methods.

  Another aspect of the railroads that made them uniquely difficult to manage was that they could never stand still. During the whole of the nineteenth century, they were constantly expanding, adopting new technology (albeit reluctantly at times), investing in improvements, adapting to new demands that they had often helped to bring about, and dealing with a constantly changing political situation that inevitably affected them as the nation’s most significant business. Change had to be built into the system, and that, too, was unique. The very nature of the business was mobile.

  The vast number of people taken on by the railroads made them unwitting catalysts for the development of new patterns of industrial relations, stimulating the creation of mass labor organizations. The railroads were the first businesses to employ people in such numbers that the rigidity of the division between workers and management became entrenched. I
t was precisely because the railroads had far more sophisticated management techniques than other industries that it became possible for the two groups, management and labor, to bargain with one another. That transformed these mid-nineteenth-century railroads into the first modern corporations. The labor force was different, too. The men had a key advantage over their counterparts in other industries in that they had sellable skills that could not easily be replaced. The withdrawal of labor was a powerful weapon, and threats to strike were seen almost as a declaration of war. Strikes represented a real threat for companies with enormous fixed assets on which they needed to obtain a return in order to satisfy shareholders. Increasingly aware of their industrial muscle, railroad workers were among the first to form local unions and then, crucially, to expand these into national federations that “quickly became the most powerful and effective unions developed in the United States before the twentieth century.”20

  The first stirrings of labor organization occurred before the Civil War, but they were very local in scope and generally involved only a small number of skilled workers. In 1863, a Brotherhood of the Footboard, later becoming the Brotherhood of Locomotive Engineers, was formed in Michigan, and this was soon followed by similar brotherhoods representing railroad conductors and “locomotive firemen and enginemen.” These were still, however, not modern-style unions organized to put pressure on management to improve wages and conditions, but rather fraternal organizations providing mutual support and holding social events. Throughout the 1870s and 1880s, larger brotherhoods and craft unions began to emerge. Not surprisingly, the railroad companies were reluctant to recognize organized labor.

  However, the size of the railroad companies meant that it was not the owners who would make decisions about union recognition, but rather the new breed of professional managers who were employed to run these big corporations. Gradually, they realized that negotiating with the men was unavoidable. Attempts to hire unskilled “scabs” inevitably led to failure, since most railroad jobs required skills and experience. The managers were faced with uniquely powerful opponents who were further strengthened by their sheer numbers. It is hardly surprising that the railroads were fertile territory for union organization and, indeed, would become “the seedbed of the American labour movement.”21 The brotherhoods’ industrial and political strength meant that they could pioneer methods of collective bargaining, union organization, and grievance procedures that later would become universal across the labor movement. Railroad workers were able to exploit their skills by moving to rival railroads, often in the expectation of bettering themselves, even if by only a few cents an hour. This practice became so prevalent that those who drifted from job to job in this way became known as “boomers.”

  Railroad workers were involved in three major strikes in the last quarter of the nineteenth century, and although all of them were effectively defeats, these actions were an inspiration for the railroad workers to form strong unions. Labor relations were to be an Achilles’ heel for the industry. Having initially made too few concessions regarding working practices, the railroads’ vulnerability to industrial action led them at times to concede too readily to union demands. This would later result in significant levels of overstaffing, endless damaging disputes over job demarcations, and a lack of flexibility that would cost the railroad companies dearly.

  The railroad companies reacted to the first major strike, in 1877, which was in response to the imposition of wage reductions, with typical heavy-handedness. After a period of economic decline caused by the panic of 1873, several railroad companies had unilaterally cut wage levels, arguing that the reduction was necessary in order to maintain or reestablish profitability. Many found their action particularly galling, since it was the railroads’ overinvestment and borrowing that had been largely responsible for the 1873 crisis in the first place. The panic had been triggered by the collapse of Jay Cooke & Company, a bank that had loaned heavily to the Northern Pacific Railway but then found itself unable to sell the resulting bonds. It was, in fact, the culmination of years of overbuilding on the railroads, fueled by speculators. Collapse was inevitable. With the Crédit Mobilier scandal breaking at around the same time, all confidence in the banks was lost. Rather cheekily, Cornelius Vanderbilt suggested that the underlying problem was that government money had been wasted on “building railroads from nowhere to nowhere,” which, he said, was not a legitimate undertaking, although he insisted he remained a friend of the iron horse.22 The panic spread quickly, other banks went under, and a lengthy depression, the longest in American history to that date, set in. The railroads, hit by falling demand and with large fixed costs—railroads are asset-hungry behemoths that cannot easily cut spending when there is a downturn in the economy, which is why so many around the world have ended up in state hands—tried to reduce wages, one of the few areas of expenditure under their control. The workers, however, for the first time began to resist in a united show of force. The men on the Baltimore & Ohio, whose wages were already lower than those of their counterparts on other railroads at $3.00 per twelve-hour day for engineers and a mere $1.75 for brakemen, were the first to crack. In response to the second pay cut in a year, on July 14, 1877— coincidentally the anniversary of the French Revolution—workers began to prevent wagons from leaving the depot at Martinsburg, West Virginia, until the cut was revoked. The militia was sent in but refused to fire on the workers, and the strike soon spread to Cumberland, Maryland, where a serious battle between strikers, supported by many local people, and the militia resulted in ten rioters being killed. Soon workers on the Pennsylvania Railroad, which had also cut wages, and other railroad companies began to join in, often with considerable support from factory workers in other major industries such as steel and mining. Thomas Scott, the president of the Pennsylvania Railroad, inflamed matters by suggesting that strikers should be given “a rifle diet for a few days and see how they like that kind of bread.”23 Indeed, as the strike extended well beyond the rail industry, there were concerns among industrialists that it was the start of a revolutionary movement. With good reason. In Pittsburgh, the militia called in from Phila delphia killed twenty people as they sought to regain control of the streets, but this merely served to infuriate the mobs. When at least twenty thousand people took to the streets and destroyed large amounts of railroad property, including burning down the roundhouse and destroying a hundred locomotives, the guards could only stand and watch. In Harrisburg, Pennsylvania, the mobs were so strong that the military retreated and handed in their weapons to the strikers. There were major strikes and confrontations in Chicago and East St. Louis also, but the action petered out after a few weeks when President Rutherford Hayes sent federal troops from state to state to quell the protests. Although a few local brotherhoods were involved in the strike, for the most part it was a spontaneous uprising by workers, with railroad men leading the way.

  A precursor of the powerful rail unions that eventually emerged was the Knights of Labor, which flourished briefly in the 1870s and 1880s. The Knights led the second of these major struggles, the Great Southwest Railroad strike of 1886, which at its height saw two hundred thousand men withdraw their labor. The Knights were less concerned with the immediate terms and conditions of the workers, but rather sought to replace the wage system with cooperative enterprises—in the words of their leader, Terence Powderly, “to make each man his own employer.”24

  However, in March 1886, when one of their members in Texas was fired for attending a union meeting by the Texas & Pacific Railroad, owned by the railroad baron Jay Gould, the men walked out, and Powderly used the opportunity to demand a minimum wage of $1.50 and recognition of the union. Gould refused to make any concessions, and thousands of men on his other railroads, which included the Union Pacific and the Missouri Pacific, also walked out. Crucially, the Brotherhood of Engineers did not support the strike and kept working. Gould brought in strikebreakers and the well-organized Pinkerton thugs, boasting, “I can hire one half of t
he working class to kill the other half.” Violence escalated. The workers destroyed many railroad facilities and indulged in acts of sabotage—for example, letting locomotives run out of steam, thereby putting them out of operation for at least six hours. However, the workers were under fierce pressure, and the intimidation from the militia in several states, supported by gangs of thuggish Pinkerton men recruited by Gould, forced them back to work in the summer of 1886.

  The failure of these two strikes highlighted the difficulties of organizing railroad workers on a national scale. The unions were still in embryonic form and based locally, but this was changing rapidly. In the 1880s, union leaders sought to move away from the restrictive craft-based model of organizing and, instead, sought to create a single union that would represent all railroad workers. It was not an easy enterprise. The sheer variety of jobs carried out by railroad employees and their tendency to guard demarcation lines with as much determination as Davy Crockett defending the Alamo were almost insuperable barriers.

  Nevertheless, Eugene V. Debs, a founder of the brakemen’s national union and later an iconic figure in the annals of the American Left, formed the American Railway Union in June 1893. He emphasized that the union was open to all railroad workers and even those employed by suppliers such as repair shops and factories making parts. The union had an early success when it staged a walkout against the Great Northern Railway, persuading the normally obdurate James J. Hill to make substantial concessions. Within a year of the creation of the union, however, its members found themselves up against an even tougher opponent when it became enmeshed in the railroads’ most notorious industrial-relations battle of the century, the Pullman strike of 1894. Again, the trigger was an economic depression following the panic of 1893, which like the previous slump was the result of a combination of bank failures and overbuilding of railroad lines. Early in the year, the Philadelphia & Reading Railroad went bankrupt. Then, following a series of bank failures, three major railroad companies—the Northern Pacific Railway, the Union Pacific Railroad, and the Atchison, Topeka & Santa Fe Railroad—also went under in the last two months of 1893, starting a recession. The Pullman Company, which was dependent on the economic health of the railroad companies that hauled its cars, announced redundancies at its factory along with cuts to the remaining workers’ wages, claiming that these moves were necessary to maintain profitability. That was bad enough, but the workers were particularly angered by Pullman’s refusal to reduce rents on the houses in the company town where most of them lived. In May 1894, Pullman workers, who had formed an active American Railway Union local branch, started walking off the job, and soon 3,000 were on strike, bringing the works to a halt. They asked Debs, who was a cautious and conservative trade unionist, to support them, and, though reluctant, he had no choice but to throw the weight of the union behind them. The strike quickly became a national one, as railroad workers across the country refused to handle Pullman cars. Within four days an estimated 125,000 men on twenty-nine railroads had walked out in sympathy and refused to cross picket lines. They were emboldened by the growing Populist movement, with its demands for the national ownership of the utilities and railroads, which had reached its height at this point. Few of the Pullman Company’s large number of black on-board staff dared to strike, fearing they would lose their jobs because of discrimination, which gave a nasty racial edge to the dispute.