Infrastructure Spending

Railroads are ferociously expensive to build. It costs as much to construct a single mile of railroad as it does to build even the largest factory. A single mile. The transcontinental railroad is 2,000 miles long.

During the early years, most railroads are fairly short, often only connecting a pair of cities within the same state. Money for such short railroads can be raised the normal way, by pooling local wealth.

Clearly, building a railway across to California will require government help. The government has already supported lesser projects, like canals and bridges. Now, it grants vast tracts of public land to railroad companies.
Government railroad land grants, 1870s map

  Government Sponsorship
Every state wants railroads, because they stimulate business. Starting in 1850, Congress hits upon the scheme of supporting railway growth by giving free land to anyone willing to build a railroad in the sprawling Midwest, or even the South. RED highlights on the map show land granted to railroad companies by 1870.

Rail Stops Become Towns, 1870s map

  Rail Stops Become Towns
The map above (part of Kansas) shows that towns often sprout at new railway stops. Land grants typically include half of the land (displayed as GREEN squares in the checkerboard pattern), in a 10-mile-wide band extending to each side of the railroad. This gives the companies free land, which they can then sell to settlers, to help cover construction costs. The railroad thus acts as a land agent to lure settlers (see poster). This trades vacant land for increased settlement, which boosts land values.


Homestead Act, 1862-1890 map

  Land to the People
Railroad land grants continue a long-standing government policy of encouraging development of unsettled land. Beginning in 1820, small plots of remote government land were sold to the public for $1 per acre. In the 1860s, when Congress is awarding land grants for the transcontinental railroad, it passes the Homestead Act at the same time. This gives settlers a quarter-mile-square parcel of land for a flat $15. Many of the 'blank' squares in the checkerboard pattern of railroad grants are awarded this way.