The early Nineteenth Century was a time of Westward expansion and Westward development. Thousands of prospectors and hopeful American businessmen flocked to the frontier with the intent of making their fortunes in this previously untouched area. It was not until the development of the railroads, however, that Westward expansion reached its furious pace. Once this new form of transportation was in place, it was no longer necessary for every settlement to be self-sufficient: It could simply "import" whatever it needed via the rail. This interconnectedness was extremely attractive to businessmen, who saw the opportunity to increase their wealth by exploiting the untapped resources of the West.
The developing railroads rapidly became huge businesses, imperative to the success of American enterprise. The material needs of the railroads helped create several other big industries, such as iron, steel, copper, glass, machine tools, and oil. Soon, Wall Street had to be reorganized into a national money market, capable of handling the enormous capital that was needed to build and operate the railroads. The result was a revolution in the organization and scale of enterprise: "Big business reached greater markets than were ever conceived of before and could benefit from the ability to raise vast amounts of capital that made possible the cost economies of large-scale production" (Chalmers).
The need for all of these industries to stay successful was worrisome for railroad owners. To avoid the loss of production in any of these areas, large corporations attempted to stabilize their situations by pooling markets and centralizing management. By combining all of the fields into one conglomeration, the railroads had a new power, as they acquired control of many facets of the new economy. This body now had the ability to "squeeze out competitors, force down prices paid for labor and raw materials, charge customers more… and get special favors and treatments from National and State government" (Chalmers). The railroads had all the power, because they controlled all the prices. Since the new residents of the West could not survive without the use of the railroads, they were forced to pay whatever rates the raildroad companies set.
With these huge stores of capital, the railroad companies were able to finance political campaigns through whatever and whomever was needed in government. With this control in Washington, there was no way to stop the overwhelming control of this industry over society. The entire nation was subject to the whims of this monopoly.
The effects on society were widespread and deeply influential in the way individuals carried out their lives. The most poignant example is effect railroad rates had on the Grange Movement. During the second half of the 19th Century, farmers increasingly relied on the railroads to transport their crops to the rest of the nation. These individuals were powerless to avoid the exorbitant rates of the railroad companies. The dominant analogy of the industry at the time was that of the Octopus. This beasts' tentacles control several different fields which feed on "the flesh of the yeoman farmer, diligent artisan, and honest merchant" (Chalmers).
Concerned about the growing power of railroad companies, the government decided to take action. In the case of Munn v. Illinois, the Supreme Court established the government's right to regulate businesses to protect public interest. The so-called granger laws that followed this decision held little weight, however. Railroads continued to control the entire industry. In response to the growing national discontent, the Interstate Commerce Commission was established (1887). This body of five individuals was created to hear complaints of individuals or individual businesses, and to ensure that the railroads maintained "just and reasonable" rates. It is obvious that this latter goal of the committee was intentionally vague. What does "just and reasonable" mean? Although vaguely defined, this was the first agency designed to regulate commerce and has since served as a prototype for several later agencies.
Though this initial legislation and controlling bodies were mainly ineffectual, the incredibly hazardous effects of monopolies were certainly realized. The actions of the railroad companies dictated how nearly every citizen in the West (and a majority in the East) performed their businesses and lived their lives. They were powerless to avoid this conglomeration (or conspiracy) of individual companies.
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