How Government Railroad Grants Resulted In Widespread Corruption

The building of railroads in the 19th century United States brought opportunities for economic growth, but also opportunities for greed and corruption. If you’re short on time, here’s a quick answer: Massive government subsidies and land grants to railroad companies, with limited oversight, enabled railroad executives, politicians, and speculators to reap enormous profits through shady and fraudulent practices.

Background on Railroad Expansion

The expansion of railroads in the United States played a crucial role in the country’s development and economic growth. It revolutionized transportation and allowed for the efficient movement of goods and people across long distances.

However, this expansion was not without its controversies and instances of corruption.

Early Railroad Growth and Support

In the early 19th century, the construction of railroads was primarily funded by private investors. These investors recognized the potential profitability of connecting different regions and cities through a reliable transportation network.

The federal government, however, also played a significant role in supporting the growth of railroads.

One of the ways the government supported the expansion of railroads was through the granting of land to railroad companies. These land grants allowed companies to obtain large tracts of land along their proposed routes.

They could then sell or develop this land to generate revenue to fund the construction of the railroad. This support from the government helped accelerate the construction of railroads and encouraged private investment.

Pacific Railway Acts and Land Grants

The Pacific Railway Acts of 1862 and 1864 were landmark pieces of legislation that further fueled the expansion of railroads. These acts provided federal support for the construction of the First Transcontinental Railroad, which connected the eastern and western coasts of the United States.

Under these acts, the government provided substantial land grants and loans to the Union Pacific and Central Pacific railroad companies. The land grants amounted to millions of acres of public land, which the companies could sell to finance the construction of the railroad.

The loans, on the other hand, were repaid with interest by the companies once the railroad was operational.

While these grants and loans were intended to promote the growth of railroads and facilitate westward expansion, they also created fertile ground for corruption. Some railroad executives and government officials took advantage of the system to enrich themselves at the expense of the public.

It is important to note that not all railroad companies or individuals involved in the industry were corrupt. Many played by the rules and made significant contributions to the development of the nation’s transportation infrastructure.

However, the widespread availability of government grants and the potential for personal gain led to instances of bribery, fraud, and other forms of corruption.

For more information on the history of railroad expansion and its impact on American society, you can visit

Forms of Corruption and Fraud

Inflated Construction Costs and Pocketing Funds

One of the most prevalent forms of corruption resulting from government railroad grants was the inflation of construction costs and the subsequent pocketing of funds by dishonest individuals. This form of fraud involved contractors and government officials colluding to artificially increase the expenses associated with building railroads.

As a result, taxpayers’ money was siphoned off, and the actual construction costs were significantly higher than they should have been.

These inflated construction costs allowed those involved in the corruption to benefit financially. Contractors could charge exorbitant fees for their services, while government officials could receive kickbacks and bribes in exchange for awarding lucrative contracts.

This widespread fraudulent activity not only depleted public funds but also led to the construction of subpar railroads that were prone to safety issues and frequent breakdowns.

According to a report by the Transparency International, instances of inflated construction costs and pocketing funds were found in numerous government railroad projects across the country. The report highlighted the need for stricter oversight and accountability measures to prevent such corruption in the future.

Speculation and Profiteering on Railroad Land

Another form of corruption resulting from government railroad grants was the rampant speculation and profiteering on railroad land. When the government provided land grants to railroad companies, it was meant to facilitate the construction of railroads for the public’s benefit.

However, unscrupulous individuals took advantage of this opportunity to manipulate land prices and make substantial profits.

Speculators would acquire large plots of land along the proposed railroad routes, anticipating that the value of the land would skyrocket once the railroads were completed. They would then sell the land at inflated prices, often to the railroad companies themselves.

This practice not only led to financial losses for the government but also contributed to the monopolization of land by a few wealthy individuals.

The extent of speculation and profiteering on railroad land was so significant that it became a major concern for the government. According to a study conducted by the National Bureau of Economic Research, the manipulation of land prices resulted in significant economic distortions and hindered the equitable distribution of wealth.

Efforts were made to address this corruption, including the passage of laws to prevent land speculation and the establishment of regulatory bodies to oversee land transactions. Despite these measures, the legacy of corruption resulting from government railroad grants continues to have lasting effects on the country’s development and economy.

Key Players in Railroad Corruption

During the era of government railroad grants, there were several key players who contributed to the widespread corruption that plagued the industry. These individuals played a significant role in manipulating the system for their own personal gain.

Rail Executives and Financiers

Rail executives and financiers were instrumental in orchestrating corrupt practices within the railroad industry. They often colluded with politicians and lobbyists to secure lucrative government contracts and grants.

These individuals would bribe government officials, manipulate bidding processes, and engage in fraudulent practices to ensure they were awarded the contracts. This resulted in the misallocation of funds and subpar infrastructure development.

One prominent example of a corrupt rail executive was Thomas Durant, a financier and vice-president of the Union Pacific Railroad. Durant was involved in numerous scandals, including the Credit Mobilier scandal, where he and other executives used a construction company to siphon off government funds for personal gain.

This scandal exposed the deep-rooted corruption within the industry and led to public outrage.

Politicians and Lobbyists

Politicians and lobbyists were also key players in the railroad corruption of the time. They used their influence and connections to further their own interests and secure favorable legislation for the rail companies.

These individuals would accept bribes and kickbacks from rail executives and financiers in exchange for supporting legislation that benefited the industry.

One notorious example of a corrupt politician during this period was William “Boss” Tweed, the political boss of Tammany Hall in New York City. Tweed was heavily involved in the corrupt dealings of the railroad industry, accepting bribes from rail executives and using his political power to protect their interests.

His actions led to the misappropriation of public funds and a lack of accountability within the railroad sector.

It is important to note that not all rail executives, financiers, politicians, and lobbyists were involved in corruption. However, the actions of a few bad actors tarnished the reputation of the entire industry and highlighted the need for stricter regulations and oversight.

Impact on Native Americans and Western Development

The government railroad grants had a significant impact on both Native Americans and the development of the Western frontier. The construction and expansion of railroads often resulted in the displacement of Native American tribes from their ancestral lands.

This led to conflicts and clashes between settlers and Native Americans, further exacerbating tensions and leading to the loss of Native American lives and culture.

Additionally, the railroad grants played a major role in the rapid development of the Western frontier. The construction of railroads opened up previously inaccessible areas, allowing for the transportation of goods and people across vast distances.

This, in turn, spurred economic growth and attracted settlers to the region, leading to the establishment of new towns and cities.

Displacement of Native Americans

As railroads expanded across the West, Native American tribes were often forced to move from their traditional homelands. This displacement disrupted their way of life, as they relied on the land for sustenance, spiritual practices, and cultural traditions.

Many tribes faced violence and conflict as they resisted the encroachment of settlers and the loss of their territories.

One notable example of this is the Pacific Railroad Acts of the 1860s, which granted vast amounts of land to railroad companies for construction purposes. These grants often included land that was already inhabited by Native American tribes.

As a result, tribes such as the Sioux and Cheyenne were pushed off their lands and onto reservations, leading to further tension and hostility between Native Americans and the United States government.

Economic Growth and Settlement

Despite the negative impact on Native Americans, the government railroad grants played a crucial role in the development of the Western frontier. The railroads facilitated the transportation of goods, enabling farmers, ranchers, and miners to access new markets and expand their operations.

This led to a boom in agricultural production, mining activities, and the establishment of new industries.

The construction of railroads also attracted a wave of settlers to the West, seeking opportunities for land ownership and economic prosperity. Towns and cities sprung up along the railroad lines, creating vibrant communities and contributing to the overall growth and development of the region.

The railroad grants acted as a catalyst for the expansion of the American frontier, transforming it from a sparsely populated wilderness to a thriving and interconnected region.

Reforms and Changes

As investigations into the government railroad grants unfolded, the widespread corruption and abuses became apparent. The public was outraged by the blatant misuse of funds and the lack of accountability within the system.

This led to a push for reforms and changes to prevent such abuses from happening again in the future.

Investigations Expose Railroad Abuses

Investigations into the government railroad grants revealed a staggering amount of corruption and fraud. It was discovered that some government officials had accepted bribes from railroad companies in exchange for favorable treatment in the grant process.

This not only undermined the integrity of the grants but also resulted in the construction of subpar railroads that were unable to meet the needs of the public.

Furthermore, it was found that some railroad companies had been inflating their costs and pocketing the excess money. This not only wasted taxpayer dollars but also hindered the development of efficient and reliable railroads.

The investigations shed light on the extent of the corruption and the urgent need for reforms in the system.

Strengthening Government Accountability and Oversight

In response to the revelations of corruption, steps were taken to strengthen government accountability and oversight. The government implemented stricter rules and regulations for the grant process, ensuring that it was transparent and fair.

This included the establishment of independent committees to review and evaluate grant applications, as well as the introduction of stricter penalties for those found guilty of corruption.

Additionally, efforts were made to enhance the monitoring and auditing of railroad projects. This involved the creation of specialized teams tasked with regularly inspecting the construction and maintenance of railroads to ensure quality and adherence to safety standards.

By increasing accountability and oversight, the government aimed to prevent further abuses and ensure that taxpayer money was being used effectively.

Reforms also focused on promoting competition and preventing monopolies within the railroad industry. The government introduced measures to encourage the entry of new players into the market and to prevent existing companies from dominating the industry.

This not only fostered innovation and efficiency but also provided consumers with more options and better services.


The corruption and profiteering that occurred during railroad expansion left a mixed legacy. While railroads connected the country and enabled Western growth, their development came at the cost of exploited taxpayers, shareholders, and Native American communities.

The reforms eventually put in place reined in some of the worst abuses and paved the way for more accountable governance of infrastructure projects that serve the public interest.

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