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The Railroad Barons: Vanderbilt, Stanford, Hill, and the Great American Fortunes

The railroad barons were the great entrepreneurs who built the American railroad system in the late nineteenth century and amassed some of the largest fortunes in American history. Cornelius Vanderbilt, Leland Stanford, Collis Potter Huntington, James J. Hill, and others transformed the American economy by creating a national railroad network, and the public reaction to their rate-setting, land grants, and labor practices produced the Granger laws of the 1870s, the Interstate Commerce Act of 1887, and the Hepburn Act of 1906. Vanderbilt alone was worth more than $100 million at his death in 1877, more than the entire United States federal budget of 1865.

The Age of the Railroad Barons

The era of the railroad barons, which lasted from about 1865 to about 1900, was one of the most dramatic periods in the history of American capitalism. The railroad barons built a national railroad network, created some of the first modern American corporations, and accumulated some of the largest fortunes ever seen in the United States. At the same time, they were widely criticized for their ruthless business practices, their corruption of the political process, and their accumulation of unprecedented economic power.

The railroad barons were not a homogeneous group. They came from different backgrounds, operated in different regions, and pursued different business strategies. Some, like Cornelius Vanderbilt, were primarily transportation entrepreneurs who saw the railroad as a way to expand their existing businesses. Others, like Leland Stanford and the other leaders of the Central Pacific, were primarily business and political leaders who saw the railroad as a way to build their reputations and fortunes. Still others, like James J. Hill, were primarily railroad men who saw the railroad as a way to build a great business empire.

Cornelius Vanderbilt and the New York Central

Cornelius Vanderbilt (1794-1877) was one of the first great American railroad magnates. He began his career as a ferryman in New York Harbor, and he built a fortune in the steamship business before turning to the railroad in the 1850s. Vanderbilt acquired the New York and Harlem Railroad in 1863, and he soon added the Hudson River Railroad and the New York Central Railroad to his empire.

Vanderbilt’s railroad empire, based in New York City, was the largest in the country. He was known for his aggressive business tactics, his willingness to crush his competitors, and his disdain for what he called “public be damned” attitude toward the public interest. Vanderbilt was also known for his ruthless treatment of his workers, and he was one of the first major employers to break strikes by hiring strikebreakers.

Vanderbilt’s descendants, including William Henry Vanderbilt and Cornelius Vanderbilt II, continued to manage the railroad empire after his death. The Vanderbilt fortune, which was at one time the largest in the United States, supported a dynasty that became one of the most prominent in American social and cultural life.

The Big Four of the Central Pacific

The “Big Four” of the Central Pacific Railroad were Leland Stanford, Collis Potter Huntington, Mark Hopkins, and Charles Crocker. The four men had been successful merchants in California before the Civil War, and they came together to build the Central Pacific in the 1860s.

The Big Four were known for their aggressive business tactics, their corruption of the political process, and their exploitation of Chinese workers. They used the land grants they received from the federal government to build a vast business empire that included the railroad, steamship lines, real estate, and other businesses. The article on the transcontinental railroad describes the construction of the railroad in more detail.

Leland Stanford (1824-1893) became the most prominent of the Big Four, serving as governor of California and as a U.S. senator. He is also remembered for founding Stanford University in memory of his son, who died young. The other members of the Big Four, including Collis Potter Huntington (1821-1900), Mark Hopkins (1813-1878), and Charles Crocker (1822-1888), also accumulated large fortunes, much of which was used to support their families’ philanthropic and political activities.

James J. Hill and the Great Northern

James J. Hill (1838-1916) was the builder of the Great Northern Railway, the only transcontinental railroad to be built without federal land grants. Hill began his career in the steamboat business in Minnesota, and he turned to the railroad in the 1870s. Working with a group of Canadian investors, he built the Great Northern from St. Paul, Minnesota, to Seattle, Washington, completing the route in 1893.

Hill was known for his more cautious and more responsible approach to railroad management. He avoided the speculative practices of many of his competitors, and he was known for treating his workers better than most other railroad barons. He also believed in building the railroad for the long term, with high-quality tracks and well-maintained equipment, rather than for short-term profit.

Hill’s Great Northern was profitable from the start, and it became one of the most successful railroads in the country. Hill also built a network of related businesses, including steamship lines, mining companies, and agricultural operations. He was a major figure in the development of the American Northwest, and he helped to establish the region as a major economic area.

The Railroad Barons and the Public Interest

The railroad barons were widely criticized in their own time, and they have been criticized by historians ever since, for their ruthless business practices, their corruption of the political process, and their accumulation of unprecedented economic power. The era of the railroad barons was the era of the great American fortunes, and the disparity between the wealth of the barons and the poverty of many of their workers was a major source of social tension.

The railroad barons were also the target of a number of important reform movements, including the Granger movement, the Interstate Commerce Act of 1887, and the Hepburn Act of 1906. These reforms were aimed at regulating the railroads, preventing the most abusive practices, and protecting the public interest. The article on the causes of the Industrial Revolution describes the institutional context of these developments.

Despite their abuses, the railroad barons also made important contributions to the American economy. The railroads they built tied the country together, opened up the West to settlement, and helped to create a national market for goods. The railroad barons were also among the first modern American capitalists, and their careers established the model of the great American business leader that has been imitated by industrialists, financiers, and entrepreneurs ever since.

The Legacy of the Railroad Barons

The railroad barons were among the most important figures in the history of American capitalism. The railroads they built transformed the country, and the fortunes they accumulated supported a wide range of philanthropic and cultural activities. The Vanderbilt family supported the development of Vanderbilt University and the construction of Grand Central Depot in New York; the Stanford family founded Stanford University in 1885 in memory of Leland Stanford Jr.; and the Hill family established the James J. Hill Reference Library in St. Paul.

The railroad barons also established a model of American business leadership that has been imitated by industrialists, financiers, and entrepreneurs ever since. The combination of aggressive business tactics, close relationships with government, and aggressive pursuit of profit became the standard for American business in the late nineteenth and early twentieth centuries, and it remained influential for much of the twentieth century.

The Continuing Question

The unresolved question about the railroad barons is whether they were builders or wreckers. The traditional answer, going back to Charles Adams’s A Chapter of Erie (1871) and Ida Tarbell’s History of the Standard Oil Company (1904), and given its modern form in the work of Richard White’s Railroaded (2011), is closer to the second: the railroad barons were rapacious monopolists who corrupted politics, exploited farmers and shippers, and produced some of the great financial scandals of the 19th century (Erie, Crédit Mobilier, the 1893 panic). The revisionist answer, developed in Alfred Chandler’s The Visible Hand (1977) and given a more nuanced form in the work of economic historian Robert Fogel, is closer to the first: the railroad barons were the builders of the first modern corporations, the developers of the managerial hierarchies and financial instruments that defined 20th-century American capitalism, and the creators of the national market that the U.S. economy needed to grow. The interesting current question, raised in the work of business historian Naomi Lamoreaux and developed in the recent literature on the comparative history of American and European industrial capitalism, is whether the railroad barons’ combination of corruption and corporate-building was net positive (because the U.S. economy got the national market and the modern corporation), net negative (because the corruption and the monopoly power had lasting effects on American political economy), or a mixed case that depends on which dimension one is looking at. The honest answer, given the historical evidence, is probably: a mixed case, with the modern corporation as a clear positive, the monopoly power and the political corruption as a clear negative, and the railroad network itself as a public good that the U.S. economy would have eventually needed in some form or another.

Selected Sources

  • Alfred D. Chandler Jr., The Visible Hand: The Managerial Revolution in American Business (Harvard University Press, 1977)
  • Maury Klein, Union Pacific: The Birth of a Railroad, 1862–1893 (Doubleday, 1987)
  • Jean Strouse, Morgan: American Financier (Random House, 1999)
  • Richard White, Railroaded: The Transcontinentals and the Making of Modern America (W. W. Norton, 2011)

For more on the development of the American railroad, see the transcontinental railroad and railroads in America.