During the 1840’s, the US was still a nation of small farmers with barely any manufacturing. That situation changed, however, with the Civil War in 1861. The huge armies involved in the war required a massive amount of weapons, clothing, supplies and other manufactured goods, and spurred a rapid growth in American manufacturing capacity. And one industry that grew spectacularly and played a major part in the war was the railroads, largely due to one man—Thomas Scott.
Union Army railroad locomotive, 1863. Photo from Wiki Commons
In the 1850’s, Scott was the brains behind the Pennsylvania Railroad. When the Civil War began, he was appointed by President Lincoln as Assistant Secretary of War, and took over the task of organizing the railroads to move Union troops and supplies. The Union had a huge advantage in this area: the industrial North had four-fifths of all manufacturing capacity in the United States and two-thirds of its railroad miles, while the agricultural South only had one factory capable of making or repairing railroad tracks.
Despite this material advantage, it was the Confederates who first realized the utility of railroads in rapidly moving large armies. In the First Battle of Bull Run, a Union force under General Irvin McDowell advanced towards the town of Manassas, Virginia, hoping to move on to Richmond and end the war quickly. Instead, McDowell’s forces were stopped by a Confederate force made up of troops under Generals Pierre Beauregard, Joseph Johnston and Stonewall Jackson, who used trains to move their troops quickly into the railroad station at Manassas, and defeated the Union forces at the First Battle of Bull Run.
In June 1862, the US government passed the Railway and Telegraph Emergency Act, authorizing the Army to seize railroads and telegraph systems as needed for wartime use. Under Scott’s direction, the commandeered railroads were organized into the United States Military Railroad, which came just in time to help deliver large numbers of troops rapidly to the area around Gettysburg, Pennsylvania, to defeat General Robert E Lee’s attempt to invade the North.
Railroads quickly became vital parts of both sides’ supply networks, and were targeted by both sides in raids to capture or destroy them. With its superior industrial ability and under the capable direction of Thomas Scott, the North quickly gained the advantage. When General William T Sherman took his Army through the heart of the South in the “March to the Sea”, he tore up and destroyed the tracks supplying the South’s armies; these rails were unbolted, heated in a fire, and bent around a tree (known as “Sherman’s Bowties”). And in the final stages of the war, during the sieges at Petersburg and Richmond, Scott constructed an entire railroad station for General Ulysses Grant to allow the US Military Railroad to deliver the supplies he needed. Scott’s skillful use of rail transportation played an important part in winning the Civil War.
But Scott had another indirect legacy. After the war, his experience as wartime railroad manager also convinced him that a nationwide rail network, connecting the entire continent together, was a vital national interest. And now, as the manager of the Pennsylvania Railroad Company, he was determined to control as much of it as possible. His initial plans called for a span of railroad tracks running down the East Coast and then across the South to the West Coast. As a Federal officer who had helped win the Civil War, however, Scott’s name was hated in the South, and he knew he could never openly buy any railroad companies in the former Confederacy.
Scott’s solution to this problem was simple; he lobbied the Pennsylvania state legislature to allow his company to do what no other corporation in the country was allowed to do under the law—buy and own stock in another corporation. Using this weapon, Scott set up a “holding company” whose sole purpose was to buy a controlling share of stock in smaller railroad companies across the country, allowing Scott to build railroad lines all over the South. In one stroke, Scott had pioneered the tools that would allow the future growth of the national railroad corporation–and the stockholding corporation structure which would dominate the US economy and politics for the next half century.