How Did Railroads Contribute to the Growth of Cities?

For over 200 years, the railroad systems throughout America have impacted the country’s economy and everyday life. What many do not realize is how critical the development of railroads was to the growth of cities, including many of the major cities we still see today. In fact, railroads continue to be one of the biggest employers today and impact the economy each year. 

The growth of railroads throughout history has facilitated the growth of cities, leading to improved quality of life in many areas. A major contributor to city growth was the development of transcontinental railroads which linked America and cities popped up along this railroad. 

Railroads today continue to help our economic growth by creating jobs, increasing international trades, and offering lower freight costs. However, to best understand how these railroads impacted cities, we need to discuss the history of our modern railroad systems. To learn more about the impact of railroads and how they continue to be important today, keep reading. 

freight railroads growth of cities
Todd and Jack Humphrey

How Railroads Led to City and Economic Growth 

Upon completion of the transcontinental railroads, America began a new surge of economic growth. These railroads allowed people to reach each other in new ways. They increased travel and grew cities exponentially. 

One of the biggest reasons that cities began to grow throughout the country and not just out west, is because travel became much simpler. Individuals who wanted to move to new areas could simply hop on a train and be there, versus taking weeks on a stagecoach. There was an overall increase in mailing abilities, commerce abilities, and traveling.

What Were Railroad Towns?

A major impact of the growth of railroads was the advancement of railroad towns. These were towns that popped up along the routes that the railroad tracks were passing through. During the growth of the transcontinental railroad, these towns were simple tents and makeshift establishments. These cities would pop up as travelers began moving westward and goods were needed along the railroad route. 

However, many of the towns continued to grow and some are still around today and are major cities across the United States. Over time, the makeshift railroads grew into larger cities with more concrete establishments. These cities could more easily transport their goods to other areas around the country by being near train stations.

Some railroad towns were created by the railroad themselves as somewhat of a marketing technique and would help drive populations to their railroad stops, helping make them money. They would create towns near already existing cities and the population would eventually shift into the railroad town as they were more economically sound.

santa fe growth of railroads
The Santa Fe Kansas City Chief Waits to Depart Dearborn Station in Chicago
Roger Puta photo, Marty Bernard Collection

This would increase economic growth in the area and would make the railroad money, as many living there would begin utilizing the railroad for travel and freight purposes. Since these towns were along the railroad tracks, they could easily access goods from the trains. This allowed the cities to grow even further, as they were able to transport goods to surrounding areas and make money. 

Over time, these cities became vital parts of the area and the nation. Some still existing railroad towns that have grown into major cities today are:

  • Chicago
  • Los Angeles
  • Atlanta 
  • Birmingham
  • Fresno
  • Sacramento
  • Denver
  • Baltimore
  • Kansas City
  • St. Louis
  • Las Vegas
  • Albany
  • New York City
  • Portland
  • Chattanooga 

Economic Benefits of Railroad Cities

While the cities themselves become large parts of our country even today, the economic impact of these cities was vital at the time. Many moved to the areas because they offered opportunities that were once impossible, especially for those who moved to new territories. For the first time, many were able to purchase goods from other areas and businesses could transport their goods more easily. 

Here’s some of the many economic benefits of railroads that helped grow these railway cities.

It Lowered Business Costs 

Railroads allowed for goods to be transported at much lower rates, which led to lowered business costs. In fact, the railroad had a larger technological impact than many modern advancements today. With the advancement of railroads, the costs to transport goods became exponentially cheaper.

The theory of comparative advantage describes this, explaining how the costs of transporting materials via railroads was far cheaper than previous methods. With practically no transportation costs of their goods, businesses were able to profit substantially. Also, companies were able to transport their raw materials more easily and from less expensive sources.

railroad growth up challenger
UP Challenger 3985 charges through Colton, Ca in 1994
Craig Walker photo

It Created New Markets

Railroads allowed businesses and individuals to be more particular about where they received their goods and services from. They were able to transport items more effectively and from areas that were further away. For example, areas nowhere near water could now get fresh seafood within days. 

In addition to creating new pathways to goods, the railroads also created new markets entirely. Prior to the growth of railroads, there was not much travel for leisure purposes. However, railroads opened an entirely new opportunity for tourism which led to growth in many cities.

It Increased Living Standards Across the Country

Due to this economic growth and increased ability to achieve goods, the living standard around the country increased dramatically. The costs of living decreased greatly through lowered food and goods costs. Those living around the country were able to get items that were once not available for costs that did not break their budgets. 

In addition to offering new items and making it easier to obtain goods, the railroads also opened new business opportunities for people. Before railroads spread across the country, most people lived within walking distance of their workplace. This means that many were subjected to work in less than ideal conditions and for less money than they deserved. 

However, with the increase in railroads, many were able to begin using railroads as transportation to new workplaces. This allowed people to find jobs that were safer and offered higher pay, increasing their overall standard of living. This also drove many to the cities because they were able to find better work in these areas. 

SP railroad growth of cities
Southern Pacific 2472 heads through Refugio State Beach, Ca in 1992.
Craig Walker photo

The Impact of the Transcontinental Railroad

One of the most notable and influential advancements in the railroad industry was the development of the transcontinental railroad. As mentioned previously, this was a railroad that linked the East Coast to the West Coast. The first transcontinental railroad also inspired the expansion of railroads across the country and led to additional similar designs that linked other areas of the country, creating an extensive railroad system that is still used today. 

The original transcontinental railroad was created by joining together the tracks of the Union Pacific Railroad and Central Pacific Railroad in Promontory, Utah. This opened up the ability for trains to travel from New York to San Francisco in only a week’s time, something once impossible. The railroad utilized 21,000 workers, cost around $60 million, and consisted of 1,776 miles of track being laid. 

Some of the many impacts of this original transcontinental railroad on cities at the time were:

Increased Western Importance 

Upon first expanding westward, this land was highly unknown and was not being utilized as fully as other American owned land as it was difficult to travel to and required a long stagecoach ride.

transcontinental railroad growth of cities
Workers gather at Promontory Point, Utah, the site of the completion of the first transcontinental railroad

However, the expansion of railroad systems allowed for areas like California, to become larger economic forces that are still notable today. This led to quicker growth and higher importance for western locations and allowed more Americans to travel to the area. 

Travel Costs Were Lowered 

Previously, going west required a lot more preparation and often much more money than what a later train ride would cost. However, the costs of this same trip dropped by 85 percent when the transcontinental railroad was completed.

This allowed for not only more individuals to move western but also allowed for cheaper travel to new areas for recreational or business purposes.

It Created New Cities

One of the biggest changes that came with the completion of the transcontinental railroad is that new cities were created. These were designed to be stops along the way for the trains, such as water stops, depots, and more.

Though some of these cities dissipated over time, many are still around today and continued to grow due to railroad passengers settling in these areas. 

Commerce Became Possible on a Larger Scale

Reaching the west with goods and bringing goods back was nearly impossible prior to the transcontinental railroad and was done on a much smaller scale. However, with the creation of the transcontinental railroad, goods could be transported on a much, much larger scale.

In addition, it allowed for growth in these new cities as they could send goods back to the eastern part of the country. 

growth of railroads and cities
Ben Sutton Photo

Mail Order Catalogs Were Created 

Prior to the creation of the transcontinental railroads, those living in western cities had to create much of their wardrobes, home décor, and other items on their own with the limited supplies available.

However, this new ability to transfer goods allowed for mail-order catalogs to be created, which allowed individuals living in the west to order the newest fashions. These goods could be transported to them via the railroad and allow them to order from stores that had not yet made their way into these newer territories. 

Led to More Government Financed Business Ventures 

Since the transcontinental railroad was created using mainly government grants and loans, this opened up the influx of government-financed businesses. In fact, many of the companies who utilized this money during the railroad’s construction did not have the financial means to do so on their own, and in turn, did not pay back these loans upon completion.

Upon seeing this, many companies followed a similar pattern and used government money to create new businesses. 

Metra growth of railroad and cities
Matt Spencer Photo

A Brief History of Railroads in America

While it may be hard to imagine a world without railroads, they were once just a construct that had yet to come to life. Before we jump into the ways that railroads benefited the economy and growth of cities, we will discuss how railroads emerged in America today. Starting from the beginning, some of the notable moments in the development of railroads are:

  • 1812Colonel John Stevens first created the concept of a railroad in the United State. He wrote this plan out using the idea of horse-drawn cars that ran on tracks, the goal of these cars was to haul freight. The first of these carts was created in 1826 and was the Granite Railway of Massachusetts. 
  • 1827 – The first railroad that carried passengers and freight was created. This was the Baltimore and Ohio railroad. 
  • 1830 – On Christmas Day, the South Carolina Canal and Railroad company designed the first modern railroad system. This was a mechanical passenger train that was a major turning point in railroad design. 
  • 1830 to 1835 – Within this five-year time span, dozens of railroads began popping up around the country. These were very small railroad tracks, only a few miles each. However, this was when the interest in railroads skyrocketed and dreams of larger systems grew. 
  • 1850 – The New York Central Railroad Company was formed. This began merging a dozen smaller railroads and created a single company that expanded the railroad systems. 
  • 1857 – The federal government began issuing land grants to Illinois. This was to encourage the construction of the Illinois Central railroad. This created one of the largest companies in the nation at the time. 
  • 1869 – There was a dip in railroad construction during the Civil War, but this time of war showed Americans the importance of railroads and the ability to transport goods. After the war, the first transcontinental railroad was constructed. The railroad met in Promontory Point, Utah on May 10th of that year.
  • 1900 – Due to the success of the first transcontinental railroad, the federal government issued more land grants and the construction of railroads increased even further. By the early 1900s, there were four more transcontinental railroads connected. This gave the country a vast expansion of railroad options and drastically encouraged city growth.

What are the Impacts of Railroads Today?

For many, railroads seem like a thing of the past, but they are still very beneficial today. While most do not use railroads for transportation purposes, they are still very important for transporting goods and materials. In fact, railroads significantly contribute to our economy each year.

Some of the many ways that railroads are still important to cities and our economy today are:

They Offer Job Opportunities 

There are around 140,000 railroad employees in America today and it continues to be one of the largest job opportunities in the country. In addition to active railway workers, there are thousands who are paid retirement each year due to past railroad work. In fact, this is a higher paying job for many areas and is a great employment option. 

NYC growth of railroads
The New York Central was instrumental in the growth of railroads with their famous “Water Level Route”.
Roger Puta photo, Marty Bernard collection

They Actually Save Citizen’s Money

Most roadways and highways are paid for by the government, which means a large amount of taxes go to these projects each year and costs citizens money. However, railroads are often paid for by the company themselves and utilize cars, tracks, and infrastructure they pay to maintain. If the freight that was hauled via railroad was hauled on highways, it would cost taxpayers millions more each year

Increase International Trade 

Railroads help Americans continue being competitive and actually help increase international trade abilities. Close to half of the international trade completed in the U.S. today is done through railroads and at a lowered cost than other trade sources. Overall, freight railroads help save America money while also allowing us to trade with nearby countries.

Create Lowered Shipment Costs 

While there are several options for shipping goods today, the railroad continues to be one of the lowest costing options available today. For companies that need to send a large amount of freight, railroads are far less expensive than other transportation methods. Though the economic impact of railroads has come to light in recent years, they still serve as a quality way to transport materials at a low cost. 

Washigton DC growth of railroads
Penn Central GG1 4879 leads the “Crescent” at Washington Union Station in 1976.
Drew Jacksich Photo

Railroads Led to Vast Economic Growth 

As railroads began to spread across the country, cities popped up along these railroads, which has led to some of the biggest cities in the country still today. A major reason why these cities began to grow is because of the positive economic impact of the railroads themselves, which allowed those living in these areas the ability to transport goods in new ways

The railroads helped link the sides of the country together, allowing goods to be transported across the country. Railroads are responsible for increasing the quality of life throughout the country and made it much easier for the country to expand as travel was far simpler than stagecoach days. 

Today, railroads still positively impact the economy, and many companies utilize railroads for inexpensive transportation costs. While today we have far more options for transportation, railroads continue to prove beneficial in the modern world.


Lifelong Rail Enthusiast and Owner of Worldwide Rails

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