The building of railways more than kept pace with the growth of the population and the increase in manufacturing. There were 30,000 miles of lines in 1860; 52,000 in 1870; 166,000 in 1890; and 242,000 in 1910. Beginning at first with the construction of lines between strategic centers like Boston and Albany, and Philadelphia and Reading, the leaders in this new enterprise grew more bold. They pushed rapidly into the West where there were no cities of magnitude and no prospect of developing a profitable business within the immediate future. Capital flowed into the railways like water; European investors caught the fever; farmers and merchants along prospective lines bought stocks and bonds, expecting to reap a harvest from increased land values and business, only to find their paper valueless on account of preferred claims for construction; and the whole West was aflame with dreams of a new Eldorado to be created by transportation systems.

The era of feverish construction was shortly followed by the combination of lines and the formation of grand trunk railways and particular "systems." In 1869, Cornelius Vanderbilt united the Hudson River and New York Central lines, linking the metropolis and Buffalo, and four years later he opened the way to Chicago by leasing the Lake Shore Michigan and Southern. About the same time two other eastern companies, the Pennsylvania and Baltimore and Ohio secured western connections which let them into Chicago.

It must not be thought that this rapid railway expansion was due solely to private enterprise, for, as has been the standing custom in American politics, the cost of doubtful or profitless undertakings was thrown as far as possible upon the public treasury. Up to 1872, the Federal Government had granted in aid of railways 155,000,000 acres of land, an area estimated as "almost equal to the New England states, New York, and Pennsylvania combined; nineteen different states had voted sums aggregating two hundred million dollars for the same purpose; and municipalities and individuals had subscribed several hundred million dollars to help railway construction." To the Union Pacific concern alone the Federal Government had granted a free right of way through public lands, twenty sections of land with each mile of railway, and a loan up to fifty million dollars secured by a second mortgage on the company's property. The Northern Pacific obtained lands which a railway official estimated to be worth enough "to build the entire railroad to Puget Sound, to fit out a fleet of sailing vessels and steamers for the China and India trade and leave a surplus that would roll up into the millions." Cities, townships, counties, and states voted bonds to help build railways within their limits or granted rights of way and lands, in addition, with a lavish hand.

The chronicle of all the frauds connected with the manipulation of land grants to railways and the shameless sale of legal privileges cannot be written, because in most instances no tangible records have been left. Perhaps the most notorious of all was the Crédit Mobilier scandal connected with the Union Pacific. The leading stockholders in that company determined to secure for themselves a large portion of the profits of construction, which were enormous on account of the prodigal waste; and they organized a sham concern known as the Crédit Mobilier in which they had full control and to which the construction profits went. Inasmuch as the Federal Government through its grants and loans was an interested party that might interfere at any time, the concern, through its agent in Congress, Oakes Ames, a representative from Massachusetts, distributed generous blocks of stock to "approachable" Senators and Representatives. News of the transaction leaked out, and a congressional investigation in 1872 showed that a number of men of the highest standing, including Mr. Colfax, the Vice President, were deeply implicated. Nothing was done, however; the leading conspirator, Ames, was merely censured by the House, and the booty, for the most part, remained in the hands of those connected with the scandal. When the road was complete, "it was saddled with interest payments on $27,000,000 first mortgage bonds, $27,000,000 government bonds, $10,000,000 income bonds, $10,000,000 land grant bonds, and if anything were left, dividend payments on $36,000,000 of stock."

It would be easy to multiply figures showing astounding gains in industry, business, foreign trade, and railways; or to multiply stories of scandalous and unfair practices on the part of financiers, but we are not primarily concerned here with the technique of inventions or the history of promotion.[7] The student of social and political evolution is concerned rather with the effect of such material changes upon the structure of society, that is, with the rearrangements of classes and the development of new groups of interests, which are brought about by altered methods of gaining a livelihood and accumulating fortunes. It is this social transformation that changes the relation of the individual to the state and brings new forces to play in the struggle for political power. The social transformation which followed the Civil War embraced the following elements.

In the first place, capital, as contrasted with agriculture, increased enormously in amount and in political influence. Great pecuniary accumulations were thenceforward made largely in business enterprise—including the work of the entrepreneur, financier, speculator, and manipulator under that general term. Inevitably, the most energetic and the keenest minds were attracted by the dominant mode of money-making. Agricultural regions were drained of large numbers of strenuous and efficient men, who would otherwise have been their natural leaders in politics. To these were added the energetic immigrants from the Old World. That forceful, pushing, dominating section of society historically known as the "natural aristocracy" became the agents of capitalism. The scepter of power now passed definitively from the masters of slaves to the masters of "free laborers." The literary and professional dependents of the ruling groups naturally came to the defense of the new order.[8] The old contest between agrarianism and capitalism now took on a new vigor.[9]

On the side of the masses involved in the transition this economic revolution meant an increasing proportion of wage workers as contrasted with agriculturalists, owning and operating their farms, and with handicraftsmen. This increase is shown by the following table, giving the number of wage earners in manufacturing alone:

PopulationWage Earners
185023,191,876 957,059
186031,443,3211,311,246
187038,558,3712,053,996
188050,155,7832,732,595
189062,947,7144,251,535
190075,994,5755,306,143
191091,972,2666,615,046