In 1874 the Baltimore and Ohio, under the management of John W. Garrett, extended its system to Chicago, and became a competitor of the two older lines in the transportation of through freight. At about the same time two other parallel trunk lines were developed, the Grand Trunk on the north, and the Erie, between the Lake Shore and Pennsylvania lines. There were, therefore, in 1874 five rival trunk lines competing for the business between the West and the seaboard.
During the same period large rival lines developed west of Chicago and St. Louis. From the former city radiate the St. Paul and Northwestern systems, each with from 6,000 to 8,000 miles; the Atchison, Topeka and Santa Fe with over 9,000 miles; then the Rock Island, the Chicago, Burlington and Quincy, the Illinois Central, the Chicago Great-Western, and the Chicago and Alton, their systems ranging from 1,000 to 6,000 miles in extent. From St. Louis radiate the various branches of the Missouri Pacific and the closely allied Wabash system, controlling together some 10,000 miles of road.
This process of consolidation also went on in the Southern States, though to a less extent. Their systems do not run parallel, like the trunk lines, nor do they radiate from a common center, like the roads of the Northwest, but they radiate from the principal ports of the Atlantic and the Gulf of Mexico toward the interior.
We now enter upon the third period of the history of American railroads, the period of combinations. During the time of great activity in railroad construction following the War of the Rebellion many abuses in railroad management had been developed, which caused general complaint and led to what is known as the Granger movement. Laws were demanded, especially in the agricultural States of the West, which should regulate the rates, methods of operation, and the political relations of the railroads. The friends of this movement were successful in the political contests that followed, and Granger legislatures were elected in the States of Illinois, Wisconsin, Iowa and Minnesota. Laws were passed fixing the rates on different classes of roads and providing penalties for their violation. The companies contested these acts in the courts, but were defeated at every step, until in 1877 the Supreme Court of the United States sustained the constitutionality of the Granger laws. In the meantime railroad managers tried their utmost to render, by shrewd manipulation, these laws obnoxious, and they finally succeeded in having them repealed or so amended as to render them largely ineffectual.
It was the principal object of the Granger movement to do away with the many discriminating tariffs which so injuriously affected local points. It is true, discriminations between individuals were practiced at business centers, but rates upon the whole were low at such points as compared with those which obtained at local stations. While the Granger contest was still going on in the West, a new evil developed in the East, which became characteristic of the period and finally grew into one of the most intolerable abuses of railroad management. Railroad men had gradually learned that it was in their power to maintain high rates at competitive as well as at non-competitive points, provided all the roads centering at such points could be induced to coöperate, or rather to conspire for that purpose. The final solution of the problem was, after some experimentation, found in the device to control the prices of transportation generally known as the pool. It is doubtful whether any contrivance connected with railroad management ever threatened to subvert long-established principles of the common law more completely than this. Within a few years it extended its dominion over the whole country, exacting a heavy tribute from its commerce, until the people's patience finally became exhausted and their determined demand for railroad reform led to the enactment of the Interstate Commerce Act in 1887.
When this act passed, dire results were predicted by nearly every railroad man in the country. Prophecies were freely made that it would ruin half of the roads and seriously cripple and sadly interfere with the usefulness of the other half, that it would derange the business of the country, greatly depreciate all railroad securities and put an end to railroad construction. Nearly seven years have passed since the adoption of the law, but not one of these prophecies has come to pass. There are at present probably less bankrupt roads in the United States than there have been at any time for twenty years, our business interests have been improved, the securities of honestly managed roads are in better repute than they were previous to the passage of the law, and the railroad mileage of the country is increasing at the rate of about 6,000 miles a year. If any branch of business has suffered in consequence of the enactment of the law, it is the branch monopolized by Wall Street. Since 1885, the time when the Interstate Commerce Bill was first seriously agitated, the aggregate of railroad securities has increased nearly $2,500,000,000, or about one-third. This certainly does not look as if capital had been seriously frightened by the Interstate Commerce Act. There are other proofs of railroad prosperity. In 1885 the gross earnings of the railroads of the United States were $772,568,833, or 9.9 per cent. on their reported capital. In 1886 their gross earnings were $829,940,836, or 10.2 per cent. on the reported railroad capital. In 1890 the gross earnings had increased to $1,097,847,428, and equaled 10.8 per cent. on the reported capital. This includes even the capitalization of new lines and others not reporting operations. Mr. Poor gives the reported cost of the lines actually operated as $8,519,670,421, against $10,122,635,900 reported cost of all the railroads built. Omitting from the computation the lines not reporting operations, the gross earnings of the roads actually operated equaled 12.7 per cent. and their net earnings 4 per cent. on the actual cost of the lines which reported. The gross earnings for 1891 were $1,138,024,459, and for the year ending June 30, 1892, $1,222,711,698.
The gross earnings per mile have increased from $6,265 in 1885, and $6,570 in 1886, to $6,946 in 1890, and $7,409 in 1892. In 1885 the capitalization per mile of road was $55,059 and the net earnings per mile were $2,185. In 1890 the capitalization per mile had decreased to $53,783, while the net earnings per mile increased to $2,195. The railroad mileage of the country has grown from 128,361 in 1885 to 166,817 in 1890, to 170,601 in 1891, and to 175,000 in 1892.
The railroad system of the United States has had a phenomenal growth, especially since 1870, since which time nearly 120,000 miles of road, or more than two-thirds of the total mileage, have been constructed. The table below shows the number of miles of railroad constructed and in operation, by quinquennial periods from 1830 to the close of 1890, inclusive:
| YEAR. | MILES IN OPERATION. | INCREASE. |
| 1830 | 23 | |
| 1835 | 1,098 | 1,075 |
| 1840 | 2,818 | 1,720 |
| 1845 | 4,633 | 1,815 |
| 1850 | 9,021 | 4,388 |
| 1855 | 18,374 | 9,353 |
| 1860 | 30,626 | 12,252 |
| 1865 | 35,085 | 4,459 |
| 1870 | 52,922 | 17,837 |
| 1875 | 74,096 | 21,174 |
| 1880 | 93,296 | 19,200 |
| 1885 | 128,361 | 35,065 |
| 1890 | 166,817 | 38,456 |
It will be noticed that in the sixty years covered by the above table there are but two quinquennial periods which show a falling-off in the rate of growth, viz.: 1860-65 and 1875-80. During the former period railroad construction was partially checked by the War of the Rebellion, during the latter by the general financial depression following the panic of 1873.