The American Historian

Analysis of Historical & Modern Political Topics

Railroads and Wagons in Postbellum America: Economics in the Reconstruction Era Transportation Industry

By Jonathan Fisette

 

     After America desecrated itself with the Civil War, companies such as the Reading Railroad and Studebaker wagon company looked to rebound the American economy and carve out their own transportation market share during the fragile period of Reconstruction. Reconstruction Era transportation economics are a complicated business, especially when attempting to keep track of the constant bankruptcies, reacquisitions, and the constant competition that these companies faced during the mid-to late 19th century. The transportation industry established itself as a fast-moving business model that modern transportation market has adapted into the run-and-gun style of profit-or-die business strategy. This comparison of transportation companies during the area reviews only two of many business ventures during the period. These companies were similar in terms of industry sector but were different such as Studebaker being in South Bend, Indiana and Reading being in the Pennsylvania area. Market goals had been similar as both looked previously to facilitate the US Government during the Civil War and for Studebaker at least, made considerable profit from their dealings before pushing heavily into the private market.

          The Philadelphia and Reading Railroad (known colloquially as Reading Railroad) is best known to modern society as a place on the game board of Monopoly. That it occupies any space at all on the board should say much about their aims as a business and their historical expansion into national prominence and name recognition. The Reading Company, which began in southeast Pennsylvania in 1833 to transport coal throughout the region, prefaced itself on a bet hoping to see that coal, not wood, would be the essential market energy. Reading became an almost immediately profitable company because of this successful bet. The company soon looked to expand throughout the region and faced a tough competitor in the Lehigh Coal and Navigation Company. Reading fought Lehigh’s close monopoly of the regions railroad business and they bought up many of other smaller players in the regions, most notably the Schuylkill River Valley area. Through shrewd investing and surveying of the American railroad business landscape of the decimated south, Reading bet heavily on the construction of a port in Richmond, Virginia which would pay off heavily. The port would serve as a major gateway in the south for foreign and domestic product and would earn them prominence as a railroad company. While Reading was building ports and railways in the south, other railroad companies were pushing west, such as the Union Pacific company. In fact, the railroad pushing west created such a buzz in the news that it was frequently report in publications such as the Gazette:

Civilization rolls here like a freshly risen flood; bears up the former life of the wilderness like drift wood, and forces it on before. The track of the buffalo is marked still, but their herds have gone westward; their haunts centuries old are deserted. All wild animals are following them. The prairie dogs have move their cities. The ruins are frequent; they attest to the march of Empire.[1]

     Railroads were big business indeed. For 1869, Reading railroad had effectively split its business model into the passenger and cargo market having a huge year. According to the American Railroad Journal, 1868 saw a revenue of $987,606 compared with $1,184,006 in 1869. Coal and merchandise were also up in 1869 and brought in over $4.3 million, an 80% increase in profits.[2]   

     While Reading is a good example of a successful company for the period which sets the stage for Studebaker, the wagon company that would go on to produce automobiles was in the middle of the pack of many other wagons companies that were in existence in the Postbellum period. Whitewater, Milburn, Moline, Shuttler, Fish Brothers, and the still relevant John Deere company.[3]  Studebaker was founded and run by the three Studebaker Brothers; John, Peter, and Clem. The $75,000 capital in 1868 for their wagons became $1,032,040 in revenue just eight years later. Studebaker later entered the automotive market and become valued over $11 million dollars in 1910.[4]  1874 would be another landmark year for the company, as Studebaker built a four-story factor that would begin shipping its famous wagons to its new market in Europe. The factory was a modern marvel for Southbend who might argue that the Industrial Revolution was not quite dead yet. The brothers opened branches throughout the country for their wagons and vied for the title of world’s best known horse drawn carriage.[5] The Studebaker company’s balance sheets are an excellent example of what the transportation industry had experienced in Postbellum America. In January of 1868, Studebaker
had only $175 on hand compared to $444,524 in 1910. Studebaker had no investments in 1868 compared with $600,019 in 1910. [6]The company had become an American juggernaut and the three Studebaker brothers enjoyed living the American dream.

            The transportation industry in Postbellum America demonstrates the vast new market that these two companies had entered and ultimately become successful within. For Reading, competing with near monopolies in the rail industry lead them to a novel idea of chancing a new market with coal hauling. The bet certainly paid off. Meanwhile Studebaker was in a similar situation with many highly competitive players in the wagon market. Studebaker succeeded because of their business prowess in Indiana and marketing throughout the major cities in the United States. The dealership model that Studebaker called branches caused such good publicity for the wagon maker that they entered the European market to some general success. The transportation market of the period is one of the best examples of what motivated Americans could do given the resources to chase their dreams which there is a young, new market present. Reading did this through buyouts and placing rail ports, Studebaker did by pushing its reputable product directly to the American people.


[1] William Thomas, The Iron Way: Railroads, the Civil War, and the Making of Modern America (New Haven: Yale University Press, 2011). 204-5.

[3] William Foster-Harris, The Look of the Old West (New York: Skyline Publishing, 2007). 164.

[4] Albert Erskine, History of the Studebaker Corporation (Southbend: The Studebaker Corporation, 1924). 27.

[5] Ibid., 25.

[6] Ibid., 30.

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1 reply

  1. Excellent blog Jonathan. I really enjoyed the intersection of technologies through an economic perspective.

    Like

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