Prior to the US conquest of the independent South in 1865, the many navigable rivers of Dixie were used as natural highways to transport cotton and other agricultural products to the coast where they could be shipped to foreign markets.
The South, with its rivers and agriculture, had less of a need for railroads than did the North, and therefore, was slow to develop them. Likewise, due to the tremendous profits available from cotton and rice, industry was also slow to start in the South. In the 1840s and 50s large iron works and factories were beginning to appear in Richmond and other areas of the South. However, this development was reversed in the 1860s when a generation of the best and brightest Southerners killed by the invading US military and dozens of Southern cities as well as countless plantations were looted and torched.
The South was transformed from an extremely wealthy society to an utterly ruined backwater under outside military occupation. Before the war, the major economic and political issue of the nineteenth century was the protective tariff (of which Southerners paid two-thirds and most of which was spent on internal improvements in Northern States).
After the war, the South as a conquered land was unable to fight the tariff and an additional layer of economic exploitation was added with Northern industrial manipulation of Federal commercial and transportation regulations. Consolidated Northern businesses gained control of the South’s railroads, expanded them, and began to use the South as an economic colony; raw materials were shipped in mass out of the South. Most Southerners continued to live in extreme poverty and never saw any of the profits gained from stripping the South of its natural resources. Author Frank Conner describes how this came to be on pages 228-229 of his book The South Under Siege: 1830-2000.
The South’s rail network had been largely destroyed in the War. And many of the postwar railroads that went into operation there (under Northern ownership and control) were badly undercapitalized, in serious need of major rework, and shrouded in fraud. To survive, the operating managements of those railroads (which, in many areas, had a monopoly on local transportation), then squeezed their customers for all they were worth. And the typical railroad lawyer was not widely known as the kindliest soul on earth. In those days you could not live with the railroad, and you could not live without it; the South had to take what it could get; and that often turned out to be an extremelyexpensive proposition in the long run.
Typical of the inimical railroads foisted off on the South was the Louisville and Nashville (L&N) Railroad. It had always been owned and controlled by Northern and British capital; during the war it had served the Union Army faithfully. After the war it sought a monopoly on overland transportation in the Southeast, and toward that end it bought off the legislatures of several Southern states. Having been given large tracts of land, the L&N then subsidized many new businesses and encouraged the formation of many new towns along its routes – always in pursuit of hefty long-term profits. Its rate structure was extremely high. So the L&N helped and hurt the South at the same time.
In 1887, the Interstates Commerce Commission (ICC) was founded – to create the image (illusion) of federal control of the railroad industry, whose destructive behavior and rapacious freight-rate structures had infuriated the nation [sic]. But in fact, the ICC had no teeth. And it institutionalized the inequitable freight rates established by the Northern capitalists to discriminate against the South.
Under those rates, it cost far more to ship manufactured goods from South to North than it did to ship the same goods from North to South. Those rates were a powerful tool to discourage the growth of industry in the South; they were fully enforced by the U.S. government; and they remained in effect into the 1950s.
Many railroads around the nation [sic] went bankrupt in the late 1870s, because of the economic depression following the Panic of 1873; and they were swallowed up and consolidated into half a dozen big companies, directed from New York.
Then, after the Panic of 1893, J.P. Morgan bought up most of the consolidated railroads in the Southeast. He bought out the Richmond Terminal Company, and control of the L&N and others. He created the Southern, the Seaboard Air Line, and the Atlantic Coast Line: 10,000 miles of railroads in the Southeast. For all practical purposes, Morgan thereafter held the monopoly on overland transportation in the Southeast which the L&N had sought earlier.Now the U.S. government belatedly spent huge sums to improve the long-neglected war-devastated harbors in Southern port cities such as New Orleans, Galveston, and Mobile. Vast quantities of goods and materials flowed along Morgan’s railroads for export from those cities.
Also see: North vs South on the transcontinental railroad
Source>> Railroads & post-war exploitation of the South