Railroads played an even more important role than canals in promoting economic growth, not only by lowering transportation costs, but also by stimulating many different types of ancillary economic activities. The heavy consumption of iron by railroads hastened a long overdue change in iron technology--specifically, the adoption of mineral furnace fuel, the substitution of puddling for forging, and the construction of rolling mills large enough to produce rails. Other branches of manufacturing became more centralized and concentrated because of wider markets and improved access to raw materials brought about by railroads. Many former commission merchants became jobbers, buying and selling in their own names, because faster transportation enabled them to carry a balanced stock without an inordinate outlay of capital. The massive financial needs of the railroads centralized the nation's investment market in New York City and hastened the development of investment banking toward its modern form. As the first billion dollar, nonagricultural enterprise, the railroads between 1834 and 1858 accounted for one-half of all capital importations into the United States and about 10 percent of total capital
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Publication information: Book title: The Coming of Age of American Business:Three Centuries of Enterprise, 1600-1900. Contributors: Elisha P. Douglass - Author. Publisher: University of North Carolina Press. Place of publication: Chapel Hill, NC. Publication year: 1971. Page number: 241.
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