From How the U.S. Railroad Expansion Worked:
Railroads played an important role in America’s Civil War. As the North industrialized rapidly between 1820 and 1860, railroad companies helped create — and prospered from — the rise of factory production and diversified, large-scale agriculture.
In the South, railroads played a marginal role in the cotton and tobacco economy. With little industry to support them, the railroads that did crisscross the inland South were lightly built, often poorly maintained, and generally inferior to those in the North. In the end, the North’s industrial superiority — epitomized by its superb railroad system — helped it beat out the Confederacy.
Both Abraham Lincoln and Jefferson Davis recognized the need for an effective railroad system in the war effort, and military men on both sides used railroads skillfully. The South, however, had neither the factories capable of building new locomotives in wartime nor the political will to forge the existing railroad network into a smoothly functioning system.
The North, on the other hand, quickly created the United States Military Railroad to expropriate and operate any railroad it needed. The Union Army appointed Daniel C. McCallum and Herman Haupt as ranking officers, giving them extraordinary powers to provide railroad support for northern troops.
Throughout the war, opposing forces recognized the tactical advantages of either controlling or destroying railroad supply lines. But it was not until Union General William Rosecrans found himself under siege at Chattanooga, Tennessee, in 1863 that leaders discovered the true strategic value of railroads.
[See more in our Civil War Galleryand in How Trains Work.]