Dagny Taggart and the railroads

I read The Fountainhead and Atlas Shrugged many years ago, and last week saw the movie “Atlas Shrugged Part One,” the first of a trilogy based on the novel.  It is ironic that Ayn Rand chose the railroad heiress Dagny Taggart as the heroine.  American railroads are one of the starkest illustrations of the difference between actual existing capitalism and Ayn Rand’s “capitalism, the unknown ideal.”

The American railroad system did not come into existence as a result of autonomous individuals engaging in voluntary exchange in a free and unregulated market.  The railroads were built by government-chartered limited-liability corporations exercising the power of eminent domain and other quasi-governmental powers.  The transcontinental railroads were subsidized by huge grants of public lands, whose value far exceeded the cost of the railroad construction.

Railroad operators in the 19th century expropriated small property owners in the name of the greater good, and obtained monopoly rights in the name of the public interest.  They never hesitated to call in state militias or federal troops to suppress strikes.  But when farmers and small merchants proposed regulation of monopoly freight rates, they called a violation of property rights and the free market.

Give credit where credit is due.  Construction of the American rail network, and especially the transcontinental railroads, was a great achievement – second only to the construction of the Trans-Siberian Railroad in Russia.  It is no small thing to supervise the construction or operation of a railroad. People who can do this well deserve respect and reward.  But few of the fortunes that were made from railroads at the time were made by the people who made the trains run on time.  They were made by financial and political manipulators.

Railroads in the late 19th century were notorious for issuing “watered stock” – stock in such amounts that the stocks’ face value greatly exceeded the value of assets.  At least the stock did represent a tangible asset, however inflated the pretended value.  The market manipulators of today trade in “derivatives,” which do not represent any asset at all.

Railroads carry freight with less expenditure of energy than trucks and much more less than airlines. Yet in the 20th century, the railroads were unable to compete.  It was left to the federal government to reorganize bankrupt railroads into the Conrail and Amtrak systems.

When Ayn Rand wrote Atlas Shrugged, she made no references to contemporary persons or events.  She intended to make her novel a timeless fable that would not go out of date, and she largely succeeded.  The look and feel of the movie “Atlas Shrugged Part One” are consistent with this philosophy.  The costumes and settings have a retro look independent of the fashions of any particular decade.  But then the director made the mistake of setting the movie in the year 2016 – just five years from now.  This not only shortens the movie’s shelf life; it raises the question of the plausibility of  its vision of the future.

It is not plausible. In the world of the movie, odious politicians, bureaucrats and failed business executives strive to curb the power of a railroad heiress, a steel tycoon and an oil baron, who would be capable of solving the nation’s problems if they only were let alone.  In the real USA, the railroads are dying.  It took the federal government to reorganize the bankrupt railroads and create Amtrak and Conrail.  The United States no longer has a domestic steel industry to amount to anything, and domestic oil production peaked 40 years ago.

The premise of the movie is that rising oil prices have made railroads viable again because they can run on coal or electricity.  But all locomotives looked like diesel to me.

In the movie and novel, Taggart Transcontinental is the lifeline for Ellis Wyatt’s Colorado oil field, and he is her major customer. But I saw no railroad tank cars in the movie.  The high-speed train on the John Galt Line looks like a streamlined passenger train.  It runs 120 miles an hour, but what is the importance of high speed in transporting oil?  Wouldn’t the capacity of the train be more important than the speed?  And why is Wyatt dependent on rail shipments?  Are there no oil pipelines?

Another irony is that if the United States gets high speed rail, it will be as a result of the Obama administration’s subsidies, not the enterprise of libertarian capitalists.  Rand thought socialists and bureaucrats could never run a railroad, but there are a number of countries with well-functioning, high-speed passenger railroads, and they all are socialist or government-subsidized.

The movie depicts a nation in which business people are pilloried by the press and intellectuals, and hamstrung by government.  This is not the actual existing United States.  Successful entrepreneurs such as Bill Gates of Microsoft, Steve Jobs of Apple Computer, Larry Page and Sergei Brin of Google, Jeff Bezos of Amazon, Mark Zukerberg of Facebook are idolized, as were Henry Ford, Walter Chrysler, Lee Iacocca in an earlier generation.

Americans have never been anti-business.  They have only been hostile to particular businesses who are perceived to be exploiters, polluters or monoplists.  The U.S. government is not anti-business. For 30 years, the government has been reducing upper-bracket taxes and lifting regulatory burdens.  But this has not produced a business renaissance.  The United States is in a state of dilapidation much like the world of Atlas Shrugged.

Wesley Mouch and the corrupt bureaucrats of the novel and movie talk about evils of over-production.  Their scheme is much like the misguided National Recovery Act and Agricultural Adjustment Act of the early 1930s, which, I agree, were very bad ideas.  But nobody is worried about over-production in the United States of today.  Today’s issue is how to compete with foreign producers and reverse the hollowing out of American industry.

Successful business executives are people who can organize other people’s work, usually using other people’s money and other people’s inventions.  They have to know more than the technical aspects of their businesses.  They have to know how to get other people to buy in to their ideas.   There is little sense of this in the Atlas Shrugged novel or movie.

In the movie, a railroad union official comes into Dagny Taggart’s office and protests that the new high-speed train, on the untested Rearden Metal rails and bridges, is unsafe.  His manner is abrasive, but his concern, based on what he has been told, seems reasonable.  Taggert’s response is not the use of fact and logic.  She doesn’t present any data to show the metal is safe.  Instead she says, yes, maybe it is unsafe, but if the union members have a free choice to risk their lives or be blacklisted from working for her company ever again.

The oil baron Ellis Wyatt decides that he is sick of having his efforts frustrated by an ungrateful government, and burns down his oil operation.  He puts up a sign saying that he left it just as he found it.  But did he create his company all by himself?  Didn’t his employees contribute anything?  Isn’t Wyatt not, out of spite, destroying the fruits of their work as well as his own?

Ayn Rand saw herself as an apostle of reason.  For me, the essence of reason is persuasion by rational argument – not the issuance of ultimatums and oracular pronouncements.

Ayn Rand in The Romantic Manifesto said that the realistic novel, which shows things as they are, is inferior to the romantic novel, which shows things as they should be.  Atlas Shrugged is romantic, not realistic.  That is its appeal.  Every sentence in the novel is an expression of Ayn Rand’s philosophy, and the movie is true to the spirit of the novel.  But its world is as imaginary as C.S. Lewis’s Narnia or Gene Roddenberry’s Star Trek.

Click on Robber Barons by economist Brad DeLong and scroll down to the heading “IV. Wealth and Politics” for historical background on the American railroad industry.

Click on The Misunderstood Robber Baron for a discussion of the career of railroad tycoon Cornelius Vanderbilt.

Tags: , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: