Posts Tagged ‘Atlas Shrugged movie’

Dagny Taggart and the railroads

April 27, 2011

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.

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