Posted on 01/31/2009 11:38:31 AM PST by Publius
Synopsis
The bar is the most expensive in New York. Located on the 60th floor of a skyscraper, it looks like a cellar, even forcing its patrons to stoop to get across the room. Orren Boyle of Associated Steel, James Taggart, Paul Larkin and Wesley Mouch, now identified as Hank Rearden’s lobbyist in DC, all meet to discuss the order of Rearden Metal from the railroad.
Boyle explains to Jim that the delay in supplying steel to the railroad is due to his inability to obtain iron ore, thanks to played out mines, worn out equipment and general transportation problems. Because of the interdependency of business, he wants others to help shoulder his burdens. “The only justification of private property is public service,” says Boyle. He believes that Rearden Metal is dangerous because of its lightness; the National Council of Metal Industries has created a commission to study it.
Jim states that when the people are agreed on something, how dare anyone dissent from the popular will? (This is to become a recurring theme.)
Boyle says that while monopolies are bad, so is unbridled, destructive competition. He is upset that Rearden can always get the material needed for his mills while others can’t. Rearden’s ability and success are destroying everyone else in the steel business; therefore, there should be a national industrial policy aimed at giving everybody a fair shot at iron ore. He wants Taggart’s help in DC.
But Jim wants something for himself. Is it fair at a time of transportation shortages and railroad bankruptcies that there is duplication of service and unbridled, destructive competition from newcomers in areas where the old established railroads have always held sway? Boyle agrees that his friends at the National Alliance of Railroads might weigh in on this.
Larkin, who apparently has some pull in DC, is uncomfortable about betraying his friend Hank Rearden, but in the face of historical necessity he sees he may have to.
Wesley Mouch says little to nothing the whole time except to agree with what everyone else has said. His disloyalty to his boss is not mentioned.
The deals are sealed.
Boyle says he has visited the San Sebastian mines in the People’s State of Mexico, the last piece of private property left in that benighted country. Taggart asks about the rumors of imminent nationalization and Boyle labels them as malicious slander.
Boyle is upset about the poor rail service to San Sebastian provided by Taggart Transcontinental, especially the fact that there is only one passenger train per day, using ancient coaches hauled by an even more ancient wood-burning steam locomotive. Taggart isn’t aware of this but makes excuses to sound as if he knows what is going on.
There is a flashback explaining the relationship between Dagny and Jim and her friendship with Francisco d’Anconia. Dagny made the railroad run, while Jim worked Washington for favors and influence. Jim had built the line to Francisco’s mines at San Sebastian, but the line had never shown a profit. Jim’s friends had purchased large blocks of stock in Francisco’s enterprise. Their rationale for building the line was to help the people of Mexico, not to mention currying favor with the communist government which they believed was the wave of the future. Profit was secondary.
This mis-allocation of resources is causing the more important Rio Norte Line to crumble, and because Taggart cannot service Ellis Wyatt’s oil fields in Colorado, Wyatt is moving his oil by the competing Phoenix-Durango Railroad.
The San Sebastian Line isn’t producing because the mines aren’t producing, but Francisco had explained that his mines were still in development. Dagny knows that Francisco had become utterly worthless over the past decade, but Jim still believes he can deliver. Dagny had been putting the worst assets of the railroad into service in Mexico because she believed the line was about to be nationalized, and Jim goes ballistic when she mentions this. He orders her to run better service in Mexico, but Dagny says she will have to reduce service on the rest of the network to accomplish it. Jim doesn’t want to make decisions or take responsibility, so Dagny resolves to continue providing service her way.
Leaving her office, Dagny stops at a cigarette stand in Taggart Terminal. The proprietor says that there are only a few brands of cigarettes available because most of the other brands have gone out of business. He notes that the people who rush through the train station seem to be haunted by fear. In his list of things wrong with the world, he ends by saying, “Who is John Galt?” Dagny is upset at hearing the phrase, and both of them dislike what people mean when they say it.
Eddie Willers eats in the company cafeteria with a nameless Rail Worker. He tells the Worker that the Rio Norte Line is the last hope for Taggart Transcontinental. There have been more accidents on the system; diesel locomotives are being lost, and United Locomotive Works is two years behind schedule in delivering new equipment. McNamara of Cleveland will lay the new rail on the Rio Norte Line once Rearden delivers. Eddie also tells the Worker of Dagny’s love for the music of Richard Halley. (The Worker is to play a critical role later, so let’s keep the discussion out of spoiler territory.)
Hank and Dagny’s Enemies
The previous two chapters defined Dagny Taggart and Hank Rearden, and now we meet the villains, all friends of Jim Taggart and a scurvy lot indeed. Orren Boyle was just a name earlier, but now he has a face and an ideology. We’ve heard that Hank employs a lobbyist in DC and now we meet him, or we would if he had anything worthwhile to say.
Concerning the ever quiet and discreet Wesley Mouch, is his last name pronounced “ouch” prefixed by an “M”, “mouk”, “mooch”, or the French “moosh”?
Railroads and Government Transportation Policy
A Canadian rail magnate once told me, “Railroads are a tool of government transportation policy.” From the earliest days of railroading, government at all levels got involved.
Early in the railroad age, the state of Pennsylvania launched the Main Line of Public Works, a plan to build a railroad that would pierce the Alleghenies and join the two halves of the state. After years of pouring money down a rathole and having little to show for it, the state sold the project to a group of financiers in Philadelphia who created the Pennsylvania Railroad, the “standard railroad of the world”.
States would grant corporate charters to one group of people for building a railroad in order to prevent another group of people favored by competing interests from building a different railroad. Favoritism and influence peddling were part of the game from the very beginning.
Abraham Lincoln, a railroad lawyer by trade, gave away vast tracts of the American West to railroads to raise the capital necessary to build across the continent and link the country together. This was a product of grand vision and even grander influence peddling.
Because railroads are so capital intensive, most rail entrepreneurs were financiers first, people who built their rail lines with equal parts BS and other people’s money. It was a rare man, like the real life Jim Hill and the fictional Nat Taggart, who did it the hard way, raising money outside of Wall Street. Most rail entrepreneurs had some facet of government policy on their side.
It had started almost at the very beginning of the United States.
After the War of 1812, the federal government decided it needed a transportation policy, and it concentrated that policy upon canals and roads, classified under the term “internal improvements”. The burning issue of that era was who was going to pay for them. One side took the position of private financing and the other favored the application of government largesse. The two-party system as we know it today coalesced around this issue.
With the arrival of railroad technology in the years before the War Between the States, government policy shifted again, both at the state and federal level. This was the great era of railroad building in America.
With the invention of the internal combustion engine at the beginning of the 20th Century, transportation policy shifted back to roads. This began the great era of highway building, culminating in Eisenhower’s Interstate Highway System, the greatest and most successful application of practical socialism in American history.
Today, with the highways saturated with trucks, there are signs that government transportation policy is poised to shift back to railroads again.
While Rand’s image of the lone entrepreneur building a railroad is certainly noble, it is also rare. Government was always a key player.
Hank Rearden, Bill Gates and Industrial Policy
James Madison built a constitutional prison for the federal government. By keeping taxation powers limited, there would not be much money to spend, thus keeping the government out of trouble. One thing the Framers feared was that an entire class of people would come to the seat of government to lobby for their share of federal largesse; the term used at the time was “rent seeking”. But the implementation of government transportation policy started an inexorable process.
During the Seventies, there was serious discussion of government allocation of resources to “sunrise” industries, as opposed to “sunset” industries. Financiers like Felix Rohatyn and industrialists like Max Palevsky pushed this idea within the Democratic Party. Jimmy Carter ran for president in 1976 touting government resource allocation under the title “industrial policy”.
In the book, it was mentioned that Jim Taggart was picked as railroad president by the board because of his pull in DC, thus making him a professional rent seeker for his company. The meeting in this chapter was aimed at using the federal government as a weapon against Hank Rearden because he was a success. Rearden’s own friend and paid lobbyist were in on it. The weapon itself was industrial policy, designed not to protect the people, but to protect other industrialists.
When the Microsoft antitrust suit was filed by the government, the current wisdom was not that Bill Gates had done anything wrong, but that he had failed to hire the right lobbyists in DC and pay off the right politicians and regulators. Gates’ crime, like Hank Rearden’s, was simply to be successful.
Some Discussion Topics
Which they won by being born? Sure, I agree with that observation.
But there is also a deep insecurity in such people. They need to be on top and give orders to reinforce that conviction of superiority. Like the classic narcissist, they need others below them to provide the reflection of their own perceived greatness.
It isn’t ever enough to be convinced of one’s own superiority and not even enough to be lauded by one’s *peers*, however they define that. They need those whom they perceive to be under their whim and command in order to really experience the conviction of being essentially superior and that any extrinsic advantage (wealth/education/position) is just icing on the cake of an in-born supremacy.
The rest of us know that talent can be found walking the streets and only effort and actual results count.
I didn’t see Lord of the Rings. I tried to watch part of a movie on TV but it wasn’t the first one and I didn’t really know what was going on. I don’t know if I saw the elf queen. I did hate the “my precious” guy. Don’t know why anyone in their right mind would have followed him anywhere.
But the religious ideas is right out there glaring in our eyes today. Combine both philosophies, we have an obamanation in the making. Those who believe in a higher being versus those who believe man will destroy ourselves. Does the end of western civ matter how people view the outcome? How we get there is really unimportant, we're heading down this path, extremely fast. I have some videos, some writings etc, that you can take or leave on how religion plays into this. But, the bottom line is, if we don't stem this assault on Freedom, we're doomed. There is no other nation in the World that will promote Freedom today.. A book that is over 2000 years old, it's hard to dismiss.
I'm struggling with A=A.
Balph? Where the heck did that come from? Perhaps it’s akin to the names today.
I saw Newt give a sermon one morning for Dr. Charles Stanley. He talked about God’s place in the founding of our country. He said that our Founding Fathers believed in God and founded a nation on His principles. The thinking being that if our freedom, liberty and laws in our country are God given rights and laws, then who is man to try to take them away or change them.
Jim Taggert states the following phrase: “”Speaking of progressive policies, Orren” said Taggert, “you might ask yourself whether at a time of transportation shortages.....”
I had thought that the term “progressive” was a recent term adopted by the left, but I have seen it several times. There was also Hank’s brother collecting money for Friends of Global Progress. Does anyone know when progressive started being used as a sort of cover name for collectivism?
Unfortunately, we have gotten ourselves in the position where if the government/union/education complex doesn't create lots of simple, good-paying jobs for people who are too stupid and miseducated to do work more advanced than filling in a circle for Democrats every two years, the whole country in going to collapse into civil unrest and criminal overload.
"We have no government armed with power capable of contending with human passions unbridled by morality and religion. Avarice, ambition, revenge, or gallantry would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other."
John Adams - October 13, 1789
Although Rand is ambivalent to religion, it's out there, and a huge part of our history. I'm finding my outlook for the worst case scenario, the purposeful destruction of the American way, the religious outcome is more appealing. I really believe, in these past couple months, God has given our country a second chance. Find him or be a master to satan. I'm just going to have to figure out what's going on in my personal life, and the stress these past couple months has brought. I can't sleep, everything is bombarding my senses, I wake up thinking, "I can pound sense into these morons", alas, satan is more powerful, bit God is there. I'll give my life to God. I'd rather be dead that give up my freedom. I've been so stressed about all this obamacrap, If the sanity is with God, I'm embracing it big time.
bit = but
Progressive is code for commie, liberal, DEMOCRAT. Who knows where it came from, it’s like compassionate conservationism, utter bull****. Ronald Reagen thought we left this on the ash heap of history. The cancer has come back. McCarthy was right.
This chapter brings us to a recurrent topic in AS, that of "fairness" and how that ambiguous phrase is used to cover a grand rhetorical con game. One hears it in the mouths of both sides, the bad guys somewhat more often than the good, but what they mean by it is two very different things. Just as no two cultures agree on the definition of the term "justice" (more on that one later) they don't agree on "fair."
In the mouths of Rand's protagonists the term "fair" might be considered interchangeable with "merited" or "earned"; that is, one's desserts being a function of one's actions. In the mouths of such as James Taggart it represents an equitable division of material possessions regardless of one's actions: meritless. Rand considers the latter immoral and I am inclined to agree.
This is the fundamental philosophical conflict between the two sides. The notion that material possessions are somehow "naturally" evenly distributed is central to such systems as Marxism, (that state of nature existing nowhere in fact but between the theoretician's ears). It is a premise central to collectivist approaches at building a society, and its corollaries are (1) that inequities of such distribution are undesirable and constitute theft by the individual from the collective, and (2) that it is the proper function of authority to remediate them.
This sort of "fairness" is reminiscent of my parents doling out blocks to my brother and myself - a game we used to call "twofer" as in "two for you, two for you," - which is a perfect metaphor for the socialist view of private property in general, to be held in the name of the collective and doled out to its individual members as deemed desirable by those entrusted to lead - the cadre, if you will. "Fair" here is to be taken however that authority chooses to define it. It is equitable only in theory - in practice never turns out that way as commentators from Orwell to Djilas have shown. Ironically, the ones calling most for this sort of "fairness" tend to be not the disadvantaged, but the advantaged, and the reason isn't that they want more material possessions, but that they want the power to distribute them. That sort of "fairness" is always arbitrary, and the power of arbitration is the power to rule.
Contrasted to this is Rand's view that "fairness" in the distribution of material goods is a function of creative activity and that those who manage it by jobbing the system are the thieves - "moochers and looters," as she puts it. It is easy to envisage Mouch and James Taggart as moochers, useless parasites on a system that heretofore could muster the surplus necessary to support them. The death of the host is in the interest of no competent parasite.
In fact, they are not. To Rand they truly are looters, and the death of the host is inconsequential to them so long as the system may be maintained. It is the system, and not the looters, that Atlas must shrug from his shoulders.
Clearly the roots of economic value within this system are creative activity, the likes of Taggart adding little value to the product but a good deal of cost. At first glance this skirts the Ricardan/Marxian Labor Theory of Value (Marx insisted it was a definition, not a theory, and refused to debate it as the latter). In fact, under the strict laissez-faire capitalism that is the root of Rand's system a commodity is worth what it takes to acquire it, and nothing more. There is, in fact, room for mooching and looting there, which is probably why all economic systems tend to display them. It is unclear that they necessarily would be absent from the post-Shrug world of Galt's Gulch writ large, but more of that later.
Substitute the phrase "social justice" for "fairness" and we may read precisely this case in every day's newspapers. Inequities in the distribution of material goods are presented as the results of systemic theft, "institutional racism," "Whiteness studies," and a host of other neologisms - and it is the putative responsibility of authority to remediate them. It's a pity Rand didn't name one of AS's villains "Jesse Jackson," or "Cornel West" because they belong there. IMHO, of course.
Sorry - “Whiteness Studies” = “Whiteness.”
This is where the age old question comes up, who is responsible for the training? The employee that wants to get ahead? The union that is working for their members to create more opportunity? The owner who wants to keep good people and create opportunity for his loyal workers? Or the Government? I feel it is the person's responsibility to create the opportunity for themselves.
Close.
Liberals will tell you -- correctly -- that 90% of Americans will live and die in the same socio-economic class they are born into. They will also tell you -- incorrectly -- that the American dream is a lie intended to convince people to live with great inequality.
Capitalism is highly selective. Not everybody is cut out for the world of high competition. Some fail once and never try again. Some are too afraid to even try.
Liberals argue that hard work and persistence are no substitute for luck. Often that luck comes from being born into the right circumstances. Therefore, those who achieve success did so by being lucky in life's lottery, not because they worked for it. There is nothing to be proud of in success. It merely means that a successful man became successful, not by means of his own work, but by standing in the right place at the right time. His success is not his own, therefore neither is his money.
This is what I'm trying to get at.
The Civil War had ended the states rights, or federalism, argument between Hamiltonians and Jeffersonians. The Jeffersonian impulse now aimed at capturing the powerful central government that Hamilton and Clay had wanted and that Lincoln had created. Rather than put the government at the service of bankers and industrialists, Jeffersonians (progressives) wanted to put the government at the service of the people.
Like any political movement, the Progressives spent decades wandering in the desert, but Theodore Roosevelt put them into power.
They ended up moving from the Republican Party to the Democratic Party during the Twenties, but now both parties claim the mantle of progressivism to one degree or another.
See Post #116.
Yes, I see what Rand is saying, here. It’s the foundational belief of the looters/liberals.
By George, I think you've got it!
You know, between the two of you, this is turning into a wonderful course on history, economics and political history.
Thank you! It is a great way to handle the present economic/historical/political situation.
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