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
Publius, thank you so much for doing this! I had intended to read AS again and this analysis is really a great way to get the most out of the book!
Perfect character but at 65 I fear he is to old for the part now.
You fans of 24, could Kiefer Sutherland play the part?
How about the scandinavian Stellan Skarsgard?
The Scot actor Kevin McKidd?
I had been thinking that Orlando Bloom who played the bow and arrow wielding Legolas Greenleaf in the Lord of the Rings movie and was also in one or more Pirates of the Carribean movies would be great as Ragnar Danneskjold.
Ping to Chapter 3.
rationing is exactly what taxdodger Daschle has in mind
Sorry, late to the book club.
Add me to the ping list?
Great topic. Enjoyed your insights.
Ping to Chapter 3.
Ping to Chapter 3.
So, the characters are developing, who in the current political environment are similar to the characters in AS? I might think Rahm is Wesley. Dagney isn’t Sarah, but their ideas are close. It would be an interesting exercise.
Ping to Chapter 3.
We’re going to be doing a lot more of these exercises as our book club moves on. Be patient. Wesley is nothing compared to monsters like Cuffy Meigs.
I finally got a copy of the book and am caught up now. I’ll start participating. Thanks for the pings.
When the book was published in 1957 this was not an isolated opinion. This was the age of Sputnik, when the Soviet Union seemed at least to be equal and at times superior to the United States. Around this time, John W. Campbell (the influential and extremely conservative editor of Astounding Science Fiction) published many stories around this time by Mack Reynolds and others, about a future where the USA was second-rate power in a world dominated by the technological and economic prowess of the USSR. In other words, a belief that Communism was the wave of the future was held by many from all over the political spectrum, not just leftist ideologues.
Today, after the collapse of the Soviet empire in 1989-91, this kind of faith in the USSR seems almost quaint, but it was very real and very much informed Rand's world.
The most expensive bar in New York...is designed to look like a cellar
Another prescient image of the future. The 1980s saw the beginnings of "rave" culture, where the coolest clubs were literally abandoned warehouses taken over for the night by hipsters.
Rearden's success was a threat because it was an inspiration. If the goal is nationalization, then the way to further that goal is to remove the incentive to acheive through sapping the hope that one can acheive without the government and make it seem almost like a crime to become a success independently.
This way, not only is it less likely that someone will want to strive but if they do, then they will be castigated as being opposed to the public good and the passions of the masses will be used in councils against them.
Sounds eerily like the present day, doesn't it.
Yeats, not Keats.
Liberals think that advantage, especially economic advantage, is unearned and undeserved. For example, an advantaged (rich) person got his money due to illicit practices, exploitation, inheritance and/or luck. Since all of these means are improper to a liberal, the advantaged person has no right to his position. As a corollary, a disadvantaged person has every right to usurp the position of the advantaged (i.e., start at the top). In fact, a disadvantaged person may see such usurpation as a noble act.
In Marxism, all inequities are the result of class differences ... social constructs, not human failings. "Fix" the society and you erase the inequities. The corollary of course is that no one "deserves" more than any other, regardless of their abilities, ethic, or diligence. They should simply revel in their ability to contribute more to the Collective since, in the edenic Marxist vision, no status accrues to material wealth anyway.
And you're right. It was Yeats, not Keats. Unpardonable sin for an English major.
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