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
Ewan would be good...
Not sure if you got my late reply to the first thread, so if you haven’t already, please put me on the list. (finally got caught up.)
Dagny and Hank do get to feelings later on. Personal life feelings are different than letting feelings make business decisions.
I watched my dad ever since I can remember and still today in his business. He had 45 employees (up until a few weeks ago) and dealt with customers daily. He never raised his voice no matter what the stiuation with a customer or employee. I don’t know how he did it sometimes. He would want to but he didn’t want to say or do something rash or unwise. He also took tons of notes on every call or wrote notes in the rolodex about specific people. One time some men called a conference call with my dad on something and tried to give a different date or some such. My dad said “hold on, I’ll check my call notes.” The guy said “Ah $hit, don’t do that. I know what it will say.” LOL!
The only time he was ever soft with an employee and gave them somthing against his better judgement was when they mentioned God, needing a chance, etc. He almost always had to eventually get rid of them.
This is my 1st time reading the book and I am working through it at record speed. I reread the chapter discussion each week and am finding such insight in reading these posts.
Well it looks as if I’ve, once again, arrived late to the party and all the good incites are already made so Ill just follow along quietly.
I work for a manufacturer and call on the manufacturing industry. We hear about all the jobs lost in the auto industry and supporting industries. John McCain actually told the truth during the campaign and said that most of these jobs will not be coming back. What he did not elaborate on was this is due to technology and automation. There is just not a need in this day and age for the amount of workers that performed tasks on the plant floor. To get ahead today is to upgrade those skill, blend with tech savvy and integrate those posts. Most do not want to hear or take advantage of the opportunity.
Also, this links to the discussion of the decrease of union membership. Why the fervent push from the Union leaders to get rid of the secret ballot?
“This is my 1st time reading the book and I am working through it at record speed. I reread the chapter discussion each week and am finding such insight in reading these posts.”
I’m also a first-timer. I haven’t picked it up in a few days, but I’m through the first twelve chapters. Quite fortuitous for us that someone selected this book as the Book Club’s first, eh?
An interesting aside! (Do you work for Colonial Williamsburg?!! I once asked one of their "People of the Past" who was impersonating George Wythe and looked like him too, to describe his typical day. Mr. Wythe began his answer by trying to understand my question and we settled on that I was asking him to describe his regular day.)
So I looked in the OED and it does appear that lunch as a synonym for luncheon was not current during Franklin's time. But it's first use was recorded in 1829 and many 19th century usage examples are given.
ML/NJ
I feel like I live in an alternate universe these days. This is a great book. I almost feel like laughing out loud at these useless characters.
I’m glad to hear they express some feelings later on. I was thinking more of Hank’s dealing with his family than business - I got frustrated when he let them walk all over him. I mean, he was not denying he was having feelings or annoyance and sadness, but was not expressing them either. Dagny, on the other hand, seemed to be suppressing feelings as they arose.
I get the difference between having feelings rule one’s decisions vs. logic. I think I said that in my last post - responding to someone saying the heros in AS were more like robots while the antagonists ran on feelings only. I think we can have both in our heros, as long as they stick with logic for making decisions.
BTW, where are you in WV? This sounds nuts, but we want to retire there (having never visited, at least not yet). I am so sick of Mexifornia and desperately need to live in the mountains. WV being heavily forested and land being reasonable and rural - she sounds just perfect. The pictures I’ve seen are incredible. We are planning trips during various seasons in the next few years to get a feel for different areas.
I don't recall if Rand shows it yet in the book, but she will peel back the "back room deals," that seeming force people like Kutcher into making such pronouncements. It's all about "getting the goods on someone," and when you do, you can get them to make "public service announcements," with the emphasis on the public good. It's how the game is played, and Hollywood isn't immune. In today's celebrity culture, they're more important than the business leaders, so they're the ones spouting the propaganda.
The same during the Seventies. You had Rohatyn and Palevsky pushing for full socialist industrial planning, but no push from the people. Fortunately, Reagan ended all discussion of the topic in 1980.
Good catch. I refer to it as "doing your time on the sweatshop cross." Everybody does it.
My late father once said, "Never fall in love with an investment. It will screw you every time." I have learned the wisdom of those words the hard way.
The only time he was ever soft with an employee and gave them somthing against his better judgement was when they mentioned God, needing a chance, etc.
In a few chapters we will meet the legend of Michael "Midas" Mulligan, a Chicago banker. Midas looked at your character first. If you ever mentioned the word "need" in a loan interview, he would throw you out of his office.
I liked Midas’ story. Fortunately for my Dad, the ones he gave the chances to were starting at the bottom and had to work their way up. It was the second part of that they had trouble with...
That is precisely the purpose your silver eagles will serve. They’re very pretty, but their job is to keep you alive when the fertilizer hits the ventilator.
Please explain what this video is and where did you see it?
I highly reccomend any and all Freepers to read Atlas Shrugged. Don’t let the size of it stop you.
I first read it over 30 years ago, and this past Dec 1-Dec 12, I read it for the 7th time.
Amazing how accurate the author was- and the book was published in 1957. I don’t know for sure, but I think it took her a number of years to write it.
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