Riding Coach Through Atlas Shrugged: Part 4 – Governor’s Ball

Pages 48 – 53

Chapter Summary – A group of industrialists sit around a shadowy table plotting the downfall of our favorite rugged individualist.

[Part 3]

I love how cliché this chapter is. Four figures sitting around a table, their faces shrouded in darkness as they scheme over the fate of the world, the sycophant politician sniveling his consent to their plans. This is one of those times where I am not quite sure if the fiction created the trope or the fiction is following the trope but it is okay either way, it is delightful to read.

We have at our table:

James Taggert: Who is far less whiny when not in the presence of his sister.

Orren Boyle: Our socialist-industrialist representative in the story.

Wesley Mouch: Our aforementioned politician, in the pay of Hank Rearden but in the pocket of Orren Boyle.

And finally –

Paul Larkin: The man at Rearden’s dinner party last chapter.

Essentially they spend the chapter plotting against Hank Rearden and promoting a philosophy of non-competition among businesses. From a historical standpoint this is essentially what happened with Hoover and the industrialists leading up to the great depression. A series of price and wage controls were set up that distorted normal market activity leading to the boom-and-bust cycle as described by Ludwig von Mises. As a side-note it is an interesting historical misconception that Hoover “did nothing” during the great depression. Hoover was arguably the most meddling president up to that point in regards to the economy except perhaps for Abraham Lincoln, but total economic warfare is hard to beat.

But to get back on track here, for what it lacks in literary creativity this chapter makes up for with pure economic and political insight that is delightful to read. The most illuminating part is a speech, or perhaps rant, by Orren Boyle that goes as follows, some of Taggert’s responses are edited out for brevity:

“Listen Jim…” He began heavily.

“Jim, you will agree, I’m sure, that there’s nothing more destructive than a monopoly.”

“Yes.” Said Taggart, “on the one hand. On the other, theres the blight of unbridled competition.”

“That’s true. That’s very true. The proper course is always, in my opinion, in the middle. So it is, I think, the duty of society to snip the extremes, now isn’t it.”

“Yes,” said Taggart, “it isn’t fair.”

“Most of us don’t own iron mines: How can we compete with a man who’s got a corner on God’s natural resources? Is it any wonder that he can always deliver steel, while we have to struggle and wait and lose our customers and go out of business? Is it in the public interest to let one man destroy an entire industry?”

“No,” said Taggart, “it isn’t.”

“It seems to me that the national policy ought to be aimed at the objective of giving everybody a chance at his fair share of iron ore, with a view towards the preservation of the industry as a whole. Don’t you think so?”

“I think so.”

This exchange is a fantastic summary of the process involved when the government gives special privileges to favored industries under the guise of regulation. Essentially Rearden is out-competing his fellow steel producers and since they cannot compete under market conditions they intend to compete politically by ham-stringing his business through the legal process.

This process has happened time and time again throughout history and the ironic part is that these actions have almost universally been heralded as “anti-business” when in fact it is the businesses itself that propose this regulation. The first anti-monopoly laws in America were lobbied for by the competitors of the successful oil, rail, and steel businesses which resulted in the *rise* in prices of those goods. It seemed the “natural” monopolies were pro-consumer while the regulation was pro-business.

There are also historical comparisons to be made to the great depression. The whole concept of “protecting an industry” at the expense of a single, productive, individual was the cornerstone of “Hoover-nomics” especially in the farm industry. The industrial revolution brought about a massive increase in farming productivity which naturally led to a decline in prices and a surplus of labor in that industry that came to a head during the “dirty thirties”.

The natural course of the market would be for inefficient firms in that industry to liquidate; with the entrepreneurs and workforce moving to other industries. This would cause a short period of transitional unemployment as workers moved into similar or growing industries while the more efficient firms and prospective entrepreneurs would buy the liquidated capital goods of the inefficient businesses at a discount.

Consumer goods prices would fall to equilibrium where only firms able to produce goods below that price would be able to maintain production. This would have the net effect of expanding the labor pool and be a net gain for society as new areas of production would be made available by the increases in productivity. Instead, Hoover organized industrial cartels that maintained price and wage controls over the entire economy propping up inefficient businesses that continued to waste and malinvest resources resulting in what we know today as the great depression.

To summarize, this chapter is a fantastic must read five page tour de force of economic insight.

Next chapter: More Dagny, more snark, and more family drama.

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