June 18, 2024

I first heard of Garet Garrett when Murray Rothbard mentioned him in What Has Government Done to Our Money? James Grant said he was one of his heroes (James Grant is one of my heroes). When I finally got the chance to read Garrett’s People’s Pottage, I too became a fan. Next I anxiously read his fascinating story of Henry Ford and laissez-faire, The Wild Wheel. I then embarked on his novel The Driver, the story of Henry M. Galt who courageously turned a railroad bankrupted during the panic of 1892 into a profit-making juggernaut by focusing on efficiently serving the customer.

The historical period of the book’s beginning, the panic of 1892, is of great interest to lovers of classical liberty as it existed in the United States. The Democratic Party to that point had been the last political bastion of sound money, laissez-faire, and non-interventionist foreign policy.

Sound money would face one of its greatest crises and the inefficiency of government intervention in economic affairs would become evident to the observant in 1892. Unfortunately, President Grover Cleveland, the last knight of the old Democracy, would win the battle against the silverite inflationists but lose the war to them as their hero, William Jennings Bryan, was nominated to run for president in 1896. The Democracy, as the party was called at the time, would never be itself again. It would make a comeback as the antithesis of its old self under Woodrow Wilson and then FDR.

Garet Garrett fairly portrays the typical silverite money crank of the time as a well-meaning ignoramus. His explanation of the silver problem is one of the clearest available. Simply put, the government was forced by political pressure to declare that silver was worth about twice what it was really worth in terms of gold. Therefore people took advantage of the bargain thus created by continuing to buy gold for silver. The treasury’s gold supply was continually in danger of dropping to a level which would mean national bankruptcy (see Allan Nevins’s biography of Grover Cleveland or Cleveland’s own book, Presidential Problems, for a complete account of the episode). Garrett portrays Wall Street at the time of this monetary crisis as a place filled with people who had lost faith in what they were doing with no plan of how to renew their faith.

Into the breach steps Henry M. Galt. Galt had been quietly buying devalued shares of the struggling Great Midwestern railroad and making himself a general nuisance to the complacent and hopeless board of directors. Privately Galt had been studying everything about the railroad business in general and in particular the potential of the Great Midwestern line. When, like every other major government-subsidized railroad at the time, the Great Midwestern went into bankruptcy, Galt was the only major shareholder with a plan to make the Great Midwestern profitable again.

One of Galt’s first tasks was to invest money in straightening the route and reducing the grades so that freight could be carried profitably all along the line. Anyone familiar with the incredible inefficiency of the government subsidized transcontinental railroads—they were built over the longest routes with little concern for grading in order to collect government money on the basis of miles of track laid—will understand the task that Galt faced in turning around the Great Midwestern.

But Galt’s vision for the Great Midwestern went beyond simply making it a profitable line. He also acquired feeder lines so that the Great Midwestern could originate its own traffic. Next Galt acquired various life insurance interests that would be sources of capital to continue expanding the services of the Great Midwestern.

Galt became an upstart titan of Wall Street. Share value of the Great Midwestern and of Galt’s other holdings skyrocketed. However, while Galt was a visionary in the railroad business, he had made powerful enemies. First his family was socially ostracized and then his politically well-connected rivals used vaguely written antitrust laws to attempt to destroy him. Anyone familiar with the true nature of antitrust laws as means for less efficient competitors to attack more efficient rivals and for politicians to shake down corporations for money could have predicted the ease with which largely ignorant congressmen could be convinced to pursue Henry M. Galt.

Legal scholars may point to other laws and legal theories to explain the descent of the legal profession into its current sorry state, but antitrust law has to be considered one of the prime culprits. Garrett describes the lawyer Congress had to hire to cross-examine Galt (congressmen being incompetent to do it themselves) as a consummate opportunist. He would either collect huge fees for advising corporations on how to avoid prosecution, or if he found a corporation in violation of the law, blackmail the corporation into paying exorbitant fees for advice on how to fix the problem—or turn to “public service” and collect fees from the government for his help in investigating corporations.

When cross-examined by this lawyer, who had previously attempted to extort a million dollars from him, Galt was perfectly honest and totally disarmed the lawyer and derailed the case against him. I won’t spoil it by giving too many details. Rest assured it is well worth reading.

Garet Garrett’s The Driver is a masterpiece of a novel that rewards any one interested in how a great entrepreneur sees what others do not, at a time when few others are even looking. Galt ran his business as I think Gary North would advise. In Galt’s own words:

“Somebody has to see it,—somebody who knows not only how to spend money when everyone is wild to buy, but how to spend it courageously when there is a surplus of things that nobody else wants. Every financial institution that I have anything to do with will be governed by that idea, and Great Midwestern properties, while I run them, will decrease their capital expenditures as prices rise and increase them as prices fall. When we show them the whole trick and how it pays everybody will do it…. We won’t have any more unemployment. In a country like this unemployment is economic lunacy.”

Economic lunacy indeed. And it is economic lunacy foisted upon society not by greedy capitalists but by ignorant politicians who can create no wealth; they can only impede great visionaries like Henry M. Galt with monetary chicanery, antitrust litigation, labor laws, and a host of other regulatory measures from creating wealth.

Originally published September 7, 2007.