A fascinating
(albeit somewhat tedious – this is hard-core econ) look at 19th century
industrial development and all the chaos that that includes. Although written
20 years ago, the concepts Perelman details apply today. The idea that the free
market is self-regulating is demolished with numerous examples and remarkably
clear writing. The title argument tackles the incredibly high capital costs of “creating”
a railroad. Simply put, there is no way for a company to exist in a competitive
market facing this level of indebtedness. Hence the large number of railroads
that went bankrupt and were eventually combined into a very few entities –
think J.P. Morgan – industrialist/financier supreme. Sounds simple and
intuitive, but the author skillfully and excruciatingly describes the complexity
of the various economic theories that railroad builders tied their fantasies
and fortunes to. David Ricardo, Adam Smith and a pantheon of economists are featured
as are the various schools of economic thought -- laissez-faire, corporatists,
socialists, monopolists, Marxists, etc. The trick for me was seeing how the dilemma
of high fixed capital costs relate to our current service and finance-based economy.
I am sure Perelman would be writing about crypto currencies if he were writing
now.
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