It is now over four years since the bankruptcy of Lehman Brothers heralded the credit crunch and the start of the one of the deepest global recessions in history. We are well versed in warning stores of booms, busts and bubbles. The South Sea Bubble and the Wall Street Crash are well known examples of speculative bubbles bursting with catastrophic effect. Less well known, but similarly destructive, was the British ‘Railway Mania’ of the 1840s.
The warning signs were glaring and obvious in hindsight. In 1846, the British Parliament had authorised almost 5,000 miles of new railways. This single year’s allocation would amount to nearly half of the entire modern railway network. Thousands more miles had been authorised in the heady build up to this apogee.
Or perhaps it could be discerned from the vast quantities of capital being sunk into British railway projects during the increasingly frenzied 40s. By 1847, over £40 million had been invested and throughout the decade well over £150 million was raised in capital. This equates to some £380 billion in 2010 terms as an equivalent share of GDP. If all of the railway schemes put forward to Parliament had been authorised it would have needed £250 million of capital to build.