An asylum of railway lunatics

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.

Maybe the ridiculous and patently uneconomic proposals were a sign that things were going too far. The ‘Direct Great Western’, for example, would stretch in as perfectly straight a manner as possible from Reading to Land’s End, cavalierly disregarding the fact that no one lived at the tip of Cornwall and few along the proposed route. A mini-mania for direct routes would see proposals for a ‘Harwich, Oxford and Bristol Direct’ and a ‘Cheltenham, Oxford and Brighton’ direct.

What had caused the railway boom? Partially, it was fuelled by the availability of money; the 1840s saw more money available for investment than the previous decade. Interest rates had plummeted and savers sought better returns by investing in railways. They seemed a solid investment: share prices rose, returns were, at first, decent and savers could see physical evidence of their investment as lines forged through all parts of the island.

The Mania was pumped by an eager public, a excitable press (benefitting from lucrative advertising of prospectuses) and a thoroughly corrupt compact between speculators and Westminster. Hudson maintained a slush fund for bribing MPs. Many of those parliamentarians who were not bribed were still heavily involved as shareholders and directors.

A sense that everyone was involved was invoked in a Punch cartoon, with Queen Victoria asking her husband Prince Albert whether he had any railway shares. The frenzy was well described by literary figures, including Charles Reade in Hard Cash who mocked the desperate greed for shares in any railway enterprise:

“High and low scrambled for the shares, even when the projected line was to run from the town of Nought to the village of Nothing across a goose common.”

One judge was even moved to declare that: “the country is an asylum of railway lunatics”.

The bursting of the bubble came as a period of financial reckoning. The social, economic and personal repercussions were terrible: it was estimated that £230 million had been lost, half the UK’s national income. Amongst the casualties were the Brontë sisters, although Charlotte, writing in 1849, was phlegmatic and philosophical in the face of her losses:

“The business is certainly very bad; worse than I thought, and much worse than my father has any idea of … However the matter may terminate, I ought perhaps to be rather thankful than dissatisfied. When I look at my own case, and compare it with that of thousands besides, I scarcely see room for a murmur. Many, very many, are by the late strange railway system deprived almost of their daily bread. Such then as have only lost provision laid up for the future, should take care how they complain.”

The crash’s impact on Britain’s upper and middle classes was told with characteristic melodrama by John Francis in A History of the English Railways:

“no other panic was ever so fatal to the middle class. It reached every hearth, it saddened every heart in the metropolis. Entire families were ruined. There was scarcely an important town in England but what beheld some wretched suicide. Daughters, delicately nurtured, went out to seek their bread; sons were recalled from academies; households were separated, homes were desecrated by the emissaries of the law.”

The mighty were brought low and the mightiest of all, George Hudson, the railway king, ended up in a debtor’s prison in York.