THE WAY WE LIVE NOW

RMT helpline 0800 376 3706 :: march 2023 :: RMTnews 22 Following the great economic crash of 1873, the author Anthony Trollope wrote a biting satirical novel The Way We Live Now exposing the scandals, greed and speculation on railway construction that led to the devastating financial collapse. Trollope had just returned to England from Australia and was appalled by the overriding avarice and dishonesty that pervaded commercial, political, moral and intellectual life. The central figure in the book is the financier Augustus Melmotte said to be loosely based on 'King' Hudson an enormously wealthy railway speculator in the 1840s who had died abroad in disgrace in 1871. Melmotte sets up his office in the City of London and woos rich and powerful investors along with US entrepreneur, Hamilton K. Fisker, to float a company to construct a new railway line running from Salt Lake City in the United States to Mexico. Melmotte's goal was to ramp up the share price without paying any of his own money into the scheme itself, thus further enriching himself, regardless of whether the line was built or not…sound familiar? This seemingly risk- proof racket lures in greedy and gullible investors. It does not end well for Melmotte but not before he becomes MP for Westminster and immensely rich. The book accurately reveals the basis for the great depression which began when the stock market slumped in Europe. As a result, investors began to sell off investments they had in US railway projects. But railway companies had borrowed using bonds, which were debt securities specifying how much a company was borrowing and how much interest it would pay. When Europeans started offloading their rail bonds there were soon more bonds for sale than anyone wanted and rail companies could no longer find anyone who would lend them cash resulting in many investors and banks going bankrupt. When one of the biggest banks in New York City involved in rail construction Jay Cooke & Company went bust people ran to their banks demanding their money back. The panic spread to banks in Washington, Pennsylvania, New York, Virginia and Georgia, as well as to banks in the Midwest, including those in Indiana, Illinois, and Ohio. Nationwide, at least 100 banks failed. This collapse was disastrous for the economy and 89 of the country's 364 railways crashed into bankruptcy. A total of 18,000 businesses failed within two years. By 1876, unemployment had ballooned to over 14 per cent. This so-called long depression sparked the THE WAY WE LIVE NOW 150 years ago railway speculation led to global depression, growing racism, pay cuts and strike action by US rail workers STRIKE: workers blockade the locomotive engines at Martinsburg, West Virginia, 1877