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Entry 190 of 240Economic

Railway Mania

1845–1847 CE/British Isles/Britain
Today BritainSpan Victorian Britain · 1837–1901

Parliament let anyone propose a railway, newspapers ran pages of prospectuses, and the middle classes — clergymen, widows, Charlotte Brontë among them — poured savings into schemes for lines that were never surveyed and often never built. Investors paid a deposit and owed the rest on call; when the calls came and the money was gone, they were ruined. At the peak, proposed railways would have cost roughly twice the nation's annual income. About a third of the approved lines were never constructed, and the ones that were built are largely the network Britain still uses.

◆ Worth knowingThe mania's central figure, George Hudson, controlled a third of Britain's rail and paid dividends out of capital rather than profits — an arrangement that works until it doesn't. He died in obscurity; the tracks he laid are still carrying trains.
◆ The mechanismMania & panic

A speculative belief detaches asset prices from fundamentals; the belief breaks and prices collapse.

Also: Debt / credit cycle · Labor displacement

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