decorated initial 'R'ailway Mania of the 1840s has many parallels to the bust of the 1990s. In both cases people invested, foolishly often more than they could afford, in dramatically innovative new technologies that promised to make changes in the way we live and work — and in the end actually did so. Although some of the financial losses resulted from outright fraud, probably more money was lost through simple bad business practice: inadequate initial financing, poor planning, and little attention paid to the question of whether the technology could do what entrepreneurs claimed it could or even if anyone wanted it to do so. For example, one of the justifications for constructing astonishingly expensive large stations and lines leading to them in the center of major cities was that they would supposedly permit low-cost shipping of essential goods, such as coal and fuel, that would benefit the poorer classes and thus demonstrate social responsibility benefit society as a whole. Unfortunately, to pay for the enormous cost of construction railways had to raise rates, thereby making the low-cost shipping of necessities impossible. Another instance of poor bad planning appears in the creation of stations or entire lines for which there turned out to be little need.

The seriousness of the Railway Mania derives in part from the fact that

in the investment booms of 1837 and 1846 . . . the whole character of the investing class changed. An entirely new range of small shareholders pressed forward to offer their savings, or even the working capital from their businesses. . . . Because of the relatively high unit cost of theses shares, it can be assumed that the majority, if not all of this numerous group were from the middle class, were politically enfranchised, and therefore proportionately influential in making their disappointment felt when they saw their investments more than halved in value in 1846 and 1847. Their resentment was increased by the knowledge that a great part of their loss could be assigned not to legitimate business miscalculations but to the sharp practices . . . [such as] misleading prospectuses, payments of dividends out of capital, rigged Board Meetings, accounts "audited by daring amateurs." [Kellett, 29]

The Railway Mania that affected the United Kingdom saw many forms of dishonest practice ranging from careless estimates of costs to outright fraud, many forms of which involved stocks and bonds. In the earliest days of nineteenth-century capitalism, Great Britain did not have limited companies, which meant in practice that if an investor bought, say, £500 worth of bonds and the managers of the company later declared that constructing the railroad line actually cost twice as much as initially thought, the investor had to pay additional funds in proportion to his or her ownership in the company or forfeit his or her shares. Managers who worked essentially without oversight could claim losses, thereby drive down the value of the stock, and then take control of the railway for a tiny fraction of its actual cost and value. Another form of sharp practice, shown in great detail by Trollope in The Way We Live Now, involved floating a stock company, watching its stock rise, and then selling out before the company ever turned a profit or in some cases before it even produced a product.

Sounding much like Carlyle (who liked to use the word "whirligig"), Charles Reade in Hard Cash describes the kind of investing frenzy England had not seen since the South Sea Bubble.

When this sober state of things had endured some time, there came a year that money was loose, and a speculative fever due in the whirligig of time. Then railways bubbled. New ones were advertised, fifty a month, and all went to a premium. 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. The flame spread, fanned by prospectus and advertisement, two mines of glowing fiction, compared with which the legitimate article is a mere tissue of understatements; princes sat in railway tenders, and clove the air like the birds whose effigies surmount their armorials; our stiffest Peers relaxed into Boards [of Directors]; Bishops warned their clergy against avarice, and buttered Hudson an inch thick for shares; and turned their little aprons into great pockets; men, stainless hitherto, put down their infants, nurses included, as independent subscribers, and bagged the coupons.

Wilkie Collins's No Name shows the effects of such investing on Captain Wragge:

The railway mania of that famous year had attacked even the wary Wragge; had withdrawn him from his customary pursuits; and had left him prostrate in the end, like many a better man. He had lost his clerical appearance — he had faded with the autumn leaves. His crape hat-band had put itself in brown mourning for its own bereavement of black. His dingy white collar and cravat had died the death of old linen, and had gone to their long home at the paper-maker's, to live again one day in quires at a stationer's shop. A gray shooting-jacket in the last stage of woolen atrophy replaced the black frock coat of former times, and, like a faithful servant, kept the dark secret of its master's linen from the eyes of a prying world. From top to toe every square inch of the captain's clothing was altered for the worse; but the man himself remained unchanged — superior to all forms of moral mildew, impervious to the action of social rust.

Nothing could help the often amateurish business practices of many of the railways except failure and consolidation, but Parliament eventually passed laws curbing certain kinds of fraud, the battle for which often had to overcome what came to be known as the Railway interest in the Houses of Commons and Lords. According to Kellett, the owners of railways, contractors, engineers, and surveyors formed the so-called Railway interest in Parliament, which varied in numbers between "50 and 150 M.P.s. Some had already become directors of railways before they entered Parliament; others were elected first and received invitations to the boardrooom afterwards" (74).

Related Materials


Arnold, A. J. and S. M. McCartney. George Hudson: The Rise and Fall of the Railway King. London and New York: Hambeldon and London, 2004

A new book about one of the most famous — and infamous — figures of the railway age who served as the basis of works by Carlyle, Dickens, Trollope, and others [GPL].

Kellett, John R. Railways and Victorian Cities. London: Routledge & Kegan Paul, 1979; Toronto: U. of Toronto Press, 1979.

The essential book for anyone who wants to learn about the relations of Victorian railways to contemporary government, industry, finance, urban life, and so on, Kellett's volume is packed with quotations from primary sources, including parliamentary reports and contemporary periodicals; it also has valuable maps and illustrations [GPL].

Lewin, Henry Grote. The Railway Mania and Its Aftermath, 1845-1852. London: Railway Gazette, 1936.

Last modified 13 March 2014