The Cinder Buggy - part 21 - Chapters XXXVI, XXXVII and XXXVIII; F. A. Hayek; W.H. Hutt; Capitalism and the Historians
Click here for Parts 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20 of my review of The Cinder Buggy.
I had written in part 20 that the end of Chapter XXXV seemed to deviate from the plot with apparently unrelated matter that leads the story in a new direction with new characters. From reading Chapter XXXVI, it appears that these concerns were unfounded, as Chapter XXXV appears to have set the stage for Chapter XXXVI, which takes the original story to a new level.
Between Chapters XXXV and XXXVI, Garrett bridges the gap between (1) compulsive gamblers that cannot stop betting on horses and (2) owners of large companies, where the company's incredible value does not truly enrich the owner because the company is too large to be sold. Both types of people are trapped:
. . . and there seemed no way either to quit or get out. If you had all the wealth in the world you could not sell it. There would be no one to buy it. In principle that was their problem. If they could sell out they would be millionaires. But where was there anybody with money enough to buy them out?[p. 301]. Garrett's (and John's) solution was intended to take the story of steel in America to new heights. A modern reader would lament that steel companies of the past 40 years have achieved the opposite of what John was attempting. However it would turn out for John, it was obvious that the characters had come a long way from the original iron furnaces of New Damascus.
At this point Garrett also introduces the concept of the Wall Street speculator. Speculators and stock/commodity price manipulators played a major role in the plots of both Satan's Bushel and The Driver. Despite the complexity involved in speculation, Garrett was very comfortable with this subject and the type of events depicted in Chapter XXXVI . Speculators have served as both the heroes and neutral characters in Garrett's works. They often, as here, play the role of advancing the action toward a conclusion more quickly.
Chapter XXXVII integrates the events of Chapter XXXVI into the old plot involving the old characters . It becomes apparent at this point that Garrett, instead of taking the plot in a new direction, has continued the plot in a more complicated fashion with a new element. Chapter XXXVII gives the reader the feeling of experiencing the "calm before the storm," as the book proceeds to its final few chapters with good things happening to the major characters.
Chapter XXXVIII is a continuation of Chapter XXXVII, only on a broader scale. The financial prospects for the major characters look better than ever, as the steel industry continues to grow. Garrett tries to place steel in perspective with a statement that could not be fully comprehended until our own time:
Nobody knew how big it should be nor could tell by looking at it what stage it was in. Not until afterward.[p. 322] [emphasis added]. This quote might fall into the category of unintended irony. I am not sure if Garrett has an "afterward" planned for some point in the rest of the book. I know that since the mid-1970's, the United States has been living in the "afterward" of the steel industry. I lament that Garrett is not around to place the 1970's and beyond into the proper context.
Garrett's description of the growth of the steel industry stands in sharp contrast to the accepted doctrine in modern textbooks. Textbooks describe steel (and other) "trusts" creating monopolies and being somehow "bad." The modern student is left with a vague impression of big business needing government regulation to avoid the dreaded "monopoly." Garrett's pre-New Deal description of events would surprise those whose only exposure to industrialism came from modern textbooks:
Minor groups were continuously springing up at preciesly the wrong time. They generally smashed up or had to be bought out by the others to save themselves from ruinous competition. The steel age cared nothing about profits. All it wanted was steel - more and more and more.[p. 323]. Garrett goes on to write that specialization in the steel industry began and "only intensified the competition." [p. 323]. But the specialty steel companies began to form trusts for the sake of preserving profitability:
So there came to be a steel pipe trust, a sheet steel trust, a bridge and structural steel trust, a tin plate trust, a trust for everything; and matters became a great deal worse because some of the biggest mills, such as John's, were never in a trust and if the pipe trust or the structural steel trust got prices too high the independent mills would begin to make pipe or structural steel.[p. 324]. Garrett makes the same point as a few modern writers that have recognized the effect that competition and potential competition had on prices over the long term. Large companies might have enjoyed large profits for a short time, but high prices always attracted the threat of competition that would drive or hold down prices. Companies would come and go, but prices would ultimately reflect the threat of more competition.
The main characters did their part by producing steel rails at a lower cost than their competition. This ability gave them the "whip hand." [p. 322].
Establishment historians have long remained vague on the movement of actual prices and the effects of competition, while focusing on labor disputes and the supposed evils of wealth accumulation. One book I have seen cited (but have not read) for the purpose of refuting these attacks is Hayek's (and W.H. Hutt's) Capitalism and the Historians:
I know from experience the treatment that modern text writers give to this era. I spent my high school (and junior high school) years being bombarded with propaganda. The text writers were consumed by vague attacks using buzzwords such as "monopoly." I am curious as to how pervasive was this tone during the early 1920's, when Garrett wrote his books. Was he writing in response to an increasingly shrill anti-capitalist movement? Hayek's book might help with the answer.
Chapter XXXVIII is important for a complete understanding of the industrial revolution and the steel industry. Chapters VII, XIII, XXXIV and XXXVIII should be required reading in history classes. Even though Cinder Buggy is fiction, there is more truth in those chapters than in most allegedly nonfiction history textbooks. These chapters would serve as a supplement and a practical application of a free market based economic treatise. Without Garrett's writing, Americans will never fully understand what they lost when the steel industry shrank to its present level.
Chapter XXXVIII ends with mild foreshadowing of a continuation of the triangle plot.
Update - Click here for part 22.