The songs in this section deal with the stock market crash following the railway share bubble of the mid 1840s. They mainly represent the middle and upper class view of events. The poor, of course, being unable to indulge in financial speculation.

 Main Themes and Motifs

• Unscrupulous share dealers
• Naïve middle class investors
• Lower class investors acting 'above their station'

Chronology

1835-39
1840-44     119
1845-49     336; 327; 425; 553; 560; 562
1850-54
1855-59     329
1860-64

Historical Background

There were three periods of "railway mania"; the first being in the early 1820s. In 1824 20 schemes, worth a total of about £20 million were proposed. Most of them were never built.
During the mania of 1837 a new sort of investor was drawn into the market. Small shareholders began to chance their savings, or even the working capital from their businesses, on the value of railway shares. It was only too easy for them to get sucked in. In 1842, the Stockton & Darlington, Grand Junction, Liverpool & Manchester, London & Birmingham, and the York & North Midlands lines were all paying dividends of at least 10% of the share value; several other lines were paying 5% or more. The result was the third and most dramatic 'railway mania'
Many of these new investors were gullible and easily exploited by unscrupulous dealers who called them "flats". Proposals for new lines were based on wildly optimistic estimates of the expected volume of traffic and profit to be had. Some warning voices had been raised. In 1824 - even before the Stockton & Darlington had opened for business - George Stephenson worried that "the rage for railroads is so great the many will be laid in parts where they will not pay". Unscrupulous traders sold shares in lines that were wildly optimistic in their forecasts, and in fraudulent schemes for foreign railways that would never be built. The change in the character of the investors was accompanied by a huge increase in the amount invested. The aristocrats of the boom of 1825 invested £170 thousand in railways. When people of the middling sort put their stakes on to the table, the investment grew to £67 million by 1844.
Parliament was overwhelmed by railway bills. In 1844 Parliament sat on 103 days between 1st February and 5th September and was presented with 240 railways bills; more than two bills per day. [ref Hansard]. There was no framework of law to guide MPs in their discussions. From February to August 1845 - the only period during which parliament sat that year - they approved a further 2,816 miles of new railways - equal to all the mileage approved between 1821 and 1843. There was no national plan to dictate where railways should be built, nor any need to demonstrate the engineering skills or financial know-how; anyone could build a railway anywhere. [atlas of railway history]. Shares became a huge speculative bubble. Initially investors not required to put up cash but only promise to subscribe in return for an option. These promises (scrip) were sold on the market. Subscribers often signed up with the intention of immediately selling.
The difficulties - and hence the costs and timescales - of railway construction were underestimated. For example; the original estimate for Great Western Railway was £2.5 million but its actual cost was £6 million. Much of the extra cost arising from Brunel's insistence on having "perfect flats to work upon". The line was known as Brunel's billiard table". When share prices boomed in the early 1840s, the gravy-train had already left the station; the most profitable routes were already in operation or being built. In order to keep the shareholders sweet, company directors resorted to cooking the books so that dividends could be paid.
In October 1845 share prices fell but there were several minor peaks throughout 1846 that presumably served to maintain enthusiasm for railway investment. During that year parliament approved 4,541 miles of line. In 1847, 6.7% national income was invested in railways - about 2/3 of value of all domestic exports and more than twice the Bank of England's bullion reserve in the decade. And then share prices began an inexorable fall that lasted until 1850. Although parliament approved 1,295 miles during 1847, many were never built.
The new investors expected company directors to be as good as their word in their business dealings. When their investments more than halved in value in 1846 and 1847 they wanted to know why and were horrified to discover that they were the victims of sharp practice: practices that were however, perfectly legal. In 1849 the government set up the Audit Committee on Railway Accounts but there were so many Members of Parliament with shares in railway companies that it proved almost impossible to pass any laws to improve standards in railway accounting.
The most infamous villain of Railway Mani was George Hudson "the Railway King". The Hudson was made to resign from many of his company directorships and to repay large sums of money which he had misappropriated. However he continued as a member of parliament (being returned for Sunderland in 1847). He could not be arrested for debt while the House of Commons was in session, but in between sessions he went to France and Spain in order to evade his creditors. Hudson was unscrupulous and by all accounts an unpleasant fellow but he was not alone in his wrong-doing. He was a self-made man - at the height of his fortune Hudson paid the 6th Duke of Devonshire £475 thousand for Londesborough Hall, and as such was the object of much snobbery and a particular target for satirists like the class-conscious Thackeray. The historian F S Williams commented (while Hudson was still living) that
"Mr Hudson is neither better nor worse than the morality of 1845. He rose to wealth and importance at an immoral period; he was the creature of an immoral system; he was wafted into fortune upon the wave of a popular mania; he was elevated into the directorship of railway speculation in an unwholesome ferment of popular cupidity, pervading all ranks and conditions of men".
[F.S. William Our Iron Roads 1852]
The impact of the crash effected the popular perception of railways and especially railway directors and investors for a decade. Lewis Carroll's nonsense poem The Hunting of the Snark published in 1876 - 30 years after the Mania bubble burst - includes the line "You may threaten its life with a railway-share"

References