This chapter shows readers the way things work in a mixed economy that’s moving toward socialism. Private property exists nominally, but the state has steadily increasing control over its use and distribution. In such a system, productive businessmen like Hank Rearden and Dan Conway have no rights; they are at the mercy of any inferior competitor with political friends. Only capitalism provides the economic freedom that great producers like Rearden and Conway require. Under a capitalist society, their productive activities would be unrestricted by government bureaucrats and envious competitors.
The men who meet at the beginning of this chapter insist that the preservation of the steel industry “as a whole” is vital to the public welfare. Therefore, Boyle’s virtually bankrupt company must not be allowed to fail. It must be propped up by stripping Rearden of his ore mines and turning them over to Paul Larkin, who will please the Washington planners by giving Boyle first priority for the ore. Rearden’s productive company will be sacrificed to Boyle’s unproductive one, in keeping with the moral premise underlying socialism, which states that the strong must serve the weak.
As the government acquires power over an economy, the level of corruption necessarily rises. This rise in corruption occurs because, as the state gains power to dispense economic favors, it attracts power-seekers like Wesley Mouch and enables incompetent businessmen like Jim Taggart and Orren Boyle to exist parasitically off of competent men like Rearden. In a free market, where customers can choose unrestrictedly among competitors, customers select companies like Rearden’s and Dan Conway’s because they get the job done. In a free market, businesspeople like Boyle and Taggart go out of business. But in a state-dominated system, unprincipled businesspeople curry favor with power-seeking politicians, brokering corrupt deals that allow them to stay in business by means of legislation.
In contrast to these unprincipled and incompetent businessmen, Dagny fumes over the corruption and mindless incompetence of a statist economic system. As an engineer, she respects the facts. She makes business decisions based on facts, not political favors. She knows that Francisco d’Anconia showed no evidence to support his claim that the San Sebastian Mines contain any copper. Her brother Jim was eager to build a branch line to the mines at a cost of millions to the struggling railroad so that he could please his political “friends” in Washington. The government regards the branch line as a self-sacrificing, “public-spirited” action to aid the destitute Mexicans. As a result of Jim’s decision, Taggart Transcontinental will lose millions of dollars—money desperately needed to rebuild the collapsing Rio Norte Line and save the industrial enterprises of Colorado. Dagny tries to reason with her brother and with the men of Taggart Transcontinental’s board, but the government’s power over the railroad has become too great. She fights a losing battle.
This chapter also hints at Francisco d’Anconia’s past, implying that as a young man, he turned his extraordinary talents to industrial production and was fabulously successful. Jim’s remarks indicate that Dagny’s relationship with Francisco in the past may have been much closer than it is currently. This chapter raises questions about Francisco’s true nature, his motives, and his past relationship with Dagny. We don’t yet have answers to any of these questions.
