A group of Washington men that includes James Taggart, Orren Boyle, Wesley Mouch, Dr. Floyd Ferris, and Mr. Thompson (the Head of State) meet to discuss the ramifications of a proposed series of laws that would restrict economic change. Although worried about public backlash, the group decides to enact the laws, which are labeled Directive 10-289. The purpose of Directive 10-289 is to arrest the country's economic decline by freezing the economy in its current state. The directive makes it illegal for workers to leave their current jobs and prevents businessmen from closing their doors. It forbids the introduction of inventions or new products, and it requires companies to produce an amount of annual goods identical to the amount produced the previous year. All wages, prices, profits, and dividends are frozen, and every individual is obligated to spend as much as he did in the previous year. The directive also sets up a Unification Board to hear all disagreements arising from the new laws. The Unification Board's decisions on any issues that surface will be final.
Upon hearing that the directive has been enacted, Dagny immediately resigns, as do other people around the country who refuse to work either as a slave or a slave driver. Dagny retires to a hunting lodge in the mountains that she inherited from her father.
The directive also requires that all patents, including the one for Rearden Metal, be signed over to the government within two weeks. At the end of the two-week period, Rearden hasn't yet complied. Dr. Ferris comes to Rearden's office and tells him that if he doesn't sign, his affair with Dagny will be broadcast to the country, portraying Dagny as a slut. Rearden knows that if Dagny were present, she would not permit him to sign over the rights to his metal. But he also realizes the magnitude of his guilt. He knows that he should have immediately divorced Lillian and proclaimed to the world his love for Dagny. He can't allow Dagny to pay the price of his error, so he signs.
Directive 10-289 ends economic and personal freedom in the United States. The government now controls every aspect of an individual's economic life; it is a dictatorship. The best minds, including Dagny's, can't tolerate this change and choose to retreat.
But while the directive itself has an astounding impact, the most important event of this chapter is the steadily increasing liberation of Hank Rearden from the looters' moral code. Rearden has finally realized that he follows the code of life. He can mine ore, manufacture steel, create Rearden Metal, earn a fortune, make love to Dagny, and, in countless other ways, exult in his ability to live. Lillian and her allies can do none of these things. They can't produce steel or anything else. In fact, they couldn't even conceive of something as valuable as Rearden Metal. They are incapable of true love, and to them "friendship" denotes not affection and respect, but the opposite: mutual contempt and a desire to use each other to attain corrupt ends.
People such as Lillian, James Taggart, Wesley Mouch, and all the other looters can't survive on their own, and the purpose of the current government policies is to ensure that creative, productive people can't survive either. If Rearden's is the code of life, the government's is the code of death. He now understands the one error he's made — and its importance. He accepted the moral code of self-sacrifice, which convinced him that he had a duty to submit to suffering at the hands of Lillian, his family, and the politicians. By doing so, Rearden betrayed the code of life by which he's always lived, and he put his incomparable virtue in service to the code of death. He has made an enormous, though innocent, error, and he knows that he must pay for it, not Dagny. This is why he signs away the rights to Rearden Metal. He is now free forever from the code of death that has caused him so much undue suffering.
company union an organization of workers in a single company, not affiliated with any group of labor unions. The term generally implies control by the employers. In this novel, the term refers to the Rearden Steel Workers Union. Because Rearden demands the best labor force, he pays wages significantly higher than any union scale in the country.