Who is Henry M. Galt?

From TheAtlasphere.com

Review
Who is Henry M. Galt?
By Ed Younkins
Mar 14, 2005

The Driver, written in 1922, is a prime example of the literature of achievement. The author, Garet Garrett (1878-1954), had the ability to make economic, financial, and management processes come alive in novel form.

Not only is The Driver a compelling tale of high finance and Wall Street methods, it also paints a portrait of an efficacious and visionary man who uses reason to focus his enthusiasm on reality in his efforts to attain his goals.

As a financial journalist for several prominent papers, Garrett knew Wall Street well and wrote a series of novels portraying the morality of capitalism, production, and business activities. For many years, he exhibited his talents as a political commentator and essayist at the Saturday Evening Post. In fact, The Driver first appeared as a six-part series in the magazine.

The novel captures the essence of the progressive era of America that spanned the late 19th and early 20th centuries. During this period, industrialization and a wave of immigrants altered the fabric of American life which became increasingly urban, industrial, and specialized. This was a time of great social and economic development.

During this formative period, America’s agrarian society of farmers and small producers was transformed into an urban society in which the corporation became the dominant form of business organization. Steel and oil were in great demand, and national transportation and communications networks were being developed. This was a period of seemingly boundless expansion with unprecedented opportunities for entrepreneurs and speculators. Wall Street was beginning to develop, and railroads boomed as trains moved products from the resource-rich West to the East.

This was also a period of instability characterized by periods of boom and bust, and the fact that not all citizens shared in the new wealth and optimism. Mark Twain called this period the “Gilded Age” — a period that was glittering on the surface but tarnished and corrupt underneath. This age saw the rise of populist reformers who blamed greedy Robber Barons and speculators for society’s ills. Many people in society — especially those in government — were anti-business and anti-Wall Street, and called for government intervention to cure the problems that had developed during the great industrial growth spurt of the late 19th century.

After the Panic of 1893, America suffered a severe economic depression resulting in mass unemployment. In response to this economic adversity, in the winter of 1893-94, Jacob S. Coxey, an American social reformer and populist leader from Massillon, Ohio, proposed a recovery program that included Congressional enactment of a large increase in the amount of legal tender in circulation that could be spent on public works, thus providing jobs for the unemployed. In other words, he advocated public works financed by fiat money. Coxey formed an organization called the Commonwealth of Christ and assembled an army of unemployed men. On Easter Sunday, March 25, 1894, he led an army of 100 unemployed men on a march scheduled to arrive in Washington, D.C. on May 1 for a huge demonstration petitioning Congress for measures to alleviate distress and unemployment. Coxey’s Army wanted to demand from Congress a law by which unlimited prosperity and human happiness might be established on earth. They thought that people would work and be prosperous if Congress created an abundant amount of fiat or “democratic” money. Coxey’s Army grew to only 500 participants, and when they arrived in D.C. the leaders were arrested and the army was quickly disbanded.

According to Garrett, naïve trust in the power of words to command reality is found in all mass delusions. For example, in 1894, populists pressured Congress to enact a bi-metallic system of money by declaring that gold and silver were equal in dollar value, and that gold and silver dollars should be interchangeable. The problem was that gold remained more valuable to people, prompting them to hoard it or to sell it in Europe. As a result, the Treasury’s gold fund was continually depleted.

The nameless first-person narrator of The Driver is a reporter for an undisclosed newspaper who follows Coxey’s Army to Washington, D.C. This correspondent-narrator is selected by a group of 43 reporters to send accurate reports regarding the march of Coxey’s Army to Mr. Valentine, President of the Great Midwestern Railroad headquartered in New York City.

The narrator, who acquires the nickname of “Coxey,” gains a position as personal secretary to Valentine and meets Henry M. Galt, a Wall Street speculator who has an intense interest in the Great Midwestern. After meeting Galt, “Coxey” becomes Galt’s friend and a constant presence in Galt’s business and personal life. It is through the eyes of this reporter-narrator that readers understand the career, struggles, and evolution of a little-known Wall Street speculator and risk-taker to king of Wall Street, and potential economic dictator of the United States. Unfortunately, Garrett also includes a disappointing, confusing, frustrating, and mostly irrelevant subplot dealing with Galt’s family.

Galt, an eccentric and brilliant broker, floor trader, and member of the stock exchange believes in the future of the Great Midwestern Railroad, continually buys stock in it with his and his family’s money, and becomes one of its largest stockholders. He knows more about the Great Midwestern than anyone else including its President, Mr. Valentine, a weak, inefficient, and non-confident man who runs the business into bankruptcy.

Although Valentine is appointed as receiver, Galt intelligently and diligently studies records, data, and statistics to develop a strategic plan of reorganization to save and rebuild the Great Midwestern. His creative plan encompasses finance, physical resources, and business policy, reflects his great knowledge of the railroad and its properties, and is embraced by the Board. He thereby exhibits how invaluable he is to the railroad.

Galt knows that after the reorganization he will be one of ten men in the boardroom and that “everything else follows from that.” Not only does he become a member of the Board of Directors, he also manages to get himself elected as its Chairman using his influence with several men who are indebted to him. The Great Midwestern Railroad Company thus lives on, and progresses under the new name of the Great Midwestern Railway Company. In time, Galt overthrows Valentine, thereby becoming the company’s President.

Galt overcomes obstacles by driving ahead with aggressive insensitivity and fanatic intentness, all the time keeping focused on his goal and taking practical rational steps in its pursuit. He harshly dismisses employees who hinder the company and rewards employees who advance it. Carefully calculating his every action, Galt continually persists to improve the railroad. He makes huge investments in assets, including new tracks, engines, cars, rails, land, road improvements, and equipment. He carefully considers the relative merits of different kinds of equipment, operational problems, the cost of capital, upkeep, and so on. Galt employs an innovative profile map identifying bad grades. As a consequence, he develops better routes by cutting steep grades and by reducing or eliminating curves. He ultimately rebuilds the railroad from end to end.

Through his intelligence, hard work, and determination, he is able to take a failing company and revitalize it. One of his key moves is to issue new securities using the proceeds to invest in the reconstruction of the Great Midwestern. He later uses the company’s profits to buy large interests in other companies. Through the reinvestment of profits he is able to make his railroad stronger.

Unlike many other businessmen, Galt does not begin by asking how his company can be made to earn a certain rate of profit. Rather, he asks how the Great Midwestern can be built into the greatest transportation company in the world. He knows with that accomplished, the profits will take care of themselves.

Galt is committed to reality and action, and the need to transform ideas into concrete form. He works on the premise that once something happens, it becomes an irreversible fact, and every other fact in the universe must adjust itself to that one fact. In other words, a man must use his unique attribute — reason — to apprehend the natural order by which he is bound. It is evident that Galt has confidence in his capacity to deal with the world through the implementation of appropriate and efficacious ideas and measures.

He invests all of himself, as well as all of his savings, into the Great Midwestern. He has a tremendous work ethic, as evidenced by his passionate expenditure of time and mental and physical effort in the unwavering pursuit of his dream of building a great railroad. Galt has the power to move men’s minds, persuade them, command them, and reward them. He has the power to imagine what could be, to bring his vision into reality, and to create wealth. He is seen as an elemental force. Regarding Galt, the novel’s narrator says, “The sight of inspired craftsmanship is irresistible to men.”

After rebuilding the Great Midwestern, Galt leads the company into other ventures such as buying controlling interests in other railroads, as well as in investment and insurance companies, including the Orient and Pacific Railroad and the Security Life Insurance Company. As a result, he and his family become rich.

Galt wins, creates his empire, and makes enemies in the process. He is satiric and has the power to irritate people, and has no use for public opinion or government; he is contemptuous of politics. Galt knows nothing about society’s views and does not care about them. He has no time for the press, and does not engage in public relations.

Unfortunately, he greatly underestimates the force of public opinion. As a result, his family faces social ostracism, Wall Street turns against him, and he is attacked under the antitrust act that had been enacted as special interest regulation to protect less-efficient firms.

After at time Galt’s family gains some acceptance, and Galt is able to take actions to reverse the decline in the price of the Great Midwestern’s stock. An alarmed Congress resolves to investigate Galt and his business dealings, and summons him to appear before a Committee of the House. Of course, as expected by now by the reader, Galt defends himself magnificently. He tells the Committee that he is a farmer who farms the country, fertilizes it with money, sows it with more money, reaps profits, and sows the profits back again.

Galt is then asked by the Committee if he, as chairman of the finance committee of Security Life Insurance Company, recommends that securities of the Great Midwestern be purchased. He answers yes, and explains that he does not know of a better investment. He is then asked about the disgruntled minority shareholders of the Orient and Pacific who were upset with the Great Midwestern for exercising the power of a majority shareholder. Galt simply explains that he is willing to buy them out at any time.

He goes on to explain that he built his empire by buying a bankrupt company and equipment, property, and stock in other companies when they were selling at low prices. He bought things that nobody else wanted, saw what others did not see, worked hard, managed well, and created great wealth. At this point he announces that in the next year he will be spending $500,000,000 (an amount equal to half the national debt at that time) for double tracking, grade reductions, new equipment, and larger terminals. Galt’s testimony turns public opinion overwhelmingly in his favor.

Sadly, Galt suffers a stroke and collapses after his ordeal with the committee. His health deteriorates and he becomes bed-ridden. Still, his mind is clear, and he continues to build for the future. He even has maps and charts drawn on the ceiling so that he can see them. His dream for a pan-American railroad connecting the North and South American continents survive him in the form of an idea. Galt dies a well-respected hero.

It is interesting to note that the character of Henry M. Galt was modeled on 19th century railroad czar and turnaround specialist, Edward H. Harriman (1848-1909). Harriman had bought a seat on the New York Stock Exchange at age 22. By 1883, he sat on the board of the Illinois Central and initiated its huge expansion program. In 1898 he took over and rescued the Union Pacific, a property in receivership and near collapse, and shortly thereafter purchased the Southern Pacific and Central Pacific and saved the Erie. It was Harriman who established standards for locomotives, cars, bridges, structures, signals, and so on.

Although The Driver is flawed by its sketchy characterization and its bewildering and extraneous subplot involving Galt’s family, it is still to be recommended for the portrait it paints of a hard working, visionary, passionate, loyal, and competent businessman, and for the sense of the “drive of the age” that it conveys. It is certainly not in the same class as Atlas Shrugged, but what is? Sadly, it is out of print, but it is a good book and a quick read if you are fortunate enough to find a copy.

Ed Younkins is a Professor of Accountancy at Wheeling Jesuit University, and is also the author of Capitalism and Commerce: Conceptual Foundations of Free Enterprise. Interested readers can find many more of his essays on his web site.

This article was originally published at SOLO HQ.

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