The 1840s Railway Mania
In the 1840s, Britain was at the height of the industrial revolution, and inexpensive lending rates stimulated investment. Public money moved back into joint-stock enterprises as the middle class perceived better returns than government bonds. Early railway companies-built track and charged tolls, making them a reliable investment. Existing railroad companies were profitable and paid higher dividends than other equities. The Bubble Act was repealed, allowing new businesses. Businessmen developed railways across the rapidly industrializing British state. These corporations just needed Parliament’s permission to install track. As is common in manias, lawmakers invested in the companies they were supposed to control and rubber-stamped railway licenses without considering the financial sustainability of the new lines. The public bought railroad stocks, driving up prices far above business reality. In 1850, Britain possessed 6,600 miles of track between London and Wales. Stock prices were unrelated to railroads’ profits. Opening new lines became less profitable as more railroads were established. Huge rewards vanished once the market settled. Many people lost their life savings in these ventures.