Revisiting the British railway ‘mania’ of 1845–1846 with Marx’s theory of crises – was it a ‘great railway under depreciation swindle’?

The British railway ‘mania’ of 1845–1846 remains a puzzle. Building on Marx’s observation that it was a ‘great railway swindle’, Bryer proposed a ‘swindle hypothesis’ that underlying this ‘mania’ was a ‘social conspiracy’ by the London wealthy, who orchestrated the boom and bust, centrally by not defining profit, allowing directors to manipulate accounts and ‘swindle’ investors, who incurred large losses. This study examines counter-arguments that directors did not systematically manipulate accounts by employing Marx’s theory of crises and new evidence to explain the ‘mania’. It investigates a revised hypothesis, that the ‘social conspiracy’ of history, Britain’s transition from landed, commercial and money capitalism, to industrial capitalism, produced the conditions that facilitated the ‘swindle’ underlying the ‘mania’. The transition increased the forces of production, multiplied by railways, which generated intra-class conflict during the 1840s over the ‘mode-of-exploitation’ between the dominant ‘gentlemanly’ and emergent ‘industrial’ capitalists. Basing regulation on gentlemanly capitalists’ political economy allowed railway directors to resist a falling rate of profit, ‘swindling’ investors by unscrupulously understating depreciation. The author supports this story by reanalysing accounting history and comparing actual with required charges derived from modelling aggregate capital expenditures, and concludes that the revised hypothesis should be on accounting historians’ agenda.