Book Reviews

A REVIEWER'SNOTEBOOK JOHN CHAMBERLAIN NoWay to Run a Railroad Stephen Salsbury's No Way to Run a Railroad: The Untold Story of the Penn Central Crisis (McGraw-Hill Book Company, 1221 Avenue of the Americas, New York, N.Y., 10020, 363 pp., $19.95) is a story within a story. The author defines his fasci nating and tortuous book as a busi ness biography of David Bevan, the chief financial officer of the Penn Central Railroad who struggled against a thousand odds to avert America's largest business failure. Most of the time Mr. Salsbury, who once taught at the University of Delaware and now teaches in Aus tralia, manages the perspective of a close-up. You see Mr. Bevan, the common sense protagonist, as a le gitimate tragic hero who might have saved the railroad if only he had had more understanding superiors. 1 QA The perspective doesn't hold when, at odd moments, Mr. Salsbury looks at the bigger picture. Sensible though he may have been, David Bevan's efforts to stave off the bankruptcy of the Penn Central merger were doomed by a mind-set that took hold in the United States before he was born. Nobody could have saved the Penn Central as long as our Statist philosophy of regulation prevailed.

Mr. Salsbury casts the two chief of ficers of the merged railroads, Stuart Saunders of the Pennsy and Alfred Perlman of the New York Central, as obstructionist villains. But they were not villains, they were merely men who lacked the tools to reverse an historic situation. If they had lis tened to Bevan they might have failed with at least a show of honor. But they would still have been unNO WAY TO RUN A RAILROAD 187 able to escape the nemesis of a Washington, D.C., that does not be lieve in giving enterprisers freedom to compete. David Bevan came to the Penn syIvania Railroad with a back ground in finance. He was properly appalled at methods of bookkeeping that did not permit accurate analy sis and computerization. Budgets were haphazard affairs, and esti mates of cash flow had to be made by guesswork that might be shrewd or might not. The old Pennsy had been run by operators who couldn't go wrong for the simple reason that coal and iron had to be moved by rail in hilly territory if they were to be moved at all. Capital improvements in these circumstances always paid off.

A Declining Business The great days were coming to an end when Bevan, who worked well with President James Symes, man aged to install modern methods of cost accounting and control. With declining business it became impor tant to know where the cash account stood before projecting such things as the rehabilitation of freight cars and the investment in diesels. Be van had considerable skill in money raising, but he did not push his wiz ardry beyond the ability of the rail road to pay its operating expenses. The trouble, as Mr. Salsbury sees it, is that Symes, and President Stuart Saunders iafter him, had the fixed idea that die only way to save the Pennsy for profits was to merge it with the New "York Central, which served much ofthe same Middle West market. But th¢re was no proper planning for the Ip.erger.The Pennsy had a decentralized system that was held together by Bevan's good meth ods of accounting, which let Phila delphia headquarters know what was going on in the boondocks. The Cen tral, on the other hand, was a cen tralized road that: somehow got along with ancient Interstate Commerce Commission bookkeeping that made no effort to help budget makers an ticipate the future. An added hazard 'was that Alfred Perlman, who had been brought in i from the West by Robert Young to! manage the Cen tral, didn't wan~ the merger any way.

What happened when the two roads were put together was utter chaos. Cars were lost, and customers vanished. Up to the time of the lrnerger the Pennsy was able to pay its bills out of the investment in eome earned by !its wholly-owned subsidiary, the Pennsylvania Com pany. David Bev~n had followed a diversification~rogram that was generally succes~ful. And both the Pennsy and the <Central had profit able real estate in New York City, where "air righ~s" over trackage (~ould be turned tQ good account. But the blunders in operation, magnified 188 THE FREEMAN March by employees who simply did not like to work together as a team, could not be compensated for by outside investments. PersonalClashes Part of the time David Bevan functioned as a Cassandra. As Pro fessor Thomas Cochran notes in his foreword to the book, Cassandras are never believed. But, unlike the orig inal Cassandra, Bevan had a free will streak. At one point he had ar ranged to take early retirement, but he allowed himself to be persuaded that he might help avert doom by hanging on. He felt a loyalty to his benefactor, Richard Mellon, a Pennsy board member who asked him not to resign.

Mr. Salsbury makes it high per sonal drama, with the good guy (Be van) standing off the bad guys (Saunders and Perlman). But the personal drama collapses when the author, in a mournful commentary, remarks that "what no one knew in 1969 and early 1970 was the long term and severe nature of the col lapse of the northeastern rail roads .... It was evident that the Pennsylvania and the New York Central had long been marginal en terprises. It was also clear these railroads suffered from the general decline of the Northeast and were further damaged by Eisenhower's massive highway program, which diverted much of the high-value traffic still remaining in the region. Hindsight tells us that the operat ing failure created large operating losses ... " The difficulties went far deeper than anything connected with cost accountancy or cash flow pro jections. At one point the Pennsy, following Bevan's diversification ideas, invested in something called Executive Jet, a company that pro vided jet transport for corporations which lacked the resources to own jets of their own. Saunders, no vil lain at this point, caught a vision of a future given over to well-rounded transportation enterprises. Says Mr.

Salsbury, "he felt that it was only a matter of time before railroads would be allowed to control a thoroughly integrated transportation system that would mix trucks, pipelines, ships, inland barges and trains. To the north in Canada, the Canadian Pacific Railroad already did exactly that. In the West, Southern Pacific was coordinating trucks and pipe lines with its rail operations." So, on Mr. Salsbury's own show ing, Stuart Saunders wasn't quite a dummy. The big villain of the piece turns out to be government. If our regulators and antitrust zealots had only allowed transportation compa nies to expand into trucks, air planes, barges and pipelines at their own sweet will, we might have averted such bankruptcies as that of the Penn Central. ® 1982 OTHER BOOKS 189 WHEN WE ARE FREE Edited by LawrenceW. Reed and Dale M. Haywood (NorthwoodInstitutePress, Mid land, Michigan48640), 1981 403 pages- $15.50 paperback Reviewed by Brian Summers TEXTBOOKS supporting the freedom philosophy are few and far between.

Thus this book of readings, edited by two economics professors at the Northwood Institute, is a welcome addition to the literature offreedom. The readings consist of sixty es says, many of which first appeared in The Freeman. Leading off are several articles on property and the nature of man. Frank Chodorov ex amines the source of rights. Paul Poirot establishes the connection between property rights and human rights. And Roger Williams makes the case for treating all people as unique individuals. On this individualistic basis the role of government is examined, and different systems of economic orga nization are compared. Turning to history, Professor Reed describes the fall of Rome and draws some worri some modern parallels. Bettina Greaves shows how capitalism lib erated women, while Eric Brodin tells why he liberated himself from socialist Sweden. Ben Rogge, Hans Sennholz, and Ludwig von Mises describe the moral underpinnings of the free economy.

Several authors ~ispel myths of cap italism and exaJpine contemporary issues: immigration, energy, medi cal care, and for~ign policy. Finally, the essays conclude with Leonard Read's wise couQsel on the methods for promoting liOerty. This review can only hint at the range of topics cQvered. Such a wide selection, and c&reful organization, makes this an excellent choice as a primary text or for supplemental reading. We hop~ this book will see wide use in our n~tion's high schools and colleges. i HOW DO WE KNOW? by Leonard E. Read] (The Foundationfor,EconomicEducation, Inc., Irvington-on-H4dson,N.Y. 10533), 1981 117 pages- $6.00 Reviewedby Perry E. Gresham How Do We Knorp? is the catchy ti tIe for the latest book froJ:I:l the pro lificpen ofLeonarp E. Read. The book is a warm and g~ntle invitation to readers who wish to learn more about liberty. The titl~ might suggest a brief essay on epi~temology, but this iis far from the case. It is rather more 190 THE FREEMAN March of a modest testimony from a great man who has given his life to the pursuit of knowledge and under standing concerning individual freedom.

The cover of this striking little volume shows the face of an inquir ing person looking through the cir cular portion of a question mark. Many questions leap to the mind of a reader, the first being "Who is this Leonard Read?" The current volume of Who's Who in America shows him to have been born in Hubbardston, Michigan, September 26, 1898. Here were his school days and his first ef forts at business. After a short while as president of the Ann Arbor Produce Company, he became an or ganization executive for the U.S. Chamber of Commerce. His rare ability to work with people, his cre ative imagination, his tireless dili gence and his sterling integrity brought him to first place among his peers with the Chamber of Com merce and with other associations such as the Western Conference for Commercial and Trade Executives. Read is an inspiring leader who brings out the best in his associates.

Read was almost fifty when he de cided to give his life to the study of Iiberty. In 1946 he organized the Foundation for Economic Educa tion. This foundation is the length ened shadow of a man who exempli fies everything he writes concerning the study of human freedom as it applies to the field of political econ omy. To this concern he has invested his thought, his time and his genius. There is absolutely no arrogance in Leonard Read. This is his twenty eighth book on the practice of lib erty and yet he professes to know nothing. He is like Socrates who does not claim to be wise but loves wis dom with his total being. Those of us who have known him through these rolling years give testimony to the fact that his personality, his speaking and writing start a conta gious love of liberty. After fifty years in academics, my favorite quotation for high ceremo nies such as graduation and honors day comes from a student who said of his new degree awarded summa cum laude, "Nothing wilts as quickly as laurels that have been rested upon!" Read is pushing his middle eighties but he is not about to sit in the sun and disintegrate. He is like the Venerable Bede who, writing in his cold cell, answered the question, "Why do you write in these ad vanced years?" - and the brave old monk answered, "I do not want my students to believe a lie."

Every morning Read is at his typewriter whacking away, writing for the multitudes that look to him for the inspiration, knowledge and literature of liberty. His ideas are so cherished that his friends have said, "Why do you quote so many sources in your book?" (There are many quo1982 OTHER BOOKS 191 tations and 140 names.) On page three of How Do We Know?, Read answers the query, "I am often crit icized - in a friendly way - for so copiously quoting those whose wis dom is far superior to mine, Edmund Burke, for instance. 'Why don't you confine yourself to your own think ing?' My reason? Most individuals do not have available to them such resources as are available to us at FEE. So why not share the wisdom of seers - those who have seen what most of us have not - with freedom aspirants!" This wide-ranging little book deals with the pilgrimage toward a free political economy. The logic of the contents is a pleasant journey for the mind. It begins by urging us to read the great books; it warns against the corruptive influence of coercive power; it moves through the fields of happiness when one finds truth. He then sees America as an experiment in freedom based on morality, as the market works and the ideas possess the people.

He calls us to respond to our vi sions of greatness held before us by the prophets and seers. He argues for self-realization and stresses the importance of all-out dedication. He takes interest in education, peers into the future and, in the culminating chapter, "Strive To Be A Noble man," he challenges us to become honorable before God and human ity. Read is not content to argue for integrity. He lives it. This is suc eeeded by charity, intelligence, jus tice, love and h\llmility, which he lmentions on page' fifty-eight. He is a man of single mi:nd and calls other people to single-minded pursuit of truth and freedom. He has little r~gard for the pre tentious. His lovely aphorism is "The know-it-all is a It.now-nothing." He is poignantly aw(jre of his own limi tation. On page n~nety-three he says, "Who am I? Herfs one part of the answer: I am one octillion atoms 1 followed by twenty-seven zeros -- a number diffidult to grasp unless we use our imagination. Cover the surface of this eaIith - land and sea -- with dried pea~ to a depth of four feet and their nu~ber would fall far, far short of an octillion. Go out into the universe and qover 250,000 other earth-sized planets with four feet of peas and that woiIld be the number of atoms in my njlake-up. Mystery?

The atom? It is sq small that thirty trillion atoms could be placed on the period at the en~ of this sentence without overlappilng. Blow an atom up to one hundred yards in diameter and what do you behold? Radiant energy in the form of electrons, neu trons and the like, in wave se quences flying ab<j)utat the speed of light. In the center is the atomic nu cleus which, after being thus ex panded, is the size;of a pinhead. This and this alone is "stuff' and· no one 192 THE FREEMAN knows what it is, except that it ap pears 'solid.' All else is empty space. Mystery?" Out of this sense of mystery, how ever, come his sensible and practical doctrines in the field of political economy.He argues for sound money, limited government, individual freedom, reliance on the market, the importance of thrift, and the virtues of self-reliance. The person who takes an evening to read this book is not only in the presence of Leonard Read, but in the presence of the world's greatest peo ple in time and space, who offer their ideas on how to improve the quality of life in this fair land. There is a suggestion here that America can continue to be an exemplar of lib erty for the rest of the world.

The abiding influence· of Leonard Read could make this new American Dream come true! i HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $4.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVINGTON-ON-HUDSON, NEW YORK 10533 the Freeman VOL. 32, NO. 4 • APRIL 1982 The Relics of Intervention: I. Populism ClarenceB. Carson 195 Signs today of the impact of the Populist movement of the late 1800s. Freedomand "Social-Democracy" Earl P. Holt III 207 Why economic freedom underlies all other expressions of personal choice. Scalping and Envy A careful look at the popular resentment against middleman. Gary North most helpful 214 Cutting the Budget Dennis Bechara 225 Examining the roadblocks against those who would curtail government spending and control. Teachingsof Soviet Experience Mark Hendrickson 229 Solzhenitsyn's Warningto the West affords important lessons to free men everywhere. Toward Radical Monetary Reform LawrenceW. Reed 239 A suggestion for putting monetary management back into the marketplace.