Train driver Chris Cubit on board the Locomotion No 1 replica at the Locomotion Museum in Shildon, County Durham, Friday, Sept. 26, 2025, on its first official journey in 200 years from the Locomotion Museum in Shildon to Darlington, as part of celebrations marking the 200th anniversary of British passenger rail services.AP/YONHAP
Kim Sung-jae
The author is a business administration professor at Furman University and the author of “The Story of Tariffs” (2025).
In September 1825, crowds gathered in Shildon, England, for the opening ceremony of the Stockton and Darlington Railway. “Locomotion No. 1,” the steam locomotive designed and built by George Stephenson, hissed as it pulled more than 30 railcars along the track. Tens of thousands of spectators cheered the spectacle. On the road beside the railway, horse-drawn carriages raced the train and briefly held the lead. The locomotive soon accelerated and easily overtook them, symbolizing the arrival of a transformative technology and the beginning of the end of the age of carriages.
Five years later, the Liverpool and Manchester Railway opened, linking the industrial city of Manchester with the port of Liverpool. The new line cut travel times from two days by carriage to just an hour and a half. Freight charges for cotton and coal, previously dominated by canal operators, fell by more than 30 percent. Passenger demand surged as shorter journeys created an entirely new railway industry. The commercially successful line consistently paid shareholders the legally permitted maximum dividend of 10 percent.
A widespread conviction took hold that railway shares guaranteed profits. Between 1843 and 1845, railway stock prices more than doubled, while some speculative issues increased more than fivefold. An unusual subscription system further fueled the frenzy. Investors could apply for newly issued shares by paying only 5 percent of the offering price. Because subscription certificates themselves were traded, investors could effectively take positions with leverage of up to twenty times.
The promise of extraordinary returns turned railway stocks into a national obsession. Speculation spread beyond aristocrats and the middle class to small merchants, domestic servants and even rural clergymen. At the height of the railway mania in the mid-1840s, investment in new railway projects amounted to nearly half of Britain’s gross domestic product.
In 1845, Parliament tightened regulations governing subscription deposits, while the Bank of England raised interest rates. As liquidity dried up, banks halted loans backed by railway shares. Investors rushed to sell in order to meet unpaid subscription obligations. By 1850, railway stocks had fallen 67 percent from their peak.
Britain’s railway boom offers important lessons for Korea’s capital markets. Over the past year, explosive investment in AI data centers and related infrastructure has driven semiconductor stocks sharply higher. Even previously uninterested investors have borrowed heavily to join the rush. The government’s recently announced three mega-projects envision semiconductor complexes and AI facilities requiring investments exceeding half of GDP. Without careful scrutiny, excessive spending could inflate unrealistic expectations and encourage speculation. Railways transformed the world, but not everyone who bought railway stocks became rich. The AI revolution is unlikely to be any different.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
