In a dark bar, four men discuss the state of the nation’s economy. Orren Boyle argues that Rearden Steel has an unfair advantage because it owns iron mines, while his Associated Steel does not. Jim Taggart agrees to use his influence in Washington to force Rearden to give up the mines. Paul Larkin, also at the meeting, agrees to receive the mines from Rearden but give the ore directly to Boyle. In return, Jim wants Boyle to convince friends on the National Alliance of Railroads to force Dan Conway out of Colorado on the grounds that his Phoenix-Durango Line offers “cutthroat competition” to Taggart in a state where Taggart had operations first. Wesley Mouch, Rearden’s Washington Man, is also present. In return for Mouch’s not warning Rearden, Jim agrees to find him a bureaucratic post in Washington. Their conversation shifts to Mexico, where Jim has built the San Sebastian Line. There are rumors that Mexico is going to nationalize the line, but Boyle refutes them. He tells Jim that on a recent visit, he rode in old, run-down trains.
Back at the office, Jim confronts Dagny about the shoddy trains. She tells him she has removed everything of value from the San Sebastian Line to minimize Taggart’s losses if Mexico nationalizes the line. They argue about the San Sebastian Line, the first major project Jim began after becoming president of Taggart, and one Dagny has opposed from the beginning, believing the resources were needed on the Rio Norte Line. Jim reminds her that Mexico has guaranteed their property rights for two hundred years and argues that he built it for the good of the Mexican people. But he also built the line in order to reap a huge profit from the nearby d’Anconia copper mines. Dagny reminds him that Francisco d’Anconia, formerly an industrial genius, has become a worthless playboy in recent years and has yet to produce any copper from the mines.
Eddie Willers enters the cafeteria of the Taggart Terminal. He sits, as he often does, with a grease-stained worker. Eddie has always liked this worker and feels comfortable with him, although he does not know his name. Eddie complains about the decay slowly eating the world and the railroad. He has hope, however, because Dagny has found a reliable contractor and is going to fix the Rio Norte Line. The worker inquires about Dagny’s personal life, and Eddie tells him what he knows. He is surprised by the worker’s interest.
Eddie informs Dagny that McNamara, their new contractor, has just quit, offering no reasons. No one knows where he has gone. The People’s State of Mexico nationalizes the San Sebastian Railroad and the d’Anconia copper mines. In his report to the Board of Directors, Jim takes full credit for Dagny’s decision to remove the most valuable equipment from Mexico before the San Sebastian Railroad was nationalized.
The members of the National Alliance of Railroads approve a proposal known as the “Anti-dog-eat-dog Rule,” designed to reduce competition among railroads. According to the proposal, the interests of the whole industry are to be determined by majority vote, and each company must subordinate itself to the majority’s decision. Dagny goes to see Dan Conway, president of the Phoenix-Durango railroad, which will cease to exist under the new rule. She urges him to fight, but he is too tired and has decided to retire. Dagny had intended to compete with him in Colorado, but she cannot stand to defeat him in this fashion. She feels like a looter. He tells her to get her Rio Norte Line up and running quickly, because the fate of Ellis Wyatt depends on it. Ellis Wyatt comes to see Dagny and tells her angrily that she must fix the Rio Norte Line at once. He issues her an ultimatum. If she does not give him the transportation he needs, he will take her company down with him. She tells him that he will have the transportation he needs in time. He is surprised, having expected excuses and evasion.
Dagny goes to see Hank Rearden. She tells him about the Wyatt meeting and tells him they must rebuild the line in nine months, not twelve. He assures her that he will be able to provide what she needs. Rearden is surprised and delighted that she deals with him on his own level and thinks he has finally met a woman he can understand. He tells her that it is people like them who move the world and who will ultimately pull it through.