The Panic of 1893 was an economic depression in the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...

that began in 1893 and ended in 1897. It deeply affected every sector of the economy, and produced political upheaval that led to the

political realignment A political realignment, often called a critical election, critical realignment, or realigning election, in the academic fields of political science and political history, is a set of sharp changes in party ideology, issues, party leaders, regional ...

of 1896 and the

presidency of William McKinley The presidency of William McKinley began on March 4, 1897, when William McKinley was inaugurated and ended September 14, 1901, upon his assassination. A longtime Republican, McKinley is best known for conducting the successful Spanish–American ...

Causes

The Panic of 1893 has been traced to many causes, one of those points to Argentina; investment was encouraged by the Argentine agent bank,

Baring Brothers Barings Bank was a British merchant bank based in London, and one of England's oldest merchant banks after Berenberg Bank, Barings' close collaborator and German representative. It was founded in 1762 by Francis Baring, a British-born member ...

. However, the 1890 wheat crop failure and a failed coup in Buenos Aires ended further investments. In addition, speculations in South African and Australian properties also collapsed. Because European investors were concerned that these problems might spread, they started a run on gold in the

U.S. Treasury The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...

Specie Specie may refer to: * Coins or other metal money in mass circulation * Bullion coins * Hard money (policy) * Commodity money Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects ...

was considered more valuable than paper money; when people were uncertain about the future, they hoarded specie and rejected paper notes.Nelson, Scott Reynolds. 2012. A Nation of Deadbeats. New York: Alfred Knopf, p. 189. During the

Gilded Age In United States history, the Gilded Age was an era extending roughly from 1877 to 1900, which was sandwiched between the Reconstruction era and the Progressive Era. It was a time of rapid economic growth, especially in the Northern and Weste ...

of the 1870s and 1880s, the United States had experienced economic growth and expansion, but much of this expansion depended on high international commodity prices. Exacerbating the problems with international investments, wheat prices crashed in 1893. In particular, the opening of numerous mines in the western United States led to an oversupply of silver, leading to significant debate as to how much of the silver should be coined into money (see below). During the 1880s, American railroads experienced what might today be called a "

bubble Bubble, Bubbles or The Bubble may refer to: Common uses * Bubble (physics), a globule of one substance in another, usually gas in a liquid ** Soap bubble * Economic bubble, a situation where asset prices are much higher than underlying funda ...

": investors flocked to railroads, and they were greatly over-built. One of the first clear signs of trouble came on 20 February 1893, twelve days before the inauguration of U.S. President

Grover Cleveland Stephen Grover Cleveland (March 18, 1837June 24, 1908) was an American lawyer and politician who served as the 22nd and 24th president of the United States from 1885 to 1889 and from 1893 to 1897. Cleveland is the only president in American ...

, with the appointment of receivers for the

Philadelphia and Reading Railroad The Reading Company ( ) was a Philadelphia-headquartered railroad that provided passenger and commercial rail transport in eastern Pennsylvania and neighboring states that operated from 1924 until its 1976 acquisition by Conrail. Commonly called ...

, which had greatly overextended itself. Upon taking office, Cleveland dealt directly with the Treasury crisis and successfully convinced

Congress A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of a ...

to repeal the

Sherman Silver Purchase Act The Sherman Silver Purchase Act was a United States federal law enacted on July 14, 1890.Charles Ramsdell Lingley, ''Since the Civil War'', first edition: New York, The Century Co., 1920, ix–635 p., . Re-issued: Plain Label Books, unknown date, ...

, which he felt was mainly responsible for the economic crisis.Grover Cleveland
," American President: A Reference Resource, millercenter.org As concern for the state of the economy deepened, people rushed to withdraw their money from banks, and caused

bank run A bank run or run on the bank occurs when many clients withdraw their money from a bank, because they believe the bank may cease to function in the near future. In other words, it is when, in a fractional-reserve banking system (where banks no ...

s. The

credit crunch A credit crunch (also known as a credit squeeze, credit tightening or credit crisis) is a sudden reduction in the general availability of loans (or credit) or a sudden tightening of the conditions required to obtain a loan from banks. A credit cr ...

rippled through the economy. A

financial panic A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and man ...

in London combined with a drop in continental European trade caused foreign investors to sell American stocks to obtain American funds backed by gold. The economic policies of President

Benjamin Harrison Benjamin Harrison (August 20, 1833March 13, 1901) was an American lawyer and politician who served as the 23rd president of the United States from 1889 to 1893. He was a member of the Harrison family of Virginia–a grandson of the ninth pr ...

have been characterized as a contributing factor to the depression.

Populists

The People's Party, also known as the '

Populists Populism refers to a range of political stances that emphasize the idea of "the people" and often juxtapose this group against " the elite". It is frequently associated with anti-establishment and anti-political sentiment. The term developed ...

', was an agrarian-populist political party in the United States. From 1892 to 1896, it played a major role as a left-wing force in American politics. It drew support from angry farmers in the West and South. It was highly critical of capitalism, especially banks and railroads, and allied itself with the labor movement. Established in 1891 as a result of the Populist movement, the People's Party reached its height in the 1892 presidential election, when its ticket, consisting of James B. Weaver and

James G. Field James Gaven Field (February 24, 1826 – October 12, 1901) was an American politician in California and Virginia, who was also a businessman, government clerk, and Confederate major. He became the Attorney General of Virginia and the vice presid ...

, won 8.5% of the popular vote and carried five states (Colorado, Idaho, Kansas, Nevada, and North Dakota), and the 1894 House of Representatives elections when it won nine seats. Built on a

coalition A coalition is a group formed when two or more people or groups temporarily work together to achieve a common goal. The term is most frequently used to denote a formation of power in political or economical spaces. Formation According to ''A Gui ...

of poor, white cotton farmers in the South (especially North Carolina, Alabama and Texas) and hard-pressed wheat farmers in the

Plains States The Midwestern United States, also referred to as the Midwest or the American Midwest, is one of four census regions of the United States Census Bureau (also known as "Region 2"). It occupies the northern central part of the United States. I ...

(especially Kansas and Nebraska), the Populists represented a radical form of agrarianism and hostility to elites, cities, banks, railroads, and gold.

Silver

The Free Silver movement arose from a

synergy Synergy is an interaction or cooperation giving rise to a whole that is greater than the simple sum of its parts. The term ''synergy'' comes from the Attic Greek word συνεργία ' from ', , meaning "working together". History In Christia ...

of farming and mining interests. Farmers sought to invigorate the economy and thereby end

deflation In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation ...

, which was forcing them to repay loans with increasingly expensive dollars. Mining interests sought the right to turn silver directly into money without a central minting institution. The

of 1890, while falling short of the Free Silver movement's goals, required the U.S. government to buy millions of ounces of silver above what was required by the 1878 Bland–Allison Act (driving up the price of silver and pleasing silver miners). People attempted to redeem silver notes for gold. Ultimately, the statutory limit for the minimum amount of gold in federal reserves was reached and U.S. notes could no longer be successfully redeemed for gold. Investments during the time of the panic were heavily financed through bond issues with high-interest payments. Rumors regarding the National Cordage Company (NCC)'s financial distress (NCC was the most actively traded stock at the time) caused its lenders to call in their loans immediately, and the company went into bankruptcy

receivership In law, receivership is a situation in which an institution or enterprise is held by a receiver—a person "placed in the custodial responsibility for the property of others, including tangible and intangible assets and rights"—especially in c ...

as a result. The company, a rope manufacturer, had tried to corner the market for imported hemp. As demand for silver and silver notes fell, the price and value of silver dropped. Holders worried about a loss of face value of bonds, and many became worthless. A series of bank failures followed, and the Northern Pacific Railway, the

Union Pacific Railroad The Union Pacific Railroad , legally Union Pacific Railroad Company and often called simply Union Pacific, is a freight-hauling railroad that operates 8,300 locomotives over routes in 23 U.S. states west of Chicago and New Orleans. Union Paci ...

and the

Atchison, Topeka & Santa Fe Railroad The Atchison, Topeka and Santa Fe Railway , often referred to as the Santa Fe or AT&SF, was one of the larger railroads in the United States. The railroad was chartered in February 1859 to serve the cities of Atchison and Topeka, Kansas, and ...

failed. This was followed by the bankruptcy of many other companies; in total over 15,000 companies and 500 banks, many of them in the West, failed. According to high estimates, about of the workforce was unemployed at the panic's peak. The huge spike in unemployment, combined with the loss of life savings kept in failed banks, meant that a once-secure middle-class could not meet their

mortgage A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any ...

obligations. Many walked away from recently built homes as a result.

Effects

As a result of the panic, stock prices declined. Five hundred banks closed, 15,000 businesses failed, and numerous farms ceased operation. The unemployment rate hit 25% in Pennsylvania, 35% in New York, and 43% in Michigan. Soup kitchens were opened to help feed the destitute. Facing starvation, people chopped wood, broke rocks, and sewed by hand with needle and thread in exchange for food. In some cases, women resorted to prostitution to feed their families. To help the people of Detroit, Mayor Hazen S. Pingree launched his "Potato Patch Plan", which were community gardens for farming. President

was blamed for the depression. Gold reserves stored in the

fell to a dangerously low level. This forced President Cleveland to borrow $65 million in gold from Wall Street banker J.P. Morgan and the

Rothschild banking family of England The Rothschild banking family of England was founded in (1798) by Nathan Mayer von Rothschild (1777–1836) who first settled in Manchester but then moved to London (at the time in the Kingdom of Great Britain). Nathan was sent there from his ...

. His party suffered enormous losses in the 1894 elections, largely being blamed for the downward spiral in the economy and the brutal crushing of the

Pullman Strike The Pullman Strike was two interrelated strikes in 1894 that shaped national labor policy in the United States during a period of deep economic depression. First came a strike by the American Railway Union (ARU) against the Pullman factory in Chi ...

. After their defeat in 1896, the Democrats did not regain control of any branch of the Federal Government until 1910.

Shipping

The Panic of 1893 affected many aspects of the

shipping industry Maritime transport (or ocean transport) and hydraulic effluvial transport, or more generally waterborne transport, is the transport of people ( passengers) or goods (cargo) via waterways. Freight transport by sea has been widely used thro ...

, both by

rail Rail or rails may refer to: Rail transport *Rail transport and related matters *Rail (rail transport) or railway lines, the running surface of a railway Arts and media Film * ''Rails'' (film), a 1929 Italian film by Mario Camerini * ''Rail'' ( ...

and by sea. It arrested the acquisition of ships and rolling stock and pushed down shipping rates.

Fluctuations in railroad investment after the Panic of 1893

The bad omen of investors switching from equity based

stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...

s to constant return bonds in 1894 was mirrored in the corporate finance actions of railroads which reduced their acquisition of

rolling stock The term rolling stock in the rail transport industry refers to railway vehicles, including both powered and unpowered vehicles: for example, locomotives, freight and passenger cars (or coaches), and non-revenue cars. Passenger vehicles can b ...

. Railroad expansion including capital expenditures rose again in 1895, but slowed in 1897 during another economic trough.

Receivership

In 1893, the total railroad mileage in the U.S. was 176,803.6 miles. In 1894 and 1895, railroads only expanded 4,196.4 miles, although 100,000 miles of rail was added from 1878 to 1896. In 1893, the year following the panic, one fourth of all rail mileage went into receivership. The U.S. Census placed this value at close to $1.8 billion (not adjusted for inflation), the largest amount recorded between 1876 and 1910. This was over $1 billion (also not adjusted for inflation) more than the next largest amount, in 1884.

Pullman Strike

In 1894, the U.S. Army intervened during a strike in Chicago to prevent property damage. The

began at the Pullman Company in

Chicago (''City in a Garden''); I Will , image_map = , map_caption = Interactive Map of Chicago , coordinates = , coordinates_footnotes = , subdivision_type = Country , subdivision_name ...

after Pullman refused to either lower rent in the company town or raise wages for its workers due to increased economic pressure from the Panic of 1893. Since the Pullman Company was a

railroad car A railroad car, railcar (American and Canadian English), railway wagon, railway carriage, railway truck, railwagon, railcarriage or railtruck (British English and UIC), also called a train car, train wagon, train carriage or train truck, is a ...

company, this only increased the difficulty of acquiring rolling stock.

American merchant tonnage

The maritime industry of the United States did not escape the effects of the Panic of 1893. The total gross registered merchant marine tonnage employed in "foreign and coastwise trade and in the fisheries", as measured by the U.S. Census between 1888 and 1893, grew at a rate of about 2.74%. In 1894, however, U.S. gross tonnage decreased by 2.9%, and again in 1895 by 1.03%.

Rates

In 1894, the rate for a

bushel A bushel (abbreviation: bsh. or bu.) is an imperial and US customary unit of volume based upon an earlier measure of dry capacity. The old bushel is equal to 2 kennings (obsolete), 4 pecks, or 8 dry gallons, and was used mostly for agricult ...

of wheat by rail dropped from 14.70¢ in 1893 to 12.88¢. This rate continued to decrease, reaching a terminal rate in 1901 of 9.92¢ and never reached 12 cents between 1898 and 1910. Between 1893 and 1894, average shipping rates by lake or canal per wheat bushel decreased by almost 2 cents, from 6.33¢ to 4.44¢. Rates on the transatlantic crossing from

New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...

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also decreased, from 2 and 3/8 to 1 and 15/16, but this reflected a trend downward since 1891.

References

External links

Henry George Henry George (September 2, 1839 – October 29, 1897) was an American political economist and journalist. His writing was immensely popular in 19th-century America and sparked several reform movements of the Progressive Era. He inspired the eco ...

; appeared in ''Once a Week'', a New York periodical, March 6, 1894 {{authority control 1893 in the United States Financial crises Economic crises in the United States 1893 19th-century economic history 1893 in economics