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The Panic of 1893 was an
economic depression An economic depression is a period of carried long-term economical downturn that is result of lowered economic activity in one major or more national economies. Economic depression maybe related to one specific country were there is some economic ...
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 Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
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 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 of ...
. 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. Specie 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 Wes ...
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 fund ...
": 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, 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 ...
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 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 have been characterized as a contributing factor to the depression.


Populists

The People's Party, also known as the ' Populists', 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 James Baird Weaver (June 12, 1833 – February 6, 1912) was a member of the United States House of Representatives and two-time candidate for President of the United States. Born in Ohio, he moved to Iowa as a boy when his family claimed ...
and James G. Field, 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 Agrarianism is a political and social philosophy that has promoted subsistence agriculture, smallholdings, and egalitarianism, with agrarian political parties normally supporting the rights and sustainability of small farmers and poor peasants ag ...
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 Christian ...
of farming and mining interests. Farmers sought to invigorate the economy and thereby end 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
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, ...
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 Northern Pacific Railway was a transcontinental railroad that operated across the northern tier of the western United States, from Minnesota to the Pacific Northwest. It was approved by Congress in 1864 and given nearly of land grants, wh ...
, 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 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 kitchen A soup kitchen, food kitchen, or meal center, is a place where food is offered to the hungry usually for free or sometimes at a below-market price (such as via coin donations upon visiting). Frequently located in lower-income neighborhoods, soup ...
s 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
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 ...
was blamed for the depression. Gold reserves stored in the U.S. Treasury fell to a dangerously low level. This forced President Cleveland to borrow $65 million in gold from Wall Street banker
J.P. Morgan JP may refer to: Arts and media * ''JP'' (album), 2001, by American singer Jesse Powell * ''Jp'' (magazine), an American Jeep magazine * ''Jönköpings-Posten'', a Swedish newspaper * Judas Priest, an English heavy metal band * ''Jurassic Par ...
and the Rothschild banking family of England. 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. 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, both by 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 stocks 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 ca ...
. 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 Pullman Strike began at the
Pullman Company The Pullman Company, founded by George Pullman, was a manufacturer of railroad cars in the mid-to-late 19th century through the first half of the 20th century, during the boom of railroads in the United States. Through rapid late-19th century ...
in
Chicago (''City in a Garden''); I Will , image_map = , map_caption = Interactive Map of Chicago , coordinates = , coordinates_footnotes = , subdivision_type = List of sovereign states, Count ...
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 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
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to
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also decreased, from 2 and 3/8 to 1 and 15/16, but this reflected a trend downward since 1891.


See also

* Black Friday (1869) – also referred to as the "Gold Panic of 1869" * Basic City, Virginia *
Denver Depression of 1893 The Denver Depression of 1893 was the economic and psychological depression of Denver, Colorado, that began in 1893 after the rapid drop in the price of silver and lasted for several years. Causes With the Coinage Act of 1873, bimetallism was dise ...
* ''The Driver'', a 1922 novel set during the panic * Long Depression * Panic of 1896 *
Second-term curse The second-term curse is the perceived tendency of second terms of U.S. presidents to be less successful than their first terms. According to the curse, the second terms of U.S. presidents have usually been plagued by a major scandal, policy in ...


References


Further reading


Contemporary sources


''American Annual Cyclopedia...1894'' (1895) online
*Baum, Lyman Frank and W. W. Denslow. '' The Wonderful Wizard of Oz'' (1900); see
Political interpretations of The Wonderful Wizard of Oz Political interpretations of ''The Wonderful Wizard of Oz'' include treatments of the modern fairy tale (written by L. Frank Baum and first published in 1900) as an allegory or metaphor for the political, economic, and social events of America i ...
*Brice, Lloyd Stephens, and James J. Wait. "The Railway Problem." ''North American Review'' 164 (March 1897): 327–48. online at MOA Cornell. *Cleveland, Frederick A. "The Final Report of the Monetary Commission," ''Annals of the American Academy of Political and Social Science'' 13 (January 1899): 31–5
in JSTOR
*Closson, Carlos C. Jr. "The Unemployed in American Cities." ''Quarterly Journal of Economics'', vol. 8, no. 2 (January 1894) 168–21
in JSTOR
vol. 8, no. 4 (July 1894): 443–7
in JSTOR
*Fisher, Willard. "‘Coin’ and His Critics." ''Quarterly Journal of Economics'' 10 (January 1896): 187–20
in JSTOR
*Harvey, William H. ''Coin’s Financial School'' (1894), 1963 (Introduction by Richard Hofstadter)
online first edition
*Noyes, Alexander Dana. "The Banks and the Panic," ''Political Science Quarterly'' 9 (March 1894): 12–2
in JSTOR
*Shaw, Albert. "Relief for the Unemployed in American Cities," '' Review of Reviews'' 9 (January and February 1894): 29–37, 179–91. *Stevens, Albert Clark. "An Analysis of the Phenomena of the Panic in the United States in 1893," ''Quarterly Journal of Economics'' 8 (January 1894): 117–4
in JSTOR


Secondary sources

*Barnes, James A. ''John G. Carlisle: Financial Statesman'' (1931). * * * *Destler, Chester McArthur. ''American Radicalism, 1865–1901'' (1966). * Dewey, Davis Rich. ''Financial History of the United States'' (1903)
online
*Dighe, Ranjit S. ed. ''The Historian's Wizard of Oz: Reading L. Frank Baum's Classic as a Political and Monetary Allegory'' (2002). *Dorfman, Joseph Harry. ''The Economic Mind in American Civilization.'' (1949). vol 3. *Faulkner, Harold Underwood. ''Politics, Reform, and Expansion, 1890–1900.'' (1959). *Feder, Leah Hanna. ''Unemployment Relief in Periods of Depression ... 1857–1920'' (1926). * Friedman, Milton, and Anna Jacobson Schwartz. ''A Monetary History of the United States, 1867–1960'' (1963). * Harpine, William D. ''From the Front Porch to the Front Page: McKinley and Bryan in the 1896 Presidential Campaign'' (2006
excerpt and text search
* *Hoffmann, Charles. ''The Depression of the Nineties: An Economic History'' (1970). *Jensen, Richard. ''The Winning of the Midwest: 1888–1896'' (1971). *Josephson, Matthew. ''The Robber Barons'' New York: Harcourt Brace Jovanovich (1990). *Kirkland, Edward Chase. ''Industry Comes of Age, 1860–1897'' (1961). *Lauck, William Jett. ''The Causes of the Panic of 1893'' (1907)
online
*Lindsey, Almont. ''The Pullman Strike'' 1942. * *Nevins, Allan. ''Grover Cleveland: A Study in Courage.'' 1932, Pulitzer Prize. * * *Ritter, Gretchen. ''Goldbugs and Greenbacks: The Anti-Monopoly Tradition and the Politics of Finance in America'' (1997) * * * *Schwantes, Carlos A. ''Coxey’s Army: An American Odyssey'' (1985). * Shannon, Fred Albert. ''The Farmer’s Last Frontier: Agriculture, 1860–1897'' (1945). *Steeples, Douglas, and David O. Whitten. ''Democracy in Desperation: The Depression of 1893'' (1998). *Strouse, Jean. ''Morgan: American Financier'' (1999). *White; Gerald T. ''The United States and the Problem of Recovery after 1893'' (1982). *Whitten, David
EH.NET article on the Depression of 1893
* Wicker, Elmus. ''Banking panics of the gilded age'' (Cambridge University Press, 2006
contents


External links



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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