The Panic of 1893

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Podcast Transcript

It was the worst economic depression that the United States had ever seen. 

The stock market crashed. Thousands of businesses went bankrupt. The unemployment rate hit 20% There were soup lines and an army of homeless scattered throughout the country. 

It was not the Great Depression.

Learn more about the Panic of 1893, the forgotten depression which realigned American politics, on this episode of Everything Everywhere Daily.


History is sort of weird. There are people and events which punctuate history that gather most of the attention. This usually consists of wars, charismatic leaders, or notable inventions. 

These events usually are pretty important, but they are not the only events in history. In particular, economic events are often overlooked because they aren’t as dramatic, and their causes aren’t as easily understood.

For example, the Roman emperor Diocletian was known for ending the crisis of the third century and for instituting the tetrarchy. However, the thing which probably most impacted the empire was his economic reforms, which were simply horrible. He devalued the currency and instituted a ridiculous series of wage and price controls.

Modern history isn’t much different. 

If you ask most people to name a depression before the Great Depression, they probably couldn’t do it. Yet, in the 19th century alone, there were major economic downturns in 1819, 1837, 1857, and 1873 in just the United States.

19th-century depressions or recessions were actually called panics because they almost involved a bank panic. This would be where depositors would rush to a bank to withdraw their money before the bank collapsed. Of course, the irony was that bank run would often be the cause of a bank collapse, which often made the rumors of a bank collapse a self-fulfilling prophecy. 

The previous American depressions were bad, but they were nothing like what happened in the last decade of the 19th century. 

Sometime around 1890, the United States became the world’s largest economy. 

Since the panic of 1873, the country had experienced a massive economic boom. 

The nation was expanding west due to the homestead act, there were enormous numbers of immigrants coming into the country, and perhaps most importantly, railroads had crisscrossed the entire country. 

In 1860 there were 29,000 miles of railroad track in the country. By 1890 there was 163,000. 

Likewise, the stock market had grown along with the economy. The Dow Jones Industrial Average hit a record high of 78.38 in 1890. 

The stocks which overwhelmingly drove the market were railroad companies. They were the tech stocks of the period, and for good reason. They were high-growth companies that facilitated commerce in all the communities they reached.

While the economy was booming, there were problems. There was a populist uprising against the railroads and other monopolies, which were felt to be exploiting farmers and small businesses. From 1870 to 1890, there was a global period called the Great Deflation, where prices generally dropped at a 2-3% rate globally.  

Deflation meant that any loans taken out were progressively harder to pay off as money kept appreciating in value. 

This led to calls for increased silver coinage and a move away from the gold standard.

The immediate cause of the panic had to do with events that took place on May 3, 1893. The National Cordage Company of New Jersey was a major rope and twine manufacturer. They overextended themselves and failed to get a $50,000 loan, resulting in their bankruptcy. 

The next day, the bankruptcy was announced to the public, and on Friday, May 5, there was a massive sell-off on the stock market. 

Over the next several months, dropping stock prices caused many banks to call in their loans, which the companies couldn’t repay. The Northern Pacific Railway, the Union Pacific Railroad, and the Atchison, Topeka & Santa Fe Railroad all went bankrupt. 

As banks couldn’t get their loans paid back, many banks went bankrupt, causing bank runs where people tried to get their money out, escalating the problem.

When railroads went out of business, the communities they served and the businesses in those communities also went out of business. 

By the end of 1893, over 16,000 businesses had failed, including 642 banks and 156 railroads.

The bankruptcies were especially severe in the western states. 

All of these business failures caused massive unemployment. The estimates for peak unemployment during the depression are between 17-20%. The economic data collection during this period was fairly rudimentary, but there is general consensus that the only other time in US history with higher unemployment was the Great Depression in the 1930s. 

I should note that all of this started just two months after President Grover Cleveland took office in March 1893. 

In 1894, the effects of massive unemployment began to appear. 

In March, a group of unemployed gathered in Ohio to march on Washington to protest the high unemployment and to demand that the government institute a jobs program. 

The group was officially known as the Army of the Commonwealth in Christ. However, it was better known as Coxey’s Army, named after its leader Jacob Coxey.

The group of 500 reached Washington, DC, on April 30, and it has the distinction of being the first protest march on Washington. The media coverage the march received was much larger than the number of people who actually marched.

Other groups throughout the country formed, including one group in the Pacific Northwest that commandeered a train to go to Washington. 

One interesting side note has to do with the author Frank. L. Baum, who observed Coxey’s Army’s march on Washington. One theory that was floated is that he used the march as the basis for his book the Wizard of Oz. 

The scarecrow represents the American farmer, the tin man is the industrial worker, the lion represents William Jennings Bryant, and the wizard represents the president.

In the book, Dorthy wore silver shoes instead of ruby shoes, in the movie.  The shoes represent the issue of free silver, and the yellow brick road represents the gold standard. 

Perhaps the biggest labor event was the Pullman Strike which took place in 1894. 

The Pullman strike is one of the biggest events in the history of labor in the United States. 

The Pullman company was a manufacturer of railroad cars. They were so dominant that sleeper cars were literally known as Pullmans. 

The Pullman corporation had a company town located just south of Chicago called Pullman. All of the employees lived in Pullman-owned housing, for which they had to pay the Pullman corporation. 

With the economic downturn, the Pullman company cut wages but refused to decrease the price of rent or prices at the company store.

The Pullman strike will be the subject of its own episode in the future, but suffice it to say it was a huge strike. The president sent in the Army to break up the strike, and 40 people were killed. 

When the strike was quashed, it resulted in a national boycott by the American Railway Union of all trains which used Pullman cars. The boycott began on June 26, and 125,000 workers walked off the job. There were attempts to break the strike by hiring replacements, which also resulted in sympathy strikes in western states. 

Thousands of US Marshalls and soldiers ended the strike by being deployed to ensure the trains ran. 

All of this social upheaval resulted in huge political changes. 

If you remember, I did a previous episode on political realignments in American history; there had been three political alignment systems at this point.

The first was after the revolutionary war, the second was with the collapse of the Federalist party and the rise of Jacksonianism, and the third was realignment after the Civil War. 

The Panic of 1893 ushered in the fourth political era in American History. 

The Democrat Party of President Grover Cleveland suffered a staggering loss in the 1894 off-year elections. Of the 356 seats in the House of Representatives, there was a 110-seat swing from the Democrats to the Republicans. The largest change in the house in a single election in American history. 

Unemployment rates varied throughout the country. The state with the highest unemployment was probably Michigan, with an estimated 45%. 

There were huge increases in migrant workers looking to do anything for work. Churches opened soup kitchens. The Mayor of Detroit started a community garden program to grow more food for everyone in the city. 

Many people who couldn’t make mortgage payments on their homes simply abandoned them and moved west. The Panic of 1893 was directly responsible for large increases in population for many western cities such as Seattle, San Francisco, Denver, Portland, and Salt Lake City.

Perhaps the biggest policy issue became that of monetary policy. In fact, this was arguably the high point for popular interest in monetary policy. 

The free silver movement began before the panic was bigger than ever. 

Free silver encouraged the move from the gold standard to a bimetallic standard. The movement was openly inflationary, as a deflationary environment benefited creditors and hurt borrowers. 

The free silver movement was mostly a rural Democrat movement. Despite being a Democrat, President Cleveland was not pro-silver and was known as a “Bourbon Democrat.” 

President Cleveland was confronted with a depleted gold supply in 1895. To replenish the US’s gold stock, he issued government bonds to the New York Banker J.P. Morgan for $129 million dollars. 

Morgan turned around the sold the bonds for an $18 million dollar profit which outraged the public. 

The depression was still ongoing, although improving, during the presidential election of 1896. 

The Democrats abandoned the “Burbon Democrats” and nominated William Jennings Bryan for president. At 36 years old, he remains the youngest person ever nominated for president by a major political party. 

Bryan was known as a great orator and gained fame for his “Cross of Gold” speech at the Democratic National Convention, which catapulted him to the nomination. 

The Republicans nominated William McKinley, who stuck to a sound money platform. He also advocated for protectionism and higher import tariffs. 

McKinley won a comfortable electoral college and popular vote victory, carrying midwest and New England states. 

The Panic is generally considered to have ended in 1897, but the estimated unemployment rate was still over 10% until 1899. 

The Panic of 1893 is one of the most significant events in American history, yet most people have completely forgotten it. 

It was, however, front of mind for the politicians during the Progressive Era in the Teddy Roosevelt administration and during the Great Depression and the Franklin Roosevelt administration.

Even if the general population has mostly forgotten it, it doesn’t change the fact that the Panic of 1893 radically changed the United States socially, economically, and politically.


Everything Everywhere Daily is an Airwave Media Podcast. 

The executive producer is Darcy Adams.

The associate producers are Thor Thomsen and Peter Bennett.

Today’s review comes from listener BMPM01 over at Apple Podcasts in Australia. They write:

The title says it all

Gary’s consistently high-quality production and engaging delivery of detailed research encompassing diverse and interesting subjects within each episode makes it hard to believe Gary creates this podcast single-handedly. The content is such compelling listening, I binged the back catalog over a short time and enjoyed every episode. I offer my membership as a card-carrying, flag-waving member of the Oz sub-branch of the completionist club. I’ll leave my membership paperwork on the fridge.

Thanks, BMPM! Over the next several months, we will be rolling out completionist club locations in all the Australian capital cities. Each location will have VB and 4x on tap, and we will be serving Tim Tams and chicken parma during all AFL and NRL matches.  Hamburgers will be served with beetroot and fried eggs.

We will also, of course, have ANZAC biscuits on ANZAC day.

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