Summary of "The Panic of 1893 (Encore)" Episode on Everything Everywhere Daily

Release Date: November 24, 2024
Host: Gary Arndt | Glassbox Media

Introduction to the Panic of 1893

In this encore episode, Gary Arndt delves into the Panic of 1893, often referred to as the "forgotten depression," which stands as one of the most severe economic downturns in United States history prior to the Great Depression. This episode meticulously examines the economic, social, and political ramifications of the panic, highlighting its profound influence on American society.

Economic Context Before the Panic

Economic Boom and Expansion:
Prior to the panic, the United States experienced a significant economic boom. By 1890, the nation had become the world's largest economy, fueled by westward expansion through the Homestead Act and a surge in immigration. The railroad industry was the driving force, with the Dow Jones Industrial Average reaching a record high of 78.38 in 1890. The railroad companies, akin to today's tech giants, facilitated commerce across vast communities, underpinning the nation's rapid growth.

Population and Infrastructure Growth:
There was a dramatic increase in railroad infrastructure, expanding from 29,000 miles in 1860 to 163,000 miles by 1890. This expansion not only boosted the economy but also connected disparate regions, fostering national integration.

Triggering Events of the Panic

Economic Imbalances:
Despite the booming economy, underlying issues such as deflation plagued the nation. From 1870 to 1890, the U.S. experienced a Great Deflation, with prices dropping 2 to 3% annually. This deflation intensified the difficulty of repaying loans, as the value of money increased over time, placing immense strain on borrowers.

Catalyst – National Cordage Company Bankruptcy:
The immediate trigger of the panic was the bankruptcy of the National Cordage Company on May 3, 1893. As a major rope and twine manufacturer, their failure signaled deeper economic troubles. The announcement on May 4 led to a massive stock market sell-off on May 5, igniting a cascade of bank failures and exacerbating financial instability.

Consequences of the Panic

Bank Failures and Business Bankruptcies:
The panic resulted in the collapse of numerous banks and businesses. By the end of 1893, over 16,000 businesses had failed, including 642 banks and 156 railroads. Major railway companies like the Northern Pacific Railway and Union Pacific Railway went bankrupt, leading to widespread economic turmoil.

Unemployment Surge:
The economic downturn caused unemployment rates to skyrocket, peaking between 17% to 20%—levels not surpassed until the Great Depression of the 1930s. Regions like Michigan experienced unemployment rates as high as 45%, reflecting the widespread nature of the crisis.

Community and Social Impact:
The collapse of railroads led to the downfall of businesses dependent on these transportation networks, devastating local economies. Migrant workers increased significantly as people sought employment elsewhere. Communities responded with initiatives such as soup kitchens and community garden programs to alleviate the suffering caused by unemployment and poverty.

Political Impact and Realignment

Shift in Political Power:
The economic hardships precipitated by the panic led to a major political realignment. In the 1894 midterm elections, President Grover Cleveland's Democratic Party suffered a historic loss, with a 110-seat swing to the Republicans in the House of Representatives—the largest shift in a single election in American history.

Rise of the Free Silver Movement:
Monetary policy became a central issue, with the Free Silver Movement gaining momentum. Advocates pushed for a bimetallic standard to combat deflation and ease loan repayments. This movement, largely supported by rural Democrats, clashed with President Cleveland's staunch belief in the gold standard, epitomizing the era's economic debates.

Impact on Presidential Elections:
The turmoil set the stage for the 1896 presidential election, where the Democrats nominated William Jennings Bryan, renowned for his "Cross of Gold" speech advocating for free silver. The Republicans, led by William McKinley, championed protectionism and the gold standard, ultimately securing victory and shaping the nation's economic future.

Social Effects and Legacy

Labor Movements and Strikes:
The Panic of 1893 spurred significant labor unrest, most notably the Pullman Strike of 1894. The strike, led by the American Railway Union against the Pullman Company, highlighted the tensions between labor and management. The federal government's intervention, resulting in violence and loss of life, underscored the era's social strife.

Population Shifts:
Economic despair drove population movements westward, with many abandoning their homes in search of better opportunities. Cities like Seattle, San Francisco, Denver, Portland, and Salt Lake City saw significant population increases as migrants sought to rebuild their lives.

Long-Term Political and Economic Changes:
Although often overshadowed by later events, the Panic of 1893 had lasting effects on American policies and political landscapes. It influenced Progressive Era reforms and shaped responses to future economic crises, including the Great Depression.

Notable Quotes from the Episode

• Host, Gary Arndt [00:27]: "Learn more about the panic of 1893, the forgotten depression which realigned American politics."

• Co-Host [04:00]: "Deflation meant that any loans taken out were progressively harder to pay off as money kept appreciating in value."

• Host, Gary Arndt [06:07]: "One theory that he used the march as the basis for his book, The Wizard of Oz. The scarecrow represents the American farmer, the Tin man represents the industrial worker, and the lion represents William Jennings Bryan."

• Co-Host [10:14]: "Morgan turned around and sold the bonds for an $18 million profit, which outraged the public."

• Host, Gary Arndt [11:32]: "The Panic of 1893 radically changed the United States socially, economically, and politically."

Conclusion

The Panic of 1893 was a pivotal yet often overlooked event in American history. This episode of Everything Everywhere Daily by Gary Arndt illuminates how the economic collapse reshaped the nation's financial systems, labor movements, political dynamics, and societal structures. By exploring the intricate causes and far-reaching effects of the panic, the episode underscores its significance in shaping modern America.

Credits:
Executive Producer: Charles Daniel
Associate Producers: Benji Long and Cameron Keever
Supporters: Patreon community and producers
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