The Panic of 1893 (Encore)

Summary

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
Join the conversation: Everything Everywhere Daily Facebook Group | Discord Server
Note: Advertisements and non-content segments have been omitted for clarity and focus on the episode's main content.

Transcript

[Charles Daniel]

The following is an encore presentation of Everything Everywhere Daily.

[Host]

It was the worst economic depression that the United States had ever seen. The stock market crashed, thousands of businesses went bankrupt.

[Co-Host]

The unemployment rate hit 20%. There were soup lines and an army.

[Host]

Of homeless scattered throughout the country. And it was not the Great Depression.

[Co-Host]

Learn more about the panic of 1893, the forgotten depression which realigned American politics.

[Host]

On this episode of Everything Everywhere Daily.

[Ryan Reynolds]

Ryan Reynolds here from Mint Mobile. With the price of just about everything going up during inflation, we thought we'd bring our prices down. So to help us, we brought in a reverse auctioneer, which is apparently a.

[Mint Mobile Ad]

Thing Mint Mobile Unlimited Premium Wireless 3030 bid to get 30 better 202020202020 a video 15151515 just 15 bucks a month.

[Ryan Reynolds]

So give it a [e-mail] Switch $45.

[Mint Mobile Ad]

Upfront payment equivalent to $15 per month New customers on first three month plan only taxes and fees, extra speed slower above 40 gigabytes.

[Walmart Ad]

You detail wanna shop Walmart Black Friday deals first Walmart plus members get early access to our hottest deals. Join now and get 50% off a one year annual membership. Shop Black Friday deals first with Walmart plus see [e-mail].

[Host]

History is sort of weird. There are people and events which punctuate history that gather most of the attention.

[Co-Host]

This usually consists of wars and charismatic.

[Host]

Leaders or notable inventions.

[Co-Host]

These events usually are pretty important, but.

[Host]

They'Re not the only events in history.

[Co-Host]

In particular, economic events are often overlooked because they aren't as dramatic and their.

[Host]

Causes can't be as easily understood. For example, the Roman emperor Diocletian was known for ending the crisis of the third century and for instituting the tetrarchy.

[Co-Host]

However, the thing which probably most impacted.

[Host]

The empire was his economic reforms which were simply horrible.

[Co-Host]

He devalued the currency and instituted a.

[Host]

Ridiculous series of wage and price controls. Modern history isn't much different.

[Co-Host]

If you asked most people to name.

[Host]

A depression before the Great Depression, they probably couldn't do it.

[Co-Host]

Yet in the 19th century alone, there.

[Host]

Were major economic downturns in 1819, 1837, 1857 and 1873 in just the United States.

[Co-Host]

19Th century depressions or recessions were actually.

[Host]

Called panics because they almost always involved a bank panic. This would be where depositors would rush.

[Co-Host]

To a bank to withdraw their money.

[Host]

Before the bank collapsed. Of course, the irony was that the bank run would often be the cause of the bank collapse, which made the rumors of a bank collapse usually 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.

[Co-Host]

Sometime around 1890, the United States became.

[Host]

The world's largest economy.

[Co-Host]

Since the bank panic of 1873, the.

[Host]

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 Nation. In 1860, there were 29,000 miles of railroad track in the country. By 1890, there were 163,000. Likewise, the stock market had grown along with the economy. The Dow Jones industrial average hit a.

[Co-Host]

Record high of 78.38 in 1890.

[Host]

The stocks which overwhelmingly drove the market were railroad companies.

[Co-Host]

These were the tech stocks of the.

[Host]

Period and for good reason. They were high growth companies that facilitated commerce in all the communities that they reached. While the economy was booming, there were problems.

[Co-Host]

There was a populist uprising against the.

[Host]

Railroads and other monopolies which were felt to be exploiting farmers and small businesses.

[Co-Host]

From 1870 to 1890, there was a.

[Host]

Global period called the Great Deflation where.

[Co-Host]

Prices generally dropped at 2 to 3% per year globally. Deflation meant that any loans taken out.

[Host]

Were progressively harder to pay off as money kept appreciating in value.

[Co-Host]

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

[Host]

The immediate cause of the panic had.

[Co-Host]

To do with events that took place.

[Host]

On May 3, 1893.

[Co-Host]

The National Cordage Company of New Jersey.

[Host]

Was a major rope and twine manufacturer.

[Co-Host]

They overextended themselves and failed to get.

[Host]

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 of the stock market. Over the next several months, dropping stock prices caused many banks to call in their loans which companies could not repay. The Northern Pacific Railway, the Union Pacific Railway and the Atchison, Topeka and Santa Fe Railway all went bankrupt as banks couldn't get their loans paid back. Many banks went bankrupt, causing bank runs where many people tried to get their money out, escalating the problem. When railroads went out of business, the.

[Co-Host]

Communities they served and the businesses in.

[Host]

Those communities also went out of business. By the end of 1893, there were.

[Co-Host]

Over 16,000 businesses that had failed in.

[Host]

The United States, including 642 banks and 156 railroads. The bankruptcies were especially severe in the western states. All of these business failures caused massive unemployment. The estimated peak for unemployment during the.

[Co-Host]

Depression are between 17 to 20%.

[Host]

Economic data collection during this period was fairly rudimentary, but there is a general.

[Co-Host]

Consensus that the only other time in.

[Host]

US History with higher unemployment was during the Great depression in the 1930s. And I should note that all of this happened just two months after President Grover Cleveland took office in March of 1893. In 1894, the effects of massive unemployment began to appear.

[Co-Host]

In March, a group of unemployed gathered.

[Host]

In Ohio to march on Washington to protest the high unemployment and to demand that the government institute a jobs program.

[Co-Host]

The group was officially known as the.

[Host]

Army of the Commonwealth in Christ. However, it was better known as Coxey's army, named after its leader, Jacob Coxey.

[Co-Host]

The group of 500 reached Washington, D.C. on April 30 and had the distinction.

[Host]

Of being the first protest march on Washington.

[Co-Host]

The media coverage the march received was.

[Host]

Much larger than the number of people who actually marched.

[Co-Host]

Other Coxie army groups formed throughout the country, including one group in the Pacific.

[Host]

Northwest that commandeered a train to go to Washington. One interesting side note has to do with the author Frank L. Baume, who observed Coxey's Army's march on Washington. One theory that has been floated is.

[Co-Host]

That he used the march as the.

[Host]

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 Bryant.

[Co-Host]

And the wizard was the president. In the book, Dorothy wore silver shoes.

[Host]

Instead of the ruby shoes that she wore in the movie.

[Co-Host]

The shoes represent the issue of free.

[Host]

Silver, and the yellow brick road represents the gold standard. No one knows if this is true.

[Co-Host]

But it makes for a great story.

[Host]

Perhaps the biggest labor event was the Pullman strike, which took place in 1894. The Pullman strike is one of the.

[Co-Host]

Biggest events in labor history in the United States.

[Host]

The Pullman Company was a manufacturer of railroad cars, and they were so dominant that sleeper cars were literally known as Pullmans.

[Co-Host]

The Pullman Corporation had a company town.

[Host]

Located just south of Chicago called Pullman.

[Co-Host]

All of the employees lived in Pullman.

[Host]

Owned housing for which they had to.

[Co-Host]

Pay the Pullman Corporation. With the economic downturn, the Pullman Company cut wages but refused to decrease the.

[Host]

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 really big strike.

[Co-Host]

The President sent in the army to.

[Host]

Break up the strike and as many as 40 people were killed. When the strike was quashed, it resulted in a national boycott by the American Railroad 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.

[Co-Host]

By bringing in replacements, which also resulted in sympathy strikes.

[Host]

In Western states. Thousands of U.S. marshals and soldiers ended.

[Co-Host]

The strike by being deployed to ensure.

[Host]

That the trains ran.

[Co-Host]

All of this social upheaval resulted in huge political changes.

[Host]

If you remember, I previously did an episode on political realignments in American history.

[Co-Host]

There had been three political alignment systems at this point.

[Host]

The first was after the Revolutionary War. The second was with the collapse of the Federalist Party and the rise of Jacksonianism.

[Co-Host]

And the third was the realignment after the Civil War. The Panic of 1893 ushered in the.

[Host]

Fourth political era in American history.

[Co-Host]

The Democratic party of President Grover Cleveland.

[Host]

Suffered a staggering loss in the 1894 off year elections.

[Co-Host]

Of the 356 seats in the House.

[Host]

Of Representatives, there was a 110 seat.

[Co-Host]

Swing from the Democrats to the Republicans.

[Host]

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 rate was probably Michigan with an estimated 45%.

[Co-Host]

There were huge increases in migrant workers.

[Host]

Looking to do anything for work.

[Co-Host]

Churches opened soup kitchens. The Mayor of Detroit started a community.

[Host]

Garden program to grow more food for everyone in the city.

[Co-Host]

Many people who couldn't make mortgage payments.

[Host]

On their home simply abandoned them and moved west.

[Co-Host]

The panic of 1893 was directly responsible.

[Host]

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 of popular interest in monetary policy in American history.

[Co-Host]

The free silver movement began before the.

[Host]

Panic but was now bigger than ever.

[Co-Host]

Free silver encouraged the move from the.

[Host]

Gold standard to a bimetallic standard.

[Co-Host]

The movement was openly inflationary as a deflationary environment benefited creditors and hurt borrowers. The free silver movement was mostly a rural Democratic movement. Despite being a Democrat, President Cleveland was.

[Host]

Not pro silver and was known as a bourbon Democrat.

[Co-Host]

President Cleveland was confronted with a depleted.

[Host]

Gold supply in 1895 and to replenish the US gold stock, he issued government.

[Co-Host]

Bonds to the New York banker J.P.

[Host]

Morgan for $129 million. Morgan turned around and sold the bonds for an $18 million profit, which outraged the public.

[Co-Host]

The Depression was still ongoing, although improving.

[Host]

During the presidential election of 1896, the Democrats abandoned the Burma Democrats and nominated William Jennings Bryan for president.

[Co-Host]

At 36 years old. He remains the youngest person ever nominated.

[Host]

For president by a major political party. Bryan was known as a great orator.

[Co-Host]

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.

[Host]

To a sound monetary platform and also advocated for protectionism and higher import tariffs. McKinley won a comfortable Electoral College and popular vote victory, carrying the Midwest and New England states.

[Co-Host]

The Panic is generally considered to have.

[Host]

Ended in 1897, but the estimated unemployment.

[Co-Host]

Rate was still over 10% until 1899. The panic of 1893 is one of.

[Host]

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 as well as.

[Co-Host]

During the Great Depression in the Franklin Roosevelt administration. Even if the general population has mostly.

[Host]

Forgotten it, it doesn't change the fact that The Panic of 1893 radically change the United States socially, economically and politically.

[Charles Daniel]

The executive producer of Everything Everywhere Daily is Charles Daniel. The associate producers are Benji Long and Cameron Keever. I want to give a big shout out to everyone who supports the show over on Patreon, including the show's producers. Your support helps me put out a show every single day and also Patreon is currently the only place where Everything Everywhere Daily merchandise is available to the.

[Host]

Top tier of supporters.

[Charles Daniel]

If you'd like to talk to other.

[Host]

Listeners of the show and members of.

[Charles Daniel]

The Completionist Club, you can join the Everything Everywhere Daily Facebook group or Discord server. Links to Everything are in the show Notes.