The Panic of 1873 represented the first great crisis of industrial capitalism in the United States, and it altered the nature of economic enterprise, political ideology, and labor rights. The resulting depression caused widespread tension between laborers and capitalists, dividing the country along class lines.
After the end of the U.S. Civil War, the United States experienced a period of economic expansion that arose from a northern
Jay Cooke and Company’s office during the Panic of 1873.
The situation worsened when New York banks loaned money to railroads that expected to raise funds for repayment by selling bonds before the notes came due. There was no central national bank to shield the economy from the brunt of the railroads’ collapse, so a chain reaction of bank failures resulted. The stock market plummeted, and the New York Stock Exchange was closed for ten days. Between 1873 and 1878, eighteen thousand businesses failed and the unemployment rate reached 14 percent.
One-quarter of New York City’s labor force was unable to find work in 1874. The panic caused companies to hoard cash receipts rather than depositing them in banks, so payrolls could not be met. In previous decades, workers had concentrated on such issues as greenbacks, cooperatives, and the eight-hour workday. Now, they simply sought to maintain their predepression wages or find unemployment relief. Some moved toward socialism.
Worker unrest led to social class tensions and labor demonstrations, especially in northern urban centers. The
President Rutherford B. Hayes had to send in federal troops to quell a railroad
The emergence of the corporation in the United States coincided with the rise of the railroad industry and of organized labor movements to counter the influence of monopolistic practices. Political leaders were reluctant to involve the federal government too heavily in the private sector, but this mentality shifted during the late nineteenth century, when unions began asking the government to intercede on their behalf. Congress finally enacted the
The Panic of 1873 represented a shift in political power. Voters reacted to the depression by turning against the party in power and reversing the Republican stranglehold on Congress by the mid-1870’s. It would not be until 1896 that Republicans would gain control of both houses. Northerners began to turn away from Reconstruction policies, and African Americans’ hopes for social reform began to fade, as educational opportunities and social and industrial progress stagnated in the South. The effects of the panic were devastating because of the emerging factory system in the region. Poor whites and African Americans were forced to depend on cotton as the primary cash crop once again, and they became dependent on sharecropping and tenant systems until the mid-twentieth century.
Fels, Rendigs. “American Business Cycles, 1865-1879.” American Economic Review 41, no. 3 (June, 1951): 325-349. Analyzes the causes and effects of the Panic of 1873, contending that businesses undergo cyclical cycles of peak and decline. _______. “The Long-Wave Depression, 1873-1897.” The Review of Economics and Statistics 31, no. 1 (February, 1949): 69-73. Argues that scholars Alvin Hansen and Joseph Schumpeter are too dependent on comparing the causes of the Great Depression with that of the Panic of 1873. Contends that specific causal factors for the Panic of 1873 must be taken into account and studied within the context of that time period. Foner, Eric. Reconstruction: America’s Unfinished Revolution, 1863-1877. New York: Harper & Row, 1988. Provides an overview of the Panic of 1873 in the context of the political, social, and economic factors of the Reconstruction era. Juglar, Clement. A Brief History of Panics and Their Periodical Occurrence in the United States. Reprint. New York: Augustus M. Kelley, 1966. Day-to-day account of the events that took place immediately following September, 1873. Wicker, Elmus. Banking Panics of the Gilded Age. New York: Cambridge University Press, 2000. Major study of post-Civil War banking panics; argues that the suspension of cash payments had the greatest impact on the working class during depressions during the late nineteenth century.
New York Stock Exchange
Panic of 1819
Panic of 1837
Panic of 1857
Panic of 1893
Panic of 1907
Sherman Antitrust Act