Panic of 1893

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Estimates of the unemployment rate per 100 persons during the 1890s (Source: Romer, 1986)
Year Lebergott Romer
1890 4.0 4.0
1891 5.4 4.8
1892 3.0 3.7
1893 11.7 8.1
1894 18.4 12.3
1895 13.7 11.1
1896 14.5 12.0
1897 14.5 12.4
1898 12.4 11.6
1899 6.5 8.7
1900 5.0 5.0
Drawing of frenzied stockbrokers on May 5, 1893, from Frank Leslie's Illustrated Newspaper

The panic of 1893 was a serious economic depression in the United States that began in 1893.[1] Similar to the panic of 1873, it was marked by the overbuilding and shaky financing of railroads, resulting in a series of bank failures. Compounding market overbuilding and the railroad bubble was a run on the gold supply. The panic of '93 was the worst economic depression the United States had ever experienced at the time.


One of the causes for the panic of 1893 can be traced back to Argentina. Investment was encouraged by the Argentinean agent bank, Baring Brothers. However, a failure in the wheat crop and a coup in Buenos Aires ended further investments. This shock started a run on gold in the U.S. Treasury, as investors were cashing in their investments. This occurred during the Gilded Age, when the United States was experiencing economic growth and expansion. This expansion eventually became driven by railroad speculation. Railroads were over-built, incurring expenses that outstripped revenues. Also, new mines flooded the market with silver (due in part to governmental silver purchases required by the 1878 Bland–Allison Act and the 1890 Sherman Silver Purchase Act), causing its price to fall. In addition, farmers—particularly in wheat and cotton regions—struggled under a decline in prices for agricultural commodities.

One of the first clear signs of trouble came on February 23, 1893, ten days before the inauguration of U.S. president Grover Cleveland,[2] with the bankruptcy of the Philadelphia and Reading Railroad, which had greatly overextended itself.[3] Upon taking office, Cleveland dealt directly with the Treasury crisis,[4] and successfully convinced Congress to repeal the Sherman Silver Purchase Act, which he felt was mainly responsible for the economic crisis.[5]

As concern for the state of the economy worsened, people rushed to withdraw their money from banks, and caused bank runs. The credit crunch rippled through the economy. A financial panic in the United Kingdom and a drop in trade in Europe caused foreign investors to sell American stocks to obtain American funds backed by gold.[6]

The Populists, which appealed politically to poorer cotton and wheat farmers in the South and West, represented the traditional emphasis of hard work and independence over the monied interests of the Gilded Age's dominant "robber barons" and bankers. They saw the resulting panic as confirmation that the values of rootless global finance were assailing traditional American values.

With some reason,[7] but moderating over the period,[8] historian Hasia Diner notes that "Some Populists believed that Jews made up a class of international financiers whose policies had ruined small family farms. Jews, they asserted, owned the banks and promoted the gold standard, the chief sources of their impoverishment. Agrarian radicalism posited the city as antithetical to American values, asserting that Jews were the essence of urban corruption.[9]


The Free Silver movement arose, gaining support from farmers (who sought to invigorate the economy and cause inflation, thus allowing them to repay their debt with cheaper dollars) and mining interests (who sought the right to turn silver directly into money). The Sherman Silver Purchase Act 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 the metal 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.[6] Investments during the time of the panic were heavily financed through bond issues with high interest payments. The National Cordage Company (the most actively traded stock at the time) went into receivership as a result of its bankers calling their loans in response to rumors regarding the NCC's financial distress. The company, a rope manufacturer, had tried to corner the market for imported hemp. As the 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 Union Pacific Railroad 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 17%–19% 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 obligations. Many walked away from recently built homes as a result. From this the sight of the vacant Victorian "haunted house" entered the American mindset.[10]


The 1896 Broadway melodrama The War of Wealth was inspired by the panic of 1893.

As a result of the panic, stock prices declined. 500 banks were closed, 15000 businesses failed, and numerous farms ceased operation. The unemployment rate in Pennsylvania hit 25%, in New York 35%, and in Michigan 43%. Soup kitchens were opened to help feed the destitute. Facing starvation, people chopped wood, broke rocks, and sewed in exchange for food. In some cases, women resorted to prostitution to feed their families. To help the people of Detroit, Mayor Hazen Pingree started "Pingree's Potato Patch" which were community gardens for farming.[11]

The severity was great in all industrial cities and mill towns. Farm distress was great because of the falling prices for export crops such as wheat and cotton. "Coxey's Army" was a highly publicized march of unemployed laborers from Ohio, Pennsylvania, and several Western states to Washington tp demand relief in the form of a jobs program. Led by Jacob S. Coxey, Sr., it was the first populist march on Washington. A severe wave of strikes took place in 1894, most notably the bituminous coal miners' strike of the spring, which led to violence in Pennsylvania, Ohio, and Illinois. More serious was the Pullman Strike which shut down much of the nation's transportation system in July 1894.

The Sherman Silver Purchase Act of 1890, perhaps along with the protectionist McKinley Tariff of that year, has been partially blamed for the panic. Passed in response to a large overproduction of silver by western mines, the Sherman Act required the U.S. Treasury to purchase silver using notes backed by either silver or gold. The Democrats and President Cleveland were blamed for the depression. The decline of the gold reserves stored in the Treasury fell to a dangerously low level. This forced President Cleveland to borrow $65 million in gold from Wall-Street banker J.P. Morgan and the Rothschild banking family of England[12] to support the gold standard.[13] In the ensuing 1894 elections, the Democrats and Populists lost heavily. The election marked the largest Republican gains in history.[14]

Many of the western silver mines closed, and many never re-opened. A significant number of western mountain narrow-gauge railroads, built to serve the mines, went out of business. The Denver and Rio Grande Railroad stopped its ambitious plan, then under way, to convert its system from narrow gauge to standard gauge.

The depression was a major issue in the debate over bimetallism. The Republicans blamed the Democrats for the depression and scored a landslide victory in the 1894 state and Congressional elections. The Populists lost most of their strength and had to support the Democrats in 1896. The presidential election of 1896 was fought on economic issues and the pro-gold, high-tariff Republicans led by William McKinley won a decisive victory over the over pro-silver William Jennings Bryan.

The U.S. economy began to recover in 1897. After the election of Republican McKinley, confidence was restored with the Klondike gold rush and the economy began 10 years of rapid growth, until the panic of 1907.

See also[edit]


  1. ^ Timberlake, Jr., Richard H. (1997). "Panic of 1893". In Glasner, David; Cooley, Thomas F., eds. Business Cycles and Depressions: an Encyclopedia. New York: Garland Publishing. pp. 516–18. ISBN 0-8240-0944-4. 
  2. ^ The History Box, The Panic of 1893 – Financial World; accessed 2009.04.08.
  3. ^ James L. Holton, The Reading Railroad: History of a Coal Age Empire, Vol. I: The Nineteenth Century, pp. 323–325, citing Vincent Corasso, The Morgans.
  4. ^ "Grover Cleveland,"
  5. ^ "Grover Cleveland," American President: A Reference Resource,
  6. ^ a b Whitten, David O. "EH.Net Encyclopedia: Depression of 1893". Retrieved 2009-04-20. 
  7. ^ Paul Johnson, A History of the Jews, p.368-369. “As with the Thirty Years War and the Napoleonic Wars, the Civil War brought out the organizational and financial skills of many Jewish bankers, contractors and clothing-suppliers, and from the 1860s onwards the Jews were a power in American business, especially in New York. Their massive philanthropy provided Judaism with a well-endowed institutional framework, and inevitably this had a strong liberal orientation.”
  8. ^ Jewish Encyclopedia c. 1906 Finance. "The practice initiated by the Rothschilds of having several brothers of a firm establish branches in the different financial centers was followed by other Jewish financiers, like the Bischoffsheims, Pereires, Seligmans, Lazards, and others, and these financiers by their integrity and financial skill obtained credit not alone with their Jewish confrères, but with the banking fraternity in general. By this means Jewish financiers obtained an increasing share of international finance during the middle and last quarter of the nineteenth century. The head of the whole group was the Rothschild family... Of more recent years, non-Jewish financiers have learned the same cosmopolitan method, and, on the whole, the control is now rather less than more in Jewish hands than formerly."
  9. ^ Hasia R. Diner (2004). The Jews of the United States, 1654 to 2000. U. of California Press. p. 170. 
  10. ^ Hoffman, Charles. The Depression of the Nineties: An Economic History. Westport, CT: Greenwood Publishing, 1970. p. 109.
  11. ^ Parshall, Gerald. "The Great Panic Of '93." U.S. News & World Report 113.17 (1992): 70. Academic Search Complete. Web. 26 Feb. 2013.
  12. ^ [1]
  13. ^ Paper Money vs. Gold Money – U.S. 38 Year Cycle
  14. ^ Frail, T. A. "Top 10 Historic Midterm Elections.", Oct. 14, 2010.

External references[edit]

Contemporary sources[edit]

  • 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
  • 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): 31–56 in JSTOR
  • Closson, Carlos C. Jr. "The Unemployed in American Cities." Quarterly Journal of Economics, vol. 8, no. 2 (January 1894) 168–217 in JSTOR); vol. 8, no. 4 (July 1894): 443–477 in JSTOR
  • Fisher, Willard. "‘Coin’ and His Critics." Quarterly Journal of Economics 10 (January 1896): 187–208 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): 12–28 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): 117–48 in JSTOR.

Secondary sources[edit]

  • Barnes, James A. John G. Carlisle: Financial Statesman (1931).
  • Barnes, James A. (1947). "Myths of the Bryan Campaign". Mississippi Valley Historical Review (The Mississippi Valley Historical Review, Vol. 34, No. 3) 34 (3): 383–394. doi:10.2307/1898096. JSTOR 1898096. 
  • 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 (1956). "The Depression of the Nineties". Journal of Economic History 16 (2): 137–164. JSTOR 2114113. 
  • 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. jays journal The Causes of the Panic of 1893 (1907). online
  • Lindsey, Almont. The Pullman Strike 1942.
  • Littlefield, Henry M. (1964). "The Wizard of Oz: Parable on Populism". American Quarterly (American Quarterly, Vol. 16, No. 1) 16 (1): 47–58. doi:10.2307/2710826. JSTOR 2710826. 
  • Nevins, Allan. Grover Cleveland: A Study in Courage. 1932, Pulitzer Prize.
  • Rezneck, Samuel S. (1953). "Unemployment, Unrest, and Relief in the United States during the Depression of 1893–97". Journal of Political Economy (The Journal of Political Economy, Vol. 61, No. 4) 61 (4): 324–345. doi:10.1086/257393. JSTOR 1826883. 
  • Ritter, Gretchen. Goldbugs and Greenbacks: The Anti-Monopoly Tradition and the Politics of Finance in America (1997)
  • Ritter, Gretchen (1997). "Silver slippers and a golden cap: L. Frank Baum's The Wonderful Wizard of Oz and historical memory in American politics". Journal of American Studies 31 (2): 171–203. doi:10.1017/S0021875897005628. 
  • Rockoff, Hugh (1990). "The 'Wizard of Oz' as a Monetary Allegory". Journal of Political Economy (The Journal of Political Economy, Vol. 98, No. 4) 98 (4): 739–760. doi:10.1086/261704. JSTOR 2937766. 
  • Romer, Christina (1986). "Spurious Volatility in Historical Unemployment Data". Journal of Political Economy 94 (1): 1–37. doi:10.1086/261361. 
  • 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).
  • 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

Further reading[edit]