Panic of 1893
The Panic of 1893 was a brief but severe depression brought about by multiple factors, including the collapse of the Philadelphia & Reading Railroad, and the Sherman Silver Purchase Act, passed three years before. Urban and rural areas were both hit hard, though as the 1890 census showed, for the first time, the majority of Americans did not work on farms.
Unemployment reached 20% or higher. Some banks were unable to collect on mortgages, and went bankrupt after foreclosing many homes. Congress under President Grover Cleveland repealed the disastrous Sherman Silver Act in October of 1893.
The Panic of 1893 did have a significant effect, as by the close of 1893, more than 15,000 businesses and more than 640 banks were bankrupt. Large-scale strikes were frequent and often bloody. The Depression formed the backdrop for the intensely contested elections of 1894 and 1896, which both resulted in Republican landslides and the emergence of the Fourth party System.
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. The investments during the time of the Panic were heavily financed through bond issues with high interest payments (the most actively traded stock at the time) and went into receivership as a result of its bankers calling their loans in response to rumors regarding the NCC's financial distress.
A series of bank failures followed, and the price of silver fell. The Northern Pacific Railway, the Union Pacific Railroad and the Atchison, Topeka & Santa Fe Railroad all failed. This was followed by the bankruptcy of many other companies; in total over 15,000 companies and 500 banks failed (many in the west). About 20%-25% of the workforce was unemployed at the Panic's peak.
The Panic was severe 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 men from Ohio and Pennsylvania to Washington to demand relief. A severe wave of strikes took place in 1894, most notably the Midwestern bituminous coal strike of the spring, which led to violence in Ohio. Even more serious was the Pullman Strike which shut down much of the nation's transportation system in July, 1894.
The most memorable cultural events were the Chicago World's Fair of 1893. The hard times and utopian dreams that characterized the era were immortalized in L. Frank Baum's The Wonderful Wizard of Oz (1900).
The Sherman Silver Purchase Act of 1890 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. Politically the Democrats and President Cleveland were blamed for the depression. The Democrats and Populists lost heavily in the 1894 elections, which marked the largest Republican gains in history.
Many of the western silver mines closed, and a large number were never re-opened. A significant number of western mountain narrow-gauge railroads, which had been built to serve the mines also 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 debates over Bimetallism. The Republicans blamed the Democrats 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 was marked by a decisive victory of the pro-gold, high-tariff Republicans led by William McKinley over pro-silver William Jennings Bryan.
The U.S. economy finally began to recover in 1896. After the election of Republican McKinley confidence was restored and the economy began 33 years of rapid growth..
- Panic of 1819
- Panic of 1837
- Panic of 1857
- Panic of 1873
- Panic of 1890
- Panic of 1907
- Great Depression
- Wizard of Oz
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- Source: Romer, 1986
- There were small dips before the Great Depression, such as the Panic of 1907 and a sharp recession in 1920-21.