(9 am. – promoted by ek hornbeck)
As even a sole nation’s history demonstrates, depressions were neither unknown or infrequent before the 1930s. The witnesses just weren’t as likely to live long enough to see the end of a second economic cycle! Methinks we’d do well to remember about our real roots without the glorious inbetween sections.
I have below a half generation’s worth of disparate plague, horsies, fire, massacre, union politics, extravagance, silver, financial wizards, cronies and price deflation bound together under contemporaneous ages of American History: The Gilded Age, the Long Depression and The Second Industrial Revolution.
Precursors: Gold, Chicago and The Great Epizootic of 1872
Let’s get right into the history, then. In 1869, the markets were hit by Black Friday. Two slick businessmen named James Fisk (a one time cotton runner) and Jay Gould bought up massive amounts of gold in an attempt to dominate the market. Through a friend, they even got President Grant to appoint Daniel Butterfield as As. Treasurer to prevent a possible counteractive sale of federal gold. As stocks crashed and people caught on to Fisk and Gould’s scheme, the government sold 4 million in bullion. Unfortunately, the government gold caused a stock run. Novelist Henry Adams wrote an article entitled The New York Gold Conspiracy, calling out Grant for his role. This turned out to be only one of Grant’s many scandals (see below).
Fire claimed Chicago and nearby cities in 1871, although it probably wasn’t caused by a dairy cow. The pricetag: 200 million in damage. So count that one city destroyed post-war, one scandal-ridden Republican presidency and economic problems. Now it’s seven years after the Civil War, November 1872.
Say in 2009, there was a ruthless microorganism which proliferated virtually everywhere and could eat petroleum or gasoline rapidly. We’d be screwed… a majority of our commerce and transport would come to a halt. Confusion, panic, devastation would ensue as even routine and life-necessary functions became unavailable. But instead of petroleum, what about when everyday transportation was done by horses? Clip-clopping beasts pulled the plows, carraiges and even city trolleys were equine-drawn in 1872; when horses across the continent were struck down by flu:
Imagine an equestrian health disaster that crippled all of America, halted the government in Washington DC, stopped the ships in New York, burned Boston to the ground and forced the cavalry to fight the Apaches on foot. It was an equine tragedy so deadly that one wave of the infection swept south like a Biblical plague from its origin in Toronto, Canada, down the Atlantic Seaboard to Havana, Cuba, leaving everything in its path in ruins in weeks, while another branch simultaneously raced west to the Pacific.
Here’s more on The Great Boston Fire of 1872 which, ironically enough, started in the financial district, destroyed over 960 firms and spread to warehouses and tenements. Since Boston’s buildings were largely wood-roofed, and with flu affecting the horses, few fire engines could come to the rescue as flames leaped from block after another. In total, “$75,000,000 [about $3.5 billion current dollars]” worth of property in Boston was razed. Second city lost in Republican peace time.
As for the science, equine influenza is caused by two strains of Influenzavirus A, which includes the avian flu virus DemfromCt regularly profiles on Daily Kos. Both H7N7 strain and H3N8 cause sickness in humans, horses and dogs, and H7N7 can also infect birds. For horses in 1872, infection rate was near 100% and mortality could have been as high as 10%, with many infected horses too weak to stand let alone work.
The economic havoc from The Great Epizootic was so bad, it was one of the key influences leading to the Panic of 1973. The influenza’s deleterious effects can’t be overstated here.
Panic of 1873
left: Jay Cooke, a “wizard” of investment banking
As with the Great Depression and the 2008
Bush-Cheney Global Recession/Financial Crisis/Housing Collapse/Cluster@#$%, the Long Depression very much started in the United States.
Let’s start with investment banker Jay Cooke. A northern, technologically-saavy businessman and a Republican’s Republican, he’d eventually become a Radical. His brand new firm Jay Cooke & Company loaned the state of Pennsylvania 3 million at the beginning of the war effort. A true believer of the cause and personal friend of Treasury Sec. Salmon P. Chase, he quickly sold 11 million in war bonds, which the cash-strapped Treasury Dept. had failed to accomplish. In 1865, when the Republican administration faced further difficulty with the bond market, Cooke delivered the goods. Cooke got the deal so quickly because he was the first banker to use the telegraph to coordinate sales. Thus was the ultimate Civil War financier.
By 1870, Cooke was dabbling in many projects, including a passionate desire to contruct a Northern Pacific Railroad from Duluth, Minnesota to the Pacific NW. Unfortunately, Cooke wrote liabilities against the expected returns from the not-yet-happened sale of Northern Pacific but couldn’t find buyers: the firm ran out of money.
In fact, everyone did. The silver dollar had just come to an end in 1873 due to the Coinage Act, which put the US on a gold standard for currency (it had used both gold and silver before). Prices deflated, the money supply contracted, and the West and its regional capital in Virginia City were hard hit because it produced silver in abundance, now no longer needed for currency. Cooke tried to cash in his brownie points with the government to the tune of a 300 million loan, but rumors spread faster, and the firm filed for bankruptcy on September 18. New York buckled, two days later the NY Stock Exchange closed and stayed so for 10 days. Financier Henry Clews was also wiped out, and the recently unified Germany was having its own financial problems, along with Britain, Austria, France, Russia and company. Price depression spread throughout the land, from New York to San Francisco and Chicago.
Of the country’s 364 railroads, 89 went bankrupt. A total of 18,000 businesses failed between 1873 and 1875. Unemployment reached 14% by 1876, during a time which became known as the Long Depression. Construction work lagged, wages were cut, real estate values fell and corporate profits vanished.
The Long Depression is a key insight into understanding the nature of our economic system. While it’s end date is controversial, either within the decade or as late as 1896, the rest of the century was a generally miserable time to be in the vast lower class.
An Alcoholic GOP President Who Couldn’t Say No To His Friends
Now almost universally regarded as a failure by presidential historians, Ulysses S. Grant actually reduced the US debt from the war and raised the nation’s credit. But a presidency already muddied by Black Friday was hit with the revelations that Congressmen who’d voted for sending funds to construction contractor Credit Mobilier received cheap company stock, including Grant’s VP nominee. (Deja vu?)
His friends were implicated in further intrigues. War Secretary Wm. Belknap accepted bribes in return for American Indian trading posts. Belknap avoided conviction by Congress by resigning. Then Treasury Secretary Bristow unveiled a group of conspirators called the Whiskey Ring who looted the government of 3 million dollars. Grant’s secretary Orville Babcock was indicted but pardoned by the POTUS. The President and the hero of Vicksburg was fairly innocent of the actual crimes but continued to cover for his friends, outraging a public already sick of scandal and besieged by the Depression.
Classical liberal economics dictated that the government’s intervention in the Long Depression be kept to a minimum, which thus prolonged the misery. As had government throughout history. But many industrialists did just fine.
Captains of Industry And The Rise Of Labor
As ordinary Americans suffered, the super rich used the crisis as an opportunity to buy up foundering competitors. Often forgotten amidst later industrialists Andrew Carnegie, JP Morgan, the Rockefellers and the longtime aristocratic Astors were the Vanderbilts. To understand the deep inequality of the Gilded Age, ponder on the fabulous wealth and conspicuous consumption of this family. At one point the richest man alive, Cornelius “The Colonel” Vanderbilt was of the first generation born in the United States of America and built the family’s railroad business from the 1860s until his death in 1877. One million dollars got him his own university. As patrons of the arts and totally dominant in NY social life, the family was on “the list“. (Updated:His descendants, however, were not all so fortunate in the 20th century.
One of them financed Marble House (to the left) in 1888 in Newport, RI, only a stone’s throw from the Irish immigrants living in town. Not to be outdone, Cornelius Vanderbilt II made a summer home nearby at The Breakers in 1893, used to get away from the dreadful hustle and bustle of his NYC mansion on Fifth Avenue. The famous 1888 Biltmore estate in North Carolina was George Washington Vanderbilt’s project. It’s still owned by the family. In all, they had ten mansions in downtown Manhattan, and estates in Michigan, upstate, New England, the Deep South and Britain. Count among them media elite Anderson Cooper, great-great grandson of Cornelius I on the maternal side.
So much wealth in the hands of so few made conditions for many workers easily dictated, prevented the growth of any real middle class and generally made life at the bottom hard-scrabble. Imagine these buildings with their postage stamp-sized apartments, packed. At this really cool website here you can see the history of a tenement flat in NYC with lots of photos of how people lived at the time. Some blamed their frustrations on the cheap immigrant labor, prompting massacres, expulsions and anti-Chinese legislation: check out this picture of a NY protest in the 1870s via the Library of Congress. But things can only be so miserable for so long before people start to get pissed off and do something about dangerous work and poor conditions.
Organizations like National Labor Union and the Knights of Labor were at the forefront of progressivism, and in a twenty year period instigated many worker laws which now protect union and non-union alike. After 1878, the KoL accepted women and blacks as members. The Federation of Organized Trades and Labor Unions (would become the AFL in ’88) was going to use its strength of numbers to enforce a radical notion: an 8 hour work day. May 1 1886 would be the day they striked until the new work day become code. At least 300,000 participated in cities everywhere.
On the afternoon of Monday, May 3, the first working day after the national eight-hour walkout, August Spies was invited to be the German-language speaker at a rally of the striking Lumber Shovers’ Union. Coincidentally, the meeting took place very near the main factory of the McCormick Reaper Works, whose union employees had been locked out since February. As Spies spoke, a portion of the crowd broke away to join McCormick strikers in heckling their non-union replacements as the latter left the plant. Spies advised his listeners to exercise restraint, but a melee broke out. When the police arrived, they answered jeers and stones with clubs and guns, killing two workers.
Union leaders like Samuel Gompers thought the politicization of unions by socialists and anarchists lessened their credibility, and sought to remove their influence. But Anarchists weren’t afraid of the union-busters and shoot-first lawmen of the time, and outraged by the McCormick incident, passed 20,000 leaflets calling for a rally in support of the workers the next day at Haymarket.
At the conclusion of the rally, the police marched on the crowd, ordering their dispersal. Someone threw a pipe bomb which killed one cop, and the police began to fire, rather wildly actually, even into their own ranks. (They caused most of their own casualties). Some of the protesters were armed, and fired back. 8 police and 4 workers were killed, and scores wounded.
As wikipedia states, August Spies, Albert Parsons, Adolph Fischer, George Engel, Louis Lingg, Michael Schwab, Samuel Fielden and Oscar Neebe were charged in connection with the bomb throwing. Most of them were Germans. The brother of Albert Parsons claimed the powerful and violent Pinkerton Detective Agency were behind the bomb throwing. The notoriously anti-left newspapers of the time called for their deaths, and the trials escalated, ascending to the Supreme Court of Illinois, then the US Supreme Court. Now considered a miscarraige of justice, Parsons, Fisher, Engel, and Spies were executed by hanging. Lingg slowly died the night before from a botched suicide bombing. The four were strangled before onlookers as the fall didn’t snap their necks.
Now we commemorate May Day across the world, but often forget the great cost paid seven generations ago by unions, non-union workers and leftists.
Reaction and Synthesis
People were mad as hell, and they weren’t going to take it anymore. Picture: Wm. J Bryan giving a speech
Union workers and their sympathizers fought, sweat and died for the concessions and gains we take for granted today. The silver politics that hit Virginia City, Denver and the other mining states came to a head when the Democrats were actually able to make something of a movement capturing the hard-working people’s frustration at rich Republicans. Really, aristocrats and cronies who didn’t seem to be too concerned with common man’s plight.
The realigning election of 1896 took place at the latest possible end-date for the Long Depression. Populist hero William Jennings Bryan routed the historically corrupt, business-friendly Dems (called Bourbon Democrats) and became the Democratic nomiee, grafting a coalition of Western miners, Midwestern farmers, the Southern poor and “Silver Republicans”. At the Chicago Democratic National Convention on July 6th, Bryan gave his most famous speech, called “Cross of Gold“:
You come to us and tell us that the great cities are in favor of the gold standard. I tell you that the great cities rest upon these broad and fertile prairies. Burn down your cities and leave our farms, and your cities will spring up again as if by magic. But destroy our farms and the grass will grow in the streets of every city in the country…
If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.
Outspent 5-1, Bryan lost to McKinley (the dude who got shot which catapulted Teddy Roosevelt to the presidency) and his subsequent runs in 1900 and 1908 were failures. But Bryan changed the demographics of the Democratic Party, setting the stage for Wilson and FDR and Truman.
Depressions have happened plenty of times in the last five centuries, and spread their misery for quite some time if unchecked. Some businesses did survive, like Standard Oil of New Jersey, which later turned John D Rockefeller into the arguably richest man in history. But the new monopolies and trusts were not matched with rights or decent wages for workers, of which most Americans were, until unions and new political coalitions fought for and paid for them dearly.