The Depression of 1893, Essay Example

Abstract and Summary

This is an article review of the article “The Depression of 1893” which was authored by Edwards, Rebecca and published by Vassar College in 2000. The article is widely researched and contains well researched information of the genesis of the depression to how it manifested its self to cause a historic economic depression which reached its pick in 1893. The article further explained on how the depression was mitigated and the role of Jacob Coxey who was a Businessman in Ohio and how he organized an industrial army in an attempt to protest for the federal government to act on the economic crisis (Edwards, 2000).

The economic depression was in most places before it was full blown in 1893 it has started much earlier. In the early 1890’s there were crisis in the southern regions which were growing cotton and also in the late 1880’s Great Plains in the lakes were affected. However, the wave of depression hit urban areas and Wall Street in 1893 which turn up to be worldwide economic crises. As a result to this depression unemployment in most cities rose to a record level of 20-25% and almost quarter of the country railroads went bankrupt.

This depression is regarded as the worst form of depression in history which had its employment rate to exceed 10% for a period of half a decade. The economic activities which took place during early 1880’s which were both international and domestic caused social and political responses towards the depression.

The article emphasized on the factors which lead to the economic depression the factors range from domestic causes, international causes, recovery path out of depression, its effects and significance of it in the country economy at that time and in the future. The depression has been widely blamed on poor monetary policy, civil war, gold standard and under consumption. During this period goods and services were produced in large quantities than what the society would have consumed (Steeples, & Whitten, 1998). Hence, due to accumulation of inventory most of the leading firm’s retrenched employees in an attempt to reduce production.

Factors of depressions

According to Bienen, (2008) the economic depression in Europe and Great Britain preceded the depression of United States in 1893 who were the main consumers of goods produced in United States. Their reduction of trading is one factor which caused destabilization of the American economy because locally produced agricultural products and goods from the manufacturing industry didn’t have ready market for its goods. These lead to reduction of prices which were far below the production costs hence most of the economic activities during that time would not be able to sustain them financially.

A currency problem was created then by a heated debate among different stakeholders in economic development on whether silver and gold would backup the American paper currency. The confidence of United States economy continued to deteriorate which lead to the collapse of the stock market which made most companies to collapse due to bankruptcy.  People didn’t have faith in paper currency and were using Gold and silver to trade which lead to depletion of Gold reserves and banks demanded debtors to pay off the loans they had taken. These eventually lead to reduction of purchasing power of Americans which subsequently caused most of the companies to fail and close its operations.

Effects of the depression

The effects brought about by this depression were so severe and affected all industrial cities and also mill towns. The falling prices of export cash crops like cotton and wheat were worst recorded in this era and the farmers had the distress of their life trying to make up for the losses after the depression and they too did cry foul to the government over this issue. The publicized march of unemployed men from Ohio and Pennsylvania to Washington forming Coxey’s Army demanding relief, this was just the start of uproars and waves of strikes in around 1894. The rest were the spring Midwestern bituminous coal strike, leading violence in Ohio and the shutting down of much of public transportation by the Pullman strike in July same year.

This led to financial panic in 1893 starting with the collapse of financial failure in Philadelphia and in January Reading Railroad; this was followed in May by more string of railway failures, this saw the going under of Erie Railroad in July, in august Northern Pacific, in October Union Pacific and in December saw the going under of both Atchison, Topeka and Santa Fe Railroads. The politician were rampantly saying that the economy was in a high state of prosperity just as they had in back cases claimed before the financial panic ensued, this saw a number of 500 banks and more than 16,000 business declaring bankruptcy.

Recovery

The year 1896 saw the election of Republican Grover Cleveland into presidency, this saw the reverse of the Sherman Silver Purchase Act unpopular to most business men and restoration of the confidence of the American economy. This act had permitted unlimited coinage of silver and increased correspondently the supply of paper circulation, though all paper currency had to be backed by gold as most American favored gold over silver. This people hoarded gold and traded for it in paper currency instead of silver, this helped exhaust gold reserves in America (Charles, 1970). After Europe recovered from its depression, the demand for American goods rose again overseas, this was complimented by the failure of crops in India, Argentina and Australia. The increase of more gold from Alaska and South Africa expanded money supply which led to rising of prices.

Economic Treads

Between the year 1870 and 1890 saw number of farms rising by 80% at 4.5 million and later increased by 25% at the end of this century. The3 value of farm property grew by 75% as 16.5 billion and by 1900 also saw 25% increment. Vast indebtedness was presented by advancing checkerboard of tilled field of the nation heartland, 29% of farmer’s nation wide encumbered mortgages.

This saw many western silver mines closing and opening and significant number of western narrow gauge railroads go out of business.

Mitigation of its effects

Oblivious of structural crisis many American accused those who did find work as lazy and beggars, some unemployed blamed themselves which led to high cases of suicide and despair in many newspapers.

Jacob Coxey organized the industrial Army in 1894 protesting the federal government inaction to face economic crisis. His proposals were later accepted during New Deal though they were considered extremely radical in the 1890’s. This included advocating of creation of government jobs, national roads and thi9s initiative he argued that would be funded using government bonds.

Significance

Most business men acclaimed that the great depression was felt due to decrease demand of American goods overseas. Preventive desires of such depression encouraged American imperialism so as to secure markets in overseas; this became a factor in the Spanish American war 1898. Since the coinage of silver was blamed for the depression the debate over currency in favor of gold standard was ended by this depression.

References

Bienen, L. (2008). The Panic of 1893. Retrieved on February 20, 2010 from http://florencekelley.northwestern.edu/historical/panic/

Charles, H. (1970). The Depression of the Nineties. Westport: Greenwood Press

Edwards, R. (2000). The Depression of 1893. Retrieved on February 20, 2010 from http://projects.vassar.edu/1896/depression.html

Steeples, D & Whitten, D. (1998). Democracy in Desperation: The Depression of 1893. Westport: Greenwood Press