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Panic of 1893

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The Panic of 1893 was a serious decline in the economy of the United States that began in 1893 and was precipitated in part by a run on the gold supply.

The Panic was the worst economic crisis to hit the nation in its history to that point. Economic historians are not certain what caused it but point to several possible factors. First, too many 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. Next, the Philadelphia and Reading Railroad went bankrupt. Then, 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. 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 12%-18% of the workforce was unemployed at the Panic's peak.

Estimates of Unemployment during the 1890s




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






Source: Romer, 1984


The severity of unemployment 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 men from Ohio and Pennsylvania to Washington to demand relief.  A severe wave of strikes took place in 1894, most notably 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, perhaps along with the protectionist McKinley Tariff of 1890, have been partially blamed for the panic.  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.  The depression was a major issue in the debates over Bimetallism and the presidential election of 1896. 


The U.S. economy finally began to recover in 1896. After the election of William McKinley confidence was restored and the economy began ten years of rapid growth, until the Panic of 1907.





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