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On September 18, 1873, the announcement of Jay Cooke and Company's bankruptcy sent Wall Street to a panic, and the country to a long, harsh depression. Americans interpreted this economic crisis in the light of the acrimonious financial debates born of the Civil War—the money question chief among them. The consequences transformed American politics. Ideologically ill-equipped to devise cohesive economic policies, political parties split dangerously along sectional lines (between the Northeast and the Midwest). Particularly divided over President U.S. Grant's veto of the 1874 Inflation Bill, the Republican Party decisively lost the 1874 congressional elections. As a Democratic majority in the House spelled the doom of Reconstruction, the ongoing divisions of both parties on economic issues triggered a political realignment. The dramatic 1876 elections epitomized a new political landscape that would last for twenty years: high instability in power at the national level and what has been described as the “politics of inertia.” Therefore, by closely following the ramifications of the 1873 panic, this article proposes an explanation of how an economic crisis transformed into a pivotal political event.
This article greatly benefited from the comments of many fine scholars who have either read or heard it at different stages. I particularly wish to thank Margo Anderson, Richard Bensel, Pierre Gervais, Jean Heffer, Richard John, and Scott Nelson for their very helpful input.
2 Nelson, Scott, “The Real Great Depression,” Chronicle of Higher Education, Oct. 17, 2008; Krugman, Paul, “The Third Depression,” New York Times, June 27, 2010. The current crisis has renewed scholarly interest in historical precedents: see Reinhart, Carmen M. and Rogoff, Kenneth S., This Time Is Different: Eight Centuries of Financial Folly (Princeton, 2009).
3 There is no equivalent to the study of the Panic of 1857 by Huston, James L., The Panic of 1857 and the Coming of the Civil War (Baton Rouge, 1987).
4 See for instance such standard works as Gillette, William, Retreat from Reconstruction, 1869–1879 (Baton Rouge, 1979); and Perman, Michael, The Road to Redemption: Southern Politics, 1869–1879 (Chapel Hill, 1984); or, more recently, Simpson, Brooks D., The Reconstruction Presidents (Lawrence, KS, 1998).
5 A typical example might be Hogue, James Keith, Uncivil War: Five New Orleans Street Battles and the Rise and Fall of Radical Reconstruction (Baton Rouge, 2006). The author mentions the economic recession only to explain that unemployment swelled the ranks of the White Leagues in Louisiana.
6 Heather Cox Richardson underlines this in “North and West of Reconstruction: Studies in Political Economy” in Reconstructions: New Perspectives on the Postbellum United States, ed. Brown, Thomas J. (Oxford, 2006), 66–90.
7 For instance, Eric Foner views it as a large shift in the history of political thought and culture; the end of free-labor ideology put the fear of class warfare into the elites and pushed the Republican Party to economic conservatism. Foner, , Reconstruction: America's Unfinished Revolution, 1863–1876 (New York, 1988), 512–24. More recently, Michael Holt argued that voters generally voted the party out of power when such a hardship hit: Donald, David Herbert, Baker, Jean Harvey, and Holt, Michael F., The Civil War and Reconstruction (New York, 2001); Holt, Michael F., By One Vote: The Disputed Presidential Election of 1876 (Lawrence, KS, 2008).
8 Kleppner, Paul, The Third Electoral System: Parties, Voters and Political Cultures, 1853–1892 (Chapel Hill, 1979); Keller, Morton, Affairs of State: Public Life in Late Nineteenth-Century America (Cambridge, MA, 1977), quotation 238.
9 Chandler, Alfred D. Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, MA, 1977); Nugent, Walter T. K., Money and American Society, 1865–1880 (New York, 1968); Schneirov, Richard, Labor and Urban Politics: Class Conflict and the Origins of Modern Liberalism in Chicago, 1864–97 (Urbana, 1998); Beckert, Sven, The Monied Metropolis: New York City and the Consolidation of the American Bourgeoisie, 1850–1896 (New York, 2001).
10 Schneirov, Richard, “Thoughts on Periodizing the Gilded Age: Capital Accumulation, Society, and Politics, 1873–1898,” Journal of Gilded Age and Progressive Era 5 (July 2006): 189–224. The phrase “Gilded Age” is used here for lack of a better one. Although the terminology might be contested, Schneirov offers a convincing argument about the chronology of the period. On the term itself, see the forum in Journal of Gilded Age and Progressive Era 8 (Oct. 2009): 463–85.
11 Sprague, O. M. W., History of Crises under the National Banking System (Washington, 1910). Most data related to the crisis in later works come from this book; among the most useful are Rendigs Fels, American Business Cycles, 1865–97 (Chapel Hill, 1959); and Unger, Irwin, The Greenback Era: A Social and Political History of American Finance, 1865–1879 (Princeton, 1964). Fred Moseley also remarks on the scant scholarship on the 1873 crisis, while Hugh Rockoff underlines in a survey published in 2000 that Sprague's book “is still indispensable”: Moseley, Fred, “Depression of 1873–1879” in Business Cycles and Depressions: An Encyclopedia, eds. Glasner, David and Cooley, Thomas F. (New York, 1997), 148–49; Rockoff, Hugh, “Banking and Finance, 1789–1914” in The Cambridge Economic History of the United States, vol. 2: The Long Nineteenth Century, eds. Engerman, Stanley L. and Gallman, Robert E. (Cambridge, 2000), 643–84. One notable exception is Wicker, Elmus, Banking Panics of the Gilded Age (Cambridge, 2000), 16–33, which offers a new narrative and brings new data to the analysis of the banking side of the panic.
12 The first NBER study of business cycles was published in 1923: National Bureau of Economic Research, Business Cycles and Unemployment; Report and Recommendations of a Committee of the President's Conference on Unemployment, Including an Investigation Made under the Auspices of the National Bureau of Economic Research, 1st ed. (New York, 1923). This ongoing study has since been the subject of many discussions and reevaluations, but most commonly with regard to twentieth-century data. For a recent essay focusing on the nineteenth century, however, Davis, Joseph H., “An Improved Annual Chronology of U.S. Business Cycles since the 1790s,” Journal of Economic History 66 (Mar. 2006): 103–21.
13 Certainly the most successful attempt is Kindleberger, Charles P., Manias, Panics, and Crashes: A History of Financial Crises (1978; rev. ed., New York, 1989). See also Calomiris, Charles W. and Gorton, Gary, “The Origins of Banking Panics: Models, Facts, and Bank Regulation” in Financial Markets and Financial Crises, ed. Hubbard, R. Glenn (Chicago, 1991), 109–73. A good summary of the financial side of the crisis and the scholarship dedicated to it can be found in Rockoff, “Banking and Finance,” esp. 667–69, 942.
14 “The President and the Panic,” Harper's Weekly, Oct. 11, 1873, 890; David Glasner, “Crisis of 1873” in Business Cycles and Depressions, eds. Glasner and Cooley, 132–34; Larson, Henrietta M., Jay Cooke, Private Banker (Cambridge, MA, 1936); White, Richard, Railroaded: The Transcontinentals and the Making of Modern America (New York, 2011).
15 “The President and the Panic,” Harper's Weekly, Oct. 11, 1873, 890; Rockoff, “Banking and Finance”; Glasner, “Crisis of 1873”; Wicker, Banking Panics. Wicker's contention is that suspension was unnecessary and probably a serious mistake.
16 Redlich, Fritz, The Molding of American Banking: Men and Ideas (repr. New York, 1968).
17 U.S. Comptroller of the Currency, Annual Report of the Comptroller of the Currency (Washington, 1868); Myers, Margaret G., The New York Money Market (New York, 1931); Bensel, Richard Franklin, Yankee Leviathan: The Origins of Central State Authority in America (New York, 1990), 265–67.
18 Glasner, “Crisis of 1873”; Kindleberger, Charles P., A Financial History of Western Europe, 2nd ed. (Oxford, 1993).
19 Unger, Greenback Era, 220–26; Nugent, Money and American Society, 175–84; Moseley, “Depression of 1873–1879”; Heffer, Jean, Le port de New York et le commerce extérieur américain, 1860–1900 (Paris, 1986), 9; Joseph H. Davis, “An Annual Index of U. S. Industrial Production, 1790–1915: Companion Technical Data Appendix,” National Bureau of Economic Research, http://www.nber.org/data/industrial-production-index/ (accessed July 25, 2011).
20 Among those introducing the concept of a Long Depression was Fels, Rendigs, “The Long-Wave Depression, 1873–97,” Review of Economics and Statistics 31 (Feb. 1949): 69–73. Fels based his case on the National Bureau of Economic Research chronology of peaks and troughs, which relied heavily on price movements. This has been revised based on a new production index in Davis, “An Improved Annual Chronology.”
21 Robert A. Margo, “The Labor Force in the Nineteenth Century”; and Atack, Jeremy, Bateman, Fred, and Parker, William N., “The Farm, the Farmer, and the Market” in The Cambridge Economic History of the United States, eds. Engerman, and Gallman, , 2:207–84; Unger, Greenback Era, 226; Atack, Jeremy, Lee, Susan Previant, and Passell, Peter, A New Economic View of American History: From Colonial Times to 1940, 2nd rev. ed. (New York, 1994); Gutman, Herbert G., “The Tompkins Square ‘Riot’ in New York City on January 13, 1874: A Re-Examination of Its Causes and Its Aftermath,” Labor History 6:1 (1965): 44–70. Quotation from Strong, George T., The Diary of George Templeton Strong, eds. Nevins, Allan and Thomas, Milton Halsey (New York, 1952), 4:498.
22 At least, that is how Irwin Unger perceived the initial response. Unger, Greenback Era, 213.
23 Ashtabula Sentinel, Sept. 25, 1873; Cincinnati Enquirer, Sept. 23, 1873. Such an outlook was not peculiar to Ohio; Harper's Weekly thought the new panic was less serious than the 1869 Gold Corner and believed it would serve as a useful lesson to all. “The Financial Outlook,” Harper's Weekly, Sept. 27, 1873, 843.
24 Klein, Maury, The Life and Legend of Jay Gould (Baltimore, 1986), 65–210; White, Richard, “Information, Markets, and Corruption: Transcontinental Railroads in the Gilded Age,” Journal of American History 90 (June 2003): 19–43.
25 Sharkey, Robert P., Money, Class, and Party: An Economic Study of Civil War and Reconstruction (Baltimore, 1959); Unger, Greenback Era; Nugent, Walter T. K., The Money Question during Reconstruction (New York, 1967); Nugent, Money and American Society; Ritter, Gretchen, Goldbugs and Greenbacks: The Anti-Monopoly Tradition and the Politics of Finance in America (New York, 1997).
26 Congressional Globe, 41st Cong., 2nd sess. (Jan. 24, 1870), 702.
27 The moral approach to the money question is at the crux of Walter Nugent's argument in The Money Question during Reconstruction and Money and American Society. On the role of Protestant clergymen, see Unger, Greenback Era, 120–31.
28 On the sectional politics of the money question, Nicolas Barreyre, “Sectionalisme et politique aux États-Unis: le Midwest et la Reconstruction, 1865–1877” (PhD diss., EHESS, 2008), 97–159. The role of sectionalism in economic issues was studied by Beale, Howard K., The Critical Year: A Study of Andrew Johnson and Reconstruction (New York, 1930); but his particular analysis encountered considerable criticism after World War II. See, for example, Coben, Stanley, “Northeastern Business and Radical Reconstruction: A Re-Examination,” Mississippi Valley Historical Review 46 (June 1959): 67–70; and Sharkey, Money, Class, and Party. These scholars did not offer an alternative model of how sectional tensions shaped the money question. On the importance of sectionalism in American politics, see Bensel, Richard Franklin, Sectionalism and American Political Development: 1880–1980 (Madison, 1984).
29 On George Pendleton's role in the “Ohio Idea,” see Mach, Thomas S., “Gentleman George” Hunt Pendleton: Party Politics and Ideological Identity in Nineteenth-Century America (Kent, OH, 2007). On the presidential conventions of 1868, see Franklin, John Hope, “Election of 1868,” in History of American Presidential Elections, 1789–1968, eds. Schlesinger, Arthur M. Jr and Israel, Fred L. (New York, 1971), 1247–66.
30 Sectional tensions are clearly visible in the congressional debates and votes. For a detailed analysis, Barreyre, “Sectionalisme et politique,” 291–94.
31 The word “Midwest” is used here for clarity, even though it did not exist at the time. Contemporaries most often talked of the “(Old) Northwest” when referring to the states from Ohio to Kansas and Minnesota.
32 Data from Martis, Kenneth C., Rowles, Ruth Anderson, and Pauer, Gyula, Historical Atlas of Political Parties in the United States Congress, 1789–1989 (New York, 1989).
33 James Garfield to William C. Howells, Nov. 15, 1873, and to Harmon Austin, Nov. 19, 1873, in vol. 14, ser. 6A, Garfield Papers, Library of Congress.
34 Barreyre, Nicolas, “Réunifier l'union: intégrer l'ouest à la Reconstruction américaine, 1870–1872,” Revue d'Histoire Moderne et Contemporaine 49 (Oct.–Dec. 2002): 7–36.
35 Adams, Charles Francis Jr., “The Currency Debate of 1873–1874,” North American Review, July 1874, 111–65; Garfield, James A., The Diary of James A. Garfield, eds. Brown, Harry James and Williams, Frederick D. (East Lansing, MI, 1967), 2:288. Roll-call analysis based on data compiled by Howard L. Rosenthal and Keith T. Poole, “United States ongressional Roll Call Voting Records, 1789–1990” (Ann Arbor, 2000), http://dx.doi.org/10.3886/ICPSR09822 (accessed Jan. 29, 2011).
36 “The Veto,” Harper's Weekly, May 9, 1874, 390; James Garfield to Burke Hinsdale, Apr. 23, 1874, vol. 16, ser. 6A, Garfield Papers; Cincinnati Trade List and Commerce Bulletin, reprinted in Jonesboro (IL) Gazette, May 16, 1874; John Deweese to John Logan, Apr. 24, 1874, box 2, Logan Papers, Library of Congress.
37 Seip, Terry L., The South Returns to Congress: Men, Economic Measures, and Intersectional Relationships, 1868–1879 (Baton Rouge, 1983), 189–93; Unger, Greenback Era, 244–48, quotation 246.
38 Strong, Diary, Nov. 4, 1874, 4:541.
39 McPherson, Edward, A Hand-Book of Politics for 1876: Being a Record of Important Political Action, National and State, from July 15, 1874 to July 15, 1876, 6th ed. (Washington, 1876), 255; Donald, Baker, and Holt, The Civil War and Reconstruction, 628; Martis, Rowles, and Pauer, Historical Atlas of Political Parties.
40 Other elements in the voting process should make us wary of overinterpreting election results: see Bensel, Richard Franklin, The American Ballot Box in the Mid-Nineteenth Century (Cambridge, 2004).
41 DeCanio, Samuel, “Religion and Nineteenth-Century Voting Behavior: A New Look at Some Old Data,” Journal of Politics 69 (May 2007): 339–50.
42 Kleppner, Paul, The Third Electoral System: Parties, Voters and Political Cultures, 1853–1892 (Chapel Hill, 1979), 126–28.
43 J. I. Smith to John Sherman, Oct. 22, 1874, vol. 128, Sherman Papers, Library of Congress. The temperance issue on the 1874 ballot was a local matter in Ohio. Utica (NY) Herald, quoted in Alton (IL) Telegraph, Nov. 19, 1874. Here, my conclusion directly contradicts Gillette, Retreat from Reconstruction, 236–58.
44 On those scandals, Summers, Mark W., The Era of Good Stealings (Oxford, 1993); Thompson, Margaret Susan, The “Spider Web”: Congress and Lobbying in the Age of Grant (Ithaca, 1985).
45 Barreyre, “Réunifier l'union”; Donald, Baker, and Holt, The Civil War and Reconstruction, 623–26; Gillette, Retreat from Reconstruction, 190–210. On Republican economic policies in the South, Summers, Mark W., Railroads, Reconstruction, and the Gospel of Prosperity: Aid under the Radical Republicans, 1865–1877 (Princeton, 1984).
46 On the economic background of the farmers' revolt, Atack, Bateman, and Parker, “The Farm, the Farmer, and the Market”; Higgs, Robert, The Transformation of the American Economy, 1865–1914: An Essay in Interpretation (New York, 1971). On the Granges, Miller, George H., Railroads and the Granger Laws (Madison, 1971); Ritter, Goldbugs and Greenbacks, 123–36; Unger, Greenback Era, 195–233.
47 This was true of both Republicans and Democrats. See for instance Quincy (Illinois) Whig, Feb. 12, 1874; Joliet Republican, Jan. 24, 1874; Cincinnati Enquirer, Jan. 5, 1874; James A. Garfield to Enos P. Brainerd, Feb. 9, 1874, vol. 15, ser. 6A, Garfield Papers.
48 Foner, Reconstruction, 512–24; McGerr, Michael E., “The Meaning of Liberal Republicanism: The Case of Ohio,” Civil War History 28 (Dec. 1982): 307–23; Perman, Road to Redemption; Richardson, Death of Reconstruction; Sproat, John G., “The Best Men”: Liberal Reformers in the Gilded Age (Oxford, 1968); Katz, Philip Mark, From Appomattox to Montmartre: Americans and the Paris Commune (Cambridge, MA, 1998).
49 Barreyre, “Sectionalisme et politique”, 395–400; Unger, Greenback Era, 249–63; Weinstein, Allen, Prelude to Populism: Origins of the Silver Issue, 1867–1878 (New Haven, 1970), 33–52.
50 Holt, By One Vote, xiii.
51 Silver had been demonetized in early 1873, although most people had not noticed. This only became a political issue in 1876. Weinstein, Prelude to Populism, 8–32.
52 Polakoff, Keith Ian, The Politics of Inertia: The Election of 1876 and the End of Reconstruction (Baton Rouge, 1973); Holt, By One Vote; Barreyre, “Sectionalisme et politique,” 415–32.
53 On the marginalization of moderate Democrats in the South, which to be sure started before the crisis, Perman, Road to Redemption, 135–48.
54 On the sense that parties felt precarious for many politicians, Holt, Michael F., “Change and Continuity in the Party Period: The Substance and Structure of American Politics, 1835–1885” in Contesting Democracy: Substance and Structure in American Political History, 1775–2000, eds. Shafer, Byron E. and Badger, Anthony J. (Lawrence, KS, 2001), 93–115.
1 This article greatly benefited from the comments of many fine scholars who have either read or heard it at different stages. I particularly wish to thank Margo Anderson, Richard Bensel, Pierre Gervais, Jean Heffer, Richard John, and Scott Nelson for their very helpful input.
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