Economic Depression (jan 1, 1893 – jan 1, 1899)

Description:

free silver: A policy of loosening the money supply by expanding federal coinage to include silver as well as gold, to encourage borrowing and stimulate industry. Democrats advocated the measure, most famously in the 1896 presidential campaign, but Republicans won and retained the gold standard.

In 1893, a severe economic depression hit the United States. Though it was a global shock, and the agriculture sector had already lagged for years, Republicans blamed Grover Cleveland, who had just reentered the White House. “On every hand can be seen evidences of Democratic times,” declared one Republican. “The deserted farm, the silent factory.”

Apparently receptive to such appeals, voters outside the South abandoned the Democrats in 1894 and 1896. Republicans, promising prosperity, gained control of the White House and both chambers of Congress for the next sixteen years. This development created both opportunities and challenges for progressive reformers. In those same years, a different pattern emerged in the former Confederacy: Democrats deployed fraud, violence, and race-based appeals for white solidarity to defeat the Populist revolt and create a “Solid South.”

When Cleveland took the oath of office in March 1893, hard times were prompting European investors to pull money out of the United States; farm foreclosures and railroad bankruptcies signaled economic trouble. A few weeks later, a Pennsylvania railroad went bankrupt, followed by several other companies. Investors panicked; the stock market crashed. By July, major banks had drained their reserves and “suspended” withdrawals, unable to give depositors access to their money. By year’s end, five hundred banks and thousands of other businesses had gone under. “Boston,” one man remembered, “grew suddenly old, haggard, and thin.” The unemployment rate in industrial cities soared above 20 percent.

For Americans who had lived through the terrible 1870s, conditions looked grimly familiar. Even fresher in the public mind were recent labor uprisings, including the 1886 Haymarket violence and the 1892 showdown at Homestead — followed, during the depression’s first year, by a massive Pennsylvania coal strike and a Pullman railroad boycott that ended with bloody clashes between angry crowds and the U.S. Army. Prosperous Americans, fearful of Populism, were even more terrified that workers would embrace socialism or Marxism. Reminding Americans of upheavals such as the revolutionary Paris Commune government of 1871 and its bloody suppression, conservative commentators of the 1890s launched America’s first “Red Scare” — a precursor to similar episodes of hysteria in the 1920s and 1950s.

In the summer of 1894, a further protest jolted affluent Americans. Radical businessman Jacob Coxey of Ohio proposed that the U.S. government hire the unemployed to fix America’s roads. In 1894, he organized hundreds of jobless men — nicknamed Coxey’s Army — to march peacefully to Washington and appeal for the program. Though public employment of the kind Coxey proposed would become central to the New Deal in the 1930s, many Americans in the 1890s viewed Coxey as a dangerous extremist. Public alarm grew when more protesters, inspired by Coxey, started out from Los Angeles, Seattle, and other cities. As they marched east, these men found support and offers of aid in Populist-leaning cities and towns. In other places, police and property owners drove marchers away at gunpoint. Coxey was stunned by what happened when he reached Capitol Hill: police jailed him for trespassing on the grass. Some of his men, arrested for vagrancy, ended up in Maryland chain gangs. The rest went home hungry.

As this response suggested, President Grover Cleveland’s administration was increasingly out of step with rural and working-class demands. Any president would have been hard-pressed to cope with the depression, but Cleveland was particularly inept. He steadfastly resisted pressure to loosen the money supply by expanding federal coinage to include silver as well as gold. Advocates of this free silver policy (“free” because, under this plan, the U.S. Mint would not charge a fee for minting silver coins) believed the policy would encourage borrowing and stimulate industry. But Cleveland clung to the gold standard. Even if ordinary people had difficulty borrowing because money was tight and interest rates high, Cleveland believed the money supply must remain tied to the nation’s reserves of gold.

As the 1894 midterm elections loomed, Democratic candidates tried to distance themselves from the president. But on election day, large numbers of voters chose Republicans, who promised to support business, put down social unrest, and bring back prosperity. Western voters turned many Populists out of office. In the next congressional session, Republicans controlled the House by a margin of 245 to 105 (see Map 19.2).

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