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Long Depression

February 17, 2023

Not to be confused with long-term depression, a neurophysiological process in the brain.

The Long Depression was a worldwide price and economic recession, beginning in 1873 and running either through March 1879, or 1896, depending on the metrics used.[1] It was most severe in Europe and the United States, which had been experiencing strong economic growth fueled by the Second Industrial Revolution in the decade following the American Civil War. The episode was labeled the "Great Depression" at the time, and it held that designation until the Great Depression of the 1930s. Though a period of general deflation and a general contraction, it did not have the severe economic retrogression of the Great Depression.[2]

It was most notable in Western Europe and North America, at least in part because reliable data from the period is most readily available in those parts of the world. The United Kingdom is often considered to have been the hardest hit; during this period it lost some of its large industrial lead over the economies of continental Europe.[3] While it was occurring, the view was prominent that the economy of the United Kingdom had been in continuous depression from 1873 to as late as 1896 and some texts refer to the period as the Great Depression of 1873–1896, with financial and manufacturing losses reinforced by a long recession in the UK agricultural sector.[4]

In the United States, economists typically refer to the Long Depression as the Depression of 1873–1879, kicked off by the Panic of 1873, and followed by the Panic of 1893, book-ending the entire period of the wider Long Depression.[5] The U.S. National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction.[6][7] In the United States, from 1873 to 1879, 18,000 businesses went bankrupt, including 89 railroads.[8] Ten states and hundreds of banks went bankrupt.[citation needed] Unemployment peaked in 1878, long after the initial financial panic of 1873 had ended. Different sources peg the peak U.S. unemployment rate anywhere from 8.25%[9] to 14%.[10]

Background

The period preceding the depression was dominated by several major military conflicts and a period of economic expansion. In Europe, the end of the Franco-Prussian War yielded a new political order in Germany, and the £200 million indemnity imposed on France led to an inflationary investment boom in Germany and Central Europe.[11][page needed] New technologies in industry such as the Bessemer converter were being rapidly applied; railroads were booming.[11][page needed] In the United States, the end of the Civil War and a brief post-war recession (1865–1867) gave way to an investment boom, focused especially on railroads on public lands in the Western United States - an expansion funded greatly[weasel words] by foreign investors.[11][page needed]

Causes of the crisis

Main article: Panic of 1873
 
Run on the Fourth National Bank, No. 20 Nassau Street, New York City, 1873. From Frank Leslie's Illustrated Newspaper, October 4, 1873.

In 1873, during a decline in the value of silver—exacerbated by the end of the German Empire's production of thaler coins—the US government passed the Coinage Act of 1873 in April. This essentially ended the bimetallic standard of the United States, forcing it for the first time onto a pure gold standard. This measure, referred to by its opponents as "the Crime of 1873" and the topic of William Jennings Bryan's Cross of Gold speech in 1896, forced a contraction of the money supply in the United States. It also drove down silver prices further, even as new silver mines were being established in Nevada, which stimulated mining investment but increased supply as demand was falling.[12] Silver miners arrived at US mints, unaware of the ban on production of silver coins, only to find their product no longer welcome. By September, the US economy was in a crisis, deflation causing banking panics and destabilizing business investment, climaxing in the Panic of 1873.

The Panic of 1873 has been described as "the first truly international crisis".[11][page needed] The optimism that had been driving booming stock prices in central Europe had reached a fever pitch, and fears of a bubble culminated in a panic in Vienna beginning in April 1873. The collapse of the Vienna Stock Exchange began on May 8, 1873, and continued until May 10, when the exchange was closed; when it was reopened three days later, the panic seemed to have faded, and appeared confined to Austria-Hungary.[11][page needed] Financial panic arrived in the Americas only months later on Black Thursday, September 18, 1873, after the failure of the banking house of Jay Cooke and Company over the Northern Pacific Railway.[13] The Northern Pacific railway had been given 40 million acres (160,000 km2) of public land in the Western United States and Cooke sought $100,000,000 in capital for the company; the bank failed when the bond issue proved unsalable, and was shortly followed by several other major banks. The New York Stock Exchange closed for ten days on September 20.[11][page needed]

The financial contagion then returned to Europe, provoking a second panic in Vienna and further failures in continental Europe before receding. France, which had been experiencing deflation in the years preceding the crash, was spared financial calamity for the moment, as was Britain.[11][page needed]

Some[who?] have argued the depression was rooted in the 1870 Franco-Prussian War that devastated the French economy and, under the Treaty of Frankfurt, forced that country to make large war reparations payments to Germany. The primary cause of the price depression in the United States was the tight monetary policy that the United States followed to get back to the gold standard after the Civil War. The U.S. government was taking money out of circulation to achieve this goal, therefore there was less available money to facilitate trade. Because of this monetary policy the price of silver started to fall causing considerable losses of asset values; by most accounts, after 1879 production was growing, thus further putting downward pressure on prices due to increased industrial productivity, trade and competition.

In the US the speculative nature of financing due to both the greenback, which was paper currency issued to pay for the Civil War and rampant fraud in the building of the Union Pacific Railway up to 1869 culminated in the Crédit Mobilier scandal. Railway overbuilding and weak markets collapsed the bubble in 1873. Both the Union Pacific and the Northern Pacific lines were central to the collapse; another railway bubble was the Railway Mania in the United Kingdom.

Because of the Panic of 1873, governments depegged their currencies, to save money. The demonetization of silver by European and North American governments in the early 1870s was certainly a contributing factor. The US Coinage Act of 1873 was met with great opposition by farmers and miners, as silver was seen as more of a monetary benefit to rural areas than to banks in big cities. In addition, there were US citizens who advocated the continuance of government-issued fiat money (United States Notes) to avoid deflation and promote exports. The western US states were outraged—Nevada, Colorado, and Idaho were huge silver producers with productive mines, and for a few years mining abated. Resumption of silver dollar coinage was authorized by the Bland–Allison Act of 1878. The resumption of the US government buying silver was enacted in 1890 with the Sherman Silver Purchase Act.

Monetarists believe that the 1873 depression was caused by shortages of gold that undermined the gold standard, and that the 1848 California Gold Rush, 1886 Witwatersrand Gold Rush in South Africa and the 1896–99 Klondike Gold Rush helped alleviate such crises. Other analyses have pointed to developmental surges (see Kondratiev wave), theorizing that the Second Industrial Revolution was causing large shifts in the economies of many states, imposing transition costs, which may also have played a role in causing the depression.

Course of the depression

Like the later Great Depression, the Long Depression affected different countries at different times, at different rates, and some countries accomplished rapid growth over certain periods. Globally, however, the 1870s, 1880s, and 1890s were a period of falling price levels and rates of economic growth significantly below the periods preceding and following.

Between 1870 and 1890, iron production in the five largest producing countries more than doubled, from 11 million tons to 23 million tons, steel production increased twentyfold (half a million tons to 11 million tons), and railroad development boomed.[14] But at the same time, prices in several markets collapsed - the price of grain in 1894 was only a third what it had been in 1867,[15] and the price of cotton fell by nearly 50 percent in just the five years from 1872 to 1877,[16] imposing great hardship on farmers and planters. This collapse provoked protectionism in many countries, such as France, Germany, and the United States,[15] while triggering mass emigration from other countries such as Italy, Spain, Austria-Hungary, and Russia.[17] Similarly, while the production of iron doubled between the 1870s and 1890s,[14] the price of iron halved.[15]

Many countries experienced significantly lower growth rates relative to what they had experienced earlier in the 19th century and to what they experienced afterwards:

Growth rates of industrial production (1850s–1913)[18]
1850s–1873 1873–1890 1890–1913
  Germany 4.3 2.9 4.1
  United Kingdom 3.0 1.7 2.0
  United States 6.2 4.7 5.3
  France 1.7 1.3 2.5
  Italy 0.9 3.0
  Sweden 3.1 3.5
GNP of the Great Powers of Europe
(in billions USD, 1960 prices)[19]
1830 1840 1850 1860 1870 1880 1890
  Russia 10.5 11.2 12.7 14.4 22.9 23.2 21.1
  France 8.5 10.3 11.8 13.3 16.8 17.3 19.7
  United Kingdom 8.2 10.4 12.5 16.0 19.6 23.5 29.4
  Germany 7.2 8.3 10.3 12.7 16.6 19.9 26.4
  Austria-Hungary 7.2 8.3 9.1 9.9 11.3 12.2 15.3
  Italy 5.5 5.9 6.6 7.4 8.2 8.7 9.4

Austria-Hungary

The global economic crisis first erupted in Austria-Hungary, where in May 1873 the Vienna Stock Exchange crashed.[11] In Hungary, the panic of 1873 terminated a mania of railroad-building.[20]

Chile

In the late 1870s the economic situation in Chile deteriorated. Chilean wheat exports were outcompeted by production in Canada, Russia and Argentina and Chilean copper was largely replaced in international markets by copper from the United States and Spain.[21] Income from silver mining in Chile also dropped.[21] Aníbal Pinto, president of Chile in 1878, expressed his concerns the following way:[21]

If a new mining discovery or some novelty of that sort does not come to improve the actual situation, the crisis that has long been felt, will worsen

— Aníbal Pinto, president of Chile, 1878.

This "mining discovery" came, according to historians Gabriel Salazar and Julio Pinto, into existence through the conquest of Bolivian and Peruvian lands in the War of the Pacific.[21] It has been argued that economic situation and the view of new wealth in the nitrate was the true reason for the Chilean elite to go into war with its neighbors.[21]

Another response to the economic crisis, according to Jorge Pinto Rodríguez, was the new pulse of conquest of indigenous lands that took place in Araucanía in the 1880s.[22][23]

France

France's experience was somewhat unusual. Having been defeated in the Franco-Prussian War, the country was required to pay £200 million in reparations to the Germans and was already reeling when the 1873 crash occurred.[11] The French adopted a policy of deliberate deflation while paying off the reparations.[11]

While the United States resumed growth for a time in the 1880s, the Paris Bourse crash of 1882 sent France careening into depression, one which "lasted longer and probably cost France more than any other in the 19th century".[24] The Union Générale, a French bank, failed in 1882, prompting the French to withdraw three million pounds from the Bank of England and triggering a collapse in French stock prices.[25]

The financial crisis was compounded by diseases impacting the wine and silk industries[24] French capital accumulation and foreign investment plummeted to the lowest levels experienced by France in the latter half of the 19th century.[26] After a boom in new investment banks after the end of the Franco-Prussian War, the destruction of the French banking industry wrought by the crash cast a pall over the financial sector that lasted until the dawn of the 20th century.[24] French finances were further sunk by failing investments abroad, principally in railroads and buildings.[20] The French net national product declined over the ten years from 1882 to 1892.[27]

Italy

A ten-year tariff war broke out between France and Italy after 1887, damaging Franco-Italian relations which had prospered during Italian unification. As France was Italy's biggest investor, the liquidation of French assets in the country was especially damaging.[27]

Russia

The Russian experience was similar to the US experience - three separate recessions, concentrated in manufacturing, occurred in the period (1874–1877, 1881–1886, and 1891–1892), separated by periods of recovery.[28]

United Kingdom

Further information: Great Depression of British Agriculture

The United Kingdom, which had previously experienced crises every decade since the 1820s, was initially less affected by this financial crisis, even though the Bank of England kept interest rates as high as 9 percent in the 1870s.[11]

The 1878 failure of the City of Glasgow Bank in Scotland arose through a combination of fraud and speculative investments in Australian and New Zealand companies (agriculture and mining) and in American railroads.

Building on an 1870 reform, and the 1879 famine, thousands of Irish tenant farmers affected by depressed producer prices and high rents launched the Land War in 1879, which resulted in the reforming Irish Land Acts.

United States

See also: Panic of 1873
 
Real gross national product per capita of the United States 1869–1918
Estimated declines in United States manufacturing output in selected sectors (1872–1876)[29]
Industry % decline in output
Durable goods 30%
Iron and steel 45%
Construction 30%
Overall 10%

In the United States, the Long Depression began with the Panic of 1873. The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction.[6][30] Figures from Milton Friedman and Anna Schwartz show net national product increased 3 percent per year from 1869 to 1879 and real national product grew at 6.8 percent per year during that time frame.[31] However, since between 1869 and 1879 the population of the United States increased by over 17.5 percent,[32] per capita NNP growth was lower. Following the end of the episode in 1879, the U.S. economy would remain unstable, experiencing recessions for 114 of the 253 months until January 1901.[33]

The dramatic shift in prices mauled nominal wages - in the United States, nominal wages declined by one-quarter during the 1870s,[13] and as much as one-half in some places, such as Pennsylvania.[34] Although real wages had enjoyed robust growth in the aftermath of the American Civil War, increasing by nearly a quarter between 1865 and 1873, they stagnated until the 1880s, posting no real growth, before resuming their robust rate of expansion in the later 1880s.[35] The collapse of cotton prices devastated the already war-ravaged economy of the southern United States.[16] Although farm prices fell dramatically, American agriculture continued to expand production.[29]

Thousands of American businesses failed, defaulting on more than a billion dollars of debt.[34] One in four laborers in New York were out of work in the winter of 1873–1874[34] and, nationally, a million became unemployed.[34]

The sectors which experienced the most severe declines in output were manufacturing, construction, and railroads.[29] The railroads had been a tremendous engine of growth in the years before the crisis, yielding a 50% increase in railroad mileage from 1867 to 1873.[29] After absorbing as much as 20% of US capital investment in the years preceding the crash, this expansion came to a dramatic end in 1873; between 1873 and 1878, the total amount of railroad mileage in the United States barely increased at all.[29]

The Freedman's Savings Bank was a typical casualty of the financial crisis. Chartered in 1865 in the aftermath of the American Civil War, the bank had been established to advance the economic welfare of America's newly emancipated freedmen.[36] In the early 1870s, the bank had joined in the speculative fever, investing in real estate and unsecured loans to railroads; its collapse in 1874 was a severe blow to African-Americans.[36]

The recession exacted a harsh political toll on President Ulysses S. Grant. Historian Allan Nevins says of the end of Grant's presidency:[37]

Various administrations have closed in gloom and weakness ... but no other has closed in such paralysis and discredit as (in all domestic fields) did Grant's. The President was without policies or popular support. He was compelled to remake his Cabinet under a grueling fire from reformers and investigators; half its members were utterly inexperienced, several others discredited, one was even disgraced. The personnel of the departments was largely demoralized. The party that autumn appealed for votes on the implicit ground that the next Administration would be totally unlike the one in office. In its centennial year, a year of deepest economic depression, the nation drifted almost rudderless.[37]

Recovery began in 1878. The mileage of railroad track laid down increased from 2,665 mi (4,289 km) in 1878 to 11,568 in 1882.[29] Construction began recovery by 1879; the value of building permits increased two and a half times between 1878 and 1883, and unemployment fell to 2.5% in spite of (or perhaps facilitated by) high immigration.[25]

The recovery, however, proved short-lived. Business profits declined steeply between 1882 and 1884.[25] The recovery in railroad construction reversed itself, falling from 11,569 mi (18,619 km) of track laid in 1882 to 2,866 mi (4,612 km) of track laid in 1885; the price of steel rails collapsed from $71/ton in 1880 to $20/ton in 1884.[25] Manufacturing again collapsed - durable goods output fell by a quarter again.[25] The decline became another financial crisis in 1884, when multiple New York banks collapsed; simultaneously, in 1883–1884, tens of millions of dollars of foreign-owned American securities were sold out of fears that the United States was preparing to abandon the gold standard.[25] This financial panic destroyed eleven New York banks, more than a hundred state banks, and led to defaults on at least $32 million worth of debt.[25] Unemployment, which had stood at 2.5% between recessions, surged to 7.5% in 1884–1885, and 13% in the northeastern United States, even as immigration plunged in response to deteriorating labor markets.[25]

This second recession led to further deterioration of farm prices. Kansas farmers burned their own corn in 1885 because it was worth less than other fuels such as coal or wood.[25] The country began to recover in 1885.[25]

Reactions to the crisis

Protectionism

The period preceding the Long Depression had been one of increasing economic internationalism, championed by efforts such as the Latin Monetary Union, many of which then were derailed or stunted by the impacts of economic uncertainty.[38] The extraordinary collapse of farm prices[15] provoked a protectionist response in many nations. Rejecting the free trade policies of the Second Empire, French president Adolphe Thiers led the new Third Republic to protectionism, which led ultimately to the stringent Méline tariff in 1892.[39] Germany's agrarian Junker aristocracy, under attack by cheap, imported grain, successfully agitated for a protective tariff in 1879 in Otto von Bismarck's Germany over the protests of his National Liberal Party allies.[39] In 1887, Italy and France embarked on a bitter tariff war.[40] In the United States, Benjamin Harrison won the 1888 US presidential election on a protectionist pledge.[41]

As a result of the protectionist policies enacted by the world's major trading nations, the global merchant marine fleet posted no significant growth from 1870 to 1890 before it nearly doubled in tonnage in the prewar economic boom that followed.[42] Only the United Kingdom and the Netherlands remained committed to low tariffs.[40]

Monetary responses

In 1874, a year after the 1873 crash, the United States Congress passed legislation called the Inflation Bill of 1874 designed to confront the issue of falling prices by injecting fresh greenbacks into the money supply.[43] Under pressure from business interests, President Ulysses S. Grant vetoed the measure.[43] In 1878, Congress overrode President Rutherford B. Hayes's veto to pass the Silver Purchase Act, a similar but more successful attempt to promote "easy money".[29]

Strikes

The United States endured its first nationwide strike in 1877, the Great Railroad Strike of 1877.[29] This led to widespread unrest and often violence in many major cities and industrial hubs including Baltimore, Philadelphia, Pittsburgh, Reading, Saint Louis, Scranton, and Shamokin.[44]

New Imperialism

Main article: New Imperialism

The Long Depression contributed to the revival of colonialism leading to the New Imperialism period, symbolized by the scramble for Africa, as the western powers sought new markets for their surplus accumulated capital.[45] According to Hannah Arendt's The Origins of Totalitarianism (1951), the "unlimited expansion of power" followed the "unlimited expansion of capital".[46]

In the United States, beginning in 1878, the rebuilding, extending, and refinancing of the western railways, commensurate with the wholesale giveaway of water, timber, fish, minerals in what had previously been Indian territory, characterized a rising market. This led to the expansion of markets and industry, together with the robber barons of railroad owners, which culminated in the genteel 1880s and 1890s. The Gilded Age was the outcome for the few rich. The cycle repeated itself with the Panic of 1893, another huge market crash.

Recovery

In the United States, the National Bureau of Economic Analysis dates the recession through March 1879. In January 1879, the United States returned to the gold standard which it had abandoned during the Civil War; according to economist Rendigs Fels, the gold standard put a floor to the deflation, and this was further boosted by especially good agricultural production in 1879.[47] The view that a single recession lasted from 1873 to 1896 or 1897 is not supported by most modern reviews of the period. It has even been suggested that the trough of this business cycle may have occurred as early as 1875.[48] In fact, from 1869 to 1879, the US economy grew at a rate of 6.8% for real net national product (NNP) and 4.5% for real NNP per capita.[49] Real wages were flat from 1869 to 1879, while from 1879 to 1896, nominal wages rose 23% and prices fell 4.2%.[50]

Explanations

Irving Fisher believed that the Panic of 1873 and the severity of the contractions which followed it could be explained by debt and deflation and that a financial panic would trigger catastrophic deleveraging in an attempt to sell assets and increase capital reserves; that selloff would trigger a collapse in asset prices and deflation, which would in turn prompt financial institutions to sell off more assets, only to further deflation and strain capital ratios. Fisher believed that had governments or private enterprise embarked on efforts to reflate financial markets, the crisis would have been less severe.[51]

David Ames Wells (1890) wrote of the technological advancements during the period 1870–1890, which included the Long Depression. Wells gives an account of the changes in the world economy transitioning into the Second Industrial Revolution in which he documents changes in trade, such as triple expansion steam shipping, railroads, the effect of the international telegraph network and the opening of the Suez Canal.[52] Wells gives numerous examples of productivity increases in various industries and discusses the problems of excess capacity and market saturation.

Wells' opening sentence:

The economic changes that have occurred during the last quarter of a century - or during the present generation of living men - have unquestionably been more important and more varied than during any period of the world's history.

Other changes Wells mentions are reductions in warehousing and inventories, elimination of middlemen, economies of scale, the decline of craftsmen, and the displacement of agricultural workers. About the whole 1870–90 period Wells said:

Some of these changes have been destructive, and all of them have inevitably occasioned, and for a long time yet will continue to occasion, great disturbances in old methods, and entail losses of capital and changes in occupation on the part of individuals. And yet the world wonders, and commissions of great states inquire, without coming to definite conclusions, why trade and industry in recent years has been universally and abnormally disturbed and depressed.

Wells notes that many of the government inquiries on the "depression of prices" (deflation) found various reasons such as the scarcity of gold and silver. Wells showed that the US money supply actually grew over the period of the deflation. Wells noted that deflation lowered the cost of only goods that benefited from improved methods of manufacturing and transportation. Goods produced by craftsmen and many services did not decrease in value, and the cost of labor actually increased. Also, deflation did not occur in countries that did not have modern manufacturing, transportation, and communications.

Nobel laureate economist Milton Friedman, author of A Monetary History of the United States, on the other hand, blamed this prolonged economic crisis on the imposition of a new gold standard, part of which he referred to by its traditional name, The Crime of 1873.[53] Additionally, Friedman pointed to the expansion of the gold supply through Gold cyanidation as a contributor to the recovery.[54] This forced shift into a currency whose supply was limited by nature, unable to expand with demand, caused a series of economic and monetary contractions that plagued the entire period of the Long Depression. Murray Rothbard, in his book History of Money and Banking of the United States, argues that the long depression was only a misunderstood recession since real wages and production were actually increasing throughout the period. Like Friedman, he attributes falling prices to the resumption of a deflationary gold standard in the U.S. after the Civil War.

Interpretations

Most economic historians see this period as negative for the most industrial nations.[citation needed] Many argue that most of the stagnation was caused by a monetary contraction caused by abandonment of the bimetallic standard, in favor of a new fiat gold standard, starting with the Coinage Act of 1873.[citation needed]

Other economic historians have complained about the characterization of this period as a "depression" because of conflicting economic statistics that cast doubt on this interpretation. They note it saw a relatively large expansion of industry, of railroads, of physical output, of net national product, and of real per capita income.

As economists Milton Friedman and Anna J. Schwartz have noted, the decade from 1869 to 1879 saw a growth of 3 percent per year in money national product, an outstanding real national product growth of 6.8 percent per year, and a rise of 4.5 percent per year in real product per capita. Even the alleged "monetary contraction" never took place, the money supply increasing by 2.7 percent per year. From 1873 through 1878, before another spurt of monetary expansion, the total supply of bank money rose from $1.964 billion to $2.221 billion, a rise of 13.1 percent, or 2.6 percent per year. In short, it was a modest but definite rise, not a contraction.[55] Although per-capita nominal income declined very gradually from 1873 to 1879, that decline was more than offset by a gradual increase over the course of the next 17 years.

Furthermore, real per capita income either stayed approximately constant (1873–1880; 1883–1885) or rose (1881–1882; 1886–1896), so the average consumer appears to have been considerably better off at the end of the "depression" than before. Studies of other countries where prices also tumbled, including the US, Germany, France, and Italy, reported more markedly positive trends in both nominal and real per capita income figures. Profits generally were also not adversely affected by deflation, although they declined (particularly in Britain) in industries struggling against superior, foreign competition. Furthermore, some economists argue a falling general price level is not inherently harmful to an economy and cite the economic growth of the period as evidence.[56] As economist Murray Rothbard has stated:

Unfortunately, most historians and economists are conditioned to believe that steadily and sharply falling prices must result in depression: hence their amazement at the obvious prosperity and economic growth during this era. For they have overlooked the fact that in the natural course of events, when government and the banking system do not increase the money supply very rapidly, freemarket capitalism will result in an increase of production and economic growth so great as to swamp the increase of money supply. Prices will fall, and the consequences will be not depression or stagnation, but prosperity (since costs are falling, too), economic growth, and the spread of the increased living standard to all the consumers.[56]

Accompanying the overall growth in real prosperity was a marked shift in consumption from necessities to luxuries: by 1885, "more houses were being built, twice as much tea was being consumed, and even the working classes were eating imported meat, oranges, and dairy produce in quantities unprecedented". The change in working class incomes and tastes was symbolized by "the spectacular development of the department store and the chain store".

Prices certainly fell, but almost every other index of economic activity - output of coal and pig iron, tonnage of ships built, consumption of raw wool and cotton, import and export figures, shipping entries and clearances, railway freight clearances, joint-stock company formations, trading profits, consumption per head of wheat, meat, tea, beer, and tobacco - all of these showed an upward trend.[57]

A large part at least of the deflation commencing in the 1870s was a reflection of unprecedented advances in factor productivity. Real unit production costs for most final goods dropped steadily throughout the 19th century and especially from 1873 to 1896. At no previous time had there been an equivalent "harvest of technological advances... so general in their application and so radical in their implications". That is why, notwithstanding the dire predictions of many eminent economists, Britain did not end up paralyzed by strikes and lockouts. Falling prices did not mean falling money wages. Instead of inspiring large numbers of workers to go on strike, falling prices were inspiring them to go shopping.[58]

See also

 
Wikimedia Commons has media related to Long Depression.

Footnotes

  1. ^ The Long Depression – the First Great Depression (America's Economic History. Posted Jul 16, 2015 by Martin Armstrong)
  2. ^ Rosenberg, Hans (1943). "Political and Social Consequences of the Great Depression of 1873-1896 in Central Europe". The Economic History Review. 13. Blackwell Publishing. 13 (1/2): 58–73. doi:10.1111/j.1468-0289.1943.tb01613.x. JSTOR 2590515.
  3. ^ Musson, A. E. (1959). "The Great Depression in Britain, 1873-1896: A Reappraisal". The Journal of Economic History. Cambridge University Press. 19 (2): 199–228. doi:10.1017/S0022050700109994. JSTOR 2114975. S2CID 154705117.
  4. ^ Capie, Forrest; Wood, Geoffrey (1997). "Great Depression of 1873–1896". In Glasner, David; Cooley, Thomas F. (eds.). Business cycles and depressions: an encyclopedia. New York: Garland Publishing. pp. 148–49. ISBN 0-8240-0944-4.
  5. ^ . Archived from the original on July 18, 2011. Retrieved October 27, 2010.
  6. ^ a b "Business Cycle Expansions and Contractions". National Bureau of Economic Research. Retrieved January 4, 2009.
  7. ^ Fels, Rendigs (1949). "The Long-Wave Depression, 1873-97". The Review of Economics and Statistics. The MIT Press. 31 (1): 69–73. doi:10.2307/1927196. JSTOR 1927196.
  8. ^ The Economic Performance Index (EPI), Vadim Khramov and John Ridings Lee
  9. ^ "Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: US Unemployment, 1869–1899". January 26, 2012.
  10. ^ The Long Depression of 1873: Parallels and Comparisons. Are we Missing Economic Information from an Important Piece of American Financial History? http://www.mybudget360.com/finance-investing-the-long-depression-of-1873-parallels-and-comparisons-are-we-missing-economic-information-from-an-important-piece-of-american-financial-history/
  11. ^ a b c d e f g h i j k David Glasner, Thomas F. Cooley (1997). "Crisis of 1873". Business Cycles and Depressions: An Encyclopedia. Taylor & Francis. ISBN 0-8240-0944-4.
  12. ^ *Loomis, Noel M. (1968). Wells Fargo. pp. 219–220, 224–225.
  13. ^ a b Ron Chernow (1998). Titan. New York: Vintage Books. p. 160. ISBN 1-4000-7730-3.
  14. ^ a b Eric Hobsbawm (1989). The Age of Empire (1875–1914). New York: Vintage Books. p. 35. ISBN 0-679-72175-4.
  15. ^ a b c d Eric Hobsbawm (1989). The Age of Empire (1875-1914). New York: Vintage Books. p. 36. ISBN 0-679-72175-4.
  16. ^ a b Eric Foner (2002). Reconstruction: America's unfinished revolution, 1863–1877. HarperCollins. p. 535. ISBN 0-06-093716-5.
  17. ^ Eric Hobsbawm (1989). The Age of Empire (1875–1914). New York: Vintage Books. p. 37. ISBN 0-679-72175-4.
  18. ^ Andrew Tylecote (1993). The long wave in the world economy. Routledge. p. 12. ISBN 0-415-03690-9.
  19. ^ Paul Kennedy (1989). The Rise and Fall of the Great Powers. Fontana Press. p. 219. ISBN 9780006860525.
  20. ^ a b France and the Economic development of Europe (1800-1914). Routledge. 2000. p. 320. ISBN 0-415-19011-8.
  21. ^ a b c d e Historia contemporánea de Chile III. La economía: mercados empresarios y trabajadores. 2002. Gabriel Salazar and Julio Pinto. p. 25-29.
  22. ^ Salazar & Pinto 2002, pp. 25-29.
  23. ^ Pinto Rodríguez, Jorge (1992), "Crisis económica y expansión territorial : la ocupación de la Araucanía en la segunda mitad del siglo XIX", Estudios Sociales, 72
  24. ^ a b c France and the Economic development of Europe (1800-1914). Routledge. 2000. pp. 70–71. ISBN 0-415-19011-8.
  25. ^ a b c d e f g h i j David Glasner, Thomas F. Cooley (1997). "Depression of 1882–1885". Business Cycles and Depressions: An Encyclopedia. Taylor & Francis. ISBN 0-8240-0944-4.
  26. ^ France and the Economic development of Europe (1800-1914). Routledge. 2000. pp. 198–199. ISBN 0-415-19011-8.
  27. ^ a b France and the Economic development of Europe (1800-1914). Routledge. 2000. p. 457. ISBN 0-415-19011-8.
  28. ^ David Glasner, Thomas F. Cooley (1997). "Business cycles in Russia (1700–1914)". Business Cycles and Depressions: An Encyclopedia. Taylor & Francis. ISBN 0-8240-0944-4.
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  30. ^ Fels, Rendigs (1949). "The Long-Wave Depression, 1873-79". The Review of Economics and Statistics. 31 (1): 69–73. doi:10.2307/1927196. JSTOR 1927196.
  31. ^ Milton Friedman, Anna Jacobson Schwartz. A monetary history of the United States, 1867–1960. Princeton University Press, 1971. p. 37
  32. ^ "United States Census" (PDF). Retrieved July 19, 2010. If the census figures are accurate, it is 17.83 percent.
  33. ^ . National Bureau of Economic Research. Archived from the original on September 25, 2008. Retrieved April 3, 2009.
  34. ^ a b c d Philip Mark Katz (1998). Appomattox to Montmartre: Americans and the Paris Commune. Harvard University Press. p. 167. ISBN 0-674-32348-3.
  35. ^ The Cambridge Economic History of the United States. Cambridge University Press. 2000. p. 223. ISBN 0-521-55307-5.
  36. ^ a b Eric Foner (2002). Reconstruction: America's unfinished revolution, 1863-1877. HarperCollins. pp. 531–532. ISBN 0-06-093716-5.
  37. ^ a b Nevins, Allan, Hamilton Fish: The Inner History of the Grant Administration (1936) online edition 2:811
  38. ^ France and the Economic development of Europe (1800-1914). Routledge. 2000. pp. 38–39. ISBN 0-415-19011-8.
  39. ^ a b France and the Economic development of Europe (1800-1914). Routledge. 2000. p. 39. ISBN 0-415-19011-8.
  40. ^ a b France and the Economic development of Europe (1800-1914). Routledge. 2000. p. 40. ISBN 0-415-19011-8.
  41. ^ The Reader's companion to American history. Houghton Mifflin Harcourt. 1991. ISBN 0-395-51372-3.
  42. ^ Eric Hobsbawm (1989). The Age of Empire (1875-1914). New York: Vintage Books. p. 50. ISBN 0-679-72175-4.
  43. ^ a b Eric Foner (2002). Reconstruction: America's unfinished revolution, 1863-1877. HarperCollins. p. 522. ISBN 0-06-093716-5.
  44. ^ McCabe, James Dabney; Edward Winslow Martin (1877). The History of the Great Riots: The Strikes and Riots on the Various Railroads of the United States and in the Mining Regions Together with a Full History of the Molly Maguires. National Publishing Company.
  45. ^ Eric Hobsbawm (1989). The Age of Empire (1875-1914). New York: Vintage Books. p. 45. ISBN 0-679-72175-4.
  46. ^ Hannah Arendt (1973). The Origins of Totalitarianism. Houghton Mifflin Harcourt. p. 137. ISBN 0-15-670153-7.
  47. ^ Fels, Rendigs (1951). "American Business Cycles, 1865–79". The American Economic Review. American Economic Association. 41 (3): 325–349. JSTOR 1802106.
  48. ^ Davis, Joseph (2006). "An Improved Annual Chronology of U.S.; Business Cycles since the 1790s" (PDF). The Journal of Economic History. 66 (1): 103–21. doi:10.1017/s0022050706000040. S2CID 153478495.
  49. ^ Rothbard (2002), 154
  50. ^ Rothbard (2002), 161
  51. ^ David Glasner, Thomas F. Cooley (1997). "Debt-deflation theory". Business Cycles and Depressions: An Encyclopedia. Taylor & Francis. ISBN 0-8240-0944-4.
  52. ^ Wells, David A. (1890). Recent Economic Changes and Their Effect on Production and Distribution of Wealth and Well-Being of Society. New York: D. Appleton and Co. ISBN 0-543-72474-3. RECENT ECONOMIC CHANGES AND THEIR EFFECT ON DISTRIBUTION OF WEALTH AND WELL BEING OF SOCIETY WELLS.
  53. ^ The Crime of 1873, bit Milton Friedman http://www.unc.edu/~salemi/Econ006/Friedman_Crime_1873.pdf
  54. ^ Milton Friedman. "A Program for Monetary Stability" (PDF). Readings in Financial Institutions.
  55. ^ Friedman, Schwartz. A Monetary History of the United States: 1867–1960.
  56. ^ a b Murray N. Rothbard. "A History of Money and Banking in the United States: The Colonial Era to World War II" (pdf), The War of 1812 and its Aftermath, p.145, 153-156.
  57. ^ A.E. Musson. "The Great Depression in Britain, 1873–1896: a Reappraisal", The Journal of Economic History (1959), 19: 199-228
  58. ^ George Selgin. "Less Than Zero - The Case for a Falling Price Level in a Growing Economy", The Institute of Economic Affairs, 1997, p.49-53. Referenced 2011-01-15.

Further reading

  • Samuel Bernstein, "American Labor in the Long Depression, 1873–1878," Science and Society, vol. 20, no. 1 (Winter 1956), pp. 59–83. In JSTOR.

February 17, 2023
long, depression, confused, with, long, term, depression, neurophysiological, process, brain, worldwide, price, economic, recession, beginning, 1873, running, either, through, march, 1879, 1896, depending, metrics, used, most, severe, europe, united, states, w. Not to be confused with long term depression a neurophysiological process in the brain The Long Depression was a worldwide price and economic recession beginning in 1873 and running either through March 1879 or 1896 depending on the metrics used 1 It was most severe in Europe and the United States which had been experiencing strong economic growth fueled by the Second Industrial Revolution in the decade following the American Civil War The episode was labeled the Great Depression at the time and it held that designation until the Great Depression of the 1930s Though a period of general deflation and a general contraction it did not have the severe economic retrogression of the Great Depression 2 It was most notable in Western Europe and North America at least in part because reliable data from the period is most readily available in those parts of the world The United Kingdom is often considered to have been the hardest hit during this period it lost some of its large industrial lead over the economies of continental Europe 3 While it was occurring the view was prominent that the economy of the United Kingdom had been in continuous depression from 1873 to as late as 1896 and some texts refer to the period as the Great Depression of 1873 1896 with financial and manufacturing losses reinforced by a long recession in the UK agricultural sector 4 In the United States economists typically refer to the Long Depression as the Depression of 1873 1879 kicked off by the Panic of 1873 and followed by the Panic of 1893 book ending the entire period of the wider Long Depression 5 The U S National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879 At 65 months it is the longest lasting contraction identified by the NBER eclipsing the Great Depression s 43 months of contraction 6 7 In the United States from 1873 to 1879 18 000 businesses went bankrupt including 89 railroads 8 Ten states and hundreds of banks went bankrupt citation needed Unemployment peaked in 1878 long after the initial financial panic of 1873 had ended Different sources peg the peak U S unemployment rate anywhere from 8 25 9 to 14 10 Contents 1 Background 2 Causes of the crisis 3 Course of the depression 3 1 Austria Hungary 3 2 Chile 3 3 France 3 4 Italy 3 5 Russia 3 6 United Kingdom 3 7 United States 4 Reactions to the crisis 4 1 Protectionism 4 2 Monetary responses 4 3 Strikes 4 4 New Imperialism 5 Recovery 6 Explanations 7 Interpretations 8 See also 9 Footnotes 10 Further readingBackground EditThe period preceding the depression was dominated by several major military conflicts and a period of economic expansion In Europe the end of the Franco Prussian War yielded a new political order in Germany and the 200 million indemnity imposed on France led to an inflationary investment boom in Germany and Central Europe 11 page needed New technologies in industry such as the Bessemer converter were being rapidly applied railroads were booming 11 page needed In the United States the end of the Civil War and a brief post war recession 1865 1867 gave way to an investment boom focused especially on railroads on public lands in the Western United States an expansion funded greatly weasel words by foreign investors 11 page needed Causes of the crisis EditMain article Panic of 1873 Run on the Fourth National Bank No 20 Nassau Street New York City 1873 From Frank Leslie s Illustrated Newspaper October 4 1873 In 1873 during a decline in the value of silver exacerbated by the end of the German Empire s production of thaler coins the US government passed the Coinage Act of 1873 in April This essentially ended the bimetallic standard of the United States forcing it for the first time onto a pure gold standard This measure referred to by its opponents as the Crime of 1873 and the topic of William Jennings Bryan s Cross of Gold speech in 1896 forced a contraction of the money supply in the United States It also drove down silver prices further even as new silver mines were being established in Nevada which stimulated mining investment but increased supply as demand was falling 12 Silver miners arrived at US mints unaware of the ban on production of silver coins only to find their product no longer welcome By September the US economy was in a crisis deflation causing banking panics and destabilizing business investment climaxing in the Panic of 1873 The Panic of 1873 has been described as the first truly international crisis 11 page needed The optimism that had been driving booming stock prices in central Europe had reached a fever pitch and fears of a bubble culminated in a panic in Vienna beginning in April 1873 The collapse of the Vienna Stock Exchange began on May 8 1873 and continued until May 10 when the exchange was closed when it was reopened three days later the panic seemed to have faded and appeared confined to Austria Hungary 11 page needed Financial panic arrived in the Americas only months later on Black Thursday September 18 1873 after the failure of the banking house of Jay Cooke and Company over the Northern Pacific Railway 13 The Northern Pacific railway had been given 40 million acres 160 000 km2 of public land in the Western United States and Cooke sought 100 000 000 in capital for the company the bank failed when the bond issue proved unsalable and was shortly followed by several other major banks The New York Stock Exchange closed for ten days on September 20 11 page needed The financial contagion then returned to Europe provoking a second panic in Vienna and further failures in continental Europe before receding France which had been experiencing deflation in the years preceding the crash was spared financial calamity for the moment as was Britain 11 page needed Some who have argued the depression was rooted in the 1870 Franco Prussian War that devastated the French economy and under the Treaty of Frankfurt forced that country to make large war reparations payments to Germany The primary cause of the price depression in the United States was the tight monetary policy that the United States followed to get back to the gold standard after the Civil War The U S government was taking money out of circulation to achieve this goal therefore there was less available money to facilitate trade Because of this monetary policy the price of silver started to fall causing considerable losses of asset values by most accounts after 1879 production was growing thus further putting downward pressure on prices due to increased industrial productivity trade and competition In the US the speculative nature of financing due to both the greenback which was paper currency issued to pay for the Civil War and rampant fraud in the building of the Union Pacific Railway up to 1869 culminated in the Credit Mobilier scandal Railway overbuilding and weak markets collapsed the bubble in 1873 Both the Union Pacific and the Northern Pacific lines were central to the collapse another railway bubble was the Railway Mania in the United Kingdom Because of the Panic of 1873 governments depegged their currencies to save money The demonetization of silver by European and North American governments in the early 1870s was certainly a contributing factor The US Coinage Act of 1873 was met with great opposition by farmers and miners as silver was seen as more of a monetary benefit to rural areas than to banks in big cities In addition there were US citizens who advocated the continuance of government issued fiat money United States Notes to avoid deflation and promote exports The western US states were outraged Nevada Colorado and Idaho were huge silver producers with productive mines and for a few years mining abated Resumption of silver dollar coinage was authorized by the Bland Allison Act of 1878 The resumption of the US government buying silver was enacted in 1890 with the Sherman Silver Purchase Act Monetarists believe that the 1873 depression was caused by shortages of gold that undermined the gold standard and that the 1848 California Gold Rush 1886 Witwatersrand Gold Rush in South Africa and the 1896 99 Klondike Gold Rush helped alleviate such crises Other analyses have pointed to developmental surges see Kondratiev wave theorizing that the Second Industrial Revolution was causing large shifts in the economies of many states imposing transition costs which may also have played a role in causing the depression Course of the depression EditLike the later Great Depression the Long Depression affected different countries at different times at different rates and some countries accomplished rapid growth over certain periods Globally however the 1870s 1880s and 1890s were a period of falling price levels and rates of economic growth significantly below the periods preceding and following Between 1870 and 1890 iron production in the five largest producing countries more than doubled from 11 million tons to 23 million tons steel production increased twentyfold half a million tons to 11 million tons and railroad development boomed 14 But at the same time prices in several markets collapsed the price of grain in 1894 was only a third what it had been in 1867 15 and the price of cotton fell by nearly 50 percent in just the five years from 1872 to 1877 16 imposing great hardship on farmers and planters This collapse provoked protectionism in many countries such as France Germany and the United States 15 while triggering mass emigration from other countries such as Italy Spain Austria Hungary and Russia 17 Similarly while the production of iron doubled between the 1870s and 1890s 14 the price of iron halved 15 Many countries experienced significantly lower growth rates relative to what they had experienced earlier in the 19th century and to what they experienced afterwards Growth rates of industrial production 1850s 1913 18 1850s 1873 1873 1890 1890 1913 Germany 4 3 2 9 4 1 United Kingdom 3 0 1 7 2 0 United States 6 2 4 7 5 3 France 1 7 1 3 2 5 Italy 0 9 3 0 Sweden 3 1 3 5GNP of the Great Powers of Europe in billions USD 1960 prices 19 1830 1840 1850 1860 1870 1880 1890 Russia 10 5 11 2 12 7 14 4 22 9 23 2 21 1 France 8 5 10 3 11 8 13 3 16 8 17 3 19 7 United Kingdom 8 2 10 4 12 5 16 0 19 6 23 5 29 4 Germany 7 2 8 3 10 3 12 7 16 6 19 9 26 4 Austria Hungary 7 2 8 3 9 1 9 9 11 3 12 2 15 3 Italy 5 5 5 9 6 6 7 4 8 2 8 7 9 4Austria Hungary Edit The global economic crisis first erupted in Austria Hungary where in May 1873 the Vienna Stock Exchange crashed 11 In Hungary the panic of 1873 terminated a mania of railroad building 20 Chile Edit In the late 1870s the economic situation in Chile deteriorated Chilean wheat exports were outcompeted by production in Canada Russia and Argentina and Chilean copper was largely replaced in international markets by copper from the United States and Spain 21 Income from silver mining in Chile also dropped 21 Anibal Pinto president of Chile in 1878 expressed his concerns the following way 21 If a new mining discovery or some novelty of that sort does not come to improve the actual situation the crisis that has long been felt will worsen Anibal Pinto president of Chile 1878 This mining discovery came according to historians Gabriel Salazar and Julio Pinto into existence through the conquest of Bolivian and Peruvian lands in the War of the Pacific 21 It has been argued that economic situation and the view of new wealth in the nitrate was the true reason for the Chilean elite to go into war with its neighbors 21 Another response to the economic crisis according to Jorge Pinto Rodriguez was the new pulse of conquest of indigenous lands that took place in Araucania in the 1880s 22 23 France Edit France s experience was somewhat unusual Having been defeated in the Franco Prussian War the country was required to pay 200 million in reparations to the Germans and was already reeling when the 1873 crash occurred 11 The French adopted a policy of deliberate deflation while paying off the reparations 11 While the United States resumed growth for a time in the 1880s the Paris Bourse crash of 1882 sent France careening into depression one which lasted longer and probably cost France more than any other in the 19th century 24 The Union Generale a French bank failed in 1882 prompting the French to withdraw three million pounds from the Bank of England and triggering a collapse in French stock prices 25 The financial crisis was compounded by diseases impacting the wine and silk industries 24 French capital accumulation and foreign investment plummeted to the lowest levels experienced by France in the latter half of the 19th century 26 After a boom in new investment banks after the end of the Franco Prussian War the destruction of the French banking industry wrought by the crash cast a pall over the financial sector that lasted until the dawn of the 20th century 24 French finances were further sunk by failing investments abroad principally in railroads and buildings 20 The French net national product declined over the ten years from 1882 to 1892 27 Italy Edit A ten year tariff war broke out between France and Italy after 1887 damaging Franco Italian relations which had prospered during Italian unification As France was Italy s biggest investor the liquidation of French assets in the country was especially damaging 27 Russia Edit The Russian experience was similar to the US experience three separate recessions concentrated in manufacturing occurred in the period 1874 1877 1881 1886 and 1891 1892 separated by periods of recovery 28 United Kingdom Edit This section appears to contradict another section of this article Please see the talk page for more information January 2018 Further information Great Depression of British Agriculture The United Kingdom which had previously experienced crises every decade since the 1820s was initially less affected by this financial crisis even though the Bank of England kept interest rates as high as 9 percent in the 1870s 11 The 1878 failure of the City of Glasgow Bank in Scotland arose through a combination of fraud and speculative investments in Australian and New Zealand companies agriculture and mining and in American railroads Building on an 1870 reform and the 1879 famine thousands of Irish tenant farmers affected by depressed producer prices and high rents launched the Land War in 1879 which resulted in the reforming Irish Land Acts United States Edit See also Panic of 1873 Real gross national product per capita of the United States 1869 1918 Estimated declines in United States manufacturing output in selected sectors 1872 1876 29 Industry decline in outputDurable goods 30 Iron and steel 45 Construction 30 Overall 10 In the United States the Long Depression began with the Panic of 1873 The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879 At 65 months it is the longest lasting contraction identified by the NBER eclipsing the Great Depression s 43 months of contraction 6 30 Figures from Milton Friedman and Anna Schwartz show net national product increased 3 percent per year from 1869 to 1879 and real national product grew at 6 8 percent per year during that time frame 31 However since between 1869 and 1879 the population of the United States increased by over 17 5 percent 32 per capita NNP growth was lower Following the end of the episode in 1879 the U S economy would remain unstable experiencing recessions for 114 of the 253 months until January 1901 33 The dramatic shift in prices mauled nominal wages in the United States nominal wages declined by one quarter during the 1870s 13 and as much as one half in some places such as Pennsylvania 34 Although real wages had enjoyed robust growth in the aftermath of the American Civil War increasing by nearly a quarter between 1865 and 1873 they stagnated until the 1880s posting no real growth before resuming their robust rate of expansion in the later 1880s 35 The collapse of cotton prices devastated the already war ravaged economy of the southern United States 16 Although farm prices fell dramatically American agriculture continued to expand production 29 Thousands of American businesses failed defaulting on more than a billion dollars of debt 34 One in four laborers in New York were out of work in the winter of 1873 1874 34 and nationally a million became unemployed 34 The sectors which experienced the most severe declines in output were manufacturing construction and railroads 29 The railroads had been a tremendous engine of growth in the years before the crisis yielding a 50 increase in railroad mileage from 1867 to 1873 29 After absorbing as much as 20 of US capital investment in the years preceding the crash this expansion came to a dramatic end in 1873 between 1873 and 1878 the total amount of railroad mileage in the United States barely increased at all 29 The Freedman s Savings Bank was a typical casualty of the financial crisis Chartered in 1865 in the aftermath of the American Civil War the bank had been established to advance the economic welfare of America s newly emancipated freedmen 36 In the early 1870s the bank had joined in the speculative fever investing in real estate and unsecured loans to railroads its collapse in 1874 was a severe blow to African Americans 36 The recession exacted a harsh political toll on President Ulysses S Grant Historian Allan Nevins says of the end of Grant s presidency 37 Various administrations have closed in gloom and weakness but no other has closed in such paralysis and discredit as in all domestic fields did Grant s The President was without policies or popular support He was compelled to remake his Cabinet under a grueling fire from reformers and investigators half its members were utterly inexperienced several others discredited one was even disgraced The personnel of the departments was largely demoralized The party that autumn appealed for votes on the implicit ground that the next Administration would be totally unlike the one in office In its centennial year a year of deepest economic depression the nation drifted almost rudderless 37 Recovery began in 1878 The mileage of railroad track laid down increased from 2 665 mi 4 289 km in 1878 to 11 568 in 1882 29 Construction began recovery by 1879 the value of building permits increased two and a half times between 1878 and 1883 and unemployment fell to 2 5 in spite of or perhaps facilitated by high immigration 25 The recovery however proved short lived Business profits declined steeply between 1882 and 1884 25 The recovery in railroad construction reversed itself falling from 11 569 mi 18 619 km of track laid in 1882 to 2 866 mi 4 612 km of track laid in 1885 the price of steel rails collapsed from 71 ton in 1880 to 20 ton in 1884 25 Manufacturing again collapsed durable goods output fell by a quarter again 25 The decline became another financial crisis in 1884 when multiple New York banks collapsed simultaneously in 1883 1884 tens of millions of dollars of foreign owned American securities were sold out of fears that the United States was preparing to abandon the gold standard 25 This financial panic destroyed eleven New York banks more than a hundred state banks and led to defaults on at least 32 million worth of debt 25 Unemployment which had stood at 2 5 between recessions surged to 7 5 in 1884 1885 and 13 in the northeastern United States even as immigration plunged in response to deteriorating labor markets 25 This second recession led to further deterioration of farm prices Kansas farmers burned their own corn in 1885 because it was worth less than other fuels such as coal or wood 25 The country began to recover in 1885 25 Reactions to the crisis EditProtectionism Edit The period preceding the Long Depression had been one of increasing economic internationalism championed by efforts such as the Latin Monetary Union many of which then were derailed or stunted by the impacts of economic uncertainty 38 The extraordinary collapse of farm prices 15 provoked a protectionist response in many nations Rejecting the free trade policies of the Second Empire French president Adolphe Thiers led the new Third Republic to protectionism which led ultimately to the stringent Meline tariff in 1892 39 Germany s agrarian Junker aristocracy under attack by cheap imported grain successfully agitated for a protective tariff in 1879 in Otto von Bismarck s Germany over the protests of his National Liberal Party allies 39 In 1887 Italy and France embarked on a bitter tariff war 40 In the United States Benjamin Harrison won the 1888 US presidential election on a protectionist pledge 41 As a result of the protectionist policies enacted by the world s major trading nations the global merchant marine fleet posted no significant growth from 1870 to 1890 before it nearly doubled in tonnage in the prewar economic boom that followed 42 Only the United Kingdom and the Netherlands remained committed to low tariffs 40 Monetary responses Edit In 1874 a year after the 1873 crash the United States Congress passed legislation called the Inflation Bill of 1874 designed to confront the issue of falling prices by injecting fresh greenbacks into the money supply 43 Under pressure from business interests President Ulysses S Grant vetoed the measure 43 In 1878 Congress overrode President Rutherford B Hayes s veto to pass the Silver Purchase Act a similar but more successful attempt to promote easy money 29 Strikes Edit The United States endured its first nationwide strike in 1877 the Great Railroad Strike of 1877 29 This led to widespread unrest and often violence in many major cities and industrial hubs including Baltimore Philadelphia Pittsburgh Reading Saint Louis Scranton and Shamokin 44 New Imperialism Edit Main article New Imperialism The Long Depression contributed to the revival of colonialism leading to the New Imperialism period symbolized by the scramble for Africa as the western powers sought new markets for their surplus accumulated capital 45 According to Hannah Arendt s The Origins of Totalitarianism 1951 the unlimited expansion of power followed the unlimited expansion of capital 46 In the United States beginning in 1878 the rebuilding extending and refinancing of the western railways commensurate with the wholesale giveaway of water timber fish minerals in what had previously been Indian territory characterized a rising market This led to the expansion of markets and industry together with the robber barons of railroad owners which culminated in the genteel 1880s and 1890s The Gilded Age was the outcome for the few rich The cycle repeated itself with the Panic of 1893 another huge market crash Recovery EditIn the United States the National Bureau of Economic Analysis dates the recession through March 1879 In January 1879 the United States returned to the gold standard which it had abandoned during the Civil War according to economist Rendigs Fels the gold standard put a floor to the deflation and this was further boosted by especially good agricultural production in 1879 47 The view that a single recession lasted from 1873 to 1896 or 1897 is not supported by most modern reviews of the period It has even been suggested that the trough of this business cycle may have occurred as early as 1875 48 In fact from 1869 to 1879 the US economy grew at a rate of 6 8 for real net national product NNP and 4 5 for real NNP per capita 49 Real wages were flat from 1869 to 1879 while from 1879 to 1896 nominal wages rose 23 and prices fell 4 2 50 Explanations EditIrving Fisher believed that the Panic of 1873 and the severity of the contractions which followed it could be explained by debt and deflation and that a financial panic would trigger catastrophic deleveraging in an attempt to sell assets and increase capital reserves that selloff would trigger a collapse in asset prices and deflation which would in turn prompt financial institutions to sell off more assets only to further deflation and strain capital ratios Fisher believed that had governments or private enterprise embarked on efforts to reflate financial markets the crisis would have been less severe 51 David Ames Wells 1890 wrote of the technological advancements during the period 1870 1890 which included the Long Depression Wells gives an account of the changes in the world economy transitioning into the Second Industrial Revolution in which he documents changes in trade such as triple expansion steam shipping railroads the effect of the international telegraph network and the opening of the Suez Canal 52 Wells gives numerous examples of productivity increases in various industries and discusses the problems of excess capacity and market saturation Wells opening sentence The economic changes that have occurred during the last quarter of a century or during the present generation of living men have unquestionably been more important and more varied than during any period of the world s history Other changes Wells mentions are reductions in warehousing and inventories elimination of middlemen economies of scale the decline of craftsmen and the displacement of agricultural workers About the whole 1870 90 period Wells said Some of these changes have been destructive and all of them have inevitably occasioned and for a long time yet will continue to occasion great disturbances in old methods and entail losses of capital and changes in occupation on the part of individuals And yet the world wonders and commissions of great states inquire without coming to definite conclusions why trade and industry in recent years has been universally and abnormally disturbed and depressed Wells notes that many of the government inquiries on the depression of prices deflation found various reasons such as the scarcity of gold and silver Wells showed that the US money supply actually grew over the period of the deflation Wells noted that deflation lowered the cost of only goods that benefited from improved methods of manufacturing and transportation Goods produced by craftsmen and many services did not decrease in value and the cost of labor actually increased Also deflation did not occur in countries that did not have modern manufacturing transportation and communications Nobel laureate economist Milton Friedman author of A Monetary History of the United States on the other hand blamed this prolonged economic crisis on the imposition of a new gold standard part of which he referred to by its traditional name The Crime of 1873 53 Additionally Friedman pointed to the expansion of the gold supply through Gold cyanidation as a contributor to the recovery 54 This forced shift into a currency whose supply was limited by nature unable to expand with demand caused a series of economic and monetary contractions that plagued the entire period of the Long Depression Murray Rothbard in his book History of Money and Banking of the United States argues that the long depression was only a misunderstood recession since real wages and production were actually increasing throughout the period Like Friedman he attributes falling prices to the resumption of a deflationary gold standard in the U S after the Civil War Interpretations EditMost economic historians see this period as negative for the most industrial nations citation needed Many argue that most of the stagnation was caused by a monetary contraction caused by abandonment of the bimetallic standard in favor of a new fiat gold standard starting with the Coinage Act of 1873 citation needed Other economic historians have complained about the characterization of this period as a depression because of conflicting economic statistics that cast doubt on this interpretation They note it saw a relatively large expansion of industry of railroads of physical output of net national product and of real per capita income As economists Milton Friedman and Anna J Schwartz have noted the decade from 1869 to 1879 saw a growth of 3 percent per year in money national product an outstanding real national product growth of 6 8 percent per year and a rise of 4 5 percent per year in real product per capita Even the alleged monetary contraction never took place the money supply increasing by 2 7 percent per year From 1873 through 1878 before another spurt of monetary expansion the total supply of bank money rose from 1 964 billion to 2 221 billion a rise of 13 1 percent or 2 6 percent per year In short it was a modest but definite rise not a contraction 55 Although per capita nominal income declined very gradually from 1873 to 1879 that decline was more than offset by a gradual increase over the course of the next 17 years Furthermore real per capita income either stayed approximately constant 1873 1880 1883 1885 or rose 1881 1882 1886 1896 so the average consumer appears to have been considerably better off at the end of the depression than before Studies of other countries where prices also tumbled including the US Germany France and Italy reported more markedly positive trends in both nominal and real per capita income figures Profits generally were also not adversely affected by deflation although they declined particularly in Britain in industries struggling against superior foreign competition Furthermore some economists argue a falling general price level is not inherently harmful to an economy and cite the economic growth of the period as evidence 56 As economist Murray Rothbard has stated Unfortunately most historians and economists are conditioned to believe that steadily and sharply falling prices must result in depression hence their amazement at the obvious prosperity and economic growth during this era For they have overlooked the fact that in the natural course of events when government and the banking system do not increase the money supply very rapidly freemarket capitalism will result in an increase of production and economic growth so great as to swamp the increase of money supply Prices will fall and the consequences will be not depression or stagnation but prosperity since costs are falling too economic growth and the spread of the increased living standard to all the consumers 56 Accompanying the overall growth in real prosperity was a marked shift in consumption from necessities to luxuries by 1885 more houses were being built twice as much tea was being consumed and even the working classes were eating imported meat oranges and dairy produce in quantities unprecedented The change in working class incomes and tastes was symbolized by the spectacular development of the department store and the chain store Prices certainly fell but almost every other index of economic activity output of coal and pig iron tonnage of ships built consumption of raw wool and cotton import and export figures shipping entries and clearances railway freight clearances joint stock company formations trading profits consumption per head of wheat meat tea beer and tobacco all of these showed an upward trend 57 A large part at least of the deflation commencing in the 1870s was a reflection of unprecedented advances in factor productivity Real unit production costs for most final goods dropped steadily throughout the 19th century and especially from 1873 to 1896 At no previous time had there been an equivalent harvest of technological advances so general in their application and so radical in their implications That is why notwithstanding the dire predictions of many eminent economists Britain did not end up paralyzed by strikes and lockouts Falling prices did not mean falling money wages Instead of inspiring large numbers of workers to go on strike falling prices were inspiring them to go shopping 58 See also Edit Wikimedia Commons has media related to Long Depression Crisis theory Economic history Equine Influenza of 1872 Gilded Age Great Depression of British Agriculture 1873 1896 Kondratiev wave List of economic crises List of recessions in the United States New Imperialism Panic of 1873 Panic of 1893 Second Industrial RevolutionFootnotes Edit The Long Depression the First Great Depression America s Economic History Posted Jul 16 2015 by Martin Armstrong Rosenberg Hans 1943 Political and Social Consequences of the Great Depression of 1873 1896 in Central Europe The Economic History Review 13 Blackwell Publishing 13 1 2 58 73 doi 10 1111 j 1468 0289 1943 tb01613 x JSTOR 2590515 Musson A E 1959 The Great Depression in Britain 1873 1896 A Reappraisal The Journal of Economic History Cambridge University Press 19 2 199 228 doi 10 1017 S0022050700109994 JSTOR 2114975 S2CID 154705117 Capie Forrest Wood Geoffrey 1997 Great Depression of 1873 1896 In Glasner David Cooley Thomas F eds Business cycles and depressions an encyclopedia New York Garland Publishing pp 148 49 ISBN 0 8240 0944 4 History of Economic Downturns in the US But Now You Know Archived from the original on July 18 2011 Retrieved October 27 2010 a b Business Cycle Expansions and Contractions National Bureau of Economic Research Retrieved January 4 2009 Fels Rendigs 1949 The Long Wave Depression 1873 97 The Review of Economics and Statistics The MIT Press 31 1 69 73 doi 10 2307 1927196 JSTOR 1927196 The Economic Performance Index EPI Vadim Khramov and John Ridings Lee Social Democracy for the 21st Century A Realist Alternative to the Modern Left US Unemployment 1869 1899 January 26 2012 The Long Depression of 1873 Parallels and Comparisons Are we Missing Economic Information from an Important Piece of American Financial History http www mybudget360 com finance investing the long depression of 1873 parallels and comparisons are we missing economic information from an important piece of american financial history a b c d e f g h i j k David Glasner Thomas F Cooley 1997 Crisis of 1873 Business Cycles and Depressions An Encyclopedia Taylor amp Francis ISBN 0 8240 0944 4 Loomis Noel M 1968 Wells Fargo pp 219 220 224 225 a b Ron Chernow 1998 Titan New York Vintage Books p 160 ISBN 1 4000 7730 3 a b Eric Hobsbawm 1989 The Age of Empire 1875 1914 New York Vintage Books p 35 ISBN 0 679 72175 4 a b c d Eric Hobsbawm 1989 The Age of Empire 1875 1914 New York Vintage Books p 36 ISBN 0 679 72175 4 a b Eric Foner 2002 Reconstruction America s unfinished revolution 1863 1877 HarperCollins p 535 ISBN 0 06 093716 5 Eric Hobsbawm 1989 The Age of Empire 1875 1914 New York Vintage Books p 37 ISBN 0 679 72175 4 Andrew Tylecote 1993 The long wave in the world economy Routledge p 12 ISBN 0 415 03690 9 Paul Kennedy 1989 The Rise and Fall of the Great Powers Fontana Press p 219 ISBN 9780006860525 a b France and the Economic development of Europe 1800 1914 Routledge 2000 p 320 ISBN 0 415 19011 8 a b c d e Historia contemporanea de Chile III La economia mercados empresarios y trabajadores 2002 Gabriel Salazar and Julio Pinto p 25 29 Salazar amp Pinto 2002 pp 25 29 Pinto Rodriguez Jorge 1992 Crisis economica y expansion territorial la ocupacion de la Araucania en la segunda mitad del siglo XIX Estudios Sociales 72 a b c France and the Economic development of Europe 1800 1914 Routledge 2000 pp 70 71 ISBN 0 415 19011 8 a b c d e f g h i j David Glasner Thomas F Cooley 1997 Depression of 1882 1885 Business Cycles and Depressions An Encyclopedia Taylor amp Francis ISBN 0 8240 0944 4 France and the Economic development of Europe 1800 1914 Routledge 2000 pp 198 199 ISBN 0 415 19011 8 a b France and the Economic development of Europe 1800 1914 Routledge 2000 p 457 ISBN 0 415 19011 8 David Glasner Thomas F Cooley 1997 Business cycles in Russia 1700 1914 Business Cycles and Depressions An Encyclopedia Taylor amp Francis ISBN 0 8240 0944 4 a b c d e f g h David Glasner Thomas F Cooley 1997 Depression of 1873 1879 Business Cycles and Depressions An Encyclopedia Taylor amp Francis ISBN 0 8240 0944 4 Fels Rendigs 1949 The Long Wave Depression 1873 79 The Review of Economics and Statistics 31 1 69 73 doi 10 2307 1927196 JSTOR 1927196 Milton Friedman Anna Jacobson Schwartz A monetary history of the United States 1867 1960 Princeton University Press 1971 p 37 United States Census PDF Retrieved July 19 2010 If the census figures are accurate it is 17 83 percent Business Cycle Expansions and Contractions National Bureau of Economic Research Archived from the original on September 25 2008 Retrieved April 3 2009 a b c d Philip Mark Katz 1998 Appomattox to Montmartre Americans and the Paris Commune Harvard University Press p 167 ISBN 0 674 32348 3 The Cambridge Economic History of the United States Cambridge University Press 2000 p 223 ISBN 0 521 55307 5 a b Eric Foner 2002 Reconstruction America s unfinished revolution 1863 1877 HarperCollins pp 531 532 ISBN 0 06 093716 5 a b Nevins Allan Hamilton Fish The Inner History of the Grant Administration 1936 online edition 2 811 France and the Economic development of Europe 1800 1914 Routledge 2000 pp 38 39 ISBN 0 415 19011 8 a b France and the Economic development of Europe 1800 1914 Routledge 2000 p 39 ISBN 0 415 19011 8 a b France and the Economic development of Europe 1800 1914 Routledge 2000 p 40 ISBN 0 415 19011 8 The Reader s companion to American history Houghton Mifflin Harcourt 1991 ISBN 0 395 51372 3 Eric Hobsbawm 1989 The Age of Empire 1875 1914 New York Vintage Books p 50 ISBN 0 679 72175 4 a b Eric Foner 2002 Reconstruction America s unfinished revolution 1863 1877 HarperCollins p 522 ISBN 0 06 093716 5 McCabe James Dabney Edward Winslow Martin 1877 The History of the Great Riots The Strikes and Riots on the Various Railroads of the United States and in the Mining Regions Together with a Full History of the Molly Maguires National Publishing Company Eric Hobsbawm 1989 The Age of Empire 1875 1914 New York Vintage Books p 45 ISBN 0 679 72175 4 Hannah Arendt 1973 The Origins of Totalitarianism Houghton Mifflin Harcourt p 137 ISBN 0 15 670153 7 Fels Rendigs 1951 American Business Cycles 1865 79 The American Economic Review American Economic Association 41 3 325 349 JSTOR 1802106 Davis Joseph 2006 An Improved Annual Chronology of U S Business Cycles since the 1790s PDF The Journal of Economic History 66 1 103 21 doi 10 1017 s0022050706000040 S2CID 153478495 Rothbard 2002 154 Rothbard 2002 161 David Glasner Thomas F Cooley 1997 Debt deflation theory Business Cycles and Depressions An Encyclopedia Taylor amp Francis ISBN 0 8240 0944 4 Wells David A 1890 Recent Economic Changes and Their Effect on Production and Distribution of Wealth and Well Being of Society New York D Appleton and Co ISBN 0 543 72474 3 RECENT ECONOMIC CHANGES AND THEIR EFFECT ON DISTRIBUTION OF WEALTH AND WELL BEING OF SOCIETY WELLS The Crime of 1873 bit Milton Friedman http www unc edu salemi Econ006 Friedman Crime 1873 pdf Milton Friedman A Program for Monetary Stability PDF Readings in Financial Institutions Friedman Schwartz A Monetary History of the United States 1867 1960 a b Murray N Rothbard A History of Money and Banking in the United States The Colonial Era to World War II pdf The War of 1812 and its Aftermath p 145 153 156 A E Musson The Great Depression in Britain 1873 1896 a Reappraisal The Journal of Economic History 1959 19 199 228 George Selgin Less Than Zero The Case for a Falling Price Level in a Growing Economy The Institute of Economic Affairs 1997 p 49 53 Referenced 2011 01 15 Further reading EditSamuel Bernstein American Labor in the Long Depression 1873 1878 Science and Society vol 20 no 1 Winter 1956 pp 59 83 In JSTOR Retrieved from https en wikipedia org w index php title Long Depression amp oldid 1132350271, wikipedia, wiki, book, books, library,

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