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Economic Depressions

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Panic of 1873 > Depression of 1893 > Great Depression (1930s)

Panic of 1873
America experienced an economic boom following the end of the Civil War. Wall Street banks took part in financing a massive expansion of industry and the country's railroad system. Wages for both skilled and unskilled labor rose to their highest levels ever in the late 1860s and early 1870s. In 1873, however, the boom turned to bust.

A number of U.S. banks had begun failing in April, but the Panic of 1873, as it was called, was set off by the failure of Jay Cooke & Co. on September 18th. It was one of the largest and most stable financial houses in the country (its projects included the transcontinental Northern Pacific Railroad). But it had recklessly overextended itself and issued millions of dollars of worthless stock. Numerous banks that had lent money too easily and other overextended financial institutions also failed. The New York Sock Exchange closed its doors for more than a week.

The Panic marked the beginning of the longest period of economic contraction the nation had ever experienced - sixty-five months altogether. In New York, construction was cut in half, both in terms of number of new buildings and their value. One hundred thousand people were thrown out of work, nearly one-quarter of the city's labor force. Ten thousand homeless roamed the city's streets. Those who still had work suffered a severe drop in wages, roughly 30 percent across the board. Socialism gained in popularity throughout the working-class neighborhoods of the city.

But the working class was hard-pressed by the decreased need for labor and government suppression of any labor organization. In January of 1874, laborers marched to demand that the city find them work. But the event culminated in a savage police attack on the marchers in Tompkins Square. Union membership in New York actually declined over the period, from 45,000 in 1873 to 5,000 in 1879. Government - federal, state, and local - generally took the side of employers over employees and did practically nothing to alleviate the hardship of the unemployed. It took more than five years for New York City and the nation to finally recover from the economic malaise.

American Social History Project, Who Built America? Working People and the Nation's Economy, Politics, Culture, and Society (New York, 1992)

See also: Rent, Wages, & the Cost of Living: 1870s; Public Assistance/Outdoor Relief.


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