The Panic in the Year 1893
The panic in the year 1893 was a severe and true financial panic that lasted for several months. The panic started in May of the year 1893 and lasted through to November of the same year. During the period, there was a run on the currency as banks and many businesses closed down due to lack of funds to pay their employees. Many industries also closed down due to the severe shortage of funds during the panic. The panic also caused a decline of the country’s stock market and a fail in houses of the Wall Street broke rage. It also caused a total failure of 158 national banks in the country as they lacked funds to sustain themselves. Most of the banks that crashed to the ground were mostly from the South and the West. Apart from government banks, 172 state banks plus 177 privately owned banks also came down. 47 savings banks plus thirteen loaning, trust companies and 16 companies based on mortgage were grounded. The origin of the panic was in New York before spreading like a wild fire to all the other states in the country. This condition drove Florence Kelley and her teammates to start working in chronicling the conditions of the country’s economy.
On the July of the year 1893, the banks in Chicago for the very first time approved insurance for clearing loans certificates on houses. This foreshadowed the cash payments suspension. This panic was immediately followed by a severe depression of the economy in the country that lasted until the year 1897. By the time of the panic, the US Federal reserve Banks never existed otherwise they would have enabled the country avert the panic.
By the summer of the year 1893, manufacturing, commercial and economic depression had already started taking effect throughout the country. Many of the businesses in the country failed, and many of the railways in the country with Chicago as their main dominating hub adjusting towards receivership. The railways were later handed over to the federal and state courts due to bankruptcy. By the following year, almost more than 125 rail boards were handed to receivership. During the summer of the year 1893, Florence was recording the effects of the panic that included unemployment and economic standstill. She recorded the information for the legislature in Illinois. The debate in the country at that time was centered on the silver question.
The year of the panic also saw several agencies prosecuted under the Sherman Anti-Trust Act to curb the abuses in monopoly. This is described in journal articles of Henry Demarest Lloyd and others. The level of unemployment in companies throughout the country reached the peak in the period between July and August in the year 1893. There was also a widespread reduction in wages between the same periods. Many banks reported a drastic reduction in the amount of gold in their reserves as the country’s amount of debt increased as money and gold constantly pumped out of the country at an alarming rate. The depression made its lowest point in the July of the year 1894. During this period, Florence Kelley and her team enforced the statute for factory and workshop inspection.
The problems facing the economy were worsened by the severe winters that hit the country in 1893. Coxey and his army of unemployed people marched to Washington DC to protest in the April of 1894. The strike and demonstrations in DC at the period involved over 40,000 workers from all over the country. The most dramatic of all the strikes at the time was the Pullman Strike that is reported to have covered 50,000 miles on a rail track on the July of the same year. Among the journals written at the time on the effects of the panic and the great depression included Florence’s journals and articles, journals of Jane Addams and many other writers that existed during the time the panic and depression started and ended. At one point, during this period, over 5,000 federal troops set camp along the lake in Chicago’s downtown in protest. The troops were called to step in by Grover Cleveland after the objection of Governor John Peter.
Just as other economic depressions, the panic and depression the United States face at the time was accompanied by international roots and international ramifications. The tariff policy in the States played a big role just as the stalemate over taxes by politicians. The issue at that time was whether the currency of the country should depend on gold alone or rather be backed up with silver. This issue appeared to be the central issue in the stiff presidential campaigns in the year 1896 that resulted in the defeat of presidential aspirant William Jennings of the Democratic Party.
The panic and economic depression were perceived as a sudden unexpected. It resulted due to the actions of the Barring Brothers, one of London’s main financial houses defaulting on 21 million pounds that was centralized by the agency’s heavy investment in Argentina. To cover the crisis, the Bank of England asked for economic assistance from France’s bank, which in turn borrowed money from the Imperial Russian main bank, and by the November of 1890, numerous banks in the world were failing and already there was a run on currency even in Europe.
He economic crisis and panic was meant to set in earlier in the United States had it not been for the existence of a bumper wheat crop in the States at the time Europe faced severe famine. This aided the United States gain some gold that temporarily sustained the country’s economy just before the panic and the crisis set in. the period saw a revolution in Brazil while Australia faced a banking crisis. The economic depression France and Germany faced at the time caused a severe depression in the cost of silver worldwide. This consequently resulted in high immigration to the States of America and especially to Chicago as people termed the United States as the land of opportunity.
The United States faced a great financial problem and did not have a place to turn to. Many of the country’s companies were very grounded. The level of unemployment in the country shot up and accompanied by high crime rates as the many unemployed people did not know where to turn to. They had the only exception in crime as a way of meeting their daily needs. A movement termed as the free silver movement arose. The movement gained immense support from farmers in the country whose primary purpose for joining the movement was to cause inflation that would eventually cause them to repay their debts with cheaper dollars. Mining companies also supported the movement with the idea of turning the mined silver directly into money. Some people in the country even attempted to turn silver notes into gold. The country’s economy before the crisis was based on gold. This probably was the main reason for the depression as it meant a drop in the value of gold would be directly proportional to a fall in the country’s economy. Later on the demand for silver dropped causing a subsequent drop in the value of silver in the country.