Genealogy and History: The Panic of 1873
Understanding history is a very important aspect of being effective in our genealogy and family history work. While the usual birth, marriage, death, etc. data and facts are important, understanding the historic occurrences and their impacts on your ancestors is crucial to having the best of luck in finding the facts we need and interpreting the data we uncover.
As everyone knows we are living through the continuing impacts of The Great Recession. Similarly, but to a harsher degree, our parents and grandparents lived through, and learned from, The Great Depression. So it was that our ancestors before them lived through The Panic of 1873 and the resulting economic depression that lasted for years after in America (1873-1879 according to the National Bureau of Economic Research) and for decades throughout areas of Europe.
While many reference works state the cause of The Panic of 1873 as the collapse of the banking empire of Jay Cooke this is a very United States centered view of the world economy. The Panic of 1873 neither began with Jay Cooke nor did it begin in America. The bankruptcy of Jay Cooke’s banking empire, which got its kick start when Cooke acted as the chief financier of the Union army during the Civil War since he held a monopoly on selling US government bonds, is indeed seen as the American trigger of the Panic. However, many economists point to The Panic of 1873 actually having its origins in financial failures in the Austro-Hungarian Empire, the simultaneous bursting of real estate bubbles in many Central European capital cities, U.S. monetary policy changes instituted by President Grant, and a combination of overcapacity and a loss of faith in the U. S. railroad industry in general as well as specifically due to rampant graft and corruption as evidenced by the Crédit Mobilier scandal.
Dr. David Blanke, Professor of History at Texas A&M University-Corpus Christi, points out that while The Panic of 1873 is little studied, it was the first depression brought on by ‘industrial capitalism’ as opposed to the prior downturns caused by ‘mercantile capitalism’, meaning that in The Panic of 1873 money, not labor and/or goods were the critical factor in this collapse. So what were the effects of this Panic in America? First, nine out of ten U.S. railroad companies failed, average wages fell by nearly 25%, thousands of American firms defaulted on over a billion dollars in debt, and the nation reeled under double-digit unemployment for over a decade. Dr. Blanke goes on to say “numbers fail to convey the depth of the economy distress” and that every region of the country was effected.
Dr. Scott Nelson, Professor of History at the College of William and Mary, believes that The Panic of 1873 actually was far more similar to ‘our’ recession than was the Great Depression of 1929. As a matter of fact, in one of his interviews, Dr. Nelson says “In fact, the current economic woes look a lot like what my 96-year-old grandmother still calls ‘the real Great Depression’”. Dr. Nelson further says:
“As the panic deepened, ordinary Americans suffered terribly. A cigar maker named Samuel Gompers who was young in 1873 later recalled that with the panic, ‘economic organization crumbled with some primeval upheaval.” Between 1873 and 1877, as many smaller factories and workshops shuttered their doors, tens of thousands of workers – many former Civil War soldiers – became transients. The terms ‘tramp’ and ‘bum’ both indirect references to former soldiers, became commonplace American terms. Relief rolls exploded in major cities, with 25-percent unemployment (100,000 workers) in New York City alone… Some of the most violent strikes in American history followed the panic…”
“In Central and Eastern Europe, times were even harder.”
The earliest failures in Europe occurred in 1872 in the breadbasket of Russia, in that area that is now Ukraine and Moldova. The arrival of cheap, American grown wheat, coupled with inexpensive kerosene and manufactured foods, began the collapse of the economy of Russia.
In May and then again in November, 1873 there were significant financial upheavals and panics, especially in Vienna and Berlin. Interestingly the Krach, or Crash in Vienna took place on May 9, 1873, the same day of the birth in Kladno, Bohemia of Anton Cermak, destined to become Mayor of Chicago, Illinios.
The Panic of 1873 came as a surprise to the business community and was preceded by the initial failures of the New York Warehouse and Security Company and the banking house of Kenyon, Cox, and Company. However these earliest failures were to firms not nearly as well-known as Jay Cooke & Co.
In the United States alone, almost immediately after Jay Cooke & Co. declared insolvency and defaulted on their obligations in late 1873, 89 of the country’s 364 railroads declared bankruptcy, over 18,000 businesses failed in two years, and by 1876, unemployment had risen to 14 percent and by 1878 it was over 18% nationwide. According to Dr. Drew E. VandeCreek, of the Lincoln Center, in his post at Illinois During the Gilded Age unemployment in the city of Chicago was a staggering 33%, “Many farmers had borrowed money to expand their operations during the Civil War’s boom times.”, and “Now many of these recently arrived, single male immigrants walked the streets as tramps.”
At the time of the Panic of 1873, Ulysses S. Grant was in his second term as President and was unable to solve the crisis. Historian Allan Nevins says of Grant “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.” Likewise the Presidents who followed Grant (Hayes, Garfield, Arthur, Cleveland, etc.) were unable to solve the lasting impacts of the depression as well.
In his 1998 book, Titan. The Life of John D. Rockefeller, Sr., author Ron Chernow writes nominal wages in the United States declined by a devastating 25% during the 1870s and declined by as much as 50% in some places, such as Pennsylvania.
Author Philip Mark Katz, in his book Appomattox to Montmartre: Americans and the Paris Commune notes that by 1874 New York State was experiencing 25% unemployment and nationwide more than 1,000,000 became unemployed.
In 1885 farmers in Kansas burned their own corn for fuel since it was cheaper than wood or coal. The Panic of 1873 also spelled the end of Reconstruction in the South.
Coming next …
WHAT DOES THIS ALL MEAN FOR GENEALOGY?