20.4 Social and labor unrest in the 1890s

Insofar as farmers wanted the rest of the country to share their plight, they got their wish. Soon after Cleveland’s election, the nation catapulted into the worst economic depression in its history to date. As the government continued to fail in its efforts to address the growing problems, more and more Americans sought relief outside of the traditional two-party system. To many industrial workers, the Populist Party began to seem like a viable solution.

From farmers’ hardships to a national depression

The late 1880s and early 1890s saw the American economy slide precipitously. As mentioned above, farmers were already struggling with economic woes, and the rest of the country followed quickly. Following a brief rebound from the speculation-induced Panic of 1873, in which bank investments in railroad bonds spread the nation’s financial resources too thin—a rebound due in large part to the protective tariffs of the 1880s—a greater economic catastrophe hit the nation, as the decade of the 1890s began to unfold.

The causes of the Depression of 1893 were manifold, but one major element was the speculation in railroads over the previous decades. The rapid proliferation of railroad lines created a false impression of growth for the economy as a whole. Banks and investors fed the growth of the railroads with fast-paced investment in industry and related businesses, not realizing that the growth they were following was built on a bubble. When the railroads began to fail due to expenses outpacing returns on their construction, the supporting businesses, from banks to steel mills, failed also.

Beginning with the closure of the Philadelphia&Reading Railroad Company in 1893, several railroads ceased their operations as a result of investors cashing in their bonds, thus creating a ripple effect throughout the economy. In a single year, from 1893 to 1894, unemployment estimates increased from 3 percent to nearly 19 percent of all working-class Americans. In some states, the unemployment rate soared even higher: over 35 percent in New York State and 43 percent in Michigan. At the height of this depression, over three million American workers were unemployed. By 1895, Americans living in cities grew accustomed to seeing the homeless on the streets or lining up at soup kitchens.

Immediately following the economic downturn, people sought relief through their elected federal government. Just as quickly, they learned what farmers had been taught in the preceding decades: A weak, inefficient government interested solely in patronage and the spoils system in order to maintain its power was in no position to help the American people face this challenge. The federal government had little in place to support those looking for work or to provide direct aid to those in need. Of course, to be fair, the government had seldom faced these questions before. Americans had to look elsewhere.