Panic of 1873
Episode #2 of the course “World’s biggest financial crises”
Although the Civil War halted the depression in the United States, when it was over, the United States fell back into economic disarray. Railroad construction was booming between 1866 and 1873; workers had laid over 35,000 miles of new tracks across the country, including the first transcontinental railroad, which was built in 1869. The railroads were also the nation’s largest (nonagricultural) employer, and virtually everyone was heavily invested in the railroad’s development.
A large banking firm, Jay Cooke and Company, also heavily invested in the railroad—so much that it realized that it was in too deep and had to declare bankruptcy like many other financial institutions, who were doing the same thing. The New York Stock Exchange literally closed its doors for ten days. This quick collapse was devastating. It would take the country six long years to dig itself out of this depression.
Once their funding was pulled, 89 of the United States’ 364 railroad companies declared bankruptcy. In a two year period, 18,000 businesses failed. Unemployment in 1876 was at 14 percent. In 1877, workers on the railroad began to strike because of their meager wages, and workers in virtually every industry followed suit. The strikes became so heated that President Rutherford B. Hayes sent federal troops to deal with the strikes, causing more than 100 deaths and even more injuries.
Southern blacks were hit especially hard during this time. Because of the need to cut down on wages and the falling farm prices, the north (and the south) became less concerned with addressing racism problems that were rampant in the south. The Ku Klux Klan, for example, had been largely dialed back by legislation after the Civil War, but they began their campaigns again during the depression. Violence was rampant and no one was addressing it.
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