The Great Depression of the 1930s was called "great" for a reason. It followed a long series of depressions which afflicted the American economy throughout the 19th century.
Crop failures, drops in cotton prices, reckless railroad speculation, and sudden plunges in the stock market all came together at various times to send the growing American economy into chaos. The effects were often brutal, with millions of Americans losing jobs, farmers being forced off their land, and railroads, banks, and other businesses going under for good.
Here are the basic facts on the major financial panics of the 19th century.
Panic of 1819
- The first major American depression, the Panic of 1819 was rooted to some extent in economic problems reaching back to the war of 1812.
- It was triggered by a collapse in cotton prices. A contraction in credit coincided with the problems in the cotton market, and the young American economy was severely affected.
- Banks were forced to call in loans, and foreclosures of farms and bank failures resulted.
- The Panic of 1819 lasted until 1821.
- The effects were felt most in the west and south. Bitterness about the economic hardships resonated for years and led to the resentment that helped Andrew Jackson solidify his political base throughout the 1820s.
- Besides exacerbating sectional animosity, the Panic of 1819 also made many Americans realize the importance of politics and government policy in their lives.
Panic of 1837
- The Panic of 1837 was triggered by a combination of factors including the failure of a wheat crop, a collapse in cotton prices, economic problems in Britain, rapid speculation in land, and problems resulting from the variety of currency in circulation.
- It was the second-longest American depression, with effects lasting roughly six years, until 1843.
- The panic had a devastating impact. A number of brokerage firms in New York failed, and at least one New York City bank president committed suicide. As the effect rippled across the nation, a number of state-chartered banks also failed. The nascent labor union movement was effectively stopped, as the price of labor plummeted.
- The depression caused the collapse of real estate prices. The price of food also collapsed, which was ruinous to farmers and planters who couldn't get a decent price for their crops. People who lived through the depression following 1837 told stories that would be echoed a century later during The Great Depression.
- The aftermath of the panic of 1837 led to Martin Van Buren's failure to secure a second term in the election of 1840. Many blamed the economic hardships on the policies of Andrew Jackson, and Van Buren, who had been Jackson's vice president, paid the political price.
Panic of 1857
- The Panic of 1857 was triggered by the failure of the Ohio Life Insurance and Trust Company, which actually did much of its business as a bank headquartered in New York City. Reckless speculation in railroads led the company into trouble, and the company's collapse led to a literal panic in the financial district, as crowds of frantic investors clogged the streets around Wall Street.
- Stock prices plummeted, and more than 900 mercantile firms in New York had to cease operation. By the end of the year the American economy was a shambles.
- One victim of the Panic of 1857 was a future Civil War hero and US president, Ulysses S. Grant, who was bankrupted and had to pawn his gold watch to buy Christmas presents.
- Recovery from the depression began in early 1859.
Panic of 1873
- The investment firm of Jay Cooke and Company went bankrupt in September 1873 as a result of rampant speculation in railroads. The stock market dropped sharply and caused numerous businesses to fail.
- The depression caused approximately three million Americans to lose their jobs.
- The collapse in food prices impacted America's farm economy, causing great poverty in rural America.
- The depression lasted for five years, until 1878.
- The Panic of 1873 led to a populist movement that saw the creation of the Greenback Party. The industrialist Peter Cooper ran for president on the Greenback Party ticket in 1876, but was unsuccessful.
Panic of 1893
- The depression set off by the Panic of 1893 was the greatest depression America had known, and was only surpassed by the Great Depression of the 1930s.
- In early May 1893 the New York stock market dropped sharply, and in late June panic selling caused the stock market to crash.
- A severe credit crisis resulted, and more than 16,000 businesses had failed by the end of 1893. Included in the failed businesses were 156 railroads and nearly 500 banks.
- Unemployment spread until one in six American men lost their jobs.
- The depression inspired "Coxey's Army," a march on Washington of unemployed men. The protesters demanded that the government provide public works jobs. Their leader, Jacob Coxey, was imprisoned for 20 days.
- The depression caused by the Panic of 1893 lasted for about four years, ending in 1897.
Legacy of 19th Century Financial Panics
The economic problems of the 19th century periodically caused pain and misery and it often seemed that the federal and state governments were powerless to do anything. The rise of the progressive movement was, in many ways, a reaction to earlier financial panics. In the first decades of the 20th century financial reforms made economic collapses less likely, yet the Great Depression showed that the problems could not be easily avoided.