Panic of 1893

Eugene V. Debs, having risen to the position of national officer of the Brotherhood of Locomotive Firemen and editor of its magazine, has rebuilt the organization and helped organize other railroad brotherhoods.

An Indiana native, Debs, at twenty, had helped to form a local of the Brotherhood of Locomotive Firemen in 1875.

After failing to unify these brotherhoods, Debs establishes the industrial American Railway Union in 1893.

It will soon become the nation's largest union.

The Panic of 1893 sends the U.S. economy into an economic tailspin.

One of the causes for the Panic of 1893 can be traced back to Argentina.

Investment was encouraged by the Argentine agent bank, Baring Brothers.

However, the 1890 wheat crop failure and a coup in Buenos Aires ended further investments.

In addition, speculations also collapsed in South African and Australian properties.

Because European investors are concerned that these problems might spread, they start a run on gold in the U.S. Treasury.

Specie is considered more valuable than paper money; when people are uncertain about the future, they stockpile specie and reject paper.

During the Gilded Age of the 1870s and 1880s, the United States had experienced economic growth and expansion, but much of this expansion depended on high international commodity prices.

To exacerbate the problems with international investments, wheat prices crash in 1893.

One of the first clear signs of trouble comes on February 20, 1893, twelve days before the inauguration of U.S. President Grover Cleveland, with the appointment of receivers for the Philadelphia and Reading Railroad, which had greatly overextended itself.

Upon taking office, Cleveland deals directly with the Treasury crisis and persuades Congress to repeal the Sherman Silver Purchase Act, which he feels was mainly responsible for the economic crisis.

As concern for the state of the economy deepens, people rush to withdraw their money from banks, and cause bank runs.

The credit crunch ripples through the economy.

A financial panic in London combined with a drop in continental European trade causes foreign investors to sell American stocks to obtain American funds backed by gold.

J. P. Morgan becomes active in railroads following the crash, reorganizing several lines in the East.

The Northern Pacific Railway goes bankrupt in the great depression of 1893.

A complex financial battle ensues to take control of the railroad, because bankruptcy wipes out the bondholders and it is now free of debt.

A compromise is reached involving Morgan, New York financier E. H. Harriman and St. Paul railroad builder James J. Hill.

The United States has raised tariffs to combat economic depression.

Democratic President Grover Cleveland had redefined the issue in 1887, with his stunning attack on the tariff as inherently corrupt, opposed to true republicanism, and inefficient to boot.

The election of 1888 was fought primarily over the tariff issue, and Cleveland lost.

Democrats campaigned energetically against the high McKinley tariff of 1890, and scored sweeping gains that year; they restored Cleveland to the White House in 1892.

The severe depression that started in 1893 has ripped apart the Democratic party.

Cleveland and the pro-business Bourbon Democrats insist on a much lower tariff.

His problem is that Democratic electoral successes have brought in Democratic congressmen from industrial districts who are willing to raise rates to benefit their constituents.

The Wilson–Gorman Tariff Act of 1894 does lower overall rates from 50 percent to 42 percent, but contains so many concessions to protectionism that Cleveland refuses to sign it (it becomes law anyway).

Samuel Gompers maneuvers to prevent AFL endorsement of socialism at the American Federation of Labor convention of 1894.

The Pullman Palace Car Company of Illinois cuts wages in the wake of the Panic but does not lower rents or other charges to employees in the company town of Pullman, near Chicago (later incorporated into Chicago.)

American Railway Union representatives protest on May 11, and are summarily fired by the company.

Eugene V. Debs leads a strike against Pullman in protest of wage reductions, calling for the boycott of all Pullman cars.

The Pullman Strike paralyzes rail traffic across the United States before being halted by a a blanket federal court injunction obtained by Attorney General Richard Olney on July 2.

Federal troops arriving on July 4 under kill several strikers and break the strike in six days.

Debs and other union officials are jailed for six months thereafter for disobeying the injunction.

While in jail, Debs’s readings of Karl Kautsky and visits by Austro-Hungarian born Milwaukee socialist Victor L. Berger lead him to move toward socialism.