The downfall of the Erie and Tweed rings is accompanied by a hurricane in the economy at large. For all the financial shenanigans of Fisk and Gould, the American economy has grown rapidly since the Civil War. But fat years eventually give way to lean, and in the autumn of 1873 the country suffers its first full-blown panic of the industrial era. Jay Cooke—the “good” Jay of Wall Street, renowned and respected for floating the bonds that supported the Union government during the war, in contrast to the bad Jay Gould of the Erie war and the gold conspiracy—finds himself burdened with millions of dollars of Northern Pacific Railroad bonds he can’t unload, and when Cooke & Co. closes its doors, the financial markets seize up. The panic spreads to the stock market and then to the economy as a whole. The railroad industry drives over a cliff into massive receivership; factories damp their furnaces and bar their doors; inventories pile up in warehouses; real estate prices collapse; savers lose their nest eggs in bank closures; workers lose their jobs. Panics in preindustrial America were sometimes sharp but never long or especially wide. When the nation’s economy rested on agriculture, people could always eat from their own gardens even if they couldn’t buy from their neighbors, and they could live in their own houses even if they couldn’t afford to paint or repair them. Now that the economy depends on industry, downturns are far more devastating. Laid-off workers lack money for food and rent; they and their families soon find themselves hungry and homeless. And the growing interconnectedness of the economy causes panics to ramify far from their origins. No one knows it in 1873, but the panic of this year will produce a nationwide depression lasting the rest of the decade, with bloody strife setting labor against management and political divisions pitting one half of the country against the other half.

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