Modern history

The Depression of the 1890s

When the Philadelphia and Reading Railroad went bankrupt in early 1893, it set off a chain reaction that pushed one-quarter of American railroads into insolvency. As a result, on May 5, 1893, “Black Friday,” the stock market collapsed in a panic, triggering the depression of 1893. Making this situation worse, England and the rest of industrial Europe had experienced an economic downturn several years earlier. As a result, in the early 1890s foreign investors began selling off their American stocks, leading to a flow of gold coin out of the country and further damage to the banking system. Hundreds of banks failed, which hurt the business people and farmers who relied on a steady flow of bank credit to keep their enterprises afloat. By the end of 1894, some 3 million people, nearly 12 percent of the American workforce, remained unemployed. Tens of thousands of homeless people wandered the streets of major American cities. The depression became the chief political issue of the mid-1890s and resulted in a realignment of power between the two major parties. Rather than capitalizing on depression discontent, however, the Populist Party split apart and collapsed.

Depression Politics

President Grover Cleveland’s handling of the depression only made a bad situation worse. Railroad executive James J. Hill warned the president, “Business is at a standstill and the people are becoming thoroughly aroused. Their feeling is finding expression about as it did during the War of the Rebellion [Civil War].” With talk of civil war in the air, the Cleveland administration faced protest marches and labor strife. In the spring of 1894, Jacob Coxey, a wealthy businessman and Populist reformer from Ohio, and his associate, Carl Browne, led a march on Washington, D.C., demanding that Cleveland and Congress initiate a federal public works program to provide jobs for the unemployed. Coxey had previously supported the Greenback Party, which advocated inflating the money supply with paper currency to stimulate the economy and help those in distress. Though highly critical of the favored few who dominated the federal government, Coxey had faith that if “the people . . . come in a body like this, peaceably to discuss their grievances and demanding immediate relief, Congress . . . will heed them and do it quickly.” For him, “relief ” meant both creating jobs and increasing the money supply. After traveling for a month from Ohio, Coxey led a parade of some five hundred unemployed people into the nation’s capital. Attracting thousands of spectators, Coxey's army attempted to mount their protest on the grounds of the Capitol building. In response, police broke up the demonstration and arrested Coxey for trespassing. Cleveland turned a deaf ear to Coxey’s demands for federal relief and also disregarded protesters participating in nearly twenty other marches on Washington.

In the coming months, Cleveland’s political stock plummeted further. He responded to the Pullman strike in the summer of 1894 by obtaining a federal injunction against the strikers and dispatching federal troops to Illinois when the workers disobeyed it. The president’s action won him high praise from the railroads and conservative business interests, but it showed millions of American workers that the Cleveland administration did not have a solution for ending the suffering caused by the depression. From the outset of his term, the president had made his intentions about government assistance clear: “While the people should patriotically and cheerfully support their Government, its functions do not include the support of the people.” In normal times, these words reflected the prevailing philosophy of self-help that most Americans shared, but in the midst of a severe depression they sounded heartless.

Making matters worse, Cleveland convinced Congress to repeal the Sherman Silver Purchase Act. This angered western miners, who relied on strong silver prices, along with farmers in the South and Great Plains who were swamped by mounting debt. At the same time, the removal of silver as a backing for currency caused private investors to withdraw their gold deposits from the U.S. Treasury. To keep the government financially solvent, Cleveland worked out an agreement with a syndicate led by J. P. Morgan to help sell government bonds, a deal that netted the businessmen a huge profit. In the midst of economic suffering, this deal looked like a corrupt bargain between government and the rich designed to ensure that the rich got richer as the poor got poorer.

In 1894 Congress also passed the Wilson-Gorman Act, which raised tariffs on imported goods. Intended to protect American businesses by keeping the price of imported goods high, it also deprived foreigners of the necessary income with which to buy American exports. This drop in exports did not help economic recovery. The Wilson-Gorman Act did include a provision that the Populists and other reformers endorsed: a progressive income tax of 2 percent on all annual earnings over $4,000. No federal income tax existed at this time, so even this mild levy elicited cries of “socialism” from conservative critics, who challenged the tax in the courts. They found a receptive audience in the Supreme Court. In Pollack v. Farmers Loan and Trust (1895), the justices, who had already struck down a number of attempts to regulate business, declared the income tax unconstitutional and denounced it as the opening wedge in “a war of the poor against the rich; a war constantly growing in intensity and bitterness.”

With Cleveland’s legislative program in shambles and his inability to solve the depression abundantly clear, the Democrats suffered a crushing blow at the polls. In the congressional elections of 1894, the party lost an astonishing 120 seats in the House. This defeat offered a preview of the political shakeup that loomed ahead.

Political Realignment in the Election of 1896

The presidential election of 1896 marked a turning point in the political history of the nation, one that would shape national politics for the next thirty-six years. Democrats nominated William Jennings Bryan of Nebraska, a farmers’ advocate who favored silver coinage. When he vowed that he would not see Republicans “crucify mankind on a cross of gold,” the Populists endorsed him as well. Bryan was the first major party nominee for the White House since 1868 who did not come from Ohio, Indiana, or New York.

Republicans nominated William McKinley, the governor of Ohio and a supporter of the gold standard and high tariffs on manufactured and other goods. While Bryan barnstormed around the country, McKinley remained at his home in Canton, Ohio, to conduct his campaign from his front porch. His campaign manager, Marcus Alonzo Hanna, an ally of Ohio senator John Sherman, raised an unprecedented amount of money, about $16 million, mainly from wealthy industrialists who feared that the free and unlimited coinage of silver would debase the U.S. currency. Hanna saturated the country with pamphlets, leaflets, and posters, many of them written in the native languages of immigrant groups. He also hired a platoon of speakers to fan out across the country denouncing Bryan’s free silver cause as financial madness. Republican Theodore Roosevelt, who would later become president himself, remarked that Hanna advertised McKinley “as if he were patent medicine.” By contrast, Bryan raised about $1 million and had to travel around the country making personal appearances, in part to compensate for his campaign’s lack of funds.

The outcome of the election transformed the Republicans into the majority party in the United States. McKinley won 51 percent of the popular vote and 61 percent of the electoral vote, making him the first president since Grant in 1872 to win a majority of the popular vote. More important than this specific contest, however, was that the election proved critical in realigning the two parties. Voting patterns shifted with the 1896 election, giving Republicans the edge in party affiliation among the electorate not only in this contest but also in presidential elections over the next three decades (Map 17.1).

MAP 17.1

The Election of 1896 William McKinley's election in 1896 resulted in a realignment of political power in the United States that lasted until 1932. Republicans became the nation's majority party by forging a coalition of big business and urban industrial workers from the Northeast and Midwest. Democratic strength was confined to the South and small towns and rural areas of the Great Plains and Mountain states.

What happened to produce this critical realignment in electoral power? The main ingredient was Republicans’ success in fashioning a coalition that included both corporate capitalists and their workers. Although Bryan made sincere appeals for the votes of urban dwellers and industrial workers along class lines, they generally fell on deaf ears. Many of these voters took out their anger on Clevelands Democratic Party and Bryan as its standard-bearer for failing to end the depression. In addition, Bryan, who hailed from Nebraska and reflected small-town agricultural America and its values, could not win over the swelling numbers of urban immigrants who considered Bryan’s world alien to their experience. A great orator, Bryan nevertheless sounded anti-urban, and his defeat signaled the decline of rural America in presidential politics. His campaign was the last serious effort to win the White House with mostly farm and small-town votes.

The election of 1896 broke the political stalemate in the Age of Organization. The core of Republican backing came from industrial cities of the Northeast and Midwest. Republicans won support from their traditional constituencies of Union veterans, businessmen, and African Americans and added to it the votes of a large number of urban wageworkers. The campaign persuaded voters that the Democratic Party represented the party of depression and that Republicans stood for prosperity and progress. Another factor helping the Republicans was that in 1897 the depression finally ended, largely as a result of gold discoveries in Alaska, which helped increase the money supply, and foreign crop failures, which raised American farm prices. Democrats managed to hold on to the South as their solitary political base.

The Decline of the Populists

The year 1896 also marked the end of the Populists as a national force, as the party was torn apart by internal divisions over policy priorities and electoral strategy. Populist leaders such as Tom Watson of Georgia did not want the Populist Party to emphasize free silver above the rest of its reform program. Other northern Populists, who either had fought on the Union side during the Civil War or had close relatives who did, such as Mary Lease, could not bring themselves to join the Democrats, the party of the old Confederacy. Nevertheless, the Populist Party officially backed Bryan, but to retain its identity, the party nominated Watson for vice president on its own ticket. After McKinley’s victory, the Populist Party collapsed.

Losing the presidential election alone did not account for the disintegration of the Populists. Several problems plagued the third party. The nation’s recovery from the depression removed one of the Populists’ prime sources of electoral attraction. Despite appealing to industrial workers, the Populists were unable to capture their support. The free silver plank attracted silver miners in Idaho and Colorado, but the majority of workers failed to identify with a party composed mainly of farmers. As consumers of agricultural products, industrial laborers did not see any benefit in raising farm prices. Populists also failed to create a stable, biracial coalition of dispossessed farmers. Most southern white Populists did not truly accept African Americans as equal partners, even though both groups had mutual economic interests. Southern white Populists framed their arguments around class as the central issue driving the exploitation of farmers and workers by wealthy planters and industrialists. However, in the end, they succumbed to racial prejudice.

To eliminate Populism’s insurgent political threat, southern opponents found ways to disfranchise black and poor white voters. During the 1890s, southern states inserted into their constitutions voting requirements that virtually eliminated the black electorate and greatly diminished the white electorate. Seeking to circumvent the Fifteenth Amendments prohibition against racial discrimination in the right to vote, conservative white lawmakers adopted regulations based on wealth and education because blacks were disproportionately poor and had lower literacy rates. They instituted poll taxes, which imposed a fee for voting, and literacy tests, which asked tricky questions designed to trip up would-be black voters (see chapter 16). In 1898 the Supreme Court upheld the constitutionality of these voter qualifications in Williams v. Mississippi. Recognizing the power of white supremacy, the Populists surrendered to its appeals.

Tom Watson provides a case in point. He started out by encouraging racial unity but then switched to divisive politics. In 1896 the Populist vice presidential candidate, who had assisted embattled black farmers in his home state of Georgia, called on citizens of both races to vote against the crushing power of corporations and railroads. By whipping up racial antagonism against blacks, his Democratic opponents appealed to the racial pride of poor whites to keep them from defecting to the Populists. Chastened by the outcome of the 1896 election and learning from the tactics of his political foes, Watson embarked on a vicious campaign to exclude blacks from voting. “What does civilization owe the Negro?” he bitterly asked. “Nothing! Nothing! NOTHING!!!” Only by disfranchising African Americans and maintaining white supremacy, Watson and other white reformers reasoned, would poor whites have the courage to vote against rich whites.

Nevertheless, even in defeat the Populists left an enduring legacy. Many of their political and economic reforms—direct election of senators, the graduated income tax, government regulation of business and banking, and a version of the subtreasury system (called the Commodity Credit Corporation, created in the 1930s)—became features of reform in the twentieth century. Populists also foreshadowed other attempts at creating farmer-labor parties in the 1920s and 1930s. Perhaps their greatest contribution, however, came in showing farmers that their old individualist ways would not succeed in the modern industrial era. Rather than re-creating an independent political party, most farmers looked to organized interest groups, such as the Farm Bureau, to lobby on behalf of their interests. Whatever their approach, farmers both reflected and contributed to the Age of Organization.


• How did the federal government respond to the depression of 1893?

• What were the long-term political consequences of the depression of 1893?

You can support the site and the Armed Forces of Ukraine by following the link to Buy Me a Coffee.

If you find an error or have any questions, please email us at Thank you!