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how did the panic of 1873 hasten the end of reconstruction?

[9], Many US insurance companies went out of business, as the deteriorating financial conditions created solvency problems for life insurers. Cooke's firm provided the financing, and ground for the line was broken near Duluth, Minnesota, on 15 February 1870. By the time the depression lifted in 1879, southern whites would already be regaining power. In the Compromise of 1877 Democrats conceded the presidency to Hayes on the promise that all remaining troops would be removed from the South. Johnson proved to be a strong supporter of black civil rights throughout his presidency. In March 1877, Hayes was inaugurated; in April, the remaining troops were ordered out of the South. The depression ended in the spring of 1879, but tension between workers and the leaders of banking and manufacturing interests lingered on. document.documentElement.className += 'js'; var googletag = googletag || {}; The resulting outcry raised serious questions about how long the new policy would last. The Act had the immediate effect of depressing silver prices, hurting Western mining interests, who labeled the Act "The Crime of '73", but its effect was offset somewhat by the introduction of a silver trade dollar for use in Asia and the discovery of new silver deposits at Virginia City, Nevada, that resulted in new investment in mining activity. For example, Germany dramatically increased investment of social overhead capital, such as in the management of electric power transmission lines, roads, and railroads, thereby stimulating industrial demand in that country, but similar investment stagnated or decreased in Britain. The discovery of large quantities of silver in the United States and several European colonies caused the panic of 1873 and thus a decline in the value of silver relative to gold, devaluing India's standard currency. (2010). In the South, many farms were capitalized entirely through loans. [13] By November 1873, some 55 of the nation's railroads had failed, and another 60 had gone bankrupt by the first anniversary of the crisis. Two years after the foundation of the German Empire, the panic came and became known as the Gründerkrach or "Founders' Crash". [27][28], Although the collapse of the foreign loan financing had been predicted, the events of that year were in themselves comparatively unimportant. Get the latest on new films and digital content, learn about events in your area, and get your weekly fix of American history. The general demonetisation and cheapening of silver caused the Latin Monetary Union in 1873 to suspend the conversion of silver to coins. With the depression, ambitious railroad building programs crashed across the South, leaving most states deep in debt and burdened with heavy taxes. The firm then became a federal agent in the government financing of railroad construction. Court, Cambridge University Press 1965. Unemployment peaked in 1878, at 8.25%. After the death of Thaddeus Stevens in 1868 and the political alienation of Charles Sumner by 1870, Stalwart Republicans assumed primacy in Republican Party politics, putting Reconstruction on the defensive within the very party leading it. [46] The U.S., still in the period after the Civil War, continued to be very protectionist.[47][48]. Library of Congress, Sign up for the American Experience newsletter! n.callMethod.apply(n,arguments):n.queue.push(arguments)}; s.parentNode.insertBefore(t,s)}(window,document,'script', [37], When the crisis came, the Bank of England raised interest rates to 9 percent. !function(f,b,e,v,n,t,s) [8] The perception of US instability in its monetary policy caused investors to shy away from long-term obligations, particularly long-term bonds. [38] However there was heavy unemployment in the basic industries of coal, iron and steel, engineering, and shipbuilding, especially in 1873, 1886 and 1893. A period of economic overexpansion arose from the northern railroad boom before a series of economic setbacks: the Black Friday panic of 1869, the Chicago fire of 1871, an outbreak of equine influenza and the Boston fire of 1872, and the demonetization of silver in 1873. Rates of growth of foreign trade dropped, external terms of trade deteriorated, declining wheat prices affected peasant producers, and the establishment of European control over Ottoman finances led to large debt payments abroad. Custer led little more than 200 men in an attack on the Sioux Chief Sitting Bull's camp on Montana's Little Bighorn River. if ( 'querySelector' in document && 'addEventListener' in window ) { ", Keith Tankard, "The Effects of the 'great depression' of the Late 19th Century on East London 1873-1887. Matt Morgen, Print of a crowd driven from Tompkins Square by the mounted police, in the Tompkins Square Riot of 1874, January 1874. A total of 18,000 businesses failed in a mere two years. ''); The American Civil War (1861-1865) was followed by a boom in railroad construction. A startling 89 of the country's 364 railroads crashed into bankruptcy. Reconstructed ended when national attention turned away from the integration of former slaves as equal citizens enabling white Democrats to recapture southern politics. Workers all over the country, in response to wage cuts and poor working conditions, struck and prevented trains from moving. The opening of the Suez Canal in 1869 was one of the causes of the Panic of 1873 because goods from the Far East had been carried in sailing vessels around the Cape of Good Hope and were stored in British warehouses. The railroad industry involved a huge amount of money — and risk. [22] Demonetization of silver was thus a common element in the crises on both sides of the Atlantic Ocean. In January 1874, over 7,000 protesters congregated in New York City’s Tompkins Square to insist the government make job creation a priority. Meanwhile, the Republican candidate for governor of Ohio, Rutherford B. Hayes, won big without mentioning Reconstruction, focusing instead on honest government, economic recovery, and temperance. A similar process of overexpansion took place in Germany and Austria-Hungary, where the period from German unification in 1870 and 1871 to the crash in 1873 came to be called the Gründerjahre ("Founders' Years"). /* fbq('track', 'PageView'); */ Jay Cooke's firm, like many others, had invested heavily in the railroads. [citation needed] A comparison of capital formation rates in both countries helps to account for the different industrial growth rates. But when Grant left office in 1877, the cloud remained. The economic development of the American nation, p. 356, Reginald Charles McGrane, Ginn & Co., Boston 1950. [1] In the United States, the Panic was known as the "Great Depression" until the events of 1929 and the early 1930s set a new standard.[2]. The difference in stability between Vienna and Berlin had the effect that the French indemnity to Germany flowed into Austria and Russia, but the indemnity payments aggravated the crisis in Austria, which had benefited by the accumulation of capital not only in Germany but also in England, the Netherlands, Belgium, France, and Russia.[30]. War weary from nearly a decade of bloody military and political strife, so-called Stalwart Republicans turned from idealism, focusing their efforts on economics and party politics. New French laws in 1880 and in 1892 imposed stiff tariffs on many agricultural and industrial imports. ' They focused on business, economics, political corruption, and trade, instead of Reconstruction. In the end, the fighting between strikers and troops left more than 100 people dead and many more injured. Germany was now on the gold standard. Foreign Relations in the Gilded Age: A British Free-Trade Conspiracy? [4] The railroad industry was the largest employer outside agriculture in the US and involved large amounts of money and risk. Rival governments arose claiming to recognize Tilden as the rightfully elected President. [39], From 1873 to 1896, a period sometimes referred to as the Long Depression, most European countries experienced a drastic fall in prices. The Compromise allowed southern Democrats to return to power, no longer fearing reprisal from federal troops or northern politicians for their flagrant violence and intimidation of black voters. [14] Construction of new rail lines, formerly one of the backbones of the economy, plummeted from 7,500 miles (12,100 km) of track in 1872 to just 1,600 miles (2,600 km) in 1875,[14] and 18,000 businesses failed between 1873 and 1875. In September 1873, Jay Cooke & Company, a major component of the country's banking establishment, found itself unable to market several million dollars in Northern Pacific Railway bonds. 33,000 miles (53,000 km) of new track were laid across the country between 1868 and 1873, [3] with much of the craze in railroad investment being driven by government land grants and subsidies to the railroads. Republicans, fearing another sectional crisis, reached out to Democrats. During the depression, the British ratio of net national capital formation to net national product fell from 11.5% to 6.0%, but the German ratio rose from 10.6% to 15.9%. The Politics of Economic Crises: The Panic of 1873, the End of Reconstruction, and the Realignment of American Politics1 - Volume 10 Issue 4 - Nicolas Barreyre. Democrats responded nationally in 1874, running on sound economics and fiscal policy, which allowed them to take control of the House of Representatives. President Rutherford B. Hayes was forced to send federal troops to more than a half dozen states to stop the strikes. Republicans chose Rutherford B. Hayes as their nominee while Democrats chose Samuel J. Tilden, who ran on honest politics and home rule in the South. After 1877, Republicans no longer had the political capital to intervene in the South in cases of violence and electoral fraud, resulting in fewer chances for freedpeople to hold state office. ", CS1 maint: multiple names: authors list (, convert silver from the public into silver coins, Learn how and when to remove this template message, "What history teaches us about the welfare state", "Social Democracy for the 21st Century: A Post Keynesian Perspective: US Unemployment, 1869–1899",, "The Baltimore and Ohio Railroad Martinsburg Shops NATIONAL HISTORIC LANDMARK NOMINATION". Preoccupied with the harsh realities of falling farm prices, wage cuts, unemployment, and labor strikes, the North became less and less concerned with addressing racism in the South. Most capital was involved in projects offering no immediate or early returns.[5]. A series of Viennese bank failures ensued, causing a contraction of the money available for business lending. White supremacist organizations like the Ku Klux Klan, which had been suppressed through punitive Reconstruction legislation starting in 1868, resumed their campaign of terror against blacks and Republicans.

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