Meltdown: A Case Study

What America a century ago can teach us about the moral consequences of economic decline

Would it really be so bad if living standards in the United States stagnated—or even declined somewhat—for a decade or two? It might well be worse than most people imagine. History suggests that the quality of our democracy—more fundamentally, the moral character of American society—would be at risk if we experienced a many-year downturn. As the distinguished economic historian Alexander Gerschenkron once observed, even a country with a long democratic history can become a "democracy without democrats." Merely being rich is no bar to a society's retreat into rigidity and intolerance once enough of its citizens sense that they are no longer getting ahead.

American history includes several episodes in which stagnating or declining incomes over an extended period have undermined the nation's tolerance and threatened citizens' freedoms. One that is especially vivid, and that touched many aspects of American life that remain contentious today, occurred during the Populist era, toward the end of the nineteenth century—roughly from 1880 through the middle of the 1890s.

For a decade and a half after the Civil War, economic growth was largely exuberant, society optimistic, and social progress undeniable. But all that changed over the next fifteen years, beginning with a faltering economy. From 1880 to 1890 Americans' real per capita income grew on average by just 0.4 percent a year (versus almost four percent in the 1870s). Then, after a few strong years at the start of the 1890s, the economy collapsed altogether. A severe banking panic set off a steep downturn, widely known at the time as the Great Depression. By the end of 1893, 500 banks and 15,000 other businesses, including several major railroads, were bankrupt. Prices, especially farm prices, had been falling even when the economy was growing strongly. Now the declines became ruinous. Wheat dropped from an average price of $1.12 a bushel in the early 1870s to fifty cents or less in the mid-1890s, and corn went from forty-eight cents a bushel to twenty-one. By the early 1890s farmers in some western states were burning their nearly worthless corn for fuel. By 1895 per capita income had fallen below the level it had reached fifteen years earlier.

Popular discontent followed economic distress. In 1892 labor action against the Carnegie Steel plant in Homestead, Pennsylvania, sparked an armed battle between striking workers and company-hired Pinkerton forces, leaving sixteen dead and more than 150 wounded. Two years later a strike against the Pullman Sleeping Car Company led President Grover Cleveland to call in the Army to protect the railroads. At the same time, hundreds of unemployed men, led by Ohio businessman Jacob Coxey (the group was known as "Coxey's Army"), marched on Washington to demand federal assistance. Altogether, during the course of 1894 seventeen such "industrial armies" marched on the capital.

But economic concerns did not manifest themselves only, or even primarily, in labor marches and job riots; they soured many aspects of American society. As wages fell and unemployment rose, fearful citizens sought to close the country to newcomers—particularly from areas other than northwestern Europe. The new Statue of Liberty (completed in 1886) may have proclaimed America's welcome to the world's "huddled masses" and "wretched refuse," but such popular magazines of the day as Harper's and The Atlantic Monthly were full of ethnic jokes and slurs. Beginning in the 1880s hard times catalyzed a movement to tighten immigration standards. In 1882, after riots protesting the use of Chinese labor for railroad construction, Congress barred Chinese immigrants entirely. All other immigrants were subject to a head tax. Some states adopted legislation prohibiting certain noncitizens from acquiring land.

Race relations also deteriorated. In a spectacularly unfortunate coincidence that would affect American history for decades, this period of economic stagnation—the worst up to that time—set in just as Reconstruction ended and the federal government finally withdrew its troops from the defeated southern states. No one will ever know whether the country's race relations, both in the South and elsewhere, would have taken a different course had America enjoyed robust economic growth during this period. In the event, the result was segregation by race in practically every aspect of daily life, together with appalling racial violence.

One reason for believing that economic frustrations contributed to the sad history that followed is that although the former Confederate states regained full political independence with the end of Reconstruction, in 1879, most of them did not begin to adopt what in time became pervasive "Jim Crow" laws until the 1890s. By the end of that decade most southern states had made it illegal for blacks to ride with whites in railroad cars, and some had also segregated city streetcars and railroad-station waiting rooms. The devices used to deny most black citizens their voting rights—property and literacy requirements, poll taxes, and white-only primaries—were likewise adopted mostly in the 1890s or after.

Presented by

The Best 71-Second Animation You'll Watch Today

A rock monster tries to save a village from destruction.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

The Best 71-Second Animation You'll Watch Today

A rock monster tries to save a village from destruction.

Video

The Case for Napping at Work

Most Americans don't get enough sleep. More and more employers are trying to help address that.

Video

A Four-Dimensional Tour of Boston

In this groundbreaking video, time moves at multiple speeds within a single frame.

Video

Who Made Pop Music So Repetitive? You Did.

If pop music is too homogenous, that's because listeners want it that way.

Video

Stunning GoPro Footage of a Wildfire

In the field with America’s elite Native American firefighting crew

More in Business

More back issues, Sept 1995 to present.

Just In