This Day in Labor History: September 18, 1873. The Panic of 1873 begins when the speculations of the vile financier Jay Cooke collapsed. Let's talk about the rich routinely throw workers' lives into terror in order to make money unless the government steps in, then and now. 
The Civil War created the conditions for the rapid growth of industrial capitalism. But it did not create the corruption that dominated the Gilded Age. Capitalists in the Gilded Age would become famous for their naked graft, but that was developing in the 1840s and 1850s.
Basically, like now, capitalists justified all sorts of grotesque behavior, corruption, fixing markets, trusts, corners, bribery, graft, speculations, etc, based on whatever philosophy they held onto, in the case of the 1870s, individual capitalism and free labor.
What the Civil War did was to generate the enormous industrial production that would both expand the American economy and make the potential for profits nearly endless, if only one could toy with the law to keep all the money.
Jay Cooke had become wealthy financing the United States’ effort to defeat treason in defense of slavery, a necessary service given the inability of a weak federal government to step into all the new duties it faced during this time.
He was crucial to making sure American soldiers actually got paid. Cooke used his connections and his resources to expand his operations after the war. He moved into railroads and found that field both tremendously lucrative and hyper-competitive.
Through schemes and scams, Cooke and his investors sought to both build a second transcontinental railroad and skim much of the money off for themselves. The project started in 1870. This was pure, unadulterated corruption of a most naked variety. And yet it was pretty normal!
But already a shaky proposition, Cooke’s firm collapsed in September 1873 when it was discovered that Cooke had overextended himself and his Northern Pacific had no money. Whoops!
This happened right at the same time the NP was trying to secure a $300 million loan from the Grant administration, always an easy mark for a man like Cooke. Grant was not personally corrupt. But he LOVED rich people. He thought they were geniuses. He wanted to be them.
And so those rich people stole all of Grant's money through shady speculations and the like. The upside is that this is why he wrote his Autobiography, since he was going to leave his family with nothing
Combined with the Coinage Act of 1873 that destroyed the silver market by returning the nation to the gold standard, and the economy was ready to tank. Jay Cooke’s bank closed and the bank of Henry Clews, another leading financier, soon followed.
Bank failures piled up around the country. The stock market closed briefly. Fifty-five railroads went bankrupt by November 1873.
The impact was severe for American workers. Unemployment jumped to 8%. Now, that might not seem that high compared to the Great Depression. But it had localized, severe impacts in cities such as New York, San Francisco, Chicago, and the silver town of Virginia City, Nevada.
Moreover, remember that most of the economy was agricultural at this time and much of the rest was small-shop craftsmen who faced less of an impact from events such as this than factory workers. The transition to industrial capitalism was not overnight.
The upheaval the Panic of 1873 spurred workers to action and spawned a overwrought reaction from politicians, media, and the police. In New York, when workers began to organize to demand employment and marched on City Hall to demand it, the police responded by busting heads.
The so-called Tompkins Square Riot of January 1874, where police violence took place, did not lead disapproval of the police. Rather, it led to rhetoric about the American version of the Paris Commune starting a revolution in America and urging more beatings of workers.
Basically, one of the biggest problems Americans faced in organizing is that the core ideology of Americans was individualized capitalism and that was shared up and down the economic scale. So any organizing was seen as scary evil socialism that must be violently crushed.
The Panic of 1873 turned into a full-fledged depression. Workers not only in the United States but in Europe were badly impacted by this crisis. Unemployment rose and so did discontent.
Its impacts did not alleviate until 1878 and there was no social safety net at this time. Employers in the most affected industries continued to push wages down as a result. That was especially true in the railroad industry, which was not only poorly paid but very dangerous.
The railroads that survived the Panic slashed wages. While the Great Railroad Strike began as a response to the second wage cut in a year on one railroad, it spread across the nation and shut down rail traffic with workers in cities like Chicago and St. Louis walking off the job.
The Great Railroad Strike served as a general target for Americans who did not work for the railroads but were disgusted by the role that railroads and the financial capitalism played in American life. And when Hayes sent in the military, it just reinforced that.
People were poor, the railroads pumped smoke and noise into the neighborhoods, they blamed the railroads for the high cost of needed goods, and the trains ran down their family members because of the lack of safeguards. It was a metaphor for the new America.
The Panic of 1873, which describes only the brief period that began the longer depression, also hit different parts of the country differently. In California, the waves of speculation that had caused the collapse in New York didn’t stop until 1876, when the bubble finally burst
The response among workers was to organize. Unfortunately and so common in American history, they did so not by targeting employers, but rather by targeting their Chinese competition, blaming employers for hiring them but seeking to ban the Chinese rather than work with them.
As job seekers flooded into San Francisco, they began targeting their Asian neighbors in acts of violence and in acts of political organizing. This led to the first major legislative victory by the American labor movement: the Chinese Exclusion Act in 1882.
The Panic of 1873 and the following depression also was the nail in the coffin for any chance African-Americans would have political and labor rights in the South.
The commitment of northern Republicans to black rights was always tenuous, but the corruption and economic crisis led to Democrats retaking Congress in the 1874 elections, meaning that any enforcement of black rights would not happen.
The white South would soon repress both political and labor gains made after the Civil War by the ex-slaves.
Unlike our historical memory of Reconstruction that focuses mostly on political rights, the economic issues were just as important as southern planters and landowners desperately wanted to re-institute the plantation labor that defined the cotton and sugar industries.
The economy finally pulled out of the depression by 1878 and while conditions for workers remained horrendous by modern standards, there was work.
This led Mark Twain and Charles Dudley Warner to their biting attack on the grotesqueness of the age, The Gilded Age: A Tale of Today, giving the period so dominated by capital and the huge problems that would cause most Americans a name that we remember today.
If this all reminds you of the present in any way, it should. The only thing that stopped the wealthy from destroying the lives of workers was an activist government that began in the New Deal. The Supreme Court and Republican Party are currently destroying the last of that.
Welcome to the New Gilded Age! Enjoy your housing bubbles and cryptocurrencies and extreme inequality and racial violence and disastrous politics. We let everything we fixed return to the disastrous past. Will take a long time to fix it. Let's start now!
Back tomorrow to discuss Solidarity Day, the 1981 AFL-CIO attempt to resist Reagan through a mass march.
