U.S. Economic Normality 1865-1900

1. Executive Summary     2. The Economics    3. Presidential Politics    4. Supreme Court

Return to U.S. Economic Cycle History   Updated 3/21/19   Please link to, textbook/supplement and


Prelude
Civil War Ends, Northeast Takes Control, The Gilded Age is Built on the Backs of the Poor, Especially Women, Immigrants, and Blacks

The civil War was followed by massive industrialization centered on rail roads, canals and steamships. Massive wealth was created. Farm mechanism lowered the cost of food and this coupled with science made for a somewhat more prosperous middle class. Immigrant and farmers suffered.


The Economics
Bankers blamed the 1873 financial panic
 on cheap money while workers wanted more money and blamed foreign laborers. It was a very serious economic slow down recession . In this pre safety net age it caused much hardship. It would not be the last time immigrants were blamed for problems. Think Mexico, United States barrier.

The panic of 1893 also severely deposed the economy.  Bankers would solve a banking panic problem. Tariffs a major source of federal revenue were lowered but a small income tax on the very wealthy was declared unconstitutional.

1. Executive Summary
The Politics

Attempted  to protect blacks and Indians failed, modernizing the civil service began as did civil service protection from the Jacksonian Era spoil system. Difficult  economic times reslted in restricting Chinese immigration. Think 21st Century Mexican Immigration issues.

The contested 1886 election saw the electoral college making   Republican Hayes the winner.  Payment was the end of Reconstruction with the withdrawal of Southern federal troops. Think 2000 election of Republican Bush #Two.

Ignoring the senatorial courtesy executive appointments increased presidential power and the assassination of President McKinley ignited the Progressive Era

Supreme Court
1)  Federal Government Sovereignty Over
Sates Governments
begins when 1896 Plessy v. Ferguson legalized many state public facilities segregation laws
using the "
separate but equal" doctrine.

2) Protection Individual Rights From 
Arbitrary Governmental Actions
begins when

1876 U.S. v. Cruikshank individual rights did not protected from private individuals or state governments. Jim Crow Laws legal.

3) Supreme Court as "Supreme Constitutional Authority"  North and South needed political economy adjustments.

4) Protecting Business begins when
1877  Munn v. Illinois upheld the power of government to regulate private industries.

2. The Economics
Prelude:
The Civil War was followed by massive industrialization centered on
rail roads, canals and steamships. Massive wealth was created.
Farm mechanism lowered the cost of food and this coupled with science made
 for a somewhat more prosperous middle class., Many children, Indians, immigrants and women suffered.

 The Great Chicago Fire of 1871 was a poor start and the  
Equine Flu Epidemic
which demobilized or killed nearly every horse in America
were highlights of the misery felt by many Americans.

Period ended with extreme labor unrest.


Panic of 1873
called the
Long Depression
it is Ranked #2

Great Depression is #1

 


Unemployment Exceeded 14%.

Lasted
65 months

Greenback Civil War paper currency speculation
 had the banking system on shaky ground. A 1868-1873 RR boom financed by European credit and  fostered by US government land grants and RR subsidies  would eventually overheat the economy.
A European financial crisis spread to US causing the 1873 failure of the Jay Cooke banking house which was over extended because of Northern Pacific Railway financing excesses. Think the 2007 Great Recession.

The panic that followed was caused by a low money supply caused by the Coinage Act of 1873 which lowered the money supply. . Workers blamed cheap foreign labor. It was called the Long Depression until

 

he 1930's when the Great Depression caused more hardship. It would not be the last time immigrants would be blamed for low worker wages. Think Trump's Wall.

The resulting stagflation – the combination of high unemployment and high inflation caused a 1879 return of the United States to the gold standard. See Specie Payment Resumption Act.

Politically, William Jennings Bryan would soon begin to work for easy money but even his 1896  Cross of Gold speech did not work. Eventually the Great Depression of 1929-39 would change attitudes toward government helping those suffering and modern politics would begin.

Panic of 1893-94 
is Ranked #2
Unemployment
over
10% for
60 months

 

Prelude: The 1886 Haymarket Riot began labor's fight for a larger share of company revenue. It continued with the 1892 Homestead Steel Strike in western Pennsylvania which turned into a ferocious day-long battle between Pinkerton men and townspeople. Finally came  the 1894 Pullman Strike spread across the nation. Labor peace  would rule until 1919 Red Scare.

RR speculation led to the  Reading Railroad failure and withdrawal of European investment led to a stock/banking collapse. 2) Repeal the Sherman Silver Purchase Act ended easy money. 3) Bank runs followed as foreign investors wanted species. Reluctantly J.P. Morgan bailed out the gold standard with $60,000,000.Think the Federal Reserve would become the Lender of Last Resort.

 

The 1894 Wilson–Gorman Tariff lowered tariffs slightly & created a 2% income tax on high incomes, those over $4,000 ($88,100 in 2010 dollars) income.  It would affect the top 1/10th of one percent. The 1895 Supreme Court. declared it unconstitutional. Think Trump did the opposite and lowered everyone's taxes.

Political instability resulted which created the Populist Movement highlighted by its Free Silver "cross of gold" platform. See Gold, Deflation and The Panic of 1893

 

 

3. Government Involvement

The Pendleton Civil Service Reform Act of 1883 added merit to the government hiring process.
Thus began the replacement of the spoils system in the federal hiring equation.

Chinese Exclusion Act of 1882 lasted until 1942. The Scott Act of 1888 expanded the restrictions on Chinese immigration.
Think Current Muslim Immigration Issues.

Interstate Commerce Act of 1887 began an attempt to regulate business trusts and decrease their use of monopoly power.
Effectiveness was limited by the U.S. Supreme Court

The McKinley Tariff of 1890 set a record for high rates.
Profits increased as did the price of consumers goods.
Think Trump's Tariff War

4. Supreme Court Power Grab Begins

Subjective Court Affects States and Business
 

1) Sovereignty of Federal Government Over Sates Governments
  
1896 Plessy v. Ferguson legalized many state public facilities segregation laws
   using the "
separate but equal
" doctrine.
 

2) Protection Individual Rights From Arbitrary Governmental Actions
  
1876 U.S. v. Cruikshank individual rights did not protected from private individuals or state governments
         Jim Crow Laws were legal.
 

3) Supreme Court as "Supreme Constitutional Authority"  

4) Protecting Business

1877  Munn v. Illinois 1877 upheld the power of government to regulate private industries.
1895 Pollock v. Farmer's unapportioned income taxes on interestdividends and
     
rents as direct taxes, were unconstitutional
1895 U.S. v. E.C. Knight,  the "Sugar Trust Case," limited government's control of monopolies.

 

Some Just Took Power
Presidential Power Grab

Congressional Power Grab