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{{short description|Financial crisis leading to economic depression in Europe and North America}}
{{Use dmy dates|date=May 2021}}
[[File:Panic of 1873 bank run.jpg|thumb|A [[bank run]] on the Fourth National Bank No. 20 [[Nassau Street (Manhattan)|Nassau Street]], New York City, from ''[[Frank Leslie's Weekly|Frank Leslie's Illustrated Newspaper]]'', 4 October 1873]]

The '''Panic of 1873''' was a [[financial crisis]] that triggered an [[depression (economics)|economic depression]] in [[Europe]] and [[North America]] that lasted from 1873 to 1877 or 1879 in [[France]] and in [[United Kingdom|Britain]]. In Britain, the Panic started two decades of [[economic stagnation|stagnation]] known as the "[[Long Depression]]" that weakened the country's economic leadership.<ref name=Musson/> In the [[United States]], the Panic was known as the "Great Depression" until the [[Great Depression|events of 1929 and the early 1930s]] set a new standard.<ref>{{cite news |url=https://www.washingtonpost.com/opinions/what-history-teaches-us-about-the-welfare-state/2011/07/01/AGGfhFuH_story.html?wprss=rss_opinions |title=What history teaches us about the welfare state |newspaper=The Washington Post |date=29 August 2011 |access-date=10 September 2011}}</ref>

The Panic of 1873 and the subsequent depression had several underlying causes for which [[economic history|economic historians]] debate the relative importance. American [[inflation]], rampant [[speculation|speculative investments]] (overwhelmingly in [[railroads]]), the [[Legal tender#Demonetization|demonetization]] of silver in [[Germany]] and the United States, ripples from economic dislocation in Europe resulting from the [[Franco-Prussian War]] (1870–1871), and major property losses in the [[Great Chicago Fire]] (1871) and the [[Great Boston Fire of 1872|Great Boston Fire]] (1872) helped to place massive strain on [[bank reserves]], which, in [[New York City]], plummeted from $50 million to $17 million between September and October 1873.

The first symptoms of the crisis were financial failures in [[Vienna]], the capital of [[Austria-Hungary]], which spread to most of Europe and to North America by 1873.

==Europe==

===Germany and Austria-Hungary===
[[File:Schwarzer Freitag Wien 1873.jpg|thumb|Black Friday, 9 May 1873, [[Wiener Börse|Vienna Stock Exchange]] ]]

A similar{{clarify|similar to what?|date=December 2025}} process of over-expansion took place in Germany and Austria-Hungary, where the period from [[Unification of Germany|German unification]] in 1870 and 1871 to the crash in 1873 came to be called the ''{{lang|de|[[Gründerzeit|Gründerjahre]]}}'' ("Founders' Years"). A liberalized incorporation law in Germany gave impetus to the foundation of new enterprises, such as {{lang|de|[[Deutsche Bank]]}}, and the incorporation of established ones. Euphoria over the military victory against France in 1871 and the influx of capital from the payment by France of [[French indemnity|war reparations]] fueled stock market speculation in railways, factories, docks, and steamships, the same industrial branches that expanded unsustainably in the United States.<ref>[[#Masur|Masur]], pp. 63–65.</ref> In the immediate aftermath of his [[Franco-Prussian War|victory against France]], Bismarck began the process of silver demonetization. The process began on 23 November 1871 and culminated in the introduction of the [[German gold mark|gold mark]] on 9 July 1873 as the currency for the newly united Reich, replacing the silver coins of all constituent lands. Germany was now on the [[gold standard]].<ref name="madhouse">{{cite web |url=http://www.silver-investor.com/charlessavoie/cs_3-29-05_monetarymadhouse.htm |title=Monetary Madhouse |author=Charles Savoie ly-|publisher=Silver-Investor.com |date=April 2005 |access-date=10 September 2011 |archive-url=https://web.archive.org/web/20120227014729/http://www.silver-investor.com/charlessavoie/cs_3-29-05_monetarymadhouse.htm |archive-date=27 February 2012 |url-status=dead}}</ref> Demonetization of silver was thus a common element in the crises on both sides of the [[Atlantic Ocean]].

On 9 May 1873, the [[Wiener Börse|Vienna Stock Exchange]] crashed because it was unable to sustain the bubble of false expansion, insolvencies, and dishonest manipulations. A series of Viennese bank failures ensued, causing a contraction of the money available for business lending. One of the more famous private individuals who went bankrupt in 1873 was Stephan [[House of Keglević|Keglevich]] of Vienna, a relative of Gábor Keglevich, who had been the [[master of the treasury|master of the royal treasury]] (1842–1848) and in 1845 had co-founded a financial association to fund the expansion of Hungarian industry and to protect the loan repayments, similar to the 1870 ''Kreditschutzverband'', an Austrian association for the protection of creditors and the interests of its members in cases of bankruptcy. That made it possible for a number of new Austrian banks to be established in 1873 after the Vienna Stock Exchange crash.<ref>{{lang|de|Fünfundzwanzig Jahre oesterreichischer Finanzpolitik: (1848 bis 1873) : ein historischer Rückblick, Wilhelm Emil Angerstein, Luckhardt'sche Verlagsbuchhandlung}}, 1874. {{in lang|de}}</ref>

In Berlin, the railway empire of [[Bethel Henry Strousberg]] crashed after a ruinous settlement with the government of [[Romania]], bursting the speculation bubble in Germany. The contraction of the German economy was exacerbated by the conclusion of war reparations payments to Germany by France in September 1873. Two years after the foundation of the German Empire, the panic came and became known as the ''{{lang|de|Gründerkrach}}'' or "Founders' Crash".<ref>{{cite book |author-link=William Manchester |last=Manchester |first=William |year=1968 |title=The Arms of Krupp |title-link=The Arms of Krupp |isbn=978-0-316-52940-2 |page=135 |publisher=Little, Brown }}</ref><ref>[[#Marek|Marek]], pp. 181–182.</ref><ref>[[#Masur|Masur]], pp. 64–65.</ref> In 1865, Keglevich and Strousberg had come into direct competition in a project in what is now Slovakia. In 1870 the Hungarian government, and in 1872 the Emperor-King [[Franz Joseph of Austria]], resolved the question of the competing projects.<ref>Technické noviny, číslo 46, rok 1988, ročník 36.</ref><ref>Historické štúdie, Volume 1–2, p. 239, Slovenská akadémia vied, Historický ústav SAV., Československá akademie věd, Vyd-vo Slovenskej akadémie vied, Bratislava 1955.</ref>

Although the collapse of the foreign loan financing had been predicted, the events of that year were in themselves comparatively unimportant. [[Buda]], the old capital of Hungary, and [[Óbuda]] were officially united with [[Pest, Hungary|Pest]],<ref>Frojimovics, Kinga and Komoróczy, Géza (1999) [https://books.google.com/books?id=-wUg6rlWS2kC&dq=Buda+%C3%B3buda+pest+1873&pg=PA67 ''Jewish Budapest: monuments, rites, history'']. Central European University Press. p. 67. {{ISBN|978-9639116375}}</ref> thus creating the new metropolis of [[Budapest]] in 1873. 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.<ref>Court, W. H. B. (1965) ''British Economic History, 1870–1914''. Cambridge University Press.</ref>

Recovery from the crash occurred much more quickly in Europe than in the United States.<ref>[[#Marek|Marek]], pp. 182–183.</ref><ref name="Masur 1970, pp. 74–75">[[#Masur|Masur]], pp. 74–75.</ref> Moreover, German businesses managed to avoid the sort of deep wage cuts that embittered American labor relations.<ref name="Masur 1970, pp. 74–75" /> There was an [[Antisemitism|anti-Semitic]] component to the economic recovery in Germany and Austria, as small investors blamed Jews for their losses in the crash.<ref>[[#Marek|Marek]], p. 182.</ref><ref>[[#Masur|Masur]], pp. 75–76.</ref> The ''[[Neuer Sozial-Demokrat]]'' newspaper of the [[ADAV]] published several articles blaming [[Gerson von Bleichröder]] for the stock market crash. An October 29 article called Bleichröder "Bismarck's Jew".<ref>{{cite book |last1=Brustein |first1=William L. |last2=Roberts |first2=Louisa |title=The Socialism of Fools: Leftist Origins of Modern Anti-Semitism |date=2015 |publisher=Cambridge University Press |pages=104–105}}</ref>

Soon, more luxury hotels and villas were built in [[Opatija]], and a new railway line was extended in 1873 from the Vienna–[[Trieste]] line to [[Rijeka]] (Fiume), making it possible to go by tram from there to Opatija. The strong increase of port traffic generated a permanent demand for expansion.<ref>{{cite book |title=Unconnected transport networks: European intermodal traffic junctions 1800–2000 |page=146 |first=Hans-Liudger |last=Dienel |publisher=Campus Verlag |location=Frankfurt/Main |year=2004 |isbn=3-593-37661-X}}</ref> The [[Suez Canal]] was opened in 1869.<ref>{{Cite encyclopedia |url=https://www.britannica.com/topic/Suez-Canal |title=Suez Canal {{!}} canal, Egypt |encyclopedia=Encyclopedia Britannica |access-date=2017-11-24 }}</ref> 1875–1890 became "the golden years" of [[Giovanni de Ciotta]] in Rijeka.

The crash is central in the 1877 novel ''[[The Breaking of the Storm]]'' by the German writer [[Friedrich Spielhagen]]. A portrayal of German business life in the 1870s, the literary scholar Jeffrey L. Sammons has described it as "the major fictional treatment of the financial crash of the 1870s as a harbinger of the predatory but erratic capitalism that was to become characteristic of the Reich".<ref>{{cite book |last=Sammons |first=Jeffrey L. |year=2002 |chapter-url=https://books.google.com/books?id=Ubv0eyzXEtgC&pg=PA148 |chapter=Friedrich Spielhagen: The Demon of Theory and the Decline of Reputation |title=A Companion to German Realism, 1848-1900 |location= |publisher=Camden House |page=148 |isbn=9781571133229 }}</ref>

===Britain===
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 previously been carried in sailing vessels around the [[Cape of Good Hope]] and had been stored in British warehouses. As sailing vessels were not adaptable for use through the Suez Canal (because the prevailing winds of the [[Mediterranean Sea]] blow from west to east), the British [[entrepôt]] trade suffered.<ref>McGrane, Reginald Charles (1950) ''The economic development of the American nation''. Ginn & Co., Boston. p. 356</ref>

When the crisis came, the [[Bank of England]] raised interest rates to 9 percent. Despite this, Britain did not experience the scale of financial mayhem seen in America and Central Europe, perhaps forestalled by an expectation that the liquidity-constraining provisions of the [[Bank Charter Act 1844]] would be suspended as they had been in the crises of 1847, 1857, and 1866. The ensuing economic downturn in Britain seems to have been muted – "stagnant" but without a "decline in aggregate output".<ref>{{Cite book | title = Business Cycles and Depressions: An Encyclopedia | editor1-last = Glasner | editor1-first = David | editor2-last = Cooley | editor2-first = Thomas F. | year = 1997 | location = New York | publisher = Garland Publishing | chapter = Crisis of 1873 | last = Glasner | first = David | pages = 132–133 | isbn = 0-8240-0944-4 | chapter-url = https://archive.org/details/businesscyclesde00glas/page/132 }}</ref> However, there was heavy unemployment in the basic industries of coal, iron and steel, engineering, and shipbuilding, especially in 1873, 1886, and 1893.<ref name=Musson/>

====Comparison with Germany====
From 1873 to 1896, a period sometimes referred to as the [[Long Depression]], most European countries experienced a drastic fall in prices. Still, many corporations were able to reduce production costs and achieve better productivity rates with industrial production increasing by 40% in Britain and by over 100% in Germany.{{Citation needed|date=September 2011}} A comparison of capital formation rates in both countries helps to account for the different industrial growth rates. 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%.{{Citation needed|date=September 2011}} During the depression, Britain took the course of static supply adjustment, but Germany stimulated effective demand and expanded industrial supply capacity by increasing and adjusting capital formation. 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 resulting difference in capital formation accounts for the divergent levels of industrial production in the two countries and the different growth rates during and after the depression.<ref>{{cite journal |first=Young Goo |last=Park |title=Depression and capital formation: The United Kingdom and Germany, 1873–96 |journal=Journal of European Economic History |year=1997 |volume=26 |issue=3 |pages=511–534}}</ref>

===India===
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 as an investment|silver relative]] to gold, devaluing India's standard currency.

===South Africa===
In the [[Cape Colony]], the panic caused bankruptcies, rising unemployment, a pause in public works, and a major trade slump that lasted until the discovery of gold in 1886.<ref>{{cite journal|doi=10.1080/20780389.1991.10417187|title=The effects of the "Great Depression" of the late 19th century on East London 1873–1887 |year=1991 |last1=Tankard |first1=Keith |journal=South African Journal of Economic History |volume=6 |issue=2 |pages=72–88 }}</ref>

===Ottoman Empire===
In the periphery, the [[Ottoman Empire]]'s economy also suffered. 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. The growth rates of agricultural and aggregate production were also lower during the Long Depression than the later period.<ref>{{cite journal |first=Sevket |last=Pamuk |title=The Ottoman Empire in the 'Great Depression' of 1873–1896 |journal=[[Journal of Economic History]] |year=1984 |volume=44 |issue=1 |pages=107–118 |doi=10.1017/S0022050700031399|s2cid=154752536 }}</ref>

===Latin Monetary Union===
The general demonetization and cheapening of silver caused the [[Latin Monetary Union]] in 1873 to suspend the conversion of silver to coins.<ref>{{cite book|last=Laughlin|first=James Laurence|url=https://archive.org/details/historyofbimetal0000unse_g2p3|title=The History of Bimetallism in the United States|publisher=D. Appleton and Co.|year=1898|oclc=11308536|chapter=Chapter XI|author-link=James Laurence Laughlin|edition=4th}}</ref><ref>{{cite book |first=Henry Parker |last=Willis |title=A History of the Latin Monetary Union: A Study in International Monetary Action |place=Chicago |publisher=University of Chicago Press |date=1901 |author-link=Henry Parker Willis |url=https://archive.org/details/historyoflatinmo00willuoft |via=Internet Archive |page=266}}</ref>

==United States==
===Factors===
The [[American Civil War]] (1861–1865) was followed by a [[economic boom|boom]] in railroad construction. {{Convert|33000|mi}} of [[History of rail transport in the United States#Civil War and Reconstruction, 1861–1877|new track were laid]] across the country between 1868 and 1873,<ref>{{cite book |last=Richardson |first=Heather Cox |year=2007 |title=West From Appomattox: The Reconstruction of America After the Civil War |isbn=978-0-300-11052-4 |page=131}}</ref> with much of the craze in railroad investment being driven by government land grants and subsidies to the railroads.<ref>{{cite book |last=White |first=Richard |year=2011 |title=Railroaded: The Transcontinentals and the Making of Modern America |publisher= Norton|isbn=978-0-393-06126-0 |url=https://archive.org/details/railroadedtransc00whit_0 |page=17}}
</ref> The railroad industry was the largest employer outside of agriculture in the U.S. and involved large amounts of money and risk. A large infusion of cash from speculators caused spectacular growth in the industry and in the construction of docks, factories, and ancillary facilities. Most [[capital (economics)|capital]] was involved in projects offering no immediate or early returns.<ref>{{cite book |last=Oberholtzer |first=Ellis Paxson |year=1926 |title=A History of the United States Since the Civil War: Volume 3 1872–1878 |url=https://archive.org/details/historyofuniteds03ober/page/69|pages=79–122 |publisher=New York, Macmillan }}</ref>

===Coinage Act of 1873===
A period of economic overexpansion arose from the northern railroad boom before a series of economic setbacks: the [[Black Friday (1869)|Black Friday panic of 1869]], the [[Great Chicago Fire|Chicago fire of 1871]], an outbreak of [[equine influenza]] and the [[Great Boston Fire of 1872|Boston fire of 1872]], and the [[Coinage Act of 1873|demonetization of silver in 1873]].

The decision of the German Empire to cease minting silver [[thaler]] coins in 1871 caused a drop in demand and downward pressure on the value of silver, which, in turn, affected the U.S. since much of the supply of silver was [[silver mining in the United States|mined there]]. As a result, the [[U.S. Congress]] passed the [[Coinage Act of 1873]], which changed the national silver policy.

Before the Act, the U.S. had backed its currency with both gold and silver and minted both types of coins. The Act moved the United States to a ''de facto'' [[gold standard]], which meant it would no longer buy silver at a statutory price or [[Free Silver|convert silver from the public into silver coins]], but it would still mint silver dollars for export in the form of [[Trade Dollar (United States coin)|trade dollars]].<ref>{{cite book |author-link=Irwin Unger |last=Unger |first=Irwin |title=The Greenback Era: A Social and Political History of American Finance, 1865–1879 |title-link=The Greenback Era: A Social and Political History of American Finance, 1865–1879 |year=1964 |pages=213–228 |chapter=Ch. 8}}</ref>

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.<ref>[[#Loomis|Loomis]], pp. 219–220, 224–225.</ref> The Act also reduced the domestic [[money supply]], raising interest rates and hurting farmers and others who normally carried heavy debt loads. The resulting outcry raised serious questions about how long the new policy would last.<ref>Silver coinage was resumed under the [[Bland–Allison Act]] of 1878.</ref> The perception of U.S. instability in its monetary policy caused investors to shy away from long-term obligations, particularly long-term [[bond (finance)|bonds]]. The problem was compounded by the railroad boom, which was then in its later stages.

In September 1873, the [[U.S. economy]] entered a crisis.

====Jay Cooke & Company fails====
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. [[Jay Cooke]]'s firm, like many others, had invested heavily in the railroads. Some [[Investment banking|investment banks]] were then anxious for more capital for their enterprises, U.S. President [[Ulysses S. Grant]]'s [[monetary policy]] of contracting the money supply and thus raising interest rates made matters worse for those in debt. Businesses were expanding, but the money they needed to finance that growth was becoming scarcer.

Cooke and other entrepreneurs had planned to build the second transcontinental railroad, the Northern Pacific Railway. Cooke's firm provided the financing, and ground for the line was broken near [[Duluth, Minnesota]], on 15 February 1870. The railroad had borrowed more than $1.5 million from Cooke & Co, but was incapable of paying it back.<ref name=":0">{{Cite news |last=Hiltzik |first=Michael |title=Perspective {{!}} Presidents who don't act decisively make financial crises worse |url=https://www.washingtonpost.com/outlook/2020/09/30/presidents-who-dont-act-decisively-make-financial-crises-worse/ |newspaper=The Washington Post}}</ref> An expanding funding gap became harder to resolve due to the [[Credit Mobilier scandal]].<ref name="CrisisChronicles">[https://libertystreeteconomics.newyorkfed.org/2016/02/crisis-chronicles-the-long-depression-and-the-panic-of-1873/ Crisis Chronicles: The Long Depression and the Panic of 1873]</ref> Due to the financial crises in Europe, Cooke could not sell the securities abroad.<ref name=":0" /> Just as Cooke was about to access a $300 million government loan in September 1873, reports circulated that his firm's credit had become nearly worthless. On 18 September, the firm declared bankruptcy.<ref name=":0" /><ref>Wheeler (1973), p. 81.</ref>

====Insurance industry====
Many U.S. insurance companies went out of business, as the deteriorating financial conditions created solvency problems for life insurers. The common factor of the surviving companies was that all marketed [[tontines]].<ref name="The Performance of Life Insurance Companies: 1860-1905">{{cite book |last1=Yang |first1=Tony |date=2009 |page=5 |title=The Performance of Life Insurance Companies: 1860–1905 |url=http://www.americasmutualbanks.com/images/0714_YangPaper.pdf}}</ref>

===Effects===
[[File:Tompkins square riot 1874.jpg|thumbnail|New York police violently attacking unemployed workers in [[Tompkins Square Riot (1874)|Tompkins Square Park]], 1874]]
The failure of Jay Cooke's bank and soon afterward of [[Henry Clews]]' set off a chain reaction of bank failures and temporarily closed the [[New York Stock Exchange]]. Factories began to lay off workers as the country slipped into depression. The effects of the panic were quickly felt in New York (where 25% of workers became unemployed) and more slowly in Chicago, [[Virginia City, Nevada]] (where silver mining was active), and San Francisco.<ref name="CrisisChronicles "/><ref>[[#Loomis|Loomis]], pp. 119–120.</ref><ref>[[#Masur|Masur]], p. 65.</ref> In New Hampshire, state coffers were so depleted by lost tax revenue the state government turned to private interests including tea and gunpowder manufacturer D. Ralph Lolbert for financial support.

The New York Stock Exchange closed for ten days starting on 20 September.<ref>Kindleberger, Charles Poor (1990) ''Historical:Economics: Art or Science?'' Berkeley, CA: University of California Press. p. 321. {{ISBN|978-0520073432}}</ref> 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.<ref name=Kleppner1556>Kleppner, Paul (1973) "The Greenback and Prohibition Parties", in Arthur M. Schlesinger (ed.), ''History of U.S. Political Parties: Volume II, 1860–1910, The [[Gilded Age]] of Politics.'' New York: Chelsea House/R.R. Bowker Co., p. 1556.</ref> Construction of new rail lines, formerly one of the backbones of the economy, plummeted from {{Convert|7500|mi||abbr=}} of track in 1872 to just {{Convert|1600|mi||abbr=}} in 1875,<ref name=Kleppner1556 /> and 18,000 businesses failed between 1873 and 1875. Unemployment peaked in 1878 at 8.25%.<ref>{{cite web|author=Lord Keynes |url=https://socialdemocracy21stcentury.blogspot.com/2012/01/us-unemployment-18691899.html |title=Social Democracy for the 21st Century: A Post Keynesian Perspective: U.S. Unemployment, 1869–1899 |publisher=Socialdemocracy21stcentury.blogspot.com |date=2012-01-26 |access-date=2013-12-08}}</ref> Building construction was halted, wages were cut, real estate values fell, and corporate profits vanished.<ref>{{cite journal |last=Rezneck |first=Samuel |title=Distress, Relief, and Discontent in the United States during the Depression of 1873–78 |journal=[[Journal of Political Economy]] |volume=58 |issue=6 |year=1950 |pages=494–512 |jstor=1827088 |doi=10.1086/257012 |s2cid=153898986 }}
</ref>

In 1874, Congress passed "the [[Thomas W. Ferry|Ferry]] Bill"<ref>Chernow, Ron (2018). ''Grant''. New York: Penguin Books. p.&nbsp;779. {{ISBN|978-0143110637}}.</ref> to allow for the printing of currency, increasing inflation and reducing the value of debts.<ref name=":1">{{Cite web |last=Lee |first=Jennifer 8 |date=2008-10-14 |title=New York and the Panic of 1873 |url=https://cityroom.blogs.nytimes.com/2008/10/14/learning-lessons-from-the-panic-of-1873/ |access-date=2021-02-04 |website=City Room }}</ref> The bill was vetoed by President Grant.<ref name=":1" /> The following year, Congress passed the [[Specie Resumption Act of 1875]], which would back United States currency with gold.<ref name=":1" /> Backing American currency with gold helped curb inflation and stabilize the dollar.<ref name=":1" />

===Railroad strike===
The [[railroad]] industry in the United States had seen major growth in the decades before 1873, driven in part by strong European interest in bonds issued by railroad companies.<ref>{{cite book |last=Kindleberger |first=Charles P. |title=Manias, Panics and Crashes: A History of Financial Crises |url=https://archive.org/details/maniaspanicscras00kind_182 |url-access=limited |edition=5th |location=New York |publisher=John Wiley & Sons |year=2005 |isbn=0471467146 |page=137}}</ref><ref>{{cite journal |last=Mixon |first=Peter |title=The Crisis of 1873: Perspectives from Multiple Asset Classes |journal=[[Journal of Economic History]] |volume=68 |issue=3 |year=2008 |pages=722–757 |doi=10.1017/S0022050708000624 |s2cid=154329263 |url=https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1279147_code497849.pdf?abstractid=761964&mirid=3 }}
</ref> The failure of Jay Cooke & Co., heavily invested in railroad bonds, triggered a crisis in the railroad industry.

In 1877, steep wage cuts led American railroad workers to launch the series of protests and riots later dubbed [[Great Railroad Strike of 1877|Great Railroad Strike]]. Initial protests broke out in [[Martinsburg, West Virginia]], after the [[Baltimore and Ohio Railroad]] (B&O) cut workers' pay for the third time in a year. [[West Virginia Governor]] [[Henry M. Mathews]] sent the militia, under Colonel [[Charles J. Faulkner]], to restore order but was unsuccessful, largely because the militia sympathized with the workers. The governor called on U.S. President [[Rutherford B. Hayes]] for federal assistance, and Hayes dispatched federal troops. That restored peace to Martinsburg but proved controversial, with many newspapers{{specify|date=May 2021}} critical of Mathews' characterization of the strikes as an "insurrection", rather than an act of desperation and frustration. The ''Martinsburg Statesman'' recorded a striking worker's perspective that he "might as well die by the bullet as to starve to death by inches".<ref>{{cite web |url=https://railroads.unl.edu/documents/view_document.php?id=rail.str.0058 |website=Railroads and the Making of Modern America |title=Capital Location. For Permanent Seat, Martinsburg. Election, Tuesday, Aug. 7th, 1877. |orig-date=24 July 1877 |access-date=1 February 2025}}</ref>

Within a week, similar protests had erupted in other cities.<ref name= Bellesiles>{{cite book |last=Bellesiles |first=Michael A. |year=2010 |title=1877: America's Year for Living Violently |publisher=The New Press |page=149 |isbn=978-1595584410 |url=https://books.google.com/books?id=rf4q5LjLbHIC&pg=PA149 |access-date=27 November 2012}}</ref><ref>{{cite web |url=https://npgallery.nps.gov/pdfhost/docs/NHLS/Text/03001045.pdf |title=The Baltimore and Ohio Railroad Martinsburg Shops National Historic Landmark Nomination  |last=Caplinger |first=Michael |date=2003 |pages=40–45}}</ref> In [[Baltimore, Maryland]] where strikers set fire to buildings owned by B.& O. Railroads and an outnumbered militia guard division opened fire when they were surrounded by rioters, killing 10 and injuring 25 more<ref name="scharf">{{Cite book |last=Scharf |first=J. Thomas |title=History of Maryland From the Earliest Period to the Present Day |publisher=Tradition Press |date=1967 |orig-year=1st. Pub. 1879 |url=https://books.google.com/books?id=ANYwAQAAMAAJ |location = Hatboro, PA |volume=3 |pages=733–742 }}</ref> leading to a days-long standoff at [[Camden Yards]].

In New York, striking workers began pelting arriving trains with thrown objects, prompting a response from local police.<ref name="stowell">[https://muse.jhu.edu/article/33581 Scott Molloy, "Book Review: ''Streets, Railroads, and the Great Strike of 1877'' By David O. Stowell"], ''Technology and Culture'' 41.3 (2000) 636–638, via Project MUSE, accessed 20 May 2016.</ref> Pennsylvania saw perhaps the worst violence of the railroad strikes;<ref name="UE">{{cite web |title=The Great Strike of 1877: Remembering a Worker Rebellion |publisher=UE News |date=June 2002 |url=http://www.ranknfile-ue.org/uen_1877.html |access-date=2008-05-25}}</ref><ref>{{Cite book
  |title=Drugging the Poor: Legal and Illegal Drugs and Social Inequality
  |first=Merrill  |last=Singer
  |publisher=Waveland Press
  |year=2007
  |isbn=978-1478610243
  |pages=47–48
}}</ref> notably in the [[Pittsburgh railroad strike of 1877]], the [[Reading Railroad massacre]] and the [[Scranton general strike]]. In [[Chicago, Illinois]], striking workers brought freight and passenger trains to a standstill, leading to an order from judge [[Thomas Drummond (judge)|Thomas Drummond]] that such actions were illegal.<ref name="cahan">{{cite book |last=Cahan |first=Richard |title= A Court That Shaped America: Chicago's Federal District Court from Abe Lincoln to Abbie Hoffman |publisher=Northwestern University Press |year=2002 |pages=[https://archive.org/details/courtthatshapeda0000caha/page/33 33]–34 |url =https://archive.org/details/courtthatshapeda0000caha |url-access=registration |quote=Court That Shaped America. |access-date=2009-10-05 |isbn=0-8101-1981-1}}</ref> The [[United States Marshals Service]] responded by arresting dozens of strikers. In Missouri, strikers also brought rail traffic to a halt, and at least 18 people died in conflicts.<ref name="strike">{{cite book |last=Brecher |first=Jeremy |title=Strike!|edition=3rd|publisher=Fawcett Publications |year=1974 |author-link=Jeremy Brecher}}</ref>

In July 1877, the market for lumber crashed, leading several Michigan lumber companies to go bankrupt.<ref>Among the lumbering firms that failed were the Danaher & Melendy Company and Oliver O. Stanchfield of [[Ludington, Michigan]], and Cushman, Calkins & Company and Tyson, Sweet & Company of [[Manistee, Michigan]]. ''History of Manistee, Mason and Oceana Counties, Michigan'' (1882), "History of Mason County", p. 50, and "History of Manistee County", pp. 52, 53 (separate pagination).</ref> Within a year, the effects of this second business slump reached all the way to California.<ref>[[#Loomis|Loomis]], pp. 241–243.</ref>

===Aftermath in the United States===
{{more citations needed|section|date=May 2022}}
The depression ended in the spring of 1879, but tension between workers and the leaders of banking and manufacturing interests lingered on.<ref>{{Cite web |title=The Panic of 1873 {{!}} American Experience |url=https://www.pbs.org/wgbh/americanexperience/features/grant-panic/ |access-date=2024-11-26 |website=www.pbs.org |language=en}}</ref>

Poor economic conditions also caused voters to turn against the [[United States Republican Party|Republican Party]]. In the [[1874 United States House of Representatives elections|1874 congressional elections]], the [[United States Democratic Party|Democratic Party]] assumed control of the House for the first time since the Civil War.<ref>{{Cite journal |last=Barreyre |first=Nicolas |year=2011 |title=The Politics of Economic Crises: The Panic of 1873, the End of Reconstruction, and the realignment of American Politics |journal=Journal of the Gilded Age and Progressive Era |volume=10 |issue=4 |pages=403–423 |doi=10.1017/S1537781411000260|s2cid=154493223}}</ref>

Public opinion made it difficult for the [[Grant administration]] to develop a coherent policy on the Southern states, and the North began to steer away from [[Reconstruction era of the United States|Reconstruction]]. With the depression, ambitious railroad building programs crashed across the South, leaving most states deep in debt and burdened with heavy taxes. [[Retrenchment]] was a common response of the South to state debts during the depression. One by one, each state fell to the Democrats in the South, and the [[Republican Party (United States)|Republicans]] lost power.

The end of the crisis coincided with the beginning of the great wave of [[immigration to the United States]], which lasted until the early 1920s.<ref>{{Cite web |date=2024-11-26 |title=Reconstruction {{!}} Definition, Summary, Timeline & Facts {{!}} Britannica |url=https://www.britannica.com/event/Reconstruction-United-States-history |access-date=2024-11-26 |website=www.britannica.com |language=en}}</ref><ref>{{Cite web |title=Immigration to the United States, 1851-1900 {{!}} Rise of Industrial America, 1876-1900 {{!}} U.S. History Primary Source Timeline {{!}} Classroom Materials at the Library of Congress {{!}} Library of Congress |url=https://www.loc.gov/classroom-materials/united-states-history-primary-source-timeline/rise-of-industrial-america-1876-1900/immigration-to-united-states-1851-1900/ |access-date=2024-11-26 |website=Library of Congress, Washington, D.C. 20540 USA}}</ref>

==Global protectionism==
After the 1873 depression, agricultural and industrial groups lobbied for protective [[tariff]]s. Conservative politicians such as [[Otto von Bismarck]] shifted from [[classical liberal]] economic policies in the 1870s, embracing many [[economic interventionist]] policies, including high tariffs, [[nationalization]] of railroads, and compulsory social insurance.<ref>{{cite book |last=Eyck |first=Erich |year=1950 |title=Bismarck and the German Empire |pages=223–236, 252–261}}</ref><ref>[[#Masur|Masur]], pp. 75–80.</ref><ref>{{cite book |author-link=Hans Werner Richter |last=Richter |first=Hans Werner |year=1962 |title=Bismarck |pages=219–220, 255–256}}</ref> The political and [[economic nationalism]] also reduced the fortunes of the German and Canadian classical liberal parties. France, like Britain, also entered into a prolonged stagnation that extended to 1897. The French also attempted to deal with their economic problems by the implementation of tariffs. New French laws in 1880 and in 1892 imposed stiff tariffs on many agricultural and industrial imports.<ref>{{cite book |first=Yves |last=Breton |title=La Longue Stagnation en France: L'Autre Grande Depression, 1873–1897|language=fr |year=1997 |location= Paris |publisher=Économica |isbn=2-7178-3130-4 |display-authors=etal}}</ref> The U.S., still in the period after the [[American Civil War|Civil War]], continued to be very [[protectionist]].<ref>{{cite journal|doi=10.1093/dh/dht003|jstor=44254517|title=Foreign Relations in the Gilded Age: A British Free-Trade Conspiracy? |year=2013 |last1=Palen |first1=M.-W. |journal=Diplomatic History |volume=37 |issue=2 |pages=217–247 }}</ref><ref>{{cite book |first=H. Wayne |last=Morgan |title=From Hayes to McKinley: National Party Politics, 1877–1896 |location=Syracuse |publisher=University Press |year=1969}}</ref>

==See also==
{{Portal|Banks}}
* [[Panic of 1857]]
* [[Panic of 1893]]
*[[Second-term curse]]
* [[Workingmen's Party of Illinois]]

==References==
{{Reflist|30em|refs=
<ref name=Musson>{{cite journal |last=Musson |first=A. E. |year=1959 |title=The Great Depression in Britain, 1873–1896: A Reappraisal |journal=Journal of Economic History |volume=19 |issue=2 |pages=199–228 |doi=10.1017/S0022050700109994 |jstor=2114975 |s2cid=154705117 }}</ref>
}}

==Cited sources==
*{{cite book |ref=Loomis|last=Loomis |first=Noel M. |year=1968 |title=Wells Fargo }}
*{{cite book |ref=Marek|author-link=George Richard Marek |last=Marek |first=George R. |year=1974 |title=The Eagles Die: Franz Joseph, Elisabeth, and Their Austria |publisher=[[Harper (publisher)|Harper & Row]] |isbn=978-0-246-10880-7 }}
*{{cite book |ref=Masur|last=Masur |first=Gerhard |year=1970 |title=Imperial Berlin |location=New York |publisher=Basic Books |isbn=0465032095 |url=https://archive.org/details/imperialberlin0000masu }}

==Further reading==
{{refbegin|30em}}
*{{cite journal |last=Barreyre |first=Nicolas |year=2011 |title=The Politics of Economic Crises: The Panic of 1873, the End of Reconstruction, and the Realignment of American Politics |journal=Journal of the Gilded Age and Progressive Era |volume=10 |issue=4 |pages=403–423 |doi=10.1017/S1537781411000260|s2cid=154493223 }}
* Davies, Hannah Catherine. "'Mingled in an almost inextricable confusion': the panics of 1873 and the experience of globalization." ''Journal of Global History'' 15.2 (2020): 291–309.
* Davies, Hannah Catherine. ''Transatlantic Speculations: Globalization and the Panics of 1873'' (Columbia UP, 2018) [https://eh.net/?s=%22Transatlantic+Speculations%22  online review]
*{{cite book |last=Fawcett |first=W. L. |year=1877 |title=Gold and Debt; An American Hand-Book of Finance |url=https://archive.org/details/cu31924013815802 |publisher= Chicago, S.C. Griggs and company}}
*{{cite journal |last=Fels |first=Rendigs |year=1949 |title=The Long-Wave Depression, 1873–97 |journal=[[Review of Economics and Statistics]] |volume=31 |issue=1 |pages=69–73 |jstor=1927196 |doi=10.2307/1927196 }}
*{{cite journal |last=Fels |first=Rendigs |year=1951 |title=American Business Cycles, 1865–79 |journal=[[American Economic Review]] |volume=41 |issue=3 |pages=325–349 |jstor=1802106 }}
*{{cite book |author-link=Eric Foner |last=Foner |first=Eric |year=1990 |title=A Short History of Reconstruction 1863–1877 |location=New York |publisher=Harper & Row |isbn=0060964316 |url=https://archive.org/details/shorthistoryofre00eric }}
*{{cite book |last=Kirkland |first=Edward Chase |year=1967 |title=Industry Comes of Age: Business, Labor, and Public Policy 1860–1897 |location=Chicago |publisher=Quadrangle Books }}
*{{cite book |last=Lubetkin |first=M. John |year=2006 |title=Jay Cooke's Gamble: The Northern Pacific Railroad, the Sioux, and the Panic of 1873 }} Focused on construction in the West.
* {{cite book|author=Lucibello, Alan|year=2014|chapter=Panic of 1873|editor=Daniel Leab|title=Encyclopedia of American Recessions and Depressions|chapter-url=https://books.google.com/books?id=qI6dAwAAQBAJ&pg=PA227|publisher=ABC-CLIO|isbn=9781598849462|pages= 227–76}}
*{{cite book |last=Moseley |first=Fred |year=1997 |chapter=Depression of 1873–1879 |editor1-first=David |editor1-last=Glasner |editor2-first=Thomas F. |editor2-last=Cooley |title=Business Cycles and Depressions: An Encyclopedia |pages=[https://archive.org/details/businesscyclesde00glas/page/148 148–149] |publisher=Taylor & Francis |isbn=0-8240-0944-4 |chapter-url=https://archive.org/details/businesscyclesde00glas/page/148 }}
*{{cite book |author-link=Ellis Paxson Oberholtzer |last=Oberholtzer |first=Ellis Paxson |year=1907 |title=Jay Cooke: Financier of the Civil War |volume=2 |pages=378–430 }} {{Google books |id=8jHiEwVmB8MC |title=Available }}
*{{cite journal |last1=Persons |first1=Warren M. |last2=Tuttle |first2=Pierson M. |last3=Frickey |first3=Edwin |year=1920 |title=Business and Financial Conditions Following the Civil War in the United States |journal=[[Review of Economic Statistics]] |volume=2 |issue=Supplement 2 |pages=5–21 |jstor=1928610 |doi=10.2307/1928610 }}
*{{cite journal |last=Scott | first=Ira O. Jr. |title=A Comparison of Production during the Depressions of 1873 and 1929 |journal=American Economic Review |volume=42 |issue=4 |year=1952 |pages=569–576 |jstor=1810159 }}
*{{cite book |last=Sprague |first=Oliver Mitchell Wentworth |year=1910 |title=History of crises under the national banking system |url=https://archive.org/details/bub_gb_Q4AsAAAAYAAJ |pages=[https://archive.org/details/bub_gb_Q4AsAAAAYAAJ/page/n237 1]–107 }} {{Google books|Q4AsAAAAYAAJ|Available}}
*{{cite book |last=Wheeler |first=Keith |year=1973 |title=The Railroaders |url=https://archive.org/details/railroaders00time |url-access=registration |location=New York |publisher=Time-Life Books }}
* Wicker, Elmus. ''Banking panics of the [[gilded age]]'' (Cambridge University Press, 2006) [https://web.archive.org/web/20140323075727/http://www.langtoninfo.co.uk/web_content/9780521025478_frontmatter.pdf contents]
{{refend}}

===Yearbooks===
* {{Google books|c6QoAAAAYAAJ|''Appleton's Annual Cyclopedia...for 1873'' (1879)}}
* {{Google books|2WcMAAAAYAAJ|''Appleton's Annual Cyclopedia...for 1875'' (1877)}}
* {{Google books|r6MYAAAAIAAJ|''Appleton's Annual Cyclopedia...for 1876'' (1885)}}
* {{Google books|Do4EAAAAYAAJ|''Appleton's Annual Cyclopedia...for 1877'' (1878)}}

==External links==
{{Commons category|Panic of 1873}}

{{Financial crises}}
{{Ulysses S. Grant}}
{{Reconstruction Era}}

{{DEFAULTSORT:Panic of 1873}}
[[Category:1873 in economic history]]
[[Category:1873 in the United States]]
[[Category:Economic crises in the United States]]
[[Category:Financial crises in the United States]]
[[Category:History of banking in the United States]]
[[Category:History of rail transportation in the United States]]
[[Category:Presidency of Ulysses S. Grant]]
[[Category:Stock market crashes in the United States|1873]]
[[Category:Aftermath of the Franco-Prussian War]]