Crises: The Panic Of 1873, The End Of Reconstruction, And The Realignment Of American Politics1

On September 18, 1873, the announcement of Jay Cooke and Company’s bank-ruptcy sent Wall Street to a panic, and the country to a long, harsh depression. Americans interpreted this economic crisis in the light of the acrimonious financial debates born of the Civil War—the money question chief among them. The conse-quences transformed American politics. Ideologically ill-equipped to devise cohesive economic policies, political parties split dangerously along sectional lines (between the Northeast and the Midwest). Particularly divided over President U.S. Grant’s veto of the 1874 Inflation Bill, the Republican Party decisively lost the 1874 con-gressional elections. As a Democratic majority in the House spelled the doom of Reconstruction, the ongoing divisions of both parties on economic issues triggered a political realignment. The dramatic 1876 elections epitomized a new political landscape that would last for twenty years: high instability in power at the national level and what has been described as the “politics of inertia.” Therefore, by closely following the ramifications of the 1873 panic, this article proposes an explanation of how an economic crisis transformed into a pivotal political event.

Before the crisis of 1929 claimed the name, the “Great Depression” com-monly referred to the tough economic times ushered in by the Panic of 1873. Starting with a double financial crash (in Vienna, Austria, in the spring, and in New York in the fall), it evolved into a full-blown economic depression that spread through Europe and North America, with an initial recession that severely affected production, prices, and wages. Social costs

1This article greatly benefited from the comments of many fine scholars who have either read or heard it at different stages. I particularly wish to thank Margo Anderson, Richard Bensel, Pierre Gervais, Jean Heffer, Richard John, and Scott Nelson for their very helpful input.

The Journal of the Gilded Age and Progressive Era | 10:4 Oct. 2011 doi:10.1017/S1537781411000260 403

were heavy; widespread unemployment bred labor unrest and strikes, often met with harsh repression.

Nevertheless, we know surprisingly little about this major event of the post-bellum United States. Although its historical impact was large—and, as two scholars have recently argued, it might be particularly relevant to understand today’s economic crisis2—few studies have tried to explain its manifold con-sequences, economic, social, and political.3 Reconstruction is a case in point. Arguably the most salient political issue of the day, it could not but be affected by a crisis of such magnitude, yet many classic studies simply over-look it.4 Others mention it, but rarely give it real explanatory power in their arguments.5 It might be that the historiography of Reconstruction, focusing on race and politics in the South, has evolved very separately from other his-toriographies dealing with developments within the North.6 Still, even studies with a more national scope, while they give more importance to the 1873 economic crisis, generally approach its political consequences in the broadest terms (often in striking contrast with the detailed analyses they otherwise offer).7 The specific causal links between the economic crisis and the fate of Reconstruction remain nebulous.

To many historians, however, it seems obvious that the 1870s were a turning point in American history. Textbooks also tell us so, generally using 1877 as

2Scott Nelson, “The Real Great Depression,” Chronicle of Higher Education, Oct. 17, 2008; Paul Krugman, “The Third Depression,” New York Times, June 27, 2010. The current crisis has renewed scholarly interest in historical precedents: see Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, 2009).

3There is no equivalent to the study of the Panic of 1857 by James L. Huston, The Panic of 1857 and the Coming of the Civil War (Baton Rouge, 1987).

4See for instance such standard works as William Gillette, Retreat from Reconstruction, 1869–1879

(Baton Rouge, 1979); and Michael Perman, The Road to Redemption: Southern Politics, 1869–1879

(Chapel Hill, 1984); or, more recently, Brooks D. Simpson, The Reconstruction Presidents (Lawrence, KS, 1998).

5A typical example might be James Keith Hogue, Uncivil War: Five New Orleans Street Battles and the Rise and Fall of Radical Reconstruction (Baton Rouge, 2006). The author mentions the economic recession only to explain that unemployment swelled the ranks of the White Leagues in Louisiana. 6Heather Cox Richardson underlines this in “North and West of Reconstruction: Studies in Political Economy” in Reconstructions: New Perspectives on the Postbellum United States, ed. Thomas J. Brown (Oxford, 2006), 66–90.

7For instance, Eric Foner views it as a large shift in the history of political thought and culture; the end of free-labor ideology put the fear of class warfare into the elites and pushed the Republican Party to economic conservatism. Foner, Reconstruction: America’s Unfinished Revolution, 1863–1876

(New York, 1988), 512–24. More recently, Michael Holt argued that voters generally voted the party out of power when such a hardship hit: David Herbert Donald, Jean Harvey Baker, and Michael F. Holt, The Civil War and Reconstruction (New York, 2001); Michael F. Holt, By One Vote: The Disputed Presidential Election of 1876 (Lawrence, KS, 2008).

404 | Barreyre | The Politics of Economic Crises

a cutting point in their narratives. The transformations of the decade have been analyzed through many lenses. Politically, the 1870s saw the resur-gence of Democrats, the end of Reconstruction, and an altogether new “char-acter of American politics.”8 Economically, the decade ushered in an unprecedented trend of concentration and the waning of the producerist ideology, especially among businessmen. Socially, it resulted in a hardening of class lines.9 All in all, the 1870s were a time of deep transformations of American society. Arguably, the 1873 crisis played a large role in this. Richard Schneirov recently argued in this journal that

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