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Long Depression

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Not to be confused withlong-term depression,a neurophysiological process in the brain.

TheLong Depressionwas a worldwide price and economicrecession,beginning in1873and running either through March 1879, or 1896, depending on the metrics used.[1]It was most severe in Europe and the United States, which had been experiencing strong economic growth fueled by theSecond Industrial Revolutionin the decade following theAmerican Civil War.The episode was labeled the "Great Depression" at the time, and it held that designation until theGreat Depressionof the 1930s. Though it marked a period of generaldeflationanda general contraction,it did not have the severe economic retrogression of the Great Depression.[2]

Great Britain was the hardest hit; during this period it lost some of its large industrial lead over the economies ofcontinental Europe.[3]While it was occurring, the view was prominent that British economy had been in continuous depression from 1873 to as late as 1896 and some texts refer to the period as theGreat Depression of 1873–1896,with financial and manufacturing losses reinforced by along recession in the agricultural sector.[4]

In the United States, historians refer to theDepression of 1873–1879,kicked off by thePanic of 1873,and followed by thePanic of 1893,book-ending an era of prosperity. The U.S.National Bureau of Economic Researchdates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction.[5][6]In the United States, from 1873 to 1879, 18,000 businesses went bankrupt, including 89 railroads.[7]Unemployment peaked in 1878 at 8.25%.[8]

Background[edit]

The period preceding the depression was dominated by several major military conflicts and a period of economic expansion. In Europe, the end of theFranco-Prussian Waryielded a new political order inGermany,and the £200 million indemnity imposed on France led to an inflationary investment boom in Germany and Central Europe.[9]New technologies in industry such as theBessemer converterwere being rapidly applied; railroads were booming.[10] In the United States, the end of theCivil Warand a brief post-war recession (1865–1867) gave way to an investment boom, focused especially on railroads on public lands in theWestern United States– an expansion funded largely by foreign investors.[11]

Causes of the crisis[edit]

Main article:Panic of 1873
Runon the Fourth National Bank, No. 20 Nassau Street, New York City, 1873. FromFrank Leslie's Illustrated Newspaper,October 4, 1873.

In 1873, during a decline in the value of silver – exacerbated by the end of the German Empire's production ofthalercoins – the US government passed theCoinage Act of 1873in April. This essentially ended thebimetallic standardof the United States, forcing it for the first time onto a puregold standard.This measure, referred to by its opponents as "the Crime of 1873" and the topic ofWilliam Jennings Bryan'sCross of Gold speechin 1896, forced a contraction of themoney supplyin the United States. It also drove down silver prices further, even as new silver mines were being established inNevada,which stimulated mining investment but increased supply as demand was falling.[12]Silver miners arrived at US mints, unaware of the ban on production of silver coins, only to find their product no longer welcome. By September, the US economy was in a crisis, deflation causing banking panics and destabilizing business investment, clima xing in thePanic of 1873.

The Panic of 1873 has been described as "the first truly international crisis".[13][page needed]The optimism that had been driving booming stock prices in central Europe had reached a fever pitch, and fears of a bubble culminated in a panic inViennabeginning in April 1873. The collapse of theVienna Stock Exchangebegan on May 8, 1873, and continued until May 10, when the exchange was closed; when it was reopened three days later, the panic seemed to have faded, and appeared confined toAustria-Hungary.[13][page needed]Financial panic arrived in the Americas only months later onBlack Thursday,September 18, 1873, after the failure of the banking house ofJay Cookeand Company over theNorthern Pacific Railway.[14]The Northern Pacific railway had been given 40 million acres (160,000 km2) of public land in the Western United States and Cooke sought $100,000,000 in capital for the company; the bank failed when the bond issue proved unsalable, and was shortly followed by several other major banks. TheNew York Stock Exchangeclosed for ten days on September 20.[13][page needed]

Thefinancial contagionthen returned to Europe, provoking a second panic in Vienna and further failures in continental Europe before receding. France, which had been experiencing deflation in the years preceding the crash, was spared financial calamity for the moment, as was Britain.[13][page needed]

Some[who?]have argued the depression was rooted in the 1870Franco-Prussian Warthat devastated the French economy and, under theTreaty of Frankfurt,forced that country to make largewar reparationspayments to Germany. The primary cause of the price depression in the United States was the tight monetary policy that the United States followed to get back to thegold standardafter theCivil War.The U.S. government was taking money out of circulation to achieve this goal, therefore there was less available money to facilitate trade. Because of this monetary policy theprice of silverstarted to fall causing considerable losses of asset values; by most accounts, after 1879 production was growing, thus further putting downward pressure on prices due to increased industrial productivity, trade and competition.

In the US the speculative nature of financing due to both thegreenback,which was paper currency issued to pay for the Civil War and rampant fraud in the building of theUnion Pacific Railwayup to 1869 culminated in theCrédit Mobilier scandal.Railway overbuilding and weak markets collapsed the bubble in 1873. Both the Union Pacific and the Northern Pacific lines were central to the collapse; another railway bubble was theRailway Maniain the United Kingdom.

Because of the Panic of 1873, governmentsdepeggedtheir currencies, to save money. The demonetization of silver by European and North American governments in the early 1870s was certainly a contributing factor. The USCoinage Act of 1873was met with great opposition by farmers and miners, as silver was seen as more of a monetary benefit to rural areas than to banks in big cities. In addition, there were US citizens who advocated the continuance of government-issuedfiat money(United States Notes) to avoid deflation and promote exports. The western US states were outraged –Nevada,Colorado,andIdahowere huge silver producers with productive mines, and for a few years mining abated. Resumption of silver dollar coinage was authorized by theBland–Allison Actof 1878. The resumption of the US government buying silver was enacted in 1890 with theSherman Silver Purchase Act.

Monetaristsbelieve that the 1873 depression was caused by shortages of gold that undermined the gold standard, and that the 1848California Gold Rush,1886Witwatersrand Gold Rushin South Africa and the 1896–99Klondike Gold Rushhelped alleviate such crises. Other analyses have pointed to developmental surges (seeKondratiev wave), theorizing that theSecond Industrial Revolutionwas causing large shifts in the economies of many states, imposing transition costs, which may also have played a role in causing the depression.

Course of the depression[edit]

Like the laterGreat Depression,the Long Depression affected different countries at different times, at different rates, and some countries accomplished rapid growth over certain periods. Globally, however, the 1870s, 1880s, and 1890s were a period of falling price levels and rates of economic growth significantly below the periods preceding and following.

Between 1870 and 1890, iron production in the five largest producing countries more than doubled, from 11 million tons to 23 million tons, steel production increased twentyfold (half a million tons to 11 million tons), andrailroaddevelopment boomed.[15]But at the same time, prices in several markets collapsed – the price ofgrainin 1894 was only a third what it had been in 1867,[16]and the price ofcottonfell by nearly 50 percent in just the five years from 1872 to 1877,[17]imposing great hardship on farmers and planters. This collapse provoked protectionism in many countries, such as France, Germany, and the United States,[16]while triggering mass emigration from other countries such as Italy, Spain,Austria-Hungary,and Russia.[18]Similarly, while theproductionof iron doubled between the 1870s and 1890s,[15]thepriceof iron halved.[16]

Many countries experienced significantly lower growth rates relative to what they had experienced earlier in the 19th century and to what they experienced afterwards:

Growth rates of industrial production (1850s–1913)[19]
1850s–1873 1873–1890 1890–1913
Germany 4.3 2.9 4.1
Great Britain 3.0 1.7 2.0
United States 6.2 4.7 5.3
France 1.7 1.3 2.5
Italy 0.9 3.0
Sweden 3.1 3.5
GNP of theGreat Powersof Europe
(in billionsUSD,1960 prices)[20]
1830 1840 1850 1860 1870 1880 1890
Russia 10.5 11.2 12.7 14.4 22.9 23.2 21.1
France 8.5 10.3 11.8 13.3 16.8 17.3 19.7
Great Britain 8.2 10.4 12.5 16.0 19.6 23.5 29.4
Germany 7.2 8.3 10.3 12.7 16.6 19.9 26.4
Austria-Hungary 7.2 8.3 9.1 9.9 11.3 12.2 15.3
Italy 5.5 5.9 6.6 7.4 8.2 8.7 9.4

Austria-Hungary[edit]

The global economic crisis first erupted inAustria-Hungary,where in May 1873 theVienna Stock Exchangecrashed.[13]In Hungary, the panic of 1873 terminated a mania of railroad-building.[21]

Chile[edit]

In the late 1870s the economic situation in Chile deteriorated.Chilean wheat exportswere outcompeted by production in Canada, Russia andArgentinaand Chilean copper was largely replaced in international markets by copper from the United States and Spain.[22]Income fromsilver mining in Chilealso dropped.[22]Aníbal Pinto,president of Chile in 1878, expressed his concerns the following way:[22]

If a new mining discovery or some novelty of that sort does not come to improve the actual situation, the crisis that has long been felt, will worsen

— Aníbal Pinto,president of Chile, 1878.

This "mining discovery" came, according to historiansGabriel SalazarandJulio Pinto,into existence through the conquest of Bolivian and Peruvian lands in theWar of the Pacific.[22]It has been argued that economic situation and the view of new wealth in the nitrate was the true reason for the Chilean elite to go into war with its neighbors.[22]

Another response to the economic crisis, according toJorge Pinto Rodríguez,was the new pulse ofconquest of indigenous landsthat took place inAraucaníain the 1880s.[23][24]

France[edit]

France's experience was somewhat unusual. Having been defeated in theFranco-Prussian War,the country was required to pay £200 million inreparationsto the Germans and was already reeling when the 1873 crash occurred.[13]The French adopted a policy of deliberate deflation while paying off the reparations.[13]

While the United States resumed growth for a time in the 1880s, theParis Bourse crash of 1882sent France careening into depression, one which "lasted longer and probably cost France more than any other in the 19th century".[25]The Union Générale, a French bank, failed in 1882, prompting the French to withdraw three million pounds from theBank of Englandand triggering a collapse in French stock prices.[26]

The financial crisis was compounded by diseases impacting the wine and silk industries[25]Frenchcapital accumulationandforeign investmentplummeted to the lowest levels experienced by France in the latter half of the 19th century.[27]After a boom in newinvestment banksafter the end of the Franco-Prussian War, the destruction of the French banking industry wrought by the crash cast a pall over the financial sector that lasted until the dawn of the 20th century.[25]French finances were further sunk by failing investments abroad, principally in railroads and buildings.[21]The Frenchnet national productdeclined over the ten years from 1882 to 1892.[28]

Italy[edit]

A ten-yeartariff warbroke out between France and Italy after 1887, damaging Franco-Italian relations which had prospered duringItalian unification.As France was Italy's biggest investor, the liquidation of French assets in the country was especially damaging.[28]

Russia[edit]

The Russian experience was similar to the US experience – three separate recessions, concentrated in manufacturing, occurred in the period (1874–1877, 1881–1886, and 1891–1892), separated by periods of recovery.[29]

Great Britain[edit]

Further information:Great Depression of British Agriculture

Great Britain, which had previously experienced crises every decade since the 1820s, was initially less affected by this financial crisis, even though theBank of Englandkept interest rates as high as 9 percent in the 1870s.[13]

The 1878 failure of theCity of Glasgow Bankin Scotland arose through a combination of fraud and speculative investments in Australian and New Zealand companies (agriculture and mining) and in American railroads.

Building on an1870 reform,and the1879 famine,thousands of Irishtenant farmersaffected by depressed producer prices and high rents launched theLand Warin 1879, which resulted in the reformingIrish Land Acts.

United States[edit]

See also:Panic of 1873
Realgross national productper capitaof the United States 1869–1918
Estimated declines in United States manufacturing output in selected sectors (1872–1876)[30]
Industry % decline in output
Durable goods 30%
Ironandsteel 45%
Construction 30%
Overall 10%

In the United States, the Long Depression began with the Panic of 1873. The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879. At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression's 43 months of contraction.[5][31]Figures fromMilton FriedmanandAnna Schwartzshownet national productincreased 3 percent per year from 1869 to 1879 and real national product grew at 6.8 percent per year during that time frame.[32]However, since between 1869 and 1879 the population of the United States increased by over 17.5 percent,[33]per capita NNP growth was lower. Following the end of the episode in 1879, the U.S. economy would remain unstable, experiencing recessions for 114 of the 253 months until January 1901.[34]

The dramatic shift in prices mauled nominal wages – in the United States, nominal wages declined by one-quarter during the 1870s,[14]and as much as one-half in some places, such asPennsylvania.[35]Although real wages had enjoyed robust growth in the aftermath of theAmerican Civil War,increasing by nearly a quarter between 1865 and 1873, they stagnated until the 1880s, posting no real growth, before resuming their robust rate of expansion in the later 1880s.[36]The collapse of cotton prices devastated the already war-ravaged economy of thesouthern United States.[17]Although farm prices fell dramatically, American agriculture continued to expand production.[30]

Thousands of American businesses failed, defaulting on more than a billion dollars of debt.[35]One in four laborers in New York were out of work in the winter of 1873–1874[35]and, nationally, a million became unemployed.[35]

The sectors which experienced the most severe declines in output were manufacturing, construction, and railroads.[30]The railroads had been a tremendous engine of growth in the years before the crisis, yielding a 50% increase in railroad mileage from 1867 to 1873.[30]After absorbing as much as 20% of US capital investment in the years preceding the crash, this expansion came to a dramatic end in 1873; between 1873 and 1878, the total amount of railroad mileage in the United States barely increased at all.[30]

TheFreedman's Savings Bankwas a typical casualty of the financial crisis. Chartered in 1865 in the aftermath of the American Civil War, the bank had been established to advance the economic welfare of America's newly emancipatedfreedmen.[37]In the early 1870s, the bank had joined in the speculative fever, investing inreal estateand unsecured loans to railroads; its collapse in 1874 was a severe blow toAfrican-Americans.[37]

The recession exacted a harsh political toll on PresidentUlysses S. Grant.HistorianAllan Nevinssays of the end of Grant's presidency:[38]

Various administrations have closed in gloom and weakness... but no other has closed in such paralysis and discredit as (in all domestic fields) did Grant's. The President was without policies or popular support. He was compelled to remake his Cabinet under a grueling fire from reformers and investigators; half its members were utterly inexperienced, several others discredited, one was even disgraced. The personnel of the departments was largely demoralized. The party that autumn appealed for votes on the implicit ground that the next Administration would be totally unlike the one in office. In its centennial year, a year of deepest economic depression, the nation drifted almost rudderless.[38]

Recovery began in 1878. The mileage of railroad track laid down increased from 2,665 mi (4,289 km) in 1878 to 11,568 in 1882.[30]Construction began recovery by 1879; the value of building permits increased two and a half times between 1878 and 1883, and unemployment fell to 2.5% in spite of (or perhaps facilitated by) high immigration.[26]

Business profits declined briefly between 1882 and 1884.[26]The recovery in railroad construction reversed itself, falling from 11,569 mi (18,619 km) of track laid in 1882 to 2,866 mi (4,612 km) of track laid in 1885; the price of steel rails collapsed from $71/ton in 1880 to $20/ton in 1884.[26]Manufacturing again collapsed – durable goods output fell by a quarter again.[26]The decline becamea brief financial crisisin 1884, when multiple New York banks collapsed; simultaneously, in 1883–1884, tens of millions of dollars of foreign-owned American securities were sold out of fears that the United States was preparing to abandon the gold standard.[26]This financial panic closed eleven New York banks, more than a hundred small state banks, and led to defaults on at least $32 million worth of debt.[26]Unemployment, which had stood at 2.5% between recessions, surged to 7.5% in 1884–1885, and 13% in the northeastern United States, even as immigration plunged in response to deteriorating labor markets.[26]

The 1880s saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product, and real per capita income. As Friedman and Schwartz admit, the decade from 1869 to 1879 saw a 3-percent-per annum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita. Even the alleged "monetary contraction" never took place, the money supply increasing by 2.7 percent per year in this period. From 1873 through 1878, before another spurt of monetary expansion, the total supply of bank money rose from $1.964 billion to $2.221 billion – a rise of 13.1 percent or 2.6 percent per year. In short, a modest but definite rise, and scarcely a contraction.[39]

Reactions to the crisis[edit]

Protectionism[edit]

The period preceding the Long Depression had been one of increasing economic internationalism, championed by efforts such as theLatin Monetary Union,many of which then were derailed or stunted by the impacts of economic uncertainty.[40]The extraordinary collapse of farm prices[16]provoked a protectionist response in many nations. Rejecting the free trade policies of theSecond Empire,French presidentAdolphe Thiersled the newThird Republicto protectionism, which led ultimately to the stringentMéline tariffin 1892.[41]Germany's agrarianJunkeraristocracy, under attack by cheap, imported grain, successfully agitated for aprotective tariff in 1879inOtto von Bismarck'sGermanyover the protests of hisNational Liberal Partyallies.[41]In 1887, Italy and France embarked on a bittertariff war.[42]In the United States,Benjamin Harrisonwon the1888 US presidential electionon a protectionist pledge.[43]

As a result of the protectionist policies enacted by the world's major trading nations, the global merchant marine fleet posted no significant growth from 1870 to 1890 before it nearly doubled in tonnage in the prewar economic boom that followed.[44]Only the United Kingdom and the Netherlands remained committed to low tariffs.[42]

Monetary responses[edit]

In 1874, a year after the 1873 crash, theUnited States Congresspassed legislation called theInflationBill of 1874 designed to confront the issue of falling prices by injecting freshgreenbacksinto the money supply.[45]Under pressure from business interests,PresidentUlysses S. Grantvetoedthe measure.[45]In 1878, Congress overrode PresidentRutherford B. Hayes's veto to pass theSilver Purchase Act,a similar but more successful attempt to promote "easy money".[30]

Strikes[edit]

The United States endured its first nationwide strike in 1877, theGreat Railroad Strike of 1877.[30]This led to widespread unrest and often violence in many major cities and industrial hubs includingBaltimore,Philadelphia,Pittsburgh,Reading,Saint Louis,Scranton,andShamokin.[46]

New Imperialism[edit]

Main article:New Imperialism

The Long Depression contributed to the revival ofcolonialismleading to theNew Imperialismperiod, symbolized by thescramble for Africa,as the western powers sought new markets for their surplus accumulated capital.[47]According toHannah Arendt'sThe Origins of Totalitarianism(1951), the "unlimited expansion of power" followed the "unlimited expansion ofcapital".[48]

In the United States, beginning in 1878, the rebuilding, extending, and refinancing of the western railways, commensurate with the wholesale giveaway of water, timber, fish, minerals in what had previously been Indian territory, characterized a rising market. This led to the expansion of markets and industry, together with therobber baronsof railroad owners, which culminated in the genteel 1880s and 1890s. TheGilded Agewas the outcome for the few rich. The cycle repeated itself with thePanic of 1893,another huge market crash.

Recovery[edit]

In the United States, the National Bureau of Economic Analysis dates the recession through March 1879. In January 1879, the United States returned to the gold standard which it had abandoned during the Civil War; according to economist Rendigs Fels, the gold standard put a floor to the deflation, and this was further boosted by especially good agricultural production in 1879.[49]The view that a single recession lasted from 1873 to 1896 or 1897 is not supported by most modern reviews of the period. It has even been suggested that the trough of this business cycle may have occurred as early as 1875.[50] In fact, from 1869 to 1879, the US economy grew at a rate of 6.8% for real net national product (NNP) and 4.5% for real NNP per capita.[51]Real wages were flat from 1869 to 1879, while from 1879 to 1896, nominal wages rose 23% and prices fell 4.2%.[52]

Explanations[edit]

Irving Fisherbelieved that the Panic of 1873 and the severity of the contractions which followed it could be explained by debt and deflation and that afinancial panicwould trigger catastrophicdeleveragingin an attempt to sell assets and increase capital reserves; that selloff would trigger a collapse in asset prices anddeflation,which would in turn prompt financial institutions to sell off more assets, only to further deflation and straincapital ratios.Fisher believed that had governments or private enterprise embarked on efforts toreflatefinancial markets, the crisis would have been less severe.[53]

David Ames Wells(1890) wrote of the technological advancements during the period 1870–1890, which included the Long Depression. Wells gives an account of the changes in the world economy transitioning into theSecond Industrial Revolutionin which he documents changes in trade, such as triple expansion steam shipping, railroads, the effect of the international telegraph network and the opening of the Suez Canal.[54]Wells gives numerous examples ofproductivityincreases in various industries and discusses the problems of excess capacity and market saturation.

Wells' opening sentence:

The economic changes that have occurred during the last quarter of a century – or during the present generation of living men – have unquestionably been more important and more varied than during any period of the world's history.

Other changes Wells mentions are reductions in warehousing and inventories, elimination of middlemen,economies of scale,the decline of craftsmen, and the displacement of agricultural workers. About the whole 1870–90 period Wells said:

Some of these changes have been destructive, and all of them have inevitably occasioned, and for a long time yet will continue to occasion, great disturbances in old methods, and entail losses of capital and changes in occupation on the part of individuals. And yet the world wonders, and commissions of great states inquire, without coming to definite conclusions, why trade and industry in recent years has been universally and abnormally disturbed and depressed.

Wells notes that many of the government inquiries on the "depression of prices" (deflation) found various reasons such as the scarcity of gold and silver. Wells showed that the US money supply actually grew over the period of the deflation. Wells noted that deflation lowered the cost of only goods that benefited from improved methods of manufacturing and transportation. Goods produced by craftsmen and many services did not decrease in value, and the cost of labor actually increased. Also, deflation did not occur in countries that did not have modern manufacturing, transportation, and communications.

Nobel laureate economistMilton Friedman,author ofA Monetary History of the United States,on the other hand, blamed this prolonged economic crisis on the imposition of a new gold standard, part of which he referred to by its traditional name,The Crime of 1873.[55]Additionally, Friedman pointed to the expansion of the gold supply throughGold cyanidationas a contributor to the recovery.[56]This forced shift into a currency whose supply was limited by nature, unable to expand with demand, caused a series of economic and monetary contractions that plagued the entire period of the Long Depression.Murray Rothbard,in his bookHistory of Money and Banking of the United States,argues that the long depression was only a misunderstood recession since real wages and production were actually increasing throughout the period. Like Friedman, he attributes falling prices to the resumption of a deflationary gold standard in the U.S. after the Civil War.

Interpretations[edit]

Most economic historians see this period as negative for the most industrial nations.[citation needed]Many argue that most of the stagnation was caused by a monetary contraction caused by abandonment of thebimetallic standard,in favor of a new fiatgold standard,starting with theCoinage Act of 1873.[citation needed]

Other economic historians have complained about the characterization of this period as a "depression" because of conflicting economic statistics that cast doubt on this interpretation. They note it saw a relatively large expansion of industry, of railroads, of physical output, of net national product, and of real per capita income.

As economistsMilton FriedmanandAnna J. Schwartzhave noted, the decade from 1869 to 1879 saw a growth of 3 percent per year in money national product, an outstanding real national product growth of 6.8 percent per year, and a rise of 4.5 percent per year in real product per capita. Even the alleged "monetary contraction" never took place, the money supply increasing by 2.7 percent per year. From 1873 through 1878, before another spurt of monetary expansion, the total supply of bank money rose from $1.964 billion to $2.221 billion, a rise of 13.1 percent, or 2.6 percent per year. In short, it was a modest but definite rise, not a contraction.[57]Although per-capita nominal income declined very gradually from 1873 to 1879, that decline was more than offset by a gradual increase over the course of the next 17 years.

Furthermore, real per capita income either stayed approximately constant (1873–1880; 1883–1885) or rose (1881–1882; 1886–1896), so the average consumer appears to have been considerably better off at the end of the "depression" than before. Studies of other countries where prices also tumbled, including the United States, Germany, France, and Italy, reported more markedly positive trends in both nominal and real per capita income figures. Profits generally were also not adversely affected by deflation, although they declined (particularly in Britain) in industries struggling against superior, foreign competition. Furthermore, some economists argue a falling general price level is not inherently harmful to an economy and cite the economic growth of the period as evidence.[58]As economistMurray Rothbardhas stated:

Unfortunately, most historians and economists are conditioned to believe that steadily and sharply falling prices must result in depression: hence their amazement at the obvious prosperity and economic growth during this era. For they have overlooked the fact that in the natural course of events, when government and the banking system do not increase the money supply very rapidly, freemarket capitalism will result in an increase of production and economic growth so great as to swamp the increase of money supply. Prices will fall, and the consequences will be not depression or stagnation, but prosperity (since costs are falling, too), economic growth, and the spread of the increased living standard to all the consumers.[58]

Accompanying the overall growth in real prosperity was a marked shift in consumption from necessities to luxuries: by 1885, "more houses were being built, twice as much tea was being consumed, and even the working classes were eating imported meat, oranges, and dairy produce in quantities unprecedented". The change in working class incomes and tastes was symbolized by "the spectacular development of the department store and the chain store".

Prices certainly fell, but almost every other index of economic activity – output of coal and pig iron, tonnage of ships built, consumption of raw wool and cotton, import and export figures, shipping entries and clearances, railway freight clearances, joint-stock company formations, trading profits, consumption per head of wheat, meat, tea, beer, and tobacco – all of these showed an upward trend.[59]

A large part at least of the deflation commencing in the 1870s was a reflection of unprecedented advances in factor productivity. Real unit production costs for most final goods dropped steadily throughout the 19th century and especially from 1873 to 1896. At no previous time had there been an equivalent "harvest of technological advances... so general in their application and so radical in their implications". That is why, notwithstanding the dire predictions of many eminent economists, Britain did not end up paralyzed by strikes and lockouts. Falling prices did not mean falling money wages. Instead of inspiring large numbers of workers to go on strike, falling prices were inspiring them to go shopping.[60]

See also[edit]

Wikimedia Commons has media related toLong Depression.

Footnotes[edit]

  1. ^The Long Depression – the First Great Depression (America's Economic History. Posted Jul 16, 2015 by Martin Armstrong)
  2. ^Rosenberg, Hans (1943). "Political and Social Consequences of the Great Depression of 1873–1896 in Central Europe".The Economic History Review.13.13(1/2). Blackwell Publishing: 58–73.doi:10.1111/j.1468-0289.1943.tb01613.x.JSTOR2590515.
  3. ^Musson, A. E. (1959). "The Great Depression in Britain, 1873–1896: A Reappraisal".The Journal of Economic History.19(2). Cambridge University Press: 199–228.doi:10.1017/S0022050700109994.JSTOR2114975.S2CID154705117.
  4. ^Capie, Forrest; Wood, Geoffrey (1997)."Great Depression of 1873–1896".InGlasner, David;Cooley, Thomas F. (eds.).Business cycles and depressions: an encyclopedia.New York: Garland Publishing. pp.148–149.ISBN0-8240-0944-4.
  5. ^ab"Business Cycle Expansions and Contractions".National Bureau of Economic Research.RetrievedJanuary 4,2009.
  6. ^Fels, Rendigs (1949). "The Long-Wave Depression, 1873–97".The Review of Economics and Statistics.31(1). The MIT Press: 69–73.doi:10.2307/1927196.JSTOR1927196.
  7. ^The Economic Performance Index (EPI), Vadim Khramov and John Ridings Lee
  8. ^James R. Vernon, "Unemployment rates in postbellum America: 1869–1899."Journal of Macroeconomics16.4 (1994): 701–714.online
  9. ^Glasner and Cooley,Business cycles and depressions: an encyclopediap. 149
  10. ^Glasner and Cooley,Business cycles and depressions: an encyclopediap. 132.
  11. ^Michael Edelstein, "The determinants of UK investment abroad, 1870–1913: the US case."Journal of Economic History34.4 (1974): 980–1007.
  12. ^Loomis, Noel M. (1968).Wells Fargo.pp. 219–220, 224–225.
  13. ^abcdefghDavid Glasner,Thomas F. Cooley (1997). "Crisis of 1873".Business Cycles and Depressions: An Encyclopedia.Taylor & Francis.ISBN0-8240-0944-4.
  14. ^abRon Chernow(1998).Titan.New York: Vintage Books. p.160.ISBN1-4000-7730-3.
  15. ^abEric Hobsbawm(1989).The Age of Empire (1875–1914).New York: Vintage Books. p.35.ISBN0-679-72175-4.
  16. ^abcdEric Hobsbawm (1989).The Age of Empire (1875–1914).New York: Vintage Books. p.36.ISBN0-679-72175-4.
  17. ^abEric Foner (2002).Reconstruction: America's unfinished revolution,1863–1877.HarperCollins. p. 535.ISBN0-06-093716-5.
  18. ^Eric Hobsbawm (1989).The Age of Empire (1875–1914).New York: Vintage Books. p.37.ISBN0-679-72175-4.
  19. ^Andrew Tylecote (1993).The long wave in the world economy.Routledge. p. 12.ISBN0-415-03690-9.
  20. ^Paul Kennedy (1989).The Rise and Fall of the Great Powers.Fontana Press. p.219.ISBN978-0006860525.
  21. ^abFrance and the Economic development of Europe (1800–1914).Routledge. 2000. p. 320.ISBN0-415-19011-8.
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Further reading[edit]

  • Samuel Bernstein, "American Labor in the Long Depression, 1873–1878,"Science and Society,vol. 20, no. 1 (Winter 1956), pp. 59–83.In JSTOR.
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