Depression of 1893

Like the panic of 1873, the depression of 1893 was a major economic downturn that had significant impact on the Populist movement. While related to an economic slowdown in Europe which began in 1890, the downturn in the United States was facilitated by the failures of major railroads. Just after the inauguration of President Grover Cleveland in March 1893, the Philadelphia and Reading railroad went under. By the end of the summer of 1893, four additional railroads had failed: the Erie, Northern Pacific, Union Pacific, and Santa Fe. Additionally, the U.S. banking system was tottering. The collapse of a major Philadelphia firm, the National Cordage Company, caused two Chicago banks to fail. This, in turn, caused a run on New York bank deposits as panicked customers withdrew cash because of uncertainty about bank stability. By the end of 1893, 15,000 banks had failed in the United States with the largest portion of bankruptcies in the South and the West.

As banks and railroads failed, many businesses were forced to contract their operations, leading to job loss and an estimated national unemployment rate between 20 and 25 percent. In the nation's cities, misery was apparent, particularly in the winters when many starved to death or died of exposure. In the farming areas of the West and South, impoverished farmers and unemployed agricultural workers were often visible traveling as tramps, hoping to scrape together a living as best they could. Responding to reduced wages and layoffs, angry workers vented their frustration by staging a number of strikes in different industries and different regions of the country. There were strikes in Pennsylvania steel mills, the mines of West Virginia and Idaho, and the cities of Buffalo, New York, and New Orleans. The most significant was the strike on the Pullman Car Company in 1894, led by Eugene V. Debs and the newly formed American Railway Union (ARU). Precipitated by a drastic 25 to 40 percent reduction in wages, the ARU practically halted railway traffic in the United States, forcing President Cleveland to send troops to Chicago to break the strike and restore railroad transportation.

Critics of Cleveland's financial policies wanted to expand the money supply. Some critics, such as Jacob Coxey, a Massillon, Ohio, resident, wanted the federal government to attack the depression by massive public works projects that would hire the nation's unemployed workers and pay them through interest-free bonds that could also be circulated as legal tender. To emphasize his point, Coxey organized an 1894 march on Washington, DC, with supporters known as “Coxey's Army.”

For the nation's farmers and members of the People's Party, the depression of 1893 underscored the inadequacy of the nation's money supply. Faced with high credit costs, onerous railroad rates, and fixed mortgage payments, farm groups believed that Cleveland's policy of currency contractions made agricultural problems worse. Contracting the money supply meant that it took more and more crops to generate the same amount of cash to meet financial obligations; however, the more farmers produced, the lower commodity prices fell. It was a vicious cycle that most farm advocates believed could only be overcome by pursuing inflationist monetary policies. Where in prior years Populist advocates had attached themselves to greenback ideas of fiat currency, during the middle 1890s, influenced by western silver-mining interests and ambitious Democratic politicians eager to coopt the Populist vote, much of the agrarian agenda was reduced to the free coinage of silver.