Authors:
Historic Era: Era 4: Expansion and Reform (1801-1861)
Historic Theme:
Subject:
May/June 1991 | Volume 42, Issue 3
The Other Great Depression
Text Complexity Grade Level
9
In 1937, the American economy, which had been slowly rising from the depths it had reached in 1933, suddenly reversed course and sank once more. While this new economic trend enlarged the misery of the American people, it also gave the economists a new problem: what to call it.
Since the start of the 19th century, an economic downturn had been called a depression, but in 1937, the country was already in a depression. So the economists, probably delighted to have a problem they could actually do something about, pressed the word recession into service. Because of the iron law of euphemism (weak terms drive out strong ones), recession took hold, and we have not had a depression since. Today that word effectively belongs to the 1930s and, indeed, is often capitalized to indicate its now unique meaning.
But the Great Depression was hardly the first major downturn in the American economy. In fact, a severe economic contraction followed hard on the heels of the Revolution itself. And in 1837, after several years of economic expansion that was reflected in Wall Street’s first big bull market, Wall Street was hit with its first big crash.
The depression that followed lasted well into the 1840s. However, while it deeply affected Wall Street bankers and merchants, it did not greatly alter the daily lives of a majority of Americans. Most citizens lived on farms, largely outside of what economists call the cash economy.
By the end of the century, however, millions of Americans had become dependent on weekly wages. In 1860, for every worker toiling in a factory there had been nearly four working on farms; by 1890, the ratio had dropped to two to one. In 1860, there had not been a single industrial concern listed on the New York Stock Exchange; by the mid-nineties there were twenty, each employing tens of thousands.
Therefore, the depression that struck the country in 1893 has a very good claim to being called the Other Great Depression, for it directly affected the livelihoods not just of the bankers and merchants but of millions. The GNP fell almost 12 percent. Unemployment, which had stood at only 3 percent of the work force in 1892, soared to 18.4 percent two years later. Hunger stalked the streets of the now vast slum districts in American cities, while only private charity was available to alleviate the misery.
The causes of the depression were partly the usual ones of overexpansion. In early 1893, the Philadelphia and Reading Railway Company and the National Cordage Company collapsed and touched off panic on Wall Street. By the end of the year, another 15,242 companies (and 642 banks) had failed. Before the great depression of the 1890s was over, nearly one-third of the country’s railroad mileage would pass through receivership.
But an equally important cause of the depression was that the government had been ignoring another iron law, this time economic, not linguistic.