Editing Long Depression (section)

==Course of the depression==

Like the later [[Great 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), and [[railroad]] development boomed.<ref name="hobsbawm-1">{{cite book|title=The Age of Empire (1875–1914)|author=Eric Hobsbawm|publisher=Vintage Books|location=New York|year=1989|isbn=0-679-72175-4|page=[https://archive.org/details/ageofempire1875100hobs_0/page/35 35]|url=https://archive.org/details/ageofempire1875100hobs_0/page/35|author-link=Eric Hobsbawm}}</ref> But at the same time, prices in several markets collapsed{{snd}}the price of [[grain]] in 1894 was only a third what it had been in 1867,<ref name="hobsbawm-2">{{cite book|title=The Age of Empire (1875–1914)|author=Eric Hobsbawm|publisher=Vintage Books|location=New York|year=1989|isbn=0-679-72175-4|page=[https://archive.org/details/ageofempire1875100hobs_0/page/36 36]|url=https://archive.org/details/ageofempire1875100hobs_0/page/36}}</ref> and the price of [[cotton]] fell by nearly 50 percent in just the five years from 1872 to 1877,<ref name="reconstruction-3">{{cite book|title=[[Reconstruction: America's Unfinished Revolution - 1863-1877|Reconstruction: America's unfinished revolution]], 1863–1877|author=Eric Foner|publisher=HarperCollins|year=2002|isbn=0-06-093716-5|pages=535}}</ref> imposing great hardship on farmers and planters. This collapse provoked protectionism in many countries, such as France, Germany, and the United States,<ref name="hobsbawm-2"/> while triggering mass emigration from other countries such as Italy, Spain, [[Austria-Hungary]], and Russia.<ref name="hobsbawn-3">{{cite book|title=The Age of Empire (1875–1914)|author=Eric Hobsbawm|publisher=Vintage Books|location=New York|year=1989|isbn=0-679-72175-4|page=[https://archive.org/details/ageofempire1875100hobs_0/page/37 37]|url=https://archive.org/details/ageofempire1875100hobs_0/page/37}}</ref> Similarly, while the ''production'' of iron doubled between the 1870s and 1890s,<ref name="hobsbawm-1"/> the ''price'' of iron halved.<ref name="hobsbawm-2"/>

Many countries experienced significantly lower growth rates relative to what they had experienced earlier in the 19th century and to what they experienced afterwards:
{| class="wikitable" style="margin:1em auto;"
|+ Growth rates of industrial production (1850s–1913)<ref name="longwave-1">{{cite book|title=The long wave in the world economy|publisher=Routledge|isbn=0-415-03690-9|author=Andrew Tylecote|year=1993|page=12}}</ref>
|-
!
! 1850s–1873
! 1873–1890
! 1890–1913
|-
| {{flag|German Empire|name=Germany}}
| 4.3
| 2.9
| 4.1
|-
| {{flag|United Kingdom of Great Britain and Ireland|name=United Kingdom}}
| 3.0
| 1.7
| 2.0
|-
| {{flag|United States|1873}}
| 6.2
| 4.7
| 5.3
|-
| {{flag|French Third Republic|name=France}}
| 1.7
| 1.3
| 2.5
|-
| {{flag|Kingdom of Italy|name=Italy}}
|
| 0.9
| 3.0
|-
| {{flag|Sweden}}
|
| 3.1
| 3.5
|}

{| class="wikitable" style="margin:1em auto;"
|+ GNP of the [[Great Power]]s of Europe<br />(in billions [[United States dollar|USD]], 1960 prices)<ref name="kennedy-1">{{cite book|title=The Rise and Fall of the Great Powers|url=https://archive.org/details/risefallofgreatp00paul|url-access=registration|publisher=Fontana Press|author=Paul Kennedy|year=1989|page=[https://archive.org/details/risefallofgreatp00paul/page/219 219]|isbn=978-0006860525}}</ref>
! 
! 1830
! 1840
! 1850
! 1860
! 1870
! 1880
! 1890
|-
| {{flag|Russian Empire|name=Russia}}
| 10.5
| 11.2 
| 12.7 
| 14.4 
| 22.9 
| 23.2 
| 21.1
|-
| {{flag|French Third Republic|name=France}}
| 8.5 
| 10.3 
| 11.8 
| 13.3 
| 16.8 
| 17.3 
| 19.7 
|-
| {{flag|United Kingdom of Great Britain and Ireland|name=United Kingdom}}
| 8.2 
| 10.4 
| 12.5 
| 16.0
| 19.6 
| 23.5 
| 29.4 
|-
| {{flag|German Empire|name=Germany}}
| 7.2 
| 8.3 
| 10.3 
| 12.7 
| 16.6 
| 19.9 
| 26.4 
|-----
| {{flag|Austria-Hungary}}
| 7.2 
| 8.3 
| 9.1 
| 9.9 
| 11.3 
| 12.2 
| 15.3 
|-----
| {{flag|Kingdom of Italy|name=Italy}}
| 5.5
| 5.9
| 6.6
| 7.4
| 8.2
| 8.7
| 9.4
|}

===Austria-Hungary===
The global economic crisis first erupted in [[Austria-Hungary]], where in May 1873 the [[Wiener Börse|Vienna Stock Exchange]] crashed.<ref name="cycles-4"/> In Hungary, the panic of 1873 terminated a mania of railroad-building.<ref name="france-5"/>

===Chile===
In the late 1870s the economic situation in Chile deteriorated. [[Chilean wheat cycle|Chilean wheat exports]] were outcompeted by production in Canada, Russia and [[Argentina]] and Chilean copper was largely replaced in international markets by copper from the United States and Spain.<ref name=salazar>''Historia contemporánea de Chile III. La economía: mercados empresarios y trabajadores.'' 2002. [[Gabriel Salazar]] and [[Julio Pinto]]. pp. 25–29.</ref> Income from [[Chilean silver rush|silver mining in Chile]] also dropped.<ref name=salazar/> [[Aníbal Pinto]], president of Chile in 1878, expressed his concerns the following way:<ref name=salazar/>

{{cquote|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|author=[[Aníbal Pinto]], president of Chile, 1878.}}

This "mining discovery" came, according to historians [[Gabriel Salazar]] and [[Julio Pinto]], into existence through the conquest of Bolivian and Peruvian lands in the [[War of the Pacific]].<ref name=salazar/> 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.<ref name=salazar/>

Another response to the economic crisis, according to [[Jorge Pinto Rodríguez]], was the new pulse of [[occupation of Araucanía|conquest of indigenous lands]] that took place in [[Araucanía (historic region)|Araucanía]] in the 1880s.<ref name="salazar25-29">Salazar & Pinto 2002, pp. 25–29.</ref><ref>{{Citation
| last  = Pinto Rodríguez
| first = Jorge
| author-link = Jorge Pinto Rodríguez
| title = Crisis económica y expansión territorial : la ocupación de la Araucanía en la segunda mitad del siglo XIX
| journal = Estudios Sociales
| volume  = 72
| year    = 1992
}}</ref>

===France===
France's experience was somewhat unusual. Having been defeated in the [[Franco-Prussian War]], the country was required to pay £200 million in [[French indemnity|reparations]] to the Germans and was already reeling when the 1873 crash occurred.<ref name="cycles-4">{{cite encyclopedia|encyclopedia=Business Cycles and Depressions: An Encyclopedia|author=[[David Glasner]], Thomas F. Cooley|publisher=Taylor & Francis|year=1997|isbn=0-8240-0944-4|article=Crisis of 1873|url=https://archive.org/details/businesscyclesde00glas}}</ref> The French adopted a policy of deliberate deflation while paying off the reparations.<ref name="cycles-4"/>

While the United States resumed growth for a time in the 1880s, the [[Paris Bourse crash of 1882]] sent France careening into depression, one which "lasted longer and probably cost France more than any other in the 19th century".<ref name="france-4">{{cite book|title=France and the Economic development of Europe (1800–1914)|isbn=0-415-19011-8|publisher=Routledge|year=2000|pages=70–71|author8=Rondo E. Cameron, Mark Casson}}</ref> The Union Générale, a French bank, failed in 1882, prompting the French to withdraw three million pounds from the [[Bank of England]] and triggering a collapse in French stock prices.<ref name="cycles-2"/>

The financial crisis was compounded by diseases impacting the wine and silk industries<ref name="france-4"/> French [[capital accumulation]] and [[foreign direct investment|foreign investment]] plummeted to the lowest levels experienced by France in the latter half of the 19th century.<ref name="france-4-2">{{cite book|title=France and the Economic development of Europe (1800–1914)|isbn=0-415-19011-8|publisher=Routledge|year=2000|pages=198–199|author8=Rondo E. Cameron, Mark Casson}}</ref> After a boom in new [[investment bank]]s after 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.<ref name="france-4"/> French finances were further sunk by failing investments abroad, principally in railroads and buildings.<ref name="france-5">{{cite book|title=France and the Economic development of Europe (1800–1914)|isbn=0-415-19011-8|publisher=Routledge|year=2000|page=320|author8=Rondo E. Cameron, Mark Casson}}</ref> The French [[net national product]] declined over the ten years from 1882 to 1892.<ref name="france-6">{{cite book|title=France and the Economic development of Europe (1800–1914)|isbn=0-415-19011-8|publisher=Routledge|year=2000|page=457|author8=Rondo E. Cameron, Mark Casson}}</ref>

===Italy===
A ten-year [[tariff war]] broke out between France and Italy after 1887, damaging Franco-Italian relations which had prospered during [[Italian unification]]. As France was Italy's biggest investor, the liquidation of French assets in the country was especially damaging.<ref name="france-6"/>

===Russia===
The Russian experience was similar to the US experience{{snd}}three separate recessions, concentrated in manufacturing, occurred in the period (1874–1877, 1881–1886, and 1891–1892), separated by periods of recovery.<ref name="cycles-3">{{cite encyclopedia|encyclopedia=Business Cycles and Depressions: An Encyclopedia|author=[[David Glasner]], Thomas F. Cooley|publisher=Taylor & Francis|year=1997|isbn=0-8240-0944-4|article=Business cycles in Russia (1700–1914)|url=https://archive.org/details/businesscyclesde00glas}}</ref>

===United Kingdom===
{{Self-contradictory|othersection|talksection=Contradiction re UK|date=January 2018}}
{{further|Great Depression of British Agriculture}}
The United Kingdom, which had previously experienced crises every decade since the 1820s, was initially less affected by this financial crisis, even though the [[Bank of England]] kept interest rates as high as 9 percent in the 1870s.<ref name="cycles-4"/>

The 1878 failure of the [[City of Glasgow Bank]] in 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 an [[Land War#Irish Land Act 1870|1870 reform]], and the [[Irish Famine (1879)|1879 famine]], thousands of Irish [[tenant farmer]]s affected by depressed producer prices and high rents launched the [[Land War]] in 1879, which resulted in the reforming [[Irish Land Acts]].

===United States===
{{see also|Panic of 1873}}
[[File:US-GNP-per-capita-1869-1918.png|thumb|300px|[[Real versus nominal value (economics)|Real]] [[gross national product]] [[per capita]] of the United States 1869–1918]]
{| class="wikitable floatright"
|+ Estimated declines in United States manufacturing output in selected sectors (1872–1876)<ref name="cycles">{{cite encyclopedia|encyclopedia=Business Cycles and Depressions: An Encyclopedia|author=David Glasner, Thomas F. Cooley|publisher=Taylor & Francis|year=1997|isbn=0-8240-0944-4|article=Depression of 1873–1879|url=https://archive.org/details/businesscyclesde00glas}}</ref>
|-
! Industry
! % decline in output
|-
| [[Durable goods]]
| 30%
|-
| [[Iron]] and [[steel]]
| 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.<ref name="NBER1"/><ref>{{Cite journal | doi = 10.2307/1927196 | title = The Long-Wave Depression, 1873–79 | author = Fels, Rendigs | year = 1949 | pages = 69–73 | issue = 1 | volume = 31 | journal = The Review of Economics and Statistics | jstor = 1927196 }}</ref> Figures from [[Milton Friedman]] and [[Anna Schwartz]] show [[net national product]] increased 3 percent per year from 1869 to 1879 and real national product grew at 6.8 percent per year during that time frame.<ref>Milton Friedman, Anna Jacobson Schwartz. A monetary history of the United States, 1867–1960. Princeton University Press, 1971. p. 37</ref> However, since between 1869 and 1879 the population of the United States increased by over 17.5 percent,<ref>{{cite web | title = United States Census | url = http://www2.census.gov/prod2/statcomp/documents/HistoricalStatisticsoftheUnitedStates1789-1945.pdf | access-date =2010-07-19}}  If the census figures are accurate, it is 17.83 percent.</ref> 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.<ref name=NBER2>{{Cite web|url=https://www.nber.org/cycles/ |work=National Bureau of Economic Research |title=Business Cycle Expansions and Contractions |access-date=April 3, 2009 |url-status=dead |archive-url=https://web.archive.org/web/20080925210636/https://www.nber.org/cycles/ |archive-date=September 25, 2008 }}</ref>

The dramatic shift in prices mauled nominal wages {{snd}}in the United States, nominal wages declined by one-quarter during the 1870s,<ref name="titan-1">{{cite book|title=Titan|author=Ron Chernow|publisher=Vintage Books|year=1998|location=New York|isbn=1-4000-7730-3|page=[https://archive.org/details/titan00ronc_0/page/160 160]|url=https://archive.org/details/titan00ronc_0/page/160|author-link=Ron Chernow}}</ref> and as much as one-half in some places, such as [[Pennsylvania]].<ref name="appomattox"/> Although real wages had enjoyed robust growth in the aftermath of the [[American 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.<ref name="cambridge-1">{{cite book|title=The Cambridge Economic History of the United States|url=https://archive.org/details/cambridgeeconomi00stan_1|url-access=registration|publisher=Cambridge University Press|isbn=0-521-55307-5|year=2000|page=[https://archive.org/details/cambridgeeconomi00stan_1/page/223 223]|author8=Stanley L. Engerman, Robert E. Gallman}}</ref> The collapse of cotton prices devastated the already war-ravaged economy of the [[southern United States]].<ref name="reconstruction-3"/> Although farm prices fell dramatically, American agriculture continued to expand production.<ref name="cycles"/>

Thousands of American businesses failed, defaulting on more than a billion dollars of debt.<ref name="appomattox">{{cite book|title=Appomattox to Montmartre: Americans and the Paris Commune|author=Philip Mark Katz|publisher=Harvard University Press|year=1998|isbn=0-674-32348-3|page=167}}</ref> One in four laborers in New York were out of work in the winter of 1873–1874<ref name="appomattox"/> and, nationally, a million became unemployed.<ref name="appomattox"/>

The sectors which experienced the most severe declines in output were manufacturing, construction, and railroads.<ref name="cycles"/> 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.<ref name="cycles"/> 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.<ref name="cycles"/>

The [[Freedman's Savings Bank]] was 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 emancipated [[freedmen]].<ref name="reconstruction-2">{{cite book|title=[[Reconstruction: America's Unfinished Revolution - 1863-1877|Reconstruction: America's unfinished revolution, 1863–1877]]|author=Eric Foner|publisher=HarperCollins|year=2002|isbn=0-06-093716-5|pages=531–532}}</ref> In the early 1870s, the bank had joined in the speculative fever, investing in [[real estate]] and unsecured loans to railroads; its collapse in 1874 was a severe blow to [[African-Americans]].<ref name="reconstruction-2"/>

The recession exacted a harsh political toll on President [[Ulysses S. Grant]].  Historian [[Allan Nevins]] says of the end of Grant's presidency:<ref name=Nevins>[[Allan Nevins|Nevins, Allan]], ''Hamilton Fish: The Inner History of the Grant Administration'' (1936) [https://www.questia.com/PM.qst?a=o&d=94934148 online edition] 2:811{{dl|date=May 2024}}</ref>

{{Quote|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.<ref name=Nevins/>}}

Recovery began in 1878. The mileage of railroad track laid down increased from {{convert|2665|mi|km|abbr=on}} in 1878 to 11,568 in 1882.<ref name="cycles"/> 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.<ref name="cycles-2">{{cite encyclopedia|encyclopedia=Business Cycles and Depressions: An Encyclopedia|author=David Glasner, Thomas F. Cooley|publisher=Taylor & Francis|year=1997|isbn=0-8240-0944-4|article=Depression of 1882–1885|url=https://archive.org/details/businesscyclesde00glas}}</ref>

Business profits declined briefly  between 1882 and 1884.<ref name="cycles-2"/> The recovery in railroad construction reversed itself, falling from {{convert|11569|mi|km|abbr=on}} of track laid in 1882 to {{convert|2866|mi|km|abbr=on}} of track laid in 1885; the price of steel rails collapsed from $71/ton in 1880 to $20/ton in 1884.<ref name="cycles-2"/> Manufacturing again collapsed{{snd}}durable goods output fell by a quarter again.<ref name="cycles-2"/> The decline became [[Panic of 1884|a brief financial crisis]] in 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.<ref name="cycles-2"/> 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.<ref name="cycles-2"/> 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.<ref name="cycles-2"/>

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{{snd}}a rise of 13.1 percent or 2.6 percent per year. In short, a modest but definite rise, and scarcely a contraction.<ref> Milton Friedman and Anna  J. Schwartz, ''A Monetary History of the United States: 1867–1960'' (1963) pp. 39–44, 87.</ref>