One of the worst economic crises to hit the US was the Panic of 1893. The situation was so severe that May 5, 1893, is often referred to as the 'Industrial Black Friday' by historians.
Just like the situation in 1873, this economic crisis was caused due to bank failures and financial crisis in railroad companies. This crisis lasted till 1897. This crisis is considered as the greatest economic crisis in US history, bar the Great Depression.
Summary and Causes
During the 1880s, the US was progressing economically, and railroad companies were flourishing. Silver began to flood the American market. But problems arose when the Philadelphia and Reading Railroad went bankrupt on February 23, 1893.
Stephen Grover Cleveland was the President of America at that time; in fact the company went bankrupt just ten days before Cleveland's second inauguration. As soon as he assumed his position, the President directly dealt with the crisis, and convinced the Congress to annul the Silver Purchase Act, as he felt that this Act was the main cause of the crisis.
But conditions began to worsen, and, fearing the worst, people started withdrawing their money from the banks. This led to the closure of banks, as now the banks went bankrupt. Due to similar falls in Britain and Continental Europe, foreign investors sold off American stocks.
The National Cordage Company also went into receivership, and the value and demand for silver went down. One by one, several banks and industries went bankrupt, followed by several railroad companies as well.
Unemployment became a major issue, and brought the people out on the streets, protesting and going on strikes. The President did little to help the economy, as he felt that the business cycle was a natural occurrence and that politicians should not poke their nose into such matters. The crisis finally came to an end when McKinley became the President.
The section that was most affected was the farmers. This was due to the fall in the price of the crops that were usually exported―cotton and wheat. A large number of people became unemployed as several industries closed down. The Democrats were blamed for this crisis
As demand for silver went down, several silver mines also closed down, and the railroads which used to serve the mines also went out of business. People started moving to cities such as Los Angeles, Portland, Salt Lake City, San Francisco, and Seattle.
Due to the fall in the mining industries, towns which were completely dependent on mines went into a severe downward spiral. Conditions began to improve after the Republican candidate, McKinley, became the President in the year 1897.