The Politics of Economic Crises: The Panic of 1873, the End of Reconstruction, and the Realignment of American Politics

Abstract

On September 18, 1873, the announcement of Jay Cooke and Company's bankruptcy sent Wall Street to a panic, and the country to a long, harsh depression. Americans interpreted this economic crisis in the light of the acrimonious financial debates born of the Civil War—the money question chief among them. The consequences transformed American politics. Ideologically ill-equipped to devise cohesive economic policies, political parties split dangerously along sectional lines (between the Northeast and the Midwest). Particularly divided over President U.S. Grant's veto of the 1874 Inflation Bill, the Republican Party decisively lost the 1874 congressional elections. As a Democratic majority in the House spelled the doom of Reconstruction, the ongoing divisions of both parties on economic issues triggered a political realignment. The dramatic 1876 elections epitomized a new political landscape that would last for twenty years: high instability in power at the national level and what has been described as the “politics of inertia.” Therefore, by closely following the ramifications of the 1873 panic, this article proposes an explanation of how an economic crisis transformed into a pivotal political event.

Shaping the rise of brotherhood: Social, political, and economic contexts and the “Golden Age of Fraternalism”

“…Panics, thus, were a threat during the entire Golden Age. Given how widespread fraternal organizations' memberships were, as well as the attraction of fraternalism to middle-and upper-class men with money to spend (Carnes 1989;Dumenil 2014Dumenil [1984), it seems unlikely that fraternal orders were fully insulated from the effects of bank panics (see Wicker 2000) and the resultant political battles (e.g., Barreyre 2011;Carson and Roberts 2005, p. 480;Eichengreen et al 2017). The financial struggles caused by these economic downturns likely resulted in a decreased demand for fraternalism, as some members could no longer afford membership fees and the pool of potential members found themselves less financially able to join.…”

“…Panics, thus, were a threat during the entire Golden Age. Given how widespread fraternal organizations’ memberships were, as well as the attraction of fraternalism to middle‐ and upper‐class men with money to spend (Carnes 1989; Dumenil 2014[1984]), it seems unlikely that fraternal orders were fully insulated from the effects of bank panics (see Wicker 2000) and the resultant political battles (e.g., Barreyre 2011; Carson and Roberts 2005, p. 480; Eichengreen et al. 2017).…”

The Oneida Community and the utility of liberal capitalism

“…Public perception of the crash and depression engendered monetarist and other political activity among small-scale agriculturalists, rejuvenated the Democratic Party, and disrupted social reconstruction within the former slave states. 40…”

American Political Development and Political History

“…Scholarship by political historians on Congress is notoriously unsystematic and can benefit from the rigorous analysis of voting, agenda-setting, and institutional rule-making-topics at which political scientists (many of whom are not APD practitioners) excel (Katznelson 2013;Jenkins and Stewart 2013;Katznelson and Lapinski 2006;Zelizer 2004;Katznelson and Milner 2002;Poole and Rosenthal 1997;Binder 1997). In addition, and with a few conspicuous exceptions (Barreyre 2011;Richardson 2007), political historians have proved reluctant to follow the lead of APD practitioners and underscore the influence of regionalism on public policy (Bensel 2000(Bensel , 1984. This is true despite the distinguished pedigree of regionalism in historical scholarship, a pedigree that goes all of the way back to the "sectionalist" school pioneered by Frederick Jackson Turner, one of the founders of the historical profession.…”