The key to understanding the history of the 1890s was the depression that followed the Panic of 1893.  The depression dominated thought and shaped actions for the remainder of the decade.  The violence and social unrest at Homestead had served merely as an introduction; the reformist policies of Populism were only a suggestion of the bigger changes to come.

     The genesis of the depression came with the sudden failure of the Philadelphia and Reading Railroad in February 1893, which kicked off the first sign of financial panic.  By early April, other important firms closed their doors, and it became clear to everyone that the slide had begun.  In mid-April, a precipitous drop in the stock market underscored the seriousness of the situation, and by summer, the reversal in the state of the economy from the previous winter was complete.  No section of the country was spared from the paralysis.   Before the year was out, some 500 banks and nearly 16,000 business firms had gone into bankruptcy.  Samuel Gompers estimated the number of unemployed in December 1893 to be at 3 million.  The initial financial panic was soon over, but the heavier burdens of a full-scale depression lingered to stagger the nation.

     The depression reached bottom during 1894.   At that time, approximately twenty percent of the labor force was without work during the winter months of 1893-94; in Chicago alone, more than 100,000 men were unemployed and often homeless.  In city after city, police stations and other public buildings had to be opened at night to the jobless so that they might have some place to sleep.  Municipal and relief agencies strained to provide even the cheapest and simplest kind of food for the thousands who could no longer afford to buy their own.   During that terrible winter, relief expenditures in New York City alone ran as high as $5 million.  For the nation as a whole, the real income of the population dropped eighteen percent between 1892 and 1894.

     For a time in 1895, there were indications that an upswing in business activity and employment might be in the making, but instead, the economy took a new tumble in 1896.  Not until the new century opened would the economic machinery of the U.S. run smoothly again.

     Nothing illustrates better the pervasive belief in laissez faire than the character of the public action taken to offset the impact of the depression.  Businessmen and statesmen alike viewed dips in the business cycle as unfortunate, inexplicable interruptions in prosperity for which there was no governmental remedy and through which the nation must muddle as best it could.  (Only radical Populists suggested any departure from this attitude.)   As a result, when President Cleveland called Congress into special session, the only anti-depression recommendation he proposed was the repeal of the Sherman Silver Purchase Act of 1890.  The repeal did nothing to counter the depression, but it did alienate the many Democrats to whom the Sherman Silver Purchase Act was an important reform measure.

     One other reaction to the depression is familiar enough to us in the 1990s:  the search for blame.  Which party was responsible?  There were several explanations for the panic offered at the time.  As Cleveland's request for the repeal of the silver act made clear, each party blamed the other.  Labor ascribed the slump to capitalist greed.   Some private citizens, like Henry Adams, attributed it to Wall Street's "dark, mysterious, crafty, wicked, rapacious and tyrannical power...to rob and oppress and enslave the people."

     In fact, though, the explanation was both more obvious and less immediate.   The depression had been long in the making--the bankruptcy of a few prominent companies simply acted as the trigger.   One of the important causes was the inevitable decline in railroad construction boom that had been going on since the early 1880s.  The subsequent reduction in the number of orders for rail, steel, and other machinery brought about a contraction in the economy which soon spread to other industries.   The chronically depressed state of agriculture offered no counterweight and may actually have aggravated the fall in demand.   Moreover, European investors, hit hard by their own financial panic, began to withdraw their capital from the U.S.   In the single year of 1892, for example, $50 million in gold left the country.

     The depression sparked a kind of labor unrest and class antagonism that had been seen only occasionally before, as at Homestead in 1892 or in the violent railroad disputes of 1877.  To contemporaries, perhaps the most convincing measure of the breadth of discontent in the working class were the several "armies" of unemployed that marched on Washington in 1894 seeking jobs and relief.   The most famous of these "armies" was led by Jacob S. Coxey, a former Greenbacker and Populist.  The radical Coxey believed that government bore a responsibility for unemployment and should provide funds to put men to work building roads.   When told his idea would not get a hearing in Washington, he responded:  "We will send a petition to Washington with boots on."   By the time Coxey and 500 marchers arrived in Washington from Massilon, Ohio, at the end of March 1894, they were met by police, who attacked the marchers with clubs, injuring 50 people, including some bystanders.  Coxey and two other leaders were arrested for illegally carrying banners on the Capitol grounds and for walking on the grass.

     The attack on Coxey's army and the inglorious ending to the march were only the beginning of the industrial army movement.  Having struck a hopeful note in the midst of working-class despair, the idea spread.  All told, perhaps 17 industrial armies set out in 1894 from various localities to present petitions "with their boots on."   The larger armies were able to commandeer trains and throw scares into small towns through which they passed.  But what the conservatives found surprising about the armies was not even their actual behavior, reprehensible as it was.  The real revelation was the sympathy they received along the way.  Journalist Ray Stannard Baker wrote:  "I am beginning to feel that the movement has some meaning, that it is a manifestation of the prevailing unrest and dissatisfaction among the labor class.   When such an ugly and grotesque fungus can grow out so prominently on the body politic there must be something wrong."

     In the political history of the United States, the 1890s are significant because during this decade the political parties caught up with the economic revolution.   The resulting realignment of parties and voters not only made the Republicans the majority party of the nation for the first time, but set the stage for the social and economic reforms of the 20th century.

     The depression, climaxing after a decade of agrarian discontent, put the new Cleveland administration to tests that its conservative outlook could not meet.  The Cleveland administration proved inadequate to the demands of the new age of cities, factories, and political dissatisfaction.

     Cleveland's determination to keep the country on the gold standard was not shared by Congress, which preferred a bimetallic standard of gold and silver.   As a result, Congress would not grant the administration the necessary powers to replenish the gold reserves through long-term borrowing or by any other device suggested by the President.   In February 1895, after trying several ineffective means of stopping the drain, the administration turned in desperation to the banking houses of J.P. Morgan and August Belmont, which, for a sizable profit, secured gold from abroad.  This and other persistent efforts by the administration managed to stop the drain, and by January1896, it was evident that the gold standard had been saved.

     The crowning rebuff to the conservative Democrats--and their most dramatic failure--came in the congressional elections of 1894.   The transfer of seats that year from the Democratic to the Republican side of the House was the largest in history.  The Republicans now had an unprecedented majority of 132 seats.  In 24 states, not a single Democrat was elected, and in each of six others, only one Democrat was returned.  Without the ever-faithful and solid South, Democratic strength would have been almost wiped out.

     Impressed with the excitement of the presidential election of 1896, historians have underestimated the importance of the Congressional elections two years before.  The defeat of the Democrats in 1896 comes as no surprise once the tremendous popular switch to the Republicans in 1894 is recognized.  Indeed, the twin Republican victories in 1894 and 1896 mark one of the great divides in American political history.

     For Americans living in the second half of the 20th century, it is hard to fathom the central place the issue of free coinage of silver came to occupy in the politics of the 1890s.  On the one level, the silver problem was symbolic. Western and southern reformers saw in it their hopes for an improved society, based upon government concern for the welfare of the ordinary citizen.  This was true even though free silver would not have achieved all that the Populists and silver Democrats wanted.  But insofar as free silver did involve government indifference to the economy through the manipulation of the currency, it symbolized the drive for broader reforms.  Conversely, free silver represented everything abhorrent to the conservatives of the day:  it threatened established ways of operating the economy.  Yet, as important as the silver issue was as a symbol, it was also a real answer to a real problem that was not clearly recognized by either side.

     The "cheap-money" men complained not only about the rigidity of the money supply, but also blamed it for the decline in prices during the 1880s and 1890s.  By definition, a decline in prices meant an appreciation in the value of money, for as the prices of goods fall, each dollar purchases more.  Free silverites blamed the fall in prices and subsequent appreciation of the dollar on the scarcity of money, arguing that like any other commodity, money rose in value when there was not enough of it to satisfy the demand.  Greenbackers, free silverites, and inflationists in general all agreed that the low prices on farm products were the result of an insufficient supply of money.  (Actually, this reasoning is valid neither in theory nor in fact.   An increase in the supply of agricultural commodities, for example, would cause a fall in prices regardless of whether the money supply was adequate.)

     Despite the acuteness of the problems that the monetary policy of the United States presented to farmers and other debtors, the free coinage of silver was both an inept and inadequate remedy.  Using silver as a backing for paper money was little more than a tactical move by those who wanted inflation but were not prepared to go to the extreme of advocating fiat money or greenbacks.  Logically, the same arguments of a limited supply could be laid against silver as well as gold.  The underlying weakness of the free-silver position was that no one, professional economist or Populist dirt farmer, understood what is well known today--namely, that government by its own action can issue money, unrelated to its stock of silver or gold.

     Yet there were aspects of the silverites' case that were eminently sound and worthy of consideration.  One was their demand for a monetary supply that fluctuated in accordance with the needs of business and yet was stable.   In fact, events after 1896 generally bore out the silverites' contention by bringing about just the kind of monetary system they favored.   New discoveries of gold in the late 1890s increased the monetary supply and helped to raise prices.  Even more important was the establishment of the Federal Reserve System in 1913, which introduced the kind of flexible and responsive monetary and banking system that the farmers and Populists had been demanding for so long.   Nor is it an accident that after 1913 the long debate on currency and banking that ran all through previous American history finally came to an end.  With the Federal Reserve System, both sides in the historical debate received recognition in law and in the nation's banking institutions:  a fairly stable value for the dollar was combined with a banking system that ensured a money supply responsive to changes in business activity.

     Because the nature of the money supply affected everyone, the issue of free silver swallowed up all others as the election of 1896 approached.   Increasingly, in the eyes of Populists and anti-Cleveland Democrats, belief in the wonder-working properties of free silver became the test of a true reformer.  However, as a measure of reform, this equation turned out to be disastrous:  as the election was to demonstrate, not all those who were dissatisfied with the status quo held this belief, nor what was more important, did they think such an equation was valid.

     The way in which the silver issue enveloped all other reforms was best illustrated by the behavior of the Populist party in 1896.  Populism, as the platform of 1892 (Omaha platform) made evident, stood for a reform program considerably broader than free silver.  But many of the party members and leaders regarded the broad national interest in currency reform as a rare opportunity to unite all radicals and reformers in a common bid for power.  Free silver also presented an opportunity to gain support from the silver-producing West.  Hence, when the Democratic party nominated a fervent silverite, William Jennings Bryan, in the summer of 1896, many Populists eagerly embraced him as their own.

     The really decisive reason for Bryan's defeat should have been apparent from the start:  he could not capture the votes of the cities or of industrial labor.  It was all well for farmers and small businessmen to like a little inflation as a stimulus to business, but to workers, with a fixed income, free silver and inflation meant a rising cost of living. Moreover, since urban white-collar and professional workers were holders of bank accounts and insurance policies, they were creditors, to whom cheap money was anathema.

     The cities, where the industrial workers were concentrated, voted overwhelmingly Republican.  For the first time, Republicans made substantial gains in the cities of the Middle West. Bryan won in only 12 of 82 cities, and 7 of those cities were in the South and two in the silver West.  He even lost traditionally Democratic New York City, where the Republicans' campaign of a "full dinner pail" appealed to urban immigrants.  And for all of his talk about the unity of farmers and workers, Bryan was unable to make himself the spokesman of industrial discontent then permeating the nation's working class.  McKinley came closer.  Both Hanna and McKinley, for example, had good labor records.  In short, by appealing to immigrants and urban workers in general, the Republicans were dealing realistically with the new America; the Democrats and Populists were not.  By making their principal pleas to the rural population, they misjudged the direction in which the country was moving.   By the 90s, political decisions were being made in the cities.  In 1896, the decision went to the party that had frankly identified itself with the achievements of the Economic Revolution.

     Actually, the shift had been underway for some time.   As we have seen, neither party in the 1880s had been the favorite of the voters.  Before the depression of 1893, it appeared that the long-term popularity of the Democrats would swing the nation in the 90s behind the party of Jackson and Jefferson, but the depression changed that, and in 1894, a massive swing to the Republicans was underway, and confirmed in 1896 with the defeat of Bryan.

     The fact that makes the 1894 and 1896 victories significant is that from then on Republican victory became a habit.   For the next 16 years, without interruption, the party captured the House of Representative and the presidency.   Indeed, if one looked on the election of Woodrow Wilson and a Democratic Congress in 1912 and 1916, as exceptions, as one well might, then Republican ascendancy continued until 1932, when another revolution occurred in American politics.   For this reason, the elections of 1894 and 1896 constitute a watershed.  Not only had the indecisive era of American party politics ended, but a new era of Republican ascendancy had begun.  The shift was also a clear sign of the political consequences of the growth of the city and the factory, for the Republican ascendancy then and later was dependent on the changes wrought by the economic revolution of the Gilded Age.  

     Although the Populist Party never recovered from its fusion with the Democrats in 1896, it could take comfort in knowing that a large part of its 1892 program was enacted in the next decade.  In fact, the Populists helped to set the goals and programs of the progressive movement of the early 20th century.  (It is crucial to note, however, that the Progressive movement was not the Populist movement transformed.)  By 1920, the direct election of senators, the income tax, adequate railroad legislation--but not government ownership--the initiative and referendum, postal savings banks, and even a form of the Subtreasury Plan had all been written into law.