Economy CSI Series on Debt

An American History: Part VII

Off to see the Wizard - Silver and Greenbacks and Gold, Oh My!

By the Economy Team

How’s it going? Are you hanging in there?

The Civil War cost our country a lot in blood and treasure.

The Greenback remained the currency, even though some wanted to do away with it. In 1875, the Greenback Party would have none of that, campaigning for an increase in circulation of all that sweet green paper money and returned 14 members to congress in 1878, when it was decided to keep the number of dollars in circulation to the then current amount. In practice, the Gold Standard was in effect starting in 1873, when the silver dollar ceased to be the standard for our currency.

Thanks to the various gold rushes, our currency was once again backed by something and this time it was gold and only gold. If you were a silver miner you were not happy about this. If you were a Kansas farmer who hadn’t heard about the change in time to cash in the hoard of silver coins under the floor boards in the cabin, you were equally chagrined.

Unless you were an industrialist like this guy...
or had a monopoly on oil like this guy..

... times were pretty tough!

As Dickens said, “these were the best of times and the worst of times.”

Slaves became sharecroppers and essentially had to work for food. Rarely did they come out ahead on their crops and were indebted for the next year to the landowner who paid them more or less in provisions.

Tenant farmers did a little better, but not much. As for the factory workers, immigration increased to bring in more cheap labor. Women and children worked long hours without breaks and days off in sweat shop conditions. There were no unions to support them in their plight. The banks found ways to keep the farmers in debt, so it seems the later 1800s were pretty depressing. As for the US economy, oil became the boom resource. Cars were invented to run on the stuff. Railroad owners expanded and did well most of this time.

If you were rich, the 1890s were gay, but if you weren’t part of the gentry, you wanted leadership that would change course. It just wasn’t right that the counterfeiters were coming out ahead, finding ways to scam the secret service, but honest workers couldn’t make a living.

In 1896 William Jennings Bryan, a congressman from Nebraska, was chosen to run for president for the Democratic party. He was a strong voice against the gold standard. He said, “you shall not press down upon the brow of labor a crown of thorns. You shall not crucify mankind upon a cross of gold.” Bryan was the son of a Baptist minister who Teddy Roosevelt said would have made the best Baptist minister in the country, but he chose law and politics instead. Bryan was also a supporter of the movement to start unions, saying of striking coal miners in PA, “whether a man is a laboring man, a farmer or merchant, he must see the opportunities are constantly narrowing under the trust system.”

He ran again, unsuccessfully, in 1900, against the war in the Philippines. He referred to this war as “US Imperialism,” going on to say:

“if we steal a man’s purse, we are thieves. If we steal twelve hundred islands we are patriots. If you steal a man’s money you will be sent to the penitentiary. If you steal his liberty you will be sent to the White House.”

Needless to say, Bryan scared off a large number of voters. He never became president. But as a lawyer and orator he did a heck of a job!

Andrew Carnegie agreed with Bryan about the US imperialism thing, but not with his view on economics. He said, “Bryan is much too earnest, too sincere and true to be entrusted with power, filled as he is with ideas subversive of economic laws.” Carnegie made his millions running his steel business. His company didn’t treat the workers very well. When his workers went on strike in 1892, while Carnegie was out of the country, violence broke out between hired company thugs and striking workers. Carnegie didn’t try to stop it. He didn’t recognize labor unions as legit.

You can see, gentle reader, why he and Bryan didn’t see eye to eye on economics. Carnegie did have a change of heart in his later years, selling the company and becoming a philanthropist. He gave away $350 million, becoming a role model for the likes of Warren Buffett and Bill Gates’ father, aka Bill Gates. Carnegie said, “a man who dies rich, dies disgraced.” He believed this country made him rich and he needed to give back in ways that benefited the common good.

Another thing happened in by the turn of the century. The gold standard became law.

I’ll bet you didn’t know, oh curious one, that The Wizard of Oz was written as an allegory for these economic times, not recognizing silver along with gold to back our currency.

Another little known fact is that by the 1890s, banking had become very important in the US and people wrote more and more checks. According to Davies,” in 1913, after several bank failures in New York and growing public unease about concentration of financial power in a few hands,” more oversight was needed. The Federal Reserve System was established to provide more supervision to banking.

This guy was president for most of the years before the establishment of the FED and was known as a “trust buster.” Guys like Carnegie and Rockefeller didn’t like him very much. He believed government had a hand in doing a great deal more for the common good of the people and the country.

Next time… we hit a hard landing, relying on another Roosevelt to figure out what to do about it….


Links and Sources
Tenant farmers - Mississippi Historical Society
The Wizard of Oz - National Council on Economic Education
OZ allegory - Minnesota Public Radio

Additional Sources
US Farm Credit - PCA's and Farm Credit System
Dr. Fred E. Foldvary - Real Estate Cycles
Wikipedia - Crime of 1873 - Fourth Coinage Act
The History of Money - R. Davies
Greenback - The Almighty Dollar and the Invention of America - J. Goodwin

Images
Mississippi Historical Society - Sharecropper Image
Over the Rainbow, by Peter Dreier - El Cerrito High School - William Jennings Bryan Image
Library of Congress Exhibitions - Wizard of Oz Book Cover Image
Whitehouse.gov - Theodore Roosevelt Image and Information
PBS - Andrew Carnegie Image and Information
Wikipedia - John D. Rockefeller Image and Information