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San José State University Department of Economics |
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applet-magic.com Thayer Watkins Silicon Valley & Tornado Alley USA |
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It is clear that the U.S. went through a severe economic depression during the period of 1893 to 1898, but the statistical apparatus did not exist at the time to precisely document it. Much after the fact the economist Simon Kuznets estimated the national income accounts for the period. The figures are shown below:
| YEAR | GROSS NATIONAL PRODUCT ($ billions) |
CONSUMPTION ($ billions) | NET CAPITAL FORMATION ($ billions) |
|---|---|---|---|
| 1889 | 12.0 | 9.59 | 1.13 |
| 1890 | 12.4 | 9.25 | 1.86 |
| 1891 | 12.9 | 9.91 | 1.73 |
| 1892 | 13.3 | 9.76 | 2.23 |
| 1893 | 13.3 | 10.30 | 1.56 |
| 1894 | 12.0 | 9.30 | 1.33 |
| 1895 | 12.9 | 9.95 | 1.60 |
| 1896 | 12.9 | 10.10 | 1.43 |
| 1897 | 13.9 | 10.70 | 1.71 |
| 1898 | 14.8 | 11.40 | 1.80 |
| 1899 | 16.4 | 12.50 | 2.00 |
| 1900 | 17.9 | 13.50 | 2.48 |
These estimates are in current year dollars so the real changes in output are not revealed. Nevertheless it is worthwhile to view the statistics graphically.
The cause of the depression was much in dispute at the time. A financial panic occured in 1893 starting with the financial failure of the Philadelphia and Reading Railroad in January, followed by the National Cordage Co. in May. A string of railroad failures continued in 1893 with the Erie Railroad going under in July, Northern Pacific in August, Union Pacific in October and finally the Atchison, Topeka and Santa Fe Railroad in December. As has happened in other times some politicians went on record stating that the American economy was in a high state of prosperity just before the financial panic began and 500 banks and 16,000 businesses declared bankruptcy.
While the financial might of the railroads constitutes only a part of the economy it does represent a major source of demand for some commodities such as steel. The figures below show the decline in production of the industries related to the railroads.
| YEAR | RAIL PRODUCTION (millions long tons) |
(STEEL PRODUCTION (million long tons) | LOCOMOTIVES PRODUCED | FREIGHT CARS PRODUCED |
|---|---|---|---|---|
| 1889 | 1.5 | 3.4 | 1,860 | 70,600 |
| 1890 | 1.9 | 4.3 | 2,300 | 103,800 |
| 1891 | 1.3 | 3.9 | 2,165 | 95,500 |
| 1892 | 1.6 | 4.9 | 2,012 | 98,100 |
| 1893 | 1.1 | 4.0 | 2,011 | 56,900 |
| 1894 | 1.0 | 4.4 | 695 | 17,000 |
| 1895 | 1.3 | 6.1 | 1,101 | 38,100 |
| 1896 | 1.1 | 5.3 | 1,175 | 51,200 |
| 1897 | 1.6 | 7.2 | 1,251 | 43,600 |
| 1898 | 2.0 | 8.9 | 1,875 | 99,800 |
| 1899 | 2.3 | 10.6 | 2,475 | 119,900 |
| 1900 | 2.4 | 10.2 | 3,153 | 115,600 |
The above material addresses only the matter of documenting the depression. The question of causes will be dealt with later.
(To be continued.)
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