This week, President Barack
Obama won re-election in a
victory that so surprised many of his ideological opponents that they have
spent the hours since wailing that the country is going to wrack and ruin.
With a divided and polarized government, and a battle looming over a “fiscal
cliff” of more than $600 billion in tax increases and spending cuts
scheduled for next year, Obama faces a rocky term ahead -- even assuming his
Republican opponents negotiate in good faith.
But good faith fiscal negotiation isn’t something a president can always
count on. In 1892, a dramatic Democratic victory prompted Republicans to
sabotage the economy in order to ruin the incoming administration.
Then, as now, Republican insiders couldn’t believe that misguided voters had
bucked the wise business leaders who backed the Republican incumbent. At the
annual meeting of the New
York Chamber of Commerce,
held at the fancy Delmonico’s restaurant shortly after the election, members
commiserated over vintage wine and an expensive dinner. Republican railroad
baron Chauncey Depew snarled to his comrades about the Democrats who had
just taken over Congress and the White House for the first time since the
Civil War. “Business interests” were dangerous, he warned, and the Democrats
had better be careful.
Outgoing President Benjamin Harrison and his men had presided over what they
dubbed a “businessman’s administration.” The nation’s industrial giants ran
their corporations without the nuisance of foreign competition, thanks to a
high tariff wall the Republicans had maintained since 1861. Safe behind this
wall, men like Andrew Carnegie and J.D. Rockefeller could carve up markets
and charge whatever prices they wanted. When workers and farmers complained
that high prices were ruining them, the Republican Congress responded in
1890 by raising rates even higher. The Harrison administration had been
“beyond question the best businessman’s administration the country has ever
seen,” the members of one Republican business association insisted.
Farmers and workers agreed, and they turned away from the Republican Party.
In 1892, voters re-elected Democrat Grover Cleveland (who
had already served a term as president from 1885 to 1889) to the White House
on a promise to reform the tariff that protected big business. They also
elected a Democratic Congress.
Republicans were outraged. The Democrats would destroy the economy, they
predicted. Their policies would throw people out of work. The unemployed
would starve in the streets. But, the staunchly Republican Chicago Tribune
mused, “perhaps the working classes of the country need such a lesson.”
Businessmen set out to teach it to them. Although economic indicators
remained steady, Republicans trumpeted that businessmen feared a coming
catastrophe. The Democrats had only won with the votes of “socialists and
anarchists,” Republican Senator Henry Teller of Coloradorailed.
Such men would deliberately create rampant inflation to wipe out their
debts. Or they might slice away the tariffs altogether, throwing industry
into a global market where foreign competition would instantly undercut it.
Businesses would fail overnight. Newspapers warned investors to avoid
stocks, which could only plummet under the new administration.
Within days of the election, Wall Street was feeling a strain and gold was
flowing out of the country as foreign investors brought their money home.
“WALL STREET DAZED,” said a Chicago Tribune headline. “Republican
millionaires are in the dumps.”
The situation deteriorated rapidly. “OPERATORS ABANDON HOPE,” announced the
Washington Post in mid-February. J.P. Morgan rushed to Washington to beg the
president to issue bonds to replenish the Treasury. But Harrison rebuffed
him, and Treasury Secretary Charles Foster airily announced that the
Republicans were only responsible for the nation’s finances until March 4,
Inauguration Day. All they had to do was “avert a catastrophe” until then.
Harrison’s men didn’t quite make it. On Feb. 20, 1893, Wall Street crashed,
taking more than $20 million with it. The next day, the plunge continued.
Businesses folded overnight, starting the Panic of 1893. Over the next two
years, the country convulsed with riots, strikes, and marches on Washington by
farmers and workers demanding relief.
Republicans had set out to sow fear and panic in advance of the transfer of
power. It worked. The crisis hit in the last days of the Harrison
administration, but the Republicans successfully blamed the chaos of
1893-1894 on the Cleveland administration and the new Congress. The falling
wages, unemployment, business failures, strikes and desperation all proved
what they had always said: Democrats destroyed the economy.
As they planned for midterm elections in 1894, the National Republican
Congressional Committee published a “Campaign Text Book” promising that a
new Congress with their party in charge would restore the nation’s economic
health. Businessmen would no longer worry about the safety of their money,
knowing that Republicans would legislate in their favor. With business safe,
the economy would recover. Workers would have jobs again. This all added up
to one conclusion: Republican government was the only way to ensure a sound
Although the economy was slowly improving by mid-1894, voters found this
argument persuasive. The 1894 election remains the largest midterm turnover
in the nation’s history. Republicans gained an astonishing 130 seats in the
House and regained control of the Senate. The economy recovered, in part
because of increased investment, in part because of the discovery of gold in
Mostly, though, it recovered because investors had confidence again. With
the election results, “American manufacturers and merchants and business-men
generally will draw a long breath of relief,” the Chicago Tribune promised.
While big-business Republicans had managed to scuttle the Democrats and
regain control of the government, their victory was short lived. Within a
decade, younger members of their own party, led by Theodore Roosevelt, would
challenge the Old Guard’s determination to promote business at the expense
of workers and farmers. Unlike the Democrats, they would succeed.
After an election fought largely over Obama’s handling of the economy, it’s
hard not to note the similarities between 1892 and 2012. And the fight over
taxes, spending and jobs will only intensify in the months to come. Noting
the relative positions of Benjamin Harrison and Theodore Roosevelt in our
national memory, though, might encourage Republicans to consider a more
(Heather Cox Richardson is a professor of history at Boston College and the
president of the Historical Society. The opinions expressed are her own.)
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To contact the writer of this article: Heather Cox Richardson at firstname.lastname@example.org.
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