The Journal of the Gilded Age and Progressive Era

Theme: Booms, Busts, and the Gilded Age

The Politics of Economic Crises: The Panic of 1873, the End of Reconstruction, and the Realignment of American Politics1

Nicolas Barreyrea1 c1

a1 Université Paris Ouest Nanterre


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.

(Online publication September 28 2011)

Nicolas Barreyre is an associate professor of American history at the University of Paris Ouest Nanterre. His current manuscript is tentatively entitled “Of Gold and Freedmen: Midwestern Sectionalism and Reconstruction, 1865–77.” His research deals with political economy, space, and the American state.


1 This article greatly benefited from the comments of many fine scholars who have either read or heard it at different stages. I particularly wish to thank Margo Anderson, Richard Bensel, Pierre Gervais, Jean Heffer, Richard John, and Scott Nelson for their very helpful input.