Customer Reviews

Democracy in Desperation: The Depression of 1893 (Contributions in Economics and Economic History)

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I found Douglas Steeples and David O. Whitten book, "Democracy in Desperation," delightfully informative. Steeples and Whiten offer a "nuts and bolts" approach to understanding this remarkably important period. At the writing of this book, Dr. Douglas Steeples is "dean of the college of liberal arts and professor of history at Mercer University" (end page). Dr. David O. Whitten "is a professor of economics at Auburn University" (end page). Both men have written several articles and books.
Douglas Steeples and David O. Whitten argue that the Depression of 1893 is a major demarcation point in American history. Steeples and Whiten recount Frenchman Clement Juglar's 1892 published study of business cycles and his conclusion that panics and depressions are not aberrations but integral parts of industrial society. The authors also cite Joseph A. Schumpter's 1939 study, wherein Schumpter states the Panic of 1893 reflected new technology maximally exploited. According to Schumpter's thesis, the new technologies that were maximally exploited in the 1890s were railroads and agriculture.
By the 1890s, railroads had built beyond what the market could bear, and they began to fail. Accordingly, as the market corrected, all subsidiary industries also suffered. Schumpter, according to the authors, also points out farmers, with new the advent of labor saving agricultural machines, were similarly suffering. Steeples and Whiten build on the arguments made by Juglar and Schumpter. Steeples and Whiten show that the Panic of 1893 was very significant. It was, in the words of Frederick Jackson Turner - whom they cite, the closing of `"the first period of American history"' (p. 6). In the U.S., the Panic of 1893 was different from all similar market corrections there-to-fore. Industrial recessions prior to 1893 had impacted a minority of workers in the U.S. Because the U.S. had industrialized, the 1893 depression hurt more people than ever before. By 1893, for the first time in U.S. history, there were as many, if not more, industrial workers as there were farmers.
The authors explain 19th century banking structure and how it operated without a Federal Reserve System. They say short term capital frequently found its way from rural America to the New York Stock Exchange where it was invested until needed by the depositor. Rural banks sent money to regional city banks, these city banks sent money to New York banks, these NY banks, in turn, sent money to a few really large banks (the authors do not reveal which ones). The authors explain that this is called "pyramiding" and a natural circumstance of 19th century banking process. When the money was needed, the whole process worked in reverse. What worked for small scale demands did not work when there were large scale demands. Bankers naturally sought to sell stock before its market value sank below the value of the deposit, but more selling drove down the price of stock and provoked even more selling. Too many calls for money caused the market to collapse. This was occurring in the 1890s. Operating capital for business evaporated. The role of government in banking was tenuous as was the role of government in relief: "was it constitutional to be involved?" - this was a matter that was yet to be worked out. The Federal Reserve Act of 1913, a reform stemming from the 1893 depression, was a tenuous start towards banking reform.
To me, this book was very challenging, because it is an economic history. For instance, I read the following: "The proceeds were transferred to London even though call money and 60-90 day choice two-name paper there were ' and ' to ' , as against 1' and 2 ¾ to 3 percent in New York" (p. 177). I checked the internet for a definition of "two-name paper", and I am now completely satisfied that I still do not completely understand what the authors are saying. On several occasions I had to address outside references to gain complete understanding of the text, but the instance I cited above was the most troublesome. Never-the-less, I believe book was worth every minute I spent reading it.
Reading this book helped me realize that the "Great White Fleet" was built not merely on the argument presented by Mahan. While Mahan's argument was entirely persuasive to many who had the power to act, it was, more importantly, built contiguous with solutions to problems relating to the Depression of 1893 and to diplomatic issues arising with Brazil, Great Britain, Nicaragua, and Venezuela during the 1890s. Furthermore, it provided me with a glimpse of a U.S. foreign policy in Latin America that was more benevolent and contrasting starkly with Teddy Roosevelt's later "gun-boat diplomacy" with which I am more familiar.
Steeples and Whitten make use of substantial footnotes. These are excellently presented at the end of each chapter where they do not intrude on the narrative text but remain easily accessible. The author's bibliography includes both secondary and primary sources. Many of the primary sources are government reports and statistics which the authors readily cite in their narrative.
I found this book quite substantive and very worthwhile. I highly recommend this book to any one who wishes to better understand what was happening in the U.S. during the 1890s.