The Panic of 1873 was a severe economic crisis in the United States and Europe that lasted until 1879. It was triggered by a series of events, including overexpansion of the railroad industry, speculative investments, the failure of major banks and businesses, and the demonetization of silver. The panic led to a prolonged depression, widespread unemployment, and financial turmoil.
The U.S. government, under President Ulysses S. Grant and subsequent administrations, responded to the Panic of 1873 with a combination of measures, although the response was limited compared to later economic crises like the Great Depression. Here are some of the actions taken:
Resumption Act of 1875: The government passed the Resumption Act, which aimed to stabilize the economy by redeeming Civil War-era greenbacks (paper currency) in gold starting in 1879. This move was intended to restore confidence in the U.S. currency.
The Specie Payment Resumption Act of 1875: This act mandated that the government would redeem paper currency in gold, leading up to the resumption of the gold standard on January 1, 1879. The return to the gold standard was an attempt to restore monetary stability and credibility to the nation's currency.
Monetary Policy: The U.S. government attempted to control the money supply and credit expansion, but the economic conditions persisted due to a lack of centralized monetary policy and the reliance on a gold-backed system.
Limited Intervention: The government did not intervene significantly to provide direct relief or stimulus to those affected by the crisis. At the time, the prevailing economic philosophy was that of laissez-faire, which discouraged extensive government intervention in the economy.
Infrastructure Projects: To some extent, the government continued funding and promoting infrastructure projects such as the expansion of railroads, which provided some employment opportunities and economic activity during the depression.
Tariffs: The government maintained high tariffs on imported goods to protect American industries, a policy that had been in place before the Panic of 1873.
It's important to note that the response to the Panic of 1873 was more limited compared to modern government responses to economic crises. The prevailing economic thought during that period emphasized free-market principles and minimal government intervention, which limited the scope of direct government relief measures. As a result, the economic depression persisted for several years, and recovery was slow. It wasn't until the late 1870s and early 1880s that the U.S. economy began to recover and experience sustained growth.