The Depression of 1882 to 1885

The years 1877, 1878, and the first half of 1879 constituted the sixth period of low prices. In 1878 the industries commenced to revive. The consumption of iron rose from 2,500,000 tons in 1878 to 4,900,000 tons in 1881. The stock of iron was soon exhausted; prices commenced to advance, in the spring of 1879, and within twelve months Scotch pig iron had advanced 84 per cent. in New York, No. 1 Foundry 148 per cent. in Philadelphia, and 125 per cent. in Cincinnati.

The unprecedented amount of manufacturing and construction contracts, placed while the low prices continued in 1878 and 1879, kept the mechanical industries at high tide well into the year 1882. The subsequent depression revealed itself gradually, and was not attended by a financial panic, although there were many important failures, several minor money flurries, and some Clearing House certificates issued in 1884. Railroad building, which was 11, 568 miles in 1882, the largest ever known up to that date, fell back to 6,741 miles in 1883.

The down grade continued steadily, from 1882 to 1885, when railroad building had fallen to 2,866 miles, and the consumption of iron had fallen to 4,348,844 tons. This depression lasted from three to four years. The industries did not commence to recover until 1886.

This depression was experienced by all the five industrial nations, and was purely industrial in character, if we except the minor money flurries in the United States and France, which can hardly be called panics. The depression is on record as having commenced in England a few months later than in the other four countries. It continued about four years in all five countries, and was so severe and long-continued that several government commissions were appointed to investigate its cause, yet, like the depressions of 1847 and 1867, because there was no great and general financial panic attending it to make it impressive, it is to-day hardly remembered in any of these countries.

Remarks On The Whole Period, 1832 to 1886

Up to this point we have considered three industrial depressions, known as the depressions of 1847, 1867, and 1882, during which there were in the United States no severe accompanying panics, and three, known as the depressions of 1837, 1857, and 1873, during which very severe financial panics occurred; but chronological history shows that in the three last named periods their
prominent events, namely, the revival in the volume of the industries, the abnormal advance in prices, the decline in the volume of the industries, the accumulation of unsold stocks, the fall in prices, and the recognized condition of industrial depression, had taken place from one to two years before the panics took place.

Among the characteristics common to all of these six depressions was a radical shrinking in the volume of the industries, without any universally recognized cause, and the shrinkage in each case commencing when both financial and industrial conditions appeared to be so prosperous that the public were almost unanimously predicting a long continuance of prosperity.

In the case of the three depressions which were accompanied by severe panics, the shrinkage in the volume of the industries commenced a long time before panic conditions appeared. In the 1837 period, the shrinkage amounted to more than 50 per cent. in 1836, a year before the panic. In the 1857 period, the shrinkage was greatest in 1854 and 1855, two and three years before the panic. In the 1873 period, the shrinkage commenced twenty-one months before the panic. The industrial depressions were existing facts before any sign of panic, in each of these three cases. The depressions were something distinct and apart from the panics, and would have occurred and run their course even if there had been no accompanying panic. The depressions which culminated
in 1847, 1867, and 1882, although not attended by severe financial panics, lasted as long as the three depressions cited above, which were attended by severe financial panics.

While it is true that industrial depressions do at times result from financial panics, just as they do at times result from war, pestilence, famine, or some other great calamity outside of the industries themselves, yet when this is the case, the cause is apparent to all. There is no mystery about such depressions.

But depressions which originate from panics are not the subject of this investigation. What the industrial nations are seeking to know is, what causes the depressions which take place in the absence of any recognized cause the depressions which come in the midst of "great prosperity and bright prospect for its continuance." What is the mysterious and powerful force which is so overmastering and irresistible that it overrides and submerges all the visible and powerful causes of prosperity? What is this cause, which is so obscure and mysterious as to escape notice, and which is so hidden and perplexing that it has baffled all the searchers, both national and
individual, who have for years endeavored to discover and expose it? What brings about these stupendous national calamities, which develop so mysteriously, which creep over and become fastened upon a country before they are even suspected, which transform industrial exhilaration into industrial gloom, and which result in a reduction of thousands of millions per annum in the earnings of the people? This is the kind of depression which the world has learned most to dread, and which so many of the nations have appointed government commissions to investigate in the hope of discovering their cause.

No one can make a careful analysis of this period of fifty-five years, between 1832 and 1887, without being profoundly impressed by the fact of how completely the price of iron and presumably of all other construction materials controlled the volume of construction. Wars, financial panics, etc., undoubtedly had their effect in accelerating or retarding the existing trend of business, just as everything else had its effect, but the combined effect of all these external things does not in a single instance appear to have changed the inexorable trend of investment construction. In this period, as well as all periods, large construction depends upon whether or not it can be produced at a cost which promises to pay a satisfactory revenue.

The six depressions we have just reviewed are six object lessons. They extend over a period greater than half a century, during which the industries of the country grew from an iron consumption of about 200,000 tons to a consumption of over 6,000,000 tons. This period was long enough to have insured the occurrence of almost everything which influenced the increase or decrease in the volume of business. During this period the country was under the control of two different political parties. Tariff was part of the time high, and part of the tune low; paper money was during long periods at par with gold, and at one time gold was worth two and one half tunes as much as paper money. The period covered time of war and time of peace; the fluctuations in the price of the necessities of life, of labor, and of construction materials, were enormous, and in the latter occurred no less than ten times. Many panics occurred; some of them were very severe, while some were so slight as to be now almost forgotten. It would be difficult to name any kind of occurrence or condition which affects business, that did not take place during that period. But in all these numerous and varying conditions it cannot be discovered by the most careful analysis that the six depressions occurred in any one of these five nations with, or allowing, any one of these conditions, except high prices of construction, while this condition preceded each one of the six depressions contemporaneously in all of the five industrial nations, with the same certainty that sunrise precedes sunset.