It was noticeable, also, that the wage earners tended to concentrate. The laborers engaged in manufacturing were to be found, for the most part, in the Northeast, and especially in such leading industrial cities as New York, Chicago and Philadelphia. Furthermore, the development of the factory system and the consolidation of many small companies into a few great ones tended to localize the labor problem still further—in a relatively small number of plants. The concentration of industry in great factories where large numbers of workers labored side by side ended the paternal care which the old-time employer had expended upon his employees. With the introduction of machinery, the danger of accidents due to the ignorance or carelessness of fellow workmen increased. The use of mechanical appliances also gave opportunity for the employment of women and children, and thus raised the question whether any restrictions ought to be placed upon the employment of these classes of people. The construction of factories, their ventilation, sanitary appliances, and safe-guards for health and comfort became subjects of importance.

With the example of consolidation before them that was presented by the railroads and the corporations, it was inevitable that the wage earners should organize for their protection and advancement. Labor organizations of wage earners have existed in the United States since 1827, and between that time and 1840 came a considerable awakening among the laboring classes which was part of a general humanitarian movement throughout the country. Robert Owen, an English industrial idealist, had visited this country about 1825 and provided the initiative for a short-lived communistic settlement at New Harmony, Indiana. Similar enterprises were established at other points; the most famous of these was that at Brook Farm in Massachusetts, which enlisted the interest and support of many of the literary people of New England. The expanding humanitarian and idealistic movement was cut short by the Civil War, but the development of industrialism went on uninfluenced by the spirit of social progress which might have permeated it. After reconstruction was over, a new generation had to become impressed with the evils which needed correction and to set itself to the task which civil strife had thrust aside.

The need of a responsible organization of wage earners was indicated by the career of the Molly Maguires. The Molly Maguires constituted an inner circle of Irish Catholics who controlled the activities of the branches of the Ancient Order of Hibernians in the hard-coal counties of eastern Pennsylvania. During the war and immediately after it the group gained a little power in local politics, and also undertook to punish mine owners, bosses and superintendents who offended members of the Order. Intimidation became common, and even murder was resorted to until the region was fairly terrorized. It seemed impossible to combat the Mollies because their activities were shrouded in secrecy. Usually, for example, when a murder was to be committed, a member would be brought in from an outside district in order that he might not be recognized if discovered, and he would be aided in escaping after the crime. Finally the president of the Philadelphia and Reading Railroad procured a Pinkerton detective named James McParlan who went into the region and remained for two years. During this time he posed as a fugitive from justice and as a counterfeiter, became a member of the Order, a confidant of the Molly Maguires, and collected evidence. Armed with the knowledge acquired by McParlan, the officials were able to arrest and convict twenty-four criminals, of whom ten were executed, and the career of the Mollies came to an end.

The activities of the Molly Maguires were symptomatic of what might occur throughout the ranks of labor during the confused period of adjustment after the war, and yet they were temporary and local in their effect on the development of the labor movement. The history of the great labor controversies after the war properly begins with the Knights of Labor, an association which originated in Philadelphia in 1869 as the result of the efforts of a garment cutter named Uriah S. Stephens.[2] In the beginning, the affairs of the Knights were veiled in dense secrecy; even the name of the society was never mentioned but was indicated by five stars—*****. As the number of members increased, however, all manner of disquieting and untruthful rumors spread concerning its purposes, so that the element of secrecy was done away with in 1881 and a declaration of principles was made public. The fundamental purpose of the Knights was the formation of an order which should include all branches of the wage earners and which should aim to improve their economic, moral, social and intellectual condition. Emphasis was placed, that is to say, on the welfare of the laboring classes as a whole, rather than upon that of any particular trade or craft. The organization was centralized and the interests of the group were developed on a national scale. The growth of the association was extremely rapid at times, reaching a climax in the middle eighties when about 700,000 members, both men and women, made it a power in industrial disputes. Some of the members taken in at this time were extremists—European anarchists, for example—who urged a violent policy and got almost if not quite out of control of the officers during 1886. In the late eighties the membership dwindled rapidly, owing to the failure of strikes instituted by the order, and its place and influence were largely taken by the American Federation of Labor.

The latter body was the outgrowth of a convention held in Pittsburg in 1881, but it did not adopt its final name until 1886. Its purpose was to group labor organizations of all kinds, leaving the government of each affiliated body with the body itself. Each of the members of the Federation is composed of workers in a given trade or industry, like the International Typographical Union, the United Mine Workers, and many others. The annual convention is composed of delegates from the constituent societies. The growth of the organization was rapid and continuous. Coincidently with the expansion of the Knights of Labor and the growth of the American Federation came the great development of the labor press. Professor Ely estimated late in the eighties that possibly five hundred newspapers were devoted to the needs of the labor movement. The numerous farmers' organizations, typified by the Patrons of Husbandry, are other examples of the growing tendency toward cohesion among the less powerful classes. Indeed, the Grange originated only a year earlier than the Knights of Labor, and like it was a secret order.

The wage earners, then, were rapidly becoming class-conscious. They had found conditions which seemed to them intolerable, had formed organizations on a national scale and had drawn up a definite program of principles and reforms. The exact grievances which inspired the Knights, the Federation and other less important organizations are therefore of immediate importance.

In order to secure for the wage earner a sufficient money return for his work, and sufficient leisure for the education of his intellectual and religious faculties, and to enable him to understand and perform his duties as a citizen, the Knights demanded the establishment of bureaus of labor for the collection of information; the reservation of the public lands for actual settlers; the abrogation of laws that did not bear equally on capital and labor; the adoption of measures for the health and safety of the working classes; indemnity for injuries due to the lack of proper safeguards; the recognition of the incorporation of labor unions; laws compelling corporations to pay laborers weekly; arbitration in labor disputes; and the prohibition of child labor. The Knights of Labor also favored state ownership of telegraphs and railroads, as well as an eight hour working day. The purposes of the American Federation scarcely differed from this program, although its methods and its form of organization were quite distinct.

At the present time, when most of these demands have been met in one degree or another, it is difficult to see why there should have been delay and contention in agreeing to a program which, so far as it deals with labor problems pure and simple, appears both modest and reasonable. But the state of mind of a large fraction of the nation was not in accord with ambitions which doubtless seemed excessively radical. Fundamentally a great portion of the propertied classes held a low estimate of the value and rights of the laboring people, as well as of the possibilities of their development, and feared that evil results would follow from attempts to improve their condition. The employment of children in factories, it was thought, would inculcate in them the needed habits of industry, and the reduction of the working hours would merely provide time which would be spent in the acquirement of vicious practices. If, in addition, the employers opposed such changes as the abolition of child labor and the reduction of the working day to eight hours on the ground of the financial sacrifice which seemed to be involved, their attitude was in keeping with the ruthless exploitation of the human resources of the country which was common during this period. It should be remembered, too, that the lofty conception which most Americans held of the opportunities and customs of their country stood in the way of a frank study of conditions and an equally frank admission of abuses. For decades we had reiterated that America was the land of opportunity, that economic, political and social equality were the foundations of American life and that the American workingman was the best fed and the best clothed workingman in the world. In the face of this view of industrial affairs it was difficult to be alert to manifold abuses and needed reforms. To one holding this view of affairs—and it was a common view—the laborer who demanded better conditions was unreasonable and unappreciative of how "well off" he was. Hence the blame for the labor unrest was frequently laid on the foreigner, who was supposed to bring to America the opposition to government which had been fostered in him by less democratic institutions abroad. Undoubtedly immigration greatly complicated industrial conditions, as has been indicated, yet essentially the labor question arose from the upward progress of a class in American society and was as inevitable, foreigner or no foreigner, as the coming of a new century.

Two illustrations will throw light upon some of the demands which the wage earners frequently presented. Writing in August, 1886, Andrew Carnegie, the prominent steel manufacturer, discussed the proper length of the working day. Every ton of pig-iron made in the world, with the exception of that made in two establishments, he asserted, was made by men working twelve hours a day, with neither holiday nor Sunday the year round. Every two weeks it was the practice to change the day workers to the night shift and at that time the men labored twenty-four hours consecutively. Moreover, twelve to fifteen hours constituted a day's work in many other industries. Working hours for women and children had almost equally slight reference to their physical well-being.

The "truck-system" was a less widespread abuse, but one that caused serious trouble at certain points. Under this plan, a corporation keeps a store at which employees are expected to trade, or are sometimes forced to do so. Obviously such a store might be operated to the great benefit of the workman and without loss to the employer, but the temptation to make an unfair profit and to keep the laborer always in debt to the company was very great. A congressional committee which investigated conditions in Pennsylvania in 1888 found that prices charged in company stores ran from ten per cent. to 160 per cent. higher than prices in other stores in the vicinity, and that a workman was more likely to keep his position if he traded with the company.

The most insistent cause of industrial conflict was the question of wages. Forty-one per cent. of all the strikes between 1881 and 1900 were for more pay; twenty-six per cent., for shorter hours. Between the close of the war and the early nineties, industrial prosperity was widespread except for the period of prostration following 1873 and the less important depression of 1884. Not unnaturally the laborer desired to have a larger share of the product of his work. The individual, however, was impotent before a great corporation, when the wage-scale was being determined; hence workmen found it advantageous to combine and bargain collectively with their employer, in the expectation that he would hesitate to risk the loss of all his laboring force, whereas the loss of one or a few would be a matter of indifference.

In the meanwhile, a little ameliorative labor legislation was being passed by state legislatures and by Congress. A Massachusetts law of 1866 forbade the employment of children under ten years of age in manufacturing establishments, prohibited the employment of children between the ages of ten and fourteen for more than eight hours per day, and provided that children who worked in factories must attend school at least six months in the year. In 1868 a federal act constituted eight hours a day's work for government laborers, workmen and mechanics, but some doubt arose as to the intent of part of it and the law was not enforced. In many states eight-hour bills were introduced, but were defeated in all except six, of which Connecticut, Illinois and California were examples, and even in these cases the laws were not properly drawn up or were not enforced. In 1869 a Bureau of Statistics of Labor was established in Massachusetts which led the way for similar enterprises in other states. It collected information concerning labor matters and reported annually to the legislature. In 1874 a Massachusetts ten-hour law forbade the employment of women and minors under eighteen for more than sixty hours a week, although refraining from the regulation of working hours for men. In 1879, in imitation of English factory acts, Massachusetts passed a general law relating to the inspection of manufacturing establishments. It provided that dangerous machinery must be guarded, proper ventilation secured, elevator wells equipped with protective devices and fire-escapes constructed. Other states followed slowly, but legislation was frequently negatived by lack of effective administration. In brief, then, agitation previous to 1877 had resulted in the passage of a few protective acts, but even these were restricted to a few states and were not well enforced. It was, therefore, more than a mere coincidence that the first general strike movement spread over the country in this same year, 1877.

It will be remembered that the great railroad strikes of that year extended over many of the northern roads but caused most trouble in Martinsburg, West Virginia, Pittsburg and other railway centers. Much property was destroyed, lives were lost, and the strikers failed to obtain their ends.[3] Other effects of the controversy, moreover, made it an important landmark in the history of the labor question. The inconvenience and suffering which the strike caused in cities far distant from the scene of actual conflict indicated that the transportation system was already so essential a factor in welding the country together that any interruption to its operation had become intolerable. The hostility of some of the railway managers to union among their laborers and the rumors that they were determined to crush such organizations augured ill for the future. The hordes of unemployed workmen and the swarms of tramps which had resulted from the continued industrial depression of 1873 insured rioting and violence during the strike, whether the strikers themselves favored it and shared in it or not. The destruction of property which resulted from the strike caused many state legislatures to pass conspiracy laws directed against labor; more attention was paid to the need of trained soldiers for putting down strikes, and the construction of many armories followed; and the courts took a more hostile attitude toward labor unions. Equally important was the effect on the workmen themselves. When the strike became violent and the state militia failed to check it, the strikers found themselves face to face with federal troops. President Hayes could not, of course, refuse to repress the rioters; nevertheless his action aligned the power of the central government against the strikers, and seemed to the latter to align the government against the laborers as a class. Of a sudden, then, the labor problem took on a new and vital interest; workingmen's parties "began to spring up like mushrooms"; and the laboring men saw more clearly than ever the essential unity of their interests.

Industrial unrest increased rather than diminished during the prosperous eighties; for the first five years of the decade, strikes and lockouts together averaged somewhat over five hundred annually. The climax came in "the great upheaval" of 1884 to 1886.[4] In the latter year nearly 1600 controversies involved 610,024 men and a financial sacrifice estimated at $34,000,000. Early in May, 1886, occurred the memorable Haymarket affair in the city of Chicago. The city was a center of labor agitation, some of it peaceful, some of it in the hands of radical European anarchists whose methods were shown in a statement of one of their newspapers, The Alarm, on February 21, 1885:

Dynamite! Of all the good stuff, this is the stuff. Stuff several pounds of this sublime stuff into an inch pipe ... plug up both ends, insert a cap with a fuse attached, place this in the immediate neighborhood of a lot of rich loafers ... and light the fuse. A most cheerful and gratifying result will follow.

On May 1 strikes began for the purpose of obtaining an eight hour day. During the course of the strike some workmen gathered near the McCormick Reaper Works; the police approached, were stoned, and retorted by firing upon the strikers, killing four and wounding many others. Thereupon the men called a meeting in Haymarket Square to protest against the action of the police; in the main they were orderly, for Mayor Carter Harrison was present and found nothing objectionable. Later in the evening, when the Mayor and most of the audience had left, remarks of a violent nature seem to have been made, and at this point a force of 180 police marched forward and ordered the meeting to disperse. Just then a bomb was thrown into the midst of the police, killing seven and wounding many others. The entire nation was shocked and terrified by the event, as hitherto anarchy had seemed to be a far-away thing, the product of autocratic European governments. The thrower of the bomb could not be discovered, but numerous anarchists were found who themselves possessed such weapons or had urged violence in their speeches or writings. Eight of them, nearly all Germans, were tried for murder on the ground that the person who threw the bomb must have read the speeches or writings of the accused anarchists and have been thereby encouraged to do the act. The presiding judge, Joseph E. Gary, was of the opinion that the disposition in the guilty man to throw the bomb was the result of the teaching and advice of the prisoners. The counsel for the accused declared that since the guilty person could not be found it was impossible to know whether he had ever heard or read anything said or written by the prisoners, or been influenced by their opinions. Eventually seven anarchists were convicted, of whom four were hanged, one committed suicide, and three were imprisoned. In 1893 the Governor of Illinois, John P. Altgeld, pardoned the three prisoners, basing his action mainly on the ground that no proof had been brought forward to show that they were in any way acquainted with the unknown bomb-thrower. The result of the conviction was the break-up of the radical anarchistic movement and also the temporary discrediting of the general agitation for an eight hour day, although neither the Knights of Labor nor the Federation of Labor had any connection with the anarchists, and both deprecated violence.

In the meanwhile, Congress had concerned itself slightly with the labor problem. In 1884 a Bureau of Labor had been established to collect information on the relation of labor and capital. Two years later, just before the Haymarket affair, President Cleveland had sent a message to Congress in which he adverted to the many disputes which had recently arisen between laborers and employers, and urged legislation to meet the exigency. Considerations of justice and safety, he thought, demanded that the workingmen as a class be looked upon as especially entitled to legislative care. Although Cleveland deprecated violence and condemned unjustifiable disturbance, he believed that the discontent among the employed was due largely to avarice on the part of the employing classes and to the feeling among workmen that the attention of the government was directed in an unfair degree to the interests of capital. On the other hand, he suggested that federal action was greatly limited by constitutional restrictions. He accordingly urged that the Bureau of Labor be enlarged and that permanent officers be appointed to act as a board of arbitration in industrial disputes. The legislative branch was not inclined to follow Cleveland's lead, although he returned to the subject after the Haymarket affair, for it was commonly felt that his suggestion was too great a step in the direction of centralization of government. Two years later, in 1888, a modest act was passed which provided for the investigation of differences between railroads and their employees, but only when agreed to by both parties, and no provision was made for the enforcement of the decision of the investigators. The practical results were not important. Similar action had already been taken in a few states. By 1895 fifteen states had laws providing for voluntary arbitration, but the results were slight in most cases.

Very little progress was being made in the states in the passage of other industrial legislation. In Alabama and Massachusetts in the middle eighties acts extended and regulated the liability of employers for personal injuries suffered by laborers while at work.[5] At the same time the attitude of the legislatures and the courts in some states toward strikes underwent a slight modification. In many states where the legislatures had not passed definite statutes to the contrary, it had been held by the courts that strikers could be tried and convicted for conspiracy. In a few cases, states passed acts attempting to define more exactly the legal position of strikers. A New York court in 1887, for example, held that the law of the state permitted workmen to seek an increase of wages by all possible means that fell short of threats or violence. Before the close of Cleveland's second administration, considerable progress had been made in state legislation concerning conditions and hours of labor for women and children, protection of workers from dangerous machinery, the payment of wages, employer's liability for accidents to workmen, and other subjects. On the other hand, in some cases unreasonable or ill-considered actions on the part of the unions or their active agents—the "walking delegates"—turned popular sentiment against them. Particularly was this true in cases of violence and of strikes or boycotts by unions in support of workmen in other trades at far distant points.

During the presidential campaign of 1892 a violent strike at the Carnegie Steel Company's works in Homestead, Pennsylvania, arose from a reduction in wages and a refusal of the Company to recognize the Iron and Steel Workers' Union. An important feature of this disturbance was the use of armed Pinkerton detectives by the Company for the protection of its buildings. Armed with rifles they fell into conflict with the workmen, a miniature military campaign was carried on, lives were lost and large amounts of property destroyed. Eventually the entire militia of the state had to be called out to maintain peace.

It remained, however, for Chicago and the year 1894 to present one of the most far-reaching, costly and complex labor upheavals that has ever disturbed industrial relations in America. So ill understood at the time were the real facts of the controversy that it is doubtful whether it is possible even now to distinguish between truth and rumor in regard to some of its aspects.

The town of Pullman, near Chicago, was the home of the Pullman Palace Car Company, a prosperous corporation with a capital of $36,000,000. It provided houses for its employees, kept up open stretches of lawn, flower beds and lakes. In 1893 and 1894, when general business conditions were bad, the Company reduced the wages of its workmen about twenty-five per cent. A committee of the men asked for a return to former rates, but they were refused, three members of the committee were laid off, and the employees then struck. Late in June, 1894, the American Railway Union, to which many of the workmen belonged, took up the side of the men, and the General Managers' Association, comprising officials of twenty-four roads entering Chicago, took the side of the Company. Through the entry of the Union and the Association, the relatively unimportant Pullman affair expanded to large proportions. Violence followed; cars were tipped over and burned; property was stolen and tracks ruined; and eventually the United States government was drawn into the controversy.

Numerous complaints having reached Washington that the mails were being obstructed and interstate commerce interfered with, President Cleveland decided to send troops to Chicago. The Constitution requires that the United States protect states against domestic violence on the application of the legislature, or of the executive when the legislature is not in session. Moreover the statutes of the United States empower the President to use federal force to execute federal laws. The position taken by the Governor of Illinois, John P. Altgeld, was expressed in his telegram to President Cleveland protesting against the action of the executive:

Should the situation at any time get so serious that we cannot control it with the State forces, we will promptly and freely ask for Federal assistance; but until such time I protest with all due deference against this uncalled-for reflection upon our people, and again ask for the immediate withdrawal of these troops.

The President replied that troops were being sent in accordance with federal law upon complaint that commerce and the passage of the mails were being obstructed. A somewhat acrimonious correspondence between the Governor and the President resulted but the troops were retained and assisted in bringing the strike to a conclusion.

The attitude of the courts, meanwhile, had brought up a serious situation. On July 2 a "blanket injunction" was issued by the United States District Court of Illinois and posted on the sides of the cars. It forbade officers, members of the Union and all other persons to interfere in any way with the operation of trains or to force or persuade employees to refuse to perform their duties. Under existing law, anybody who disobeyed the injunction could be brought before the Court for contempt, and sentenced by the judge without opportunity to bring witnesses and to be tried before a jury. When Eugene V. Debs, the president of the Union, and other officers continued to direct the strike they were arrested for contempt of court and imprisoned.[6] With federal troops against them and their officers gone, the strikers could hardly continue and gave up in defeat. The loss in property and wages had already reached $80,000,000.

The apportionment of the blame for so appalling a controversy was not a simple task. On the one hand, a writer in the Forum declared that

The one great question was of the ability of this Government to suppress insurrection. On the one, side was the party of lawlessness, of murder, of incendiarism, and of defiance of authority. On the other side was the party of loyalty to the United States.

But this was a superficial view. A commission of investigation appointed by President Cleveland looked into the matter more deeply. Its unanimous report made important assertions: the Pullman Company, while providing a beautiful town for its employees, charged rents twenty to twenty-five per cent. higher than were charged in surrounding towns for similar accommodations, and the men felt a compulsion to reside in the houses if they wished to retain their positions; when wages were reduced, the salaries of the better paid officers were untouched, so that the burden of the hard times was placed on the poorest paid employees; there was no violence or destruction of property in Pullman, and much of the rowdyism in Chicago, but not all of it was due to the lawless adventurers and professional criminals who filled the city at that time;[7] when various public officials and organizations attempted to get the Company to arbitrate the dispute, the uniform reply was that the points at issue were matters of fact and hence not proper subjects for arbitration; and the Managers' Association selected, armed and paid 3,600 federal deputy marshals who acted both as railroad employees and as United States officers, under the direction of the Managers.

In view of the amount of labor disturbance after the Civil War, it was noteworthy that it attracted the interest of political parties to so slight a degree previous to 1896. In general the national platforms of the two large parties reflected an indefinite if not remote concern with the welfare of the wage earner. It was urged, to be sure, by both protectionists and tariff reformers that customs duties should be framed with the welfare of the laborer in mind, but the sincerity of this concern was sometimes open to question. The smaller parties, as usual, were far less vague in their demands. The Labor Reformers in 1872 demanded the eight-hour day, for example; the Greenbackers had a definite program for relief in 1880; the Anti-Monopolists in 1884 and the Union Labor and the United Labor parties in 1888. By 1892 the great parties found themselves face to face with a growing labor vote. The labor planks in the two platforms of that year were strikingly similar. Each called for federal legislation to protect the employees of transportation companies, but looked to the states for the relief of employees engaged in manufacturing. Neither the Socialist Labor party nor the Populists, however, were greatly troubled by the question of the proper distribution between state and nation of the responsibility for the welfare of the wage earner. Both proposed definite action; both urged the reduction in length of the working day. The Populists condemned the use of Pinkertons in labor disputes and the Socialists urged arbitration, the prohibition of child labor, restrictions on the employment of women in unhealthful industries, employers' liability laws and the protection of life and limb.

In brief, then, the situation of the wage-earning classes in the middle nineties was becoming accurately defined. The strike as a weapon was open to serious objections. The leaders of the two large parties had given no evidence of an effective and immediate interest in labor unrest. The other political parties were too small to afford chances of success. If less reliance was to be placed upon the strike and more upon political action, either a third party must be constructed or the leadership in one of the old ones must be seized. When the conference of labor officials met in Chicago and concluded that the Pullman strike was lost, it issued an address to the members of the American Railway Union advising a return to work, closer organization of the laboring class and the correction of industrial wrongs at the ballot box. If this advice should be taken, and if the wage earner should attempt to control legislation for his economic interest, as the propertied class had long been doing for its benefit, the struggle might be shifted to the political arena. The interest of the workers in the South and West in the Populist movement suggested the possibility that such a shift might occur.

BIBLIOGRAPHICAL NOTE

Surprisingly little attention has been paid to the social aspects of the growth of the laboring classes before 1896. There is ample material, however, on the more obvious sides of the labor movement, such as the growth of the organizations and the use of the strike.

The Documentary History of American Industrial Society (10 vols., 1910-1911), contains a little documentary material on the period after 1865; J.R. Commons and others, History of Labour in the United States (2 vols., 1918), is the best and most recent historical account; T.S. Adams and H.L. Sumner, Labor Problems (1905), is useful; consult also R.T. Ely, Labor Movement in America (3rd ed., 1890); C.D. Wright, The Industrial Evolution of the United States (1897), by a practical expert; G.E. McNeill, The Labor Movement (1887); J.R. Buchanan, Story of a Labor Agitator (1903); S.P. Orth, The Armies of Labor (1919), contains a good bibliography; John Mitchell, Organized Labor (1903); T.V. Powderly, Thirty Years of Labor (1890); Quarterly Journal of Economics (Jan., 1887), Knights of Labor; J.H. Bridge, Inside History of the Carnegie Steel Co. (1903). On the Haymarket affair, compare Century Magazine (Apr., 1893), and J.P. Altgeld, Reasons for Pardoning Fielden, Neebe and Schwab; on the Pullman strike, Grover Cleveland, Presidential Problems, and the report of the commission of investigation in Senate Executive Documents, 53rd Congress, 3rd session, vol. 2 (Serial Number 3276). Edward Stanwood, History of the Presidency, contains political platform planks on labor. The reports of the Commissioner of Labor (1886-), and of the state bureaus of statistics of labor in such states as Massachusetts (1870-), and New York (1884-), are essential for the investigator.

* * * * *

[1] Cf. above, p. 64

[2] Two earlier organizations had a brief existence, the National Labor Union and the Industrial Brotherhood.

[3] Above, pp. 133-134.

[4] For the effect on the Knights of Labor, see p. 310.

[5] For the legal side of this matter, consult Wright, Industrial Evolution, 278-282.

[6] The Court based its action mainly on the provisions of Section 2 of the Sherman anti-trust law, which thus had an unforeseen effect. The Supreme Court upheld the action, although on broader grounds. Above, p. 256, cf. 159 U.S. Reports, 564.

[7] In 1893 the "World's Fair" in Chicago had celebrated the four hundredth anniversary of the landing of Columbus, and many of the criminals attracted by the event had remained in the city.



CHAPTER XV

MONETARY AND FINANCIAL PROBLEMS

The critical monetary and financial situation during Cleveland's second administration is understandable only in the light of a series of acts which were passed between 1878 and 1893. It will be remembered that in the former year the Bland-Allison act had provided for the purchase and coinage of two million to four million dollars' worth of silver bullion per month, and that the force behind the measure had been found chiefly among westerners who wished to see the volume of the currency increased and among mine owners who were producing silver.

The passage of the law did not end all opposition to the greater use of silver, nor did it solve all our monetary difficulties. In the first place, the United States sent delegates to an International Monetary Conference in Paris, in conformity with one of the provisions of the Bland-Allison act, to discuss a project for the utilization of silver through an agreement among the commercial nations of the world. No tangible results were obtained, however, so that it was plain that for the time, at least, the United States would be alone in its attempt to bring about the greater use of the white metal. In the meantime the law was put into operation, and the secretary of the treasury exercised his option by purchasing the minimum amount, two million dollars' worth of bullion. It was impossible to keep the coins in circulation, however, mainly because of their weight, and the policy was therefore adopted of storing part of the silver in the government vaults and issuing paper "silver certificates" in its place. As these were of small denominations and circulated on a par with gold, no immediate difficulty was experienced in making them part of the currency supply of the country.

The currency question, nevertheless, remained as complicated as ever and the differences of opinion upon it as diverse as before. The market price of silver steadily declined through the eighties and the bullion value of the metal in a dollar sank from ninety-three cents in 1878 to less than seventy-one cents in 1889. Both Republican and Democratic secretaries of the treasury gave warning that the inflow of silver into the currency supply was too great. President Arthur urged the repeal of the Bland-Allison act in his first annual message; President Cleveland again and again reiterated the same advice, warning Congress of the danger that silver would be substituted for gold. The argument of the opponents of silver could hardly be stated in more concise or complete terms. As soon as the supply of currency became too great, he asserted, the unnecessary portion would go out of circulation;[1] it was the experience of nations that the more desirable coin—gold, in this case—would be hoarded by banks and speculators; it would then become apparent that the bullion value of the gold dollar was greater than that of the silver dollar and the two coins would part company; those who, in such a contingency, could get gold dollars would demand a premium for them, while the laboring man, unable to demand gold, would find his silver dollar sadly shrunken in value.

Although the coinage of silver in the twelve years during which the Bland-Allison act was in force amounted to $378,000,000, the danger that Cleveland's prophecy would come to pass was lessened by several facts. The country was, in the first place, passing through a period of industrial expansion that required an enlarged circulating medium; the revenues of the government were exceeding expenditures, and part of the surplus was being stored in the vaults in Washington; and the volume of the national bank notes shrank more than $158,000,000 between 1880 and 1890. Falling prices for agricultural products continued to keep western discontent alive and far from being convinced by Cleveland's warnings, western conventions and representatives in Congress continued to urge legislation to increase the amount of silver to be coined, and free-coinage bills were constantly introduced and frequently near passage. Manifestly the demand that something more be done for silver was not at an end.

Although agitation over the use of silver currency resulted in no further important legislation for the time being, the general financial situation was complicated by a series of important acts. During the eighties the federal revenues mounted to an unprecedented height and as expenses did not increase proportionately, a surplus of large and finally of embarrassing and dangerous size appeared.



Between 1880 and 1890 it averaged more than $100,000,000 annually. Although part of it was used to reduce the public debt, the remainder began to accumulate in the treasury and thereby seriously reduced the amount of currency available for the ordinary needs of business. In 1888, for example, the surplus in the treasury was one-fourth as great as the entire estimated sum outside. The one device for doing away with the surplus upon which all leaders could unite was the reduction of the national debt. Between 1879 and 1890 over $1,000,000,000 were thus disposed of. Yet even this process raised difficulties. Although a portion of the debt came due in 1881 and could be redeemed at the pleasure of the government, other bonds were not redeemable until 1891 and 1907, unless the federal authorities chose to go into the market and buy at a premium. Eventually this was done for a time, although prices were thereby forced up to 130 in 1888, and as a result the redemption of $95,000,000 during the year cost more than $112,000,000. The treasury also adopted the expedient of depositing surplus funds in banking institutions, but the plan was open to serious objections. In order to qualify for receiving government deposits the banks had to present United States bonds as security, but these were already at a high premium because of purchase by the treasury itself. There remained, therefore, two general policies which might be followed—reduction of revenue or enlargement of expenditure.

Both parties were theoretically committed to the economical conduct of the nation's business, but Republican advocacy of a high tariff tended to restrict that party's answer to the surplus problem. The revenue came largely from tariff and internal taxes. The latter were reduced, as has been seen, by the tariff act of 1883, but the redundant income continued. The Republicans then faced the alternative of lowering the customs or turning to the policy of increased expenditure. The latter policy would delay the reduction of duties and was in line with the Republican tendency toward increased federal activity. For the Democrats the problem was easier. Since the party was tending toward advocacy of low customs duties, had constantly condemned Republican extravagance in administration and was traditionally the party of a restricted national authority, it was logical to turn to severe reduction of revenue in order to solve the problem of the surplus.

President Cleveland's political and personal philosophy led toward economy in expenditure and therefore toward revenue reduction. By nature he was frugal; in politics, a strict constructionist. In vetoing an appropriation bill he succinctly set forth his creed:

A large surplus in the Treasury is the parent of many ills, and among them is found a tendency to an extremely liberal, if not loose, construction of the Constitution. It also attracts the gaze of States and individuals with a kind of fascination, and gives rise to plans and pretensions that an uncongested Treasury never could excite.

The Republicans were becoming committed to the policy of large expenditures. President Harrison, to be sure, in his first annual message urged the reduction of receipts, declaring that the collection of money not needed for public use imposed an unnecessary burden upon the people and that the presence of a large surplus in the treasury was a disturbing element in the conduct of private business. Nevertheless such party leaders as Reed and McKinley, who effectively controlled the legislation of the Harrison administration, acted on the philosophy of Senator Dolph:

If we were to take our eyes off the increasing surplus in the Treasury and stop bemoaning the prosperity of the country, ... and to devote our energies to the development of the great resources which the Almighty has placed in our hands, to increasing (our products) ... to cheapening transportation by the improving of our rivers and harbors, ... we would act wiser than we do.

Congress was more inclined to follow the policy suggested by Dolph than that proposed by Cleveland. One project was the return of the direct tax which had been levied on the states at the outbreak of the Civil War. At that time Congress had laid a tax of $20,000,000 apportioned among the states according to population. About $15,000,000 had been collected, mainly, of course, from the northern states. It was suggested that the levy be returned, a plan which would give the northern states a return in actual cash and the southern states "the empty enjoyment of the remission from a tax which no one now dared to suggest was ever to be made good." President Cleveland had vetoed such a bill, during his first administration, believing it unconstitutional and also objectionable as a "sheer, bald gratuity." Under the Harrison administration the scheme was revived and carried to completion, March 2, 1891.

Pension legislation was even more successful as a method of reducing the unwieldy surplus. Garfield had declared in 1872, when introducing an appropriation bill in the House of Representatives, "We may reasonably expect that the expenditures for pensions will hereafter steadily decrease, unless our legislation should be unwarrantably extravagant," and in fact the cost of pensions for 1878 had been lower by more than $7,000,000 than in 1871. The Arrears act of 1879 had given a decided upward tendency to pension expense, which amounted to over $20,000,000 more in 1880 than in 1879. The surplus was a constant invitation to careless generosity. Liberality to the veteran was a patriotic duty which lent itself to the fervid stump oratory of the time and presented an opportunity to the undeserving applicant to place his name on the rolls of pensioners along with his more worthy associates. Besides, an administration which seemed niggardly in its attitude toward the veterans was certain to lose the soldier vote, and neither party was willing to incur such a risk. Hence, despite Cleveland's vetoes of private pension legislation, hundreds of such measures passed during his first term. The Harrison administration proceeded upon the President's theory that it "was no time to be weighing the claims of old soldiers with apothecary's scales." A dependent pension bill like that which President Cleveland vetoed in 1887 was passed in 1890. The list of pensioners more than doubled in length; the number of applications for aid increased tenfold in two years. It became necessary for President Harrison to displace his over-liberal commissioner of pensions, but the mischief was already done. The total yearly pension expenditure quickly mounted beyond the one hundred million mark, where it has remained ever since. Indeed, the cost of pensions in 1872 when Garfield made his prophecy was less than one-sixth as great as in 1913. Large pension expenditure was clearly a permanent charge.

The improvement of the rivers and harbors of the country has always been a ready means of disposing of any embarrassing surplus and of assisting Congressmen to get money into their districts. "Promoters of all sorts of schemes, beggars for the widening of rivulets, the deepening of rills" clustered about the treasury during the eighties. During the early seventies expenditure on this account had not reached $6,500,000 annually, although in 1879 it exceeded $8,000,000. In 1882, the year of the mammoth surplus, Congress passed over Arthur's veto a bill carrying appropriations which amounted to almost nineteen million dollars.[2] Expenditures were somewhat reduced in the years immediately following, and Cleveland continued the repressive policy of his predecessor. Harrison in his first message to Congress in December, 1889, recommended appropriations for river and harbor improvement, although deprecating the prosecution of works not of public advantage. The recommendation fell upon willing ears and appropriations for undertakings of this sort at once increased again. Expenditure for rivers and harbors, like that for pensions, remained at a high level, the wise and necessary portions of such measures being relied upon to carry the unwise and unnecessary ones.

A project which lacked many of the unpleasant features of river and harbor legislation was the Blair educational bill, which proposed to distribute a considerable portion of the surplus among the states. As discussion of the Blair bill proceeded, it became clear that its results might be more far-reaching than had been anticipated. A gift from the national government seemed sure to retard local efforts at raising school funds and would initiate a vicious tendency to rely on federal bounty. Hence although the Senate passed the bill in 1884, 1886 and 1888, it never commended itself sufficiently to the House and eventually was dropped.

A small portion of the increased expenditure in the eighties was due to improvements in the navy, in which both parties shared. Presidents Arthur and Cleveland urged upon Congress the need of modern defences. Progress was slow and difficult. Although the day of steel ships had come, the American navy was composed of wooden relics of earlier days. The manufacture of armor and of large guns had to be developed, and skill and experience accumulated. Results began to appear in the late eighties when the number of modern steel war vessels increased from three to twenty-two in four years. Expenditures mounted from less than $14,000,000 in 1880 to over $22,000,000 in 1890.

As effective as new expenditure was the McKinley tariff act of 1890, the details of which from the point of view of tariff history have already been noted.[3] The extremely high rates levied under that legislation caused a slight reduction in customs revenue in 1891 and a sharp decline in 1892. Moreover the coincidence of instability in the currency system, business depression and the relatively high Wilson-Gorman tariff schedules of 1894 continued the decline of income from customs during the middle nineties.

In the meantime the silver agitation, which had been somewhat repressed by the well-known attitude of Cleveland during his first administration revived with increased vigor. The election of 1888, it will be remembered, had turned wholly on the tariff and had been a victory for the Republicans. The western states had almost uniformly supported Harrison in the election and during 1889 four more were admitted to the Union. Their representatives in Congress were mainly silver advocates. In his first message to Congress the President declared that the evil anticipations which had accompanied the use of the silver dollar had not been realized but he feared nevertheless that either free coinage or any "considerable increase" of the present rate of coinage would be "disastrous" and "discreditable." He announced that a plan would be presented by the Secretary of the Treasury, to which he had been able to give only a hasty examination. The scheme for expanding the silver coinage which the Secretary, William Windom, presented was not acceptable to Congress, but the result of the agitation was the law generally known as the Sherman silver purchase act, which was passed on July 14, 1890. It directed the secretary of the treasury to purchase 4,500,000 ounces of silver bullion per month and to issue in payment "Treasury notes of the United States." These notes were legal tender for all debts and were receivable for customs and all public dues. Further, the secretary was directed to redeem the notes in gold or silver at his discretion, "it being the established policy of the United States to maintain the two metals on a parity with each other."



The silver to be purchased was substantially the total output of the American mines. Fearing the strength of the silver element in the Senate and doubtful of the position which the President might take, former Secretary Sherman, now in the Senate, supported the act, although confessing that he was ready to vote for repeal at any time when it could be done without substituting free coinage. The provision for the purchase of four and one-half million ounces instead of four and one-half million dollars' worth was introduced at Sherman's suggestion. This clause kept the amount to be absorbed at a uniform level, whereas the purchase of a fixed number of dollars' worth would have increased the coinage when the price of bullion fell. The vote on the Sherman act was strictly partisan—no Republicans opposing it and no Democrats favoring it when the measure was finally passed, although 116 members of the House failed to answer to their names on the roll-call.

In view of the fact that the industrial and commercial countries of Europe were almost universally reducing their silver coinage, the passage by the United States of an act which substantially doubled the amount of silver purchased under the Bland-Allison law seems extraordinary. Moreover, only six years later a presidential campaign was fought almost wholly on the silver issue and at that time the Republican party resolutely opposed free coinage. It is obvious that powerful forces must have been at work to align the party so unitedly in behalf of the Sherman law. It was to be expected that western Republicans would support it, but the eastern members were found voting for it as well. Doubtless many things contributed to the result. Some perhaps agreed with Sherman that the silver advocates were so strong that free coinage would result in case Congress refused to pass legislation of any kind. Some may have feared with Platt of Connecticut, that a party split would ensue unless the wishes of the westerners were acceded to—hence an act which gave liberal assistance to silver to please the West and South but stopped short of free coinage so as to please the East. That opportunist politics had an influence with certain members is indicated by the remarks of a Massachusetts Republican representative who later favored the gold standard:

It is pure politics, gentlemen; that is all there is about it. We Republicans want to come back and we do not want you (to the Democratic side) to come back in the majority, because, on the whole, you must excuse us for thinking we are better fellows than you are. That is human nature, that is all there is in this silver bill (laughter on the Republican side); pure politics.

A Democrat who favored free coinage denounced the act as "Janus-Faced," moulded so as to look like silver to the West and gold to the East. Important, also, seems to have been the attitude of the western members on the tariff. The party had returned to power on the tariff issue and it seemed necessary to pass some sort of legislation on the subject. Yet the party majority in Senate and House was slight and the westerners were understood to be ready to defeat the McKinley bill which was then pending, unless something was done for silver. Harrison seems to have been unwilling to endanger successful tariff legislation by opposing the considerable extension of the coinage of silver.[4]

Contrary to the expectations of the proponents of the act, the price of silver fell gradually until the value of the bullion in a dollar was sixty cents in 1893 and forty-nine cents in 1894. They who had opposed the law saw their fears verified; as they had prophesied, silver began to replace gold in circulation; the latter was hoarded and used for foreign shipments; customs duties, which had hitherto been paid largely in gold, were now paid in paper currency; since gold was now more desired than silver, large amounts of paper were presented to the government for redemption in the more valuable metal. To be sure, the Sherman law allowed the secretary of the treasury to redeem the treasury notes of 1890 in gold or silver at his discretion, but it contained a proviso that the established policy of the United States was to maintain the two metals on a parity or equality. The secretary believed that if he refused to redeem the treasury notes in whatever coin the holder desired, that is if he insisted on redemption in silver only, a discrimination would be made in favor of gold and the equality of the two metals would be destroyed. Parity would be maintained, the government held, only when any kind of money could be exchanged for any other kind, at the option of the holder.

For the redemption of the greenbacks, the government had since 1879 maintained a fund known as the gold reserve. No law fixed its amount, but custom had set $100,000,000 as the minimum. Hitherto a negligible amount of paper had been presented for redemption, but as soon as the Sherman law came into effective operation the demand for gold became increasingly great and the level of the reserve promptly fell. Between July 1, 1890, and July 15, 1893, the supply of gold in the treasury decreased more than $132,000,000, while the stock of silver increased over $147,000,000. Evidently silver was replacing gold in the treasury, and it was equally clear that a continuation of the process would result in forcing the government to pay its obligations in silver and to refuse to redeem paper in gold—in other words, go upon a silver standard.

The situation when Cleveland's second administration began on March 4, 1893, was complex and critical. The annual expenditures had increased by $119,000,000 between 1880 and 1893, while the revenue had expanded by only half that amount; the surplus had decreased every year during Harrison's administration and a deficit had been avoided only by the cessation of payments on the public debt; the supply of currency in circulation was being heavily increased by the operation of the Sherman law; and the gold reserve had been kept at the traditional amount only through extraordinary efforts on the part of Harrison's Secretary of the Treasury as the administration came to a close.

Cleveland's attitude toward the Sherman law was well-known. He had long urged the repeal of the Bland-Allison act; before the election of 1892 he had predicted disaster in case the nation entered upon "the dangerous and reckless experiment of free, unlimited, and independent silver coinage"; it was his belief that the distresses under which the country labored were due principally to the Sherman silver purchase law. He therefore called a special session of Congress for August 7, (1893), sent a message giving a succinct account of the operation of the law and urged its immediate repeal.[5] In the House, repeal was voted with surprising promptness, although a strong free-silver element fought vigorously to prevent it. That party lines were broken was indicated by the fact that two-thirds of the Democrats and four-fifth of the Republicans voted in accord with the President's request.

In the Senate the silver advocates were stronger. The entire history of coinage was discussed at length. Members who favored repeal disliked to overturn the tradition of the Senate which allowed unlimited debate, and the silver senators therefore filibustered through the summer and early fall. Senator Jones of Nevada made a single speech that filled a hundred dreary pages of the Congressional Record. Senator Allen of Nebraska quoted more than thirty authorities, ranging from the Pandects of Justinian to enlivening doggerel poetry. Feeling ran high. In the West, Jones, Allen and others were looked upon as heroes; in the East, as villains. To a satirical onlooker it seemed that the nation had become insanely obsessed with the question of repeal:

All men of virtue and intelligence know that all the ills of life—scarcity of money, baldness, the comma bacillus, Home Rule, ... and the Potato Bug—are due to the Sherman Bill. If it is repealed, sin and death will vanish from the world, ... the skies will fall, and we shall all catch larks.

Not until October 30 were the silver supporters overcome. Including members who were paired, twenty-two Democrats and twenty-six Republicans favored repeal, and twenty-two Democrats, twelve Republicans and three Populists opposed. Again the West and South were aligned against the North and East. The Democratic party was divided and charges and countercharges had been made that augured ill for party success, as has been seen, in dealing with the tariff and other important problems.[6] Worst of all, the chief question—the volume and content of the currency—was still unanswered. Something had been done for silver—and undone—but there was no scientific settlement of the problem.

The disastrous financial and industrial crisis of 1893 made yet more complex the already tangled skein of economic history during President Cleveland's second administration. The catastrophe has been ascribed to a variety of causes but the relative importance of the various factors is still a matter of disagreement. Rash speculation on the part of industrial interests here and abroad seems to have made weak links in the international commercial chain; financial conditions both in Germany and in Great Britain were precarious during the early part of 1890; the collapse of the Philadelphia and Reading Railroad in February, 1893, and of the National Cordage Company soon afterwards were warnings of what was to follow; the silver purchase law produced widespread fear that the United States would not be able to continue the redemption of paper currency; and the change of political control had produced the usual feeling of uncertainty. The dwindling of the gold reserve, which has already been mentioned, assisted in causing a critical situation. Foreign investors, fearful of financial conditions here, sold their American railroad and other securities and received payment in gold. The one place where the yellow metal could be readily obtained was the United States treasury and upon it the strain centered. People attempted to turn property of all kinds into gold before the existing standard should change to a depreciated silver basis. At the same time there was a rush to the banks to withdraw funds, and the visible supply of currency therefore was seriously reduced. "Under these conditions gold seemed scarce. In reality gold was only relatively scarce in comparison with the abnormal offering of property for sale on account of the fear of the silver standard." In an incredibly short time, currency became so scarce as to create a genuine panic and was purchased like any commodity at premiums ranging from one to three per cent. In order to enable their families to pay the running expenses of every day at the summer resorts, business men were compelled to buy bills and coin and send them in express packages. The national banks were unable to supply the demand for currency so quickly, and 158 of them failed in 1893 and hundreds of state and private financial institutions were forced to close their doors. Industrial firms were affected by the uncertainty and panic and over 15,000 failures resulted, with liabilities amounting to $347,000,000 in the single year. Production of coal and iron fell sharply; railway construction nearly ceased and the value of securities shrank to a fraction of their former value. The distress among the wage-earners became extreme; unemployment was common; strikes, like that beginning in Pullman in 1894, were bitter and prolonged. "Coxey's army," composed of unemployed workmen, marched to Washington with a petition for relief.

As is usually the case in our politics, the blame for the industrial disturbance was laid at the door of the party in power. The argument of an Ohio congressman in the debate over the repeal of the Sherman law typified the political use made of the crisis of 1893. Until November, 1892, the orator declared, prosperity was undimmed. "Iron furnaces throughout the country were in full blast, and their cheerful light was going up to heaven notifying the people of the United States of existing prosperity and warning them against change of conditions." Then came the election of the party "which had declared war on the system upon which our whole industrial fabric had been erected." "One by one the furnaces went out, one by one the mines closed up, one after another the factories shortened their time." Business interests, he asserted, were fearful of Democratic rule and especially of tariff reform; hence prosperity and confidence could be renewed only by leaving the Sherman law intact and by refusing to undertake any sweeping revision of the protective tariff.



Further to complicate the financial trials of the burdensome mid-nineties, the depletion of the gold reserve demanded immediate attention. During the closing months of President Harrison's administration, in fact, the Secretary of the Treasury had ordered the preparation of plates for engraving an issue of bonds by which to borrow sufficient gold to replenish the redemption fund. By a personal appeal to New York bankers, however, he was able to exchange paper for gold and so keep the level above the one hundred million mark, and when Cleveland succeeded to the chair, the reserve was $100,982,410. In the meantime the scarcity of gold continued, and the combination of large expenditures and slender income severely embarrassed the government in its attempts to obtain a sufficient supply of gold to keep the reserve intact. The administration, indeed, was all but helpless. Paper presented for redemption in gold had to be paid out to meet expenses and was then turned in for gold again. Hence, as Cleveland ruefully reminded Congress, "we have an endless chain in operation constantly depleting the Treasury's gold and never near a final rest." On April 22, 1893, the reserve fell momentarily below $100,000,000 and later in the year it was apparent that the reduction was likely to become permanent. By January, 1894, the reserve was less than $70,000,000, while $450,000,000 in paper which might be presented for redemption were in actual circulation. Only one resource seemed available—borrowing gold. The treasury therefore sold bonds to the value of $50,000,000. Even this, however, did not remedy the ill. Bankers obtained gold to purchase bonds by presenting paper currency to the government for redemption. Relief was temporary. On the last day of May the reserve amounted to only $79,000,000; in November, to $59,000,000. Another issue of bonds was resorted to in November, but the results were not better than before. At the same time the Pullman strike during the summer months, the Wilson-Gorman tariff fiasco and an unfortunate harvest seemed to indicate that man and nature were determined to make 1894 a year of ill-omen.

By February, 1895, the treasury found itself confronted with a reserve of only $41,000,000. It seemed useless to attempt borrowing under the usual conditions, and Cleveland therefore resorted to a new device. A contract was made with J.P. Morgan and a group of bankers for the purchase of 3,500,000 ounces of gold to be paid for with United States four per cent. bonds. In order to protect the reserve from a renewed drain, the bankers agreed that at least half the gold should be obtained abroad, and they promised to exert all their influence to prevent withdrawals of gold from the treasury while the contract was being filled. The terms of the contract were favorable to the bankers, but the President defended the agreement on the ground that the promise to protect the reserve entitled the bankers to a favorable bargain. The fact, however, that the Morgan Company was able to market the bonds with the public and make a large profit, increased the demand that the administration sell directly to the people and make the profit itself. In January, 1896, occurred a fourth sale—to the public, this time—and 4,640 bids were received, for a total several times greater than the $100,000,000 called for. By this time, business conditions were improving, confidence was restored among the financial classes and gold again began to flow out of hiding and into the treasury. The endless chain was broken.

The denunciation which Cleveland received for the untoward monetary and industrial events of his administration was unusual even for American politics in the middle nineties. Such extreme silver men as Senator Stewart of Nevada declared that Cleveland's second administration was probably the worst administration that ever occurred in this or any other country; that he was a bold and unscrupulous stock-jobber; that he deliberately caused the panic of 1893 and that he sent the Venezuela message in order to divert the attention of the people from the silver question. The New York World described the transaction between the government and the Morgan Company as a "bunco" game, and charged that Cleveland had dishonest, dishonorable and immoral reasons for bringing about the transaction and that he did it for a "consideration." Representative W.J. Bryan, who belonged to the President's party and who ordinarily was chivalrous to his opponents, declared that Cleveland could no more escape unharmed from association with the Morgan syndicate than he could expect to escape asphyxiation if he locked himself up in a room and turned on the gas. The Democratic party, he thought, should feel toward its leader as a confiding ward would feel toward a guardian who had squandered a rich estate, or as a passenger would feel toward a trainman who opened a switch and precipitated a wreck.

BIBLIOGRAPHICAL NOTE

The standard works, mentioned under Chapter V, by Dewey, Hepburn and Noyes continue valuable. The attitude of Hayes and of succeeding Presidents is found in J.D. Richardson, Messages and Papers of the Presidents; F.W. Taussig, The Silver Situation in the United States (1892), is concise; Political Science Quarterly, III, 226, discusses the surplus revenue; Quarterly Journal of Economics, III, 436, on the direct tax; W.H. Glasson, Federal Military Pensions, has already been mentioned. W.J. Lauck, Causes of the Panic of 1893 (1907), lays the blame for the industrial distress of 1893 wholly on the silver law of 1890. On the gold reserve, consult Grover Cleveland, Presidential Problems; D.R. Dewey, National Problems (1907); Political Science Quarterly, X, 573; and Quarterly Journal of Economics, XIII, 204. "The Silver Debate of 1890," in Journal of Political Economy, I, 535, contains a detailed account of the discussion in Congress. W.J. Bryan, First Battle (1897), should be consulted.

* * * * *

[1] According to the principle known as Gresham's law, bad money tends to drive out good; or overvalued money to drive out undervalued money. If the face value of a coin is more than its worth as bullion, it is "overvalued." Thus, if coins of equal face value, but of different bullion value, circulate side by side, there will be a tendency for the possessors of the coins to pass on the currency with the smaller bullion value and to withdraw the others for sale as bullion and for use in the arts.

[2] Above, p. 164.

[3] Above, pp. 238-240.

[4] The law remained in force about three years. During that interval nearly $156,000,000 worth of silver bullion was purchased with the new treasury notes. The government began retiring these notes in 1900.

[5] The call for the extra session, together with news of the suspension of free-coinage in India, sent the bullion price of silver down twenty-one cents per ounce in two weeks. The President was seriously handicapped at this time by a cancerous growth in the jaw, necessitating an operation, news of which was withheld from the public for fear of its ill effect on the financial situation. Cf. Saturday Evening Post, 22 Sept., 1917.

[6] Above, p. 274.



CHAPTER XVI

1896

The political situation in 1896, when the parties began to prepare for the presidential election, was more complex than it had been since 1860. The repeal, in 1893, of the purchase clause of the Sherman silver act had divided the Democrats into factions; the financial and industrial distress in the same year had been widely attributed to fear of Democratic misgovernment; the Wilson-Gorman tariff act of 1894 had discredited the party and aroused ill-feeling between the President and Congress; the Pullman strike and the use of the injunction had aroused bitterness in the labor element against the administration; the income tax decision of 1895 had done much to shake popular confidence in the Supreme Court; the Hawaiian and Venezuelan incidents had caused minor dissent in some quarters; and the bond sales had made Cleveland intensely unpopular in the West and South. The Democratic party was demoralized and leaderless. The Republicans were better off because they had been out of power during the years of dissension and panic, but they had been without a leader since the death of Blaine in 1893 and were far from united in regard to the most pressing issues. Indeed, the sectional differences in both parties, and the unexpected strength of the Populist movement caused no little anxiety among the political leaders. And finally, the volume and character of the currency was still undetermined. The Democrats had divided on the question. The Republicans were almost as little united; they had played politics in passing the Sherman silver act and three years later had assisted a President of the opposite party in accomplishing the repeal of its most important provision. From the standpoint of the silver supporters neither party organization was to be trusted. The outstanding political questions of 1896, therefore, were whether the supporters of silver could capture the machinery of one of the parties and whether the other unsettled issues could ride into the campaign on the strength of the financial agitation. The answers to these questions gave the campaign and election its peculiar significance.

The background of 1896 is to be found in the South and West, where the farmers' alliances and the Populist party continued their success in arousing and directing the ambitions of the discontented classes. In 1892, it will be remembered, the Populists had cast more than a million ballots and had chosen twenty-two presidential electors, two senators, and eleven representatives. In 1894, at the time of the congressional election, they had increased their voting strength more than forty per cent., and had elected six senators and six members of the House, besides several hundreds of state officials. In the Senate it happened that the two great parties had been almost equally strong, after the election of 1894, so that the Populist group had held the balance of power. The insistence of the South and West that Congress do something further for silver had not lessened. A measure providing for the coinage of a portion of the silver bullion in the treasury had been defeated in 1894 only through the President's veto. Indeed the only hope of the East and of the supporters of the gold standard was the unflinching determination of the head of a party to which the East and the gold supporters were, in the main opposed.

The growing enthusiasm for silver which was sweeping over the South and West and rapidly developing into something resembling frenzy was difficult for the more stolid East to comprehend. Not merely the politician, but the man on the street and in the store, the school-teacher, the farmer and the laborer, in those portions of the country, fell to discussing the virtues of silver as currency and the effect of a greater volume of circulating medium upon prices and prosperity. The two metals became personified in the minds of the people. Gold was the symbol of cruel, snobbish plutocracy; silver of upright democracy. Gold deserted the country in its hour of need; silver remained at home to minister to the wants of the people. Such arguments as those presented in Coin's Financial School, published in 1894, brought financial policy within the circle of the emotions of its readers even if they did not satisfy the more critical student of monetary problems. This influential little volume, written by W.H. Harvey, acted as a hand-book of free coinage, cleverly setting forth the major arguments for the increased use of silver and bringing forward objections which were triumphantly demolished. Simple illustrations enforced the lessons taught by its pages: a wood-cut of a cripple with one leg indicated how handicapped the country was without the free coinage of two metals; in another, Senator Sherman and President Cleveland were depicted digging out the silver portion of the foundations of a house which had been erected on a stable basis of both gold and silver; in a third, western farmers were seen industriously stuffing fodder into a cow which capitalists were milking for the benefit of New York and New England.[1] With the enthusiasm and the sincerity of the early crusaders, the people assembled in ten thousand schoolhouses to debate the absorbing subject of the currency. Indeed the South and West had become convinced that the miseries inflicted upon mankind by war, pestilence and famine had been less "cruel, unpitying, and unrelenting than the persistent and remorseless exaction" which the contraction of the volume of the currency had made upon society. Low prices, the stagnation of industry, empty and idle stores, workshops and factories, the increase of crime and bankruptcy—all were laid at the door of the gold standard.

The East looked upon the rising in the West at first with amusement, and was quite ready to accept the diagnosis of a western newspaper man, quoted by Peck in his Twenty Years of the Republic:

What's the matter with Kansas?

We all know; yet here we are at it again. We have an old moss-back Jacksonian who snorts and howls because there is a bath-tub in the State House. We are running that old jay for Governor.... We have raked the ash-heap of failure in the State and found an old human hoop-skirt who has failed as a business man, who has failed as an editor, who has failed as a preacher, and we are going to run him for Congressman-at-large.... Then we have discovered a kid without a law practice and have decided to run him for Attorney-General.

Later the East looked upon tendencies in the West with more concern: Roosevelt, although admitting the honesty of the Populists, characterized their ignorance as "abysmal"; others were more inclined to doubt their sincerity; their conventions were supposed to be made up of cranks and unsexed women; and their principles were looked upon as "wild and crazy notions."

In fact it was no simple task to distinguish between the legitimate grievances and ambitions of the westerners, and their eccentricities and errors. Nor was this difficulty lessened by the reputation with which some of the proponents of silver were justly or unjustly credited. "Sockless Jerry" Simpson and Mrs. Lease were among them—the Mrs. Lease to whom was ascribed the remark "Kansas had better stop raising corn and begin raising hell!"[2] Benjamin R. Tillman was another—a rough, forceful character, leader of the poor whites and small farmers of South Carolina, organizer of the "wool hats" against the "silk hats" and the "kid gloves"—Governor of the state and later member of the federal Senate. Although a Democrat, he was thoroughly at odds with Cleveland, and publicly declared it was his ambition to stick his pitchfork into the President's sides.[3] Richard P. Bland, of Missouri, had the disadvantage of having been one of the earliest of the silver supporters, since he had initiated the bill which resulted in the Bland-Allison act, and was looked upon in the East as a thorough-going, free-silver radical. Governor Altgeld, of Illinois, leader of the Democrats of that state from 1892 to 1896, was a successful lawyer who was looked upon by his friends as a liberal-minded humanitarian, the friend of

The mocked and the scorned and the wounded, the lame and the poor,

whose sympathies with the laboring classes had given him the support of the reformers and the wage earners. But his pardon of the Haymarket anarchists and his attitude during the Pullman strike had led the East to regard him as a dangerous revolutionist and an enemy to society.[4]

The free-silver movement nevertheless continued to gather momentum. For some years influential silver advocates had been associated in the Bimetallic League, an organization which supported the free coinage of both gold and silver. Among its members were prominent Democrats, Republicans and Populists, especially from the western states, and some of the foremost labor leaders. At one of its meetings in 1893 it was determined to invite every labor and industrial organization in the country to send delegates. A few experts, even in the East, gave some scientific support to the argument for the greater use of silver. Eastern Republicans like Senator Henry Cabot Lodge proposed free coinage of both metals by an international agreement, which, they thought, might be brought about through threats of tariff discrimination against nations refusing to adhere to the arrangement. A silver convention in Nebraska in 1894 was attended by a thousand delegates. From the point of view of party harmony the subject was a nuisance. Democratic state conventions were badly divided. Thirty of them adopted resolutions distinctly favorable to free coinage and fourteen opposed. Ten of the latter committed themselves definitely to the gold standard. The fourteen included all the northeastern states, together with Michigan, Wisconsin and Minnesota. Such gold Democrats as President Cleveland sought to stem the tide, but Cleveland's control over his followers was rapidly dwindling, and it seemed likely that the silver element of the party might reach out to seize the organization and displace the former leaders.

The Republican professional politicians were as ignorant of technical monetary problems as the Democrats, and moreover did not wish to risk popular disapproval in any section by utterances which might be offensive to that part of the country. The first Republican state convention during 1896 was that in Ohio. Its financial plank was awaited with interest, because of the early date of the meeting and because its proceedings were in the hands of friends of the most prominent candidate for the Republican presidential nomination. The convention dodged the issue by demanding that all our currency be "sound as the Government and as untarnished as its honor," and that both metals be used as currency and kept at parity by legislative restrictions. The New York Tribune thought that this could mean nothing but a gold standard; the Times was fearful that it would lead to silver; the Springfield Republican condemned it as "chock full of double-dealing." Its ambiguity, however, was in line with the purposes and ambitions of two men who were actively preparing for the campaign of 1896—Marcus A. Hanna and Major William McKinley.

Marcus A. Hanna, or "Mark" Hanna as he was universally known, was an Ohioan, born in 1837.[5] As a young man he entered upon a business career in Cleveland, first in a wholesale grocery company, later in a coal and iron firm and finally in a variety of industrial and commercial enterprises which his energy and ability opened to him. The expansion of industrial America after the Civil War was coincident with the greater part of Hanna's career and he was a typical product of that period in his political, economic and social philosophy. After he had attained a degree of business success he became actively interested in politics and took a prominent part in placing Joseph B. Foraker in the governor's chair in Ohio in 1885. Strained relations between the two turned Hanna's attention to the fortunes of John Sherman. When it became apparent in 1888 that the presidential campaign would turn upon President Cleveland's tariff principles, Hanna, who looked upon the protective tariff as synonymous with industrial expansion and even of industrial safety, threw his weight upon the side of Sherman, who was again seeking the Republican nomination. The failure of Sherman was a blow to Hanna, but it called to his attention the pleasing personality of a more prominent protectionist, William McKinley. He was an important agent in McKinley's successful campaign for the governorship of Ohio in 1891. Two years later the Governor met serious financial reverses, and again Hanna proved to be a firm friend. Aided by other men of means he rescued McKinley from bankruptcy. Between the two there sprang up a mutual admiration of unusual strength, and finally, in 1894-1895, Hanna withdrew from his business enterprises in order to devote his entire time to the political fortunes of his friend.

Mark Hanna had extraordinary capacity for leadership. Sociable, open-handed, full of energy, direct, aggressive, shrewd, daring, a hard fighter, a loyal friend, an organizer and a man of his word, he was essentially a man of action. In politics he was practical and straight-forward. He wanted results, not reforms, and results meant accepting the prevailing methods and using them. When he wished a street-railway franchise in Cleveland, he bought enough influence with the city government to get what he wanted, as others of his day did. He was a strict party man; good government and safety to industry, he believed, were dependent upon Republican control. Patriotism therefore demanded his utmost energy in getting Republicans elected. In political campaigns his counsel, his energy and his money were always available. A protective customs tariff, a "sound" currency system and a free hand in the conduct of business were the things which he most desired from the government.

William McKinley would have been a formidable competitor for the presidential nomination in 1896 even without the assistance of his rugged friend. His personality was attractive, in a pleasing, soothing, tactful, ingratiating way. His military career had been honorable even if not famous. For most of the time from 1877 to 1891 he had been a member of the House of Representatives, becoming identified particularly with the high protective tariff and acting as sponsor for the McKinley act of 1890. After being defeated for re-election, just subsequent to the passage of the tariff law, he had become Governor of Ohio for two terms. The panic of 1893 and the ill-fated Wilson-Gorman tariff act during the time when he was Governor caused the tide of popular favor to swing away from the Democrats; McKinley, as the apostle of protection, appeared in a more favorable light; and his partisans began to press him forward as the logical nominee for 1896 and as "the advance agent of Prosperity." The fact that his home was in a populous state in the Middle West was also in his favor, because the Republicans had frequently chosen their candidate from this debatable ground rather than from the Northeast, where success was to be had without a struggle.

Hanna's first care upon determining to devote himself to the interests of McKinley was to keep the candidate before the people as the one man who could rescue the nation from industrial depression. To that end he widely circulated the Cleveland Leader, a strong McKinley organ, for eighteen months at his own expense; he rented a house in Georgia, entertained Governor McKinley there and brought numbers of southern politicians to meet the candidate; and experienced political workers were sent all over the country and especially to the South to prepare the way for the election of delegates to the nominating convention. Hanna himself went to the East to discover on what terms the support of some of the states in that section could be obtained. On his return he reported that aid would be assured by a guarantee that the patronage of the administration would go to certain powerful politicians; Hanna thought the bargain a desirable one, but the candidate objected and Hanna acquiesced. The campaign of publicity and of personal canvass for delegates and influence continued. First and last, it is estimated, Hanna contributed over $100,000 for this purpose, urging his assistants always to use funds only for legitimate ends, although promising McKinley partisans who aided in the work that they would be "consulted" in the disposition of patronage.

Two difficulties stood in the way of completely ensuring the choice of McKinley as the candidate by the convention. Several states had "favorite sons" whom they would be sure to present, and if so many of these should appear as to prevent McKinley's nomination on the first ballot or at least on an early one, there might be a stampede to an unknown man—a "dark horse"—and then Hanna's ambitions would be frustrated. Thomas B. Reed of Maine was an especial source of anxiety as he possessed considerable strength throughout New England. To guard against such a danger, Hanna sedulously cultivated the popular demand for Governor McKinley and also fought in the state conventions for delegates even against favorite sons. A crucial state was Illinois, where Senator Cullom was powerful. The Senator says that a representative of McKinley offered him "all sorts of inducements" to withdraw, but McKinley's biographer mentions no such attempt at a bargain. Eventually Cullom made the fight and was defeated, and from then on, the nomination of McKinley seemed sure unless he should be tripped by the currency issue.

The silver question was the second obstacle in the way of success. Not only was the party divided, but McKinley's record on the subject was far from consistent. He had voted for the Bland free-silver bill in 1877, for the Bland-Allison act in 1878 and for the passage of that act over President Hayes's veto. In 1890 he had urged the passage of the Sherman silver purchase law, intimating that he would support a free coinage measure if it were possible to pass it. Hardly more than a year later he was campaigning for the governorship of Ohio, and there he denounced the free coinage of silver and advocated international bimetallism. In 1896 McKinley feared that a definite public utterance on the one side or the other of the question would widen the division in the party, prevent his nomination and lose the election. Hence the ambiguous currency plank in the Ohio state convention and hence, also, the refusal of the candidate to commit himself openly. Nevertheless he commissioned a friend to go to the East and explain his attitude privately to certain leaders and prominent business men, urging them not to force a declaration for gold before the convention met. In this way, he thought, the currency issue might be subordinated, the tariff emphasized and the party held together. In this state of uncertainty the currency situation was allowed to rest until the convention met at St. Louis on June 16.