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‘Mingled in an almost inextricable confusion’: the panics of 1873 and the experience of globalization
Published online by Cambridge University Press: 25 June 2020
Abstract
This article analyses the transatlantic financial crises of 1873 from the vantage point of the three countries that were most affected by it, Austria, Germany, and the United States, focusing on the experience of economic globalization and disintegration for actors on both sides of the Atlantic. It compares the perception of financial commentators and financiers of the panics in 1873, when the experience of integration was asymmetrical, and more pronounced in Germany and Austria than in the United States. It further argues that this asymmetrical experience of contagion shaped the monetary debates of the 1870s in all three countries. Focusing on the interrelationship and coexistence of experiences of integration and isolation, the article maintains that, despite the panics’ near-synchronicity, financial globalization remained difficult to see.
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References
1 London and Great Britain, by contrast, were less affected. See P. L. Cottrell, ‘Domestic finance’, 1860–1914, in Roderick Floud and Paul Johnson, eds., The Cambridge economic history of modern Britain, Cambridge: Cambridge University Press, 2004, vol. 2, p. 277; S. B. Saul, The myth of the Great Depression, 1873–1896, 2nd edn, Basingstoke: Macmillan, 1985.
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5 Hannah Catherine Davies, Transatlantic speculations: globalization and the panics of 1873, New York: Columbia University Press, 2018.
6 Jessica Lepler, The many panics of 1837: people, politics, and the creation of a transatlantic financial crisis, Cambridge: Cambridge University Press, 2013, p. 6.
7 See, for example, Kevin H. O’Rourke and Jeffrey G. Williamson, Globalization and history: the evolution of a nineteenth-century Atlantic economy, Cambridge, MA, 1999; Wolfram Fischer, Expansion – Integration – Globalisierung: Studien zur Geschichte der Weltwirtschaft, Göttingen: Vandenhoeck & Ruprecht, 1998; Michael D. Bordo, Alan M. Taylor, and Jeffrey G. Williamson, eds., Globalization in historical perspective, Chicago, IL: University of Chicago Press, 2003. For a succinct summary of nineteenth-century globalization, see also Jürgen Osterhammel and Niels P. Petersson, Globalization: a short history, Princeton, NJ: Princeton University Press, 2005, pp. 57–90. For a critique similar to mine, see Christof Dejung and Niels P. Petersson, ‘Introduction: power, institutions, and global markets – actors, mechanisms, and foundations of worldwide economic integration, 1850–1930’, in Christof Dejung and Niels P. Petersson, eds., The foundations of worldwide economic integration: power, institutions, and global markets, 1850–1930, Cambridge: Cambridge University Press, 2013, pp. 1–17; more generally on the historicity of economic concepts and theories, see Christof Dejung, Monika Dommann, and Daniel Speich-Chassé, ‘Einleitung’, in Christof Dejung, Monika Dommann, and Daniel Speich-Chassé, eds., Auf der Suche nach der Ökonomie, Tübingen: Mohr Siebeck, 2014, pp. 1–16.
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10 See, for example, Christopher A. Bayly, The birth of the modern world, 1780–1914, Malden, MA: Blackwell, 2004, p. 1; Adam McKeown, ‘Periodizing globalization’, History Workshop Journal, 63, 1, 2007, p. 220; Frederick Cooper, Colonialism in question: theory, knowledge, history, Berkeley, CA: University of California Press, 2005, pp. 95, 11. ‘Interchange: globalization and its limits between the American Revolution and the Civil War’, Journal of American History, 103, 2, 2016, passim. For a detailed account of competing visions of American economic globalization that could include protectionism, see Marc-William Palen, The ‘conspiracy’ of free trade: the Anglo-American struggle over empire and economic globalization, 1846–1896, Cambridge: Cambridge University Press, 2016.
11 On German cities during the 1857 crisis, see Hans Rosenberg, Die Weltwirtschaftskrise von 1857–1859: mit einem Vorbericht, 2nd edn, Göttingen: Vandenhoeck & Ruprecht, 1974, pp. 128–30.
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15 Robert E. Gallman, ‘Growth and change in the long nineteenth century’, in Stanley L. Engerman and Robert E. Gallman, eds., Cambridge economic history of the United States, volume 2: the long nineteenth century, Cambridge: Cambridge University Press, 2000, p. 25.
16 Baltzer, Berliner Kapitalmarkt, pp. 17–27; Matis, Österreichs Wirtschaft, pp. 185–93; E. Ray McCartney, ‘Crisis of 1873’, PhD thesis, University of Nebraska, 1932, p. 15.
17 Bericht über den Handel und die Industrie von Berlin im Jahre 1872, nebst einer Uebersicht über die Wirksamkeit des Aeltesten-Collegiums vom Mai 1872 bis Mai 1873 erstattet von den Aeltesten der Kaufmannschaft von Berlin, Berlin, 1873.
18 Hans Pohl, Aufbruch der Weltwirtschaft: Geschichte der Weltwirtschaft von der Mitte des 19. Jahrhunderts bis zum Ersten Weltkrieg, Stuttgart: Franz Steiner Verlag, 1989.
19 ‘Financial relations of the United States Bankers’ Magazine, June 1871, p. 902.
20 Gustav Cohn, Die Börse und die Spekulation, Berlin: Lüderitz, 1868, pp. 7–8.
21 ‘The end of an era of speculation’, The Nation, 30 June 1870, pp. 415–16.
22 See, for example, Lance E. Davis and Robert J. Cull, ‘International capital movements, domestic capital markets, and American economic growth, 1820–1914’, in Engerman and Gallman, Cambridge economic history, pp. 733–812; Christopher Hoag, ‘The Atlantic telegraph cable and capital market information flows’, Journal of Economic History, 66, 2, 2006, pp. 342–53.
23 White, Railroaded, pp. 20–1, 34–8; Jonathan Barron Baskin, ‘The development of corporate financial markets in Britain and the United States, 1600–1914: overcoming asymmetric information’, Business History Review, 62, 2, 1988, p. 215.
24 Mira Wilkins, The history of foreign investment in the United States to 1914, Cambridge, MA: Harvard University Press, 1989, pp. 109–21.
25 On nineteenth-century financial journalism, see Wayne Parsons, The power of the financial press: journalism and economic opinion in Britain and America, Aldershot: Edward Elgar, 1989; Mary Poovey, Genres of the credit economy: mediating value in eighteenth- and nineteenth-century Britain, Chicago, IL: University of Chicago Press, 2008, pp. 243–75; Alfred D. Chandler, Henry V. Poor: business editor, analyst, and reformer, Cambridge, MA: Harvard University Press, 1956; David P. Forsyth, The business press in America, 1750–1865, Philadelphia, PA: Chilton Books, 1964; Douglas Steeples, Advocate for American enterprise: William Buck Dana and the Commercial and Financial Chronicle, Westport, CT: Greenwood Press, 2002; Eli Cook, The pricing of progress: economic indicators and the capitalization of American life, Cambridge, MA: Harvard University Press, 2017, pp. 140–56; Robert Radu, Auguren des Geldes: eine Kulturgeschichte des Finanzjournalismus in Deutschland 1850–1914, Göttingen: Vandenhoeck & Ruprecht, 2017.
26 Geheimes Staatsarchiv Preußischer Kulturbesitz, Berlin, I. HA Rep. 120 Ministerium für Handel und Gewerbe, C IX 1 Nr. 28, vol. 1, pp. 40–2, 7 May 1870.
27 ‘Transatlantisches’, Zeitschrift für Kapital und Rente, 5, 1869, p. 303.
28 For similar expressions of scepticism regarding American papers and American railroad bonds, see, for example, ‘Amerikanische Post’, Aktionär, 26 February 1871, p. 120; ‘Frankfurter Börse’, Aktionär, 1 October 1871, p. 692; ‘Die Gefährdung des Aktienbesitzes’, Zeitschrift für Kapital und Rente, 9, 1873, p. 145.
29 Eduard März, Österreichische Industrie- und Bankpolitik in der Zeit Franz Josephs I. Am Beispiel der k. k. priv. Österreichischen Credit-Anstalt für Handel und Gewerbe, Vienna: Europa-Verlag, 1968, p. 145; Baltzer, Berliner Kapitalmarkt, p. 27.
30 ‘Notes on the money market’, Bankers’ Magazine, July 1872, p. 76.
31 Paul Barnett, Business-cycle theory in the United States: 1860–1900, Chicago, IL: University of Chicago Press, 1941, pp. 30–1; Jürgen Kromphardt, ‘Konjunktur- und Krisentheorie in der 2. Hälfte des 19. Jahrhunderts’, in Bertram Schefold, ed., Studien zur Entwicklung der ökonomischen Theorie VII, Berlin: Duncker & Humblot, 1989, p. 13.
32 ‘Einige Betrachtungen über das Finanzwesen der Gegenwart’, Zeitschrift für Kapital und Rente, 8, 1872, 13; ‘Die Folgen des Gründungsschwindels und der Überspekulation’, Berliner Tageblatt, 23 January 1872.
33 Max Wirth, Geschichte der Handelskrisen, Frankfurt am Main: J. D. Sauerländer, 1858, p. 151; Clément Juglar, Des crises commerciales et de leur retour périodique en France, en Angleterre et aux États-Unis, Paris: Guillaume & Cie., 1862, p. 13.
34 Ranald C. Michie, The City of London: continuity and change, 1850–1990, Basingstoke: Palgrave, 1992, pp. 72–8.
35 John Clapham, The Bank of England: a history, 2 vols., Cambridge: Cambridge University Press, 1970 (first published 1944), vol. 2, pp. 291–2.
36 ‘The impending financial storm’, New York Times, 16 December 1871, p. 4.
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38 ‘New York’, Chicago Tribune, 4 May 1872, p. 6; ‘Money and commerce’, Chicago Tribune, 30 October 1872, p. 6; ‘Money and commerce’, Chicago Tribune, 3 December 1872, p. 6.
39 ‘Notes on the money market’, Bankers’ Magazine, June 1872, p. 988.
40 Jay Sexton, Debtor diplomacy: finance and American foreign relations in the Civil War era 1837–1873, Oxford: Oxford University Press, 2005, pp. 190–228.
41 Matthew Simon, Cyclical fluctuations and the international capital movements of the United States 1865–1897, New York: Arno Press, 1978, p. 162.
42 National Archives, College Park, MD, RG 84, Records of Foreign Service Posts, Consular Posts, Berlin, Germany, vol. 014, H. Kreisman to S. McLean & Co., 8 November 1872.
43 ‘German capital and our money market’, Commercial and Financial Chronicle, 11 January 1873, p. 37; see also ‘Notes on the money market’, Bankers’ Magazine, December 1872, pp. 491–6.
44 McCartney, ‘Crisis of 1873’, p. 46.
45 Morgan Library, New York, Pierpont Morgan papers, ARC 120, letterpress copybook 1873–80, J. P. Morgan Jr to Pierpont Morgan, 3 April 1873.
46 ‘Berlin, den 2. October 1872’, Berliner Börsen-Zeitung, 2 October 1872, evening edn, p. 12; ‘Frankfurter Börse’, Aktionär, 6 October 1872, p. 848; ‘Frankfurter Börse’, Aktionär, 22 December 1872, p. 1069.
47 ‘Oestreichische Briefe’, Aktionär, 17 November 1872, p. 986; ‘Berlin, den 8. October 1872’, Berliner Börsen-Zeitung, 8 October 1872, evening edn, p. 10.
48 Markus Baltzer, ‘Cross-listed stocks as an information vehicle of speculation: evidence from European cross-listings in the early 1870s’, European Review of Economic History, 10, 3, 2006, pp. 301–27.
49 Ulrich Ronge, Die langfristige Rendite deutscher Standardaktien: Konstruktion eines historischen Aktienindex ab Ultimo 1870 bis Ultimo 1959, Frankfurt am Main: Lang, 2002, p. 212; Anja Weigt, Der deutsche Kapitalmarkt vor dem Ersten Weltkrieg: Gründerboom, Gründerkrise und Effizienz des deutschen Aktienmarktes bis 1914, Frankfurt am Main: Knapp, 2005, p. 83.
50 ‘Berliner Cours-Bericht’, Berliner Tageblatt, 8 January 1873.
51 ‘Berlin, den 8. Januar 1873’, Berliner Börsen-Zeitung, evening edn, 8 January 1873, p. 10; see also the stock market reports in Berliner Börsen-Zeitung, 9, 10, 14, and 15 January 1873, evening edn, p. 10.
52 ‘Berlin, den 17. Januar 1873’, Berliner Börsen-Zeitung, evening edn, 17 January 1873, p. 10; see also the stock market reports in Berliner Börsen-Zeitung, 21, 23, and 29 January 1873, p. 10.
53 ‘Frankfurter Börse’, Aktionär, 17 November 1872, pp. 964–5; ‘Berlin, den 3. Januar 1873’, Berliner Börsen-Zeitung, 3 January 1873, evening edn, p. 9.
54 Rothschild Archive, London (henceforth RAL), XI/64/0: 1872, Gerson von Bleichröder to N. M. Rothschild and Sons, 21 November 1872; XI/64/0: 1873, Gerson von Bleichröder to N. M. Rothschild and Sons, 19 April 1873.
55 Joseph Neuwirth, Die Speculationskrisis von 1873, Leipzig: Duncker & Humblot, 1874, pp. 74–7, 82–92.
56 ‘Börsen- und Geldverhältnisse in Wien’, Berliner Börsen-Zeitung, 9 May 1873, evening edn, p. 1; ‘Misstrauen’, Berliner Börsen-Zeitung, 15 May 1873, evening edn, p. 3. A recent study confirms this contemporary view: see Baltzer, Berliner Kapitalmarkt, p. 102.
57 ‘Frankfurter Börse’, Aktionär, 15 June 1873, p. 545.
58 Werner Siemens to Wilhelm Siemens, 17 May 1873, in Werner Siemens, Ein kurzgefaßtes Lebensbild nebst einer Auswahl seiner Briefe: aus Anlass der 100. Wiederkehr seines Geburtstages, ed. Conrad Mayschoß, vol. 2, Berlin: Julius Springer, 1916.
59 ‘Berliner Börse’, Aktionär, 3 August 1873, p. 658.
60 RAL, XI/64/0: 1873, Gerson von Bleichröder to N. M. Rothschild and Sons, 26 August 1873.
61 ‘Volkswirthschaftliche Revue. Die Chancen des Welthandels. (Aus dem “Deutsch-Amerikanischen Oeconomist”)’, Oesterreichischer Oeconomist, 28 June 1873.
62 ‘The money market’, New York Tribune, 17 May 1873, p. 9.
63 ‘Financial. Money market’, Independent, 22 May 1873, p. 10; Clapham, Bank of England, p. 293.
64 The reasoning behind the rate rise is not recorded in the Bank of England Archive, Committee of the Treasury Minute Book, vol. 35.
65 RAL, XI/62/23B, August Belmont to N. M. Rothschild and Sons, 13 and 15 May 1873.
66 RAL, XI/62/23B, August Belmont to N. M. Rothschild and Sons, 16 May 1873.
67 Sprague, History of crises, pp. 32–3. For a differing, but unconvincing account, see Nelson, Nation of deadbeats, p. 164.
68 Ellis P. Oberholtzer, Jay Cooke: financier of the Civil War, vol. 2, Philadelphia, PA: George W. Jacobs & Co., 1907, pp. 183–222, 232–9; Henrietta M. Larson, Jay Cooke: private banker, Cambridge, MA: Harvard University Press, 1936, pp. 298–307, 339–62, 392–3.
69 Wicker, Banking panics, pp. 22–6.
70 ‘Max Wirth über die amerikanische Krisis’, Teplitz-Schönauer Anzeiger, 4 October 1873, p. 737; ‘Berlin, den 20. September 1873’, Berliner Börsen-Zeitung, 20 September 1873, evening edn, p. 10.
71 ‘Der amerikanische Krach’, Aktionär, 28 September 1873, p. 761.
72 Sprague, History of crises, pp. 58–9.
73 Clapham, Bank of England, p. 293.
74 Edwin J. Perkins, ‘In the eyes of the storm: Isaac Seligman and the panic of 1873’, Business History, 56, 7, 2014, pp. 1133, 1138.
75 ‘Quistorp’sche Institute’, Berliner Börsen-Zeitung, 30 September 1873, evening edn, p. 2; ‘Handels- und Verkehrsnachrichten’, Vossische Zeitung, 11 October 1873; ‘Banken’, Vossische Zeitung, 15 October 1873.
76 ‘Industrie und Handel’, Berliner Tageblatt, 4 October 1873; ‘Falliments in Süddeutschland’, Berliner Tageblatt, 8 October 1873; Max Wirth, Geschichte der Handelskrisen, 2nd edn, Frankfurt am Main: J. D. Sauerländer, 1874, p. 658.
77 ‘Die amerikanische Krise’, Neue Freie Presse, 2 October 1873, morning edn, p. 8.
78 ‘Der Nach-“Krach”’, Morgen-Post, 27 September 1873, p. 1.
79 ‘Zur Situation’, Aktionär, 19 October 1873, p. 1.
80 ‘Abroad’, Chicago Tribune, 1 October 1873, p. 5.
81 New York Journal of Commerce, 4 October 1873.
82 RAL, XI/62/23D, August Belmont to N. M. Rothschild and Sons, 30 October 1873.
83 ‘A great failure in Berlin’, Daily Evening Bulletin (San Francisco), 19 November 1873, p. 2.
84 ‘Abroad’, Chicago Tribune, 29 September 1873, p. 2.
85 Davies, Transatlantic speculations, pp. 123, 127–44.
86 Henry Carey, Financial crises: their causes and effects, Philadelphia, PA: Baird, 1860, p. 5. See also Juglar, Crises commerciales, p. 5; H. v. Marschall, ‘Bedürfnisse, Wohlthaten und Gefahren, heutige Lage und Aussichten des Welthandels’, Welthandel, 2, 1869, pp. 57–67.
87 Franz Stöpel, Die Handelskrisis in Deutschland, Frankfurt am Main: Expedition des ‘Merkur’, 1875, p. 7.
88 Matis, Österreichs Wirtschaft, pp. 155–8; Reinhard Kamitz, ‘Die österreichische Geld- und Währungspolitik von 1848 bis 1948’, in Hans Mayer, ed., Hundert Jahre österreichischer Wirtschaftsentwicklung, Vienna: Springer, 1949, p. 143; Barreyre, ‘Politics of economic crisis’; Walter T. K. Nugent, Money and American society, 1865–1880, New York: Collier & Macmillan, 1968, pp. 175–295; Irwin Unger, The greenback era: a social and political history of American finance, 1865–1879, Princeton, NJ: Princeton University Press, 1964, pp. 213–407; Baltzer, Berliner Kapitalmarkt, p. 5; Karl Helfferich, Die Reform des deutschen Geldwesens nach der Gründung des Reiches, 2 vols., Leipzig: Duncker & Humblot, 1898, vol. 1, p. 312.
89 Gretchen Ritter, Goldbugs and greenbacks: the antimonopoly tradition and the politics of finance in America, Cambridge: Cambridge University Press, 1997, p. 96.
90 Jacques Mertens, La naissance et le développement de l’étalon d’or, 1696–1922, Louvain: Presses Universitaires de France, 1944, p. 157; Nugent, Money and American society, pp. 35–7 and passim; Ritter, Goldbugs and greenbacks, p. 76; Helfferich, Reform des deutschen Geldwesens, pp. 123–6.
91 ‘The lessons of the American monetary crisis’, Economist, 27 September 1873, p. 1169. The Nation, a journal strongly in favour of resumption, quoted this passage affirmatively (‘The week’, 9 October 1873, p. iii). Littell’s Living Age reprinted the entire article in October 1873.
92 ‘Die amerikanische Krise’, Neue Freie Presse, 2 October 1873, morning edn, p. 8; see also ‘Amerikanische Geldkrisis’, Berliner Börsen-Zeitung, 30 September 1873, evening edn, p. 3.
93 For an examination of the actual operation of the gold standard, which was not automatic but instead often relied on interventions by central banks, see Barry Eichengreen, Globalizing capital: a history of the international monetary system, Princeton, NJ: Princeton University Press, 1996, pp. 25–44.
94 Michael D. Bordo, ‘The gold standard: the traditional approach’, in Michael D. Bordo and Anna J. Schwartz, eds., A retrospective on the classical gold standard, 1821–1931, Chicago, IL: Chicago University Press, 1984, p. 34.
95 Hugh McCulloch, in House Executive Documents 2, 2nd session of the forty-second Congress, pp. ix, xliii, quoted in Nugent, Money and American society, p. 36.
96 Joseph Ropes, ‘Restoration and reform of the currency’, Journal of Social Science, 1 January 1873, p. 53; Ritter, Goldbugs and greenbacks, p. 89.
97 Ted Wilson, Battles for the standard: bimetallism and the spread of the gold standard in the nineteenth century, Aldershot: Ashgate, 2000, pp. 147–50; ‘The low value of silver and its effects on India’, Littell’s Living Age, 4 March 1876; John Eadie, Panics in the money market and recovery from their effect: being an inquiry into the practical working of the monetary systems of America and Europe, past and present, and the phenomena of speculations, revulsions and panics, New York, 1873, p. 41. For an assessment of the role of non-Western countries within the currency system around the turn of the century, see G. Balachandran, ‘Power and markets in global finance: the gold standard, 1890–1926’, Journal of Global History, 3, 3, 2008, pp. 313–35.
98 Neuwirth, Speculationskrisis von 1873, p. 372. See also Bruno Weber, Einige Ursachen der Wiener Krisis vom Jahre 1873, Leipzig: Veit, 1874, p. 26; Moritz Linder, Die Asche der Millionen: vor, während und nach der Krise vom Jahre 1873, Vienna: Frick, 1883, p. 103.
99 Erwin Nasse, ‘Ueber die Verhütung der Produktionskrisen durch staatliche Fürsorge’, Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im Deutschen Reich, 3, 1879, p. 186.
100 A. Soetbeer, Die 5 Milliarden: Betrachtungen über die Folgen der großen Kriegsentschädigung für die Wirthschaftsverhältnisse Frankreichs und Deutschlands, Berlin: Habel, 1874, pp. 49, 51; Adolf Berliner, Die wirthschaftliche Krisis, ihre Ursachen und ihre Entwicklung, Hanover: C. Meyer, 1878, pp. 39, 46; Wilhelm Oechelhaeuser, Die wirthschaftliche Krisis, Berlin: Springer, 1876, pp. 10–12.
101 See the quotations by McCulloch and Ropes above (nn. 95 and 96); see also Eadie, Panics in the money market, p. 8; William G. Sumner, A history of American currency, New York: Holt, 1875, p. 250 and passim.
102 Joseph Ropes, Hugh McCulloch, William D. Kelley, David A. Wells, and Secretary Sherman, ‘The resumption of specie payments’, North American Review, 1 November 1877. Nor did James A. Garfield in ‘The currency conflict’, Atlantic Monthly, 37, February 1876, pp. 219–37.
103 ‘The currency and the panic’, Bankers’ Magazine, 1 February 1875, p. 576.
104 Walter E. Huffman and James R. Lothian, ‘The gold standard and the transmission of business cycles, 1833–1932’, in Bordo and Schwartz, Retrospective on the classical gold standard, pp. 455–507.
105 ‘The failures in England and their influence here’, Commercial and Financial Chronicle, 19 June 1875, p. 579.
106 Christopher L. Hill, National history and the world of nations: capital, state, and the rhetoric of history in Japan, France, and the United States, Durham, NC: Duke University Press, 2008, p. 24; Dorothy Ross, The origins of American social science, New York: Cambridge University Press, 2001, p. 26.
107 Lepler, Many panics, pp. 183–7.
108 Carlos Marichal, A century of debt crises in Latin America: from independence to the Great Depression, 1820–1930, Princeton, NJ: Princeton University Press, 1989, pp. 99–119 (quotations pp. 99 and 112).
109 Winseck, ‘Double-edged swords’, p. 57.