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Crises are designated as financial, commercial, and
Industrial. These qualifying phrases mark the places in
the economic organism where the disturbance is felt. In
a purely financial crisis the stock market is the
storm-centre, the disturbance affecting but slightly
commercial or productive enterprises. A commercial
crisis is of wider area, and embraces the trading
classes, while an industrial crisis extends its baneful
influence to producers in all lines of agriculture,
manufactures, and the like. These expressions do not
designate so much different classes of crises as crises
of different degrees of intensity, inasmuch as an
industrial disturbance will market, though a financial
panic does not necessarily imply the others.
While crisis and depression are usually associated, this
is not always the case. Panic and crises may occur, and
after a brief interval affairs may prosper as before.
This is particularly true of the purely financial
crises, which are not deep-rooted enough to affect wider
areas. The crisis in its larger sense, however, is
invariably followed by hard times. On the other hand,
depression may occur without a panic. It is hardly
correct to say that it is ushered in without a crisis,
for the phenomena of such a period can usually be
observed even if they lack the spectacular elements
which so frequently accompany them. It should be
observed, moreover, that crises may be local or general,
and while they have many points in common, it is
particularly the latter with which we have to deal.
General crises affecting the economic situation of an
entire country, and extending themselves to other
countries which have trade relations with the former,
are peculiarly a mark of the modern organization of
business. A century ago bad harvest or other calamities
might cause local distress, or speculation such as was
exhibited in the days of the South Sea Bubble and the
Mississippi Scheme might cause a panic, but such
occurrences did not show the pertinacity and
wide-reaching effects which characterize the modern
industrial disturbances. That such crises are inevitable
consequences of modern methods of doing business and
inseparable from the economic activities of our times,
seems to be well established by their frequent
recurrence and by their greater severity in the most
advanced nations.
Crises more or less pronounced occurred in England in
the years 1815, 1825-26, 1836,37, 1847, 1857, 1866,
1873, and 1890, while in the United States like
disturbances were felt in 1814, 1818-1819, 1837, 1857,
1873, 1884, and 1893. The periodicity of these
occurrences is marked, and certain writers have gone so
far as to establish a normal interval of ten or twelve
years between crises. The facts as far as we know them
do not warrant us in fixing any absolute rule, though
the history of these crises reveals many common
features.
It will further be observed that the dates given for
Great Britain and our own country coincide in several
instances, and if space permitted us to draw upon the
history of Belgium, Holland, France, and Germany further
coincidences would be obvious. Certain crises, notably
that of 1873, were felt quite generally. The Actual
crash did not occur in the same month, or even in the
same year, in all the countries involved, but it is a
frequent occurrence that local circumstances may hasten
or postpone an event for which the general conditions
are preparing.
The concrete manifestations of a crisis can best be
studied in an historical instance, and none is better
adapted for this purpose than the crisis of 1873 in the
United States. With the close of the Civil War an
extraordinary activity in all lines of enterprise was
manifested. The public lands had been thrown open to
settlement, and large tracts had been granted to the
Pacific railroads. This, together with the return of the
army to the pursuits of peace, and an enormous increase
in immigration was the condition for an era of
speculative development in the Western States. The
impulse which had been given to manufactures, not only
by the highly protective duties which marked the war
tariffs, but also by the depreciation of the currency,
which acted as a check upon foreign competition, caused
a similar activity in the manufacturing States of the
East.
Business prospered; prices and profits were high. The
census of 1870 showed in every branch of industry a
great advance over that of 1860, and the greater part of
this advance was in the latter half of the decade.
Nowhere was this confidence in the future shown more
than in railroad building and in the iron industry. In
1867 there were 2249 miles of railway constructed ; in
1869, 4615 ; in 1871,7379. A like expansion of railways
had marked the approach of the panic of 1857. In like
manner, the outlay for constructing railways rose from
$271,310,000 in 1864-68 to $841,260,000 in 1869-73.
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