The REAL Great Depression , The Panic of 1873

For the yoof around here . A crash or depression in the 1800’s was called a “Panic” . How very apt .

The Panic of 1873 was a DotCom and Credit Bubble burst all in one . It happened when the credit markets realised that they had spent far too much money building railroads for which there was no demand .

America then played the role vs Europe that China plays against America. Nevertheless America crashed hardest.

If only we’d built railroads… :unamused:

We had !

That picture makes me want to burn the corpses of every dead irish leader, and perhaps do likewise for those still alive.

I still have some of the railway sleepers ripped up in that fiasco if you need them for the pyre.

Back on topic, I have been reading some about that crash and it does resemble this one very much. The effects of it were felt for years afterwards despite the massive expansionism of the victorian era. It caused or coincided with ( I’m not sure which) a period of deflation that lasted until just short of the twentieth century. In reading the history it would appear that we are repeating the crashes of the 19th century because we have forgotten their lessons as all we know as a market crash is the 1929 crash and its consequences. We have covered the bases to prevent that one happening again but in recent years have begun to repeat the mistakes of the earlier crashes. Time to get the historians out to advise the politicians on what did and did not work in the past.

*dug quote from that font of … er … knowledge Wikipedia

I remember reading that UK prices were lower in 1900 than 1815.
The Napoleonic Wars required the UK to greatly increase their national debt.
Agricultural produce and Land prices had surged during Napoleonic Wars.

Once the war was over deflation kicked in.

“Those who cannot remember the past are condemned to repeat it” as the wise man said many moons ago.

In particular, agricultural prices collapsed - in much part due to globalisation - cheap cereals from America and Russia, combined with refrigeration and lower transport costs. This was what really worried many commentators, as the upper classes who lived off landlord rents couldn’t make so much money… This was also the heyday of agricultural cooperation (creameries, raiffeisen banks, etc) as independent farmers in Europe invested collectively in technology to increase yields in order to keep the wolf from the door…

Isn’t the opposite happening today though?

Yes and no. The Depression of the late nineteenth century marked the collapse of the existing basis for many economies (as you point out - the flooding of agricultural products) without the next stage of the economy (industrialised mass production on a consumerist basis) being ready. That depression, IMO, sparked the first world war, as a scramble for imperial possession resulted from a recognition that the economy was changing and that markets and resources were important. The 1920s saw the beginning of the industrialised consumerist economy in the US, but most countries were unprepared, so huge global imbalances were created (gold flight to the US). There was also a failure to match wages of consumers with the products they were supposed to purchase. This led to the 1930s depression and the second world war.

Now we see a huge shift in the industrialised consumerist economy to lower-wage countries beggaring the west of things to do. The FIRE economy was supposed to take over from this, but, really, how much insurance do we need? In any case, the unbalanced capital flows of the 1920s were replicated and the result is that the new economy of the west is not available to replace the old one that has fled from most countries (significantly, apart from Germany!) largely to Asia.

Personally, I think the FIRE economy is bunk. What then should replace it and the industrialised economy it was supposed to replace? The knowledge economy, attractive as it is, relies on something else to provide its services to. It will not occupy the numbers or the talents available in a population. It is therefore not a substitute for some form of primary or secondary production. But what is that to be?


Of course the FIRE economy is bunk - it could only exist temporarily, while most of the world’s capital existed in a handful of places, and even then, the ‘rabbit out of a hat’ trick ended up having to sell both the rabbit and the hat.

Find out what Average Joe buys, figure out where the manpower goes into those things, and you’ll end up pretty close to what Average Joe does - it can be no other way (modified for gender neutrality :slight_smile: ).

As such, the FIRE economy cannot ever be more than a small slice of the economy, and were it not for the lack of competition in housing, and the massive tax breaks for pensions, it wouldn’t even be that.

The ‘knowledge’ economy is simply a marketing term for the reality that humans are now several steps removed from actually creating many products and services - and these ‘higher’ level positions are generally better paid etc than the ‘coal-face’ jobs they replace or assist. This trend will continue, into what you could consider the ‘design’ economy - people will merely specify what they want, and the product will be made automatically.

Once the massive inequalities between rich/poor countries even out to the point that ‘western robots’ are cheaper than ‘eastern humans’, manufacturing will be an automation race.

This reduces the essential manpower needed for most tasks (although it increases the capital investment), At that point, we either massively reduce the number of ‘worked hours’ per human lifetime, or we add more and more unnecessarily layers to soak up the available labour.

Then even ‘low end’ stuff will be produced in the west, because programming the machines which build the automated factories to produce the product will be competitive with doing the same in india/china, and using such machines will be cheaper than poorly paid people doing the work themselves.

think of the amount of exurbs that could be planned with infastructure from 1925


When dramatic comets are visible, night after night, they are generally held to be telling us about a wave of long-lasting change. Back in 1892, Comet Holmes erupted, heralding the worst economic crisis the USA had ever known. The ‘Panic of 1893’ was triggered by a problem with the financing of railroads. This led to a credit crunch, a stock market crash and the collapse of several banks. By 1896, though, news from the Klondike created a Gold Rush followed by a tremendous ten-year boom. Late last year, for the first time since 1892, Comet Holmes erupted again.


The panic of 1873 and the subsequent depression only lasted four years. It lasted, as the agrarian depression nearly thirty years in the UK and was largely responsible for wiping out landed wealth in the UK. Not until the economic stimulus of the armament campaigns in the years before WWI did the economy really pull out of it.

What I really hate about these depressions is that they always seem to end in wars…