Chapter 14 Section 4 The Farmers' Complaint The American economy rested on shaky ground in the post-civil War era. Twice, in 1873 and 1893, the collapse of a financially ailing railroad led to a cascading national panic. Banks failed. Businesses which, like farmers, had also over-borrowed went under. Unemployment soared. During both panics, farmers suffered the double disasters of falling crop prices and loans called in by banks desperate for cash. Historically, the federal government rarely had intervened to stabilize the nation's economy, nor would most people have expected it to. But in their distress, farmers increasingly began to view government help as a right. In small but rapidly growing numbers, they voiced their demands. Farmers and Tariffs One federal policy of concern to farmers was tariffs. Tariffs on imported goods discourage people from buying imports by making them more expensive. Thus, tariffs encourage the sale of goods produced at home. Americans in the late 1800s were divided on the benefit of tariffs. Businesses claimed that tariffs protected American factory jobs and their own profits. But because tariffs reduced foreign competition, they also encouraged American firms to raise their prices, which harmed workers and consumers in general. Tariffs helped farmers by protecting them against competition from farm imports. But tariffs hurt farmers in two ways. First, they raised the prices of manufactured goods, such as farm machinery. Second, they kept foreigners from earning the U.S. currency they needed to buy American crops. Thus, tariffs indirectly reduced the world market for American farm products. Whenever the government raised tariffs to benefit industry, farmers protested. They viewed tariff increases as proof that the government favored eastern manufacturers over western farmers. The Money Issue Tariffs were not farmers' only concern in the late 1800s. For many, the key issue was the silver supply. The value of money is linked to the money supply, the amount of money in the national economy. If the government increases the money supply, the value of every dollar drops. This drop in value shows up as inflation, a widespread rise in prices on goods of all kinds. People who borrow money benefit from inflation because the money they eventually pay back is worth less than the money they borrowed. Inflation also helps sellers, such as farmers, because it raises the prices of the goods they sell. In contrast, if the government reduces the money supply, the value of each dollar becomes greater. This causes deflation, or a drop in the prices on goods. People who lend money are helped by deflation because the money they receive in payment of a loan is worth more than the money they lent out.
In the years following the Civil War, the nation's money supply shrank as the federal government took out of circulation the paper money issued during the war. As a result, the nation experienced a prolonged period of deflation. Monetary policy, the federal government's plan for the makeup and quantity of the nation's money supply, thus emerged as a major political issue. Supporters of inflation pushed for an increase in the money supply. Supporters of deflation wanted a tight money policy of less currency in circulation. Gold Bugs In 1873 the year of the worst economic panic in U.S. history to that point supporters of tight money won a victory. Until that time, United States currency had been on a bimetallic standard. That is, currency consisted of gold or silver coins or United States treasury notes that could be traded in for gold or silver. In 1873, in order to prevent inflation and stabilize the economy, Congress put the nation's currency on a gold standard. This move reduced the amount of money in circulation because the money supply was limited by the amount of gold held by the government. Conservative gold bugs were pleased. Many of them were big lenders, and they liked the idea of being repaid in currency backed by the gold standard. Silverites The move to a gold standard enraged silverites, mostly silver-mining interests and western farmers. They claimed that ending silver as a monetary standard would depress farm prices. Silverites called for free silver, the unlimited coining of silver dollars to increase the money supply. Gold Bugs vs. Silverites In this famous exchange, one silverite proposes the return to a bimetallic standard along with the unlimited coining of silver, while his opponent, a gold bug, criticizes the proposal. In Favor of Free Silver Our forefathers showed much wisdom in selecting silver, of the two metals, out of which to make the unit [of currency]. [T]hey were led to adopt silver because it was the most reliable. It was the most favored as money by the people. It was scattered among all the people. Gold was considered the money of the rich. [With the coining of silver,] you increase the value of all property by adding to the number of monetary units in the land. You make it possible for the debtor to pay his debts; business to start anew, and revivify all the industries of the country. The money lenders in the United States, who own substantially all our money, have a selfish interest in maintaining the gold standard. pamphlet by Professor W. H. Coin Harvey, of Coin's Financial School, 1894 Opposed to Free Silver Do you suppose that the farmers of this country really believe that with each ton of silver taken out of the mines by the silver law-makers in the Senate that there are created bushels of wheat [?] Free
coinage of silver then is absolutely certain to drive all our gold out of circulation. [Hence] there will be no increase in the quantity of money. The only way it would act would be by increasing the price of everything. A dozen eggs, now selling at 15 cents, would sell for about 30 cents. As [it] would inevitably result in a rise of prices it would immediately result in the fall of wages. Are we willing to sacrifice the interests of the laboring classes to the demands of certain owners of silver mines? University of Chicago economist James Laurence Laughlin, in a public debate with Coin Harvey, 1895 The Bland-Allison Act of 1878, was, for the silverites, a step in the right direction. This act required the federal government to purchase and coin more silver, increasing the money supply and causing inflation. Passed by Congress, the Bland-Allison Act was vetoed by President Rutherford B. Hayes because he opposed the inflation it would create. Congress overrode Hayes's veto. Yet the act had only a limited effect, because the Treasury Department refused to buy more than the minimum amount of silver required under the act. The Treasury also refused to circulate the silver dollars that the law required it to mint. In 1890, Congress passed the Sherman Silver Purchase Act. While not authorizing the free and unlimited coinage of silver that the silverites wanted, it increased the amount of silver the government was required to purchase every month. The law required the Treasury to buy the silver with notes that could be redeemed for either silver or gold. That plan backfired, as people turned in their silver Treasury notes for gold dollars, thus depleting the government's gold reserves. To protect the gold supply, President Grover Cleveland oversaw the repeal of the Silver Purchase Act in 1893. Organizing Farmer Protests Because farmers lived far from one another and usually relied on their own efforts, they tended not to organize protests against policies they opposed. In the late 1800s, however, farmers took advantage of improvements in communication and transportation to form several powerful protest groups. The Grange In 1866, the Department of Agriculture sent Oliver H. Kelley on an inspection tour of southern farms. Disturbed by the farmers' isolation, the following year he founded the Patrons of Husbandry, or the Grange. The Grange soon began helping farmers form cooperatives, through which they bought goods in large quantities at lower prices. The Grange also pressured state legislators to regulate businesses on which farmers depended, such as the operators of grain elevators that stored farmers' crops and the railroads that shipped goods to market.
Farmers' Alliances Although the Grange was popular (and still exists today), eventually farmers formed other political groups. In the 1880s, many farmers joined a network of Farmers' Alliances that were formed around the nation. The alliances launched harsh attacks on monopolies, such as those that controlled the railroads. The Farmers' Alliance in the South, formed in Texas in the mid-1870s, grew especially powerful. It called for actions that many of the nation's farmers could support: federal regulation of the railroads, more money in circulation, creation of state departments of agriculture, antitrust laws, and farm credit. Farmers' Alliances held special importance for women, who served as officers and won support for women's political rights. One of the most popular speakers was Kansas lawyer Mary Elizabeth Lease, who reportedly urged farmers to raise less corn and more Hell! African Americans worked through a separate but parallel Colored Farmers' Alliance. Formed in 1886 in Lovelady, Texas, the group had a quarter of a million members by 1891. A series of natural disasters gave special urgency to Farmers' Alliance programs. The Mississippi River flooded in 1882. In 1886 and 1887, Texas suffered a 21-month drought. Terrible blizzards, which killed thousands of cattle, struck the West in 1887. Increasingly, farmers wanted to know why the federal government was unwilling to respond to these disasters. Government Responses Political power and influence were splintered during this period. Farmers often differed on how much federal help was needed, if any. On the other hand, business interests were not always strong enough to prevent legislation they disliked from becoming law. As one historian put it, Big business was powerful; it was by no means all-powerful. Meanwhile, fragmented political parties had difficulty rallying support for controversial proposals among their members in various regions of the country as well as among different economic and ethnic groups. In every election from 1880 to 1892, no candidate won a majority of the popular vote. Only rarely did the President's party command a majority in Congress. Presidents thus lacked the power to take bold action. In addition, some Presidents were influenced by promises of support from powerful business interests. In 1887, Congress passed the Texas Seed Bill, which provided seed grain to drought victims. But President Cleveland, a Democrat, vetoed the bill, expressing the commonly held view that though the people support the government, the government should not support the people. On the issue of railroad regulation, some consensus emerged. Even some railroad owners backed moderate regulations, fearing more drastic measures. In 1887, Cleveland signed the Interstate Commerce Act. It regulated the prices that railroads charged to move freight between states, requiring the rates to be set in proportion to the distance traveled. The law also made it illegal to give special rates to some customers. While the act did not control the monopolistic railroad practices that angered
farmers, it established the principle that Congress could regulate the railroads, a significant expansion of federal authority. The act also set up the Interstate Commerce Commission (ICC) to enforce the laws. In 1890, President Benjamin Harrison approved the Sherman Antitrust Act. This act was meant to curb the power of trusts and monopolies. But during its first decade, enforcement was lax. The Populists In 1890, the various small political parties associated with the Farmers' Alliances began to enjoy success at the ballot box, especially in the South. In 1891, the Alliances founded the People's Party, a new national party that demanded radical changes in federal economic and social policies. The Populists, as followers of the new party were known, built their platform around the following issues: 1) An increased circulation of money. 2) The unlimited minting of silver. 3) A progressive income tax, in which the percentage of taxes owed increases with a rise in income. This tax would place a greater financial burden on wealthy industrialists and a lesser one on farmers. 4) Government ownership of communications and transportation systems. Seeking the support of urban industrial workers, the Populists endorsed an eight-hour work day. For the same reason, they opposed the use of Pinkertons, the private police force that had been involved in the bloody Homestead Strike of 1892, as strikebreakers. Breaking through deeply rooted racial prejudice, Populists sought a united front of African American and white farmers. The poor of both races had a common cause, they argued. You are kept apart that you may be separately fleeced of your earnings, said one party leader. The party drew some black sharecroppers and tenant farmers away from the Republican Party. During the 1892 campaign, populism generated great excitement among its followers. But the party's presidential candidate, Iowan James B. Weaver, won barely a million votes. Cleveland returned to the presidency. Bryan's Cross of Gold Populists renewed their vigor in the 1896 presidential campaign. In an election that focused mainly on currency issues, the Republicans ran moderate Ohio governor William McKinley on a gold-standard platform. William Jennings Bryan, a former silverite congressman from Nebraska and a powerful speaker, captured the Democratic nomination with an emotional plea for free silver. Bryan addressed the 1896 Democratic Convention in Chicago on July 8, at the close of the debate over the party platform. Using images from the Bible, he stood with head bowed and arms outstretched and
cried out at the climax of his speech, You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold! So stunning was Bryan's speech that both the Democrats and the Populists nominated him for President. The Cross of Gold speech is one of the most famous in American history. The 1896 campaign was one of marked contrasts. Bryan created a whirlwind of activity, traveling all over the country and making speeches at every stop. McKinley ran a more traditional campaign. He remained in his hometown of Canton, Ohio, greeting visitors and making a few speeches from his front porch. Despite his best efforts, Bryan lost the election. He carried the Democratic West and South but none of the urban and industrial midwestern and northern states. In these states, factory workers feared that free silver might cause inflation, which would eat away the buying power of their wages. Thus, despite populism's broad appeal, it could not bridge the gap between America's cities and farms. Nor could populism slow America's transition from an agricultural nation to an industrial nation. Populism's Legacy By 1897, McKinley's administration had raised the tariff to new heights. In 1900, after gold discoveries in South Africa, the Canadian Yukon, and Alaska had increased the world's gold supply by more than $100 million, Congress returned the nation to a gold standard. To the surprise of many farmers, crop prices began a slow rise. The silver movement died, as did populism. The goals of populism, however, lived on. In the decades ahead, other reformers, known as Progressives, applied populist ideas to urban and industrial problems. In so doing, they launched a new, historic era of reforms. Reading Comprehension 1. What changes in economic policy did many farmers seek? 2. Explain the difference between a gold standard, a bimetallic standard, and free silver. 3. What did the government do to address farmers' complaints? 4. To whom did Bryan's Cross of Gold speech appeal, and why?