Rebels needing a cause
The Occupy Wall Street protesters may not know much about Coxey’s Army. But like the current demonstrations, Jacob Coxey’s 1894 March on Washington occurred after a period of economic turmoil that increased inequality and followed a crash of the financial system. Coxey failed but his demands for stimulus spending and printing money became the standard response to recessions. Occupy Wall Street should be so lucky.
Economically, the lead-up to 1894 bore considerable resemblance to the present. In the 1879-92 boom years, disruptive technologies like the transcontinental railroad and refrigeration brought prolonged downward pressure on prices. Since the United States was then on a gold standard, this resulted in about 20 percent deflation in consumer prices. As in the past decade, when American manufacturing workers saw their living standards eroded and their employment opportunities diminish, in 1879-92 one class, farmers, were especially adversely affected, and income differentials widened.
The financial crash of 1893 resembled that of 2008, with similar distress in the financial sector, but caused more corporate bankruptcies and higher unemployment, estimated to have peaked at up to 19 percent. It also caused a severe credit problem for the country. To avoid running out of gold in early 1895 the United States sought a bailout from J.P. Morgan.
Coxey, a successful businessman with Populist Party connections, began his march on the capital on March 25, 1894, with 100 participants from his home town of Massillon, Ohio. The marchers demanded federal deficit spending on roads and other public works, with laborers paid in paper money, thus expanding the currency in circulation.
A generation before John Maynard Keynes’ “General Theory of Employment, Interest and Money,” the protesters’ ideas found little response in the conservative administration of Grover Cleveland, and the march was eventually dispersed with little short-term effect. However, Coxey’s prescriptions have since become conventional wisdom, notably in the fiscal and monetary response to the most recent downturn.
Occupy Wall Street arises out of a similar economic situation, when technology-driven deflation has widened income gaps and produced a stratum of economic losers. In that respect, the situation does not resemble, say, 1932, when distress was general, or even 1968, a period of great prosperity. But like Coxey’s followers, Occupy Wall Street could influence the debate for decades ahead. It just needs some ideas.