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What were the causes of the depression of 1893?

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Quick Answer

Economic historians contend the depression of 1893 was the result of deflation extending back to the Civil War, overproduction of goods and government extravagance. Despite this, few saw the depression coming until it was too late.

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Full Answer

According to the Economic History Association website, most economic indicators seemed to show the economy was healthy in the early part of 1893. However, a shortage of credit caused consumers to panic which, when combined with the economic collapse of the Philadelphia Reading Railroads and British investors selling American investments in response to a European depression, led to a depression in the United States. By the time the depression ended, 15,000 businesses, 74 railroads and 600 banks had failed.

Government leaders disputed the cause of the depression at the time, according to a report by the San Jose University Department of Economics. In fact, just prior to the depression a number of politicians claimed the economy was enjoying a marked period of prosperity. The impact of multiple railroad failures, however, was far-flung, with railroads serving at the time as major consumers of commodities like steel, as well as being the major means of shipping goods across the country. The domino effect touched many other businesses.

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