Moved by the visible desolation outside his shabby little doorway which day after day had been practically shoved in his face, Samuel Gompers would go on to become one of the most important, if not the most important, figures in American labor. An immigrant from Britain, rolling cigars in New York City, he’d end up creating the American Federation of Labor in 1886, serving as its first leader and forever changing how the value of the worker was conceived.
Gompers had been driven by what he observed during the miserable depression which lasted from 1873 until 1878 (in the US). Even today, according to the National Bureau of Economic Research (NBER), the group of economists who date business cycles, that downturn remains the longest in our nation’s history. They say it had lasted 65 months peak to trough, and as a matter of time has only been challenged by the 1929-33 contraction.
Because it seemed to go on and on, multitudes of the unemployed and displaced milled around Gompers’ locale week after miserable week, month beyond month, a tangible expression of a phenomenon never before known in American experience. In his memoirs, the future labor leader recalled the experience of a family friend whose inability to find meaningful employment had, during the cruel winter of ’76, reduced them to eating their pet canine.
The Society for Improving the Condition of the Poor figured that one-quarter of New York City’s labor was out of work. Similar notes were made of cities all throughout the country; the defining feature of this first true “industrial depression” was that there was no escaping from it. Regional troubles had come and gone throughout the early nation’s history, but no longer geographic constraints to spreading doom.
In fact, the terms “tramp” and “bum” entered our vernacular and became commonplace during these specific years. Typically, these had referred to the unfortunate Civil War veterans who would often camp together in various places seeking to consolidate grievances in the difficult search for either private or government relief. They simply didn’t know what else to do.
What had sparked the downturn was no mystery. On September 19, 1873, the New York Times wrote:
“The first intimation which came into the Stock Exchange of any change in the programme was contained in a brief notice, which said authoritatively that Jay Cooke & Co. had suspended payment. To say that the street became excited would only give a feeble view of the expressions of feeling. The brokers stood perfectly thunderstruck for a moment, and then there was a general run to notify the different houses in Wall street of the failure.”
The same scene would play out numerous times over the decades to come; “Some of the men who were ruined swore, some of them wept, some went out of the street without saying a word; others talked of the trouble in a jovial way and went about trying to borrow money from friends.” But what transformed a financial panic into this prolonged industrial depression?
At one point during this particular one, it had been said as many as 3 million American workers would have their exertions expunged. On a percentage basis, it was greater than that of the Great Depression of the 1930’s.
Hold on, said a guy by the name of Carroll D. Wright. That figure was tossed about by “croakers”, those who like a future Samuel Gompers were beholden to labor agitation and therefore purposefully sought out the most beneficial means to further that cause. Wright had been made head of Massachusetts’ Bureau of Labor Statistics in 1873 after the first fellow to lead the state’s agency had unscrupulously used his position to advocate all on the one side.
Promising instead objectivity, Wright claimed the 3 million estimate “a wild guess.” He said, “We have given the croaker the benefit of every doubt” and then set out to figure out a way to find the truth. The disaster was certainly a disaster, but just what was the disaster? Being impartial about all its proportions would be the only way to uncover useful knowledge.
Wright began a survey which was sent to local town assessors asking them to report back on honest numbers of unemployed workers they’d observe in their own locations. What had been conveyed back to the Bureau was one-tenth the number widely cited; for the 3 million claimed to be unemployed across the country, supposedly a quarter-million unemployed resided within the Massachusetts boundary alone.
This first unemployment survey found only 22 thousand.
It wasn’t the end of the matter, however. Far from it, Wright had asked these assessors a very specific question when it came to tallying the number of unemployed. It seems a very simple thing; either you are working, or you aren’t. Yet, gradations in the labor market do exist and at times can mean everything.
Excluded from this initial survey were all women and children under the age of 18, even though the latter cohort, especially boys, had been a significant contributor to the American labor force of the time. Wright also omitted those who might be determined as not looking for work, or even those not looking hard enough for work (in the assessor’s judgement), or anyone who refused to take a job at reduced wages (a common condition in these early industrial depressions).
The consequence was this potentially huge number of potential labor falling outside either definition; neither employed nor, in the Bureau’s estimation, “truly” unemployed. Even Wright would concede this method had intentionally understated the big picture level of misery and economic dysfunction, but he had done so under the search for what he claimed was accuracy.
You’ll no doubt notice the similarities here to the modern calculation of the unemployment rate. That’s because President Chester Arthur in January 1885 would appoint Carroll Wright the first Director of the Bureau of Labor (then housed under the Department of the Interior), into which he imported these ideas.
Among the first major projects this national bureau sought out in its first year was to describe - in the finest detail - the causes of these protracted downturns which had so flummoxed the labor market. And it hadn’t just been the decade before, the 1870’s; no, there was trouble ongoing throughout the 1880’s, too, leading Congress and Arthur to create a bureaucracy (as politicians do) ostensibly to get to the bottom of the problem.
This led to the Commissioner of Labor’s (Wright) First Annual Report published in March 1886; its title was, very simply, Industrial Depressions.
The introduction was a brief walk through history which right from the start pointedly noted the timeless nature of idleness. On its second page, Wright quotes from Richard Hakluyt’s Discourse Concerning Western Planting written in 1584:
“But wee, for all the statutes that hitherto can be devised, and the sharpe execution of the same in poonishinge idle and lazye persons, for wante of sufficient occasion of honest employment, cannot deliver our commonwealth from multitudes of loyterers and idle vagabondes…yea many thousands of idle persons are within this realme, which, having no way to be sett on worke, be either mutinous and seeke alteration in the state, or at leaste very burdensome to the commonwealth.”
Wright’s intent in bringing this up was actually to distinguish between the “vagabondes” of yesteryear with the unwilling “tramps” and “bums” set upon, through no fault of their own, by the modern industrial depression. Something else was going on, something new to human economic experience.
This 1886 report sports a wealth of statistics and information, all of which serve to fundamentally support the earnest contributions of its stated quest. However the claims contained within it might survive scrutiny, there was absolutely no doubt they had been thoroughly researched in a way that had never been done before.
As to the matter of the economy and the specific malady of the severe 1873-78 contraction which had inaugurated this mess and extended it into the following decade when these words were written down:
“That while…the extent of the existing industrial depression involves a crippling of the wage-receivers of the country, and a consequent crippling of the consumer power of the people, the volume of business has been fairly well preserved – at least not reduced to any such extent as is indicated by the crippling of consumer power – and that prices have constantly fallen. Along with these two features there has been a constant diminishing of profits until many industries have been conducted with little or no margin to those managing them, and a great lowering of wages in general.” [emphasis added]
Lack of pricing power, outright deflation, hadn’t left America (and most of the rest of the industrial world) in a straight-line contraction from the get-go, an inescapable downward slide with no off-ramp. On the contrary, the economy’s overall performance was best characterized as unstable; fits and starts, always seeming to come up short and therefore unable to produce the magnitude of recovery that today is said to be natural and is thus taken for granted.
As the report further stated, “…on the whole, the volume of business of the country during the depressed period has been satisfactory.”
A satisfactory depression?
In one sense, yes, though only because of the expectations workers and laypeople have quite organically developed in how they think about these things (or are told today to think about them). Even now, the term “depression” conjures an image of a never-ending sea of minus signs, an outright contraction forever forward (which further seduced and still seduces the ongoing Marxist fantasy of capitalism’s imminent end); “the extent of the depression has not been so great as the popular mind has conceived it.”
What Wright was writing about was the reality insofar as this burgeoning Long Depression had become. Never all down all the time forever and ever, rather it had been best characterized as the distinct lack of upside which had easily typified the decades beforehand (antebellum and Reconstruction). The economy had materially differed from itself under the preceding period, punctuated by bank panic, which produced an after-effect as described in the quotation cited above.
Workers getting stuck with the short end (Keynes’ greater evil) of the stick as businesses tread water unable to ever do much better than that.
Why?
According to Wright’s report:
“An industrial depression is a mental and moral malady which seizes the public mind after the first influences of the depression are materially or physically felt. Falling prices, or any of the other influential causes by which an industrial depression is inaugurated, create apprehensiveness on the part of all classes, and the result is that the depression is aggravated in all its features.”
Jay Powell and all the rest of current Economics could not possibly have said it better. Once triggered, people/economic agents naturally react to heightened risks, perceived or real. Those depressions associated and triggered by bank panics and the monetary disease of deflation (disinflation?) attending them understandably lead right to the kind of prolonged hard economic case so thoroughly cataloged by the nearly five hundred pages of the Bureau of Labor’s First Annual Report (over a hundred of those pages containing just data tables).
This begs the question, of course, as to what might be done if ever so triggered again – which, situated from our 21st century perch, we know it would recur over and over, even in the current era. Proposed remedies included the restriction of land grants and immigration, enacting laws to stop speculation, and then sound currency as well as “checking the expansion of credit.”
In other words, what better way to challenge the “moral” disease of the triggered industrial depression than to assure both workers and their employer of the stability a committed government might fashion in its obligation to “…stimulate any methods for the mitigation of the severity and shortening of the duration of the industrial depression.”
That might be more accurately branded as “stimulus”, certainly when compared to what passes for it these days.
While written up a century and a half ago, this is just what neo-Keynesian dogma has stated for its purpose. The results? Since 2007, a whole lot that looks very familiar to the reality of the Long Depression despite overactive government. The key difference is that if the 1870’s and 1880’s had led to what Carroll Wright had called “industrial hypochondria”, of the sort blabbed up by the croakers and such, the past decade or so has been marked by a sort of weird, unsupported economic euphoria.
The unsatisfactory boom.
Sure, the economy hasn’t gone straight backward and GDP goes up most of the time, but, as history had already shown, it needn’t be like that in order to become the very thing most people fear the most. What ends up being the worst of the worst is time and the lack of any upside.
The truth of the matter is that we live in a non-linear world which presents that rate of change as the ultimate arbiter between the healthy and the unhealthy. Yes, Carroll, there can be a satisfactory depression. We’re living in one right now, as easily established by the preceding thirteen years of our labor market.
Its hallmarks are, ironically, the expansion of those caught in the no man’s land Mr. Wright created back in the 19th century; the throngs of potential workers who aren’t looking for work, because there isn’t any or isn’t any which might produce a sufficient income, but otherwise would if the current condition added up to satisfactory recovery processes. A growth too small and timid, limited by the instability which naturally comes with the undercurrent monetary disease.
Rocked instead by these intermittent introductions, no wonder current business around the world has chosen to overmanage their costs at the expense of pre-crisis (2008) hiring methods and demand; “there has been a constant diminishing of profits until many industries have been conducted with little or no margin to those managing them, and a great lowering” not of wages but of hiring and wage growth.
Finally, it should be noted the similarities, too, of the tremendous social and political upheaval which had accompanied the Long Depression’s long reach upon the industrial world. I won’t list them here, suffice to briefly note how it had been the first serious effort and imposition of socialism and its doctrines. Even the more modest among the greatly disaffected, such as Samuel Gompers, demanded serious “change.”
This all before 2020. Facing 2021, there are now 10 million fewer jobs in the United States, as well as almost 2 million new jobs that never happened (a number already insufficient to begin with), still more than 900 thousand weekly jobless claims indicating more destructiveness, and, in many places, an undeterred belief none of this will matter because…”stimulus” of the same untruthful, unstable kind which has been introduced by those who don't want to realize, or anyone else to realize, the situation for what it truly has become.
