Great Northern Railway magnate James J. Hill (1838-1916) had spotted signs of economic depression on the horizon as early as 1890, when he told his son-in-law, Seattle millionaire and road builder Samuel Hill, that the United States was on a collision course with "a panic that it will take five years to get over." Three years later, the second-worst depression in this nation's history began, staggering a Northwest economy that had grown too swiftly and too recently to be able to defend itself against widespread financial upheaval.
The depression of '93 was partly the fault of federal policy. Under President Benjamin Harrison (1889-1893), a Republican-led Congress had profligately spent away a $100 million Treasury surplus, mostly on enrichment programs for wealthy industrialists. In 1890, it also passed the Sherman Silver Purchase Act, which obligated the government to pay gold in exchange for millions of ounces worth of coinable silver being mined from Western states. Unfortunately, this Act assigned a value to the silver that was radically greater than what public markets paid. The results were a serious undermining of US gold reserves and skyrocketing inflation.
No Silver Lining
At the same time, the country was wobbling under the rapid shift from an agrarian to an industrial economy. The US Census of 1890 found that for the first time, the majority of Americans did not live and work on farms. Ambitious men instead swarmed into towns such as Seattle, Tacoma, and Portland, confident that through the alchemy of being in the right place at the right time, they could convert bantam grubstakes into dynastic fortunes. But the bigger cities were already overwhelmed with annual immigrations from Europe, and disparities were growing between the capitalist and laboring classes, inspiring strikes and worker violence.
Confidence in the public marketplace's ability to weather these changes and pressures was dashed just 10 days before the second presidential inauguration of Grover Cleveland (1837-1908), on March 4, 1893, when the powerful Philadelphia & Reading Railroad went bankrupt. In April, the new Secretary of the Treasury confessed that the nation's gold reserves had dipped below their traditionally acceptable level of $100 million. On May 4, the National Cordage Company, an important rope trust, failed, touching off a Wall Street selling panic on May 5, "Industrial Black Friday." Seven weeks later, on June 27, the price of silver caved to 77 cents an ounce, down from 92.2 cents just a week before. Suddenly the value of an American silver dollar was a paltry 58 cents.
The Panic of 1893 and the depression it spawned marked a painful, bitter end to the prosperous Gilded Age. By the close of 1893, more than 15,000 assorted business ventures, and 642 banks, had gone belly up nationwide. Twenty percent of American workers (between two and three million persons) had lost their employment. The jobless fled Seattle, Everett, Spokane, Portland, and especially Tacoma, hoping to find work elsewhere, anywhere.
Doom and Gloom
For the next two years, newspapers all over this region would be peppered with tales of monetary woe. They told of men who turned to suicide because they'd been scratched off the payrolls of suburban factories or had lost their small businesses; and of women, abandoned by out-of-work spouses, who were caught stealing from markets or who were booted from their apartments for lack of cash. The national economy was coming apart at the seams, and some Northwesterners were coming apart with it.
Seattle in 1893 was still recovering from the great fire that four years before had leveled its original downtown (today's Pioneer Square). Rebuilding was fast and furious, with office termitaries formerly wooden now reaching skyward in fireproof brick and rusticated stone. Streets were being widened and paved with brick. Grand hotels were on the rise.
After being snubbed in the 1870s by the Northern Pacific Railroad, in June 1893, Hill's Great Northern Railroad finally opened easy access from Elliott Bay to the rest of the nation. Meanwhile, pioneer David Denny was creating the most ambitious urban railway system Seattle had seen yet, and real estate hustlers were busy touting "a streetcar at your door." Other entrepreneurs ran up ponderous debts, trusting that their high-risk ventures would realize handsome returns in a surging economy.
Boosters were calling the Puget Sound area "the boomingest place on earth." Too bad their optimism would be short lived.
From Riches to Rags
The Panic of 1893 thundered west from Wall Street, first clobbering San Francisco, then spreading its carnage up the West Coast. In Washington state, as elsewhere, a run on banks ensued. Depositors withdrew their savings, converted them into gold when possible, and just buried or otherwise hid them when they couldn't. Credit became impossible to procure. Construction came to a dead stop. Banks tried to collect mortgage payments, foreclosed on those who couldn't pay, then went bankrupt themselves. Within a year, 11 Seattle banks had bolted their doors. After the Panic, local land values sank by as much as 80 percent.
Some people fled the area with only their last savings in their pockets, hoping to protect what little they had. Others vanished with other people's life savings in their pockets. In September 1893, Seattle city treasurer Adolph Krug hopped an early morning train to Canada, taking with him about $225,000 in public funds. At the end of November, the president and cashier at Buckley State Bank of Tacoma skipped with $30,000.
The depression was an egalitarian disaster, hitting the rich no less hard than the poor. It squashed the dreams of English industrialist Peter Kirk (1840-1916) and his well-healed investors, who had planned to create a huge steel-milling town ("the Pittsburgh of the West") on the northeast shore of Lake Washington. (Today's Kirkland is but a token reminder of Kirk's big dream.) The Panic derailed David Denny's streetcar empire. It also spelled disaster for his holdings in real estate and for his sawmill on Lake Union, the largest of its kind in King County. Three years of litigation and foreclosures followed, until finally the banking firm of Dexter Horton & Company -- where David's brother Arthur served as senior vice president -- fell in with other creditors to force David Denny's bankruptcy.
Too Little, Too Late
Prodded by President Cleveland, Congress repealed the disastrous Sherman Silver Purchase Act in October 1893, and the Treasury Department subsequently floated four bond issues, collecting enough gold so that government gold payments would not be suspended.
But the Northwest felt the depression's reverberations throughout the 1890s. Declines in the price of silver and elimination of the Sherman Act caused mines to shut down all over the West. Lumber interests were hurt when nervous railroads from the East cut shipments out of Washington by a full third. Three-quarters of the shingle plants operating in the state in 1893 had closed within two years. Poorhouses throughout Western Washington had to turn their occupants out into the streets. So precious was cash in Everett, that at one point the Merchants' Protective Association actually began publishing the names of people who spent their money in Seattle. The Everett Times endorsed running those "traitors" out of town.
Politicians were predicting better times ahead, but the millions of laborers ousted from their jobs by the Panic couldn't see them. In the spring of 1894, Jacob S. Coxey (1854-1951), the prosperous owner of quarries and a scrap-iron business in Massillon, Ohio, decided to unify these disgruntled workers behind his own banner. An economic zealot (he'd actually named his son Legal Tender), Coxey decided to deliver "a petition with boots on": a peaceful march on Washington, D.C. that would prove just how serious Americans were about improving their nation's fiscal profile. In April 1894, 1500 displaced laborers from Seattle and Tacoma were reportedly prepared to march. Hundreds left Seattle on April 28 to meet up with fellow protestors at Puyallup. But few Northwest marchers ever touched down on Pennsylvania Avenue. One who did was Frank P. ("Jumbo") Cantwell, a bouncer and prizefighter who had started his trip with 1,260 men and finished it by helping to draft a "Bill to Provide Work for American Citizens." The bill died in Congress.
Frozen Gold Thaws Seattle
Seattle's release from the crash came in 1897, with the start of the Klondike gold rush, when Elliott Bay became the frenzied embarkation point for tens of thousands of miners shipping north. The city did everything it could after that to make up for lost time. In 1901, the business community collected $100,000 to support Moran Brothers shipyard so that it could win the contract to build the Navy's battleship Nebraska. City engineer Reginald H. Thomson (1856-1949) began an aggressive regrading project that would level 94 acres of downtown land for construction. Seattle's biggest boom would follow its biggest bust, lasting until about 1910.
Journalist Ray Stannard Baker (1870-1946) understood the city's Panic-driven determination well when he wrote, in 1903, a decade after the Panic began, that "In Seattle, everything seems to have happened in the last 10 years."