The 1896 Presidential election: A War over Inflation
Jack Howard
One of the biggest problems facing any economy is successfully managing inflation, the rise in prices over time. Many different economic actions can cause and get rid of inflation, but this problem really isn’t on the minds of ordinary people all too often in our modern world. Inflation is something that the government corrects, so we aren’t that focused on it like we are unemployment or GDP. With that in mind, I want to take you back to a time in America where the average person had a lot to say about inflation; where inflation was THE issue of the day so we can understand inflation better. Where better to do that than in 1896?
In 1896, former Republican Governor of Ohio William McKinley faced off against Nebraska Representative William Jennings Bryan. The backdrop of this election was the Panic of 1893, an acute economic depression which began in, well, 1893. Due to a series of failed foreign investments and the USA’s export-driven economy, the economy started to shrink as banks failed due to unsuccessful investments. President Grover Cleveland successfully repealed the Sherman Silver Purchase Act, which got rid of the Government’s commitment to use silver to back the Dollar. Unpegging the Dollar to silver ended the initial surge of inflation caused by the depression and left America solely of the Gold Standard. The deflation that resulted from this action caused the cost of living in urban areas to decrease, making lots and lots of people happy.
Now, to truly understand why people cared that much about inflation and gold I must explain the Gold Standard. When a currency is tied to a metallic standard, like gold, that is saying that any currency is backed by said precious metal. If you wanted to, you could walk into any bank and ask to convert your paper currency into its equivalent in gold bullion. This has two main benefits to an economy: It stabilizes a currency to a set value, so purchasing power doesn’t fluctuate and in the case of a recession you still have your amount of savings in gold. The second benefit is that it controls inflation and spending because the government cannot print more money than they have backed by gold, so governments wouldn’t have that much budgeting trouble and their currency would be rather deflated compared to those without a Gold Standard.
(In 1970, the USA ditched the Gold Standard under President Nixon. As you can see, without a Gold Standard governments can have more money to spend and more money can exist, at the cost of a greater possibility of inflation. This is why some influential people want to return to the Gold Standard today, but we spend way too much money to make that possible at this point.)
This deflation, however, did not please everyone. Farmers were very upset at the continuing deflation of the Dollar, and for good reason. Inflation benefits debtors and industries where the price of products rises faster than the wages of workers, both of which applied to Agriculture. This period of deflation meant that farmers who were in debt due to purchasing farming equipment had increasing interest rates that they had to pay back, and the price of crops was falling faster than the wages of workers, thus farmers made lower and lower returns on crops and many had to go out of business.
The agrarian anger and continued recession boiled over in the Democratic National Convention and local democratic primaries, where pro-gold candidates were defeated by pro-silver candidates. The DNC, in a contentious election, nominated the Populist and Progressive William Jennings Bryan as their candidate. William Jennings Bryan advocated for Bimetallism, or reintroducing silver into coinage and making the Dollar pegged to both Gold and Silver. Since in the Gold Standard you cannot have more money than gold, changing the standard to both Gold and Silver would create more possible money to exist and massively inflate the currency as there is a lot more silver in the world than gold. This increase in the money supply of the Independent Treasury would increase inflation dramatically, helping Bryan’s farmer and miner base.
Unlike the DNC, the Republican National Convention was much more straightforward, with William McKinley easily winning the nomination. He supported the purchasing of more gold to slightly increase the money supply and give the US economy a little push in the right direction, and the implementation of high tariffs on foreign business that Grover Cleveland got rid of, which would protect American businesses and industry and thus create better-paying jobs for the working class. McKinley focused his campaign on spreading the message of how purposely inflating the dollar would hurt people of all economic status alike, by raising the prices of living across the country and making everyday products cost more.
As you can see here, McKinley’s message won out over William Jennings Bryan’s populism. This election was a realigning election as many pro-gold democrats permanently switched to voting for Republicans and farmers were now a toss-up demographic. William McKinley would be inaugurated in 1897 and fix the Panic of 1893 with his policies. Ironically, McKinley and Bryan would face off again in the 1900 presidential election, with McKinley winning by a larger margin. Sadly on September 6th, 1901, President William McKinley would be shot and killed in Buffalo, NY by anarchist terrorist Leon Czolgosz. His Vice President, one Theodore Roosevelt, would take office and be president until 1909.
In conclusion, the election of 1896 was one of two different philosophies on inflation; it was a fight between inflation and deflation, between farmers and urbanites, between gold and silver. Who knows what would have happened if William Jennings Bryan won the election and instituted his policies of bimetallism and Greenback Currency. This was a time in American history when everyone knew and debated about inflation. What do you think would have happened with the purposeful inflation? Or about the gold and/or silver standard? Thanks for reading!
Works Cited
The Editors. “United States Presidential Election of 1896.” Encyclopædia Britannica, Encyclopædia Britannica, Inc., 2018, www.britannica.com/event/United-States-presidential-election-of-1896.
Pruitt, Sarah. “The Contentious 1896 Election That Started the Rural-Urban Voter Divide.” History.com, A&E Television Networks, 5 Aug. 2020, www.history.com/news/rural-urban-divide-1896-election.
Gevinson, Alan. “Silverites, Populists, and the Movement for Free Silver.” Teachinghistory.org, teachinghistory.org/history-content/ask-a-historian/25222.
Lioudis, Nick. “What Is the Gold Standard?” Investopedia, Investopedia, 2 Dec. 2020, www.investopedia.com/ask/answers/09/gold-standard.asp.
I enjoyed reading your article. I knew a little bit about inflation but I'm now educated on how it connects with our history. My stepmom lives in Colombia and they have extremely high inflation rates. I've seen how it affects a country firsthand. Because their currency has very little value most people are in poverty or have to work a lot. Crime rates go up and people start stealing food they cant afford. I also was interested in the gold standard. I've seen an increase in ads encouraging buyers to buy gold due to deflation and such. I'm now informed about how it works, the benefits, and the history. Overall, your article is very well structured and easy to follow. You did a very good job with this article!
ReplyDelete(Jack Miller)
ReplyDeleteThis blog was really interesting to read. Part of why it was so interesting is because this is not a hot topic and you don't hear about it much. What made you pick this topic because I feel like most people aren't knowledge on the topic like me. I have heard many countries struggle with inflation but I didn't know much about how it plays/played a role in the USA. I never heard of the of the gold standard and how that effected things. Overall this was a great piece and very informational but I have 2 last questions. Do you think this is something I might have to worry for in the future? If so how would that change my life as an average american?
I loved reading this because talking about back then is interesting to me. Basically what life was like then compared to now which is way different.
ReplyDeleteThis was super informative and I learned a lot of new information on a topic that I had a vague understanding of! The Gold Standard seems to me as the most logical way to go when it comes to keeping economies balanced and maintaining the value of that country’s money. I know that something similar but that went in a very bad direction, that is when Fidel Castro took over Cuba he destroyed all the money that was previously backed up by gold and instituted his own money. This money now has basically no value and has taken the economy of Cuba to the gutter. So I think that if the US had taken a similar route to what Castro did, the US economy would be nonexistent.
ReplyDeleteThe fact that we spend to much money to return to the gold standard is interesting to me. That's why I like hearing what it was like back then to make comparisons. (elise keesler)
ReplyDeleteThis was a very interesting article. This topic isn't something that is very talked about today due to all the other things going on around the world, yet this is a very interesting topic that you brought light to in a very effective way. I had no idea about nearly any of the things you mentioned in your article, however you offered a lot of new information such as the Gold Standard which I never knew existed and found very interesting.
ReplyDeleteMaterialism spins the world around and around. Everything has some worth and there is always a way to obtain it. Since the time of mesopotamia, there has been trade, and objects have had worth. They even started a currency with nonother silver and gold. It has been around for ages and it will continue. The question is, are there materials that can have more worth than silver/gold and are undiscovered? Take into account a fictitious material from the Marvel comics as an example. Vibranium, an elite metal, was worth a great deal because of its properties and rarity. With that being said, 80% of the ocean is undiscovered. There could be materials on the ocean floor that could one day in the future, be traded for sums of currency.
ReplyDeleteThis was an interesting topic to read and write about. I knew a little about inflation but not about anything that you talked about within this piece. I think that you asked a good question at the end of your piece about what would have happened if there had been purposeful inflation. I'm not sure that purposeful inflation would have worked the way he would have wanted it to. I think that if we had went the route of purposeful inflation it would have gotten out of control and in the end completely destroy the economy. As people living in the 21st century do you think that inflation is something that we should continue to worry about now. Do you think that there is any danger of severe inflation happening again even though we know what has happened to other countries in the past.
ReplyDeleteBefore I read this I barely knew anything about the late 1800's and definitely inflation during that time, After reading this I have a way better understanding about the Inflation in the 1800's. I liked how you asked about purposeful inflation I wonder as well if is all a government scheme or are they just hiding something. My question to you is do you think there will ever be a hyperinflation like there was in Germany after WWII in America or do you believe that it is impossible to happen.
ReplyDeleteTo start off, I thought that this was a very interesting topic and I didn't really know about this presidential election. One this that I found interesting is how over the years the cumulative amount of inflation in the US was very high which I didn't really think of but comparing the value of money 100 years ago to now shows how much less money is worth and how much less purchasing power $100 has in our society. I liked how you had a lot of different facts and statistics throughout the piece and it showed how you knew your stuff and had hard factual evidence to back up your stance. Overall, I thought that you did a really good job and my question is that will their ever be a mass deflation in the US currency like what happenend in the Great Depression?
ReplyDeleteI really liked this cover of the gold standard, I did a project on William Jennings Bryan in APUSH so I knew some information on the gold standard, and I think you did well showing all the different perspectives on the gold standard. I think that you also could have potentially mentioned Bryan's Cross of Gold speech, I think that was a really cool and important moment in the Gold Standard Controversy.
ReplyDeleteNice job Jack, interesting topic. If we were to theorize what would happen if Bryan won, my guess would be that the bimetallic system would obviously help the farmers to some extent, and possibly other non-farmers, helping them to pay off their debts. It could be beneficial to everyone initially since the economy was under deflation at the time and could've gotten rid of the need for the Gold Standard then. However, there's clearly a line between too much inflation/deflation and the inflation could exceed and cause further problems, which my guess would be that Bryan would end the bimetallic system, seeing that it has since helped the farmers.
ReplyDeleteI didn't know that there was such a thing as "pro gold" and "pro silver" candidates. I do wonder if this argument will come back sometime in our lives, seeing how the US government is handling the US dollar, I think more and more people will look back on the gold standard and see it as a better system.
ReplyDeleteI think a lot of people don't realize how important farmers were in early elections before the green revolution. In the 1890s and through most of the frontier period the most common profession in a ton of states was farmers which would have a large impact on the results of the election. Thats one of the interesting economic changes over the the last century is how different fields of the work force dominate the economy. This is also applicable around now because so many truck drivers are losing their jobs to automation.
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