Trusts and the panic of 1893


The second worst depression in U.S. history arrived in Kansas City on May 9, 1893, when the Jackson county sheriff and his deputies seized a million and a quarter pounds of rope and twine belonging to the National Cordage Company to pay off a debt to a Chicago firm. The attachment wasn’t a first -- the head office of the so-called “Tissue Trust” in New York had been attached the week before – but the Kansas City seizure exemplified the tangle of financial relationships that characterized giant trusts. As the New York Times put it:

In its rather brief history the National Company contrived to make a variety of arrangements with the concerns of which it secured ownership or control. Some were bought and paid for, some were paid for in part, and some were leased. Now the old owners in several cases are reputed to be trying to find out just where they stand.

Cordage cartCordage’s financial problems arose from expensive efforts to corner the market for its chief raw material, sisal, and eliminate competition by buying up competitors’ machinery. The Cotton Oil, Distilling, Tobacco, Lead, Linseed Oil, Rubber, Starch, General Electric, Sugar, Leather, Biscuit, Standard Oil, Steel, Coal, and other trusts had grown in similar ways, arranging through means licit or illicit to gain control of rival companies’ assets and transfer them to a board of trustees. 1

The Manufacturer’s Paper Company -- the Paper trust, which controlled two –thirds of paper production for the large dailies -- attempted to shut down a paper company in Salina, Kansas, over the objections of the new Populist government. The Republican Kansas City Journal mocked Populist fears that the Trust was scheming to buy up the straw of farmers in the region and leave the Salina company without raw materials: “The attorney general and the whole reform administration are determined to prevent this if they have to fortify every stack,” chuckled the paper, but Populist fears of trust tactics were reasonable.  In the Kansas City case, Cordage had taken over a twine factory belonging to the Chicago company but never paid for it.2  

Other trusts acquired companies by undercutting their prices to force them out of business, or even by physical intimidation. Coerced monopolisticWhiskey Trust contracts were common, such as those of the Distilling and Feeding Company of Peoria, known as the Whiskey Trust. The company controlled production of distilled alcohol around the country, including that of Kansas City Distilling, maintaining its virtual monopoly by paying wholesalers a rebate on condition that purchasers buy only from the trust.  A Kansas City and St. Louis beer trust required saloonkeepers to sell only one brand of beer, on pain of a $3 a barrel penalty for any different brand sold.

Standard Oil used the same tactic on an international scale when it attempted to corner the petroleum market by making a deal with its two chief foreign competitors to divide up the world’s supply. “If the scheme succeeds,” a Kansas City Times editor wrote in an editorial presciently titled “Standard Oil After the Earth,”  “the world may look for a rise in the price of coal oil, which has become in a great many places an article of positive necessity.”3

Senator John ShermanThe Sherman Anti-Trust act of 1890 -- named for Ohio Republican Senator John Sherman, brother of Civil War general William Tecumseh Sherman -- was intended to prevent such schemes by making illegal any “combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce,” as its preamble put it, but the trusts made sure the Act was seldom applied.

In early May stock prices took a sudden fall and the Ponzi trust economy began to unravel.  “Wall Street in a Turmoil,” the Kansas City Star headlined on May 5, as shares in Cordage fell from $65 to $45 in a few hours, taking other trusts down with it: “speculation was excited and feverish,” the paper reported, “owing to the circulation of rumors affecting the solvency of other firms and individuals.” “We are not only in trouble, but we are in serious trouble,” wrote a columnist in the Chicago Tribune toward the end of the month. “My heart is sick. I am amazed at the possibilities of disaster now hanging over us.”

Blame for the panic went in all directions. For Democrats, the cause was government monetary policy causing “financial stringency” owing to another Sherman law, the Silver Purchase Act, which required the federal government to purchase a specified amount of silver in order to support its value against gold. The silver was exchanged for treasury notes redeemable in gold, reducing currency in circulation, since paper currency was backed by gold reserves.  

A slowdown in the economy also threatened the existence of the railroads, which were already unpopular in Kansas City. Local businessmen complained of “reckless and costly stupidity in constructing railroad lines” and high freight rates. They even founded a small steamboat fleet to compete with the railroad monopoly. The success of the river boats would, argued an editorial in the Journal, “in a very great measure govern the rates by rail on a very large part of the carrying trade […].” Steamboats, however, were unreliable, tending to arrive late when they were not sinking or exploding, and appeals to use the packet boats fell on deaf ears.5

In late May the Whiskey trust failed, deserted by its five largest component companies, who had not received rental payments on property leased to the trust. “We think the trust is bursted,” announced the owner of one of the distilleries, “and that wide open.”  The Kansas City Times noted that small distilleries in Missouri, unconnected with the trust, happily carried on as usual. Missouri’s Internal Revenue collector said that there were thirty-six of them in the Western part of the state, some with a capacity of less than two gallons a day while a big eastern distillery might turn out 80,000 gallons a day, “but we have to pay as much attention to them as if they manufactured 1,000 gallons an hour,” he told the Times. “One of these distillers uses a hollow beech log in place of a worm to lead the spirits from the still.”

By the end of the month the underlying factor driving the panic of 1893 came to be identified as debt. Trusts like General Electric presented investors with a healthy balance sheet to drive up share prices, but were heavily in debt. Their stock, the Chicago Tribune thought, was due for a fall. Millionaires, the paper pointed out, were quietly liquidating trust stock and buying New York real estate: “All the trusts are in for liquidation,” the paper predicted. “Some of them have taken their punishment; others have not.” 6

Meanwhile the Cleveland administration was contemplating action against the trusts, Cleveland having inveighed in his second inaugural address against “the unlawful combinations intended to restrict trade, and all that,” the tone suggesting the Republican Tribune’s skepticism about what a Democratic administration would actually do.

Everyone recognized that monopolistic corporations were the problem, but no one could agree on a solution. In June a national “anti-trust convention” met in Knute NelsonChicago, called by Minnesota Governor Knute Nelson, a Republican. Nelson told representatives from thirty-four states that the Sherman anti-trust law was weak because it did not define the crime: “What is needed,” he said, “is a law which will enumerate the acts of the trust which are illegal.” It was a plausible idea, but Nelson left it up to state legislatures rather than the federal government to do the enumerating, guaranteeing that progress, if any, would be slow.


 “The trouble with the country,” ran an editorial in the pro-Populist Kansas City Mail, “is monopoly everywhere in everything. The farmer is complaining of low prices for all products.  The consumers are equally loud in their complaints as to the high prices of the articles they are compelled to consume.” The coal companies are the worst, the paper declared in an editorial titled “The Coal Barons’ Stealings.” They are “the meanest monopolies in existence, their prices “extortionate […] sheer robbery and it is practiced solely by virtue of the monopoly held by the Reading conspirators.”7

The Reading Railroad, at one time the largest company in the world, controlled mining and delivery of coal up and down the east coast. Its February bankruptcy was an early indicator of the coming panic, and first among many failures of debt-laded Reading Railroad Terminal Philadelphiarailroad companies and trusts. “The men who have made the monopoly have in the first placed ruined the fine property of the Reading company,” said the Mail editors, “hardening it with hundreds of millions of debt and, in effect, robbing the stock holders of their possessions. The manipulators of the conspiracy have got rich in the process.[…] While it has been making the consumer pay extortionate prices for coal, it has reduced the miners in its employ from a thrifty, prosperous body of industrious men to poverty-stricken wretches whose condition is very much worse than that of blond slaves everywhere and whose liberty is less.”

Railway workers unionized to resist the efforts of rail companies to cut their wages as the depression deepened and banks failed.  Eugene Debs, president of the American Railway Union and future five-time presidential candidate of the Socialist Party of America, came to town in August to recruit members for his new union, which aimed to bring all railway workers under a single union in place of the numerous competing organizations. “In consequence of the rivalry and jealousy existing among members of the different organizations of railway employees their strikes had been disastrous,” Debs said, certainly referring among other failed strikes to the Great Southwest Railroad strike of 1886 against Jay Gould’s Union Pacific and Missouri Pacific lines, led by theEugene V. Debs Knights of Labor.

While eastern railway executives traveled in luxurious private railcars, complete with “fifteen colored attendants” and a “spacious play-room” for the executive’s children in one case, workers on the Santa Fe railroad had not been paid for over a month and were threatening to strike. Merchants were refusing to extend them credit , while the company said it was broke. The General Manager blamed what he called “the irregularity of our pay days” on the country’s “financial stringency”: “We cannot go into the money market and borrow on short notice, as we used to, to meet an emergency of this kind,” he told reporters; “money is too closely hoarded.”8

As the year ended, the 1893 economic depression was settling in for a long stay. Politicians and partisan editors blamed it on the other party, the Times of Kansas City, for example, saying that Republicans in Congress wanted “further to establish the grip and control of monopolies upon production, transportation and markets in this country and enslave the working class.” The main problem for Democrats was the “McKinley tariff,” associated with future president James McKinley of Ohio, which levied high tariffs on imported goods. The tariff benefited neither small industries, the Democratic Times said, nor consumers, nor farmers who had to pay high costs for machinery but received low prices for their goods, nor the unions:

 for they have discovered that the increased prices of home manufactured products go into the pockets of the trust barons and make them the more invulnerable against all organized efforts of the laboring classes to increase their wages and better their condition.

The real beneficiaries of the McKinley tariff policy are the great monopolies like the Carnegie Company and the Sugar Refiners’ trust, which have perfected their plans under the high protective tariff system to destroy all the smaller industries, absolutely crush out competition, control the American markets and limit production and regulate wages.

Trusts, the editors continue, have been “the chief contributors to and supporters of the Republican party,” which has no reason to curb their practices or lower the tariff that protects them. Let American manufacturers buy where they please, they say, “and they can undersell the world without any reduction of wages, and that by reason of the superior skill and industry of American workers.”

War of Wealth 1895 playThe Populist Kansas City Mail – in an article reprinted as usual from another paper – put the matter in terms familiar to contemporary ears: the “concentration of wealth” in fewer and fewer hands. In 1893, 20 percent of the country’s wealth, Political Scientist George K. Holmes estimated, was owned by less than 1 percent of its families, while the bottom 91 percent of the population owned only 29 percent, figures strikingly similar to current estimates of the income gap in the U.S.  According to the New York Times in 2014, "The richest 1 percent in the United States now owns more wealth than the bottom 90 percent.”

The rich, wrote the 1893 editors, have made the government “a mere adjunct of the schemes of privileged classes, […] filled the United States senate chamber with the attorneys of corporations and trusts. It has girdled legislative halls with a swarm of lobbyists and self-seekers. […]”9 

It is all too familiar in our own Gilded Age, which we can hope will be succeeded by a new progressive era, as was the first.






1 05-10-1893-KansasCityStar-p1-AttachedFor$100,000







 312-28-1893-Star-Dec 28-p. 1-Whiskey Trust resisted

05-20- 1893-DailyJournal-May20-p3-brewers trust

05-01-1893-p4KCT-Standard Oil trust





503-06-1893-DailyJournal-Mar6p4-patronize packets

08-19-1893-August 19- p. 4 - Railway discrimination


605-22-1893-DailyJournal-May22-p1-end of whiskey trust

06-29-1893-p4KCT-Distilleries in w. MO



710-17-1893-Oct 17 p2 KCMail-monopolists are problem

06-06-1893-DailyJournal-June6-p1-antitrust converntion

12-01-1893-Dec1  p 2KCMail-coal monopolies


808-21-1893-DailyJournal-August21p3-Railroad employees Debs

03-30-1893-p3KCT-luxurious cars

10-23-1893-Star-Oct 23-p. 1- Must wait for back pay


912-25-1893p4KCT-Republicans plead for trusts

Kristof, Nicholas (July 22, 2014). "An Idiot’s Guide to Inequality".New York Times. 

12-27-1893-Dec27  p2 KCMail-concentration of wealth



April 30, 2016