For all their similarities, each crisis, and each response, was specific to its own historical moment. So too is the current crisis and our response.
Protests were less diverse back then, certainly not marked by the mix of genders, ages, races, ethnicities we’re now seeing in the “this is what democracy looks like” crowds. They were less playful, too: one would not have seen signs like the placard toted on October 5, by a woman, no doubt a Jewish mother, that read: “DEAR WALL STREET, WE SENT CASH TO SAVE YOUR TUSH . . . YOU NEVER WRITE.”
The behavior that sparked the protests seems more familiar, from the speculative binge that triggered the first stock market crash even before there was a New York Stock Exchange (1792); to the cardiac arrest of the credit system in 1837 that sent crowds roiling toward the banks; to the bursting bubble that galvanized a march on Wall Street in 1857; to the hunger and homelessness that provoked the Tompkins Square demonstration suppressed by police in 1874; to the devastation wrought by the Great Depression and the surge of rent strikes and demands for job creation in 1930.
There are no “lessons” to be learned here, history never does repeat itself (though if the economic rules of the game remain unchanged they do tend to produce similar results). But I think it might nevertheless be interesting for Occupy Wall Street participants and supporters to know that our anger and actions are not novel, but rather the latest in a long line of opposition to the inequitable workings of our economic system.
These stories are cribbed from Gotham: A History of New York City to 1898, by Edwin G Burrows and Mike Wallace (which happily won the Pulitzer Prize in 1999), and from Gotham II: A History of New York City from 1898 to 1945, by Mike Wallace (in progress).
At the end, I’ve tossed in a proposal to consider including in any basket of programmatic responses to the current crisis. I've lifted it from my little post 9/11 book, A New Deal for New York (2002).
Click here for my recent discussion with Prof. Douglas Muzzio on CUNY TV's "City Talk."
At the center of the frenzy was William Duer, the Darth Vader of early American finance. An English immigrant, socially distinguished, financially well fixed and wired – he had many European connections – Duer had had a honorable war. With independence won, he became one of the most active New Yorkers (leagued with Dutch, French and English backers) engaged in buying up the Revolutionary debt. These were paper promises of future payment the Continental Congress had given soldiers, but not made good on. They were being snapped up by wealthy speculators, at a fraction of their face value, gambling that they'd soon be paid off in full. Their hopes were fulfilled when Hamilton won Congressional approval for funding the debt, handing the speculators a colossal windfall profit, which he hoped they would put to productive use.
Hamilton made his friend Duer Assistant Secretary of the Treasury, and while Hamilton was incorruptible, he was pretty lax about Duer's doings. The latter used inside information about impending Treasury moves to continue, indeed accelerate his speculations, notably in the new federal securities (of which by the end of 1790 there were 62 million dollars worth in circulation). Trading on informal markets, notably in lower Manhattan coffee houses, he became one of the richest men in the country, living like a potentate in the former Philipse mansion.
New Yorkers began jumping on this rapidly growing beanstalk and riding it up to the clouds, Their thought processes were described by one disapproving commentator: “Shall I continue, says an industrious Tradesman, in the drudgery of daily & laborious attention to an employment which gains me but a few dollars, while my neighbor in one Evening, or with a dash of his pen acquires thousands?! Such ideas, being disseminated amongst the various Classes of people could be subversive of private industry, happiness, & economy.”
Hamilton, who had been stoking the fever – delighted that European capital was flooding in to buy his fledgling government's shiny new securities – now grew alarmed. “These extravagant sallies of speculation,” he wrote in January 1792, “do injury to the government and to the whole system of public credit, by disgusting all sober citizens, and giving a wild air to every thing.” Far from making sober long term investments, as he'd hoped the speculator-beneficiaries of government largesse would do, they seemed gripped by an irrational exuberance. Robert R. Livingston noted that in New York City “hundreds have made fortunes by speculating in the funds... and have no idea of a more perfect government than that which enriches them in six months.”
Duer plunged ahead. He put together a secret syndicate of speculators – what later players would call a "pool" – that quietly bought up yet more extant securities. Then they set out to game the market, bulling it artificially by announcing creation of a "Million Bank" (from its putative initial capitalization of $1 million), and hinting it would merge with both the Bank of New York and the Bank of the United States, driving up the stocks of all three institutions. When they had gone up far enough, the group planned to unload its holdings at a tremendous profit.
Sure enough, this touched off a "bancomania." Values and volume soared (prompting discussion of the need for a central securities market). As one witness marveled, “The merchant, the lawyer, the physician and the mechanic, appear to be equally striving to accumulate large fortunes” through speculation.
Though Duer's paper profits were immense, he deemed them insufficient. He began making "deferred" purchases, borrowing money from others to buy at market prices, agreeing to pay in two weeks, by when he was certain the price would have gone up, allowing him to repay the debt and come out ahead.
Early in March, however, stock prices leveled off, then declined slightly. Coincidentally, the government notified Duer of a $250,000 discrepancy in his accounts as Assistant Treasury Secretary. No longer able to raise cash, Duer began to sell. On March 10, as panic engulfed New York, he stopped payment on all his debts; two weeks later he was arrested and thrown in debtor’s prison, one step ahead of a crowd seeking to disembowel him.
Now full scale panic set in, failures spread throughout town, bowling down leading figures, some of whom fled town. Shopkeepers failed, business was disrupted, and Duer was lucky to be behind bars: “I expect to hear daily that they have broken open the jail and taken out Duer and Walter Livingston, and hanged them,” wrote one resident. One creditor did get into the prison, where he confronted Duer with a brace of dueling pistols, and demanded he pay up immediately or defend his honor; he left only after Duer forked over what he owed.
The panic touched off a wider economic crisis. Many leading merchants were ruined; many ordinary citizens lost their life savings; business languished; unemployment spread.
Thomas Jefferson was dismayed. “The credit and fate of the nation seem to hang on the desperate throws and plunges of gambling scoundrels,” he wrote. Jefferson was not surprised that “at last our paper bubble has burst” – he calculated that losses exceeded the combined value of all Manhattan’s real estate – and was thankful he'd snatched the capital out of New York City in time.
But Hamilton, too, was appalled. He had created a class of proto-capitalists to lend the government stability and facilitate the production of tangible wealth—not reel off on speculative binges that paralyzed the economy. As his biographer Ron Chernow notes, “the financial turmoil on Wall Street and the William Duer debacle pointed up a glaring defect in Hamilton’s political theory: the rich could put their own interests above the national interest.” Worried “about abuses committed against the rich,” Hamilton had minimized “the skulduggery that might be committed by the rich.”
Hamilton acknowledged to a worried President Washington that speculation “may be attended with pernicious effects,” that it “fosters a spirit of gambling, and diverts a certain number of individuals from other pursuits.”
Still, he was not prepared to accept Jefferson’s judgement that it constituted a “canker at the heart of the Hamilton enterprise.” Loathing idle capital, he insisted it should be possible to draw “a line of separation between honest men and knaves” – “between respectable stockholders and mere unprincipled gamblers” -- by relying on the power of “public infamy.”
Where, and how, to draw the line between “respectable stockholders” and “gamblers” -- between the Force and its Dark Side (if indeed such a distinction is possible) – has remained a central dilemma of American capitalism from that day to this.
For a fuller account, see Burrows & Wallace, Gotham, Chapter 20.
The firm failed because New Orleans merchants, caught short by a drop in the price of cotton, had defaulted on vast sums they owed their Manhattan creditor. Soon, hundreds of other New York City brokers, commission houses, and dry goods jobbers also found their bills to southerners coming back unpaid. Many of these companies were far weaker than the defunct Josephs, who had been agents of the mighty Rothschilds. One after another, dragged down by the foundering cotton economy, they sank into default.
Mayor Lawrence's firm -- Hicks, Lawrence & Company — suspended payment on its debts and closed its Wall Street office. Brown & Hone defaulted too. It is "a dark and melancholy day," former Mayor Philip Hone informed his diary. "My eldest son has lost the capital I gave him, and I am implicated as endorser for them to a fearful amount."
Failure after failure jolted Wall and Pearl Streets. By April 8, the Journal of Commerce reported, 93 firms had gone under. Three days later the total reached 128. "The merchants are going to the devil en masse," wrote George Templeton Strong, a student at Columbia College who had begun keeping a diary as meticulous and opinionated as Hone's.
At April's end, a businessmens' committee informed newly inaugurated President Van Buren that there had been "more than 250 failures of houses engaged in extensive business," and the merchandise in New York's warehouses had lost a third of its value. As their fortunes melted away, some desperate merchants set fire to their own stores, seeking insurance payouts worth double and treble the value of their stock.
The ruin of merchants and manufacturers alike had been hastened by, and in turn exacerbated, a crisis of the financial system. To protect their reserves of specie -- gold and silver coin -- banks virtually ceased lending, turning away even the most respectable merchants. Leading brokerage houses were equally tightfisted. Interest rates skyrocketed to 24%. "Money is exorbitantly dear," wrote Hone in March. "The bloodsuckers are beginning to be alarmed, and keep their unholy treasures locked up."
Worse, banks began calling in outstanding loans, pushing more merchants over the edge into default. In turn, businessmen, who feared the banks might not survive, rushed to convert their deposits and bank notes into precious metal.
So did the citizenry. The Loco Focos, who all along had been denouncing banks and paper money, called a mass meeting in City Hall Park on March 6. Over 30,000 people turned out, more than had attended the February rally preceding the Flour Riot. The assemblage urged noteholders to cash in their banknotes, "and thus make these soulless corporate extortioners pay their debts to the people as promptly as they compel payment from the people." In April, with the panic spreading, angry crowds of the "poor and laboring classes" (Hone noted) gathered at the banks, demanding the return of their deposits "in a most alarming manner." Hone believed High Constable Hays and his "clubadiers" could protect private property, but George Templeton Strong was less sanguine. He feared that if the banks collapsed, "political convulsion and revolution, I think, would follow."
On May 3 milling crowds besieged the Dry Dock Savings Bank. Mayor Lawrence managed to convince them that their money was safe. But the next day, the President of the Merchants' Bank was found dead -- "Some say prussic acid," Strong reported -- and the bank runs began again. Captain Frederick Marryat, a noted English writer, arrived to find that "suspicion, fear, and misfortune have taken possession of the city," and that "the militia are under arms, as riots are expected."
Early next morning, the Dry Dock stopped payment. A score more merchants promptly failed. Throughout the city, people began jamming toward bank tellers shouting "Pay! Pay!" By May 9, $652,000 in coin had been drained from Manhattan vaults. Then, on May tenth, all twenty-three of Manhattan's banks announced they would henceforth refuse to exchange specie for paper. An infuriated crowd boiled into Wall Street. But the city had summoned up the Twenty-Seventh Regiment -- "the monopoly aristocracy of New-York garrisoned their fortresses with arms and men," as one Loco Foco put it — and the day passed with much tumult but no bloodshed.
Other sectors of the city economy reeled and staggered. The overheated real estate boom of the 1830s abruptly iced over, with stunned merchants calculating that the value of their real estate had "depreciated more than $40,000,000" in a scant six months, and foreclosures became rampant. There was a virtual cessation of speculative building in working class districts, and crowding worsened rapidly, setting the stage for future social disaster. Hot new rail stocks nosedived as their companies collapsed, halting construction work (the Long Island Rail Road would remain stalled for years), and speeding the disintegration of city manufacturing as cutbacks in orders for iron and engines crippled foundries and machine shops. Virtually all of New York's major clothing firms foundered.
By the end of May, Hone wrote, "a deadly calm pervades this lately flourishing city. No goods are selling, no business stirring, no boxes encumber the sidewalks of Pearl Street." Barges and boats lay idle at the docks. "Many of the counting houses were shut up, or advertised to be let," wrote a British traveler. "The coffee houses were almost empty, the streets near the water side were almost deserted; the grass had begun to grow upon the wharves." Panic had given way to depression. It would last till the mid 1840s.
There was less debate over how to respond on the local level to an explosion in unemployment. On the surface, the municipality's response seemed munificent. The number receiving relief in New York City leapt from under 30,000 in 1837 to over 80,000 in 1838. In addition, the population of the Almshouse jumped by a third, to over 2500. But the Mayor worried that New York would get a reputation for liberality that would attract out-of-town "beggars, paupers, vagrants and mischievous persons." Propertied Whigs and Democrats were as one in demanding municipal retrenchment and threatening to move to Brooklyn, which publicized itself as a refuge from onerous impositions.
In 1841, the Mayor called for isolating able bodied paupers in a Workhouse on Blackwell's Island. Zealots urged more ruthless measures, the complete elimination of any public aid that would keep paupers alive. Such sentiments remained beyond the pale of decent opinion, but so did Horace Greeley's assertion that it was the depression itself that had made it impossible for many who wanted work to find jobs. What New York needed, Greeley declared, was not a Workhouse but a "House of Industry" that could provide temporary employment in hard times. The elite consensus, disagreed, and soon a Workhouse was up and running.
Dominant opinion was equally opposed to government's providing public works jobs for the unemployed. The Council did authorize a few street and sewer projects (in part to take advantage of low wages), but established such stringent conditions for contractors that no bids were submitted, and no work provided.
There was however one magnificent exception. The Croton Aqueduct had been authorized before the panic struck, and powerful backers would sustain the gigantic state undertaking throughout the depression. Its construction would serve as New York's de facto jobs program.
For a fuller account, see Burrows & Wallace, Gotham, Chapter 37.
Since the Crimean War ended the previous year -- restoring Western Europe's access to Russian grain -- demand for American wheat had dropped steadily; shipments east had tapered off considerably; and railroad earnings (and stock prices) had dipped disappointingly. Farmers and merchants, too, had been squeezed. By the spring of 1857 metropolitan merchants found it difficult to collect on midwestern debts. In August, unfortunately for Ohio Life, European farmers harvested a bumper crop and the sudden glut threatened to further depress world farm prices. Worried midwestern businessmen had begun telegraphing New York banks asking for the return of their surplus funds. Ohio Life, caught short, went under, and many Manhattan banks had loaned funds to Ohio Life.
Now, finding themselves suddenly and dangerously overextended, the banks panicked. Terrified that soon other institutions (or even their own) might be proved rotten, they demanded payment of all matured loans from all their debtors. In the ensuing fiscal sauve qui peut, banks jammed on the credit brakes at precisely the moment businessmen were in direst need of accommodation. The financial institutions, especially banks newly hatched during the boom, saved themselves, but forced merchants into bankruptcy.
The "bursting of bubbles in New York," the Chicago Tribune had soothed at first, "need not alarm anybody in the West," for regional prosperity rested on solid foundations. But as the panic radiated outward from the metropolitan center, howls were heard around the country. The impact proved far greater than that, however, as the Panic soon reached London and Paris, affecting more than a third of the stocks traded on Lombard Street and the Bourse. In Britain, only Bank of England intervention held the line. Modern communications sped the Panic along to Northern Germany, then Scandinavia, leaving a trail of bankruptcies and unemployment. From Europe, the crisis hopscotched back across the Atlantic to South America. Though the ensuing depression had many causes, New Yorkers could (had they wished) have taken a perverse pride in having managed to trigger a crisis of the entire world capitalist system.
In New York's own house the result was a by now familiar story. By December, nearly a thousand merchants had failed, with losses totaling $120,000,000, and the shock waves from their collapse had toppled many other kinds of enterprises. Maritime construction halted, and the clipper ship industry, already weakened by competition from railroads and steamers, would never recover. Railroads were forced into receivership, foundries laid off hundreds of mechanics, four-fifths of the city's coopers lost their jobs. Textiles were badly hurt: retailers suffered accordingly. "Chinamen who peddle cigars" and Italian "organ grinders" were hard hit. Merchant princes fired servants in droves.
By October estimates of New York unemployment ran to 100,000. Landlords turned out those who didn't pay their rents; during three severe winter months of 1857-8, 41,000 were forced to seek shelter in police stations. Thousands more were forced out of respectable lodgings into crowded tenement apartments and slum conditions surged.
Analyses of the crisis again varied. The pastor of New York's largest Presbyterian Church, announced that the Panic was God's work. Many Wall Streeters agreed and hied to their churches to pray for relief. By mid-winter 1858, merchants and clerks were jamming lunch hour prayer meetings at the local John Street Methodist Church. The Journal of Commerce encouraged more readers to participate: "Steal awhile away from Wall Street / and every worldly care, / And spend an hour about mid-day / in humble, hopeful prayer."
Editor Horace Greeley argued the collapse was of more secular origin, due to the country's excess of imports over exports. This imbalance did, he believed, have its moral dimension, having been fueled by the buying binge of luxury-mad New Yorkers (and other Americans), purchases made possible by the tremendous levels of speculation in stocks and real estate ("paper bubbles of all descriptions".)
Among the working classes, resistance had gotten tougher, and theoretically more sophisticated, paced by German and British emigre radicals. The working classes claimed state assistance as a right, not as charity or patronage, a call that resonated powerfully even amongst non-socialists, especially in an Irish immigrant community profoundly scarred by the recent Great Hunger. As Gotham's Irish News wrote: "When famine stares fifty thousand workmen in the face -- when their wives and little ones cry to them for bread, it is not time to be laying down stale maxims of economy, quoting Adam Smith, or any other politico-economical old fogy."
One largely German group, the American Workers' League, announced a "work and bread” demonstration. On November 5, 4000 radicals, unionists, and land reformers gathered in Tompkins Square. Speakers declared that "those who wrought by the sweat of their brow, the actual producers, were not to be thrown out of employment when capitalists, by wicked speculation, lost their ill-gotten gains." Marching to City Hall Park they presented a "Mass Petition for the Unemployed" to Mayor Fernando Wood. "Every human being has a right to live," it declared, "not as a mere charity, but as right, and governments, monarchical or republican, must find work for the people if individual exertion prove not sufficient."
Specifically the unemployed demanded a program aimed at launching the new Central Park, building a new reservoir, leveling and sewering the city's streets, "or any other public works so indispensable for the sanitary condition of the people and the comfort and safety of the wealthy themselves." When Wood responded he would give the petition to the aldermen the following week, a spokesman named Bieler said of the massed jobless outside, "we cannot warrant that, their patience being exhausted, they will not help themselves by employing physical power with its accompanying brutalities." Thus prompted, Wood passed on the plea that evening, and the councilmen announced they would advertise for bids to undertake the project of leveling Hamilton Square (Third and Fifth Avenues, 66th to 69th Street).
demonstrating: "We will increase in numbers every day, in numbers irresistible in strength, and we will march through the streets with these increased numbers, day after day"; they would "go to Wall-street, and show those who had their pockets lined, that they wanted work."
Three days later, City Councilmen agreed to authorize a $250,000 bond issue for Central Park, and it became the major public work – and public legacy – of that particular calamity. By January 1858, 1000 men had been set to clearing debris from the site; ten months later, 2500 were so employed; by the following year, on a peak day in September 1859, 3,600 were laboring away.
For a fuller account, see Burrows & Wallace, Gotham, Chapter 47.
When news of Cooke's suspension was announced on the floor of the New York Stock Exchange, "a monstrous yell went up and seemed to literally shake the building." Now "dread seemed to take possession of the multitude," the Tribune reported. Brokers began trampling one another to sell off stocks which were suddenly, terrifyingly vulnerable. Brokerages failed on all sides. Banks buckled. A "seething mob" filled Broad Street as frenzied depositors surged to remove their funds from banks. One broker moaned that the unfolding catastrophe was the "worst disaster since the Black Death."
New York City's economy fell apart with frightening speed. Wall Street brokerage houses took the first hits, but the damage swiftly spread to other financial institutions that had invested heavily in railroad stocks and bonds. Life insurance companies crumbled: of the 32 companies chartered since 1861 only 8 remained in 1877. A score or more savings banks collapsed as well.
As usual, working people bore the brunt of things. By the winter of 1873-4, 25% of the city's labor force had lost their jobs, and the wages of the rest declined steadily. Hunger and homelessness spread. The shanty-dwelling population of the west side burgeoned. Thousands sought shelter on the floors of police stations or almshouses.
As in prior depressions, hard times stirred popular discontent. Workingmen disliked charity. The YMCA sold "dinner tickets" to New York businessmen to give to the unemployed, but the New York Workingmen's Central Council rejected "crumbs that fall from the tables of the rich." Nor did they like the police lodgings -- "living charnel houses" that reeked "with filth and vermin".
The Spring Street International (the American reformers recently expelled from the IWA) argued that the unemployed were entitled to better, as a matter of right. The government had showered aid and assistance on the wealthy; now it should "legislate for the good of all, not the few." In October 1873 they proposed a comprehensive anti-depression program. New York should provide public employment on street and park improvements, and in building a rapid transit system. The city should also establish municipally-owned markets where people could buy necessities at cost.
Such ideas rapidly gained popularity. The Workingmen's Central Council announced plans for a mass meeting to demand "Work or Bread". J.P. McDonnell, an Irish Fenian and socialist, argued in the New York Sun that to make "wealthy citizens and law-makers" listen, labor should mount the "greatest demonstration ever held in New York." Leading trade unionists endorsed the idea. So did German socialists, currency reformers, and neighborhood mass meetings around the city (including one by 1500 French workers and refugees from the Paris Commune). Wagons paraded through the streets with placards announcing the December 11 gathering at Cooper Institute. On the appointed day 4000 crammed their way in, leaving thousands more outside, as speakers analyzed the nature of the depression (in German and English) and how to respond to it.
Many blamed the financial system. Bankers and brokers -- the "moneyocracy" -- had obtained special privileges by corrupt deals with politicians, then used their ill-gotten wealth to "speculate in stocks, money, gold, or other commodities." These operations had brought on the crisis that now endangered the producing classes and the Republic itself. One long term answer was to set limits on the accumulation of personal wealth, at a maximum of $300,000, by imposing a graduated income tax. In the short run, the city should undertake massive street, pier and park improvements, and construct housing for the homeless.
Socialists at the Cooper meeting offered similar prescriptions, and added some novel ones, including suspension of evictions for non payment of rent during the coming winter, and dispensation of a week's supply of food or money to distressed families. Peter J. McGuire, a young socialist carpenter, later endorsed the meeting's no-violence pledge but argued that if relief was not forthcoming, then "a provisional committee" in each ward should "take food" to keep people from starving and "send the bills to the city for collection."
The Cooper meeting appointed a fifty-man Committee of Safety -- nomenclature borrowed from the Commune -- and selected German, French, Irish and American representatives. The Committee organized ward clubs of the unemployed throughout the city and called for a meeting with city authorities. When Mayor Havemeyer did get together with a delegation of workers it became clear that they inhabited different universes. Havemeyer expressed concern for the men's plight but suggested, none too subtly, it was their own fault for not having prepared themselves for such contingencies. "I know that it is hard for you to be out of employment," he said, "but don't you think that workingmen should lay up something for a rainy day?" "Yes, sir," a delegate replied, "that's all very well, but workingmen can't save much out of their wages. Rents are so high; and then many of us can only work four or five days out of a week." The Mayor responded with homilies: "Men who get rich, gentlemen, are men who save. When a man has $100 in a bank he becomes a capitalist." His father (an extremely wealthy sugar manufacturer), Havemeyer remarked pointedly, "didn't go to the beer shops and theaters every night." Besides, public works meant higher taxes and the "confiscation" of property, and so were out of the question.
The press was even less diplomatic. The New York Graphic said that "there is no point in railing at the rich nor in scowling at the capitalists nor in condemning corporations simply because one's stomach is empty and he happens to be dinnerless." "Whining and whimpering," the paper snarled, "are as useless as they are disgusting." The Times loftily lectured the unemployed on the hard facts of political economy. The "natural laws of trade" were "working themselves out." Governments could "only watch the process." "Things must regulate themselves."
"Things" got rapidly worse. Unemployment rose as the thermometer dropped, and the Committee of Safety issued a call to all "in sympathy with the suffering poor" to rally in Tompkins Square on January 13, 1874, and then march on City Hall to demand a municipal contribution of $100,000 to a Labor Relief Bureau for the unemployed.
The press, badly alarmed, insisted the meeting be suppressed as a "communist agitation". The Committee of Safety was adopting the "favorite tactics of the worst class of European socialists" and on behalf of the unemployed -- a "thriftless and improvident" lot. More hysterically (or cynically), it was asserted that leaders of the defeated Commune had smuggled diamonds -- stolen from the churches of Paris -- into the city to buy ammunition and bombs to launch a revolution. The Department of Parks had already given permission to use the Square, but the Police Board, composed of wealthy entrepreneurs and powerful politicians, forced them to renege at the last minute. Word of the revocation did not reach the working class quarters.
The next morning, by eleven o'clock, over seven thousand people had turned out despite below freezing temperatures. The ten acre park was filled, and the crowd, which included many women and children, overflowed into the surrounding streets. One corner of the square was occupied by 1200 resolute members of the German Tenth Ward Workingmen's Association.
At that moment the Police Commissioner and a squad of patrolmen marched into the square. Announcing "Now, you all go home, right away!", they immediately waded into the assemblage with clubs flailing. The crowd scattered "like wild birds" except for the German workers who battled back until mounted police drove them from the square. As the demonstrators fled into adjacent streets, a Sun reporter noted, the police kept "close at their heels, their horses galloping full speed on the sidewalks," their batons flailing. One zealous young German socialist, Justus Schwab, marched boldly back to the square waving the red flag of the Commune, only to be attacked and arrested. The police continued clubbing groups of workers for hours, Samuel Gompers remembered, in "an orgy of brutality," until, finally, the area was cleared and still.
The Tompkins Square clash was a minor affair materially -- a few score bloodied heads and arrested bodies -- but a major one symbolically. It hardened attitudes on both sides of the class divide and shaped larger patterns of response to the depression.
Organized labor bitterly attacked the police, asserting their rights of free assembly and free speech had been violated. Iron molders rejected the way "every protest, petition, or demand of labor is met with the cry of 'Commune'". Unions and ethnic organizations raised funds for the arrested, tried and failed to oust the Police Board, and held protest meetings. At one, a German woman shouted angrily that the police would never interfere if "A.T. Stewart, John Jacob Astor, or William Dodge should assemble." The New York Irish World denounced the police as "Grand Bashaws" who exhibited a "brutal contempt for law." The New York Graphic and the New York Sun --both editorial antagonists of the unemployed movement -- similarly condemned the "clubbing of innocent and peaceful men."
Such reactions were exceptional. The authorities, the press and the upper and middle classes were virtually united in their satisfaction with the outcome. Mayor Havemeyer was delighted: "Nothing better could have happened," he declared. The Police Board characterized the unemployed as "a parcel of vagabonds" who had deserved "a sound flogging". The Police Commissioner was elated: "It was the most glorious sight I ever saw the way the police broke and drove that crowd. Their order was perfect as they charged with their clubs uplifted."
The depression overrode middle class republican inclinations to respect the "rights of labor," or even labor's right to public protest. Also set aside was the notion that capital and labor shared a fundamental harmony of interest. In smaller cities and towns the urban middle classes would continue to harbor older republican convictions and even blame the newly rich for many of the nation's ills. But in New York City, a social and cultural chasm had opened up, and for the moment, most of the middle class jumped to the side of the rich and powerful.
So, if more reluctantly, did Tammany Hall – the Democratic Party machine. It did set out to topple the deeply unpopular Mayor Havemeyer. The mayor had given total support to the slashing cutback efforts of Comptroller Andrew Haswell Green (the future "Father of Greater New York"), which had accelerated after the onset of the depression. Their candidate won, as did the Democrats generally, but though the new mayor made an initial effort to launch public building programs, the landowners, insurance companies, trust companies, and savings banks, whose property investments had dropped drastically in value during the depression, fervently resisted expensive new municipal programs, which would largely be paid for by taxes on property. Their agent, Comptroller Green, stonily pressed on with retrenchment.
Taxes actually declined, despite complaints by city and state tax commissioners and several legislative investigations that the city's wealthy, far from being fiscally overburdened, were flagrantly evading their fair share of such exactions as existed. William H. Vanderbilt paid taxes on only $500,000 of personalty income, though his total such holdings were estimated at $40,000,000, and his New York Central railroad, while reporting a capital of $143 million, paid taxes on only $22 million. Corporations in general proved particularly skillful tax dodgers, deliberately violating the rules by cooking books, establishing phony indebtedness, or simply by bribing tax collectors. Investigators calculated that corporate evasion alone cost the state and city millions each year, but the notion of increasing revenues rather than cutting expenses was not to be placed on the political table.
Quite the opposite: to slice the budget, reduce taxes, and restore investor confidence, municipal officials cut the relief budget. In 1873, 5,000 families had been receiving public assistance; by 1874, given the crisis, 24,000 were being aided. In March of that year, then-Mayor Havemeyer, convinced that the level of "destitution and suffering" did not "warrant the interference of the Municipal authorities," announced the suspension of all public outdoor relief from July through December. In 1876, the new Tammany administration announced such assistance would be henceforth be permanently discontinued, apart from cash stipends to the blind, and fuel handouts to the proven poor (an exemption that pleased Democratic coal merchants). The Board of Aldermen protested, saying there were "more needy and deserving poor in this city than ever before in any one winter, rendered so in consequence of the general prostration of business," but outdoor relief would not return to New York City for nearly sixty years.
For a fuller account, see Burrows & Wallace, Gotham, Chapter 58.
Walter Sachs fretted, urged caution about the highly leveraged operation, but to no avail, and it became one of the largest investment disasters in the twentieth century (to that point). By 1931 out of the $172.5 million lost by the fourteen leading trusts, Goldman Sachs accounted for $121.4 million. Catchings was forced to resign. Sachs regretted "we weren't smart enough, perhaps – or perhaps we were too greedy, too – but we didn't stop it in time." Sidney Weinberg, the next-up commander, would be big on tough capital retention, and keeping payout to partners low, forcing them to build up equity in the firm.
By then, of course, the whole economy had come tumbling down, and, once again, protestors had taken to the streets.
On the morning of March 6, 1930, a New York Times headline blared: "ALL POLICE ON DUTY TO AVERT VIOLENCE AT RED RALLY TODAY / WHALEN TO COMMAND BIG FORCE EQUIPPED WITH TEAR AND GAS BOMBS AT UNION SQUARE."
Wanamaker executive Grover Whalen had recently returned to government service as Police Commissioner. The onetime major domo of New York's ticker tape parades had not lost his flair for frenzied public relations. The night before, Whalen had given the press the text of an unsigned letter. It alleged that the next day, on orders from Moscow, Reds would destroy City Hall, the Woolworth Building, Police Headquarters, the New York Stock Exchange and, for good measure, assassinate Al Smith and John D. Rockefeller. To ward off such horrors Whalen ringed Union Square with a thousand wrought-up policemen, and stationed firemen, hoses at the ready, next to every hydrant. Nonetheless he was caught off guard that morning when mammoth formations of sign and placard toting Communists poured into Union Square from side streets. The cadre were soon joined by masses of additional partisans and sympathizers disgorged from the subways, eventually forming a congregation 100,000 strong ("one of the largest crowds ever seen there" said Whalen).
The meeting indeed had roots in Moscow -- the Comintern had called for coordinated worldwide demonstrations on International Unemployment Day -- but the size of the outpouring startled organizers too. The throng cheered speakers' demands for vigorous governmental action: public funding of immediate emergency relief; an unemployment insurance program; a seven hour day and a five day week; abolition of child labor; an end to evictions; a public works program at union pay scale; and recognition of the U.S.S.R. Apart from the last, whatever their original inspiration, these were home-grown demands, familiar to New Yorkers (radical and moderate alike) who had been calling for such programs over several generations, especially during the many prior depressions.
The organizers now called on the crowd to march down to City Hall where they would present their petition directly to Mayor Jimmy Walker. Whalen summoned the leaders to his command post in the Square. He forbade the march. The leaders promptly returned to the speakers platform, reported Whalen's ukase, noted that streets which were routinely handed over to monarchists, militarists, capitalists, and assorted celebrities would now be denied to workers, and asked "Will you take that for an answer?" The crowd bellowed "No!" and turned toward Broadway.
At this point Whalen's inflamed thousand man force and 300 mounted police charged in, their "faces contorted and raving and cursing" (according to the World), and began to indiscriminately slug, club and kick demonstrators and assorted bystanders. Boys were beaten by gangs of seven or eight cops, women struck in the face with blackjacks. Firemen turned on their hoses. Most fled the flailing police, stumbling over one another to get away, but some fought back savagely, hurling curses ("Murderous Cossacks!") and occasionally bricks.
Despite this battle, and Whalen's shutdown of the subways, thousands of protestors made their way to City Hall Park. When the leaders arrived to present their petition they were immediately arrested. (They would serve six months in jail). Whalen sent in armored motorcycles and police equipped with tear gas, smoke bombs, submachine guns, rifles and riot guns. After a few more skirmishes the day was done, with four police and over 100 civilians injured.
The Communists, catapulted to prominence by this battle, had been galvanized into action by the events which seemingly had confirmed their darkest predictions (and greatest hopes) about capitalism's imminent demise. They would remain major players in the city for the remainder of the Depression decade. But as a self-appointed vanguard of the working class, they left much to be desired. They embraced a Stalinoid disdain for internal democracy, engaged in endless doctrinal wars, brandished ultra-revolutionary slogans, and engaged in vituperative sectarian attacks on "social fascists." Above all, the top leadership at national headquarters off Union Square followed every twist and turn of the party line coming out of Moscow (though local cadre often took independent initiatives). They did so not from cravenness, but from a messianic conviction that by aligning themselves with a vast international movement, they would share in its ultimate triumph. In the end, the broken field running this fealty engendered would prove ruinous.
In the short term, however, it gave the Communists terrific energy (the more devoted put in ten to twelve hour days -- "maybe 16," one radical recalled, "if you counted yakking time.") And their analyses of capitalism's systemic crisis, no matter how crudely fashioned, rendered them ideologically invulnerable to the creeping paralysis which overtook so many of the unemployed. The bulk of the jobless saw their condition as a personal failure, blaming themselves -- or at best an implacable fate -- for their shameful inability to find work. But while many sank into apathy and hopelessness -- Depression breeding depression -- Communists leapt to the barricades. And though their Unemployed Councils (whose slogan was "Fight!--Don't Starve") won few permanent adherents, thousands of angry people, hungry for an opportunity to protest their slide into poverty, seized on the opportunity afforded by Communist-led initiatives.
In the Fall of 1930, the Unemployed Councils began resisting evictions. Squads carried the furniture of displacees back into their apartment, and fashioned meter-jumps to restore disconnected electric service and gas. If marshals and police showed up, organizers appealed to neighbors -- many of whom were unemployed and ready-to-hand -- to block them from interfering. By the Spring of 1931 there had been thousands of such incidents, not only on the Lower East Side and Brownsville where the Party boasted a mass membership, but in Harlem, Hell's Kitchen, South Bronx and Coney Island, where their ranks were far thinner. This grass roots protest, peaceful for the most part, was astonishingly successful in restoring families to their homes, or at least delaying their final departure.
In the next Depression winter of 1931, the Communists escalated, launching wholesale rent strikes. Organized tenant leagues -- under the slogan "No Work, No Rent" -- demanded that building owners either reduce rents in response to mass unemployment (as employers demanded workers accept pay cuts in hard times), or "carry" tenants until they got work again. Though they did not call for the abolition of private rentals, or assert a basic right to free housing, their insistence that property rights were not sacred, and that in hard times landlords had no right to evict, struck directly at the propertied's profit margins, and even their ability to hold on to their investment. They responded to this deadly threat with fury.
The Great Rent Strike War of 1932 began in a quiet section of the Bronx, just east of Bronx Park, near the Zoo and Botanical gardens. The neighborhood was home to one of the largest concentrations of Communists in New York City, especially in the modern elevator`buildings at the corner of Bronx Park East and Allerton Avenue. Many of these skilled workers, who had moved up from the Lower East Side and South Bronx, had extensive activist backgrounds in the city's bitter garment strikes or in clandestine revolutionary struggle in Europe. They were not about to give up their hard won status and sink into poverty and despair without a fight.
In January 1932 the Upper Bronx Unemployed Council unveiled rent strikes at three large apartment buildings, demanding a 15% reduction in rent, an end to evictions, and the recognition of their tenant committee as official bargaining agent. The landlords moved to dispossess and got judges to grant eviction notices. When marshals and police arrived they found a huge crowd, over 4,000 strong, the majority of them enraged women from the community. When the marshals attempted to move out furniture, the crowd charged the police, fists, sticks and stones flying, shouting "Down with Mulroooney's Cossacks!" A compromise offer was advanced and accepted, and the crowd cheered the settlement, chanting the Internationale and waving copies of the Daily Worker in triumph.
Bronx landlords now organized anti rent strike committees, pouring money and political influence into the campaign. But the movement spread rapidly to other even poorer areas in the Bronx (like Crotona Park East) and hopped borough boundaries to Brooklyn. A formidable outbreak on Charlotte Street in December 1932 kicked off a new winter wave of resistance, affecting hundreds of buildings, involving thousands of protestors in occasionally epic street battles with police. The Communists were in heaven, relishing each confrontation as a step toward radicalizing the masses, and so were the tenants, who won a myriad of substantial victories. But the atmosphere of burgeoning communal revolt terrified and alienated the city officials, municipal judges and politicians who had been sympathetic up to this point. They swung behind the landlords, slapped picketers with injunctions, and snuffed out the revolt.
Despite this momentary victory, it was clear that something had to be done about the housing crisis. While the Communists stuck to short-term action programs, the Socialists began calling for long-range housing initiatives involving municipal ownership and construction of homes for the working masses.
More broadly, as the depression had deepened, demands had increased that Walker do more to combat unemployment. Following up the March 1930 Communist-led rally in Union Square, radicals had mounted an October 1930 demonstration at City Hall. Chanting "We want Work or Wages" and singing the Internationale, they demanded unemployment relief. Mounted police rushed the crowd, precipitating a pitched battle. In the uproar a small group slipped inside and tried to present proposals to Walker, presiding at a Board of Estimate meeting. When gaveled down, one 21 year old Communist spokesman denounced him as "a grafting Tammany politician and a crook." For once the imperturbable Walker lost his cool, shouting: "You dirty Red! In about two minutes I'll jump down there and smash you in the face." Forestalling their boss, police threw the protestor down the stairs and beat him with nightsticks and blackjacks, leaving a pool of blood on the rotunda floor.
The point had been made, however, and the very next day the city appropriated a million dollars for emergency hiring of the unemployed in city departments and another million for the Bureau of Child Welfare. These were New York's first official actions against the depression.
Within weeks, Walker announced formation of an Official Committee for Relief of the Unemployed and Needy. It was in fact an un-official, Tammany-style effort which solicited donations from municipal employees, and dispensed food, clothing, coal and rent money at police precinct houses. At the Board of Education, teachers and administrators donated 1 percent of their salaries to provide lunches and clothing to thousands of schoolchildren.
Social workers denounced Walker's charity program as haphazard and politically motivated (unemployed Democrats did fare better than others). In February 1931 a mass meeting at Town Hall demanded the city establish a professionally run $10 million program to provide emergency jobs.
Walker agreed. He sought and received permission from the state legislature to issue bonds for the undertaking. Within two months he had launched a municipal job program. By November some 17,500 New Yorkers were at work repairing highways, roads, sewers, parks, and public buildings. But given the need, this was pathetically inadequate.
The Mayor agreed, but noted that he confronted stern legal limits. These had been imposed -- as Walker pointed out to the social workers now clamoring for more municipal assistance -- by their own parsimonious predecessors who back in the 1870s depression had won a ban on "outdoor relief." It was apparent, therefore, to social workers and city officials alike, that sustainable assistance required State intervention. But would Albany be willing to help?
For much of his first term (1928-30), Governor Franklin Roosevelt's attention had been focused upstate; his sympathy with city folk seemed open to question. Yet the Governor would need metropolitan support to win the White House in 1932. Such political considerations, together with the upheavals in New York's streets, a hunger march on Albany, his own Grotonian sensibilities, and the prodding he received from urban liberals who Eleanor brought into his ambit (Lillian Wald, Mary Simkhovitch, Rose Schneiderman, and especially Frances Perkins) -- all combined to spur him to action.
In August 1931, the Governor summoned the New York State legislature into special session. Informing lawmakers that neither private charity nor local government could any longer adequately care for the unemployed, he declared: "To these unfortunate citizens, aid must be extended by government -- not as a matter of charity, but as a matter of social duty."
Within a month, the State had established a Temporary Emergency Relief Administration to channel money into local work relief and home relief programs. (New York City's charter clause prohibiting outdoor relief was superseded). In the fall of 1931, melding its own resources with TERA funds, New York City established an Emergency Work Bureau. It offered employment to people who passed a "means test" proving their destitution. At the Bureau's Southern Boulevard headquarters, fifteen hundred people tore down the door as they rushed in to the interviewers. By September 1933, 110,000 individuals held emergency jobs.
At the same time, the city set up a Home Relief Bureau, run by the Department of Public Welfare. It opened 79 offices all over the city, in schools and other public buildings. These, too, were deluged by applications from needy families. Within a year the Home Relief Bureau was supplying 50,000 families with food (rice, flour, beans, dried fruit), clothing (dresses for girls, knickers for boys), and fuel.
By 1932, therefore, private philanthropy's annual relief expenditures had gone from $2½ million to $19 million, and annual public relief had climbed from virtually nothing to over $80 million. But the need had soared farther and faster, outstripping both these efforts.
Home Relief was patently inadequate. Single men were completely ineligible. Single women and childless couples received next to nothing. Even approved nuclear families were aided below subsistence level. And the funds were intermittent as well as insufficient: in January 1932 funding stalled and Home Relief was suspended altogether until crowds stormed offices demanding food.
New York City approached its fourth depression winter (1932-3) with dread. One third of its working population was unemployed. Centralized private philanthropy was bankrupt. The Mayor's and the Board of Education's funds had been swallowed up. Private agencies had stopped taking on new cases. TERA funds were giving out. Home Relief Bureau stations had stopped registering new recipients and cut aid for families to $2.67 a week. 20,000 children had been placed in institutions by parents who could no longer provide for them.
It had become patently obvious that neither private, nor city, nor even state resources were sufficient to cope with the collapse. Pleas for federal intervention now cascaded in from social workers, church leaders, reformers, and government officials. But no one articulated the matter better than the supposedly feckless Jimmy Walker, who in June 1932 told a meeting of mayors: "We of the cities have diagnosed and thus far met the problem; but we have come to the end of our resources. It is now up to the Federal Government to assume its share."
New York's top representatives in Washington agreed. In the Senate, Robert Wagner held up newspaper photos of metropolitan breadlines and pushed for public works and emergency aid. In the House, Fiorello La Guardia called for relief programs, unemployment insurance, public housing, and "Soak the Rich" taxes to pay for it all.
Such efforts were shunted aside by the Hoover Administration. The President refused to bring Federal resources to bear, fearing public works programs would undermine private capital and lead to corruption and collectivism. He worried that relieving the unemployed would unbalance the national budget, subvert recipients' characters, and undermine the Republic. And despite his reputation as a great humanitarian, he made light of popular suffering. "Nobody is actually starving," he said in 1932. "The hoboes, for example, are better fed than they have ever been. One hobo in New York got ten meals in one day."
As the situation worsened, Hoover authorized exceptions to his hands-off policy -- but only for the corporate sector. In January 1932 came establishment of the Reconstruction Finance Corporation -- a public entity which by year's end had loaned almost two billion dollars to foundering railroads, insurance companies and banks.
The trickle-down theory justifying this intervention -- which one wit characterized as "feeding the sparrows by feeding the horses" -- proved a spectacular failure. It was not a lack of credit that was stifling the economy, but a lack of profitable investment opportunities. So troubled firms used the handouts not to create jobs but to repay creditors -- chiefly New York City banks.
Senator Wagner excoriated Hoover's hypocrisy, noting the President preached "rugged individualism" only to the poor, not to railroad presidents and bankers. An enraged Congressman La Guardia called the RFC a "millionaire's dole" and the housing plan a "Bill to Bail out the Mortgage Bankers." When Hoover in May 1932 called for bailing out commercial banks La Guardia called for nationalizing them instead. "The bastards broke the People's back with their usury," he roared. "Let them die, the People will survive."
It would take an electoral upheaval and inauguration of the New Deal – the transfer to Washington of programs tested in New York City and State – to begin to make good on this assurance.
Adapted from Wallace, Gotham II, Chapters 28 and 29, in progress.
For more on the New Deal's impact in Depression-era NYC, see A New Deal for New York.
But in the interest of honing one obviously popular slogan – Tax the Rich! – to give it a sharper cutting edge, I re-present here a proposal I advanced ten years ago, for what's now being called a Financial Transaction Tax, as was historically known as a Stock Transfer Tax or, as it was refashioned by a Nobel Prize winning economist, the Tobin Tax. It's a proposal targeted precisely at Wall Street, and one that, in addition to raising a good deal of money, might have the admirable side effect of reining in over-exuberant speculation. The proposal would need to be updated and shaped to deal with existing circumstances, which are in constant flux. And it would need to be constructed carefully, by economic experts, which I am not, to withstand the variety of hysterical objections that would certainly be launched against it. But it still seems worth considering, especially as it's now being advanced by the European Commission – see here and here and here and here – and a version of it has long been in effect in London (the Stamp Duty Reserve Tax), with no ill effect.
A Financial Transactions Tax
Finally we should revisit the stock transfer tax. A time honored American revenue source, it was applied by the federal government during the Civil War, the Spanish American War, and WWI – and we are, are we not, in a quasi-wartime condition? New York State adopted its own stock transfer tax in 1905 – despite threats from the New York Stock Exchange that if passed it would instantly decamp for New Jersey (yes, even then) – and it generated substantial income, all of which, beginning in 1965, was given to New York City. In the so-called Fiscal Crisis of the 1970s, however, the Exchange gained sufficient leverage to win repeal of the tax. The state stepped in to provide an annual consolation prize, which amounted to $114 million in 2001, the year in which even this payment was gratuitously eliminated by Governor Pataki.
What almost no one realizes is that tax is still in place, still collected to serve as technical backing for bonds issued back in the Fiscal Crisis, only to be immediately returned. As the tax was and is keyed to volume, and the market binged wildly upward during the 1980s and 90s, its earning power has shot up exponentially. During the 2000-2001 state fiscal year, the state collected (and instantly rebated) 7.6 billion dollars, and in FY 2002-03 it’s expected to reap (and return) over $8 billion – enough, obviously, to entirely wipe out our $5 billion deficit, leaving lots left over for schools and housing.
Why not reinstitute even a small portion of that tax, on a short term, sunseted, emergency, patriotic, wartime basis, with the goal of making New York a more competitive place to do business, and a more enjoyable place to live life. Rebating 90% rather than 100% would still leave a $800 million revenue stream, sufficient to back the sale (by a newly created New York City Investment Trust Fund) of $10 billion worth of municipal bonds (at 5%). This Fund would be strictly dedicated to: a) building schools; b) building affordable housing (the two might fruitfully be combined by giving bonuses to developers who include turnkey schools in their apartment towers); and c) paying for a spanking new New York Stock Exchange, relieving us of the $1.1 billion burden [which Mayor Giuliani was then proposing to hand the assembled brokers to keep them from fleeing westward]. I’ll bet Jim Lebenthal [a municipal bond specialist] would be interested.
Such a tax-and-fund policy could galvanize the construction trades (who in return for receiving a prevailing wage, and in recognition of their dwindling ranks, might be willing to open up their apprenticeship and pre-apprenticeship training programs). The tax would also reduce market volatility by discouraging speculative short-term gambling, and predispose large investment funds to pay more attention to long term investments. Finally, as the tax is paid by the seller of stock – not the brokers on the NYSE – it would allow investors from around the country (and the planet) to make a modest contribution toward rebuilding Lower Manhattan (The Whole World is Helping).
It’s possible the NYSE would once again threaten to skip town, arguing such a tax would cause it irreparable damage. If so we might remind it that in 1999, when several European exchanges joined forces and abolished transfer taxes in an effort to capture business from NYSE and the London Stock Exchange, an excitable group of the latter’s members insisted that England immediately eliminate its hefty tax, lest the fiscal roof fall in. The British Government refused, being made of sterner stuff than the one in Albany. The London Exchange, despite the tax (applicable since 1986 to electronic trades), continues to flourish mightily. Any serious examination of the viability of a local equivalent, however, would have to determine how readily it might be circumvented, especially in an era when shuttling income to tax-free offshore havens has become a fine art. Ideally the stock tax should be made national again.
[Excerpted from Mike Wallace, A New Deal for New York (2002).]
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