By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Occupy Wall Street protesters may not know much about Coxeyâs Army. But like the current demonstrations, Jacob Coxeyâs 1894 March on Washington occurred after a period of economic turmoil that increased inequality and followed a crash of the financial system. Mr. Coxey failed, but his demands of stimulus spending and printing money became the standard response to recessions. Occupy Wall Street should be so lucky.
Economically, the lead-up to 1894 bore considerable resemblance to the present. In the preceding boom years, disruptive technologies like the transcontinental railroad and refrigeration brought prolonged downward pressure on prices. Since America was on a gold standard, this resulted in about 20 percent deflation in consumer prices. As in the past decade, when American manufacturing workers saw their living standards eroded and employment opportunities diminish, farmers of the late 19th century were especially adversely affected, and income differentials widened.
The financial crash of 1893 resembled that of 2008, with similar distress in the financial sector, but caused more corporate bankruptcies and higher unemployment. It also brought a severe credit problem. To avoid running out of gold in early 1895, America sought a bailout from J.P. Morgan.
Mr. Coxey, a successful businessman with Populist Party connections, began his march with 100 participants from his home town of Massillon, Ohio. They demanded federal deficit spending on roads and other public works, with laborers paid in paper money, thus expanding the currency in circulation.
A generation before John Maynard Keynes espoused his theories, the protesters found little response to their ideas in the conservative administration of Grover Cleveland. The march was eventually dispersed with little short-term effect. Mr. Coxeyâs prescriptions, however, have since become conventional wisdom, notably in the fiscal and monetary responses to the most recent downturn.
Occupy Wall Street arises from a similar situation, when technology-driven deflation has widened income gaps and produced a stratum of economic losers. In that respect, it does not resemble, say, 1932, when distress was general, or even 1968, a period of great prosperity. But like Mr. Coxeyâs followers, Occupy Wall Street could influence the debate for decades ahead. It just needs some ideas.