Grasping Reality on TypePad, by Brad DeLong

Bernstein quotes from a Bulletin of the American Iron and Steel Association in the first quarter of 1874, when the Long Depression had barely begun. The report stated:

that the manufacturing industries of the country are rapidly sinking; and the conclusion is equally inevitable that all branches of business will soon collapse under the dead weight of the paralysis which has seized manufacturers and driven the labor classes into idleness, unless means are devised to stimulate and encourage productive enterprises....

Here's Bernstein:

From 1873 to 1878 production fell precipitously. Mills either closed or ran part time. At the end of the first year of the crisis the Bureau of Statistics in Pennsylvania reported:

Probably never in the history of the country has there been a time, when so many of the working classes, skilled and unskilled, have been moving from place to place seeking employment that was not to be had--never certainly for so long a time.

Estimates on the production of pig-iron, coal, on cotton consumption, railroad revenues, imports of merchandise and bank clearing showed a reduction of 32 percent between 1873 and 1878. Its magnitude was second only to that between 1929 and 1932, namely 55 percent.

And what was the cause of this collapse? At least one writer... for the Atlantic Monthly believed... globalization and competition from China, India, and Brazil were to blame.... W.G.M. argued:

We read in a London paper that the Chinese government have purchased machinery,and engaged experienced engineers and spinners in Germany to establish cotton mills in China, so as to free that country from dependence upon English and Russian imports. Though China is somewhat tardy in her action, we may be certain that she is thorough.... More than this, the time is not far distant when the textiles from the Chinese machine looms, iron and steel and cutlery from the Chinese furnaces, forges and workshops, with everything that machinery and cheap labor can produce, will crowd every market. The four hundred millions of China, with the two hundred and fifty millions of India,--the crowded and pauperized populations of Asia,--will offer the cup of cheap machine labor, filled to the brim, to our lips, and force us to drink it to the dregs, if we do not learn wisdom.

It is in Asia, if anywhere, that the world is to find its workshop. There are the masses, and the conditions, necessary to develop the power of cheapness to perfection, and they will be used. For years we have been doing our utmost to teach the Chinese shoemaking, spinning and weaving, engine driving, machine building, and other arts, in California, Massachusetts, and other States; and we may be sure they will make good use of their knowledge; for there is no people on earth with more patient skill and better adpated to the use of machinery than the Chinese. When the Chinese government is doing for China, Dom Pedro is doing for Brazil [this would be Dom Pedro II, the last ruler of the Empire of Brazil], though in a different form....

If you had to describe the causes of the Long Depression in modern terms, you might call it a combination of a tech boom-and-bust cycle, an industrial transformation, a banking crisis, and a a euro-style problem of currency arrangements that were not serving the economy well. The tech boom of that time was the railroad mania.... The transportation network established by rail was feeding into a growth of much larger companies that were finding cost savings by investing in equipment and economies of scale. At least some of the unemployment was... labor... displaced by rapid technological change.... As firms and consumers went broke, and currency values fluctuated against gold, there were were banking crises and times when financial payments could not be made...