What Caused the Rise of the Money Issue in American Politics During the Guilded Age?
The most notable moment in the election of 1896 was William Jennings Bryan's "cross of gold" speech, where he called out the gold standard as a failing institution that benefited investors and bankers at the expense of farmers. This money issue grew prominent by 1896 because of the economic policies of the Gilded Age, when the U.S. experienced a rapid industrialization through the growth of railroads. These economic policies were hard on farmers, who began to organize politically into groups that wold eventually coalesce into the movement known as Populism.
1 Railroads and Banks
The economic prosperity of the Gilded Age relied on railroads and banks, two industries which benefited from the gold standard, which tied the value of the dollar to that of gold. Until the 1870s, the U.S. used both gold and silver as benchmarks for money, but Congress demonetized silver with the Coinage Act of 1873. It substantially benefited bankers and investors, as it kept the value of money high and ensured their investments would not depreciate in value over time. As railroad building boomed in the 1870s, the demand for money in the form of investments grew, since railroads were an expensive endeavor that required large initial investments, a reality which only further increased the value of money and benefited banks.
By contrast, farmers suffered greatly during this deflationary period, when the prices of their crops remained low. Additionally, poorer farmers often took out large loans from banks to survive periods of low yields and poor harvests. But, with the gold standard and the high demand for money from railroad constructions, the value of money kept increasing and their loans became increasingly difficult to pay off. These farmers would eventually form political organizations, known as granges, to try and advocate for better local policies towards farmers.
3 The Greenback Party
In 1876, members of some of these granges formed an official political party known as the Greenback Party, with the goal of ending the gold standard and creating non-gold backed paper money, commonly referred to as "greenbacks." The party specifically emerged after the Panic of 1873, when the deflationary results of the gold standard and the railroad boom caused a severe economic depression. Instead of relaxing the gold standard to ease the deflation, the Republicans in Congress passed the Coinage Act to reaffirm the U.S. commitment to gold over silver, as it would continue to benefit many of the banking elites who had substantial ties to the Republican party.
4 Election of 1896
Though the Greenback Party failed achieve political reform, it created momentum towards the formation of the People's Party in 1892, another party of farmers opposed to the banking and railroad interests The People's Party grew into a larger Populist Movement after the Panic of 1893, another economic recession caused by deflationary pressures from the gold standard. In 1896, the Democratic Party had adopted the platform of the Populists and ran William Jennings Bryan as their candidate, calling for a loosening of the rigid gold standard to include silver, as had been the case prior to 1973. Yet despite his powerful "free silver" ideals, Bryan would lose to banker-supported Republican William McKinley. In 1900, a law was passed making the already used gold standard an official U.S. policy.