May 9, 1873: Gründerkrach and the Long Depression

Volksbank kurz vor dem Krach (People's Bank Shortly Before the Crash) by Christian Ludwig Bokelmann

Volksbank kurz vor dem Krach (People's Bank Shortly Before the Crash) by Christian Ludwig Bokelmann

On this day in 1873 the Vienna Stock Exchange (Wiener Börse) crashed, setting off ripples that would lead to the Panic of 1873 and the Long Depression. Since it began shorty after the founding of the German Empire (aka the Second Reich) it became known as the “Founder’s Crash” or Gründerkrach.

Some theorize that it all kind of starts with Austro-Prussian War of 1866. Prussia’s quick victory at the Battle of Königgrätz/Sandowa in Bohemia ticked off the French public who had backed Austria. The French cries for “Revanche pour Sadová” would eventually help lead to the Franco-Prussia War of 1871. Both events allowed Otto von Bismarck to consolidate and finalize the Unification of Germany under the Prussian Crown without the rival powers from Habsburg Austria. This would turn Austria’s attention away from German affairs and toward Balkan and Slavic ones within its own empire. Soon they would occupy Bosnia and before you know it WWI gets underway (there are a lot more parts in between, but those are for other posts).

Battle of Königgrätz by Gegorg Bleibtreu

Battle of Königgrätz by Georg Bleibtreu

Although Austria was left out of Germany, many Germans still invested at the powerful Vienna Stock Exchange. The influx of capital into Germany from Austrian and French war reparations fueled wild speculation in the hot hi-tech items of the day like railways, factories, and steamships. America also had “irrational exuberance” in those same industries.

Panic of 1873, Run on the Banks, NYC

Panic of 1873, Run on the Banks, NYC

On this day in 1873, the bubble burst and things were not very good for a lot of people for a long time. Both European and American history are genuinely lacking in the amount of scholarship devoted to the Long Depression. The granddaddiest one of them all the Great Depression has overshadowed it. As a result I think we sometimes lose a little perspective when we only have one example to to go on.

The Burdens of the Long Depression on Pres. U.S. Grant's Shoulders

The Burdens of the Long Depression on President U.S. Grant's Shoulders

So in these down economic days of the late millenial aughts, I challenge my colleagues to pick it up a little and give us some perspect on the 1870s. From what I gather, those days seem more appropriately juxtaposed to what is going on today than the Great Depression. Please feel free to email or write any comments if you have a book that covers the Long Depression well. And happy gathering.

Update: Reading through the H-Net sites I found this call for articles from the Critique: Journal of Socialist Theory. They are putting together a special issue on “Crises and Depression.” The due date is December 1st.

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2 Comments

  1. mr.z said,

    June 16, 2009 at 1:35 am

    Are most depressions deflationary, or inflationary? What % of depressions have been deflationary, or inflationary?

  2. May 6, 2010 at 8:27 pm

    […] den Börsencrash von 1873 (Gründerkrach) erfuhr der wirtschaftliche Aufschwung der Gründerzeit einen empfindlichen Einbruch, der nach […]


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