Jay Cooke Crisis

On September eighteenth in 1873, Jay Cooke and Company officially declared bankruptcy, and in doing so set off a series of financial crises that plunged the western world into an economic depression that lasted six long years. The collapse of American economic structure had been brewing for a long while, as in Europe the crash came early in May of that year. Surging to export into the Eastern economic vacuum, American businesses overstretched themselves and wound up in the same state as the Europeans, only worse off due to the fact that both financial superpowers were now floundering. The company, which had expanded the business past it’s finances, declared bankruptcy at the very beginning of a time of commercial instability, and in doing so
While Jay Cooke could have never predicted his venture would not pay out, if his bank had been smaller, and the banks that subsequently folded after his, the economic impact would have been far less severe. Modern financial crises, crises not based on droughts or floods, but on individual people, businesses, and their decisions are truly something that can be avoided, or at least lessened in their effect. As one historian noted, “The Long Depression also demonstrates the different nature of financial struggles in a modern economy, where many complicated and debatable factors hurt the well-being of ordinary families. Such struggles are different than those of an agrarian society … Instead, a loss of income occurs in the context of a corporate employer, and the result can be greater class distinctions, increased interest in social justice, and displays of agitation and unrest.” (Barga) We as a country could have learned from this experiences and enacted legislation limiting the size of financial institutions, but instead we recovered and quickly forgot the past, only to have the same thing happen half a century later, worse than before, if we do not change our economic policies, this pattern of crisis and temporary recovery will