Utah and the Depression of the 1890's

UTAH AND THE DEPRESSION OF THE 1890's

By Leonard F. Arrington

The depression of the 1890's, sometimes called the Cleveland depression, was one of the most severe in United States history, and undoubtedly the gravest economic debacle in nineteenth-century America. Approximately one-fifth of the nation's nonagricultural work force was unemployed, more than 800 banks failed, and by 1894 some 156 railroad companies with a capitalization of $2.5 billion and 30,000 miles of track were in the hands of receivers. The disastrous Panic of 1893, which was both cause and effect of the business failure, produced a precipitous decline in the stock market, amounting to 15 points during the first day of the Panic (May 5, 1893), a drop of 64 per cent in new stock issues, a decline in bank-clearings by almost one-third, and a 50 per cent increase in business failures. More than one-sixth of the nation's railroads went into bankruptcy in the single year 1893. Many iron and steel companies suffered a similar fate. Financial panic spread as the nation's gold supply dwindled with the export and repatriation of gold by foreign capitalists no longer willing to risk their capital in an unsafe economy. Labor unrest increased as wage cuts were applied, and strikes shut down a number of basic industries. More important, perhaps, prices declined from an index of 120 in 1882 and 80 in 1890, to an index of 50 in 1896. Particularly acute was the drop in farm prices and income, which reached the lowest level in three decades. The national economy did not fully recover from the depression until after 1900. Apparently, the celebrated "Gay Nineties" were not really so gay after all!

Grave depressions of this character are usually an outgrowth of declines in investment, and the contraction of the 1890's was no exception. New railroad construction, which had contributed substantially to the boom of the late eighties, dropped from 4,584 miles in 1892 to 1,938 miles in 1895 — a decline of almost 60 per cent. There was a sharp reduction in the output of steel rails, and orders of railroad rolling stock (locomotives, freight, and passenger cars) fell off in like proportion. In the field of manufacturing, the output of producer's durable equipment declined 25 per cent between 1892 and 1894, and did not regain the earlier level until 1899. The drop in farm prices and income occasioned a particularly sharp drop in purchases of new farm equipment. Above all, there began a long decline in residential, industrial, and agricultural building construction, which was the nation's largest investment goods industry. Building activity dropped 60 per cent during the financial panic from May to October, 1893, and did not significantly expand again until 1904.

All of this, of course, produced a decline in wage earnings, spreading unemployment, lowering of levels of consumption, and widespread suffering and distress. Nevertheless, the attitude of the federal government was essentially one of laissez faire. Proposals for federal public works projects, for example, faced a cold reception. The convention of the American Federation of Labor called for an issue of $500,- 000,000 in paper money for this purpose, but the only outcome was a dramatic but completely unsuccessful "march on Washington" in the spring of 1894, led by Jacob Coxey of Ohio, to petition Congress for that sum to be spent on the construction of roads. It was clear that "people of substance" — the people with property — were opposed to such "interference" by the federal government with the private economy of the nation, and in this they were supported by respected economists who declared that the only safe course was to rely on the automatic, harmonious, and benevolent laws of supply and demand. Thus, the nation's economy drifted on until private investment was stimulated sufficiently by the eventual appearance of opportunities for profit to absorb the unemployed. Only when its own supply of gold declined to $42,000,000 did the federal government take desperate action, and this consisted essentially of inducing an international syndicate of bankers, led by J. P. Morgan and Company, and August Belmont and Company representing the Rothschilds, to furnish the government with $65,000,000 in gold, half to come from Europe. The syndicate was remarkably successful: gold exports stopped, and the price of government bonds rose sharply.

It devolved upon municipalities and private charities to alleviate the mounting distress by programs of relief, and even this was not extensive because of the strongly-held opinion that out-and-out relief destroyed character by accustoming the laboring classes to getting something for nothing. Some cities set up soup kitchens and bread lines; others required labor in the public parks or on the streets as a condition for relief.

The distress in the nation was accentuated in Utah, for Utah's economy in the 1890's depended upon agriculture, mining, and transportation, all three of which were marginal to the national economy and accordingly suffered heavy cutbacks with the onset of the depression. As elsewhere in the nation, farm income dropped heavily. Utah wheat, for example, came to sell for as little as 30 cents a bushel. A reporter for the Deseret News traveling through Cache Valley in July, 1896, wrote: "Money is scarce among the masses of the people, and the prevailing price of wheat, from 35 to 40 cents per bushel, dampens the ardor of the farmers." Similarly, the construction of railroads which had sparkplugged Utah's speculative "boom" of the eighties slowed to a halt. But the most serious problem was the shutting down of the mines. The production of silver dropped from 8,750,000 fine ounces in 1891 to 5,891,901 fine ounces in 1894 — a decline of 33 per cent. Copper dropped from 2,209,428 pounds in 1892 to 1,147,470 pounds in 1894 — a decline of 48 per cent. And the production of salt dropped from 180,946 short tons in 1892 to 15,200 short tons in 1893 — for a decline of almost 92 per cent!

The problem in Utah was rendered still more serious by heavy population increases in that and preceding decades, caused by high birth rates and heavy immigration. Utah's population rose from 144,000 in 1880 to 277,000 in 1900. Apostle Abraham H. Cannon estimated in 1893 that there were 60,000 children in Utah for whom jobs would soon have to be provided. Indeed, thousands of them were already grown up and looking for work but could find neither land for farming nor employment in industry. According to one report, 4,347 of the 9,000 laboring men in Salt Lake City were out of work in the spring of 1894. The Deseret News, which doubted the accuracy of this figure, nevertheless agreed that the proportion of unemployed and underemployed was dangerously high.

Contemporary newspaper editorials and feature articles, letters to the editors, diaries, sermons of religious leaders, and financial journals all furnish evidence of the seriousness of the Cleveland depression in Utah. Even in 1898 when the rest of the nation had pretty well recovered from the depression, the First Presidency of the Church of Jesus Christ of Latter-day Saints, having heard there were 1,000 persons in Salt Lake City out of work, was urging Utah boys to volunteer for the Cuban War, partly of course to show the patriotism of the Mormons, but also partly, they said, to help solve the problem of unemployment. As if to reinforce that they meant it, Mormon church employees were promised half of their regular pay during their military service if they would volunteer.

What measures were taken in Utah to counteract the slump and relieve distress? There were occasional proposals for territorial intervention, as for example the suggestion of Jeremiah W. Sanborn, president of the then Agricultural College of Utah, now Utah State University. In his quarterly report to the Board of Trustees, on December 22, 1893, President Sanborn recommended that the territory proceed immediately to the construction of the center building, or what is now the center section of Old Main, to provide much needed facilities:

I may say [he explained] that it has been the policy of strong rulers in hard times, notably the French emperors, to make great public improvements.

This policy is the sound and only true policy. All the necessities of the state in the way of improvements should be put in when the people are not occupied, as it will then aid in keeping those needing labor quiet and contented, as a State should do when it can properly. At such times improvements can be done at less cost. For the state to build when its own children, wealth producers, are all occupied is to build at the highest cost and fail to serve itself at an opportune time, for the idle labor in bad times is so much energy lost to the State. The State may then at its leisure meet the obligations made in hard times.

Despite some suggestions of this character, however, Utah citizens appear to have relied primarily upon officials of the dominant Church of Jesus Christ of Latter-day Saints to handle the problems of relief. While Latter-day Saints accepted a laissez faire role on the part of the national, territorial, and city governments, they believed in active supervision of their affairs by their church. Less than a month prior to the commencement of the 1893 Panic this philosophy had been reasserted with unforgettable poignancy in a special prayer circle of 115 leading Mormon officials in the newly-completed Salt Lake Temple. After the leaders had accepted of the temple and affirmed their faith in church leadership, the aged president of the L.D.S. Church, Wilford Woodruff, said:

You acknowledge that the Presidency of the Church are set to govern and control the affairs of the Church and Kingdom of God. ... I hope from this time henceforth, whenever you see that spirit manifest that the Presidency of the Church have no power to govern or teach anybody except to preach the gospel, you will remember that you have all testified to the truth that upon their shoulders rest the responsibility of teaching, governing, controlling and counselling the Church and Kingdom of God in all things on earth.

Then President Joseph F. Smith said:

You have each expressed yourselves individually to the effect that you acknowledge the right of the First Presidency to direct in all affairs pertaining to the work of God, also that you accept the First Presidency and their teachings in this Holy House.

He asked those present who "stood by those positions" to raise their right hand. The vote was unanimous.

One of the measures adopted by the church tithing office to combat the effects of the depression and to increase the circulating medium was the issuance of tithing scrip redeemable at the Bishop's Storehouses, and duly backed by meat, produce, and other items contributed as tithing.

The steps taken by Mormon leaders, far more extensive than is commonly supposed, included moral admonition, stop-gap relief, resettlement or colonization, and the establishment of new industries. Altogether, these measures amounted to what was perhaps the most important regional effort in the nation to stimulate economic activity and raise incomes. That the effort was not overwhelmingly successful demonstrated the inadequacy of localized effort in the face of spreading and generalized national paralysis.

The church's program, in its genesis, was essentially piecemeal, consisting of specific efforts to solve specific problems; but from the vantage point of 1961 it seems surprisingly comprehensive. The first public concern in the state over the deepening depression was expressed during the winter of 1893-94 and continued to mount during succeeding winters until the winter of 1896-97 when there was alarm at the continuance of the unemployment. At first, there were merely sermons from church officials deploring the "extravagance" of previous years which had led to the situation now confronted, cautions against going into debt, and admonitions to be thrifty and industrious. Noting that there were strikes and disturbances elsewhere in the nation, church officials commended their followers for their stable and conservative temperament, and expressed the belief that this would ultimately redound to their benefit.

Early measures adopted for mitigating the suffering and hardship included the following:

1. Those who could do so were encouraged to leave Salt Lake City and go out into the "country settlements" where there was not so much want, where living was much cheaper, and where they would be in a better position to help themselves.

2. At the same time, missionaries elsewhere in the United States and in Europe and the South Seas were told to discourage the migration of converts to Utah.

3. Wards in Salt Lake City arranged for unused real estate to be loaned to the poor for vegetable gardens.

4. Wards organized gleaning parties at which those in need went in groups to outlying farms to glean wheat, fruit, and potatoes left by the harvesters.

5. Members were encouraged to fast one day a month and turn over the food thus saved to the local bishop to be used under his direction to support those in need. According to a report at the Salt Lake Stake Conference held on March 4, 1894, 1,637 persons in Salt Lake were drawing support from the church. One-third of this support came from "fast offerings" and two-thirds from the church's tithing fund, which consisted of contributions from members amounting to one-tenth of their net incomes. In addition, the Women's Relief Society had a sizeable relief program of its own.

6. Members of the church were urged to raise the level of employment in Utah by giving exclusive patronage to "home" industries — Utah woolens, boots and shoes, overalls, butter and cheese, soap, and similar products. Because of the shortage of cash, Utah factories and stores were encouraged to print due bills as a means of paying their help and facilitating the exchange of goods. The church tithing offices contributed to this circulating medium by increasing their issues of tithing scrip, duly backed by meat, produce, and other items contributed as tithing.

The seriousness of the unemployment problem during the winter of 1896-97 led church officials to establish a church employment service, called the "Industrial Employment Bureau" or "Bureau of Information." One of the first such devices in the western United States, this bureau was operated by the Presiding Bishop's Office in Salt Lake City and had branch organizations in each of the wards (parishes) and stakes (dioceses) of the church. There were, of course, no fees or charges. The purpose of the bureau was to provide a clearing house for workmen seeking land or employment and for communities needing settlers, or employers in need of labor. On a printed form, bishops were asked to report members in their wards in search of work, as well as opportunities for employment in their wards. The information in these reports was regularly published in the Deseret News which went to nearly every household in the region. In this way hundreds of farmers, mechanics, and professional persons were provided with remunerative employment, and outlying communities were provided with sawmills, creameries, blacksmiths, shoemakers, carpenters, and schoolteachers.

The bulletins published each week in the News usually began with some such statement as the following:

Industrial Bureau. Here is something of interest to the unemployed who really want to work. Where they can get it and from whom, from Idaho to Arizona.

The "opportunities" were organized under four headings: (1) Farms to rent and farm labor wanted; (2) Industrial plants wanted; (3) Mechanics; (4) Opportunities for settlers.

The bulletin in the Deseret Weekly for September 4, 1897, for example, lists four farms available for half of the crop; seven opportunities for shoemakers, some with tools and shop furnished; eleven openings for blacksmiths, in some of which the potential customers would furnish tools and shop and city lot free of charge; one dressmaker, two masons, four carpenters, one tinner, and nineteen schoolteachers. There were also opportunities to acquire farms at seventeen different places, for prices of $5.00 per acre and up.

During the twenty-six months the bulletin was published the following plants were advertised for in the bulletin: starch factory, flour mills, roller mills, saw mills, dairy, creamery, wool scouring plants, pottery, and general merchandise store.

Apparently some of these advertisements met with success. For example, the following in the News for January 14, 1898:

In several recent issues of the News, in the column devoted to the use of the Industrial Bureau, has appeared a statement to the effect that the town of St. Charles, Bear Lake County, Idaho, offered inducements for a sawmill and a dairy. A late communication from Bishop E. C. Keetch of that place to this paper contains the gratifying intelligence that plants of the kinds named are about to be established there, and that the statement that they are wanted need no longer be published ....

In the months of 1899 the list grows shorter and shorter, and the last issue in which the bulletin was published was October 28, 1899. Apparently, by that time the problem of unemployment was no longer serious. The bureau was later resurrected by Bishop Charles W. Nibley in this century under the name "Deseret Employment Agency," and apparently functioned effectively for a number of years.

While the employment agency facilitated the reemployment and resettlement of many persons on an individualistic basis, thus alleviating particular distress, a far more important program of group colonization was inaugurated in 1896 and continued until 1904. The program was directed by a "Colonization Committee," consisting of two members of the Council of Twelve Apostles of the L.D.S. Church: John Henry Smith and Abraham O. Woodruff. Under their supervision, and with the assistance of the church, colonies were established or expanded in Millard County, Utah; White Pine County, Nevada; Upper Snake River Valley, Idaho; Big Horn Basin and Star Valley, Wyoming; southern Alberta, Canada; and in Chihuahua and Sonora, Mexico. Pressure was also exerted, with eventual success, to open the Uintah Reservation in eastern Utah to settlement by white men. One is inclined to regard Brigham Young as the great Mormon colonizer, and with good reason, but this should not lead us to suppose that there was not much colonization after his death in 1877. The number of people involved marks the period 1896-1904 as one of the most intense colonization efforts in Mormon history.

Moral admonition, temporary aid and relief, employment bureau, and colonization, of course, did not really solve the employment problem. In many ways, these measures simply redistributed the suffering by arranging for the great mass of the people to share the burden of distress with the unemployed. More positive action was required to save existing firms in financial distress and to establish new industries which would build up the income potential of the region. Industries singled out for special assistance and development included beet sugar, salt, hydroelectric power, and a number of other ambitious but less successful ventures.

Sugar. The Utah Sugar Company had been incorporated in 1889 in order, in the words of the First Presidency, to "provide labor for hundreds, save the outgo of a very large amount annually, and yield a good profit to investors. . . ." With the financial support of the church a $400,000 factory was built at Lehi, Utah, in 1891. "We began to feel," said President Joseph F. Smith, "that there was a responsibility resting upon us which required something to be done, in a small way at least, in the direction of giving employment to our people."

The financial condition of the infant company, however, was endangered by the onset of the depression. The church found it necessary to hold or endorse a total of $325,000 of the company's notes, which were later redeemed with the proceeds of $400,000 worth of first mortgage bonds, backed by the church and sold to a rubber magnate of Providence, Rhode Island, Joseph Banigan. George Q. Cannon, who represented the church in this and other negotiations, stated that he emphasized to Banigan and other eastern investors the integrity, industry, and thrift of the Latter-day Saints:

I have endeavored [said Cannon] to create the impression that in the mountains there was a conservative element that could be relied upon in the days of trouble. They would not organize into mobs, they would not raise riots, they would not be carried away by the ridiculous ideas which find circulation from time to time throughout the country; but in days when other people would be quaking and trembling, and perhaps breaking forth in riot, they could be relied upon as conservative and stable. ... I have also called attention to the fact that we were a people who were true to our engagements; that when we created an obligation that obligation would be maintained, and that our country was not plastered with mortgages, as many parts of the land were.

With this and other financial assistance, not to mention the high duties of the McKinley Tariff, the company began to prosper. By 1899, the Lehi factory employed more than one hundred hands and provided income to more than six hundred farmers. In that year the company doubled the capacity of the Lehi plant, and in succeeding years erected a million dollar factory at Garland, Utah. At the same time, private companies built plants at Ogden, Logan, and Lewiston, Utah, and at Idaho Falls, Sugar City, Blackfoot, and Nampa, Idaho. In 1907 most of these plants were united under a $13,000,000 church-controlled enterprise known as the Utah-Idaho Sugar Company.

Salt. Conscious of the opportunities for employment presented by development of the resources of the Great Salt Lake shoreline, church officials combined with private interests in the early 1890's to build a salt refinery, a swimming resort, and a railroad to connect it all with Salt Lake City. There resulted the Inland Crystal Salt Company, the Intermountain Salt Works, the Saltair bathing palace, and the Salt Lake and Los Angeles Railroad (later the Salt Lake, Garfield, and Western). Total investment in these enterprises in the 1890's approached $1,000,000. One of them, the Saltair Pavilion constructed in 1893, was very nearly a church make-work project.

Hydroelectric power. An equally important endeavor to develop the resources of the region and raise the level of income and employment in the 1890's was the Pioneer Electric Power project at Ogden, Utah. Under church auspices a company was organized in 1893 to build a dam across Ogden River, in Ogden Canyon, about ten miles east of Ogden, to create a huge reservoir of water for power, culinary, and irrigation purposes. The eventual aim was to provide power for the city of Ogden, for the use of electric railways in Ogden and Salt Lake City, and for a sugar beet factory yet to be erected. A closely related objective was the provision of irrigation water for some 20,000 acres of arid land in the northwestern part of Weber Valley thought to be peculiarly adapted to the culture of sugar beets.

Top: An early picture of the Pioneer Electric Power Plant in Ogden. Middle: The power plant in Big Cottonwood Canyon. Bottom: Lehi Sugar Factory, Lehi, Utah main plant of the Utah Sugar Company.

Under the active direction of the church First Presidency, and with their financial assistance, initial developmental work was carried out in 1893, 1894, and 1895. The site for the dam was located, a contract was let to manufacture and lay the water pipe, and the land to be irrigated was settled.

In the meantime, church agents located a New York broker by the name of George A. Purbeck who was willing to market $1,250,000 in securities for this and other Utah enterprises through his connections in New York, Boston, London, Paris, and Amsterdam. "I have felt," wrote President Woodruff in his diary, "that the Lord has raised up that man to assist us in our temporal deliverance." But it became clear that Mr. Purbeck's primary interest was promotional profits, not economic development, and the deepening national financial crisis rendered it progressively more difficult to sell the securities. Eventually, that "angel" of the beet sugar company, Joseph Banigan, agreed in 1895 to invest $1,500,000 in the Ogden project, provided the bonds were "unconditionally and absolutely guaranteed" by the First Presidency and the church. "It is only my absolute confidence in the . . . honest character of your people which promptfs] me to make an offer," said Mr. Banigan.

By 1897 the Union Light & Power Company, as the enterprise was now called, was thought by Utah people to be the most extensive and complete system for the distribution of electrical energy and power over a wide area in the nation. Its system, capitalized at almost $5,000,- 000, embraced both the Salt Lake and Weber valleys, with 200 miles of overhead line construction. The company obtained power from the Ogden River, Big Cottonwood River southeast of Salt Lake City, and from two steam plants in Salt Lake City and one in Ogden. In addition, the company distributed natural gas from wells near Salt Lake City, and manufactured and distributed coal gas in Salt Lake City and Ogden. Its enterprises were taken over in this century by the Utah Power and Light Company.

The sugar, salt, and power enterprises were only the most successful of many ventures sponsored by Mormon authorities during the depression of the 1890's to develop resources, generate income, and increase employment. The most significant abortive efforts contemplated exploitation of coal resources at Coalville, Utah, coal and iron mines at Cedar City, the construction of a belt-line railroad around Salt Lake City, and of a direct line from Salt Lake to Los Angeles. In these and other cases, corporations were formed, capital was solicited in the East, and developmental and surveying work was financed by the church. At one point, plans were well advanced for a huge Utah development scheme which would have cost $75,000,000. The deteriorating financial position of the church, the continuing national financial crisis, and the death of the church's chief entrepreneur, Abraham H. Cannon, prevented the consummation of this gigantic scheme.

Had the Latter-day Saints observed the instructions of God [stated Mr. Cannon at the time that these plans were being developed] there would not now be poor and unemployed in our midst .... It was not only the duty of those in authority in Zion to attend meetings and look after the spiritual welfare of the people, but also to see that their temporal wants were complied with; men and women who were cold and hungry could not worship God as they should do.

In a prophetic vein, he concluded:

If our Utah people do not awaken to the situation, one of these days, after their Rip Van Winkle sleep, they will peep out and see all these valuable resources taken up and operated by outsiders. Eastern capitalists and foreign capital will do for us what we ought to unite and do for ourselves. We may be sure we will have to pay dearly for our privileges.

In summing up the attempts made in Utah to counteract the depression of the 1890's, three observations seem appropriate:

First, church and Utah business leaders seemed to be quite willing to borrow to the limit of possibility, and invest for the purpose of counteracting the adverse trend of business in the region. Deficit finance was part of a calculated church policy until Lorenzo Snow succeeded to the office of church president in 1898.

Second, although there are no figures on which to base a conclusion, it is probable that the efforts of church officials did mitigate the effects of the depression in Utah. The Deseret News was inclined to gloss over the difficulties too easily, but had some justification for saying, as it did in 1897:

For the last four years Utah has been better off financially than almost any neighboring state. Her banks and commercial institutions have stood the strain of the panic of 1893 and the subsequent hard times better than have those of most of the other far western states, while actual distress among her people, on account of poverty, has been almost unknown. Nearly everywhere else in the West there has been a more or less complete stoppage of the development of local resources and enterprises, and public improvements generally have been postponed indefinitely.

But in Utah, when the pressure of the panic was at its height, several great enterprises were being steadily pushed. This is especially true of the gigantic scheme of the Pioneer Power Dam company at Ogden, the Big Cottonwood Power company of this city, and the extension of the Rio Grande Western railway system in the southern part of this state, to say nothing of the vast amount of work and money that have been devoted to the development of our mineral wealth since the panic fell upon the country. When financial conditions in most of the other states, this last four years, are considered, the progress Utah has made in that time is surprising.

Finally, the extensive activities of the church in the field of business led to renewed fears on the part of free enterprising businessmen that the church sought control of the resources of the region. On the basis of the evidence, it now appears that the church's primary interest was expansion and development, rather than monopoly, but non-Mormon business interests at the time were not convinced that this was so. Noting their suspicions and opposition, the leading Mormon paper complained that when prominent churchmen saw fit to "engage in some enterprise, as a railroad, manufactory, and irrigation or electric power plant, etc., whispers begin to be circulated that the 'Mormon Church is behind it,' and the inference is conveyed that some sinister purpose is sought to be accomplished." Whether justified or not, this negative reaction of non-Mormon business interests was sufficiently strong and contagious to crystallize sentiment against Mormon Church economic activity. There resulted the senatorial investigations in connection with the trial of Apostle-Senator Reed Smoot in 1904-7. Pressure was exerted to induce the church to dispose of its economic properties and get out of business. By then, however, the depression of the 1890's was a matter of history, and the expansive forces of the twentieth century seemed to make unnecessary church stimulation of economic activity.

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