Great Railroad Strike of 1877 - Causes of The Strike

Causes of The Strike

When the Civil War ended, a boom in railroad construction ensued, with roughly 55000 kilometers (35,000) miles of new track being laid from coast-to-coast between 1866 and 1873. The railroads, then the second largest employer outside of agriculture, required large amounts of capital investment, and thus entailed massive financial risk. Speculators fed large amounts of money into the industry, causing abnormal growth and over expansion. Jay Cooke's firm, like many other banking firms, was investing a disproportionate share of depositors’ funds in the railroads, thus paving the way for the ensuing collapse.

In addition to Cooke's direct infusion of capital in the railroads, the firm had become a federal agent for the government in the government’s direct financing of railroad construction. As building new track in areas where land had not yet been cleared or settled required land grants and loans that only the government could provide, the use of Jay Cooke’s firm as a conduit for federal funding worsened the effects that Cooke’s bankruptcy had on the nation’s economy.

In the wake of the Panic of 1873, a bitter antagonism between workers and the leaders of industry developed. By 1877, 10% wage cuts, distrust of capitalists and poor working conditions led to a number of railroad strikes that prevented the trains from moving. This antagonism lingered well after the depression ended in 1878-79, eventually erupting into the labor unrest that marked the following decades and that eventually led to the birth of labor unions in the United States.

Additionally, the 1876 presidential election between Samuel J. Tilden and Rutherford B. Hayes had been a narrow victory for Tilden in the popular vote, but while Tilden had a plurality of electoral votes (184-165) he did not have a majority as is required by the United States Constitution. This sent the election to the House of Representatives who were unable to reach agreement. On January 29, 1877, the U.S. Congress passed a law forming a 15-member Electoral Commission to decide on a winner. Five members came from each house of the U.S. Congress, with the other five members coming from the Supreme Court of the United States. Thanks in part to a deal brokered by Thomas Alexander Scott (who surfaced as a figure during the strike), the commission awarded the disputed electoral votes to Hayes. Thus, the mood of the country grew darker, as those who had voted for Tilden felt disenfranchised.