International Trade, Domestic Coalitions, and Liberty: Comparative Responses to the Crisis of 1873–1896

Abstract

respond differently to the same reagent, these societies reveal their characters in divergent responses to the same stimulus. One such phenomenon is the present world-wide inflation/depression. An earlier one was the Great Depression of I873-I896.1 Technological breakthroughs in agriculture (the reaper, sower, fertilizers, drainage tiles, and new forms of wheat) and in transportation (continental rail networks, refrigeration, and motorized shipping) transformed international markets for food, causing world prices to fall. Since conditions favored extensive grain growing, the plains nations of the world (the United States, Canada, Australia, Argentina, and Russia) became the low cost producers. The agricultural populations of Western and Central Europe found themselves abruptly uncompetitive.2 In industry as well, 1873 marks a break. At first the sharp slump of that year looked like an ordinary business-cycle downturn, like the one in I857. Instead, prices continued to drop for over two decades, while output continued to rise.3 New industries-steel, chemicals, electrical equipment, and shipbuilding-sprang up, but the return on capital declined. As in agriculture, international competition became intense. Busi-

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