Published by EH.Net (June 2019)

Hannah Catherine Davies, Transatlantic Speculations: Globalization and the Panics of 1873. New York: Columbia University Press, 2018. xix + 226 pp. $65 (cloth), ISBN: 978-0-231-18556-1.

Reviewed for EH.Net by Jon Moen, Department of Economics, University of Mississippi.


The Panic of 1873 was the first bank panic of the National Banking Era in the United States. Most economic historians believe that in the absence of a central bank, the New York Clearing House handled the crisis rather well for the most part. Reserve pooling, clearinghouse loan certificates, and suspension of convertibility all helped to stem the panic, at least in New York. The immediate cause of the panic was the collapse of the highly regarded merchant banking house, Jay Cooke and Co., on September 18. It had become overextended in railroad loans, mainly to the Northern Pacific Railroad. Panic on the New York Stock Exchange ensued, leading to the insolvency of many brokerage houses and the closing of the stock exchange for ten days. It then spread down the East Coast and into the interior. This is all pretty well known by economists, and the book Transatlantic Speculations by Hannah Catherine Davies doesn’t add much to the economic analysis of the Panic.

But that is not her objective. She goes beyond examining the United States and examines the panics that had also erupted in Berlin and Vienna during 1873. This is a valuable feature of the book, as noted U.S. authorities on the panic like Sprague (1910) and Wicker (2000) are nearly silent on the European manifestation of the panic. Davies presents an historical narrative devoted to revealing how financial actors constructed notions of rational investment and the workings of financial markets that translate abstract financial theory to the personal and the global to the national. She does not use the narrative to develop a theory of crises or to seek patterns in the panics that can be used for lessons for today, a task she leaves to “economic historians of the cliometric persuasion” (p. xiv).

Chapter one presents some history of the stock exchanges in the U.S., Germany, and Austria. She notes that investors in Germany tended to be more widespread, having fewer prominent and colorful characters than in the U.S. The German government was also a direct investor in their stock market, unlike the U.S. government. Chapter two describes the role of the media in fueling investing exuberance, especially by providing overwhelming amounts of stock and bond market data and uniformly positive interpretations of the rationality of financial markets. This led the average investor to rely on the advice of honorable bankers and trusted individual advisors in making investment decisions. I suspect this is still true today, as I doubt anyone looks through the figures in the Wall Street Journal for direct advice. Furthermore, all of the numbers published in the Commercial and Financial Chronicle, along with its European counterparts, have left economic historians with a trove of data to study financial markets. But the result of all this promotion and data on both sides of the Atlantic was speculative excess, which set the groundwork for the panic. The failure of Jay Cooke and Co. clearly sparked the panic in the U.S., but nervous observers in Berlin and Vienna reversed course and began arguing that financial markets were inherently national and that transnational spillovers were unlikely. Perhaps this was a way to rationalize away deeper-seated concerns about globalization, a phenomenon that had not yet been clearly understood by many in financial markets. Chapter four describes how the panic was spurred by the use of fiat or paper currency, currency that had fueled excess speculation. A return to gold convertibility would rein in such excesses, at least that was what theorists on both sides of the Atlantic were arguing. The U.S., however, had already committed to returning to gold convertibility by 1879 following the Civil War and the concomitant inflation of Union war financing, so I doubt the return to gold was spurred by the panic. Furthermore, the stock of Greenbacks was fixed and changeable only by legislation.

Chapter five presents an interesting comparison of the social responses to the aftermath of the panic. Because finance tended to be more impersonal in Germany and Austria, conspiracy theories were more likely to ferment under such conditions. In particular, beliefs in anti-Semitic stereotypes and Jewish-backed forces flourished in Germany, and they were seen as underlying the panic. Davies suggests that the participation of European aristocracy in financial and banking markets, unlike in the U.S., may have helped to inflate conspiracy theories around the panic. In the U.S., financial speculation and excess were more likely to be seen as the product of readily identifiable and extreme individual financiers. The greater transparency of U.S. financial markets gave rise to less extreme and pervasive conspiracy theories; “Wall Street” was a less mysterious force because the men behind it were well known. Finally, the comparison of legislative responses on both sides of the Atlantic is notable. Berlin and Vienna passed legislation that strengthened shareholder rights. There was much less reform in the U.S., in part because incorporation was done at the state level and not the national level as overseas and because general incorporation laws prevailed in the U.S.; each corporation did not have to be approved individually by a state legislature. This is reminiscent of free-banking, in which a group of investors would receive a state bank charter upon meeting legislated requirements. Furthermore, most discussion of financial reform revolved around currency reform in the U.S., not reform of financial and banking markets. The Panic of 1907, however, changed this focus to banking reform.

Several considerations make this book of lesser interest to cliometricians. The underlying banking structures were very different on either side of the Atlantic. The U.S. was dominated by a unit, dual-banking system of state-chartered and national banks, while Germany and Austria had a greater degree of universal banking, in which banking and brokerage services could be done by the same institution. While the different effects of bond vs. equity financing in the U.S. vs. Europe are touched on, this seems to be a topic cliometricians could follow up on in more detail. Unit banking is in part one reason why the U.S. suffered periodic bank panics during the national banking era and helps describe the spread of the panic across the U.S. in 1873. It might also explain in part why conspiracy theories never took hold in the U.S. the way they did across the Atlantic. There is also no empirical evidence on the real effects of who was hurt during the panic in Germany and Austria. Wicker (2000) provides such evidence for the U.S. The greater connection and interaction between politicians, government officials, and banks in Germany and Austria compared to the U.S. is another difference worth expanding on. Transatlantic Speculations has, however, provided a fine introduction to the social and cultural differences relating to perceptions of finance in the U.S. and Europe, one that has increased my interest in comparing other panics across countries.


O.M.W. Sprague (1910). History of Crises under the National Banking System. Washington: Government Printing Office.

Elmus Wicker (2000). Banking Crises of the Gilded Age. New York: Cambridge University Press.

Jon Moen is a Professor in the Department of Economics at the University of Mississippi. He has studied retirement in the United States in addition to his research on the Panic of 1907. He is currently working on a project with Ellis Tallman of Oberlin College and the Cleveland Federal Reserve Bank on the effectiveness of the New York Clearing House in the late nineteenth and early twentieth centuries.

Copyright (c) 2019 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (June 2019). All EH.Net reviews are archived at