Did William Jennigs Bryan's "cross of gold" speech crash the economy?

That's the claim Yoni Appelbuam made over the weekend. Over at his excellent blog, Seth Masket rejects the thesis:

I can't claim to be any sort of an expert on the Gilded Age economy. I'm sure Appelbaum pursues this line of research in greater detail elsewhere, and I really don't have data to counter him here. But given how little power presidential speeches actually have, I'm skeptical of his argument. Were investors really so skittish and naive as to believe that the claims of a presidential nominee were soon to become law? Even if Bryan were to somehow win (McKinley beat him 51-47), would he be able to get this agenda through Congress? (Republicans held a 246-104 majority in the House at the time Bryan delivered his speech.)

I suppose this is possible. I mean, if Rick Perry were nominated next year and gave a speech at his convention promising to move the U.S. to a monetary system based solely on tungsten, yeah, some folks might panic a bit. But my guess would be that the relationship between Bryan's 1896 address and American economic problems was one of correlation rather than causation.

I don't have the economic data (or chops) either, but I think there's a case to be made for causation. Not causation based on the speech itself, but based on how the speech affected the convention and what the convention revealed to the markets. I guess this puts me somewhere in the middle between Appelbaum and Masket. I don't think the speech itself could have possibly crashed the economy. But the speech was both reflective of, and constitutive to, the information that the markets were incorporating from the convention. Here's the story:

Prior to the convention, it was almost certainly known to the markets that the clear majority of delegates were silver men. But it wasn't obvious that silver was going to win in either the platform or with the nominee. Especially the latter: the 2/3 rule, in place at the Democratic conventions since 1832, required that a candidate get a supermajority for nomination. And from a general election point of view, the Democratic Party in the late 19th century was built on a shaky proposition: combine the solid south with western populism but somehow also win New York and a handful of other northern states. The only successful path to doing this was to subsume the majority silver faction to a pro-gold northerner, and keep the platform either silent or watery on money issues. Given that such a logic had held in 1892, and there was a pro-gold Democrat in the White House (Cleveland), both the eastern Democratic establishment and their financial friends might have been optimistic going into the convention.

But at the convention, it suddenly became clear that the silver men were no longer interested in compromise. They had the delegates and intended to wield power. The outgoing national party committee, still narrowly in favor of gold, nominated a pro-gold New Yorker for temporary chair of the convention. The silver men defeated him with their own man. When the permanent roll was built, the two contested delegations (Nebraska and Michigan) were both decided in favor of silver. In short, the silver delegates at the convention announced that, this time, they meant business: they were gathering the seats they needed to ensure 2/3 representation and allow them to nominate their own man.

But it still wasn't clear if they would take the steps that would truly fracture the party: putting a clear silver plank into the party platform, and nominating a pro-silver candidate. The gold men argued that doing those things would guarantee a GOP victory in November, and also would result in a bolting of pro-gold northeastern Dems from the party. (Both of these things happened, although the Palmer/Buckner National Democratic ticket was not viable or competitive in the campaign). It was during the platform fight that Bryan gave his "cross of gold" speech. And whether or not the speech had a national impact, it certainly had an impact at the convention, throwing the silver men into a complete frenzy on the floor. A 15 minute parade ensued.

After the parade, the silver plank won. And the next day, Bryan was nominated. As Richard Bensel (2007) has written, this too was a surprise: he was not considered a major candidate going into the convention. Just a two-term former Congressmen, he was only 36 years old and had recently stood for Senate and not won. He was certainly a favorite son in Nebraska and a powerful speaker, but he was not in the top handful of names in 1896 prior to the speech.

So, while I agree with Masket that the speech itself did not independently crash the economy, it was correlated with things that might have had that impact. Going into the convention, the markets knew that the Democratic Party was majority silver delegates, but that in the past the need to hold the party together had resulted in pro-gold candidates and murky non-money platforms, which had successfully won the White House in 1892. At the convention, it was revealed that the silver men were no longer compromising, were going to risk fracturing the party by putting in a strong silver plank, and planned to nominate a 36 year old Nebraskan who more or less came out of nowhere by giving the most powerful pro-silver speech to date. In effect, the Democratic Party had been captured by silver.

I would think that such a development would strongly worry the eastern financial elite. Whether it was enough to re-crash the economy, I don't know. As I said, I don't have the economic data (or chops).

Citations:

Bensel, Richard. 2007. A Calculated Enchatment of Passion: Bryan and the "Cross of Gold" in the 1896 Democratic National Convention. In Skowronek, Stephen and Matthew Glassman, ed. Formative Acts: American Politics in the Making (Philadelphia: University of Pennsylvania Press). pp. 77-104.