The Great Railroad Strike of 1877, sometimes referred to as the Great Upheaval, began on July 14 in Martinsburg, West Virginia, after the Baltimore and Ohio Railroad (B&O) cut wages for the third time in a year. The Great Railroad Strike of 1877 was the first strike that spread across multiple different states in the U.S. This strike finally ended 52 days later, after it was put down by unofficial militias, the National Guard, and federal troops. Because of economic problems and pressure on wages by the railroads, workers in numerous other cities, in New York, Pennsylvania and Maryland, into Illinois and Missouri, also went out on strike. An estimated 100 people were killed in the unrest across the country. In Martinsburg, Pittsburgh, Philadelphia and other cities, workers burned down and destroyed both physical facilities and the rolling stock of the railroads—engines and railroad cars. Some locals feared that workers were rising in revolution such as the Paris Commune of 1871, while others joined their efforts against the railroads.
At the time, the workers were not represented by trade unions. The city and state governments were aided by unofficial militias, the National Guard, federal troops and private militias organized by the railroads, who all fought against the workers. Disruption was widespread and at its height, the strikes were supported by about 100,000 workers. With the intervention of federal troops in several locations, most of the strikes were suppressed by early August. Labor continued to work to organize into unions to work for better wages and conditions. Fearing the social disruption, many cities built armories to support the local National Guard units; these defensive buildings still stand as symbols of the effort to suppress the labor unrest of this period.
With public attention on workers' wages and conditions, the B&O in 1880 founded an Employee Relief Association to provide death benefits and some health care. In 1884, it established a worker pension plan. Other improvements were implemented later.
Panic of 1873 and the Long Depression
The Long Depression, beginning in the United States with the financial Panic of 1873 and lasting 65 months, became the longest economic contraction in American history, including the later more famous, 45-month-long Great Depression of the 1930s. The failure of the Jay Cooke bank in New York was followed quickly by that of Henry Clews, and this set off a chain reaction of bank failures, temporarily closing the New York stock market.
Unemployment rose dramatically, reaching 14 percent by 1876, many more were severely underemployed, and wages overall dropped to 45% of their previous level. Thousands of American businesses failed, defaulting on more than a billion dollars of debt. One in four laborers in New York were out of work in the winter of 1873–1874. National construction of new rail lines dropped from 7,500 miles of track in 1872 to just 1,600 miles in 1875, and production in iron and steel alone dropped as much as 45%.
Reason for strike
When the Civil War ended, a boom in railroad construction ensued, with roughly 35,000 miles (55,000 kilometers) 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, invested a disproportionate share of depositors' funds in the railroads, thus laying the track 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.