George M. Pullman suffered serious setbacks a year after he received praise as a visionary. When the stock market crashed in 1894, his Pullman Palace Car Company and his employees suffered greatly. Lack of communication caused a deadly strike followed by a federal investigation.
The Stock Market Crash of 1894 caused serious problems in Chicago. Over speculation in the railroad industry caused the financial ruin of many banks and railroads. The need for Pullman passenger cars dropped significantly. Pullman feared the destruction of the company he founded in 1864 during the coming depression.
Pullman instituted measures to protect his company. He lowered wages and increased working hours. He kept his income on rentals and fees intact by refusing to reduce rents or the prices of food and merchandise in Pullman.
These new company policies revealed the fatal, festering errors in Pullman’s residential and industrial complex. No meaningful relationship existed with the company leaders because town meetings and open discussions with the residents didn’t occur. Workers suffered because housing rentals deducted from their reduced wages left them with only pennies to feed their families. Since charitable organizations and independent newspapers were forbidden, workers had no recourse to help. Because churches couldn’t afford the church rent, Pullman had no churches to aid the struggling workers
Pullman’s employees found help from Eugene V. Deb’s American Railroad Union and shut down the company with a violent strike, resulting in property destruction and deaths. Other unions joined the strike to paralyze the railroad industry. President Grover Cleveland summoned the U.S. Army to end the strike.
A national commission investigated the crippling strike, and it blamed Pullman’s paternalism and declared its violations of civil rights un-American. It ruled that the company must divest itself of the town. Chicago annexed Pullman, and it became a Chicago community.