The sharp economic downturn that began in late 1873 significantly affected the 1877 Reichstag election. Known in Germany as the "founders' crash" () because it followed the period of rapid growth after the founding of the Empire in 1871, the worldwide
Panic of 1873 triggered an economic depression that lasted until 1879 in Germany. Particularly hard hit were workers who lost their jobs and members of the middle class who relied on income from stocks. The economic problems caused Chancellor
Otto von Bismarck to shift away from the free trade policies supported by the
National Liberals, who were the largest party in the Reichstag. In an early reaction to his policy changes, Rudolph von Delbrück, head of the Reich Chancellery and a strong proponent of free trade, resigned in 1876. The same year saw the founding of the
German Conservative Party, which supported protectionism and endorsed Bismarck's overall policies. On the political Left, the rival
General German Workers' Association (, ADAV) and
Social Democratic Workers' Party of Germany (, SDAP) merged in 1875 to form the Socialist Workers' Party of Germany (, SAPD). The hardships that the working class faced because of the founders' crash led to a strengthened sense of solidarity among them that was reflected in the SAPD's showing in the 1877 election. == Electoral system ==