The Great Southwest Strike, organized by the Knights of Labor in 1886, was the largest and most important clash between management and organized labor in the nineteenth-century history of the state. The conflict occurred only one year after the Knights of Labor won a successful strike against the Wabash Railroad, part of the southwestern system controlled by railroad baron Jay Gould. The 1885 walkout tied up the entire Wabash line in the Southwest. The strike began after the railroad terminated Knights of Labor shopmen, and the union's members on other railways refused to operate any train with Wabash cars. The solidarity of the union men soon brought Gould to the conference table. According to the terms of a resulting agreement, Gould ceased to discriminate against the Knights, and union president Terence V. Powderly called off the strike and pledged no further walkouts prior to union-management discussions. This surprising and unprecedented union victory led to a major increase in the membership rolls of the Knights of Labor. In the year ending June 30, 1886, national membership increased from about 100,000 to over 700,000. The Dallas Morning News had claimed there were more than 30,000 members in Texas in 1885.
In March 1886 master workman Martin Irons of the Knights District Assembly 101 called a strike against Gould's Texas and Pacific Railway after the firing of a foreman in Marshall. The conflict rapidly spread to the other roads in the Southwest. Violence soon erupted after workers impeded railroad operation by uncoupling cars and seizing switch junctures. Gould hired scabs (strikebreakers) and Pinkerton detectives, and requested military assistance from state governors; Governor John Ireland sent both state militia and Texas Rangers to Buttermilk Switch in Fort Worth. Gould's apparent capitulation to the Knights in 1885 later appeared to be only a strategic retreat; soon he seemed determined to destroy the union. Railroad management steadfastly refused any concession, and public opinion, initially sympathetic to the union, turned against the Knights after the onset of widespread violence. The appointment of a congressional committee to investigate the strike made little headway because of a combination of the union's lack of success in coping with the resolute railroad management, the shift of public opinion away from the union cause, and Powderly's decision that the strike was hopeless. Failure of the Great Southwest Strike represented the first major defeat sustained by the Knights of Labor and proved to be a fatal blow to their vision of an industrial union that would unite all railroad workers in the Southwest into "one big union." Once again, an emerging labor organization was crushed when competing with powerful, determined, and well-organized industrialists in command of nationally based corporations.