The Social Democracy of America (SDA), founded in 1897 by Eugene V. Debs from the remnants of his American Railway Union, is deeply divided between those who favor a tactic of launching a series of colonies to build socialism by practical example and others who favor establishment of a European-style socialist political party with a view to capture of the government apparatus through the ballot box.

Debs had became interested in socialist ideas after being jailed in the aftermath of the 1894 Pullman Strike.

Despite supporting William Jennings Bryan in the 1896 presidential race, Debs announces his conversion to socialism in January 1897.

In June of this year, he holds a convention of his American Railway Union (ARU) in Chicago, where it is decided to merge the ARU with a faction of the Brotherhood of the Cooperative Commonwealth (BCC) and other elements to create a new organization, the Social Democracy of America.

The newspaper of the ARU, Railway Times, is retitled to become official organ of the new organization, The Social Democrat.

The convention establishing the SDA is opened on June 15, 1897 in Uhlich's Hall in Chicago—the former headquarters of the ATU during the Pullman strike.

The session is attended by one hundred and eighteen delegates, predominately from the Midwest and the Western United States.

The keynote address to the convention is delivered by Gene Debs.

Among the elements that join in forming the new party is a faction of independent Midwestern socialists centered around Victor Berger

This mainly German American group keeps up a loosely organized Social Democratisher Verein and publishes the oldest socialist daily in the country, the Milwaukee Vorwarts.

This tendency emphasizes electoral socialism, especially in local politics, in order to appeal to workers on issues of immediate, day-to-day importance.

Prominent American adherents to this faction include Seymour Stedman and Frederic Heath.