I read Henry Littlefield's 1964 paper that suggests L. Frank Baum was an active observer of the growing Populist movement of the late 1800s centered around William Jennings Bryan and the promise of bi-metalism as a solution to western farmers' economic ills. While later scholars, including David Parker's 1994 paper refute the direct allegory suggested by Littlefield, it is regardless a great illustration of the forces and parties at play in the country at that time, even if it is a total coincidence. (After reading a Baum biography a few years back, I personally agree with the coincidence theory, or at least indirect influence, as Baum was likely more directly influenced by women's rights and other issues of the day, which are also more pronounced in the later Oz books.) (See what I mean by nerdiness?)
The Kansas setting of Dorothy's home represents a time of hardship for western American farmers on the plains. On top of severe weather, they were caught in an economic storm of low commodity prices and increasing shipping rates from the expanding railroad empires. At the same time the industrializing eastern cities were discovering escalating conflicts between the labor classes and the ruling capital owners. All of these parties were, of course, looking for political support of their causes. In fact, it was viewed almost as a zero-sum game: power could not support equally labor, capital, and the farmers.
In this world there were several individual who crusaded for, or represented the characterization of each of the factions. Bryan, with his single issue platform of bimetalism (which would cause inflation and help farmers at the expense of eastern industrialists) was the most prominent. William McKinley (or his predecessors) is another prominent character on the national scene as the ruling party controlled by those of money.
Against this backdrop it is easy to see how a story with the cornucopia of characters in Oz can be an allegory of the times. Scarecrow as farmers. Tin Man as labor. Cowardly Lion as Bryan. And powerful entities controlling different factions and vying for control: the Wicked Witch of the East (Eastern capitalists) who had enslaved the Munchkins (laborers), the Wicked Witch of the West (McKinley) who had conquered the Winkies (recently acquired Philippines), and the Wizard himself, who ends up having no real power (perhaps Mark Hanna, a politcal powerbroker?)
And did I mention Dorothy's magic shoes that prevail at the end are silver?
Regardless of whether Baum intended the story to be an allegory, or if he was simply naturally influenced by major story lines of the day, it is a fun exercise to the look at the Turn of the Century issues from various constituencies' perspectives.
(Disclaimer: I discovered the original Littlefield essay in high school history class when the teacher had us find out who the various characters represented as a homework assignment. In the pre-Internet days, this was quite a challenge and may or may not have included consulting with upperclassmen for clues. In graduate economics courses I reread the original article along with several criticisms, which I just revisited.)