what factors led to the panic of 1819 what government regulations might have prevented it
Students of economic history in the early on American republic often equate the Panic of 1819 with the name Murray Rothbard, the famous libertarian economist who wrote the definitive account of this subject every bit his 1962 doctoral dissertation. Later nigh six decades, we finally have an update in Andrew Browning'due south The Panic of 1819: The First Great Depression, the publication of which fell on the 200th anniversary of this watershed event. The panic, Browning argues in this ambitious and lively narrative, "gave the country its kickoff experience of nationwide waves of bankruptcies, business failures, foreclosures, and unemployment," and became "the kickoff of the serial of financial crashes and economic depressions that accept since recurred at regular intervals" (p. iii). Before crashes had more often than not affected the wealthy, he says. By 1819, all the same, the economy was more connected through interregional and global networks. This depression was noteworthy for afflicting all economic classes and regions (p. 49, 190).
Browning's telling of this story begins with Napoleon. While Jefferson's deal with the French emperor for the Louisiana Purchase in 1803 was a steal by any mensurate, the United States lacked the hard currency to pay upwards front. To raise this money, the U.S. Treasury borrowed $11.25 million from domestic and foreign investors by issuing bonds begetting six percent involvement (p. 20). The U.S. would have to pay the kickoff installment in gold to France past December 1818. As the Treasury Section's fiscal amanuensis, the Second Bank of the The states (Omnibus) was tasked with making this transfer, though coming upwards with this sum on fourth dimension involved some drama and last-minute negotiating.
The British put an cease to Napoleon's dominion in 1815, but soon found themselves mired in a post-war low. Fears of social and economical unrest rippled throughout the community. To continue their factories operating and prevent further militancy among the ranks of the unemployed, British business leaders started producing and exporting big quantities of manufactured appurtenances, dumping them on American shores.
While American consumers welcomed access to cheap goods, producers sought protection from job losses through higher tariffs. Information technology is hither, in New England and the mid-Atlantic states in 1815 and 1816, that Browning identifies some of the showtime warnings of panic. The mail service-war slump that struck the Northeast would eventually spread to cities like Pittsburgh and down the Ohio River to Lexington, Kentucky, harming nascent manufacturing sectors in the areas (p. 40-43).
The Land Bubble in the West
In the concurrently, a number of different factors were coming together to inflate a state chimera in the West. The massive eruption of a volcano in Indonesia — which was 100 times more violent as the eruption of Mt. St. Helens in 1980 — created a thick atmospheric haze and so disruptive to global weather condition systems that 1816 was remembered as "the year without a summer." This was further complicated by poor wheat harvests in Europe, which raised prices (p. 75). Repelled by the unusually cold temperatures and attracted past the prospect of profiting from high prices, New England farmers moved W in large numbers to buy land at inexpensive rates. In the Old Southwest the three mutually intertwined commodities were land, cotton fiber, and slaves, the sales of which were financed past public-private banks in a process that continually expanded then long as the price of cotton in Liverpool remained high.
What generations of historians accept described as the creation of a more integrated domestic market and an accompanying revolution in transportation were, according to Browning, enabled by a revolution in corporate charters. More than their British counterparts, Americans in the early on republic chartered express liability corporations for cities, canals, turnpikes, manufacturing companies, and banks (p. 66).
Fueling the land frenzy was an explosion in the number of banks, but some of which were faithfully redeeming their bank notes in specie on demand. Some 200 banks were open for business at the conclusion of the War of 1812 whereas just iii existed at the founding of the nation (p. 36). Federal legislation enacted in 1800 allowed farmers to buy land on credit for the commencement fourth dimension at the low price of but two dollars per acre. The program was for farmers to pledge one-quarter of the money they owed upward front with the expectation that profits from the sale of commodities at high prices would allow them to comfortably pay back the remainder in iv years (p. 93). Of course, this plan could only work if commodity prices remained high and the banking concern notes farmers used to pay for their land retained their value, neither of which were truthful. Falling prices made it difficult, if non incommunicable, for farmers to run into their obligations while land offices and the Treasury Department were stuck with depreciated banknotes issued by western banks.
The 2d Bank of the United states
Irresponsible practices at the BUS reinforced to this hell-raising country of diplomacy (p. 109). During the offset few years of its existence, the Banking company was chronically depression on specie, which information technology needed to pay off the Louisiana Purchase, regulate the lending practices of state banks, and uphold the reliability of the nation'south currency. Its southern and western branches contributed to the land boom through millions of dollars of loans. The Omnibus notes emanating from these loans eventually worked their way due east, where merchants exchanged for them for specie. Merely this but depleted the Bank's reserves and forced the institution to purchase golden and silver from abroad (p. 150-153).
When the Bank's senior officers in Philadelphia attempted to remedy this state of affairs by ordering their subordinates at the southern and western branches to curtail lending, their subordinates defied them! Simply a painful and controversial policy of wrinkle, the Bank's leadership ended, would restore specie to the Bank's vaults.
Therefore, the Second Bank stopped renewing long-term loans and called on state banks to redeem their notes in specie, which in plow forced country banks to demand specie from their borrowers. After considerable resistance from beneath, the Bank eventually caused more than specie, but not without significantly dissentious its reputation and not without destabilizing local economies in places like Louisville and Cincinnati. Through foreclosure the Banking concern concluded upward owning over half of Cincinnati's real manor (p. 222-229). The amount of currency in circulation nationwide shrank to half of what it was before the Jitney was chartered (p. 158). Deflation ensued. Perhaps a third of the country's banks failed, a level of economic destruction that would only be matched by the Dandy Depression of the 1930s (p. 174-178).
While previous scholars like Rothbard accept placed considerable blame on the Autobus for causing the panic, Browning sees multiple factors at play. There is no question, Browning posits, that the Bank magnified the bubble and subsequent crash, "but it was not responsible for creating either the commercial depression in the Northeast that came with the dumping of imports in 1815 or the swarm of country-chartered (and unchartered) banks that was already flooding the land with unsupported banknotes well earlier the Autobus opened in 1817" (p. 357). Nor did the Coach play a central role in the decline of commodity prices since the Banking concern was still expanding when the turn down began (p. 100).
Browning pays close attention to ingather exports considering the United States economy was even so predominantly agricultural. Wheat prices dropped steadily after 1817. Cotton, too, fell over 50% in 1819 in no modest part because Britain received bountiful imports from both the U.S. and India (p. 116-119). The collapse of both commodities helped burst the land and credit bubbles in the West.
The second half of this book deals with the on-the-ground experiences and long-term political consequences of the Panic of 1819. Land sales, most always linked to commodity prices, plummeted. Merchant banking houses failed, factories went idle, Gdp per capita dropped, and peradventure 20% of wage earners nationally became unemployed (statistics from this era are very tentative and imprecise). The prospect of the federal government bold a major office in supporting unemployed workers would not transpire until the 1930s, and as an example of this, Browning points out that American presidents like James Monroe could remain popular while staying aloof from the economical concerns of ordinary Americans. The prevailing assumption was that almshouses, municipal governments, charities, and non-governmental organizations operating at the local level would address the sufferings of the dispossessed (p. 252).
The Political Consequences of the Panic of 1819
The panic's political consequences were numerous and widespread. Bankruptcy laws took on a special urgency in a fourth dimension when debtor's prison house was mutual. In Boston alone, some 3,500 people were imprisoned for debt between 1820 and 1822 (p. 189). Country politics in places like Missouri and Kentucky became focused on debtor relief with loud voices in public meetings decrying the increasing scarcity of money (p. 260). Against these interests were folks like Henry Clay and Daniel Webster, both on retainer for the BUS at various times, and those who sought to uphold the sanctity of contracts and interests of creditors. The relief controversies presaged many of the political battles of the Jacksonian era (p. 218).
1819 was one of those years in which a perfect storm of events came together to alter the nation's political trajectory irrevocably. Not just did it awaken political activism, but it amplified latent feelings of sectionalism that would eventually culminate in ceremonious war (p. 321). Each region responded differently to economic dislocation. Westerners clamored for more federal funding for internal improvements, while those in mid-Atlantic states similar Pennsylvania sought higher tariffs to protect manufacturing (p. 227). Most ominously, southerners became increasingly alarmed.
A series of Supreme Courtroom decisions at this time—the unanimous McColluch v. Maryland decision being the most famous—upheld the National Bank's constitutionality. Chief Justice John Marshall's nationalistic jurisprudence seemed to trample upon states' rights and the compact theory of the Constitution, leading many white southerners to fearfulness for the security and viability of their "peculiar establishment" (p. 328).
When one views McColluch within the context of divisive congressional debates over the extension of slavery in Missouri, a bevy of political and fiscal scandals that flew in the face of republican virtue, and falling cotton prices that led enslavers to feel that the continued expansion of slavery was the merely path forward, it is like shooting fish in a barrel to narrate this moment equally "the era of bad feelings."
Conceptualizing the Panic of 1819
How Browning conceptualizes and periodizes the Panic of 1819 is interesting. The panic was not a single event like "Black Tuesday" in 1929, but a multifaceted, nationwide phenomenon whose symptoms could be felt for a decade-long catamenia (p. four). Browning's telling is not strictly chronological and there may be good reason for this. Financial and political systems were much more than decentralized compared to today. Information technology could take several weeks for news to travel the state — a characteristic that historian Jessica Lepler besides highlighted in her written report of how Americans experienced the Panic of 1837. Indeed, it does non always make sense to write history in the strictest chronological sense when life itself is seldom experienced this way.
The fascinating topics explored in this book raise a number of important questions, at least a few of which are cause for careful consideration. Did the panic really shape politics to the caste that the writer contends? Was Andrew Jackson really "swept into part on an anti-banking tide" when we know that voters also preferred favorites sons and personalities (p. 131)? To write that "The Second Party System, Whigs and Democrats, was the production of the split that had grown out of the Panic of 1819" (p. 293) is plausible, and perhaps fifty-fifty mostly true, but it is also to phrase things likewise strongly when 1 remembers that the Whigs did not formally organize as a political party until 1834 and that there were enough of pro-banking company Jacksonians.
Similarly, Browning interprets the Panic of 1819 as initiating a religiously-inspired motion in which eye classes began to blame poverty not on larger structural forces simply on individual choices and inner moral failings — a sentiment that was reinforced by the hardcore individualism of the Second Great Enkindling (p. 186). For Browning, Ronald Reagan'southward infamous stereotype of the "welfare queen" was a long-term effect of this discourse (p. 275). In both instances, the author may be overstating the importance of 1819 as a commuter of later events.
Research-wise, Browning grounds his arguments in a broad array of gimmicky newspapers and legislative reports with added insights from biographies and treatises. Salient passages are culled from the public and individual utterances of major political and financial figures of this era with a few nods to archival manuscript collections. Information technology is rare when a book offers both breadth and depth without getting excessively long. Both qualities are observable here, but the emphasis seems to be on the sometime.
Historiographical Contributions and Questions
Documenting the furnishings of the Panic of 1819 in virtually every state necessarily requires i to favor breadth at the cost of depth and nonetheless, there are quite a few claims and passages taken from secondary works, possibly a bit more than i would expect from a monograph founded on archival mastery. It might be fair to characterize this book as combining elements of a monograph and synthesis.
There are abundant citations to secondary works published prior to 1945, which is somewhat understandable given the nature of the topic and subfields. Yet curiously absent from Browning'southward lengthy bibliography are a host of relevant scholars with more than recent publications. Just a few of them include Peter Austin; Ed Baptist; Ed Balleisen; Hannah Farber; Josh Greenberg; Alejandra Irigoin; Eric Lomazoff; Stephen Mihm; Brian Murphy; Sharon Ann Murphy; Daniel Peart; Gautham Rao; Seth Rockman; Caitlin Rosenthal; Joshua Rothman; Richard Salvucci; Calvin Schermerhorn; and many others.
One has to wonder what Browning thinks of the recent controversies involving the history of capitalism subfield. There is even one scholar in California who has grappled with many of the same issues in Browning's book. If merely I could remember his name (hint, hint). The intent here is not to be nitpicky, nor to fall into the trap of "this isn't the book I would have written." Rather, it is to offer a fair-minded assessment that there may take been a missed opportunity in not linking this material to other historiographical conversations and questions.
One theme that stands out in The Panic of 1819 is the ubiquity of corrupt practices within the revolving doors of business organisation and politics that would be manifestly illegal today (p. 299). The shenanigans at the National Bank'southward Baltimore branch were illustrative. A few of the branch'due south officers and directors approved loans to themselves, using Jitney notes to speculate in BUS stock. Such embezzlement and fraud involving unsecured loans totaled several meg dollars (p. 165, 314). While it is true that banking theory was primitive and largely unknown to almost bank directors at the time, it is also true that bank officers brazenly invented loopholes to concentrate stock ownership in a few easily and otherwise ignored clauses that were conspicuously stipulated in their banks' charters (36, 147-154). Quite a few people, it seems, went into banking not to facilitate trade and promote economic growth but to oversee a pot of money from which they could describe funds to finance their own schemes. Much similar a criminal who e'er stays one stride ahead of law enforcement, financiers invented schemes faster than state legislatures could regulate them (p. 36).
An impressive amount of historical content and knowledge of the policy positions of the key movers and shakers of the antebellum era went into The Panic of 1819, a quality for which Browning should be commended. He successfully ties together a complex prepare of domestic and international factors to explain this exciting fabric with smooth prose and skilled narration. To add together, the author has an eye for arresting passages and humorous anecdotes. This book is sure to elicit lively discussions of the political and economical history of the early republic.
Nearly the Author: Stephen Campbell is a historian, writer, and lecturer who teaches in the history department at Cal Poly Pomona. He holds a master's degree in history from CSU Sacramento and a doctorate in history from UC Santa Barbara. A California native and early-19th The states scholar who specializes in political and economic history, Campbell has authored several peer reviewed articles and has been pedagogy higher-level history courses since 2007. His volume, The Bank War and the Partisan Press: Newspapers, Fiscal Institutions, and the Mail service Office, has recently been published past the Academy Press of Kansas. Stephe also maintains a website at:http://www.historianstevecampbell.com.Follow Stephen on Twitter at @Historian_Steve.
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