The Panic of 1819

VI THE MOVEMENT FOR A
PROTECTIVE TARIFF

The depression of 1819 was a great tonic to the movement for a protective tariff for American industry. Domestic industry, particularly in textiles, had expanded greatly under the impetus of the War of 1812, which virtually blocked foreign trade and imports of manufactured goods. The textile industry, in particular, was hit by the impact of foreign and especially British competition in the postwar period. Leading the complainants were the cotton manufacturers, and they were joined, among others, by the woolen manufacturers, the paper manufacturers of New England, the bar iron manufacturers, and the Louisiana sugar planters.1 Many protectionists charged that there was a British conspiracy afoot to dump their goods in the United States and crush infant American competitors.2

The tariff of 1816, adjusting American rates after the abnormal restrictions of the war period, established a moderate tariff, largely for revenue, averaging about 20 percent of value. Duties on cotton and woolen goods were set at 25 percent, but were supposed to fall in 1819. Thus, the higher rates were conceived as a temporary measure to ease the adjustment of domestic manufactures to the new competitive conditions. Probably the most protective feature of the new tariff was the adoption of a specific duty on cheap cottons.3 The effect was to exclude cheap cottons from India, and thus remove the major threat to the mass market of new plants such as the factory at Waltham, Massachusetts. The first advocate of this duty, in fact, was the Massachusetts cotton manufacturer, F. C. Lowell.

The other major victory achieved by the protectionists before the depression was an increase in the duty of bar iron in 1818, and the indefinite extension of the 25 percent duty on cotton goods in the same year.

To further their cause, the protectionists established at the end of 1816 an American Society for the Encouragement of American Manufactures.4 This was soon followed by affiliated subsidiary societies: the Delaware Society for Promoting United States Manufactures; the Pennsylvania Society; the Philadelphia Society for the Promotion of National Industry; and others in Washington, D.C., Baltimore, New York and New England. Head of the American Society was Vice-President of the United States, Daniel D. Tompkins; many leading political figures joined, including Madison, Jefferson and John Adams.

The society set its aims at making the temporarily high cotton and woolen duties permanent; the absolute prohibition of the import of cotton from India; a proviso that all government officials clothe themselves in domestic fabrics, and any other necessary protection. The first objective was soon attained; the second objective had been achieved de facto though not de jure by the minimum provisions of the Tariff of 1816. By the spring of 1818, under the impact of the boom, as well as the attainment of their goals, the protectionist movement had become more or less dormant.5

The advent of the depression in late 1818 came, therefore, as a particular boon to the protectionist cause. Societies for the Promotion of Industry blossomed with renewed vigor, expanded, and flourished throughout New England and the Middle Atlantic states—the relatively industrialized areas—and deluged Congress and the press with protectionist petitions and manifestos. The unquestioned leader in this drive was the energetic Matthew Carey, Philadelphia printer and leader of the Philadelphia Society.6 Carey and his associates were ever ready to emphasize and maximize the extent of the distress, as a prelude to the call for a protectionist remedy.7

Carey organized, in the winter of 1819, a Convention of the Friends of National Industry, which included protectionist leaders from nine states—Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland and Ohio.8 The delegates met in New York on November 29, with Carey as secretary and William Few, president of the New York Society, as president. The memorial that the convention sent to Congress, written by Carey, set the protectionist “line,” which they were to repeat in countless monographs, letters, and petitions.9 Its main proposal was an increase in duties on imported goods to protect American manufactures; two subsidiary proposals were a tax on auction sales, and the abolition of time payments on import duties. The memorial began by pointing to the nation’s great economic difficulties; in addition to the depression of manufactures, commerce and shipping were prostrated, real estate depreciated in value, and “a great portion of our mechanics and artists are unemployed.” Agricultural staples were reduced in price, and Americans were deeply indebted to foreign nations. In the midst of this distress, the cities were being filled with foreign manufactured products. Excessive importation of manufactured goods was the cause of the depression, particularly the pernicious China and East India trade in cheap cottons, which drained American specie in exchange for “worthless fabrics.” The solution to the depression was, therefore, sharply increased protective duties.

Carey’s theory of prosperity and depression was simple: free trade caused depression, protection would bring prosperity.10 Summing up his position in a comparative “table,” he asserted that the results of free trade were, in turn: immense imports; bargain purchases of foreign goods; a drain of specie abroad; decay of national industry; discharge of workmen; growth in unemployment and poor relief; bankruptcy of manufactures; failure of merchants; agricultural distress and decline in prices of staples; stoppage of specie payments by banks; and sacrifice sales of property. Full protection, on the other hand, would lead to: imports in moderation only; a prosperous industry; full employment for every person able and willing to work; disappearance of bankruptcies; rising property values; a secure home market for such agricultural products as cotton and wool; and prosperity to merchants. Carey contended that the distress among the merchants was due to their excess number, caused by free trade. Lack of protection deprived many young men of employment opportunities in manufactures, forcing them into overemployment in the merchants’ field. Protection would shift the excessive number of merchants into manufacturing, thereby benefiting manufacturing as well as the remaining merchants who would face less competition.11

To Carey, the condition of the United States was empirical evidence of the evils of nonprotection and the alleged adoption of the pernicious maxims of Adam Smith, while France and other European countries exemplified the benefits of protection. Carey brusquely dismissed arguments of critics that many fully protected countries of Europe were at that moment suffering also from depression. Their depression, he asserted, followed from wartime exhaustion of resources. Carey did not explain why this “exhaustion” required several years after the war to bring about a depression.12

Carey’s chief associate, Dr. Samuel Jackson, developed a particularly significant facet of the protectionist argument. Jackson stressed that protection was necessary to bring about full employment. During the Napoleonic wars, he declared, American commerce was active enough so that “the labor-power of the country . . . was employed to the full.” Now this source no longer existed, and a growing portion of the population was unemployed. The development of domestic manufactures was necessary to absorb the growing class of now surplus producers. Not only idle labor but also idle capital could become employed.13 Similarly, a leading Pennsylvania protectionist, Peter S. Du Ponceau, countered the opposition argument that subsidized manufacturing would withdraw capital from the more profitable field of farming. He declared that idle capital, as well as unemployed textile workers, would enter manufacturing.14

To the contention of free traders that free trade would not cause unemployment, since labor would shift from the inefficient to the efficient industries, Carey replied that people were generally idle and lax, hence immobile in their occupations. Therefore, they required protection wherever they were situated. Carey did not see that this concession shifted much of the blame for unemployment from the free trade system to the unemployed themselves.15

To the free trade assertion that unemployed workers in manufacturing should return to the soil, Carey countered with an interesting argument: that manufacturing employees were largely women and children, who were unsuitable for farm work and would thus remain unemployed. Another Carey argument held that low agricultural prices demonstrated an agricultural overproduction, just as failures of merchants proved an oversupply in trade.16

An interesting argument was developed by the protectionist journal, Patron of Industry, in commenting on inflationist proposals to increase the quantity of money.17 The proponents assumed, declared the Patron, that the root difficulty was scarcity of money. There was, however, a much more significant problem: the impossibility of employing money in a safe and profitable manner. The very fact that people were in such straits as to clamor for governmental loans indicated that they could not employ the money to advantage. In other words, there was an absence of productive employment, for money as well as labor. Protection was the remedy to bolster industry and give confidence to the economy. An article with a similar point of view, by “Plain Truth,” printed in the Pittsburgh Gazette, stated that there was an abundance of idle money capital which would be available for lending, except that no profitable employment could be found.18

An influential voice for protection was raised by the prominent New England Presbyterian clergyman, the Reverend Lyman Beecher. In a Thanksgiving sermon in 1819, later reprinted in pamphlet form, Beecher called for protection as the chief “means to national prosperity” and recovery.19 Beecher was one of the most lucid of the protectionists. He included the general arguments: that protection would provide employment for the idle and a steady home market for depressed agriculture. He laid particular stress on the monetary drain caused by an adverse balance of trade and the use of protection in ending this drain. Beecher also stressed, far more than Carey and his groups, that American manufactures as infant industries specifically needed protection. Beecher was one of the few protectionists to take cognizance of the charge that tariffs might promote domestic monopoly and tyrannize over consumers. His answers to the argument were thoughtful. In the first place, consumers could repeal the tariff if this result ensued. Furthermore, Beecher declared, tariffs would not insure an entire domestic monopoly for all products—just partial protection for some products. Finally, Beecher asserted that any rise in the prices of manufactured goods would only be temporary, that new firms would be attracted to the industry and old firms would expand, until the prices fell.

Protectionists, of course, had little use for laissez-faire theories. A particularly clear example was presented by “A Manufacturer” of Philadelphia. Lamenting over the depressed conditions, he asserted that the government had the duty as well as the power under the “general welfare” clause of the Constitution to regulate trade and commerce. For the “government is the national physician.” Furthermore, since the welfare of the manufacturer was clearly identical with the nation’s welfare, permanent and full protection was required in the interest of the nation as a whole. And “if our manufacturers shall become wealthy, they will circulate and retain the precious metals in this country.”20

Congress was of course the focal center for protectionist agitation, since the state legislatures were constitutionally prohibited from erecting tariffs. All that a state government could do, in fact, was to join in the agitation. There was little controversy on the state level since it was not an issue there.

The outstanding protectionist leader in Congress was Representative Henry Baldwin, from Pittsburgh. It was Baldwin who headed the newly formed House Committee on Manufactures, which the protectionists were able to split off from the traditional Committee on Agriculture and Manufactures, during the 1819–20 session. This new committee became the fountainhead of future protectionist measures. In the 1820 session, Baldwin promptly introduced the Baldwin Bill for a protective tariff. The bill passed the House by a substantial margin and lost in the Senate by only one vote.

Baldwin came from one of the very strongest points of the new protectionism—western Pennsylvania, centering in Pittsburgh. This was one of the leading industrial areas, not only in textiles but also in iron and glass production. Pittsburgh was now an area of heavy unemployment. For his efforts on behalf of protection from 1819 to 1821, Baldwin was feted by a citizens’ meeting in Pittsburgh, and later affectionately dubbed Father of the American System.21 Baldwin himself was an important iron manufacturer, who owned three large rolling mills, including the largest one in the Pittsburgh area. His interest in a protective tariff was quite immediate, and he did not neglect iron in his proposed tariff increases.22 He also admitted that the cut glass industry and others centering in Pittsburgh received very large relative increases of protection in his bill.23

As might be expected, Pittsburgh was one of the first areas to memorialize Congress for protection. Typical was the memorial written by a committee of manufacturers in October, 1818, and again at the end of December. Further petitions were sent by the newly formed Allegheny County Society for Protecting Agriculture and Domestic Manufactures. Pittsburgh, in fact, went further than other communities by attempting to establish a cooperative marketing association for the whole town—this was the Pittsburgh Manufacturing Association, founded in 1819.24 Not only manufacturers but also farmers from the area were seemingly impressed by the arguments and anxious to secure a home market in the face of falling foreign markets; they petitioned Congress for tariff protection for industry.25 Many of the petitions signed “practical farmers” or “impartial farmers,” however, were written by industrialists, like Alexander McClurg, an associate of Baldwin, and secretary of the new Society for Promotion of Agriculture and Domestic Manufactures of Allegheny County.26

Pennsylvania support for protection was indicated by the pleas for Congressional relief issued simultaneously by Representative Richard Povall of Philadelphia, head of the Pennsylvania House Committee on Domestic Manufactures, and by Senator Charles Shoemaker from Berks and Schuylkill Counties, of the Senate Committee on Agriculture and Manufactures.27 In addition to the standard tariff arguments, Povall asserted that free trade favored the rich at the expense of the poor, since it brought about depression and sacrifice sales to the rich. Shoemaker stressed the importance of a tariff on iron. Representative William Duane’s report as head of the select Committee on Domestic Economy stated that adequate national protection to all branches of industry was indispensable to recovery.28

Pennsylvania contributed its mite to the protection battle by levying a special duty on retailers of foreign merchandise and by requiring new licenses from retailers of foreign goods.29

Other states in the West joined in the protectionist movement. In Ohio, Governor Thomas Worthington called for a tariff to promote a shift in resources from overproduced agriculture to manufactures and to stop the specie drain. He advocated self-sufficiency and stressed a very popular exhortatory theme: calling on all good citizens to patronize domestic products. One of his major addresses for protection was delivered before the Scioto Agricultural Society, in 1819, perhaps an indication that many Ohio farmers were convinced by the home market argument.30 In his 1819–20 message to the legislature, Governor Worthington recommended the encouragement of woolen manufactures. A joint committee of the legislature was established in the next session to inquire into possible aid to Ohio manufactures by the state government. The report of Representative Joseph Vance (from Champaign County) recommended a state loan to a Steubenville woolen factory.31

General William Henry Harrison ran for the Ohio State Senate in 1819 on a pro-tariff as well as an anti-bank platform. As chairman of the Board of Supervisors of Tioga County, General Harrison spurred a series of resolutions to alleviate the hard times. The sponsors agreed to abstain from the use of any imported goods, and to give preference to domestic articles.32 Successfully elected, Harrison moved a resolution in the state legislature to support increased tariffs to bring about recovery of domestic manufactures.33

Kentucky was also enthusiastically protectionist, as typified by the Speaker of the House in Washington, Henry Clay, and this sentiment was accompanied by a widespread campaign for voluntary preference for domestic products. Ladies’ hats made of local grass were recommended as being as good as the finest wool, while roasted barley was used in many cases as a substitute for imported coffee.34

Many Missourians were eager for protection for Missouri’s lead, iron, and salt industries. The protectionist cause was particularly taken up by the St. Louis Enquirer and the St. Charles Missourian.35

Delaware is an interesting example of the swell of protectionist sentiment. At the beginning of the crisis, in 1819, the Delaware Senate passed a resolution declaring that manufactures were a great national concern, in the public interest, and hence required protection. The resolution passed the Senate, but lost in the House by a vote of 7 to 10.36

Delaware, however, became one of the prime centers of the protectionist movement. E.I. du Pont, from Wilmington, the nation’s leading powder manufacturer, was one of that movement’s original sponsors.37 By the next session, sentiment had changed. Representative Whitely reported from the House Committee on Agriculture and Manufacturing of Delaware that the origin of the distress was the present commercial system, aiding as it did foreign manufactures at the expense of domestic manufactures. The distress of domestic manufactures had thrown agriculture into depression for lack of a home market. Whitely’s concluding resolution asking Congress for protection was adopted unanimously.38 By a slim margin, and after a sharp battle, the Delaware legislature took supplemental measures to aid their manufactures, exempting all owners of cotton and woolen machinery from either taxes or the debt-paying execution process.39 A proposed blow at imports was defeated, however, when a bill narrowly failed to pass which provided that peddlers must acquire a license under the condition that they sell no foreign goods.40 Supposedly “free-trade” North Carolina, however, doubled its tax on peddlers who sold goods imported into the state. Kentucky debated a similar measure.41

Neighboring Maryland boasted two of the nation’s leading protectionists: Hezekiah Niles, who worked tirelessly for protection in his Weekly Register; and Daniel Raymond, whose Thoughts on Political Economy strongly backed a protective tariff and was a treatise particularly designed to be a counterweight to the free trade position of the classical economists.

New York was the site of one of the main organs of the protectionist movement, the New York Columbian, a paper reflecting De Witt Clinton’s views.42 The Columbian pursued the cause through letters and editorials and reprinted Carey’s Addresses of the Philadelphia Society. The emphasis in New York was on the cotton manufacture. One letter stressed that protection to cottons would be particularly useful to the state. Further, protection would inspire confidence and thus “would produce capital” and remedy the depression.43

One of the most interesting protectionist writings was an article in the Columbian stressing that protection would furnish “constant employment.” As a remedy the writer, “H.B.”, further suggested that the state establish a woolen and cotton factory, state owned, to teach the youth of New York City the “useful art of spinning and weaving—the state to furnish the raw material and receive the proceeds as it is finished for the consumer.” He also suggested a state owned cotton and woolen warehouse to sell the cloth wholesale and retail.44 Everyone was urged to wear only domestic clothing, and the clergy were particularly requested to set the proper example.

One of the most ambitious efforts of the protectionists in this period was the establishment of a semi-weekly newspaper in New York, The Patron of Industry, to serve as the bellwether of the movement. It ran a brief course in 1820 and 1821, at the height of this wave of tariff agitation. The Patron was published by the National Institute for the Promotion of Industry.45, 46

The two major groups in New York State politics were the followers of Governor Clinton and the bitterly opposed Tammany faction of the Democratic-Republican party. That the two groups were not very far apart on the tariff as well as on monetary questions may be seen in the famous Tammany Address of John Woodward. One of Woodward’s many proposed remedies for the crisis was the absolute prohibition against importing any article that could be manufactured domestically “on tolerable terms.” To supplement these legal measures, all citizens and governments were expected to give preference to American products.47

New England was a more difficult field for protectionists to plow. New manufacturers in New England were largely in the cotton industry, and tariff agitation from this area centered on this commodity. An interesting development was the use of the Washington Insurance Company of Providence, insurer for most of the Rhode Island cotton mills, as lobbyist for protection of the cotton industry. The protectionists also established a Manufacturers’ and Farmers’ Journal in Rhode Island during 1819.

By May, 1820 (when the Baldwin Bill came to a vote in Congress), seven state legislatures had passed resolutions urging Congress to pass the bill. These states were Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, and Ohio.48 The heavy investments in cottons and woolens were stressed in the Pennsylvania declarations, and the textiles were stressed by New York Governor De Witt Clinton, in his advocacy of protection.49 Under Clinton’s leadership, New York extended subsidies to woolen manufactures in the state.

Many minor industries, in addition to the major ones of cotton, wool, and iron, asked for protection. Typical was the petition of the Society of Paper Makers of Pennsylvania and Delaware. They pointed to the extent of paper manufacture and the number employed in the industry, and advocated protection to remedy its distress and to keep the profit of its manufacture in the country.50 Even the book printers demanded protection, headed by Matthew Carey, a leading Philadelphia printer.51 The protectionists, while concentrating on the major industries, were generally quite willing to include numerous industries under the protection umbrella. “An Agriculturist” advocated absolute prohibition of all imports of foreign industry, in order to build up a home market for American grain produce.52 Hezekiah Niles, though a staunch protectionist leader, balked at this trend. He stated emphatically:

most of these manufacturers are prostrated not for want of protecting duties, but in consequence of general impoverishment of the country arising principally from want of protection to the great leading branches of cotton, wool, and iron.53

Emphasis on cotton and wool and the lure of a home market for agriculture were, in fact, the features of a typical “grass roots” tariff petition. Thus, some citizens of Middletown, Connecticut, in a petition to Congress, stressed the advantage to agriculture of domestic manufactures.54 Using an “infant industry argument,” they declared that

adequate protective duties . . . would soon create or revive such a number of manufacturing establishments, that ere long their rivalry would probably reduce the price of their fabrics below the present standard of those imported.

On the other hand, if we now permitted American manufactures to die of neglect, we would have to buy only European goods at an exorbitant advance and reimburse manufacturers for their present losses. In essence, this was a forerunner of the classic argument that a firm undercuts prices in order to crush its rival and later extract a monopoly price.

Protection reached a peak in Congress late in the 1819–20 session, with the battle over the Baldwin Bill.

The heart of the Baldwin Bill was a rise in tariffs on cottons and woolens from 25 percent to 33 percent duty, plus a minimum for cheap cottons, the total increase in cotton duty being 50 to 70 percent. Tariffs were also to be increased on a variety of manufactured goods.

Mr. Baldwin began the debate on the bill in the House, stressing the depression, the decline in property values, and unemployment.55 Debate in the Senate was led by Senator Mahlon Dickerson of New Jersey, chairman of the Committee of Manufactures which reported the bill. He stressed the dominant theme of the protectionists—the great distress of the country and protection as the remedy. Protection would provide a home commerce and a home market for agriculture, raise property values, cure unemployment, eliminate the unfavorable balance of trade and the specie drain. Also speaking for protection was Senator James J. Burrill, Jr., of Rhode Island. The Baldwin Bill passed the House by a considerable majority, 90 to 69. It failed in the Senate by only two votes, 20 to 22.56 Geographically, taking both Houses into consideration, the pattern of the voting was as follows:

Voting on the Baldwin Tariff Bill

	For	Against
New England	24	18
Middle Atlantic	64	7
West	19	12
South (including Southwest)	3	54
	—	—
	110	91

In the Middle Atlantic states, Maryland supplied almost the entire anti-tariff vote. The bulk of the protectionist majority was supplied by four states (House figures only): New York (25–0); Pennsylvania (22–1); New Jersey (6–0); Ohio (6–0).

The Baldwin Bill was reintroduced in January, 1821, but with little success. The beginnings of business recovery were becoming apparent, and protectionist ardor cooled considerably. It was finally able to succeed three years later.57

Not all protectionists confined their doctrines to the national level. Every once in a while, a protectionist writer would accept the challenge of his opponents and push protection doctrine near to its logically absurd limit. Thus, Matthew Lyon of Eddyville, Kentucky, advocated a state law prohibiting imports into Kentucky of all “foreign” cotton goods and other foreign manufactured products.58 “Plain Truth” in the Pittsburgh Gazette suggested a western tariff to prevent a continued specie drain from the West, and to develop its own manufactures to provide a home market for western expenditures. He advocated western secession if necessary for this purpose.59 “Mechanic of Detroit” went even further. He attributed the economic difficulties of the Detroit artisans to the merchants of the town importing large quantities of goods that could have been made in Detroit. Merchants, he asserted, should only purchase the product of local, rather than of “foreign,” mechanics.60 One Pennsylvanian evolved an ingenious scheme reminiscent of later American development, to exclude imported manufacture by using the state power of quarantining commerce ruinous to morals, industry, and “political” health.61 “A Pennsylvanian” suggested that every retailer in the state be forced to take out a state license, and that the condition of the license be the retailers’ agreement not to sell any imported goods on credit to anyone, except tools for manufacturers or mechanics.62 This would prevent people from running into excessive debt and help out domestic manufactures.

The protectionist movement encountered formidable opposition that was able to defeat its proposals, although four years later protection was to triumph in the Tariff of 1824. Effective opposition came from the Monroe administration. The Washington National Intelligencer, known as reflecting administration views, strongly opposed higher tariffs. Ardent opposition came, as is well known, from the South. Strongly agricultural and relying on export markets for their staples of cotton and tobacco, the South opposed the protectionist measures vigorously. Southern opposition in the Congressional tariff vote was virtually unanimous.

Particularly active opposition to the tariff came from John Taylor of Caroline, who wrote many memorials for Agricultural Societies of Virginia, attacking the tariff. The focal point of opposition in Congress was the House Committee on Agriculture, which prepared comprehensive anti-tariff reports based primarily on the Taylor memorials. Also actively opposed to an increased tariff were merchant groups in the North—particularly Salem, Massachusetts—and the Chamber of Commerce of Philadelphia, which sent opposition memorials to Congress.63 Whereas the protectionists devoted a great deal of attention to the depression, the “free traders” in opposition devoted little space to the depression, since they could not counter with a simple remedy of their own. Free traders generally concentrated on general political or economic questions such as, the benefits of international trade and the division of labor, the danger of monopoly, the injustice of special privilege, and the morals of factory life.

Some free traders undertook, however, to rebut the depression argument. Counters took two general forms: (1) denying the depression was caused by lack of protection and that the tariff could provide a remedy, and (2) asserting a tariff would aggravate rather than relieve the hard times. On the first point, the free traders argued that the depression was universal and strong in the leading European countries. Yet, they were heavily protected; therefore, a protective tariff in the United States could offer no cure. This was a leading argument of the House Agriculture Committee.64

Condy Raguet, only of late a protectionist himself,65 in his 1820 report on the depression to the Pennsylvania Senate, brought up the point that if the protectionists were right, the manufacturing towns should have been the hardest hit by the depression, whereas hard times were universal throughout the nation.66

The positive argument against the new tariff was that it would worsen the depression rather than improve it. It would largely do so by increasing the depression of agriculture and commerce, which would be taxed for the benefit of possible new industries. Thus, the merchants of Portland (Maine) warned that higher tariffs would destroy their maritime commerce and also the nation’s agricultural markets abroad.67 The Portland petition was endorsed by the Portland Gazette, the Boston Gazette, and by a convention of Maine merchants and agriculturists in Portland.

Merchants of Salem, Massachusetts, in a petition written by the famous Supreme Court Justice Joseph Story, turned the tables on the protectionists by accusing them of being visionary theorists, heedless of the practical effects tariffs would have in destroying the capital and profits of commerce. Tariffs, they declared, would worsen the depression by increasing unemployment in commerce.68 Many critics pointed out that agricultural exports would be damaged because lower imports would supply less dollars abroad with which to buy American products.69 A New England writer, “Public Good,” asked his readers to suppose that all imports into the country were prohibited. American mechanics and farmers would then have fewer means with which to purchase domestic manufactures than before. Importers would earn less and exporters’ markets abroad would suffer.70

A group of Boston merchants charged that a protective tariff would cause widespread starvation among the mechanics and merchants of the seaports.71 More specifically, merchants and distillers of Boston objected to a proposed import duty on molasses. They pointed to their investment of $11 million in buildings, protesting that a tariff would lead to the unemployment of thousands of people in the molasses and rum trade.72

A more general argument held that protective tariffs would necessarily cause unprofitable business. An interesting presentation of this view appeared in a memorial by citizens of Charleston, written by the wealthy South Carolina banker and landowner Stephen Elliott.73 Elliott pointed out that a tariff would penalize labor and capital employed in commerce and agriculture, and would divert factors from the latter to manufacturing. But if labor and capital employed in manufacturing produced as much profit as that employed in the other occupations, a tariff would be unnecessary, since labor and capital would then shift to manufacturing without government help. If manufacturing were not as profitable then tariffs would be forcing labor and capital into unprofitable employments.74

One of the most sophisticated expositions of the doctrine that increased tariffs would only aggravate the depression was delivered by John Taylor of Caroline. Thus, in his memorial of the farmers and merchants of Fredericksburg, Virginia,75 Taylor established this chain of causation: tariffs cause diminished imports, that would in turn bring about restriction of exports, which would cause a fall in the prices of domestic products. The depression had already brought about great price declines, declared Taylor, which were equivalent to an increased value of the money unit. The result was an increase in the real burden of tariff duties. The further price fall following higher tariffs would add still more to the real burden.

Taylor regarded tariffs as a burden because he saw them as taxes on consumption; a tariff was a tax which diminishes consumption, hence diminishes production and prosperity. Taylor wrote:

The tariff . . . is a tax upon the national ability . . . since it was imposed, one half the national ability to pay taxes has been destroyed by the doubled value of money, and a reduction to the same amount in the value of products and property. Therefore the burden of taxation has been doubled by circumstances without the agency of legislation . . . if the whole duty is continued, it will compel the payers to retrench their consumption. . . . The enjoyments of consumption are the food of industry; diminish them, and it flags; leave them free, and it is invigorated.76

Taylor also pursued this reasoning to advocate reducing tariffs in order to reduce the real tax burden on consumption—a surprisingly modern position. The House Committee on Agriculture, in its anti-tariff report, echoed this position.77 Others also advocated reduction in existing tariff as a method of remedying the depression. For example, the National Intelligencer early in the depression declared that a depression needed a reduction in tariffs instead of an increase, to benefit the harassed merchants.78

An interesting counter on the unemployment problem was delivered by one of the most influential of the anti-protectionists, the leading New York merchant and politician, Churchill C. Cambreleng.79 The United States, he declared, was underpopulated, so unemployment could not be a permanent problem. Present unemployment was merely temporary, and even natural. “Every nation experiences a want of employment at intervals, amidst the natural fluctuations of industry.”

There was, of course, a good deal of deprecating of the manufacturers asking for protection. Cambreleng denounced the protectionists as idlers and malcontents, or as wartime speculators in manufacturing stock who wanted a government subsidy. John Taylor laid the plight of the manufacturers at the door of the banks; these were speculative manufacturers who had invested with “fictitious capital” supplied by the banks, and now were left without funds as a result of credit contraction.80

The New Orleans Louisiana Gazette spoke for many anti-tariff readers when it stated: “In these times of extraordinary embarrassment, we ought particularly beware how we prune the wing of honest industry” and concluded, “laissez-nous faire.”81 An amusing attack on the tariff from the laissez-faire point of view, by “The Friends of Natural Rights,” attacked “Professor Matthew Carey” and “Professor Hezekiah Niles” for implicitly advocating government ownership and management of all property, with the government guaranteeing full employment (no moments of idleness) for all capital and labor.82 The writers thus described the “Careyan Scheme of Government”:

The people of the United States being in a very unenlightened condition, very indolent and much disposed to waste their labor and their capital . . . the welfare of the community requires that all goods, wares, merchandise, and estates . . . should be granted to the government in fee simple, forever . . . and should be placed under the management of a Board of Trustees, to be styled the Patrons of Industry. The said Board should thereupon guarante [sic] to the people of the United States that thenceforth neither the capital nor labor of this nation should remain for a moment idle.

Among the maxims that such a Board would try to inculcate in the people:

It is a vulgar notion that the property which a citizen possesses, actually belongs to him: for he is a mere tenant, laborer, or agent of the government, to whom all the property in the nation legitimately belongs. The government may therefore manage this property according to its own fancy, and shift capitalists and laborers from one employment to another.

These writers thus saw in the tariff position a logic implicitly leading to a wholly government-planned economy.

In Congress, the leading speeches opposed to the Baldwin Bill were delivered by future president John Tyler, Representative from Charles City County in eastern Virginia, and by Representative Nathaniel Silsbee, from the great shipping center of Salem, Massachusetts.83 Tyler, like Story, denounced the protectionists as hasty theorists, willing to destroy commerce and agriculture to put their experiment into practice. Tyler also brought up the interesting and important point that, in the long run, even manufacturers would not benefit from the subsidy, since competition would flow into the protected industries until their rates of profit were no higher than in any other industry.84 Silsbee also stressed the aggravating effect the tariff would have on the existing depression in the seaports.85

The protectionists offered two subsidiary measures as part of their political program. Both were designed to supplement tariffs in restricting imports. One proposed that the government cease granting time to importers for payment of duties. The particular criticism of this system was that the debt induced excessive imports. Some merchants joined the protectionists in this proposal in order to limit the competition of those fellow-importers who had meager capital, and were therefore dependent on credit.86 The Convention of Friends of National Industry began the drive to abolish credits on duties. It pointed out that since the war many foreign merchants had been induced by the credits to import heavily, thereby depressing domestic manufactures and injuring American mercantile stability.87

Conversely, other merchants fought back in defense of the credits system. The Chambers of Commerce of Philadelphia and New York City defended the system. They charged that abolition would repress enterprise, credit, and commerce. The New York Daily Advertiser pointed out that abolition would help the large capitalists at the expense of the small, since it was the young and enterprising merchants who would be forced to abandon trade for lack of capital.88 John Pintard—leading merchant, founder of the New York Historical Society, and Secretary of the New York City Chamber of Commerce—taking a position similar to John Taylor on the tariff, charged that imposition of a cash duty would increase the tax burden on commerce. He estimated that cash duties would double the real value of taxes on imports.89

A group of Baltimore merchants headed by Isaac McKim, adopted this ingenious reasoning: “all duties on imports are taxes on consumption.” An importer had to have time to convey the goods to consumers. In every government grant of credit to the importers, the time period of the credit fell short of the period before which the capital of the merchants could be realized.90 The Baltimore merchants struck a similar note as did Cambreleng—cycles of trade were inevitable in business affairs:

Commerce always tends to extremes and excesses of trading occur under all systems and in the finest periods of commercial prosperity. But if importation does sometimes swell until business stagnates, commerce has a power of self-correction and the resource of self-recovery, and reverses soon allay the intemperate ambition of gain.

One proponent of credit on duties went to the extent of proposing a lengthening of the credit period as a remedy for the depression.91 He reasoned as follows: A particular depressant in the commercial situation was the large amount of custom house bonds owed by merchants for payment of import duties. They could not sell the goods they imported because of the “scarcity of money and the stagnation of business.” Therefore, to acquire the money to pay the bonds, the merchants had to discount their bills at the banks. After the merchants paid the bank notes into the Treasury in payment of their debts, the Treasury deposited the notes in the Bank of the United States, thereby adding to the pressure on state banks to redeem their notes in specie. This exerted deflationist pressure, obliging banks to curtail greatly their loans and discounts. Thus, the author demonstrated how taxes exerted a deflationary effect on the money supply and economy.

Senator William A. Trimble (Ohio), an ardent protectionist, introduced a bill to suspend credits on duties, but the bill failed to come to a vote in Congress, as the failure of other protectionist measures doomed this one as well.

The other subsidiary measure was a prohibitory tax on sales at auction. Protectionists charged that auction sales, which had become a prominent form of wholesale import sales after the war, spurred cheap foreign competition with American products.92 Thus, a group of Merchants and Citizens of Philadelphia, in a memorial to Congress, pointed to the pernicious effects of auction sales during the previous few years.93 Auction sales provided a means for agents of foreign exporters to dispose of their goods easily. These channels had been deluged with every sort of imported goods, fostered by the “extreme elevation of the market at the close of the war, owing to the few foreign productions in the country at the time.” Auction sales of imported goods had wrecked domestic manufactures, by underselling the established merchants. Here again the leading role in attacking auctions was taken by merchant competitors of the auction system.94 Critics also charged that auction prices fluctuated more rapidly than regular prices, since they were not regulated by cost. A prohibitory tax had first been proposed by a group of New York City merchants and traders as early as 1817.95 Merchants were, however, by no means unanimous in advocating a prohibitory tax on auction sales. Baltimore merchants split on the issue, and the Chamber of Commerce of New York City opposed a tax on auctions.96 The drive for a 10 percent tax on auction sales was launched in earnest by the protectionist Convention of Friends of National Industry.97 It pointed out that large quantities of imported clothes were sold at auction. Even domestic goods sold at auction were frowned on, because auctions generally promoted goods of “inferior quality.” The proposed 10 percent tax was to apply to both foreign and domestic goods at auction.

Congress, however, rejected a bill, submitted by Representative Baldwin at the same time as his tariff proposal, to levy a 10 percent tax on auction sales.98 Baldwin charged that the auction system was ruining the fair traders by “inundating the country with worthless goods at reduced prices, benefiting foreigners and bankrupting American merchants.” On the other hand, Representative Albert H. Tracy of Buffalo defended traders who sold at lower prices and advocated consumer freedom to buy from whatever source they desired. Representative Johnson of Virginia asserted that the measure would ruin one part of the country for the benefit of another, and that free choice was still the best system of trade. Middle-of-the-roaders, such as the influential Representative Samuel Smith of Baltimore, advocated a very small duty of 1 to 2 percent. The auction bill was closely fought. It was first rejected in the House by a vote of 77 to 72, and then was modified to a 5 percent tax on dry goods and 1 percent on minor items, and passed by an 89-to-61 vote. After the defeat of the Baldwin Tariff Bill, however, the bill never came to a vote in the Senate.

Failing to obtain legislative action, merchants of New York and other cities decided to combat the competition of auction sales of imported goods by banding together to refuse to buy goods at auction. Thus, the United Dry Goods Association of New York, representing nearly all the wholesale and retail dry goods merchants of the city, met on May 21, 1821 and resolved not to purchase any dry goods at auction, in order to combat the “price fixing” of the “auction monopoly.”99 Protectionists had high hopes for this measure, and Niles hailed the action as a check on the British menace to American employment and injury to the merchant and retailer.100 Shortly thereafter, similar boycott action was taken by organizations of Philadelphia, Boston, and Baltimore merchants, in the dry goods and hardware fields.101 The New York Association took the lead in appointing a Vigilance Committee to keep watch over the membership in carrying out the pledge. Not only did they agree not to buy at auction but they also agreed not to sell any goods at auction, except at sheriffs’ sales for bankruptcy. All these boycott efforts soon came to naught, and the report of the Vigilance Committee in September of that year provides insight into the reasons for its complete failure and into the difficulties faced by any such “cartel” arrangement.102 First, there was a lack of “complete uniformity of views upon the subject.” A few merchants, mainly small dealers, were opposed to the suppression of auction sales. Second, several large merchants, though opposed to auctions on principle, indulged in their self-interested advantage and continued to purchase—more cheaply—at auction. Third, New York, the auction center of the country, was filled with merchants from other cities who did not participate in the agreement and continued to buy at auction. And fourth, even the most “patriotic” (i.e., anti-auction) merchants were chafing at the restriction because, unfortunately, American importers did not import a sufficient variety of goods as demanded by consumers. Therefore, many merchants were “in a measure compelled” to buy at auction “for the sake of an assortment of goods” provided by auctions from foreign exporting houses. The Association, followed by the merchants of other cities, had to repeal its boycott. The repeal in New York carried by only two votes, 64 to 62.

In addition to the failure to obtain federal legislation, a proposal to tax auctions in Maryland was rejected by only two votes, after a struggle in the Maryland House.103

Thus, the depression rejuvenated a protectionist movement that had arisen after the war and become dominant. The postwar movement resulting in the Tariff of 1816, however, had been a general patriotic expression connected with the war and its aftermath, and meant to provide temporary relief to the industry spawned by war. Adherents comprised most Americans, including such later vigorous free traders as Thomas Jefferson and John Calhoun. With the passing of the war, the tariff issue had more or less disappeared. The character of the new depression-born movement would become more familiar to later generations. The movement was led by the new manufacturers, most of whom had begun during the war of 1812 when foreign trade was virtually suspended. Cotton textiles led the clamor for greater protection from imports, followed closely by woolen, iron, glass, and paper manufacturers. The battle over an increased tariff, which reached its peak in 1820 over the Baldwin Bill, was far more of a sectional controversy than the monetary issues. Protectionist sentiment flourished in the states where the manufactures were located—especially in the Middle Atlantic states, and adjacent states such as Ohio. The South, on the other hand, dependent on the export of its staples, almost solidly opposed the higher tariff, while the West and commercial New England split on the issue.

______________________

104U.S. Congress, American State Papers: Finance 3, no. 455 (December 13, 1815): 32; no. 458 (December 22, 1815): 52; no. 460 (January 5, 1816): 56; no. 533 (April 7, 1818): 265; no. 476 (March 6, 1816): 103; no. 501 (February 4, 1817): 168. Also see Niles’ Weekly Register 10 (March 23, 1816): 49; 10 (April 13, 1816): 99; 11 (November 9, 1816): 424; 11 (May 10, 1817): 166–67.

105Most of them cited a statement advocating deliberate dumping made by the influential Lord Brougham before a Parliamentary Committee. Niles’ Weekly Register 11 (December 28, 1816): 284.

106The minimum duty of 25 cents per square yard was equivalent to an over 6 cents per yard rise in price. Clark, History of Manufactures, vol. 2, p. 275.

107Bishop, History, pp. 230ff. Also see Niles’ Weekly Register 12 (March 29, 1817): 75; New York Evening Post, June 14, 1817.

108The report of the Corresponding Committee to the American Society for Encouragement of Manufactures, in the New York Evening Post, February 28, 1819.

109In the summer of 1821, the citizens of ardently protectionist Wilmington, Delaware, presented Carey with a plaque commemorating his services to the cause. Niles’ Weekly Register 20 (July 28, 1821): 345.

110For examples, see Carey, Essays, pp. 141, 198ff., 230, 318ff., 416. Also see Washington (D.C.) National Intelligencer, May 26, 1819.

111Of the 36 delegates, there were 12 from New York, 7 from Pennsylvania, 5 from New Jersey, and 5 from Connecticut. For the personnel of the threeday convention, see Niles’ Weekly Register 17 (December 11, 1819): 229.

112For the petition, see U.S. Congress, American State Papers: Finance 3, no. 560 (December 20, 1819): 440. Also see the very similar petition of the American Society of New York City for the Encouragement of Domestic Manufactures, ibid., 561 (December 27, 1819): 443; and, their later petition, ibid., 593 (April 24, 1820): 532. Leaders were William Few, Peter Schenck, and John E. Hyde. Few, a leading lawyer and banker, had had in former days a distinguished career in Georgia. Few had been United States Senator from Georgia, a delegate to the Constitutional Convention, and Federal Judge. Also see Petition of a Convention of Friends of National Industry in New Jersey (Washington, D.C.: Gales and Seaton Co., 1820). The American Society of New York, in particular, stressed recovery from the depression as the reason for advocating protection.

113Most of Carey’s numerous writings in this period are collected in his Essays. See particularly his widely distributed “Addresses of the Philadelphia Society for the Promotion of National Industry,” in ibid., pp. 18ff., 36–38. Also see Philadelphia Union, September 17, 1819.

114Carey, Essays, pp. 67, 362ff. Also see New York Patron of Industry, July 9, 1820.

115Carey, Essays, pp. 13ff. An almost identical argument was offered by Niles. Niles’ Weekly Register 17 (October 23, 1819): 117. Niles also printed Carey’s Philadelphia as well as other material, and arguments of his own. Ibid., 16 (April 17 and August 28, 1819). For Niles as a protectionist leader see Norval N. Luxon, Niles’ Weekly Register (Baton Rouge: Louisiana State University Press, 1947), p. 110.

116For Jackson’s writings, see Carey, Essays, pp. 175–87.

117See the petition for protection of cottons and woolens by Peter S. Du Ponceau and other citizens of Pennsylvania, in U.S. Congress, American State Papers: Finance 3, no. 569 (January 17, 1820): 454ff. Also the petition of the Society of Paper Makers of Pennsylvania and Delaware, ibid., 3, no. 571 (January 18, 1820).

118Carey, Essays, pp. 36–38.

119Ibid., pp. 68ff. Also see Edith Abbott, Women in Industry (New York: D. Appleton and Co., 1915), pp. 51ff.

120New York Patron of Industry, July 1, 1820.

121“Plain Truth,” in Pittsburgh Gazette, reprinted in New York Patron of Industry, August 10, 1820.

122Lyman Beecher, The Means of National Prosperity (New York: J. Sayre Co., 1820). Thanksgiving Sermon, December 2, 1819.

123“A Manufacturer,” in Philadelphia Union, May 29, 1819. Also see “A Friend of His Country,” in Washington (D.C.) National Intelligencer, January 21, 1819, and report of the Joint Committee on Domestic Manufacture of the Ohio Legislature, Journal of the House of Representatives, 1819–20 (January 24): 252–53.

124Frank W. Stonecipher, “Pittsburgh and the Nineteenth Century Tariffs,” Western Pennsylvania Historical Magazine 31 (September–December, 1948): 87ff. Also see Russell J. Ferguson, Early Western Pennsylvania Politics (Pittsburgh: University of Pittsburgh Press, 1938), pp. 236–44.

125M. Flavia Taylor, “The Political and Civic Career of Henry Baldwin, 1799–1830,” Western Pennsylvania Historical Magazine 24 (March 1941): 37–50. Dorfman, Economic Mind, vol. 1, p. 386.

126Annals of Congress, 16th Congress, 1st Session (April 21, 1820), p. 1944, speech of Representative Baldwin.

127First President of the Association was prominent glass manufacturer, George Sutton. See William Bining, “The Glass Industry of Western Pennsylvania, 1797–1857,” Western Pennsylvania Historical Magazine, 19 (December 1936): 263; George T. Fleming, History of Pittsburgh and Its Environs (New York: American Historical Society, 1922), vol. 2, p. 60; Bishop, History, pp. 250ff.

128Arthur C. Bining, “The Rise of Iron Manufacture in Western Pennsylvania,” Western Pennsylvania Historical Magazine, 16 (November 1933): 242; Eiselen, The Rise, pp. 46ff.

129Kehl, Ill-Feeling, pp. 79, 189.

130Pennsylvania Legislature, Journal of the House, 1819–20 (January 28, 1820): 413; Journal of the Senate, 1819–20 (January 28, 1820): 219–20.

131Duane Report, for Governor Findlay’s support of protection see Pennsylvania Legislature, Journal of the Senate, 1820–21 (December 7, 1820): 30.

132Philadelphia Union, April 10, 1821.

133Alfred B. Sears, “Thomas Worthington, Pioneer Businessman of the Old Northwest,” Ohio State Archaeological and Historical Quarterly 58 (January 1949): 76; “Source Illustrations of Ohio’s Relations to National History, 1816–40,” Ohio Archaeological and Historical Publications 25 (1916): 143.

134Ohio General Assembly, Journal of the Senate, 1819–20 (January 25, 1820): 219–29.

135New York Columbian, November 10, 1819.

136Boston New England Palladium, January 7, 1820.

137Gronert, “Trade,” pp. 313–23.

138Anderson, “Frontier Economic Problems, II,” p. 199.

139Delaware General Assembly, Journal of the House of Representatives, 1819 (February 2, 1819): 138.

140Du Pont was a delegate to the protectionist Convention of December 1819. Niles’ Weekly Register 18 (December 11, 1819): 229.

141Delaware General Assembly, Journal of the House of Representatives, 1820 (January 29, 1820): 109–11.

142Ibid., (February 10, 1820): 191. Governor John Clarke heartily endorsed protection and the subsidy measures. See Clarke’s message, ibid. (January 5, 1820): 8–11. New Hampshire rejected a similar proposal by a three-to-two majority. See New Hampshire General Court, Journal of the House, 1819 (June 28, 1819): 300ff.

143Delaware General Assembly, Journal of the House of Representatives, 1820 (February 4, 1820): 141ff.

144North Carolina General Assembly, Acts, 1821, p. 3; also see C.S. Sydnor, Development of Southern Nationalism, 1819–48 (Baton Rouge: Louisiana State University Press, 1948), p. 118.

145The subject here deals only with arguments over protection that had the depression as their base. Thus, the New York American, a pro-Tammany, neo-Federalist publication, supported protection on the grounds of retaliation against British restrictions. See New York American, September 22, 1819. Also see “Zeno” in Washington (D.C.) National Intelligencer, November 13, 1819.

146“A New York Gentleman to a Friend in Boston,” New York Columbian, August 11, 1819. Also see ibid., June 10 and June 12, 1819.

147“H.B.” in ibid., February 19, 1819. For emphasis on the protection for cotton and woolens also see the petition of the citizens of Middletown, Connecticut, U.S. Congress, American State Papers: Finance 3, no. 568 (January 10, 1820): 45 and the New York Columbian, August 11, 1819.

148For an example of the Patron’s use of poetry as a weapon, see New York Patron of Industry, July 22, 1820.

149For an example of protectionist opinion upstate, see Albany Argus, September 17, 1819.

150Woodward, Tammany Address, p. 18.

151The following states—Vermont, Maryland, Kentucky, Tennessee, Indiana, Illinois—were also alleged to be overwhelmingly protectionist, Annals of Congress (May 4, 1820), p. 655.

152Pennsylvania Legislature, Journal of the House, 1819–20 (January 28, 1820): 410ff. New York Evening Post, January 30, 1818.

153U.S. Congress, American State Papers: Finance 3, no. 571 (January 18, 1820): 460. Leaders were Mark Willcox, president, and Thomas Gilpin, secretary.

154Ibid., 3, no. 572 (January 26, 1820): 462ff.

155“An Agriculturist,” in Philadelphia Union, October 19, 1821. Also see speech by Gideon Granger, president of the Ontario, New York Agricultural Society, New York Patron of Industry, December 13, 1820, and ibid., December 23, 1820; “Agricola of Ontario, N.Y.,” in Washington (D.C.) National Intelligencer, January 25, 1820.

156Niles’ Weekly Register 17 (October 23, 1810): 117.

157U.S. Congress, American State Papers: Finance 3, no. 568 (January 10, 1820). Leaders of the petition were Jonathan Lawrence Lewis, chairman, and Arthur W. Magill, secretary.

158Annals of Congress, 16th Congress, 1st Session (April 21, 1820), p. 1944.

159Ibid. (May 4, 1820), pp. 655ff. Also see Niles’ Weekly Register 18 (May 6, 1820): 169.

160Stonecipher, “Pittsburgh.”

161The Lexington Kentucky Reporter, in which the suggestion appeared, lamented that such a step would probably be unconstitutional. See Washington (D.C.) National Intelligencer, September 22, 1819.

162“Plain Truth,” in New York Patron of Industry, August 10, 1820.

163Detroit Gazette, April 23, 1819.

164Eiselen, The Rise, p. 53.

165”A Pennsylvania,” in Philadelphia Union, February 11, 1820.

166Thus, see U.S. Congress, American State Papers: Finance 3, no. 596 (November 27, 1820): 540, petition of citizens of Petersburg, Virginia, Major Thomas Wallace, chairman, John F. May secretary; ibid., 3, no. 603 (December 18, 1820): 577, petition of United Agricultural Society of Virginia, Richard Field, president, Edward Ruffin, secretary; ibid., 3, no. 604 (December 22, 1820): 578, petition of Roanoke Agricultural Society, Thomas M. Nelson, president, Charles L. Wangfield, secretary; ibid., 3, no. 564 (January 3, 1820): 447, petition of Virginia Agricultural Society of Fredericksburg, Virginia, James M. Garnett, president, William G. Gray, secretary. These men were leading planters of Virginia and the South. Garnett was a friend of Madison, Taylor, and Randolph, and a leader in the anti-tariff struggle. He later became first president of the United States Agricultural Society. Ruffin was a famous agricultural experimenter, later publisher of the Farmers’ Register.

Also see ibid., 3, no. 573 (January 31,1820): 463, petition of Merchants of Salem and towns in vicinity; ibid., 3, no. 594 (April 28, 1820): 533, petition of Chamber of Commerce of Philadelphia; president was Robert Ralston.

167Thus, see Report of House Committee on Agriculture, ibid., 3, no. 613 (February 2, 1821): 65ff. Also see memorial of the United Agriculture Societies of Virginia, written by John Taylor, ibid., 3, no. 570 (January 17, 1820): 458ff. Secretary of the societies was Edward Ruffin, and the president was John Pegram. Also see “Public Good,” in Boston New England Palladium, September 28, October 1, 1819.

168Dorfman, Economic Mind, vol. 1, p. 306.

169Raguet Report, 1820.

170From the Portland Gazette, reprinted in the Philadelphia Union (August 6, 1820). Leaders were Arthur McClellan, chairman, and Henry Clarke, secretary. Also see the report of the Convention of Merchants of Portsmouth, New Hampshire, in Washington (D.C.) National Intelligencer, October 25, 1820. See “Nob,” a Virginia correspondent, ibid., May 8, 1819.

171U.S. Congress, American State Papers: Finance 3, no. 573 (January 31, 1820): 463. The same position was taken by the Chamber of Commerce of Philadelphia, ibid., 3 no. 594 (April 28, 1820): 533ff., which pointed to the plight of commerce and surplus agriculture until domestic manufactures would be established.

172Thus, see “Cato,” in Washington (D.C.) National Intelligencer, April 18, 1820.

173“Public Good,” in Boston New England Palladium, September 28, 1819.

174In Boston Daily Advertiser, reprinted in the New York Evening Post, September 13–14, 1820.

175U.S. Congress, American State Papers: Finance 3, no. 558 (April 13, 1820): 522. For other attacks on protection as a depressing force in the economy, see Memorial of a Convention of Merchants of Philadelphia by William Bayard, president, ibid., 3, no. 597 (November 27, 1820): 543; and Philadelphia Union, December 5, 1820.

176U.S. Congress, American State Papers: Finance 3, no. 600 (December 8, 1820): 563. On Elliott, see Dorfman, Economic Mind, vol. 1, pp. 370–71.

177See the statement by the influential Representative William Lowndes, a planter from South Carolina, in Niles’ Weekly Register 18 (June 10, 1820): 259, and a brief statement by a committee of citizens of Boston made after an address to them by Representative Daniel Webster, in Washington (D.C.) National Intelligencer, October 14, 1820.

178Philadelphia Union, August 29, 1820.

179Ibid.

180U.S. Congress, American State Papers: Finance 3, no. 613 (February 2, 1821): 650ff.

181Washington (D.C.) National Intelligencer, May 29, 1819.

182Cambreleng, An Examination, passim; Dorfman, Economic Mind, vol. 1, pp. 371–72.

183Memorial of United Agricultural Societies of Virginia, U.S. Congress, American State Papers: Finance 3, no. 580 (January 17, 1820): 457.

184New Orleans Louisiana Gazette, May 6, 1820; Tregle, “Louisiana and the Tariff.”

185Washington (D.C.) National Intelligencer, August 25, 1821. The “Friends of Natural Rights” also attacked “Professor Daniel Raymond” for presuming to correct Adam Smith, and faring no better than Lord Lauderdale.

186Tyler came from an aristocratic family. Later Governor and U.S. Senator, as well as President, he was a Jacksonian until the removal of deposits and sub-treasury issues arose. Silsbee was a leading Salem merchant and shipowner. Formerly noted as a Jeffersonian, Silsbee was a director of the Boston branch of the Bank of the United States and later U.S. Senator.

187Annals of Congress, 16th Congress, 1st Session, pp. 1952ff.

188Ibid., pp. 1987ff.

189Petition of Merchants and Citizens of Baltimore, U.S. Congress, American State Papers: Finance 3, no. 565 (January 5, 1820): 448. The Baltimore merchants were led by William Patterson. Also see the petition of the New York City Merchants, in New York Daily Advertiser, December 14, 1819; Convention of Friends of National Industry, Petition; “No Inflation,” New York Commercial Advertiser, December 21, 1819; “C.W.” in New York American, February 9, 1820; New York Evening Post, December 20, 1819.

190U.S. Congress, American State Papers: Finance 3, no. 560, pp. 440ff. Also see petition of William Few’s American Society of New York City for Employment of Domestic Manufactures, ibid., no. 561, p. 443; Bishop, History of Manufactures, pp. 256ff.

191New York Daily Advertiser, December 17, 1819, and February 11, 1820; “Galeani,” in New York Evening Post, April 25, 1820; Cambreleng, An Examination, pp. 151–54. (James De P. Ogden) “Publeus,” in New York Commercial Advertiser, December 15, 1819; John Pintard, New York Daily Advertiser, January 6, 1820; “R.L.” in Washington (D.C.) National Intelligencer, December 30, 1819.

192U.S. Congress, American State Papers: Finance 3, no. 567 (January 6, 1820): 451.

193Ibid., 3, no. 579 (February 8, 1820): 484ff. Also see Petition of Chamber of Commerce of Philadelphia, Robert Ralston, president, ibid., 3, no. 586 (March 11, 1820): 518.

194From the Baltimore Telegraph, reprinted in the Richmond Enquirer, January 1, 1819.

195On the rise of the auction system in this period, see Westerfield, “Early History,” pp. 200ff.

196Philadelphia Union, February 8, 1820; “H.B.” in New York Columbian, February 19, 1819.

197“A Pennsylvanian,” Philadelphia Union, February 11, 1820; “C.W.” in New York American, February 9, 1820; New York Evening Post, December 20, 1819.

198New York Evening Post, January 11, 1817.

199Bishop, History, vol. 2, p. 258. U.S. Congress, American State Papers: Finance 3, no. 567 (January 6, 1820): 51. Petition of Chamber of Commerce of New York City, William Bayard, president, John Pintard, secretary.

200Ibid., 3, no. 560 (December 20, 1819): 440ff. Also petition of citizens of Middleton, Connecticut, ibid., 3, no. 568 (January 10, 1820): 452. Also see Convention of Friends of National Industry in New Jersey, Petition, passim.

201Annals of Congress, 16th Congress, 1st Session, pp. 2174–75. Actually the 10 percent tax was to apply only to important items such as woolens, cottons, etc. Minor items were to pay 1 to 2 percent. See Niles’ Weekly Register 18 (May 5, 1820): 182ff.

202New York Patron of Industry, June 6, 1821.

203Niles’ Weekly Register 20 (July 21, 1821): 322.

204New York Patron of Industry, June 16, 17, 20, 1821.

205Niles’ Weekly Register 21 (October 13, 1821): 103. The report was presented on September 24 and signed by Stephen Lockwood, chairman.

206Maryland General Assembly, Votes and Proceedings of the House of Representatives, 1820–21.

• 1W.R. Scott found that early business crises in England—in the sixteenth and seventeenth centuries—were attributable to specific acts of government rather than to the complex economic causes that marked modern depressions. W.R. Scott, The Constitutions and Finance of English, Scottish, and Irish Joint-Stock Companies to 1720 (Cambridge, Mass.: Cambridge University Press, 1912), pp. 465–67.
• 2Very little work has been done on the Panic of 1819, either on its events or on contemporary opinion and policies. Samuel Rezneck’s pioneering article dealt largely with Niles’ Register and the protectionist controversy. William E. Folz’s unpublished dissertation was devoted mainly to a description of the events of the pre-Panic period, especially in the West. Thomas H. Greer’s useful article dealing with the Old Northwest overemphasized the traditional sectional and class version of debtors’ relief controversies, in which the West was considered to be almost exclusively in favor of debtors’ relief and the East opposed. Samuel Rezneck, “The Depression of 1819–1822: A Social History,” American Historical Review 49 (October 1933): 28–47; William E. Folz, “The Financial Crisis of 1819–A Study in Post-War Economic Readjustment” (unpublished Ph.D. dissertation, University of Illinois, 1935); Thomas H. Greer, “Economic and Social Effects of the Depression of 1819 in the Old Northwest,” Indiana Magazine of History 49 (September 1948): 227–43.
• 3The banks were largely note-issue institutions. The big-city banks were already using deposits, but there is little or no information about them.
• 4U.S. Congress, American State Papers: Finance 3, no. 559, January 26, 1819 (Washington, D.C.: Gales and Seaton, 1834), p. 398.
• 5U.S. Department of Commerce, Historical Statistics, p. 245.
• 6Clive Day, “The Early Development of the American Cotton Manufacture,” Quarterly Journal of Economics 39 (May 1925): 452.
• 7U.S. Congress, “Digest of Manufactures, Supplement,” American State Papers: Finance 4, no. 691 (Washington, D.C., 1834), p. 397ff. Also George Heberton Evans, Jr., Business Incorporations in the United States, 1800–1943 (New York: National Bureau of Economic Research, 1948), pp. 12–21.
• 8Allan G. Gruchy, Supervision and Control of Virginia State Banks (New York: D. Appleton-Century and Co., 1937), pp. 14–18, 48–56; Davis R. Dewey, State Banking Before the Civil War (Washington, D.C.: U.S. Government Printing Office, 1910).
• 9U.S. Comptroller of the Currency, Annual Report, 1876 (Washington, D.C.: U.S. Government Printing Office, 1876), p. xxxixff.; Albert Gallatin, Considerations on the Currency and Banking Systems of the United States (Philadelphia: Carey and Lea, 1831); and Boston, New England Palladium, July 27, 1819.
• 10Gallatin, Considerations on the Currency, p. 281; William M. Gouge, A Short History of Paper Money and Banking (New York: B. and S. Collins, 1835), pp. 61, 405ff.; U.S. Treasury Department, Reports of the Secretary of the Treasury of the United States (Washington, D.C., Blair and Rives, 1837), vol. 2, pp. 481–525.
• 11See also Dewey, State Banking, pp. 63–68; John Jay Knox, History of Banking in the United States (New York: B. Rhodes and Co., 1900), p. 445; for an account of small denomination paper, see J.T. Scharf and T. Westcott, History of Philadelphia, 1669–1884 (Philadelphia: L.H. Everts and Co., 1884), vol. 1, p. 581; for an account of West Virginia bank expansion, see Charles H. Ambler, Thomas Ritchie, A Study in Virginia Politics (Richmond, Va.: Bell Book and Stationery Co., 1913), pp. 66–67.
• 12Walter Buckingham Smith and Arthur H. Cole, Fluctuations in American Business, 1790–1860 (Cambridge, Mass.: Harvard University Press, 1935), pp. 146, 185; Anne Bezanson et al., Wholesale Prices in Philadelphia, 1784–1861 (Philadelphia: University of Pennsylvania Press, 1936), vol. 2, pp. 352–55, 409; Arthur H. Cole, Wholesale Commodity Prices in the United States, 1700–1861 (Cambridge, Mass.: Harvard University Press, 1938), vol. 1, p. 161.
• 13These are Treasury estimates for fiscal years ending September 30. U.S. Treasury Department, Bureau of Statistics, Monthly Summary of Imports and Exports for the Fiscal Year 1896 (Washington, D.C.: U.S. Government Printing Office, 1896), pp. 622–23. Official data on United States imports are not available before 1821.
• 14Timothy Pitkin, Statistical View of the Commerce of the United States of America, 3rd ed. (New Haven, Conn.: Durrie and Peck, 1835), p. 294; and Worthy P. Sterns, “The Beginning of American Financial Independence,” Journal of Political Economy 6 (1897–98): 191.
• 15Smith and Cole, Fluctuations, p. 147; Bezanson, Wholesale Prices, vol. 1, p. 353.
• 16Ray B. Westerfield, “Early History of American Auctions—A Chapter in Commercial History,” Connecticut Academy of Arts and Sciences, Transactions 13 (May 1920): 164–70; “Observer,” Review of Trade and Commerce of New York, 1815-to-Present (New York, 1820); J. Leander Bishop, A History of American Manufactures, 1608–1866 (Philadelphia: E. Young and Co., 1864), vol. 2, pp. 256ff.; New York Legislature, Assembly Documents, No. 10 (Albany, 1843), pp. 130ff.; Victor S. Clark, History of Manufactures in the United States, 1607–1860 (Washington, D.C.: Carnegie Institute, 1916), vol. 2, pp. 241ff.; Arthur H. Cole, The American Wool Manufacture (Cambridge, Mass.: Harvard University Press, 1926), vol. 1, pp. 156ff., 217; Horace Secrist, “The Anti-Auction Movement and the New York Workingmen’s Party of 1829,” Wisconsin Academy of Sciences, Arts, and Letters, Transactions 17, Part 1 (1914): 166.
• 17Bezanson, Wholesale Prices, vol. 1, p. 355.
• 18For an account of the difficulties of the cotton and woolen industry after the war, see Caroline F. Ware, The Early New England Cotton Manufacture (Boston: Houghton Mifflin Co., 1931), pp. 66, 126ff.; Bishop, A History, pp. 211ff., 236; “Reports of House Committee on Commerce and Manufactures,” U.S. Congress, American State Papers: Finance, vol. 3, pp. 32–35, 82ff., 103, 461; Cole, American Wool Manufacture, pp. 85, 144, 152ff.; Report of House Committee on Domestic Manufactures,” Pennsylvania Legislature, Journal of the House, 1818–20 (January 28, 1820): 413; and J.T. Scharf, History of Delaware (Philadelphia: L.J. Richards and Co., 1888), vol. 2, pp. 304ff.
• 19Day, Early Development, p. 452; Norman S. Buck, Development and Organization of Anglo-American Trade, 1800–1850 (New Haven, Conn.: Yale University Press, 1925), pp. 134–47. See also Evans, Business Incorporations, pp. 12–30; Ware, Early New England, pp. 56ff.
• 20Trade restrictions, however, had already reduced re-exports to $16 million by 1811, the immediate prewar year. Pitkin, Statistical View of Commerce, p. 35; U.S. Treasury, Monthly Summary; and Emory R. Johnson, et al., History of Domestic and Foreign Commerce of the United States (Washington, D.C.: Carnegie Institute, 1915), vol. 2, pp. 31ff. On exports from the principal cities, see Robert G. Albion, The Rise of the New York Port (New York: C. Scribner’s Sons, 1939), p. 390.
• 21Pitkin, Statistical View of Commerce, pp. 95–144.
• 22Cole, Wholesale Commodity Prices, p. 161; Pitkin, Statistical View of Commerce, pp. 108–15.
• 23William M. Gouge, Journal of Banking (Philadelphia: J. Van Court, 1842), pp. 346, 355.
• 24New note issue series by banks reached a heavy peak in 1815 and 1816 in New York and Pennsylvania. D.C. Wismer, Pennsylvania Descriptive List of Obsolete State Bank Notes, 1782–1866 (Fredericksburg, Md.: J.W. Stovell Printing Co., 1933); and idem, New York Descriptive List of Obsolete Paper Money (Fredericksburg, Md.: J.W. Stovell Printing Co., 1931).
• 25U.S. Congress, American State Papers: Finance 4, no. 705 (March 22, 1824): 759.
• 26Dewey, State Banking, pp. 6–21.
• 27For data, see Walter Buckingham Smith, Economic Aspects of the Second Bank of the United States (Cambridge, Mass.: Harvard University Press, 1953), p. 49. Also U.S. Comptroller of the Currency, Annual Report, 1876, p. 261; R.C.H. Catterall, The Second Bank of the United States (Chicago: University of Chicago Press, 1903), p. 501. Other assets of the Bank were $9.5 million in government bonds, $2.7 million due from state banks. Capital totaled $35 million.
• 28Folz, “Financial Crisis,” p. 164; Smith, Economic Aspects, pp. 105, 112; U.S. Congress, American State Papers: Finance 4, no. 705 (March 22, 1824): 523.
• 29A contemporary estimated the number of banks in 1818 at 500. “Philotheus,” Baltimore Federal Republican, July 9, 1819. Also Gouge, Journal, pp. 223–26; New York Legislature, Senate Journal, 1819 (January 26, 1819): 66–70.
• 30N.S.B. Gras, The Massachusetts First National Bank of Boston, 1784–1934 (Cambridge, Mass.: Harvard University Press, 1937), pp. 710–11.
• 31Knox, History of Banking, pp. 485–86.
• 32Gouge, Short History, pp. 166ff.
• 33Purchasers were only required to pay one-fourth of the total within forty days of purchase, and the penalty of forfeiture for failure to complete payment in five years was repeatedly postponed by Congress. U.S. Congress, The Public and General Statutes Passed by the Congress of the United States of America (Boston: Wells and Lilly, 1827), vols. 2 and 3, passim.
• 34See the data compiled from the records of the General Land Office, in Smith and Cole, Fluctuations, p. 185; and in Arthur H. Cole, “Cyclical and Seasonal Variations in the Sale of Public Lands, 1816–60,” Review of Economic Statistics 9 (January 1927): 42ff. Also Thomas P. Abernethy, The Formative Period in Alabama, 1815–28 (Montgomery, Ala.: Brown Printing Co., 1922), p. 50ff.; C.F. Emerick, The Credit System and the Public Domain (Vanderbilt, Tenn.: Southern History Society Publication No. 3, 1898); U.S. Congress, American State Papers: Finance 3, p. 10; and 4, pp. 859–61.
• 35On a building boom in New York City, see the comment by an influential merchant of the day, John Pintard, Letters to His Daughter, vol. 1: 1816–20 (New York: New York Historical Society, 1940), November 16, 1818, p. 154. Also New York Gazette, February 4, 1818. On a rental and property value boom in other states, U.S. Congress, Annals of Congress of the United States, 17th Congress, 1st Session (1821–22), March 12, 1822, pp. 1281–97; Washington (D.C.) National Intelligencer (July 24, 1819); Thomas Cushing, ed., History of Allegheny County, Pennsylvania (Chicago: A. Warner and Co., 1889), p. 547; William E. Connelley and E.M. Coulter, History of Kentucky (Chicago: American Historical Society, 1922), vol. 2, p. 593; Waldo F. Mitchell, “Indiana’s Growth, 1812–20,” Indiana Magazine of History 10 (December 1914): 385; Hattie M. Anderson, “Frontier Economic Problems in Missouri, 1815–28,” Missouri Historical Review 34 (October 1939): 48ff.; Dorothy B. Dorsey, “The Panic of 1819 in Missouri,” Missouri Historical Review 29 (January 1935): 79–80; Report of J.H. Brown at 1st Annual Meeting of Kentucky Bar Association, in William Graham Sumner, History of Banking in the United States (New York: Henry Holt and Co., 1896), p. 89; Charles H. Garnett, State Banks of Issue in Illinois (Urbana University of Illinois, 1898), p. 7; Pennsylvania Legislature, Journal of the Senate, 1819–21 (February 14, 1820): 311–37. On the rise in the price of slaves during the boom, John L. Conger, “South Carolina and Early Tariffs,” Mississippi Valley Historical Review 5 (March 1919): 415–25.
• 36U.S. Department of Commerce, Historical Statistics, pp. 169, 219–20.
• 37Taylor, Transportation Revolution, pp. 23, 336.
• 38Thomas S. Berry, Western Prices Before 1861 (Cambridge, Mass.: Harvard University Press, 1943), pp. 32, 45ff. On the heavy increase in costs of transporting convicts, see Pennsylvania Legislature, Journal of the Senate, 1820–21 (April 3, 1821): 816.
• 39U.S. Congress, House, Annual Report of the Commissioner of Navigation, 1901, 57th Congress, 1st Session, House Document No. 14, p. 585.
• 40Joseph E. Hedges, Commercial Banking and the Stock Market Before 1863 (Baltimore: Johns Hopkins University Press, 1938).
• 41U.S. Treasury, Monthly Summary; Cincinnati, Cincinnati Directory, 1819 (Cincinnati, Ohio, 1819), p. 52.
• 42Pitkin, Statistical View of Commerce, pp. 95–144; Smith, Economic Aspects, p. 280.
• 43Cole, Wholesale Commodity Prices, p. 161; Bezanson, Wholesale Prices, vol. 2, pp. 67–70. Also Smith, Economic Aspects, pp. 72–75; George Rogers Taylor, “Wholesale Commodity Prices at Charleston, South Carolina, 1796–1861,” Journal of Economic and Business History 4 (August 1932): 856–70.
• 44Taylor, Transportation Revolution, pp. 200–202.
• 45The order of magnitude of these earnings was approximately $3 million. See Pitkin, Statistical View of Commerce, p. 166.
• 46On the general attitude of hostility by the public as well as the banks toward attempts to redeem notes in specie, see Crawford, Report; Dewey, State Banking, pp. 73–79ff., 107ff.; Niles’ Weekly Register 13 (August 2, 1817): 357; 9 (February 7, 1817): 32; 14 (June 20, 1818): 281, 285; 14 (May 30, 1818): 225; New York Legislature, “Report on Committee on Currency,” Journal of the Assembly (February 24, 1818): 307–11; Knox, A History of Banking, p. 576. On an agreement by the banks of Philadelphia not to redeem balances against each other without delay, see Harry E. Miller, Banking Theories in the United States Before 1860 (Cambridge, Mass.: Harvard University Press, 1927), p. 215.
• 47Condy Raguet to David Ricardo, April 18, 1821, in David Ricardo, Minor Papers on the Currency Question, 1809–23, Jacob Hollander, ed. (Baltimore: The Johns Hopkins Press, 1932), pp. 199–201.
• 48On the silver premium, see Raguet Report, in Ricardo, Minor Papers, pp. 223–31; Smith, Economic Aspects, pp. 106, 123–24, 283, 286; James Flint, Letters from America, vol. 9, Early Western Travels, 1748–1846, Reuben G. Thwaites, ed. (Cleveland, Ohio: A.H. Clark Co., 1904–07), p. 136.
• 49Smith, Economic Aspects, p. 49.
• 50Ibid., pp. 40, 119, 286. Also see Catterall, Second Bank, p. 503.
• 51Gallatin, Considerations, pp. 45–51; Delaware General Assembly, Journal of the House of Representatives, 1819 (January 28): 104–06; New Hampshire Gazette, August 19, 1817; John J. Walsh, Early Banks in the District of Columbia, 1792–1818 (Washington, D.C.: Catholic University of America Press, 1940), pp. 49, 80, 82, 123ff., 168. Massachusetts banks, in contrast, were able to expand their note issues slightly from 1818–21; Gras, Massachusetts First National Bank, pp. 44–49. Also see Wismer, New York Descriptive List and Pennsylvania Descriptive List, passim.
• 52Folz, “Financial Crisis,” pp. 170–86; and Louis R. Harlan, “Public Career of William Berkeley Lewis,” Tennessee Historical Quarterly 7 (March 1948): 13; Sister M. Grace Madeleine, Monetary and Banking Theories of Jacksonian Democracy (Philadelphia: The Dolphin Press, 1943), p. 14.
• 53On business failures and debt judgments, Niles’ Weekly Register 16 (May 8, June 7, 1819): 179–80, 258–62; Richmond Enquirer, April 23, May 25, June 4, September 3, 1819; Philadelphia Poulson’s American Daily Advertiser, June 19, July 29, August 5, 1822. On the difficulties of domestic manufactures in the depression, Bishop, A History, vol. 2, 248–53, 256–63; Ware, Early New England, pp. 67–68; Cole, Wholesale Prices, vol. 1, pp. 147ff.; and Theodore G. Gronert, “Trade in the Blue-Grass Region, 1810–1820,” Mississippi Valley Historical Review 5 (1918): 313–23. On the failure of lead mines in the crisis, Ruby J. Swartzlow, “The Early History of Lead Mining in Missouri,” Missouri Historical Review 29 (January 1935): 114.
• 54Cole, Wholesale Prices, p. 161; Smith and Cole, Economic Fluctuations, p. 146; and Berry, Western Prices, pp. 71–74, 81–83; Arthur H. Cole, Wholesale Commodity Prices in the United States, 1700–1861 (Cambridge, Mass.: Harvard University Press, 1938), Supplement, pp. 182–91; Thomas S. Berry, “Wholesale Commodity Prices in the Ohio VaIley, 1816–60,” Review of Economic Statistics 17 (August 1935): 92; Taylor, “Wholesale Commodity Prices at Charleston;” Walter Buckingham Smith, “Wholesale Commodity Prices in the United States, 1795–1824,” Review of Economic Statistics 9 (October 1927): 181–83; Swartzlow, “Early History,” p. 201; Frederick W. Moore, “Fluctuations in Agricultural Prices and Wages in the South,” The South in the Building of the Nation (Richmond, Va.: Southern Historical Publishing Society, 1909), vol. 5, pp. 426–34. For the fall in the price of and return on slaves, Francis Corbin to James Madison, October 10, 1819, Massachusetts Historical Society, Proceedings 43 (January 1910): 261; Smith, Economic Aspects, pp. 78–79, 280. On the fall in rental and property values, see Clark, History, pp. 378–86; Richmond Enquirer, August 5, 1820; Connelley and Coulter, History, p. 599; Malcolm R. Eiselen, The Rise of Pennsylvania Protectionism (Philadelphia, 1932), pp. 44ff.
• 55Historical Statistics, pp. 245–48; Pitkin, Statistical View of Commerce, pp. 95–144; and James W. Livingood, The Philadelphia-Baltimore Trade Rivalry, 1780–1860 (Harrisburg: Pennsylvania Historical Commission, 1947), pp. 18–20, 89, 142.
• 56Historical Statistics, p. 248; Pitkin, Statistical View of Commerce, pp. 180–82.
• 57Historical Statistics, pp. 239–40, 245.
• 58Cole, Wholesale Prices, pp. 148, 165; Smith and Cole, Economic Fluctuations, p. 147; Bezanson, Wholesale Prices, p. 353.
• 59Smith and Cole, Economic Fluctuations, p. 185.
• 60One indication of the general decline in business activity was the considerable decline in total letters carried by the U.S. Post Office, a decline the more remarkable for interrupting a period of rapid secular growth, and despite continuing increase in the number of post offices and miles of post roads. Letters carried declined from a peak of 9.6 million in 1819 to 8.5 million in 1821. Wesley E. Rich, The History of the United States Post Office to the Year 1829 (Cambridge, Mass.: Harvard University Press, 1924), p. 183.
• 61Smith, Economic Aspects, p. 124.
• 62On whiskey as a medium of exchange in the crisis, see Alfred E. Lee, History of the City of Columbus (New York: Numsell and Co., 1892), vol. 1, pp. 368–69; on grain as a principal medium, see Greer, “Economic and Social Effects,” p. 232. On barter, see Charles F. Goss, Cincinnati, the Queen City, 1788–1912 (Chicago: S.J. Clarke Co., 1912), vol. 1, opp. 140ff.; Dorsey, “The Panic of 1819,” p. 85; J. Ray Cable, The Bank of the State of Missouri (New York: Columbia University Press, 1923), p. 24; James A. Kehl, Ill-Feeling in the Era of Good Feeling (Pittsburgh: University of Pittsburgh Press, 1956), p. 188.
• 63William Greene, “Thoughts on the Present Situation and Prospect of the Western Country, April 21, 1820,” in “A New Englander’s Impressions of Cincinnati in 1820—Letters by William Greene,” Rosamund R. Wulsin, ed., Bulletin of the Historical and Philosophical Society of Ohio 7 (April 1949): 116–22. Also Annals of Cleveland, 1818–20 (Cleveland: WPA in Ohio, 1938), vol. 1, pp. 398, 479, 539, 543, 569, 590, 629, 649; New York American, August 28, 1819; Harold E. Davis, “Economic Basis of Ohio Politics, 1820–40,” Ohio Archaeological and Historical Quarterly 67 (October 1938): 290, 309; Logan Esarey, History of Indiana (Indianapolis: B.F. Bowen and Co., 1918), vol. 1, pp. 280ff.
• 64See the above sources on manufactures, including Ware, Early New England, pp. 65–72; Bishop, History, vol. 2, p. 253; Cole, American Wool Manufacture, vol. 1, pp. 147ff.; U.S. Congress, American State Papers: Finance, vol. 4, pp. 28ff., 290ff., 357ff.
• 65Massachusetts Department of Labor, “Historical Review of Wages and Prices, 1782–1860,” Sixteenth Annual Report (Boston, 1885), vol. 3, pp. 317–28. Also see the index of wage rates based on these estimates, in Rufus S. Tucker, “Gold and the General Price Level,” Review of Economic Statistics 16 (February 1934): 24; idem, “Real Wages Under Laissez-Faire” Barron’s 13 (October 23, 1933): 7.
• 66William A. Sullivan, The Industrial Worker in Pennsylvania, 1800–1840 (Harrisburg: Pennsylvania Historical and Museum Commission, 1955), pp. 68, 72.
• 67See the report of a Committee of Citizens of Philadelphia, headed by Condy Raguet, in Niles’ Weekly Register 17 (October 23, 1819): 116; also U.S. Congress, American State Papers: Finance 3, p. 641; Matthew Carey, Essays in Political Economy (Philadelphia: Carey and Lea, 1822): 319–20; Niles’ Weekly Register 16 (August 7, 1819): 385 and 21 (September 1, 1821): 1; Flint, Letters, pp. 236, 248; Rezneck, “The Depression,” pp. 29–32; Minutes of the Common Council of the City of New York 9 (December 10, 1819), 663.
• 68A report of the Female Hospitable Society of Philadelphia blamed the increase in pauperism during 1819–20 on unemployment there. Benjamin J. Klebaner, Public Poor Relief in America, 1790–1860 (New York: Columbia University, microfilmed, 1952), pp. 9, 20.
• 69See the message of Governor Joseph Hiester to the Pennsylvania Legislature, December 5, 1821, in Pennsylvania, Pennsylvania Archives, George E. Reed, ed., Fourth series 5 (Harrisburg, 1900): 281.
• 70Smith, Economic Effects, pp. 271–72.
• 71See the aforementioned sources on prices.
• 72On the revival of manufacturing activity, see Niles’ Weekly Register 20 (March 17, 1821): 34–35; Ware, Early New England, p. 88; Philadelphia Union, September 4, 1821; Bishop, History, pp. 270, 294, 297; Gronert, “Trade,” p. 323; Folz, “Financial Crisis,” pp. 234–35. On revival of trade, see Hattie M. Anderson, “Frontier Economic Problems in Missouri, Part II,” Missouri Historical Review 34 (January 1940): 189.
• 73Wesley C. Mitchell, Business Cycles, vol. 1: The Problem and Its Setting (New York: National Bureau of Economic Research, 1927), p. 75.
• 74Ibid., pp. 76–79.
• 75Historical Statistics, p. 63.
• 76Arthur F. Burns and Wesley C. Mitchell, Measuring Business Cycles (New York: National Bureau of Economic Research, 1946), pp. 97n, 408n, 503–05.
• 77George K. Holmes, Cotton Crop of the United States, 1790–1911 (Washington, D.C.: U.S. Department of Agriculture, Bureau of Statistics, 1912), Circular 32, p. 6; idem, Rice Crop of the United States, 1712–1911 (Washington, D.C.: U.S. Department of Agriculture, Bureau of Statistics, 1912), Circular 34, pp. 7–8; Smith, Economic Aspects, pp. 24, 306.
• 78The urban commerce engaged in handling farm products was bolstered by the high physical production.
• 79Although the flow of manufactured imports after the war dealt a heavy blow to household manufactures, particularly in New England and the eastern urban areas, household woolen manufactures in the West and even upstate New York continued to flourish and expand undisturbed. Cole, American Wool Manufacture, vol. 1, pp. 182ff.
• 80Mitchell, Business Cycles, p. 78.
• 81Kathleen Bruce, Virginia Iron Manufacture in the Slave Era (New York: The Century Co., 1931), p. 127.
• 82Burns and Mitchell, Measuring Business Cycles, pp. 78–79.
• 83We shall see, however, that when a problem such as the land debt arose, which Monroe considered within the province of the federal government, the President was quick to take action.
• 84James D. Richardson, ed., A Compilation of the Messages and Papers of the Presidents (New York: Bureau of National Literature, 1897), pp. 608–16.
• 85Ibid., pp. 623–31. Monroe, however, vaguely hinted to Congress that domestic manufactures should in some way be supported.
• 86Ibid., pp. 642–49.
• 87Ibid., pp. 655–63.
• 88Detroit Gazette, December 17, 1819. For other attempts to minimize the depression, see the New York Daily Advertiser, June 14, 1819, June 25, 1819; Philadelphia Union, June 2, 1819; New York Gazette, December 9, 1818; Washington (D.C.) Gazette, reprinted in Raleigh Star, June 25, 1819.
• 89Some of the proponents of laissez-faire were in favor of measures to restrict bank credit expansion. While these measures hardly preserved the status quo, they were not considered programs of government intervention, but rather policies to prevent bank inflation—itself considered an interference with market processes.
• 90[Willard Phillips] “Seybert’s Statistical Annals,” North American Review 9 (September 1819): 207–39.
• 91New York Daily Advertiser, March 6, 1819, August 21, 1819, June 10, 1819, May 20, 1819, June 17, 1819. The only exception the Advertiser was willing to make was sumptuary laws, to enforce frugality and limit extravagance, but it saw no chance of a free people adopting such legislation.
• 92New York Evening Post, June 15, 1819. For other expressions of laissez-faire views, see New York Gazette, December 9, 1818; Richmond Correspondent, in the Boston New England Palladium, May 28, 1819; the charge of Judge Ross to the grand jury, Montgomery County, Pennsylvania, Niles’ Weekly Register 18 (July 1, 1820); Peter Force, National Calendar, 1820 (Washington, 1820), pp. 214ff.; Churchill C. Cambreleng (Signed “One of the People”), An Examination of the New Tariff (New York: Gould and Banks, 1821), pp. 19–21.
• 93Washington (D.C.) National Intelligencer, May 5, 1820.
• 94See New York National Advocate, October 2, 16, November 7, 24, 1818; February 5, June 5, 18, 30, July 9, 16, 22, 31, August 6, September 3, October 2, 1819.
• 95Philadelphia Union, August 10, 13, 1819.
• 96See New York Daily Advertiser, June 15, 1819. For other expressions of the industry and economy theme, see address of Governor Franklin, North Carolina General Assembly, Journal of the House, 1821 (November 22): 7–12; Address of the Society of Tammany to Its Absent Members (New York, 1819); “Homespun,” in New York Commercial Advertiser, October 15, 1819; Jackson Memorial, Niles’ Weekly Register 19 (September 2, 1820): 9; address of Governor James P. Preston, Virginia General Assembly, Journal of the House of Delegates, 1819–20 (December 6, 1819): 6–9; charge of Judge Ross to grand jury, Niles’ Weekly Register 18 (July 1, 1820): 321; “Senex;” in New York Columbian, February 11, 1819; Baltimore Federal Republican, May 22, 1819; “Experience,” in Richmond Enquirer, October 1, 1819; Detroit Gazette, January 29, 1819; New York American, October 13, 1819.
• 97New York Daily Advertiser, August 21, 1819; New York American, July 1, 1820. Also see the New York National Advocate, June 8, 1819; “Z.,” in Philadelphia Union, February 17, 1819; and Pintard, Letters, p. 197.
• 98Annapolis Maryland Gazette, June 3, 1819.
• 99Extracts from the Minutes of the General Assembly of the Presbyterian Church of the United States of America, 1819 (Philadelphia, 1819), pp. 171–72. The Convention opened on May 20 in Philadelphia, and consisted mainly of delegates from the Middle Atlantic states, particularly upstate New York.
• 100U.S. Congress, American State Papers: Finance 3, no. 589 (April 14, 1820): 522–25. Actions to cut government salaries were put into effect by the Common Council of New York City, by a two-to-one majority of the Virginia House, and suggested by the House Finance Committee of the New Jersey legislature, and by Governor Joseph Hiester of Pennsylvania. Conservative papers urged retrenchment in national spending and the national debt, and Thomas Jefferson wrote letters to his friends denouncing the Federal deficit. Virginia General Assembly, Journal of the House of Delegates, 1821 (January 23): 131ff.; ibid. (December 11, 1820, January 11, 1821), pp. 30ff., 110ff.; New Jersey Legislature, Votes and Proceedings of the General Assembly, 1820 (November 1), p. 18; Pennsylvania Legislature, Journal of the House, 1820 (December 19), p. 246; Minutes of the Common Council of the City of New York (February 28, 1820), p. 756; New York Daily Advertiser, January 1, 1820; New York American, July 29, 1820; Thomas Jefferson to Thomas Ritchie, December 25, 1820 and Jefferson to Judge Spencer Roane, March 9, 1821, in Thomas Jefferson, Writings, T.E. Bergh, ed. (Washington, D.C.: Thomas Jefferson Memorial Association of the United States, 1904), vol. 15, pp. 295, 325.
• 101Parks, “Felix Grundy,” pp. 25ff.
• 102Hamer, Tennessee, p. 233.
• 103West Tennessee was not a factor in public sentiment, since it was practically unpopulated.
• 104The Panic of 1819 was America’s first great economic crisis and depression. For the first time in American history, there was a crisis of nationwide scope that could not simply and directly be attributed to specific dislocations and restrictions—such as a famine or wartime blockades. Neither could it be simply attributed to the machinations or blunders of one man or to one upsetting act of government, which could be cured by removing the offending cause. In such a way had the economic dislocations from 1808–15 been blamed on “Mr. Jefferson’s Embargo” or “Mr. Madison’s War.” In short, here was a crisis marked with strong hints of modern depressions; it appeared to come mysteriously from within the economic system itself. Without obvious reasons, processes of production and exchange went awry.
• 105The bulk of the work deals with the remedial proposals themselves, and the speculations, controversies, and policies arising from them. Arguments were especially prevalent over monetary proposals, debtors’ relief—often tied in with monetary schemes—and a protective tariff. At the start of the depression each of these problems was unsettled: the tariff question was not resolved; the monetary system was new and troublesome. But the depression greatly intensified these problems, and added new aspects, and made solutions more pressing.
• 106The monetary system of the country was not highly developed. The banks, outside of New England at least, were confined almost exclusively to the cities. Their methods tended to be lax; government control was negligible; and the fact that most banks, like other corporations of the period, had to gain their status by special legislative charter, invited speculative abuses through pressure on the legislature. The result was a lack of uniformity in dealing with banks within and between states. Until 1811, the existence of the First Bank of the United States had influenced the banks toward uniformity. The currency of the United States was on a bimetallic standard, but at the legal ratio of fifteen-to-one gold was undervalued, and the bulk of the specie in circulation was silver. Silver coins were largely foreign, particularly Spanish, augmented by coins minted in Great Britain, Portugal, and France.
• 107The monetary system of the country was not highly developed. The banks, outside of New England at least, were confined almost exclusively to the cities. Their methods tended to be lax; government control was negligible; and the fact that most banks, like other corporations of the period, had to gain their status by special legislative charter, invited speculative abuses through pressure on the legislature. The result was a lack of uniformity in dealing with banks within and between states. Until 1811, the existence of the First Bank of the United States had influenced the banks toward uniformity. The currency of the United States was on a bimetallic standard, but at the legal ratio of fifteen-to-one gold was undervalued, and the bulk of the specie in circulation was silver. Silver coins were largely foreign, particularly Spanish, augmented by coins minted in Great Britain, Portugal, and France.
• 108The War of 1812 and postwar developments forced the American economy to make many rapid and sudden adjustments. The Anglo-French Wars had long fostered the prosperity of American shipping and foreign trade. As the leading neutral we found our exports in great demand on both sides, and American ships took over trade denied to ships of belligerent nations. With the advent of the Embargo and the Non-Intercourse Acts, and then the war itself, however, our foreign trade was drastically curtailed. Foreign trade had reached a peak of $138 million in imports and $108 million in exports in 1807, and by 1814 had sunk to $13 million imports and $7 million exports. On the other hand, war conditions spurred the growth of domestic manufactures. Cotton and woolen textiles, those bellwethers of the Industrial Revolution, were the leaders in this development. These goods were formerly supplied by Great Britain, but the government now required them for war purposes. Domestic manufactures grew rapidly to fill this demand as well as to meet consumer needs no longer met by imports. Households expanded their production of textiles. Of far more lasting significance was the growth of textile factories, especially in New England, New York, and Pennsylvania. Thus, while only four new cotton factories were established during 1807, forty-three were established during 1814, and fifteen in 1815. Leading merchants, finding their capital idle in foreign trade, turned to invest in the newly profitable field of domestic manufactures. Some of these factories adopted the corporate form, hitherto largely confined to banks, insurance and bridge companies. The total number of new factories incorporated in the leading manufacturing states of Massachusetts, Connecticut, New York, New Jersey, and Maryland, averaged sixty-five a year from 1812 to 1815, compared with eight per annum before the war.
• 109The War of 1812 and postwar developments forced the American economy to make many rapid and sudden adjustments. The Anglo-French Wars had long fostered the prosperity of American shipping and foreign trade. As the leading neutral we found our exports in great demand on both sides, and American ships took over trade denied to ships of belligerent nations. With the advent of the Embargo and the Non-Intercourse Acts, and then the war itself, however, our foreign trade was drastically curtailed. Foreign trade had reached a peak of $138 million in imports and $108 million in exports in 1807, and by 1814 had sunk to $13 million imports and $7 million exports. On the other hand, war conditions spurred the growth of domestic manufactures. Cotton and woolen textiles, those bellwethers of the Industrial Revolution, were the leaders in this development. These goods were formerly supplied by Great Britain, but the government now required them for war purposes. Domestic manufactures grew rapidly to fill this demand as well as to meet consumer needs no longer met by imports. Households expanded their production of textiles. Of far more lasting significance was the growth of textile factories, especially in New England, New York, and Pennsylvania. Thus, while only four new cotton factories were established during 1807, forty-three were established during 1814, and fifteen in 1815. Leading merchants, finding their capital idle in foreign trade, turned to invest in the newly profitable field of domestic manufactures. Some of these factories adopted the corporate form, hitherto largely confined to banks, insurance and bridge companies. The total number of new factories incorporated in the leading manufacturing states of Massachusetts, Connecticut, New York, New Jersey, and Maryland, averaged sixty-five a year from 1812 to 1815, compared with eight per annum before the war.
• 110The War of 1812 and postwar developments forced the American economy to make many rapid and sudden adjustments. The Anglo-French Wars had long fostered the prosperity of American shipping and foreign trade. As the leading neutral we found our exports in great demand on both sides, and American ships took over trade denied to ships of belligerent nations. With the advent of the Embargo and the Non-Intercourse Acts, and then the war itself, however, our foreign trade was drastically curtailed. Foreign trade had reached a peak of $138 million in imports and $108 million in exports in 1807, and by 1814 had sunk to $13 million imports and $7 million exports. On the other hand, war conditions spurred the growth of domestic manufactures. Cotton and woolen textiles, those bellwethers of the Industrial Revolution, were the leaders in this development. These goods were formerly supplied by Great Britain, but the government now required them for war purposes. Domestic manufactures grew rapidly to fill this demand as well as to meet consumer needs no longer met by imports. Households expanded their production of textiles. Of far more lasting significance was the growth of textile factories, especially in New England, New York, and Pennsylvania. Thus, while only four new cotton factories were established during 1807, forty-three were established during 1814, and fifteen in 1815. Leading merchants, finding their capital idle in foreign trade, turned to invest in the newly profitable field of domestic manufactures. Some of these factories adopted the corporate form, hitherto largely confined to banks, insurance and bridge companies. The total number of new factories incorporated in the leading manufacturing states of Massachusetts, Connecticut, New York, New Jersey, and Maryland, averaged sixty-five a year from 1812 to 1815, compared with eight per annum before the war.
• 111The war wrought great changes in the monetary system as well. It brought heavy pressure for federal government borrowing. New England, where the banks were more conservative, was opposed to the war and loaned only negligible amounts to the government, and the federal government came to rely on the mushrooming banks in the other states. These banks were primarily note-issuing institutions, generally run on loose principles. Little specie was paid in as capital, and it was quite common for the stockholders to pay for their bank stock with their own promissory notes, using the stock itself as the only collateral. Usually, the officers and stockholders of the banks were the most favored borrowers in their own institutions. Contributing to the expansion of the note issue was the practice of printing notes in denominations as low as six cents. With the restraint of the Bank of the United States removed, and the needs of government finance heavy, the number of new banks and the quantity of note issue multiplied rapidly. The great expansion of bank notes outside of New England contrasted with the conservative policy of the New England banks, and led to a drain of specie from other states to New England. The relative conservatism of New England banks is revealed by the fact that Massachusetts bank notes outstanding increased but slowly—from $2.4 million to $2.7 million from 1811 to 1815. Furthermore, specie in the bank vaults increased from $1.5 million to $3.5 million in the same period.
• 112The war wrought great changes in the monetary system as well. It brought heavy pressure for federal government borrowing. New England, where the banks were more conservative, was opposed to the war and loaned only negligible amounts to the government, and the federal government came to rely on the mushrooming banks in the other states. These banks were primarily note-issuing institutions, generally run on loose principles. Little specie was paid in as capital, and it was quite common for the stockholders to pay for their bank stock with their own promissory notes, using the stock itself as the only collateral. Usually, the officers and stockholders of the banks were the most favored borrowers in their own institutions. Contributing to the expansion of the note issue was the practice of printing notes in denominations as low as six cents. With the restraint of the Bank of the United States removed, and the needs of government finance heavy, the number of new banks and the quantity of note issue multiplied rapidly. The great expansion of bank notes outside of New England contrasted with the conservative policy of the New England banks, and led to a drain of specie from other states to New England. The relative conservatism of New England banks is revealed by the fact that Massachusetts bank notes outstanding increased but slowly—from $2.4 million to $2.7 million from 1811 to 1815. Furthermore, specie in the bank vaults increased from $1.5 million to $3.5 million in the same period.
• 113There was no uniform currency except specie that could be used in all areas of the country. Furthermore, the government, borrowing Middle Atlantic, Southern, and Western bank notes, had to make heavy expenditures in the New England area for imported supplies and for newly burgeoning textile goods manufactured in that region. The resulting specie drain and the continuing bank note expansion led inevitably to a suspension of specie payments outside the New England area in August 1814. The government agreed to this suspension, and the banks continued in operation—the exchange rate of each bank’s notes varying widely. The notes of the suspended banks depreciated at varying rates with respect to the New England bank notes and to specie. The suspension of the obligation to redeem greatly spurred the establishment of new banks and the expansion of bank note issues. The number of banks in the United States rose from 88 in 1811 to 208 in 1815, while bank notes outstanding rose from $2.3 million to $4.6 million in the same period. Expansion was particularly large in the Middle Atlantic states, notably Pennsylvania. The number of banks in the Middle Atlantic states increased from 25 to 111 in this period, while banks in the southern and western states increased from 16 to 34. Pennsylvania incorporated 41 banks in the month of March, 1814.
• 114There was no uniform currency except specie that could be used in all areas of the country. Furthermore, the government, borrowing Middle Atlantic, Southern, and Western bank notes, had to make heavy expenditures in the New England area for imported supplies and for newly burgeoning textile goods manufactured in that region. The resulting specie drain and the continuing bank note expansion led inevitably to a suspension of specie payments outside the New England area in August 1814. The government agreed to this suspension, and the banks continued in operation—the exchange rate of each bank’s notes varying widely. The notes of the suspended banks depreciated at varying rates with respect to the New England bank notes and to specie. The suspension of the obligation to redeem greatly spurred the establishment of new banks and the expansion of bank note issues. The number of banks in the United States rose from 88 in 1811 to 208 in 1815, while bank notes outstanding rose from $2.3 million to $4.6 million in the same period. Expansion was particularly large in the Middle Atlantic states, notably Pennsylvania. The number of banks in the Middle Atlantic states increased from 25 to 111 in this period, while banks in the southern and western states increased from 16 to 34. Pennsylvania incorporated 41 banks in the month of March, 1814.
• 115The war also saw a great rise in prices. Prices of domestic goods rose under the impact of the rapid expansion of the money supply; prices of imported goods rose further as a result of the blocking of foreign trade. Domestic commodity prices rose by about 20–30 percent; cotton, the leading export staple, doubled in price. Imported commodity prices rose by about 70 percent.
• 116The first war of the new nation, therefore, wrought many unsettling changes in the American economy. Trade was blocked from its former channels, the monetary system became disordered, expansion of money and a shortage of imported goods drove prices upward, and domestic manufactures—particularly textiles—developed under the spur of government demand and the closing of foreign supply sources. The advent of peace brought its own set of problems. After the wartime shortages, the scramble for foreign trade was pursued in earnest. Americans were eager to buy foreign goods, particularly British textiles, and the British exporters were anxious to unload their accumulated stocks. Total imports rose from $5.3 million in the last prewar year to $113 million in 1815, and to $147 million in 1816. British exports to the United States alone totaled $59 million in 1815, and $43 million in 1816. The renewal of the supply of imported goods drastically lowered the prices of imports in the United States and spurred American demand. Imported commodity prices at Philadelphia, for example, fell in one month (March, 1815) from an index of 231 to 178. Import prices continued to sag afterwards, reaching 125 by early 1817.
• 117The first war of the new nation, therefore, wrought many unsettling changes in the American economy. Trade was blocked from its former channels, the monetary system became disordered, expansion of money and a shortage of imported goods drove prices upward, and domestic manufactures—particularly textiles—developed under the spur of government demand and the closing of foreign supply sources. The advent of peace brought its own set of problems. After the wartime shortages, the scramble for foreign trade was pursued in earnest. Americans were eager to buy foreign goods, particularly British textiles, and the British exporters were anxious to unload their accumulated stocks. Total imports rose from $5.3 million in the last prewar year to $113 million in 1815, and to $147 million in 1816. British exports to the United States alone totaled $59 million in 1815, and $43 million in 1816. The renewal of the supply of imported goods drastically lowered the prices of imports in the United States and spurred American demand. Imported commodity prices at Philadelphia, for example, fell in one month (March, 1815) from an index of 231 to 178. Import prices continued to sag afterwards, reaching 125 by early 1817.
• 118The first war of the new nation, therefore, wrought many unsettling changes in the American economy. Trade was blocked from its former channels, the monetary system became disordered, expansion of money and a shortage of imported goods drove prices upward, and domestic manufactures—particularly textiles—developed under the spur of government demand and the closing of foreign supply sources. The advent of peace brought its own set of problems. After the wartime shortages, the scramble for foreign trade was pursued in earnest. Americans were eager to buy foreign goods, particularly British textiles, and the British exporters were anxious to unload their accumulated stocks. Total imports rose from $5.3 million in the last prewar year to $113 million in 1815, and to $147 million in 1816. British exports to the United States alone totaled $59 million in 1815, and $43 million in 1816. The renewal of the supply of imported goods drastically lowered the prices of imports in the United States and spurred American demand. Imported commodity prices at Philadelphia, for example, fell in one month (March, 1815) from an index of 231 to 178. Import prices continued to sag afterwards, reaching 125 by early 1817.
• 119The ability and eagerness to import was increased by the continued inflation and credit expansion of the banks, which still were not obliged to redeem in specie. Furthermore, the federal government aided imports by allowing from several months to more than a year for payment of import duties. British and other foreign exporters were willing to grant short-term credits on a large scale to American importers, and these credits played a major role in meeting the large balance of trade deficit in the postwar years. A further spur to imports, again particularly in British textiles, was the emergence of a system of selling these goods at auction sales instead of through regular import channels. British manufacturers found that auction sales through agents yielded quicker returns; the lower prices were compensated by the lower costs of operation. The auction system flourished, particularly in New York City. Total auction sales in the United States during 1818 were $30 million. In New York City they totaled $14 million, in contrast to $5 million before the war. Half of these sales consisted of European dry goods, in contrast to a sale of $1 million of American-made dry goods.
• 120The influx of imports spelled trouble for war-grown manufactures, especially textiles, which suddenly had to face the onrush of foreign competition. The manufacturers did not share in the general postwar prosperity. Bezanson’s index of prices of industrial commodities at Philadelphia (including such products as dyes, chemicals, metals, textiles, sugar, soap, glass), which had increased from 141 to 214 during the war period, fell abruptly to 177 in March, 1815, and continued to fall, reaching 127 in March, 1817. This drop indicates the difficulties confronting the fledgling manufacturers. The households which had increased textile manufacturing during the war could easily suspend their work as imports resumed, but the new factories had invested capital at stake. A few of the up-to-date factories, such as the famous cotton textile firm of Waltham, Massachusetts—a pioneer in American mass production, using the new power loom to make plain white sheeting for lower income customers—could easily withstand the competition, but most factories were hard-pressed. The decline continued for several years; new factories incorporated in five leading manufacturing states averaged nine per annum from 1817–19, in contrast to sixty-four per annum in the war years.
• 121The influx of imports spelled trouble for war-grown manufactures, especially textiles, which suddenly had to face the onrush of foreign competition. The manufacturers did not share in the general postwar prosperity. Bezanson’s index of prices of industrial commodities at Philadelphia (including such products as dyes, chemicals, metals, textiles, sugar, soap, glass), which had increased from 141 to 214 during the war period, fell abruptly to 177 in March, 1815, and continued to fall, reaching 127 in March, 1817. This drop indicates the difficulties confronting the fledgling manufacturers. The households which had increased textile manufacturing during the war could easily suspend their work as imports resumed, but the new factories had invested capital at stake. A few of the up-to-date factories, such as the famous cotton textile firm of Waltham, Massachusetts—a pioneer in American mass production, using the new power loom to make plain white sheeting for lower income customers—could easily withstand the competition, but most factories were hard-pressed. The decline continued for several years; new factories incorporated in five leading manufacturing states averaged nine per annum from 1817–19, in contrast to sixty-four per annum in the war years.
• 122The influx of imports spelled trouble for war-grown manufactures, especially textiles, which suddenly had to face the onrush of foreign competition. The manufacturers did not share in the general postwar prosperity. Bezanson’s index of prices of industrial commodities at Philadelphia (including such products as dyes, chemicals, metals, textiles, sugar, soap, glass), which had increased from 141 to 214 during the war period, fell abruptly to 177 in March, 1815, and continued to fall, reaching 127 in March, 1817. This drop indicates the difficulties confronting the fledgling manufacturers. The households which had increased textile manufacturing during the war could easily suspend their work as imports resumed, but the new factories had invested capital at stake. A few of the up-to-date factories, such as the famous cotton textile firm of Waltham, Massachusetts—a pioneer in American mass production, using the new power loom to make plain white sheeting for lower income customers—could easily withstand the competition, but most factories were hard-pressed. The decline continued for several years; new factories incorporated in five leading manufacturing states averaged nine per annum from 1817–19, in contrast to sixty-four per annum in the war years.
• 123American exports continued to expand greatly, however, although by far less than imports. Europe’s hunger for agricultural staples was stimulated by poor postwar crops abroad, and the prices and values of American staples exported, notably cotton and tobacco, increased greatly. Such leading customers as Britain and France led the surge in European demand. In spite of this, exports never reached the peak prewar totals. Re-exports of foreign goods fared badly, never attaining more than one-third of their prewar level, when neutral ships of the United States had a virtual monopoly of the European carrying trade. Domestic exports totaled $46 million in the fiscal year 1815, and $65 million in 1816, compared to a prewar peak of $49 million. Re-exports, on the other hand, totaled $7 million in 1816, and $17 million the next year, compared to the prewar peak of $60 million. The net balance of foreign trade, in sum, was a deficit of $60 million for the fiscal year of 1815, and of $65 million for the fiscal year 1816. Agricultural produce accounted for $14 million of the $19 million increase in domestic exports from 1815 to 1816. Agricultural produce exported rose from $38 million in the fiscal year 1815 to $52 million in 1816. Cotton furnished about half of the agricultural exports, and tobacco, wheat, and flour formed the bulk of the remainder. Of the exports in 1815, cotton was $17.5 million, tobacco was $8 million, and wheat and flour exports totaled $7 million. In 1816, cotton increased to $24 million, and tobacco to $13 million.
• 124American exports continued to expand greatly, however, although by far less than imports. Europe’s hunger for agricultural staples was stimulated by poor postwar crops abroad, and the prices and values of American staples exported, notably cotton and tobacco, increased greatly. Such leading customers as Britain and France led the surge in European demand. In spite of this, exports never reached the peak prewar totals. Re-exports of foreign goods fared badly, never attaining more than one-third of their prewar level, when neutral ships of the United States had a virtual monopoly of the European carrying trade. Domestic exports totaled $46 million in the fiscal year 1815, and $65 million in 1816, compared to a prewar peak of $49 million. Re-exports, on the other hand, totaled $7 million in 1816, and $17 million the next year, compared to the prewar peak of $60 million. The net balance of foreign trade, in sum, was a deficit of $60 million for the fiscal year of 1815, and of $65 million for the fiscal year 1816. Agricultural produce accounted for $14 million of the $19 million increase in domestic exports from 1815 to 1816. Agricultural produce exported rose from $38 million in the fiscal year 1815 to $52 million in 1816. Cotton furnished about half of the agricultural exports, and tobacco, wheat, and flour formed the bulk of the remainder. Of the exports in 1815, cotton was $17.5 million, tobacco was $8 million, and wheat and flour exports totaled $7 million. In 1816, cotton increased to $24 million, and tobacco to $13 million.
• 125Prices of American exports increased as a result of increased European demand and monetary expansion at home. The boom in export values was largely a price and not a physical production phenomenon. Cole’s index of export prices at Charleston rose from 93 in March 1815, to 138 in March 1817, and cotton prices rose even more in the same period. The physical quantity of cotton produced and exported, on the other hand, increased slowly in these years.
• 126The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 127The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 128The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 129The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 130The postwar monetary situation was generally considered intolerable. Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place. The number of banks increased from 208 to 246 during 1815 alone, while the estimated total of bank notes in circulation increased from $46 million to $68 million. There was a great desire for nationwide uniformity in the currency, and the Treasury chafed under the necessity of receiving depreciated bank notes from its sale of public lands in the West, while it had to spend the bulk of its funds in the East in far less depreciated money. It was clear, however, that the inflated banks could not return immediately to specie convertibility without an enormous contraction of credit and deflation of the money supply. As an attempted solution, a Second Bank of the United States was authorized by Congress. It was required to redeem its notes in specie, and was expected to provide a sound and uniform currency. It began operations in January, 1817, but the state banks agreed to resume specie payments by February 20, under the proviso that the new Bank discount by that date a minimum of $2 million in New York, $2 million in Philadelphia, $1.5 million in Baltimore, and $500 thousand in Virginia—a minimum of $6 million. The banks also extracted a pledge of support in emergencies. The Bank, indeed, was not averse to a credit expansion of its own. Its main office and southern and western branches soon overfulfilled their promises. It was run as a strictly profit-making enterprise, under very liberal rules. Like many of the state banks, the Second Bank of the United States accepted its second and later installments of capital in the form of IOUs instead of specie. Eventually, such stock loans totaled $10 million, and the loans were particularly heavy to the important Philadelphia and Baltimore officers and directors of the Bank. Control over the branches of the Bank was negligible, and the southern and western branches greatly expanded their credits and note issues. The officers of the Baltimore branch, indeed, engaged in outright embezzlement. By the beginning of 1818, the Bank had loaned over $41 million. Its note issue outstanding reached $10 million, and its demand deposits $13 million, for a total money issue of $23 million, contrasted to a specie reserve of about $2.5 million.
• 131The boom therefore continued in 1818, with the Bank of the United States acting as an expansionary, rather than as a limiting, force. The expansionist attitude of the Bank was encouraged by the Treasury, which wanted the Bank to accept and use the various state bank notes in which the Treasury received its revenue, particularly its receipts from public land sales. The expansion of its note issue encouraged the state banks throughout the country, especially outside New England, to multiply and continue their credit expansion. The number of banks had increased from 246 in 1816 to 392 in 1818. Kentucky alone chartered 40 new banks in the 1817–18 session. Bank expansion was spurred by the decision of the Bank of the United States and the Treasury to treat the notes of nominally resuming banks as actually equivalent to specie. The Bank thereby accumulated balances and notes against the private banks without presenting them for redemption. Many of these notes were original Treasury balances which had been deposited with the Bank but not claimed from the state banks. In New England, on the other hand, both the private banks and the branches of the Bank of the United States pursued a conservative policy. Indeed, they were forced to contract, as the New England branches of the Bank were continually forced to payout specie on the expanded note issue of the western and southern branches, since by prevailing Bank rule, all branches were liable for the notes of all other branches. As a result, the notes of the Massachusetts banks declined from a total of $1 million in June, 1815 to $850 thousand by June, 1818.
• 132The boom therefore continued in 1818, with the Bank of the United States acting as an expansionary, rather than as a limiting, force. The expansionist attitude of the Bank was encouraged by the Treasury, which wanted the Bank to accept and use the various state bank notes in which the Treasury received its revenue, particularly its receipts from public land sales. The expansion of its note issue encouraged the state banks throughout the country, especially outside New England, to multiply and continue their credit expansion. The number of banks had increased from 246 in 1816 to 392 in 1818. Kentucky alone chartered 40 new banks in the 1817–18 session. Bank expansion was spurred by the decision of the Bank of the United States and the Treasury to treat the notes of nominally resuming banks as actually equivalent to specie. The Bank thereby accumulated balances and notes against the private banks without presenting them for redemption. Many of these notes were original Treasury balances which had been deposited with the Bank but not claimed from the state banks. In New England, on the other hand, both the private banks and the branches of the Bank of the United States pursued a conservative policy. Indeed, they were forced to contract, as the New England branches of the Bank were continually forced to payout specie on the expanded note issue of the western and southern branches, since by prevailing Bank rule, all branches were liable for the notes of all other branches. As a result, the notes of the Massachusetts banks declined from a total of $1 million in June, 1815 to $850 thousand by June, 1818.
• 133The boom therefore continued in 1818, with the Bank of the United States acting as an expansionary, rather than as a limiting, force. The expansionist attitude of the Bank was encouraged by the Treasury, which wanted the Bank to accept and use the various state bank notes in which the Treasury received its revenue, particularly its receipts from public land sales. The expansion of its note issue encouraged the state banks throughout the country, especially outside New England, to multiply and continue their credit expansion. The number of banks had increased from 246 in 1816 to 392 in 1818. Kentucky alone chartered 40 new banks in the 1817–18 session. Bank expansion was spurred by the decision of the Bank of the United States and the Treasury to treat the notes of nominally resuming banks as actually equivalent to specie. The Bank thereby accumulated balances and notes against the private banks without presenting them for redemption. Many of these notes were original Treasury balances which had been deposited with the Bank but not claimed from the state banks. In New England, on the other hand, both the private banks and the branches of the Bank of the United States pursued a conservative policy. Indeed, they were forced to contract, as the New England branches of the Bank were continually forced to payout specie on the expanded note issue of the western and southern branches, since by prevailing Bank rule, all branches were liable for the notes of all other branches. As a result, the notes of the Massachusetts banks declined from a total of $1 million in June, 1815 to $850 thousand by June, 1818.
• 134A generally uniform currency prevailed throughout the country, most bank notes circulating at par. There were exceptions, however; during 1818, for example, notes of some banks in Pennsylvania were depreciated by as much as 30 percent, and in Virginia, Kentucky, and Tennessee by as much as 12 percent.
• 135A generally uniform currency prevailed throughout the country, most bank notes circulating at par. There were exceptions, however; during 1818, for example, notes of some banks in Pennsylvania were depreciated by as much as 30 percent, and in Virginia, Kentucky, and Tennessee by as much as 12 percent.
• 136Investment in real estate, turnpikes, and farm improvement projects spurted, and prices in these fields rose. Furthermore, the federal government facilitated large-scale speculation in public lands by opening up for sale large tracts in the Southwest and Northwest, and granting liberal credit terms to purchasers. Public land sales, which had averaged $2 million to $4 million per annum in 1815 and 1816, rose to a peak of $13.6 million in 1818.
• 137Investment in real estate, turnpikes, and farm improvement projects spurted, and prices in these fields rose. Furthermore, the federal government facilitated large-scale speculation in public lands by opening up for sale large tracts in the Southwest and Northwest, and granting liberal credit terms to purchasers. Public land sales, which had averaged $2 million to $4 million per annum in 1815 and 1816, rose to a peak of $13.6 million in 1818.
• 138Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 139Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 140Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 141Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 142Speculation in urban and rural lands and real estate, using bank credit, was a common phenomenon which sharply raised property values. Furthermore, this speculation increased Treasury balances in western banks, and added to the flow of the Bank’s notes from west to east. Federal construction expenditures also helped to further the boom: they rose from $700 thousand in 1816 to over $14 million in 1818. Beginning in 1816, there was a construction boom in turnpikes, especially in New York, Maryland, and western Pennsylvania. Turnpikes were built by corporations, each of which received special charters from the states, and corporations in turnpike construction rivaled new banks in number. The share of transportation in the boom is also demonstrated by high and rising freight rates on steamboats, which were just beginning operation. Shipbuilders also shared in the boom prosperity.
• 143It does not seem accidental that the boom period saw the establishment of the first formal indoor stock exchange in the country: the New York Stock Exchange opened in March, 1817. Traders had been buying and selling stocks on the curbs in Wall Street since the eighteenth century, but now they found it necessary to form a definite association and rent indoor quarters. The period also marked the beginning of investment banking: commercial banks and individual bankers bought blocks of stock and sold them in small lots on the market or sold the stocks as agents of the issuer. Prominent in this new business were former merchants in foreign trade who had accumulated capital, such as Alexander Brown and Sons, and persons with fortunes amassed elsewhere, such as Astor and Son.
• 144As a result of the monetary and credit expansion, imports continued at a high rate, exceeding the rising exports, and financed by specie outflow and by credits from foreign merchants. After the rush for imports in 1815 and 1816, import values, though remaining at a relatively high level, declined in 1817. This temporary decline from peak levels was spurred by the uncertainties surrounding the return of the banking system to specie payment in 1817, and the consequent relative slackening in monetary expansion during that period. However, imports increased sharply again in 1818 to $122 million. Imports of foreign goods into Cincinnati—the major western depot—doubled in 1817–18 over the 1815–16 totals. In contrast, prices of imported goods, determined largely by conditions outside America, remained almost constant during these years.
• 145Exports, helped by European prosperity and poor crops abroad, continued to rise in price and value. They rose to $88 million in 1817 and reached a peak of $93 million in 1818. Exports of domestic products also rose to a peak of $74 million in that year. Even reexports reached a postwar peak in 1818, although the increase over 1816 was negligible. Agricultural exports rose to $57 million in 1817 and to a peak of $63 million in 1818, advancing at a faster rate than domestic exports as a whole. Agricultural exports rose by $5 million in 1817 and $5.4 million in 1818, while aggregate domestic exports rose by $3.5 million and $5.6 million respectively. Cotton exports also reached a peak in the latter year. Prices of export staples rose even more rapidly during this period. Cole’s index of export staple prices at Charleston rose from 138 in March, 1817 to 169 in August, 1818. A similar rise occurred in Bezanson’s cotton index.
• 146Exports, helped by European prosperity and poor crops abroad, continued to rise in price and value. They rose to $88 million in 1817 and reached a peak of $93 million in 1818. Exports of domestic products also rose to a peak of $74 million in that year. Even reexports reached a postwar peak in 1818, although the increase over 1816 was negligible. Agricultural exports rose to $57 million in 1817 and to a peak of $63 million in 1818, advancing at a faster rate than domestic exports as a whole. Agricultural exports rose by $5 million in 1817 and $5.4 million in 1818, while aggregate domestic exports rose by $3.5 million and $5.6 million respectively. Cotton exports also reached a peak in the latter year. Prices of export staples rose even more rapidly during this period. Cole’s index of export staple prices at Charleston rose from 138 in March, 1817 to 169 in August, 1818. A similar rise occurred in Bezanson’s cotton index.
• 147The net result in the balance of trade was a sharp drop in the trade deficit to $11.6 million in 1817, and a later rise to $28.5 million in 1818. The large deficits of the postwar years are partly overstated, for some were offset by earnings of American shipping, which carried almost all American foreign trade—the earnings of which do not appear in the trade balance.
• 148The net result in the balance of trade was a sharp drop in the trade deficit to $11.6 million in 1817, and a later rise to $28.5 million in 1818. The large deficits of the postwar years are partly overstated, for some were offset by earnings of American shipping, which carried almost all American foreign trade—the earnings of which do not appear in the trade balance.
• 149Troubles and strains, however, began to pile up as the boom continued. The resumption of specie payments by the banks was increasingly more nominal than real. Obstacles and intimidation were the lot of those who attempted to press the banks for payment in specie. As the Philadelphia economist, merchant, and State Senator Condy Raguet wrote to Ricardo:
• 150You state in your letter that you find it difficult to comprehend, why persons who had a right to demand coin from the Banks in payment of their notes, so long forbore to exercise it. This no doubt appears paradoxical to one who resides in a country where an act of parliament was necessary to protect a bank, but the difficulty is easily solved. The whole of our population are either stockholders of banks or in debt to them. It is not the interest of the first to press the banks and the rest are afraid. This is the whole secret. An independent man, who was neither a stockholder or debtor, who would have ventured to compel the banks to do justice, would have been persecuted as an enemy of society.
• 151The consequent loss of confidence in the banks was demonstrated by the emergence of a premium for specie on the market. The discount on bank notes made it more difficult for the banks maintaining specie payment to retain specie in their vaults, since people could redeem their notes for specie, and sell it for bank notes at a discount. Specie came to be at a premium in terms of Bank of United States notes, even though the Bank was required to pay in specie. This reflected a lack of confidence in the Bank’s ability to continue specie payments. A premium on Spanish silver dollars—the major coin circulating in the United States—appeared in March, 1818, and reached 4 percent by June and 6 percent by November. The specie drain from the Bank vaults increased, adding to the heavy external drain for payment of imports. It became evident that the Bank could not long continue expanding its notes and paying out specie at such a rapid rate. Importations of specie from abroad by the Bank, totaling over $7 million and purchased at a heavy price, proved only a temporary expedient. The problem was aggravated by the pressure resulting from rapid repayment of the Federal debt. The autumn of 1818 and early 1819 were the scheduled dates for the repayment of the “Louisiana debt,” which had financed the Louisiana Purchase. Most of this debt—amounting to over $4 million—was owed abroad, and it had to be repaid in specie. The responsibility for meeting the payments fell on the Bank of the United States, the repository for the Treasury’s deposits.
• 152Faced with these threatening circumstances, the Bank of the United States was forced to call a halt to its expansion and launch a painful process of contraction. Beginning in the summer of 1818, the Bank precipitated the Panic of 1819 by a series of deflationary moves. The branches of the Bank were ordered to call on the state banks to redeem heavy balances and notes held by the Bank. The requirement that each branch redeem the notes of every other branch was rescinded, thus ending the liability of the conservative eastern branches to redeem the notes of expansionist branches. The Boston branch began this move in March, and it was made general for all the Bank’s offices by the end of August. The contractionist policy, begun hesitantly under the presidency of William Jones and continued more firmly under the direction of his successor Langdon Cheves, sharply limited and contracted the loans and note issues of the branches. As a result, total demand liabilities of the Bank, including notes, private and public deposits, declined precipitately from $22 million in the fall of 1818 to $12 million in January, 1819, and to $10 million by January, 1820. Of this amount, notes outstanding of the Bank fell from a peak of $10 million in early 1818, to $8.5 million in the fall of 1818, less than $5 million by the summer of 1819, and $3.6 million by January, 1820. Particularly striking was the decline in the Bank’s public deposits, consisting largely of bank debts accumulated from public land sales. They declined from $9 million in the autumn of 1818 to less than $3 million in January, 1819.
• 153Another result of contraction was a large rise in the Bank’s specie reserve, which had been about $2.5 million during 1818 and early 1819. As loans were recalled, and the specie drain reversed, specie flowed into the Bank and reached $3.4 million in January, 1820. Specie reserves spurted to $8 million in the spring of 1821, at a time when total demand liabilities of the Bank were less than $12 million.
• 154The contractionist policy forced the state banks, in debt to the Bank, to contract their loans and notes outstanding at a rapid pace. Total bank notes in circulation were estimated at $45 million in January, 1820, as compared to $68 million in 1816. The severe monetary contraction, lasting through 1820, led to a wave of bankruptcies throughout the country, particularly outside New England. In many cases, banks attempted to continue in operation while refusing specie payment, but their notes depreciated greatly and no longer circulated outside the vicinity of issue. The notes of most of the inland banks depreciated and fluctuated in relation to each other. New England, in contrast, was the only area little touched by bank failures or runs; the banks outside of Rhode Island remained solvent. The entire hastily built private credit structure was greatly shaken by the contraction and wave of defaults. The financial panic led, as did later panics, to a great scramble for a cash position, and an eagerness to sell stocks of goods at even sacrifice rates.
• 155The contractionist policy forced the state banks, in debt to the Bank, to contract their loans and notes outstanding at a rapid pace. Total bank notes in circulation were estimated at $45 million in January, 1820, as compared to $68 million in 1816. The severe monetary contraction, lasting through 1820, led to a wave of bankruptcies throughout the country, particularly outside New England. In many cases, banks attempted to continue in operation while refusing specie payment, but their notes depreciated greatly and no longer circulated outside the vicinity of issue. The notes of most of the inland banks depreciated and fluctuated in relation to each other. New England, in contrast, was the only area little touched by bank failures or runs; the banks outside of Rhode Island remained solvent. The entire hastily built private credit structure was greatly shaken by the contraction and wave of defaults. The financial panic led, as did later panics, to a great scramble for a cash position, and an eagerness to sell stocks of goods at even sacrifice rates.
• 156The contractionist policy forced the state banks, in debt to the Bank, to contract their loans and notes outstanding at a rapid pace. Total bank notes in circulation were estimated at $45 million in January, 1820, as compared to $68 million in 1816. The severe monetary contraction, lasting through 1820, led to a wave of bankruptcies throughout the country, particularly outside New England. In many cases, banks attempted to continue in operation while refusing specie payment, but their notes depreciated greatly and no longer circulated outside the vicinity of issue. The notes of most of the inland banks depreciated and fluctuated in relation to each other. New England, in contrast, was the only area little touched by bank failures or runs; the banks outside of Rhode Island remained solvent. The entire hastily built private credit structure was greatly shaken by the contraction and wave of defaults. The financial panic led, as did later panics, to a great scramble for a cash position, and an eagerness to sell stocks of goods at even sacrifice rates.
• 157The severe contraction of the money supply, added to an increased demand for liquidity, led to a rapid and very heavy drop in prices. Although detailed price information is available only for wholesale commodities, there is evidence that prices fell in many other fields, such as real estate values and rents. Most important for the American economy were the prices of the great export staples, and their fall was remarkably precipitate. The index of export staples fell from 169 in August 1818, and 158 in November, 1818, to 77 in June, 1819. A similar movement occurred in the price of cotton and in the Smith and Cole index of domestic commodity prices. Evidence of falling prices can be seen in freight rates and in the prices of slaves.
• 158The fall in export prices was aggravated by a fall in European demand for agricultural imports, occasioned by the abundant European crops after 1817 and the crisis and business contraction in Britain during the same period. Values of American exports declined sharply as well. Total exports fell from $93 million in 1818 to $70 million in 1819 and 1820. Re-exports did not contract, and the brunt was taken by domestic exports, which fell from $74 million to $51 million. Of this drop, $20 million was accounted for by agricultural exports ($10 million by cotton and $7 million by wheat and flour). It was a pure price decline, since the physical volume of exports continued to increase steadily during this period.
• 159Imports fell even more in value than did exports, reflecting the decline in American incomes. Total imports fell drastically from $122 million in 1818 to $87 million in 1819 and $74.5 million in 1820, thus practically ending the specie drain. Imports from Great Britain fell from $42 million in 1818 to $14 million in 1820, and cotton and woolen imports from Britain fell from over $14 million each in 1818 to about $5 million.
• 160During 1821, total exports and total imports are listed as almost identical, $54.6 million for the former and $54.5 million for the latter. Both were absolute low points, not only for the period of boom and depression but for America since 1815. Import prices also fell with the advent of economic contraction abroad. They fell only slightly, however, and were a negligible factor in the reduction of import values, as compared to the decrease in money income at home. The index of import prices at Philadelphia fell from 126 to 112 from November, 1818 to July, 1819.
• 161During 1821, total exports and total imports are listed as almost identical, $54.6 million for the former and $54.5 million for the latter. Both were absolute low points, not only for the period of boom and depression but for America since 1815. Import prices also fell with the advent of economic contraction abroad. They fell only slightly, however, and were a negligible factor in the reduction of import values, as compared to the decrease in money income at home. The index of import prices at Philadelphia fell from 126 to 112 from November, 1818 to July, 1819.
• 162The credit contraction also caused public land sales to drop sharply, falling from $13.6 million in 1818, to $1.7 million in 1820, and to $1.3 million in 1821. Added to a quickened general desire for a cash position, it also led to high interest rates and common complaint about the scarcity of loanable funds.
• 163Economic distress was suffered by all groups in the community. The great fall in prices heavily increased the burden of fixed money debts, and provided a great impetus toward debtor insolvency. The distress of the farmers, occasioned by the fall in agricultural and real estate prices, was aggravated by the mass of private and bank debts that they had contracted during the boom period. Borrowing for long-term improvements, farmers had been served by the new and greatly expanded banks of the South and West, as well as by the western branches of the Bank of the United States. Bank stockholders who had borrowed on the basis of unpaid stock found themselves forced to meet their debts. Speculators and others who had bought public lands during the boom were now confronted with heavy debt burdens. Merchants suffered from the decline in prices and demand for their produce and from heavy debts. Their debts to the British as well as to domestic creditors were often canceled by the ruthless process of bankruptcy. Niles judged that no less than $100 million of mercantile debts to Europe were eliminated by bankruptcy during the depression. So low were prices and so scarce was the monetary medium in the frontier areas that there was a considerable return to barter conditions among farmers and other local inhabitants. Various areas returned to barter or the use of such goods as grain and whiskey as media of exchange.
• 164Economic distress was suffered by all groups in the community. The great fall in prices heavily increased the burden of fixed money debts, and provided a great impetus toward debtor insolvency. The distress of the farmers, occasioned by the fall in agricultural and real estate prices, was aggravated by the mass of private and bank debts that they had contracted during the boom period. Borrowing for long-term improvements, farmers had been served by the new and greatly expanded banks of the South and West, as well as by the western branches of the Bank of the United States. Bank stockholders who had borrowed on the basis of unpaid stock found themselves forced to meet their debts. Speculators and others who had bought public lands during the boom were now confronted with heavy debt burdens. Merchants suffered from the decline in prices and demand for their produce and from heavy debts. Their debts to the British as well as to domestic creditors were often canceled by the ruthless process of bankruptcy. Niles judged that no less than $100 million of mercantile debts to Europe were eliminated by bankruptcy during the depression. So low were prices and so scarce was the monetary medium in the frontier areas that there was a considerable return to barter conditions among farmers and other local inhabitants. Various areas returned to barter or the use of such goods as grain and whiskey as media of exchange.
• 165Economic distress was suffered by all groups in the community. The great fall in prices heavily increased the burden of fixed money debts, and provided a great impetus toward debtor insolvency. The distress of the farmers, occasioned by the fall in agricultural and real estate prices, was aggravated by the mass of private and bank debts that they had contracted during the boom period. Borrowing for long-term improvements, farmers had been served by the new and greatly expanded banks of the South and West, as well as by the western branches of the Bank of the United States. Bank stockholders who had borrowed on the basis of unpaid stock found themselves forced to meet their debts. Speculators and others who had bought public lands during the boom were now confronted with heavy debt burdens. Merchants suffered from the decline in prices and demand for their produce and from heavy debts. Their debts to the British as well as to domestic creditors were often canceled by the ruthless process of bankruptcy. Niles judged that no less than $100 million of mercantile debts to Europe were eliminated by bankruptcy during the depression. So low were prices and so scarce was the monetary medium in the frontier areas that there was a considerable return to barter conditions among farmers and other local inhabitants. Various areas returned to barter or the use of such goods as grain and whiskey as media of exchange.
• 166One thing seems to be universally conceded, that the greater part of our mercantile citizens are in a state of bankruptcy—that those of them who have the largest possessions of real and personal estate . . . find it almost impossible to raise sufficient funds to supply themselves with the necessaries of life—that the citizens of every class are uniformly delinquent in discharging even the most trifling of debts.
• 167Manufacturers suffered from the general decline in prices as well as from the contraction in credit, and the panic served to intensify their generally depressed condition since the end of the war. However, the progressive factory at Waltham was able to withstand the buffetings of the depression, to continue profitable operations, and even to expand throughout the depression period.
• 168Evidence is very scanty on the behavior of wage rates during this period. In Massachusetts, the wages of agricultural workers fluctuated sharply with the boom and contraction, averaging sixty cents per day in 1811, $1.50 in 1818, and fifty-three cents in 1819. The wage rates of skilled labor, on the other hand, remained stable throughout at approximately $1 per day. In Pennsylvania, woodcutters who averaged a wage of thirty-three cents per cord in the first half of the nineteenth century were paid only ten cents per cord in 1821 and 1822. Unskilled turnpike workers paid seventy-five cents a day in early 1818 received only twelve cents a day in 1819.
• 169Evidence is very scanty on the behavior of wage rates during this period. In Massachusetts, the wages of agricultural workers fluctuated sharply with the boom and contraction, averaging sixty cents per day in 1811, $1.50 in 1818, and fifty-three cents in 1819. The wage rates of skilled labor, on the other hand, remained stable throughout at approximately $1 per day. In Pennsylvania, woodcutters who averaged a wage of thirty-three cents per cord in the first half of the nineteenth century were paid only ten cents per cord in 1821 and 1822. Unskilled turnpike workers paid seventy-five cents a day in early 1818 received only twelve cents a day in 1819.
• 170One of the most significant phenomena of the depression was the advent of a new problem casting a long shadow on future events: large-scale unemployment in the cities. Although America was still an overwhelmingly rural country, the cities—the centers of manufacture and trade—were rapidly growing, and this depression witnessed the problem of unemployment for factory workers, artisans, mechanics, and other skilled craftsmen. These workers were often independent businessmen rather than employees, but their distress was not less acute. Concentrated in the cities, their plight was thereby dramatized, and they lacked the flexibility of farmers who could resort to barter or self-sufficiency production. In the fall of 1819, in thirty out of sixty branches of manufacturing (largely handicraft) in Philadelphia, employment in these fields totaled only 2,100, compared to 9,700 employed in 1815. There was a corresponding decline in total earnings—from $3 million to less than $700 thousand during the later year. Very drastic declines in employment took place in the cotton, woolen, and iron industries. Unemployment also swelled the ranks of the paupers during the depression.
• 171One of the most significant phenomena of the depression was the advent of a new problem casting a long shadow on future events: large-scale unemployment in the cities. Although America was still an overwhelmingly rural country, the cities—the centers of manufacture and trade—were rapidly growing, and this depression witnessed the problem of unemployment for factory workers, artisans, mechanics, and other skilled craftsmen. These workers were often independent businessmen rather than employees, but their distress was not less acute. Concentrated in the cities, their plight was thereby dramatized, and they lacked the flexibility of farmers who could resort to barter or self-sufficiency production. In the fall of 1819, in thirty out of sixty branches of manufacturing (largely handicraft) in Philadelphia, employment in these fields totaled only 2,100, compared to 9,700 employed in 1815. There was a corresponding decline in total earnings—from $3 million to less than $700 thousand during the later year. Very drastic declines in employment took place in the cotton, woolen, and iron industries. Unemployment also swelled the ranks of the paupers during the depression.
• 172By 1821, the depression had begun to clear, and the economy was launched on a slow road to recovery. The painful process of debt liquidation was over, and the equally painful process of monetary contraction had subsided. The surviving banks, their notes returned to par, successfully expanded credit. The Bank of the United States, saved from imminent failure, was at last in a sound position. Its branches were again able to redeem each others’ notes, and were now more firmly under strong central control. The premium on Spanish silver dollars over Bank notes dropped in June, 1819 from 4 percent to less than 2 percent, and par was restored by April, 1820. In states such as Kentucky or Tennessee, however, there was no general return to par and redeemability for several more years. Business in Britain and continental Europe was also past the trough of depression, and American exports began to recover both in prices and in total values. Prices, in general, which had continued sluggish after the steep decline in 1819, began a slow rise. Export staples at Charleston, reaching 77 in June 1819, fell to a trough of 64 in April, 1821, then slowly rose from that point on. In the same month a trough was reached by cotton prices, domestic commodities at Philadelphia, agricultural commodities, and industrial commodities, and each rose very slowly thereafter. Import prices, however, continued to fall slightly or remain at a stable level. Credit began to be available, and new securities to be heavily subscribed, both at home and in the British market. Business and manufacturing activity began to rise again.
• 173By 1821, the depression had begun to clear, and the economy was launched on a slow road to recovery. The painful process of debt liquidation was over, and the equally painful process of monetary contraction had subsided. The surviving banks, their notes returned to par, successfully expanded credit. The Bank of the United States, saved from imminent failure, was at last in a sound position. Its branches were again able to redeem each others’ notes, and were now more firmly under strong central control. The premium on Spanish silver dollars over Bank notes dropped in June, 1819 from 4 percent to less than 2 percent, and par was restored by April, 1820. In states such as Kentucky or Tennessee, however, there was no general return to par and redeemability for several more years. Business in Britain and continental Europe was also past the trough of depression, and American exports began to recover both in prices and in total values. Prices, in general, which had continued sluggish after the steep decline in 1819, began a slow rise. Export staples at Charleston, reaching 77 in June 1819, fell to a trough of 64 in April, 1821, then slowly rose from that point on. In the same month a trough was reached by cotton prices, domestic commodities at Philadelphia, agricultural commodities, and industrial commodities, and each rose very slowly thereafter. Import prices, however, continued to fall slightly or remain at a stable level. Credit began to be available, and new securities to be heavily subscribed, both at home and in the British market. Business and manufacturing activity began to rise again.
• 174By 1821, the depression had begun to clear, and the economy was launched on a slow road to recovery. The painful process of debt liquidation was over, and the equally painful process of monetary contraction had subsided. The surviving banks, their notes returned to par, successfully expanded credit. The Bank of the United States, saved from imminent failure, was at last in a sound position. Its branches were again able to redeem each others’ notes, and were now more firmly under strong central control. The premium on Spanish silver dollars over Bank notes dropped in June, 1819 from 4 percent to less than 2 percent, and par was restored by April, 1820. In states such as Kentucky or Tennessee, however, there was no general return to par and redeemability for several more years. Business in Britain and continental Europe was also past the trough of depression, and American exports began to recover both in prices and in total values. Prices, in general, which had continued sluggish after the steep decline in 1819, began a slow rise. Export staples at Charleston, reaching 77 in June 1819, fell to a trough of 64 in April, 1821, then slowly rose from that point on. In the same month a trough was reached by cotton prices, domestic commodities at Philadelphia, agricultural commodities, and industrial commodities, and each rose very slowly thereafter. Import prices, however, continued to fall slightly or remain at a stable level. Credit began to be available, and new securities to be heavily subscribed, both at home and in the British market. Business and manufacturing activity began to rise again.
• 175By 1821, the depression had begun to clear, and the economy was launched on a slow road to recovery. The painful process of debt liquidation was over, and the equally painful process of monetary contraction had subsided. The surviving banks, their notes returned to par, successfully expanded credit. The Bank of the United States, saved from imminent failure, was at last in a sound position. Its branches were again able to redeem each others’ notes, and were now more firmly under strong central control. The premium on Spanish silver dollars over Bank notes dropped in June, 1819 from 4 percent to less than 2 percent, and par was restored by April, 1820. In states such as Kentucky or Tennessee, however, there was no general return to par and redeemability for several more years. Business in Britain and continental Europe was also past the trough of depression, and American exports began to recover both in prices and in total values. Prices, in general, which had continued sluggish after the steep decline in 1819, began a slow rise. Export staples at Charleston, reaching 77 in June 1819, fell to a trough of 64 in April, 1821, then slowly rose from that point on. In the same month a trough was reached by cotton prices, domestic commodities at Philadelphia, agricultural commodities, and industrial commodities, and each rose very slowly thereafter. Import prices, however, continued to fall slightly or remain at a stable level. Credit began to be available, and new securities to be heavily subscribed, both at home and in the British market. Business and manufacturing activity began to rise again.
• 176in the modern sense.
• 177On the one hand, the boom, the crisis of 1818–19, and the depression until 1821 present many features akin to modern business cycles as interpreted by Mitchell. Although banking had previously been undeveloped, this period saw a rapid expansion of banks and bank money—unsound as much of the expansion may have been. The period also saw much of the typical characteristics of later financial panics: expansion of bank notes; followed by a specie drain from the banks both abroad and at home; and finally a crisis with a contraction of bank notes, runs on banks, and bank failures. A corollary to the contraction of loans and bank runs was the scramble for a cash position and rapid rise in interest rates during the panic. The diversity of bank notes and bank activity from section to section was hardly a modern characteristic, but there was an approach to uniformity in expansion and contraction because of the existence of the Bank of the United States. As in modern business cycles, the entire contraction and expansion cycle was fairly short-lived, totaling five or six years, and the period of crisis itself a short one. Furthermore, the sequence of phases was boom, crisis, depression, and revival as in the business cycle.
• 178On the other hand, there were many backward features of the economy that go counter to an interpretation of the period as a modern business cycle in the Mitchellian sense or the Panic of 1819 as a modern business crisis. Despite the growth of commerce, it was still true that the overwhelming preponderance of economic activity in that period was in agriculture. It has been estimated that 72 percent of the labor force in 1820 was engaged in agriculture. Although statistics are not available, it seems from contemporary comments that urban construction increased in the boom and declined in the crisis. Physical agricultural production is not too responsive to cycles, however, and agricultural production represents overwhelmingly the greatest part of productive activity during this period. Thus, physical production of cotton, rice, wheat, and flour continued to grow during the depression period. Certainly farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally. With such a prevalence of home sufficiency and barter conditions, the economy could hardly be classified as modern, or conditions the same as a modern business cycle.
• 179On the other hand, there were many backward features of the economy that go counter to an interpretation of the period as a modern business cycle in the Mitchellian sense or the Panic of 1819 as a modern business crisis. Despite the growth of commerce, it was still true that the overwhelming preponderance of economic activity in that period was in agriculture. It has been estimated that 72 percent of the labor force in 1820 was engaged in agriculture. Although statistics are not available, it seems from contemporary comments that urban construction increased in the boom and declined in the crisis. Physical agricultural production is not too responsive to cycles, however, and agricultural production represents overwhelmingly the greatest part of productive activity during this period. Thus, physical production of cotton, rice, wheat, and flour continued to grow during the depression period. Certainly farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally. With such a prevalence of home sufficiency and barter conditions, the economy could hardly be classified as modern, or conditions the same as a modern business cycle.
• 180On the other hand, there were many backward features of the economy that go counter to an interpretation of the period as a modern business cycle in the Mitchellian sense or the Panic of 1819 as a modern business crisis. Despite the growth of commerce, it was still true that the overwhelming preponderance of economic activity in that period was in agriculture. It has been estimated that 72 percent of the labor force in 1820 was engaged in agriculture. Although statistics are not available, it seems from contemporary comments that urban construction increased in the boom and declined in the crisis. Physical agricultural production is not too responsive to cycles, however, and agricultural production represents overwhelmingly the greatest part of productive activity during this period. Thus, physical production of cotton, rice, wheat, and flour continued to grow during the depression period. Certainly farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally. With such a prevalence of home sufficiency and barter conditions, the economy could hardly be classified as modern, or conditions the same as a modern business cycle.
• 181On the other hand, there were many backward features of the economy that go counter to an interpretation of the period as a modern business cycle in the Mitchellian sense or the Panic of 1819 as a modern business crisis. Despite the growth of commerce, it was still true that the overwhelming preponderance of economic activity in that period was in agriculture. It has been estimated that 72 percent of the labor force in 1820 was engaged in agriculture. Although statistics are not available, it seems from contemporary comments that urban construction increased in the boom and declined in the crisis. Physical agricultural production is not too responsive to cycles, however, and agricultural production represents overwhelmingly the greatest part of productive activity during this period. Thus, physical production of cotton, rice, wheat, and flour continued to grow during the depression period. Certainly farm employment is not a markedly cyclical phenomenon. Furthermore, many farm households were self-sufficient, and carried on only local barter trade, or entered the monetary nexus occasionally. With such a prevalence of home sufficiency and barter conditions, the economy could hardly be classified as modern, or conditions the same as a modern business cycle.
• 182One of the most vital points of difference between the economy of that period and of the modern day is the role of manufacturing. Not only was it small-scale, and even then largely (approximately two-thirds) in self-sufficient households, but the conditions of the fledgling factories differed from the rest of the economy. The factories were depressed while the rest of the community was booming, due to the postwar import of manufactured goods; their depression was continued and intensified during the panic. A crisis occurring in the midst of a depressed period—as happened to much of manufacturing in 1819—is more a feature of early pre-cyclical crisis as described by Mitchell. Furthermore, in manufacturing fields other than textiles, there were not even glimmerings of large-scale factory production. The other leading branches of manufacture, such as pot and pearl ashes, iron, soap, whiskey, candles, leather, lumber products, flour, paper, were the product of household and small-scale neighborhood manufactures. An exception was the larger flour mills, which expanded rapidly during 1815–16 to supply the booming European market. The great preponderance of flour mills, however, continued to be small, local affairs using local streams for power.
• 183One of the most vital points of difference between the economy of that period and of the modern day is the role of manufacturing. Not only was it small-scale, and even then largely (approximately two-thirds) in self-sufficient households, but the conditions of the fledgling factories differed from the rest of the economy. The factories were depressed while the rest of the community was booming, due to the postwar import of manufactured goods; their depression was continued and intensified during the panic. A crisis occurring in the midst of a depressed period—as happened to much of manufacturing in 1819—is more a feature of early pre-cyclical crisis as described by Mitchell. Furthermore, in manufacturing fields other than textiles, there were not even glimmerings of large-scale factory production. The other leading branches of manufacture, such as pot and pearl ashes, iron, soap, whiskey, candles, leather, lumber products, flour, paper, were the product of household and small-scale neighborhood manufactures. An exception was the larger flour mills, which expanded rapidly during 1815–16 to supply the booming European market. The great preponderance of flour mills, however, continued to be small, local affairs using local streams for power.
• 184One of the most vital points of difference between the economy of that period and of the modern day is the role of manufacturing. Not only was it small-scale, and even then largely (approximately two-thirds) in self-sufficient households, but the conditions of the fledgling factories differed from the rest of the economy. The factories were depressed while the rest of the community was booming, due to the postwar import of manufactured goods; their depression was continued and intensified during the panic. A crisis occurring in the midst of a depressed period—as happened to much of manufacturing in 1819—is more a feature of early pre-cyclical crisis as described by Mitchell. Furthermore, in manufacturing fields other than textiles, there were not even glimmerings of large-scale factory production. The other leading branches of manufacture, such as pot and pearl ashes, iron, soap, whiskey, candles, leather, lumber products, flour, paper, were the product of household and small-scale neighborhood manufactures. An exception was the larger flour mills, which expanded rapidly during 1815–16 to supply the booming European market. The great preponderance of flour mills, however, continued to be small, local affairs using local streams for power.
• 185With production and transportation in a relatively backward state, with such a large proportion of production on the farms and in self-sufficient households, and with the budding factory production facing a different course of economic conditions from the rest of society it is apparent that the National Bureau of Economic Research, within its own definitions, was correct in beginning its reference dates for American business cycles with the 1834–38 cycle and not earlier. On the other hand, as the greatest and last major crisis before 1836, the panic of 1819 holds considerable interest for the study of business cycles and for the present day. It was an economy in transition, as it were, to a state where business cycles as we know them would develop. Its new shaky, banking structure provided a surge of bank notes, while bringing in its wake many modern problems of money supply, bank soundness, and bank failure. Its new manufactures were the beginning of a great industrial development, and initiated national concern with foreign competition and the prosperity of industry. Extensive foreign trade brought the country in direct relationship to the fluctuations and developments in European economic conditions. Finally, urban unemployment, that modern specter, first became an object of concern with this panic.
• 186Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 187Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 188Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 189Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 190Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 191Faced with the new and burgeoning phenomenon of the panic, those Americans opposed to any governmental interference in the existing economic structure could take one of two courses: either simply deny that any distress existed, or face the facts of depression and argue that only individual acts could bring about a cure. The former position was the official reaction of the Monroe Administration. In his annual message of December 1818, for example, President Monroe ignored the panic completely and hailed the abundant harvest and the flourishing of commerce. In the following annual message, Monroe took brief notice of some currency derangement and depression of manufactures, but added that the evils were diminishing by being left to individual remedies. By November 1820, Monroe was actually rejoicing in the happy situation of the country; he admitted some pressure, but declared these of no importance. The best remedy for these slight pressures was simplicity and economy. In his second Inaugural Address, on March 5, 1821, Monroe admitted at last to a general depression of prices, but only as a means of explaining the great decline in the federal revenue. Despite this, he asserted that the situation of America presented a “gratifying spectacle.” A few newspapers echoed this theme. An anecdote in the Detroit Gazette inferred that unemployment was nothing to worry about, being simply a consequence of the laziness of the worker.
• 192Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 193Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 194Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 195Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 196Of those who recognized the severity of the depression, there were scattered expressions of laissez-faire doctrine in opposition to all proposals of government intervention. We shall see below that the laissez-faire advocates developed their views and elaborated their arguments in the process of opposing specific proposals of government intervention: largely debtors’ relief, monetary inflation, and a protective tariff. Of general expressions of laissez-faire, not specifically related to proposals for intervention, one cogent exposition was that of Willard Phillips, young New England lawyer and leading Federalist. Phillips declared it outside the province of the legislature or of political economists to concern themselves with the state of trade or its profitability. For this “is a question which the merchants alone are acquainted with, and capable of deciding; and as the public interest coincides directly with theirs, there is no danger of its being neglected.” The New York Daily Advertiser set forth the laissez-faire position at some length. It stressed repeatedly that the depression must be allowed to cure itself. How could Congress remedy matters? It could not stop the people from exporting specie; it could not teach the people the necessary virtues of frugality and economy; it could not give credit to worthless banks or stop overtrading at home. The remedy must be slow and gradual, and stem from individuals, not governments. Any governmental interference would provide a shock to business enterprise. As the New York Evening Post succinctly expressed it: “Time and the laws of trade will restore things to an equilibrium, if legislatures do not rashly interfere to the natural course of events.” Of the expressions of laissez-faire sentiment in Congress, one of the most prominent was that of Representative Johnson of Virginia in the course of his attack against a proposed protective tariff. His theme was “let the people manage their own affairs . . . the people of this country understand their own interests and will pursue them to advantage.”
• 197The most extensive treatment of the economy and industry theme was a lengthy series of articles by Mordecai Manuel Noah, a leader in Tammany Hall and publisher of Tammany’s New York National Advocate. Noah’s theme was that the depression could only be remedied by individual economies in expenditure. He saw the cause of the depression in the indolence and lack of industry among the people and especially in the influence of the debilitating luxuries of high fashion. Noah had a Veblenian conception of the influence of the conspicuous consumption of the rich in encouraging extravagance by the poor. He advocated a return to family manufacture of clothing and an end to high fashion. In imitation of Noah, who had signed himself “Howard” in writing these articles, the editor of the Philadelphia Union, signing himself “Howard the Younger,” pointed out that it was the extravagant spenders who now complain of the “scarcity of money.” A quasi-humorous circular—printed in the Philadelphia American Daily Advertiser—called for a nationwide society to induce ladies to economize. It was signed by the “spirit” of many Revolutionary War heroes.
• 198The most extensive treatment of the economy and industry theme was a lengthy series of articles by Mordecai Manuel Noah, a leader in Tammany Hall and publisher of Tammany’s New York National Advocate. Noah’s theme was that the depression could only be remedied by individual economies in expenditure. He saw the cause of the depression in the indolence and lack of industry among the people and especially in the influence of the debilitating luxuries of high fashion. Noah had a Veblenian conception of the influence of the conspicuous consumption of the rich in encouraging extravagance by the poor. He advocated a return to family manufacture of clothing and an end to high fashion. In imitation of Noah, who had signed himself “Howard” in writing these articles, the editor of the Philadelphia Union, signing himself “Howard the Younger,” pointed out that it was the extravagant spenders who now complain of the “scarcity of money.” A quasi-humorous circular—printed in the Philadelphia American Daily Advertiser—called for a nationwide society to induce ladies to economize. It was signed by the “spirit” of many Revolutionary War heroes.
• 199The most extensive treatment of the economy and industry theme was a lengthy series of articles by Mordecai Manuel Noah, a leader in Tammany Hall and publisher of Tammany’s New York National Advocate. Noah’s theme was that the depression could only be remedied by individual economies in expenditure. He saw the cause of the depression in the indolence and lack of industry among the people and especially in the influence of the debilitating luxuries of high fashion. Noah had a Veblenian conception of the influence of the conspicuous consumption of the rich in encouraging extravagance by the poor. He advocated a return to family manufacture of clothing and an end to high fashion. In imitation of Noah, who had signed himself “Howard” in writing these articles, the editor of the Philadelphia Union, signing himself “Howard the Younger,” pointed out that it was the extravagant spenders who now complain of the “scarcity of money.” A quasi-humorous circular—printed in the Philadelphia American Daily Advertiser—called for a nationwide society to induce ladies to economize. It was signed by the “spirit” of many Revolutionary War heroes.
• 200Some writers went further to say that the depression was really having a good effect on the nation, since it forced people to go back to the highly moral ways of yesteryear—specifically to industry and economy. Thus, the New York Daily Advertiser saw much good from the depression; people had become much more economical and had established such channels for saving as savings banks and manufacturing associations. The New York American was even more emphatic, asserting that waste and indulgence had now been replaced by sober calculation, and prudence and morality had been regenerated.
• 201Similar to the theme that individual moral resurgence through industry and economy would relieve the depression was the belief that renewed theological faith could provide the only sufficient cure. The theological view, however, had no economic rationale. Typical was the (Annapolis) Maryland Gazette, which declared that the only remedy for the depression was to turn from wicked ways to religious devotion. A similar position was taken by the General Assembly of the Presbyterian Church, which found the only effectual remedy in a resurgence of religion and its corollary moral virtues.
• 202Similar to the theme that individual moral resurgence through industry and economy would relieve the depression was the belief that renewed theological faith could provide the only sufficient cure. The theological view, however, had no economic rationale. Typical was the (Annapolis) Maryland Gazette, which declared that the only remedy for the depression was to turn from wicked ways to religious devotion. A similar position was taken by the General Assembly of the Presbyterian Church, which found the only effectual remedy in a resurgence of religion and its corollary moral virtues.
• 203If individuals are to economize, then governments should also. Drives for legislative retrenchment were generally based upon the decline of prices since the onset of the depression. Since the preceding boom and price rise had been used as justification for increasing governmental salaries, many lawmakers urged that these salaries now be cut proportionately in turn. The government, in short, was regarded as having an obligation to retrench along with its citizens.
• 204Following up his resolutions, Felix Grundy introduced a bill in the Tennessee House staying all executions of judgments for two years, unless creditors accepted notes of the leading banks in the state at par. Passage of this bill in October, 1819, by an overwhelming vote of 24 to 10 in the House and a similar majority in the Senate, constituted the first major victory for the debtors’ relief forces in Tennessee. Another conditional stay law passed in the 1819 session was one introduced by Representative William Williams, of Davidson County. This provided that when a bank was the creditor and refused to accept at par, in payment of a debt judgment, either its own notes or the notes of the two leading banks in Tennessee, the execution would be stayed for two years. This bill was passed overwhelmingly with very little opposition. Another aid to the debtors passed in this session was a bill by Williams tightening the usury laws, by setting maximum rates of interest on loans.
• 205During early 1820, relief agitation grew in strength, this time centering on proposals for a new state loan office or bank to issue inconvertible paper along with further stay provisions. The reliefers called for a special session in the spring of 1820. It is interesting to note the Nashville Clarion proudly proclaimed that several men of wealth had taken the lead in the call for an extra session. Typical of the appeals for a special relief session was the petition of citizens from Williamson County, adjacent to Davidson. The petition pointed to the great decline in the price of produce, to the contraction of bank credit, and to the consequent multiplying suits for debt payment. Blame was laid on the “avidity of the creditors to collect,” which seems to increase “in an inverse ratio to the ability of the debtor to pay.” Unless relief were offered quickly, warned the petition, most of the citizens would suffer insolvency and ruin. East Tennessee, the region centering on Knoxville as its leading city, was largely opposed to the relief program and to the proposed special session. Typical was the vigorous disapproval of the Knoxville Register. It declared that the people were opposed, and charged that the huge number of petitions for relief and a special session, as described in the Nashville press, had come from only three counties endorsed by “but half a dozen signatures.” The honest, the industrious, the prudent citizens needed no relief and desired no special session. The demand for relief, charged the Register, was coming from those who had made purchases without capital, and lived in luxury beyond their means. “Now that they have run their race, they wish the Legislature to pass a law that they may keep their honest creditor from recovering his debts.” A grand jury from Sumner County, adjacent to Davidson County, declared that those seeking relief were not the poor and needy but those large businesses and speculators who had extended their credit with the banks; moreover, only these wealthy debtors would benefit from relief. The Courier, from Murfreesboro, a town near Nashville, replied that the debtors’ distress was not owing to their own imprudence but to a “fall of foreign markets, and the domestic scarcity of a circulating medium,” resulting in a great fall in the value of property. Legislative interference, it concluded, was necessary to save the people from bankruptcy and ruin. The East Tennessee opposition had a different view of the consequences of stay legislation. Thus, the Knoxville East Tennessee Patriot admitted that a stay law might give temporary relief to some people, but warned that its impairment of contracts would lead to increased rather than diminished bankruptcies. The East Tennesseans had even made a strong but unsuccessful effort to nip the debtors’ relief campaign in the bud by sending Enoch Parsons, losing gubernatorial candidate in 1819, to Nashville to campaign against Felix Grundy’s election.
• 206During early 1820, relief agitation grew in strength, this time centering on proposals for a new state loan office or bank to issue inconvertible paper along with further stay provisions. The reliefers called for a special session in the spring of 1820. It is interesting to note the Nashville Clarion proudly proclaimed that several men of wealth had taken the lead in the call for an extra session. Typical of the appeals for a special relief session was the petition of citizens from Williamson County, adjacent to Davidson. The petition pointed to the great decline in the price of produce, to the contraction of bank credit, and to the consequent multiplying suits for debt payment. Blame was laid on the “avidity of the creditors to collect,” which seems to increase “in an inverse ratio to the ability of the debtor to pay.” Unless relief were offered quickly, warned the petition, most of the citizens would suffer insolvency and ruin. East Tennessee, the region centering on Knoxville as its leading city, was largely opposed to the relief program and to the proposed special session. Typical was the vigorous disapproval of the Knoxville Register. It declared that the people were opposed, and charged that the huge number of petitions for relief and a special session, as described in the Nashville press, had come from only three counties endorsed by “but half a dozen signatures.” The honest, the industrious, the prudent citizens needed no relief and desired no special session. The demand for relief, charged the Register, was coming from those who had made purchases without capital, and lived in luxury beyond their means. “Now that they have run their race, they wish the Legislature to pass a law that they may keep their honest creditor from recovering his debts.” A grand jury from Sumner County, adjacent to Davidson County, declared that those seeking relief were not the poor and needy but those large businesses and speculators who had extended their credit with the banks; moreover, only these wealthy debtors would benefit from relief. The Courier, from Murfreesboro, a town near Nashville, replied that the debtors’ distress was not owing to their own imprudence but to a “fall of foreign markets, and the domestic scarcity of a circulating medium,” resulting in a great fall in the value of property. Legislative interference, it concluded, was necessary to save the people from bankruptcy and ruin. The East Tennessee opposition had a different view of the consequences of stay legislation. Thus, the Knoxville East Tennessee Patriot admitted that a stay law might give temporary relief to some people, but warned that its impairment of contracts would lead to increased rather than diminished bankruptcies. The East Tennesseans had even made a strong but unsuccessful effort to nip the debtors’ relief campaign in the bud by sending Enoch Parsons, losing gubernatorial candidate in 1819, to Nashville to campaign against Felix Grundy’s election.