Financial History Issue 129 (Spring 2019) | Page 28
of
change in course; realizing that it didn’t
have the silver required to redeem the
Louisiana bonds, it now curtailed loans,
demanded prompt repayment of out-
standing debts and refused to accept any
bank’s notes that were not redeemable in
specie. Banks and businesses around the
country began to fail. Then toward the end
of the year, English mills, unable to keep
paying high prices for raw cotton while
selling yarn and cloth at a loss, temporar-
ily switched from American suppliers to
cheaper sources in India. The Panic of
1819 arrived as word came from Liverpool
that the price offered for cotton—far and
away America’s most valuable export—
had fallen from over 30 cents per pound
to under 15 cents. Soon farms were being
lost to sheriffs’ sales, businesses were fail-
ing and almshouses began to swell with
destitute families.
It has been popular ever since to blame
the second Bank of the United States for
creating what people called “pecuniary
embarrassments,” “money pressures” or
simply “hard times.” The Bank had cer-
tainly made matters worse by pumping
more credit into the market from 1817
through mid-1818; and although its con-
traction was inevitable, it was dangerously
sudden and continued without easing
even after the severely deflated economy
spiraled down out of control. But the
Bank had not forced its customers to bor-
row so far beyond their means, and the
orgy of speculation was itself inspired by
unsustainable commodity prices that fell
more rapidly—and further—than anyone
could foresee.
The panic was too complex and far too
extensive to blame solely on the Bank of
the United States. There was plenty of
blame to go around, but few were willing
to accept any of it. Respectable people
condemned bankrupts as irresponsible
and extravagant—which some doubtless
were—until they suddenly found them-
selves bankrupt as well. All classes of soci-
ety suffered. Laid-off agricultural workers
in the countryside had to camp in the
woods and live off the land; city merchants
and craftsmen wound up in debtors’ pris-
ons. When a Pennsylvania debtor died
before he could be arrested, the constable
tried to jail the corpse. In Massachusetts, a
farmer traded a large hog for a small pig,
“and gave 50 cents boot money, because
the little one would eat less during the
winter.” 1
President Thomas Jefferson (left) and Mormon Church founder Joseph Smith (right)
were two of the many Americans whose lives were changed by the Panic of 1819.
Those least responsible for their own dis-
tress were the most frequently held account-
able for it: the unemployed poor. Munici-
palities, their meager poor taxes quickly
spent, refused aid to any but those willing
to give up their freedom and enter the
poorhouse; some churches provided winter
firewood or soup, but charitable groups
were more likely to dole out sermons on
the virtue of thrift and the evil of luxury.
The evangelical revivals of the Second Great
Awakening rejected Calvinist predestina-
tion in favor of the possibility of salvation
through personal conversion—but a cor-
ollary was the belief that people’s poverty
must be the result of their own moral failure
rather than God’s inscrutable will.
Too few statistics were kept to allow
detailed comparisons with later depres-
sions, but the evidence that we do have
is sobering. Contemporary estimates of
nationwide unemployment ranged from
hundreds of thousands to millions; in
places like Pittsburgh and Philadelphia,
where thorough investigations were
undertaken, it appears to have reached
50% of workers. Western land had been a
siren call that could not be resisted; people
spoke of being “carried off” by the Ohio
or Alabama “fever,” and those who moved
once would likely move again. Nearly all
farmers were in debt, and court records
are filled with both large and small land-
owners suing their debtors in order to
pay their creditors. Businesses could not
collect from their customers, and lawyers
could not collect from their clients.
26 FINANCIAL HISTORY | Summer 2018 | www.MoAF.org
Wheat and cotton, the two great cash
crops that had looked so promising, lost
half their value in 1818 and 1819, and mil-
lions of acres of newly purchased land
were forfeited, often from the inability
to pay a few hundred dollars on a loan.
Nearly half of the public lands sold in
Alabama wound up being relinquished to
the government. The westward movement
slowed to a trickle, and new western cities
were especially vulnerable. In St. Louis
half of the businesses closed and one third
of the people simply left. Cincinnati had
been the fastest growing city in America,
but half of its homes and businesses were
foreclosed upon. The Bank of the United
States had to open a second Cincinnati
branch devoted exclusively to managing
its real estate.
From 1818 through 1823, the total value
of both imports and exports, which had
been rapidly rising, fell more steeply than
in any later depression. Federal revenue,
almost all derived from import duties and
land sales, plummeted. Other long-term
growth trends also reversed. The number
of immigrants from Europe had been
steadily growing, but now their letters
warned others to stay home, and ships left
New York carrying disillusioned crowds
back to the old country, just as they would
in 1932. Existing evidence is suggestive
of deep decline in GDP, on a par with
the Great Depression. In Pittsburgh, the
value of manufactured goods fell to one-
third what it had been. It would take the
city a decade to get back to the annual