Financial History Issue 129 (Spring 2019) | Page 29
value of manufacturing it had reached in
1815, and Lexington’s hemp-processing
plants, which had produced naval stores
like rope and canvas, never reopened. The
economy of the United States depended
on commodity sales abroad; between 1816
and 1823 the index of export values fell by
more than half, even as the quantity of
cotton exported actually increased. 2
The economy eventually recovered—in
time for the next cycle of boom and bust
that culminated in the Panic of 1837. It is
not so much that people forgot the les-
sons of the panic as that they failed to
learn any. Everyone knew about the previ-
ous century’s South Sea Bubble and Mis-
sissippi Bubble—European investment
schemes that had blown up in the faces of
gullible investors. But their victims were
understood to have been wealthy specula-
tors, not the hard-working population.
The Panic of 1819 was different; it struck
all economic classes and all regions. The
country had seen nothing like this before,
and there was so little context for under-
standing it that very little of practical ben-
efit was learned.
The “hard times” of 1819 fill the let-
ters and diaries of Americans, some well-
known but many of them obscure at the
time and most forgotten now. A few, like
the Philadelphia banker Stephen Girard
or the Mississippi planter Stephen Dun-
can, were so wealthy that the depression’s
worst blows could not ruin them; for oth-
ers, the future was suddenly in doubt.
Thomas Jefferson was ruined; his
grandson took over his finances, but he
was forced to sell Jefferson’s beloved Mon-
ticello. When Stephen F. Austin’s family
lost everything in Missouri, he led emi-
grants to the Mexican province of Texas.
Lucy Mack Smith (mother of the Mormon
prophet Joseph Smith) recorded her fam-
ily’s decision to move west from Vermont,
“to New York, where the farmers raise
wheat in abundance.” Their first harvest
there, they hoped, would feed them, but
until then her husband worried, “How
shall we be able to sustain ourselves?” The
Smiths weathered the crisis, but for many
people, the Panic of 1819 was the catas-
trophe that upended their lives: Llewellyn
Jones, an aged veteran of Valley Forge
who hanged himself in despair when cot-
ton prices fell in Alabama; or John Piatt,
Cincinnati’s leading citizen and donor of
its first public park, who died in debtors’
prison at the age of 40. 3
Many other lives were cut short by the
effects of the panic, and even more hopes
were dashed. The disillusionment of a
nation resonates in the words of Patience
Lippincott, called Patty by her family.
With a three-month-old daughter she had
followed her husband to buy land in what
he insisted was a “Terrestrial Paradise” in
Missouri. Writing home to the brother
she would never see again, she closed her
letter, “Let us remember that this world is
not our abiding place... We should not be
immoderate in our desires for any earthly
goal for all things beneath the sun shall
fade and vanish away.”
Only a few months later, her restless
husband moved his little family again, to
Illinois. There Patty died of malaria in the
tiny village of Milton, which was entirely
abandoned within 10 years—a ghost town
left behind by the Panic of 1819. 4
Andrew H. Browning was educated at
Princeton and the University of Virginia.
He has taught history in Washington,
DC; Honolulu, HI; and Portland, OR,
and he has been a Virginia Governor’s
Fellow and a National Endowment for
the Humanities Scholar. He is the author
of The Panic of 1819: The First Great
Depression (University of Missouri
Press, 2019), which was nominated for
the Cundill History Prize.
Notes
1. Niles’ Weekly Register, April 1, 1820;
Asa Sheldon, The Life of Asa G. Shel-
don, Wilmington Farmer (Woburn, MA:
Moody, 1862), 146–47.
2. Douglass C. North, The Economic Growth
of the United States 1790-1860 (Engle-
wood, NJ: Prentice Hall, 1961), Appendix
III, Table 1; Pittsburgh Gazette 5 February
1819; Matthew Carey, “The New Olive
Branch,” Essays on Political Economy
(Philadelphia: Carey and Lea, 1822), 330.
3. Lucy Mack Smith, History of The Prophet
Joseph Smith, By His Mother (Salt Lake
City: Improvement Era, 1902), 65, 69.
4. Emily Noyes, ed., A Family History in Let-
ters and Documents, 1667–1837 (St. Paul,
MN: [privately printed] 1919), 1:344–45;
Charles Rammelkamp, “Thomas Lippin-
cott: A Pioneer of 1818 and his Diary,”
Journal of the Illinois State Historical Soci-
ety 10 (1917–18), 254.
Bubbles and Crashes
continued from page 19
number of shareholders, the most opti-
mistic of which is that put forth by the
NYSE. Their fact books estimate that in
1952, there were six million shareholders;
about 4% of the US population owned
stock.
By 1956, some estimates suggest that
this number had increased by one-third.
By 1965, the number increased to 20 mil-
lion, or 10% of the population. That is, the
1960s witnessed a very sharp increase in
the number of individual investors invest-
ing in the stock market.
By 1972, this number may have been
as high as 32 million people, although it
declined following the oil crisis to 25 mil-
lion in 1975. This pattern is mirrored in the
time series of stock affordability in Figure
2. Following World War II, average share
prices continued to decline, wages rose
and odd lot stock trading was increasingly
available. By the 1950s, almost any manu-
facturing worker could afford to purchase
an average priced stock with a couple
of days’ wages, and this remained fairly
constant until the 1970s. While not cheap,
stocks were now in the realm of affordable
investments for much of the population.
It was in the 1970s that the cost of a share
decreased to less than a day’s labor. In
short, there most likely were not many
new novices throughout the 1940s and
1950s, and there was a sharp increase in
the late 1950s and, in particular, in the
early 1960s. In short, there most likely
were not many new novices throughout
the 1940s and 1950s, and there was a sharp
increase in the late 1950s and, in particu-
lar, in the early 1960s.
Brent Goldfarb is Associate Professor of
Strategy and Entrepreneurship and the
Academic Director at the Dingman Cen-
ter for Entrepreneurship at the University
of Maryland’s Robert H. Smith School of
Business. David A. Kirsch is Associate
Professor of Strategy and Entrepreneur-
ship at the University of Maryland’s Rob-
ert H. Smith School of Business. Goldfarb
and Kirsch are the co-authors of Bubbles
and Crashes: The Boom and Bust of
Technological Innovation (Stanford
University Press, 2019), from which this
article has been adapted.
www.MoAF.org | Spring 2019 | FINANCIAL HISTORY 27