The Panic of 1819 (42 page)

A leading proponent of public works as a remedy for the depression was the prominent North Carolinian, Archibald D. Murphey. Murphey asserted that the cause of the depression was the lack of a home market for American agriculture. The remedy, then, was to build up the home market, particularly the soil and commercial facilities. To this end, Murphey proposed an extensive plan of internal improvements, including the building of canals, the deepening of rivers, and the construction of highways. Murphey, also an inflationist, favored keeping the state’s money at home. He urged using the new paper money to build public works projects.
⁷

Much western sentiment was reflected in a resolution introduced in the Ohio Senate by General William Henry Harrison, the future President—a foe of banks and a proponent of tariffs. Harrison argued that it was unwise to pay off the public debt too rapidly. Any surplus revenue that might accumulate, he urged, should be used to aid roads, canals, and other internal improvements.
⁸
And in eastern Tennessee, the anti-relief
Patriot
urged governmental clearing of eastern Tennessee rivers,
in lieu
of debtors’ relief, to permit the shipment of surplus produce to market.
⁹

There was also considerable discussion over the various state usury laws, which generally restricted interest to a 6 percent maximum. Some advocated further tightening and stricter enforcement of the usury laws as a means of relieving debtors. In 1820, New Jersey tightened its usury laws.
¹⁰
In the following session, citizens of populous Essex County, following the lead of Salem County, petitioned for a reduction in the legal maximum interest, but this was rejected by the Assembly’s Committee of Finance (Pennington) on the grounds that such a reduction would operate
against
debtors by inducing creditors to call their loans.
¹¹

Tennessee also tightened its usury law in 1819 by setting a legal maximum of 6 percent. A lone figure in the Tennessee House, J. C. Mitchell of Rhea County, urged defeat of the bill and the repeal of all laws on usury. Mitchell argued that a creditor had as much right to get the best price for his money as a farmer to get the best price for his horse. Tennessee’s relief leader, Representative Felix Grundy, countered with the argument that property value was determined by use, whereas the value of money was the same everywhere, thus presumably harking back to the Aristotelian concept of the barrenness of money as an argument against interest. Grundy concluded that if no limit were placed on interest, the lenders would grow rich at the expense of the borrowers.
¹²

Advocates of repeal or of great easing of the usury laws appeared in other states. One Kentuckian, for example, urged that the only way to relieve the depressed conditions would be to let interest rates
rise
to 10 percent.
¹³
Such a high interest rate, he argued, would bring money in from outside Kentucky, and spur out-state investment in Kentucky bank stock. There was no sanctity, after all, about the number “six” as a legal maximum. “Mercator” pointed out in the Richmond
Enquirer
that usury laws restricted credit rather than promoted it.
¹⁴
When the market rate of interest rose above the legal maximum, many creditors felt bound to obey the law and were therefore deterred from lending, while the other lenders had to be indemnified for the extra risk of evading the law. “A Citizen” reasoned that the very fact of credit-exchange signified that the borrower as well as the creditor believed that he benefited from the transaction.
¹⁵
The “Citizen” sprinkled his discussion liberally with quotations from Jeremy Bentham’s
Defense of Usury
. He attributed the attack on creditors to envy of those who preferred future goods by those who more strongly preferred the present.

Generally, states did little about the problem. An example was Virginia, when in 1818–19 two opposing bills were introduced: one to strengthen usury laws and another to repeal them. Both attempts were defeated in the House by three-to-one margins. The Vermont legislature received numerous petitions for a usury law, but two House committees rejected them in the fall of 1821.
¹⁶

Inevitably, poor relief increased during the depression. Governor Thomas Worthington of Ohio responded by urging the expansion of poor houses in the state.
¹⁷
On the other hand, some opinion urged that the debilitating poor laws be eliminated. Governor De Witt Clinton of New York, in his 1818 message, advocated repeal of the poor laws, because they subsidized pauperism. It was necessary, he maintained, to make living by charity a greater evil than living by industry. The pro-Tammany New York
American
agreed, quoting Jacob N. Cardozo’s (Charleston)
Southern Patriot
with approval for criticizing the poor laws as placing a premium upon idleness.
¹⁸

John Woodward, in his famous
Tammany Address
, had two minor remedies to offer for the depression: first, that money brokers be licensed and drastically limited in number, and that they be prohibited from making loans or functioning outside large cities.
¹⁹
This was a reflection of popular and bank attacks on brokers for allegedly depreciating the value of bank notes. Second, he deplored the excessively high prices of hotels, inns, and the like, and advocated maximum price controls on the rates of inns and hotels. This would spur business by lessening the cost of travel.

There were some who adopted the protectionist theory of the cause of the depression without adopting the remedy. Thus, one writer believed that domestic industry should be built up and fewer
manufactured goods imported from abroad; but instead of protection, he advocated a return to family manufactures. In Delaware, in fact, there was a fleeting movement for subsidization of household manufactures. Small premiums for household manufacture in fields where prices were depressed were recommended by Governor Jacob Stout, but rejected by a House committee.
²⁰

Another reaction to the depression, if not precisely a remedy suggested for it, was agitation for government to reduce tolls on its toll bridges and turnpikes. Thus, in Virginia, the citizens of Frederick and Shenandoah Counties asked for reduction of their bridge tolls in view of the depression and the great reduction in the prices of produce. The proposal was accepted by the Virginia legislature.
²¹

During the depression, savings banks were begun in many communities as a method of helping the poor by making saving easier as well as relieving the community to that extent of the burden of poor relief. Savings banks had only first begun in America at Philadelphia in December, 1816. Four arose in Connecticut during the depression. In Boston, a unique variant of a savings bank was born in the depression. It was the Boston Fuel Savings Institution, organized to help the poor save money in the summer so that they could buy their own fuel in the winter. For their small deposits of money, they received non-negotiable certificates, to be redeemed in the winter in wood, that the institution bought in the summer and stored for the cold weather.
²²

One of the most distinctive proposed remedies for the depression was offered by “George Le Fiscal,” in the New York
National Advocate
. He suggested that local communities aid businessmen and workers by making careful estimates of the state of demand of each trade, and in each community keep detailed accounts on which occupations and trades were under, and which were oversupplied.
²³

In those pockets of skilled urban crafts where at least informal unions had developed, some difficulties arose regarding falling wage rates. Thus, an attempt to lower wage rates brought on a strike of Philadelphia carpenters in 1821.
²⁴
Perhaps most tightly organized of workers were the journeymen cordwainers of Philadelphia, who succeeded in compelling their employers to raise their wages in the latter part of 1820, a fact perhaps not entirely unrelated to the heavy unemployment of cordwainers during the same period. The master shoemakers retaliated by continuing to try to push cordwainer wages back to the previous level, an action which the journeymen unsuccessfully tried to prevent by judicial process.
²⁵
In New York City, in 1819, the masons combined to try to prevent a reduction of their daily wage rates, and this action suspended construction activity in New York for a short time. John Pintard, one of New York City’s leading merchants and founder of the New York Historical Society, wrote at the time: “We have been retarded in consequence of a conspiracy on the part of the masons, against reducing their wages one shilling from 16/ to 15/ per day, the former being the war price. All industry has been suspended for a fortnight in expectation of compelling builders to yield. But a steady perseverance on the part of the latter against shameful imposition has brought their appetite to, and work is once more resumed. . . . These combinations are very unjustifiable.”
²⁶

______________________

¹
See O’Connor,
Origins of Academic Economics
, pp. 29, 73, 102.

²
Philadelphia
Union
, March 14, 1820. Also see Lehman’s Committee Report, ibid., March 10, 1820, and the debate, ibid., March 21, 1820.

³
See “Appias,” in the Philadelphia
Union
, December 15, 1820.

⁴
Pennsylvania Legislature,
Journal of the House, 1821
(December 5, 1821).

⁵
Philadelphia
Union
, August 24, 1821.

⁶
H. Jerome Cranmer,
The New Jersey Canals: State Policy and Private Enterprise, 1820–32
(New York, Columbia University, microfilmed, 1955), pp. 32–38.

⁷
Murphey,
Papers
, vol. 2, pp. 107, 216–17.

⁸
Boston
New England Palladium
, January 7, 1820. On Missouri moves for internal improvements, see Anderson, “Frontier Economic Problems, II,” p. 190.

⁹
Parks,
Felix Grundy
, p. 137.

¹⁰
New Jersey Legislature,
Votes and Proceedings of the General Assembly, 1820
(January 24, 1820), p. 132.

¹¹
Ibid., (November 10, 1820), pp. 67–68.

¹²
Parks,
Felix Grundy
, pp. 111–12.

¹³
“Polonius,” in the
Kentucky Commentator
, reprinted in the Boston
New England Palladium
, January 15, 1819.

¹⁴
“Mercator,” in Richmond
Enquirer
, January 14, 1819.

¹⁵
“A Citizen,” in Philadelphia
Union
, January 14, 1819.

¹⁶
Vermont General Assembly,
Journal of the House, 1820–21
(November 2, 1820): 147ff., and (November 9, 1820): 187ff.

¹⁷
Frank T. Cole, “Thomas Worthington,”
Ohio Archaeological and Historical
Publications
12 (1903): 366.

¹⁸
New York
American
, October 2, 1819. On the other hand, the
American
endorsed emergency food relief for paupers, ibid., October 13, 1819.

¹⁹
Woodward,
Tammany Address
, pp. 9–10.

²⁰
“Amicus Patriae Suae,” in Philadelphia
Union
, December 4, 1820; Delaware General Assembly,
Journal of the House of Representatives, 1821
(January 3, 1821): 16–24, and (January 12, 1821): 67.

²¹
Virginia General Assembly,
Journal of the House of Delegates, 1820–21
(December 14, 1820): 41.

²²
“Boston,”
The Christian Disciple and Theological Review
(1822): 157.

²³
Reprinted in the Boston
New England Palladium
, September 1, 1820.

²⁴
William A. Sullivan, “A Decade of Labor Strife,”
Pennsylvania History
18 (January 1950): 24.

²⁵
Sullivan,
Industrial Worker
, pp. 79ff., 128ff.

²⁶
Pintard,
Letters
(June 2, 1819), p. 197. A cartel of domestic salt manufactures in Kanawha County (West Virginia) also failed to maintain a high price of salt ($2 a bushel) during the depression. The pressure of deflation and heavy imports of cheap salt plummeted the price down to sixty cents in 1821.

Stay laws imposed moratoria on collections of debts; minimum appraisal laws set a fixed price below which the debtor’s property could not be sold at auction; compulsory par laws prohibited anyone from exchanging bank notes of the state at a discount; the “summary process” was a particularly rapid procedure for collection of debts to banks.