The Panic of 1819 (5 page)

Faced 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.
⁸³
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.
⁸⁴
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.
⁸⁵
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.
⁸⁶
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.”
⁸⁷
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.
⁸⁸

Of 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.
⁸⁹
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.”
⁹⁰
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.
⁹¹
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.”
⁹²
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.”
⁹³

Of the individual remedies proposed for the depression, the most popular were the twin virtues of “industry” and “economy.” Regardless of what specific legislative remedies any writers proposed, they were certain to add that a necessary condition for permanent recovery was an increase in, or a return to, these two moral precepts. The ideas behind these proposed remedies were generally implicit rather than explained: “economizing” and living within one’s income would prevent an aggravating debt burden from arising and reduce any existing one; “industry” meant harder work and hence increased production. Another cited advantage of economy was that most of the luxury items were purchased from abroad, so that an appeal to economy could ease the specie drain, and be urged by protectionists as a means of helping domestic manufactures. But generally these concepts were thought to need little analysis; they were moral imperatives.

The 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.
⁹⁴
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.”
⁹⁵
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.
⁹⁶

Some 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.
⁹⁷

Similar 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.
⁹⁸
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.
⁹⁹

If 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.
¹⁰⁰

Many Americans, however, were not content with individual remedies and
laissez-faire
, and they pressed for the adoption of numerous proposals of government intervention and attempts at a remedy. One of the most striking problems generated by the panic was the plight of the debtors. Having borrowed heavily during the preceding boom, they were confronted now with calls for repayment and falling prices, increasing the burden of their debts. A discussion of the American search for remedies of the panic will deal first with proposals for debtors’ relief.

____________________

¹
For a general survey of the American economy of this period, see George Rogers Taylor,
The Transportation Revolution, 1815–60
(New York: Rinehart and Co., 1951).

²
Total United States population was 7.2 million in 1810, 9.6 million in 1820. U.S. Department of Commerce,
Historical Statistics of the United States, 1789–1945
(Washington, D.C., 1949), p. 25.

³
The banks were largely note-issue institutions. The big-city banks were already using deposits, but there is little or no information about them.

⁴
U.S. Congress,
American State Papers: Finance
3, no. 559, January 26, 1819 (Washington, D.C.: Gales and Seaton, 1834), p. 398.

⁵
U.S. Department of Commerce,
Historical Statistics
, p. 245.

⁶
Clive Day, “The Early Development of the American Cotton Manufacture,”
Quarterly Journal of Economics
39 (May 1925): 452.

⁷
U.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.

⁸
Allan 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).

⁹
U.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.

¹⁰
Gallatin,
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.

¹¹
See 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.

¹²
Walter 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.

¹³
These 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.

¹⁴
Timothy 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.

¹⁵
Smith and Cole,
Fluctuations
, p. 147; Bezanson,
Wholesale Prices
, vol. 1, p. 353.

¹⁶
Ray 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.

¹⁷
Bezanson,
Wholesale Prices
, vol. 1, p. 355.

¹⁸
For 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.