Saturday, March 7, 2009

The Panic of 1819 (1)

Author: Miriam Medina

Words such as Panics, Depressions and Economic Crisis were commonly used to describe periods of financial upheavals, occurring at regular intervals, whose practices would have a devastating effect upon the entire nation as a whole.

While some were short-lived , those of long term were more complex. After the worst of the crisis was over, it would be back to business as usual, resuming its former prosperity and growth until a new economic crisis would eventually occur.

The United States has passed through several notable crisis, such as the ones in 1815,1819,1837, 1857,1869, 1873, 1893, 1901 and 1907, with the exception of 1837, 1893 and 1929.These years were defined as "major depressions because of the depth and duration of the collapse which occurred in American History."

Most of these panics would begin in New York City at the Stock Exchange and soon spread across the entire nation, leading to the closing of banks, businesses, mortgage forfeitures and not to mention mass unemployment as well.

Since a more in-depth analysis on the causes and effects of the abovementioned panic years is amply covered by available literature it will not be explored here.

However I will reflect briefly on the years of 1812-1819 which includes the Panic of 1819, before proceeding to the roaring twenties culminating in the Great Depression.

The Panic of 1819: A Brief Overview

Small scale family farming dominated America from early 17th century to the end of the 19th century. Prior to acquiring a market-economy status, most farmers managed to cultivate enough crops to sustain a healthy family. These farmers worked hard and usually did their own back-breaking job of clearing and preparing the land for cultivation. Occasionally some friends or other relatives would come over and give a helping hand. Farmers led simple lives by growing the crops that grew best on their small land holding and bartered their excess produce for their other needs... Families made their own clothes, candles, utensils and even simple tools. Though agriculture played an important role in early America, there also existed manufacturing and trading characterized by small-scale family-run or one man businesses. The manufacturers were skilled craftsmen and artisans, such as blacksmiths, cobblers, shoemakers, printers, tailors, carpenters and hatters.

Boston, in 1807, had a population of about thirty thousand, and the commercial position of the city was relatively much greater than other cities. The foreign trade of the United States was enormous, and was carried on in American ships. The total tonnage of American shipping engaged in this trade was seven hundred thousand tons, and of this Boston possessed a fair share. Her domestic trade was also important. "The merchants of Boston had then high places in the estimation of the world. The Perkinses, the Sargeants, the Mays, the Cabots, the Higginsons, and others, were known throughout the world for their integrity, their mercantile skill, and the extent and beneficial character of their operations."(8)

The war conditions of 1812 accelerated the growth of domestic manufacturers and trade...Capitalism was flourishing and the working class grew. Textile factories began to expand to New England, New York and Pennsylvania. Waltham mills in Massachusetts was established in 1814 by Francis Lowell and Paul Moody.. "This was the first mill in the United States, and one of the first in the world, to combine under one roof all the operations necessary to convert raw fiber into cloth, and it proved a success. So great were the profits at Waltham that the Boston Associates (the group of Boston investors that joined with Lowell) soon looked for new sites, first at East Chelmsford (renamed Lowell), and then Chicopee, Manchester, and Lawrence. (1)

"On the 15th of February, 1815, an effort was made to re-establish for the second time a United States Bank. It was authorized on the 10th of April 1816, the Act permitting the formation of a company, with a capital of $35,000,000, divided into 350,000 shares of $100 each, of which the Government took 70 shares and the public 180,000 shares. These last were payable in $7,000,000 of gold or silver, of the United States of North America, and $21,000,000 in like money, or, in the funded debt of the United States either in the 6 percent. It had no right to contract any debt greater than $35,000,000, more than its deposits, unless by special act; the directors were made responsible for every violation, and could be sued by each creditor. The bank could lend no more than $500,000 to the United States, $50,000, to each state, and nothing to foreigners." (9)

To Be continued: The Panic of 1819 (2)


1. Inventors "The Textile Revolution"

8. McCabe, James Dabney: Great Fortunes, and How They Were Made 1842-1883; George Maclean, Philadelphia, New York and Boston 1871.

9. Juglar, Clement; "A Brief History of Panics and Their Periodical Occurrence in the United States; Gutenberg Books 1889


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