Tuesday, July 19, 2011

Riding It Out On The Great Financial Roller Coaster - The United States' Early Panics: Part 2 (a)

In this 4 part series we will examine the rich history, no pun intended, of financial crises in the United States. In part 1 of this 4 part series, we learned the definitions and terms used to explain financial crises in general. Now we start with one of the most devastating financial crises to ever hit the U.S., the panic of 1819, leading into the Roaring Twenties.

The Panic of 1819

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 raise enough crops to maintain a healthy family. These farmers worked hard and generally did their own strenuous tasks of clearing and preparing their land for cultivation. Though agriculture played a pivotal 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.

By 1807 the foreign trade of the United States was enormous, carried by American ships. The total tonnage of American shipping engaged in this trade was seven hundred thousand tons, and of this tonnage Boston possessed a fair share. Important merchants from Boston, such as the Perkinses, the Sargeants, the Cabots and the Higginsons, ranked high throughout the world thanks to their mercantile skills and their ethical character in regards to their operations. Many of the ship owners, merchants and their associates had amassed immense fortunes during the Napoleonic wars beginning in 1804 as they provided supplies to an embattled Europe.

At President Jefferson's request to Congress, the embargo act of 1807 was passed wherein all U.S. ports were closed to export shipping from the U.S. It also restricted imports from Great Britain. This act created a serious hardship for U.S. farmers as well as on New England and New York mercantile and maritime businesses.

The embargo of 1807 and the War of 1812 created a detrimental impact to our European trade. This curbed the American merchant marine, leaving thousands of sailors without work. New England, which had owned nearly half of the nation's ships, was able to avoid the economic disaster by switching to domestic industries such as cotton mills. Among the first mills established were the Waltham Mills of Francis C. Lowell.

The war conditions of 1812 accelerated the development of domestic manufacturers and commerce. Capitalism was flourishing and the working class grew. Textile factories began to expand to New England, New York and Pennsylvania. The Waltham mill in Massachusetts was the first mill in both the United States and the world. It combined under one roof all the necessary undertakings to convert natural fiber into cloth and it proved to be quite a success.

Many immigrants from Europe, including German craftsmen and artisans, would choose to leave their country on a temporary basis seeking better economic opportunities elsewhere before returning home. However, those that ventured to America prospered economically, thriving in the relatively free American atmosphere of economic experimentation and competitive spirit. They would remain in their adopted country. The Europeans settled in areas where farm land was reasonably priced. Public land sales continued to be controlled by the Federal land offices established throughout the Northwest. After the war of 1812, the "greatest westward migration in the history of the young nation " took place.
About thirty thousand multi-ethnic immigrants from Europe entered the United States in 1818 alone. The cheap lands in the Ohio territory attracted large numbers of immigrants.

To be continued: Part 2 (b)

to contact: miriammedina@earthlink.net

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