THE CRISIS OF 1819 AND ITS RESULTS (1819-1820)
In 1820 the United States had a population of about nine and one-
half millions; in 1830, nearly thirteen millions. It was spread out
from east to west like a page in the history of society. On the
Atlantic seaboard were the centers of American civilization that had
grown up in colonial days in close touch with Europe. From this
region of commerce and manufacture, the nation, on its march towards
the west, changed through successive types of industrial life until
in the Rocky Mountains the frontier fur-trader mingled with the
Indians. The successive stages of social evolution which at first
were exhibited in narrow belts on the Atlantic coast had now spread
nearly across the continent. [Footnote: Turner, "Significance of the
Frontier," in Am. Hist. Assoc., Report 1893, pp. 200, 206, 208.]
Not only was the country vast in extent, it was rapidly growing. In
the decade the nation increased its population by over three million
and a quarter inhabitants, an addition which nearly equaled the
whole population of any one of the three great sections, the middle
states, the south, and the west. As traveler after traveler passed
over the routes of his predecessor in this period, reporting the
life by the wayside and in the towns, we can almost see American
society unfolding with startling rapidity under our gaze; farms
become hamlets, hamlets grow into prosperous cities; the Indian and
the forests recede; new stretches of wilderness come into view in
the farther west, and we see the irresistible tide of settlement
flowing towards the solitudes.
Nevertheless, at the opening of our survey the nation was in the
gloom of the panic of 1819. This was brought on by the speculative
reaction that immediately followed the war, when the long-pent-up
crops of cotton found a market at the extraordinary price of nearly
thirty cents a pound, and as high as seventy-eight dollars per acre
was bid for government land in the offices of the southwest.
[Footnote: Annals of Cong., 16 Cong., I Sess., 446.] The policy of
the government fostered reckless purchases of public land. In the
critical times of the closing years of the war, the treasury agreed
to accept the notes of state banks in payment for lands, on
condition that these banks should resume specie payment; and then
the banks, while taking only nominal steps towards resumption,
loaned their paper freely to the settlers and speculators who wished
to invest in the public domain.
Under the credit system already mentioned, the pioneer was tempted
to exhaust his funds in making his first partial payment, and to
rely upon loans from some "wild cat" bank wherewith to complete the
purchase of the hundred and sixty acres, the smallest tract offered
under the terms of the law; planters, relying equally on the state
banks, bought great tracts of land at absurd prices; speculators,
tempted by the rapid rise in land values and by the ease of securing
loans, purchased large quantities in the hope of selling before it
became necessary to complete their payment. On the seaboard,
extravagance abounded as a reaction from the economies of war times,
imported manufactures found a ready market, and the domestic
factories were in distress.
While state banks greatly multiplied and expanded their circulation
freely to meet the demands of borrowers, [Footnote: Stunner, Hist,
of Banking, I., chaps, iv.-vi.] the United States Bank not only
failed to check the movement, but even contributed to it. After a
dance of speculation, the bank, in the summer of 1818, was facing
ruin, and it took drastic means to save itself. Its measures
compelled the state banks to redeem their notes in specie or close
their doors. [Footnote: Catterall, Second Bank, chap. iii.; Dewey,
Financial Hist, of the U. S., chap, vii.; Babcock, Am. Nationality
(Am. Nation. XIII.), chap. xiii.]
By the spring of 1819 the country was in the throes of a panic.
State-bank issues were reduced from one hundred million dollars in
1817 to forty-five millions in 1819. Few banks in the south and west
were able to redeem their notes in specie before 1822; but they
pressed their debtors harshly. Staple productions fell to less than
half of their former price; land values declined fifty to seventy
per cent.; manufacturers were in distress; laborers were out of
work; merchants were ruined. [Footnote: J. Q. Adams, Memoirs, IV.,
375; Jefferson, Writings, X., 257; Benton, View, I., 5; Niles'
Register, XVI., 114; Hodgson, Travels, II., 128; Sumner, Hist, of
Banking, I., chaps, vii., viii.] The conditions are illustrated in
the case of Cincinnati. By the foreclosure of mortgages, the
national bank came to own a large part of the city-hotels, coffee-
houses, warehouses, stables, iron foundries, residences, and vacant
lots. "All the flourishing cities of the West," cried Benton, "are
mortgaged to this money power. They may be devoured by it at any
moment. They are in the jaws of the monster!" Throughout the south
and west the bank became familiarly known as The Monster. [Footnote:
Catterall, Second Bank, 67.]
Even in the days of its laxity the national bank was obnoxious in
many quarters of the country. By the state constitution of 1816
Indiana attempted to prevent the establishment within its limits of
any bank not chartered by the state; and Illinois incorporated a
similar provision in her constitution of 1818. Between 1817 and 1819
Maryland, Tennessee, Georgia, North Carolina, Kentucky, and Ohio all
passed acts taxing the United States Bank. [Footnote: Ibid., 64,
65.] Ohio, defying the decision of the supreme court in The case of
McCulloch vs. Maryland, which asserted the constitutionality of the
bank and denied to the states the right to tax it, forcibly
collected the tax and practically outlawed the bank. [Footnote: See
chap. xv., below.]
From the beginning of our history the frontier had been a debtor
region, always favorable to an expansion of the currency and to laws
to relieve the debtor class. It was but the continuation of an old
practice when the western legislature in this time of stringency
attempted measures of relief for their citizens. Kentucky's "litter"
of forty banks chartered in the session of 1818-1819 had been forced
to the wall by the measures of the national bank. After the panic,
Kentucky repealed the charters of these banks and incorporated the
Bank of the Commonwealth of Kentucky, an institution without
stockholders and under officers elected by the legislature and paid
by the state. Its notes were assigned to the counties in proportion
to the taxable property, to be loaned on mortgage securities to
those who needed them "for the purpose of paying his, her, or their
just debts," or to purchase products for exportation. The only real
capital of the bank was a legislative appropriation of seven
thousand dollars to buy the material and plates for printing notes.
In short, the treasury of the state was used as a kind of land bank
of the sort favored in the colonial days for the relief of the
debtors.[Footnote: Cf. Greene, Provincial America Am. Nation, VI.,
chap. xvii.] The legislature then passed a replevin law giving the
debtor a delay of two years to satisfy an execution, in case the
creditor refused to accept notes of the Bank of the Commonwealth of
Kentucky as payment; otherwise the debtor received an extension of
but one year. By another law, land could not be sold under execution
to pay a debt unless it brought three-fourths of its value as
appraised by a board of neighbors, usually themselves debtors and
interested in supporting values.
In 1823 the court of appeals of Kentucky declared the replevin and
stay laws unconstitutional. In retaliation the legislature, in
December, 1824, repealed the law establishing the court of appeals,
and a new court was created favorable to the "relief system." This
act the old court also declared unconstitutional, and a contest
followed between the "old court" and the "new court" parties, which
lasted until 1826, when the "old court," "anti-relief" party was
victorious. In the mean time, similar relief measures had been
passed in Tennessee, Illinois, Missouri, and other western
states.[Footnote: Summer, Hist. of Banking, I., chap. x.; ibid.,
122, 146, 157, 161; Durrett, Centenary of Louisville; McMaster,
United states, V., 160.]
The distress brought about by the panic of 1819, the popular
antagonism to the banks in general, and especially to the Bank of
the United States, as "engines of aristocracy," oppressive to the
common people, and the general discontent with the established
order, had, as we have seen, produced a movement comparable to the
populist agitation of our own time.
Upon the general government the first effect of this period of
distress was a general reduction of the revenue. Imports fell from
about $121,000,000 in 1818 to $87,000,000 in 1819. Customs receipts,
Which in 1816 were over $36,000,000, were but $13,000,000 in 1821.
Receipts for public lands, which amounted to $3,274,000 in 1819,
were but $1,635,000 in 1820. In December, 1819, Crawford, the
secretary of the treasury, was obliged to announce a deficit which
required either a reduction in expenditures or an increase in
revenue. Congress provided for two loans, one of $3,000,000 in 1820,
and another of $5,000,000 in 1821. A policy of retrenchment was
vigorously instituted, leveled chiefly at the department of war.
Internal improvement schemes which had been urged in Congress in
1818 were now temporarily put to rest. With the year 1822, however,
conditions brightened, and the treasury began a long term of
prosperity. [Footnote: Dewey, Financial Hist. of the U. S., 168.]
One of the most important results of the crisis was the complete
reorganization of the system of disposal of the public lands. The
public domain was more than a source of revenue to the general
government; it was one of the most profoundly influential factors in
shaping American social conditions. The settler who entered the
wilderness with but a small capital, or who became a squatter on the
public lands without legal title, was impatient with the policy
which made revenue the primary consideration of the government.
Benton expressed this view in 1826, [Footnote: Register of Debates,
19 Cong., I Sess., I., 727.] when he said: "I speak to statesmen,
and not to compting clerks; to Senators, and not to Quaestors of
provinces; to an assembly of legislators, and not to a keeper of the
King's forests. I speak to Senators who know this to be a Republic,
not a Monarchy; who know that the public lands belong to the People
and not to the Federal Government." The effect of the credit system
had been, as we have seen, to stimulate speculation and to plunge
the settlers deeply in debt to the general government.
By 1820 these payments for the public lands were over twenty-two
million dollars in arrears. Relief measures passed by Congress from
time to time had extended the period of payment and made other
concessions. Now the government had to face the problem of
reconstructing its land laws or of continuing the old credit system
and relentlessly expelling the delinquent purchasers from their
hard-won homes on the public domain. Although the legal title
remained in the government, the latter alternative was so obviously
dangerous and inexpedient that Congress passed two new acts. The
first [Footnote: U. S. Statutes at Large, III., 566.] (April 24,
1820) reduced the price of land from two dollars to one dollar and
twenty-five cents per acre, abolished the system of credit, and
provided that lands might be purchased in multiples of eighty acres.
Thus the settler with one hundred dollars could secure full title to
a farm. This was followed by a relief act (March 2, 1821),
recommended by Secretary Crawford, [Footnote: Am. State Papers.,
Finance, III., 551, 718; U. S. Statutes at Large, III., 566.]
allowing previous purchasers to relinquish their claims to land for
which they had not paid, and apply payments already made to full
purchase of a portion of the land to be retained by the buyer, all
overdue interest to be remitted. [Footnote: Ibid., III., 612.] It is
significant that this system was not unlike the relief system which
had been so popular in the west.
This adjustment of the land question by no means closed the
agitation. A few years later Benton repeatedly urged Congress to
graduate the price of public lands according to their real value,
and to donate to actual settlers lands which remained unsold after
they had been offered at fifty cents an acre. [Footnote: Speech in
the Senate, May 16, 1826, Meigs, Benton, 163-170.] The argument
rested chiefly on the large number of men unable to secure a farm
even under the cheaper price of 1820; the great quantity of public
land which remained unsold after it had been offered; the advantage
to the revenues from filling the vacant lands with a productive
population; and the injustice to the western states, which found
themselves unable to obtain revenue by taxing unsold public lands
and which were limited in their power of eminent domain and
jurisdiction as compared with the eastern states, which owned their
public lands. In this agitation lay the germs of the later homestead
system, as well as of the propositions to relinquish the federal
public lands to the states within which they lay.
With manufacturers in distress, thousands of operatives out of
employment, and the crops of parts of the middle states and the west
falling in price to a point where it hardly paid to produce them, an
appeal to Congress to raise the duties established by the tariff of
1816 [Footnote: Babcock, Am. Nationality (Am. Nation, XIII.). chap.
xiv.] was inevitable. Hence, in the spring of 1820 a new tariff bill
was presented by Baldwin, of Pennsylvania, the member from
Pittsburgh. He came from a city which felt the full effects of the
distress of the manufacturers, especially those of iron and glass,
and which was one of the important centers of the great grain-
raising area of the middle states and the Ohio Valley.
Baldwin believed that the time had arrived when, "all the great
interests of the country being equally prostrate, and one general
scene of distress pervading all its parts," there should be a common
effort to improve conditions by a new tariff, intended not for the
sake of restoring the depleted treasury, but distinctly for
protection. Its advocates proposed to meet the failure of the system
of revenue, not by encouraging importations, but by internal taxes
and excises on the manufactured goods protected by the impost.
Additional revenue would be secured by higher duties on sugar,
molasses, coffee, and salt. The bill increased ad valorem duties by
an amount varying from twenty-five to sixty-six per cent,
additional. For woolen and cotton manufactures the rate of
additional duty was about one-third; on hemp, an important product
in Kentucky, about two-thirds. Duty on forged iron bars was
increased from seventy-five cents to one dollar and twenty-five
cents per hundred-weight. On many other articles the increase of
duty amounted to from twenty to one hundred per cent.
Naturally the home-market argument played an important part in the
debates. It was relied upon especially by Henry Clay in his closing
speech, [Footnote: Annals of Cong., 16 Cong., I Sess., II., 3034.]
in which he argued that the rapidity of growth of the United States
as compared with Europe made the ratio of the increase of her
capacity of consumption to that of our capacity of production as one
to four. Already he thought Europe was showing a want of capacity to
consume our surplus; in his opinion, cotton, tobacco, and bread-
stuffs had already reached the maximum of foreign demand. From this
he argued that home manufactures should be encouraged to consume the
surplus, and that some portion of American industry should be
diverted from agriculture to manufacturing.
Industrial independence also required this action. England had
recently imposed new duties on wool and cotton, and her corn laws
contributed to limit her demand for our flour. "I am, too," he said,
"a friend of free trade, but it must be a free trade of perfect
reciprocity. If the governing considerations were cheapness; if
national independence were to weigh nothing; if honor nothing; why
not subsidize foreign powers to defend us?" He met the argument of
the deficiency of labor and of the danger of developing overcrowded
and pauperized manufacturing centers by reasoning that machinery
would enable the Americans to atone for their lack of laborers; and
that while distance and attachment to the native soil would check
undue migration of laborers to the west, at the same time the danger
of congestion in the east would be avoided by the attraction of the
cheap western lands.
Lowndes, of South Carolina, who with Calhoun had been one of the
prominent supporters of the tariff in 1816, now made the principal
speech in opposition: he denied the validity of the argument in
favor of a home market and contended that the supply of domestic
grain would in any case exceed the demand; and that, however small
the export, the price of the portion sent abroad would determine
that of the whole. It is important to observe that the question of
constitutionality was hardly raised. The final vote in the House
(April 29, 1820) stood 91 to 78. New England gave 18 votes in favor
and 17 opposed; the middle region, including Delaware, gave 56 votes
for and 1 vote against; the south, including Maryland and her sister
states on the southern seaboard, gave 5 votes in favor and 50
opposed. The northwest gave its 8 votes in favor, and the southwest,
including Kentucky, gave 4 votes in favor and 10 opposed. The vote
of New England was the most divided of that of any section. From the
manufacturing states of Connecticut and Rhode Island but one member,
a Connecticut man, voted in opposition to the bill. The only 3
negative votes from Massachusetts proper came from the commercial
region of Boston and Salem. That portion of Massachusetts soon to
become the state of Maine gave 4 votes in opposition and only 2 in
favor, the latter coming from the areas least interested in the
carrying-trade. New Hampshire and Vermont gave their whole vote in
opposition, except for one affirmative from Vermont. Kentucky's vote
was 4 in favor to 3 opposed, Speaker Clay not voting.
In general, the distribution of the vote shows that the maritime
interests united with the slave-holding planters, engaged in
producing tobacco, cotton, and sugar, in opposition. On the other
side, the manufacturing areas joined with the grain and wool raising
regions of the middle and western states to support the measure.
From the states of New York, New Jersey, Pennsylvania, Delaware,
Ohio, Indiana, and Illinois, casting altogether 65 votes, but one
man voted against the bill, and he was burned in effigy by his
constituents and resigned the same year. Of the 53 votes cast by the
south and southwest, outside of the border states of Maryland and
Kentucky, there were but 5 affirmative votes. It is seen, therefore,
that in the House of Representatives, on the tariff issue, the
middle states and the Ohio Valley were combined against the south
and southwest, while New England's influence was nullified by her
division of interests. By a single vote, on a motion to postpone,
the measure failed in the Senate; but the struggle was only
deferred.
The most important aspect of the panic of 1819 was its relation to
the forces of unrest and democratic change that were developing in
the United States. Calhoun and John Quincy Adams, conversing in the
spring of 1820 upon politics, had the gloomiest apprehensions. There
had been, within two years, Calhoun said, "an immense revolution of
fortunes in every part of the Union; enormous numbers of persons
utterly ruined; multitudes in deep distress; and a general mass of
disaffection to the Government not concentrated in any particular
direction, but ready to seize upon any event and looking out
anywhere for a leader." They agreed that the Missouri question and
the debates on the tariff were merely incidental to this state of
things, and that this vague but wide-spread discontent, caused by
the disordered circumstances of individuals, had resulted in a
general impression that there was something radically wrong in the
administration of the government. [Footnote: Adams, Memoirs, V.,
128; cf. IV., 498.] Although this impression was the result of
deeper influences than those to which it was attributed by these
statesmen, yet the crisis of 1819, which bore with peculiar
heaviness upon the west and south, undoubtedly aggravated all the
discontent of those regions. To the historian the movement is
profoundly significant, for ultimately it found its leader in Andrew
Jackson. More immediately it led to the demand for legislation to
prevent imprisonment for debt, [Footnote: See, for example, Annals
of Cong., 16 Cong., 2 Sess., 1224; McMaster, United States, IV.,
532-535.] to debates over a national bankruptcy law, [Footnote:
Annals of Cong., 16 Cong., 2 Sess., I., 757, 759, 792, 1203 et
passim.] to the proposal of constitutional amendments leading to the
diminution of the powers of the supreme court, to a reassertion of
the sovereignty of the states, [Footnote: See chap. viii., below.]
and to new legislation regarding the public lands and the tariff.
The next few years bore clear evidence of the deep influence which
this period of distress had on the politics and legislation of the
country.