Panic Blogging: 1837

It's been a year since the financial crisis first hit. Thirty years of tearing down New Deal and Great Society regulations undermined the apparatus to stop financial panics from taking place. In my mind, the recent collapse has a lot more in common with 19th century panics than the Great Depression. But to explore this a bit more, I want to spend the next week examining the different financial panics in American history.

Let's start with the first truly great one: 1837. It's not all that easy to compare the 1830s to the present. But they do have one important thing in common: a populist anti-government president who channeled fears of the common people toward elite institutions of which they had little understanding.

This president of course is Andrew Jackson. A major issue for the early decades of the republic was the size of the federal government. Twice, presidents created the Bank of the United States. Twice, future presidents let it die. Twice, economic depressions took place. The Panic of 1837 was caused in no small part by Andrew Jackson ending the BUS and sending government deposits to poorly regulated state banks. When Jackson vetoed the rechartering of the BUS, it was supposed to have died in 1836. But unwilling to see the Bank live until then, Jackson withdrew all government deposits early, in 1832. Those state banks showed little restraint or responsibility and were issuing tons of notes with almost no backing to them. In particular, these notes were used to pay the federal government for public land purchases. Shortly before leaving office, Jackson issued his Specie Circular, banning such notes for use in paying the federal government.

In the Panic of 1837, 1/2 of American banks failed. Like many of these panics, recovery was slow--in this case 1843. Like in the Panic of 2008, unrestrained credit and shady financial practices were a major problem--without the use of worthless bank notes, western states had no way to acquire public land. Of course, the Panic of 1837 affected the poor the most, leading to huge unemployment numbers (though it's not possible to measure these things with any accuracy during this period) and even food riots in New York.

Again, I think it is ahistorical to draw too many direct links between 1837 and 2008. But there are at least a few important similarities--an anti-government mentality among large groups of people, a president to channel that anger (though at least in Jackson's case, he actually was not born an elite), an overabundance on credit and shady financial maneuvers, and a willful ignorance about the coming problem. Exuberance over bubbles blind people to their existence. In 1837, the bubble popped and the whole system collapsed, much as it did in 2008.

Best Inauguration Ever

A couple of days ago over at Kos, Bill in Portland Maine put up this poll about which past inauguration you wish you could have attended. An insane amount of people said JFK in 1961. This says a lot about the Baby Boomer readership of the site. Kennedy is the most overrated president in U.S. history. It took Lyndon Johnson to actually get things done. But that's not my point here.

One of the choices was Andrew Jackson's 1829 inauguration. Only 3% of respondants chose this option, but they were the knowing ones. For it was on that day that all hell broke loose at the White House.

Margaret Smith, a Washington socialite, described the scene. People from around the area came to see the popular hero take office. Those people followed him to the White House.

"But what a scene did we witness! The Majesty of the People had disappeared, and a rabble, a mob, of boys, negros [sic], women, children, scrambling fighting, romping. What a pity what a pity! No arrangements had been made no police officers placed on duty and the whole house had been inundated by the rabble mob. We came too late.

The President, after having been literally nearly pressed to death and almost suffocated and torn to pieces by the people in their eagerness to shake hands with Old Hickory, had retreated through the back way or south front and had escaped to his lodgings at Gadsby's.

Cut glass and china to the amount of several thousand dollars had been broken in the struggle to get the refreshments, punch and other articles had been carried out in tubs and buckets, but had it been in hogsheads it would have been insufficient, ice-creams, and cake and lemonade, for 20,000 people, for it is said that number were there, tho' I think the number exaggerated.

Ladies fainted, men were seen with bloody noses and such a scene of confusion took place as is impossible to describe, - those who got in could not get out by the door again, but had to scramble out of windows. At one time, the President who had retreated and retreated until he was pressed against the wall, could only be secured by a number of gentleman forming around him and making a kind of barrier of their own bodies, and the pressure was so great that Col. Bomford who was one said that at one time he was afraid they should have been pushed down, or on the President. It was then the windows were thrown open, and the torrent found an outlet, which otherwise might have proved fatal.

This concourse had not been anticipated and therefore not provided against. Ladies and gentlemen, only had been expected at this Levee, not the people en masse. But it was the People's day, and the People's President and the People would rule."

Is there any question that this was the inauguration party to end all inauguration parties?

Historical Image of the Day

Rachel Jackson, wife of Andrew Jackson. She died in 1828 right after his successful candidacy for president. He always blamed her death on his opponents. They claimed she was a bigamist because the divorce from her first husband was not properly completed before she married Andrew. Maybe, but I'd say it probably had more to do with bad 1820s diets and her tobacco habit.

Andrew Jackson

I am amused by the search for the body of Charles Henry Dickinson, the man Andrew Jackson killed in a duel in 1806. I love talking about Andrew Jackson the murderer in my survey courses. I particularly like the story of him shooting at the guy on the boat before he ran for president. The guy just wanted to meet him but he was getting in the way and slowing the boat down. So Jackson started shooting. I don't think he hit anything and he certainly didn't kill the guy. But the students like the story anyway.

Theo Emery does pose some interesting questions about what might have happened had Jackson died in the duel: "would the United States have won the Battle of New Orleans? Would executive power have evolved without President Jackson? Would the Trail of Tears have taken place?

Questions like these get at the issue of top-down versus bottom-up history. How much do generals and presidents matter? I tend to fall in the middle of this debate. For example, there is no question that Martin Luther King helped shape the civil rights movement, but had he not been in Montgomery in 1955, the civil rights movement still would have happened and the ultimate successes and failures of the movement would likely have been little different.

Let me try to answer Emery's three questions. Would the United States have won the Battle of New Orleans? Hard to say. But it doesn't really matter. The Battle of New Orleans was a great boost to the morale of the United States. But it didn't actually accomplish anything. Not only had the Treaty of Ghent been signed before the battle, ending the War of 1812, but the main issue leading to the war--the impressment of U.S. sailors by the British navy--was rendered irrelevant by the end of the Napoleonic Wars. A devastating loss at New Orleans might have made the British press their advantage harder on the American continent, but ultimately I think little would have changed. We would however have been spared Johnny Horton's 1959 hit song, "Battle of New Orleans," which can only be seen as positive.

Would executive power have expanded without Jackson? This is the toughest of the three questions. I have to think the answer is yes. One thing about Jackson is that he was so dominant over the political life of his time. This is quite unusual in American history--probably only Franklin Roosevelt is comparable. The main thing tying the Whigs together was a collective dislike for Jackson. So the second party system would have fallen on somewhat different lines if Jackson had died in 1806. However, it is fairly likely that Henry Clay would have been president had Jackson not been around. Clay almost certainly would have expanded executive power on some level to promote the American System. Still, the expansion of executive power is ultimately pretty small under Jackson. Most of the presidents after him for the rest of the century did not push executive power (Polk and Lincoln being the strongest exceptions). Thus, in 1896, we had several consecutive presidents that actively believed the promotion of all legislation and national agendas should come from Congress. Nearly all the expansion of executive power we see today began with Theodore Roosevelt and blew up from there. So if Jackson is never president, we are pretty much in the same situation in 1900 and today. Ultimately, Jackson's expansion of executive authority made little difference in the big picture of American history.

Finally, the Trail of Tears. Jackson may have been right when he argued that removing the Cherokees was actually the best thing for their survival. That doesn't make him any less the racist. But the other option was war started by local whites. The U.S. military was not going to stop white settlers from invading Indian lands--they never had before and didn't after. Regardless of the Supreme Court decision that affirmed Cherokee rights, no U.S. president was going to use the army to keep whites out. So the Trail of Tears might not have happened, but other unspeakable atrocities would have.

Interesting questions though.