DOCUMENT PROJECT 9

The Panic of 1819

The panic of 1819 lasted more than four years and was the first serious economic recession faced by the United States. It resulted primarily from irresponsible banking practices and the declining demand for cotton, foodstuffs, and other American goods in Europe. This combination prompted farm foreclosures, factory layoffs, bank failures, and widespread personal and business bankruptcies. In every region of the country, people were left jobless, homeless, and destitute, and thousands auctioned off their household goods or were thrown into debtors’ prisons (Documents 9.1 and 9.2). Private charities were overwhelmed, and most could not meet the demand for clothes, housing, and food.

In the midst of this tremendous suffering, the public focused its blame on bankers and government officials. There was much disagreement, however, about the proper remedy for the economic recession. Some sought permanent restriction of bank credit, whereas others believed that cheaper credit would enable the economy to grow. Proposals were put forward to give direct government relief to debtors, abolish debtors’ prisons, and start public works projects. Debates over whether to increase protective tariffs revealed the sectional differences emerging in the United States. In 1816 Congress had passed a tariff raising duties on foreign imports, and during the panic northern manufacturers wanted this tariff increased to further protect the U.S. market from foreign competition. Southern planters, on the other hand, blamed tariffs for raising the costs of manufactured goods and felt they benefited the North at the expense of the South (Document 9.3). The panic also led to calls for political reforms, especially by those who felt the government was not responsive to the needs of the laboring classes. Many states considered lowering or even abolishing property qualifications for eligible voters. Documents 9.4 and 9.5 demonstrate both sides of this debate as it was taken up at the New York constitutional convention in 1821. By 1823 the panic had ended, but the economic and political changes it engendered reshaped American society and politics and would influence future responses to economic crises.