With Jackson suffering from tuberculosis, the Democratic convention chose Vice President Martin Van Buren to run for president in 1836. The Whigs hoped to defeat Van Buren by bringing together diverse supporters: financiers and commercial farmers who advocated internal improvements and protective tariffs; merchants and manufacturers who favored a national bank; evangelical Protestants who objected to Jackson’s Indian policy; and Southerners who were antagonized by the president’s heavy-handed use of federal authority. But these disparate interests led the Whigs to nominate three different men for president, and this lack of unity allowed Democrats to fend off an increasingly powerful opposition. Although Van Buren won the popular vote by only a small margin (50.9 percent), he secured an easy majority in the electoral college.
Inaugurated on March 4, 1837, President Van Buren soon faced another crisis that threatened the Democrats’ hold on power. The panic of 1837 started in the South and was rooted in the changing fortunes of American cotton in Great Britain. During the 1830s, the British invested heavily in cotton plantations and brokerage firms, and southern planters used the funds to expand cotton production and improve shipping facilities. British banks also lent large sums to states such as New York to fund internal improvements. This infusion of British money into the U.S. economy fueled inflation, and in February 1837 rising prices prompted protests by farmers and workers. But worse problems lay ahead.
In late 1836, the Bank of England, faced with bad harvests and declining demand for textiles, had tightened credit to limit the flow of money out of the country. This forced British investors to call in their loans and drove up interest rates in the United States just as cotton prices started to fall. Some of the largest American cotton merchants were forced to declare bankruptcy. The banks where they held accounts then failed—ninety-eight of them in March and April 1837 alone.
The economic crisis hit the South hard. Cotton prices fell by nearly half in less than a year. Land values declined dramatically, many southern whites lost farms and homes, port cities came to a standstill, and cotton communities on the southern frontier collapsed. The damage soon radiated throughout the United States. Northern brokers, shippers, and merchants were devastated by losses in the cotton trade, and northern banks were hit by unpaid debts incurred for canals and other internal improvements. Entrepreneurs who borrowed money to expand their businesses defaulted in large numbers. Shopkeepers, artisans, and farmers in the North and Midwest suffered unemployment and foreclosures.
Many Americans, especially in the North and West, blamed Jackson’s war against the Bank of the United States for precipitating the panic. They were also outraged at Van Buren’s refusal to intervene in the crisis. Probably no federal policy could have resolved the problems created by the “credit bubble,” which had been brought on by the ready availability of British money. Still, the president’s apparent disinterest in the plight of the people inspired harsh criticisms from ordinary citizens as well as political opponents. Worse, despite brief signs of recovery in 1838, the depression deepened in 1839 and continued for four more years.