Panic of 1837
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The Panic of 1837
by Adam Parker
During the Jackson administration, a crisis known as the Panic of 1837 emerged as one of the worst economic depressions of the United States' history. It started when Andrew Jackson issued an order called the "Specie Circular," which allowed only gold or silver to be used in the acquisition of land. Settlers emigrating west went to creditors to buy their land (Wentworth). As this occurred, foreign investors, including British banks, requested the immediate repayment of loans. Over 800 banks in 1837 refused the withdrawal of over $150 million dollars in funds. This caused massive chaos within the population and many businesses subsequently closed. Historians estimate that over 10,000 people were living in poverty and in New York City, over 30 percent of all manual laborers were completely out of work (Faragher 262). With these factors, the relatively new country found itself in the worst economic depression it had yet experienced.
The second major cause of the Panic of 1837 was the Second Bank of the United States. Andrew Jackson had opposed banks since the 1790s after losing a significant investment from a bank. The Second Bank was about to expire in 1832 so Congress voted to pass a bill to renew the charter but it was vetoed by Andrew Jackson, who strongly opposed its renewal. This occurred after Jackson had already withdrew $10 million dollars in federal government funds from the Second Bank and deposited them into private and state banks that later became known as "pet banks." In an effort to keep the national bank from shutting down, Biddle, head of the second bank, called in the loans and caused many businesses to fail between 1833-1834 because they could not pay their debt. Andrew Jackson was largely responsible for the Panic of 1837, however, economic depressions were not considered unnatural and unlike today, politicians saw no reason to remedy them because government intervention was then thought as unnecessary. (Faragher 263)
The effects of the Panic of 1837 would prove to be inspiring to future political figures of America in improving conditions. Mobs in New York City raided warehouses to get food and the police were unable to stop them due to their size. Unemployment was at an all time high at 10 percent during this crisis. People living in poverty and without the most basic essentials such as food and shelter looked to churches and other private organizations for relief. Many charitable groups established soup kitchens and breadlines to help those that the government had neglected. In many places, paper money was almost worthless due to high inflation and some people, including Arthur Tappan who ran a silk-importing business, lost everything (Panic). Some even resorted to trading goods for services or other goods because currency had little to no value and was effectively worthless in transactions (Wentworth)
A major outcome of the Panic of 1837 was an almost guaranteed victory in the election of 1840 for the Whigs. Andrew Jackson's six year depression that lasted from 1837 to 1843 persuaded voters to elect William Harrison in reaction to the president's actions (Panic). It could be argued that had Andrew Jackson not been directly involved in the depression by vetoing the bank renewal bill and enacting Specie Circular, the Whig party might have never won a presidential election. Although the Whigs did win the election of 1840, the victory was considered to be short-lived because the Whig party would only win one more election before dissolving (Faragher 263)
Works Cited
Faragher, John, Mary Buhle, Daniel Czitrom, and Susan Armitage. Out of Many. New Jersey: Prentice Hall, 2006.
Wentworth, John. "Panic of 1837." Readings in American History. November 6, 2006 http://www.adena.com/adena/usa/hs/hs01.htm
"Panic of 1837." Ohio History Central. November 6, 2006 http://www.ohiohistorycentral.org/entry.php?rec=536
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