The Panic of 1837
[An essay included in an historical series published
by the Henry George School of Social Science, New York, NY - 1967]
Depressions and recessions have been occurring so regularly through
our history that economists have reported variously on the resulting
mass unemployment and countless business failures. Shortly after the
War of Independence the United States witnessed the first of a series
of depressions. After the panic of 1785 there was another slump
followed by a third period of economic dislocation, but neither of
these compared in intensity with the 1837 panic, which lasted four
years, with many fortunes made and lost.
Martin Van Buren was elected to the Presidency amidst rumors that the
economy was entering a period of stagnation. Politicians and
economists joined forces in an effort to analyze the causes and
determine the extent to which government should control the economy.
Steady financial decline plagued the Democratic administration. Some
of the reasons offered were incurrence of large state debts due to the
construction of canals and railroads; expansion of credit by numerous
banks and the subsequent availability of easy money; an unfavorable
balance of trade in which the imports exceeded exports resulting in a
loss of specie; crop failures in 1835 and 1837 and the frenzy that was
caused by the avalanche of land speculation. It is the latter point
that is of major importance in the panic of 1837 and is closely linked
with many of the other causes.
During the 1830's the growth of state and wildcat banks had offered
many the opportunity to borrow money with great ease, and a sizeable
portion was invested in the purchase of land. As a result, and this
represents only one factor, government land sales soared, causing
serious concern to the succeeding President, Andrew Jackson.
The land offices recorded that in 1836 the sales were ten times
greater than they had been five years earlier. In order to limit the
speculative fever Andrew Jackson, in opposition to the prevailing
sentiment, issued the Specie Circular, which ordered land offices to
accept only gold or silver in payment of public lands. Many state
banks did not have specie backing and this caused a decline in
borrowers, a drop in land sales to one quarter of the previous year,
numerous defaulted payments and a financial crisis.
Urban real estate values increased at such an abnormally high
velocity that a Hartford speculator tells of making 75 percent
annually on an investment of $1,000 in Michigan where the boom was in
high gear. Philip Hone, a parvenu in New York society, recalls a farm
near Brooklyn that was offered for $20,000 in 1831 with no takers and
sold in 1835 for $102,000.
The boom that preceded the panic was not limited to government land
but included city lots, urban acreage, swamps and agricultural areas.
Wild speculation, fraud and corruption prevailed in tile timber lands
of Maine and extended inland from New England to western and southern
sections. Purchases by an "American land company" form a
chapter by themselves in the explosive history of mounting fortunes.