[On September 20th, 1873, the New York Stock Exchange closed for ten days, a key moment in the developing economic crisis that came to be known as the Panic of 1873. So for the 150th anniversary of that moment this week I’ll AmericanStudy a handful of Panic contexts, leading up to a weekend post on 2023 echoes of those histories!]
On what
was quite similar and what was distinct about two 19th century
economic downturns.
Rampant
speculation, a longstanding bubble that was about to burst, changes in
international monetary and lending policies, and concurrent declining prices
for key products led to widespread economic panic and resulting bank runs. When
the banks ran out of their reserves, customers were unable to access (much less
redeem) their currency and other holdings, and the economy quickly collapsed. While
that sounds very much like the 1873 conditions I described in yesterday’s post
that culminated in the Panic of 1873, here I’m actually describing the conditions in late
1836 and early 1837 that culminated in the May events which became known as
the Panic
of 1837. Despite some specific time period variations (for example, the
1837 bubble was in land speculation, rather than railroad companies and stocks
as was the case with the 1873 bubble), the two Panics share many similarities,
as do the
depressions that followed each
of them. (One can say the same about their mutual resemblance to the 2008
financial crisis, on which more this weekend.)
As the
man said, though, history might rhyme but it doesn’t repeat, and there
certainly were also important and telling differences between the Panics of
1837 and 1873. Perhaps the most telling was the role of the U.S. President in
helping cause the earlier panic—not Martin
Van Buren, who had been inaugurated only weeks before the Panic started
(although he was blamed
for the economic crisis nonetheless, a fate that many presidents have
suffered), but his predecessor
and mentor, Andrew Jackson. As with most questions of historical causation,
there has been significant
debate over whether Jackson’s infamous Bank War
directly contributed to the Panic, and I’m not going to pretend to be expert
enough to weigh in on that debate. But it seems clear to me that the absence of
a centralized national bank was at least a factor in the collapse of the banks,
and that absence was due directly to Jackson’s refusal to extend the charter of
the Second
Bank of the United States.
Historical
causes are complicated enough to pin down, but I’d argue that effects can be
even trickier. Over the next two posts I’ll focus on two particularly
complicated and unquestionably crucial aftermaths of the Panic of 1873, each of
which is unique to that era and thus distinct from the effects of the Panic of
1837 and the resulting depression. But I would argue that by far the biggest
historical difference between the two Panics was that in 1873 the nation was in
the midst of one of the largest federal government initiatives in American
history, Federal Reconstruction—and the extended depression that followed the
Panic of 1873 without
question contributed to the frustratingly and tragically early conclusion
to that federal effort. It did so in a variety of ways, including heavily influencing
the pivotal Congressional
elections of 1874 that voted out many members of President Grant’s
Republican Party. One could also argue, with a great deal of validity, that
both the depression and the elections provided cover for white Americans to
abandon Reconstruction’s commitments to racial justice and equality. But
however we parse the relationship, there’s no way to analyze the Panic of 1873
without situating it in the Reconstruction era, and that certainly represents a
key difference from 1837.
Next 1873
contexts tomorrow,
Ben
PS. What
do you think?
No comments:
Post a Comment