Most surveys of the antebellum period give only a passing reference to the Panic of 1857. It is generally referred to as a sharp, but short, economic downturn, a blip in the booming economy of the 1850s that disappeared within a matter of months and virtually without a trace. In The Panic of 1857 and the Coming of the Civil War, James L. Huston argues that these perceptions are fundamentally wrong. While banks quickly resumed paying specie – hard currency – other aspects of the downturn lingered on for years. More important, those lingering economic effects played a critical role in transforming the rickety Republican coalition from a one-issue pressure group into a well-rounded political party capable of winning the presidency in 1860.
The most obvious symptoms of the Panic, Bank failures and refusals to redeem notes presented for specie, started at the end of August 1857 and subsided by the end of the year. But the banks righted themselves only by calling in demand loans and thereafter strictly limiting credit, thereby starving their manufacturing and shipping customers of capital. This led to widespread layoffs and unemployment in the Northeast. At the same time, the end of the Crimean War led to a catastrophic decline in European demand for Northwest wheat, which rippled through the Northern economy as railroad tonnage nosedived. Prof. Huston opines that the Panic was not fully over until the beginning of 1860, when the economy returned to pre-Panic levels. The South was less affected. While the price of cotton dipped in late 1857, prices of Southern export crops quickly recovered because demand remained high.
The Panic and its economic effects, principally continued unemployment, represented a fundamental challenge to those Northern political leaders who adamantly maintained that Free Labor was the best form of labor organization. In particular, Northern leaders were shaken by bread riots that occurred during the Fall of 1857. Defenders of Free Labor developed a three-part solution that, they asserted, would right the ship: higher tariffs, homesteading, and education.
A primary reason for continued unemployment and underemployment, they argued, was that American laborers were competing against degraded European workers and peasants who toiled for subsistence wages. So long as this continued, the laws of economics would reduce American workers to the same subsistence levels. Raising import duties would cure this situation by increasing the price of the competing European goods. High tariffs were not a pro-boss tactic, they were are pro-Labor measure. Think of labor opposition to NAFTA in the 1990s.
Another reason for unemployment and low wages, so the argument went, was an excess of labor supply in urban areas of the Northeast. The answer to this was to encourage increased migration to the West via a Homestead Act that rewarded settlers with land that was free or virtually free.
The third leg – education – was more in the nature of a long-term solution that reaffirmed the core principles of American social mobility By providing for institutions of learning such as agricultural colleges, the government would insure that American labor would not descend to the degraded condition of European workers. Thrifty, industrious workers and farmers would be able to improve themselves and climb the social and economic ladder to success.
The Republican coalition did not come to these answers quickly or easily. In fact, at the outset Republicans were badly divided and confused. These Whiggish solutions came more readily to those members of the party who had been Whigs. But former Democrats were a critical component of the Republican coalition, and ironically (as I have mentioned elsewhere) former Free Soil Democrats tended to hail from the radical Locofoco wing of the party – precisely the element that embraced free trade and low tariffs. Only under the pressure of events was the party as a whole able to forge a consensus on economic matters.
Meanwhile, the Democrats and the South played directly into the Republicans' hands, allowing the Republicans to formulate a message that demonstrated that the Slave Power was the economic enemy of Northern labor. The Panic resulted in dramatically reduced federal government revenues, all of which were derived from import duties and Western land sales. During the legislative sessions of 1858-59 and 1859-60, the Buchanan administration was therefore confronted with a dilemma. It could either recommend an increase in tariffs, or float debt and cut the budget.
To make a long story short, the Southern wing of the party (silently abetted by Northwestern colleagues) took the lead to block even a modest upward revision in the tariffs. The administration was left with the second option: debt and spending cuts – spending cuts that precluded a homestead act, college land grants, and river and harbor improvements for which the Great Lakes region was clamoring. The Republicans could not believe their luck, and the Democrats' stupidity. Here was proof that the Democratic party was the pawn of the Slave Power, and that the Slave Power was intent on destroying the farmers and workers of the North. The end of the Lecompton controversy in mid-1858 had ended the immediate crisis over slavery in the territories. But the Panic of 1857, and the Democrats' response to it, breathed new life into the Republicans.
Pennsylvania is not called the Keystone State for nothing. In the late 1850s, it was the key to the presidency. The proto-Republicans had lost the state resoundingly in 1856. Everyone recognized that it would be the crucial state in 1860. Unfortunately for the Democrats, the Pennsylvania mining and iron industry was the epicenter of the downturn in employment that persisted through the late 1850s, and the epicenter of worker demands for pro-Labor tariff increases. The 1858 mid-term elections in Pennsylvania were a disaster for the Democrats. The House delegation, previously composed of 14 Democrats and 11 Opposition, was transformed into a 21 to 4 Republican majority.
Through regression analysis, Prof. Huston demonstrates that the tariff and related economic issues arising out the Panic were crucial to this dramatic transformation of the political landscape. Both former conservative Whigs and Americans (who either voted for Millard Fillmore in 1856 or sat out the election), as well as thousands of workers who had previously voted Democratic, were convinced that the Republicans were no longer merely an anti-slavery party, but had the economic answers they needed.
Thereafter, intransigent Southern Democrats continued to play into the Republicans' hands, rejecting, despite the pleas of their Pennsylvania colleagues, upward tariff revisions. The Republicans were able to hone their message into a species of Grand Unified Theory. The Democrats were the Slave Power, and the Slave Power was intent on destroying the North. In its lust for power, the South would deprive Northerners of the ability to settle in the West, grind Northern workers into the dust by depriving them of a meaningful tariff, obstruct desperately needed internal improvements in the Northwest and elsewhere, and block the ability of Northerners to improve themselves through education.
In the process, by 1860 the Republicans were able to present themselves in Pennsylvania and other conservative areas (such as New York City and New Jersey) as a multi-issue political party that did not obsessively focus on slavery alone. They had positions on, and answers to, unemployment, tariffs, internal improvements, homesteading and education. In the 1860 election, their selection of an apparently moderate, Whiggish candidate who had regarded Henry Clay as his idol, reinforced this perception. They swept Pennsylvania, and with it the presidency. Although the economic effects of the Panic had abated by early in the year, the Republicans' comprehensive message persuaded most of the voters who had defected to them in 1858 that they had the better answers in 1860.
* * *
This is obviously a specialized book, but for the right reader it will be a revelation. Among other things, it helps explain how and why various apparently disparate elements of the Republican program complemented each other and fit together. It also explains what to me had been something of a mystery: how and why the Republicans were able to survive and gain strength even after the last major pre-War territorial crisis (Lecompton) ended in the first half of 1858, when over two years remained before presidential balloting began. Highly recommended.
NOTICE PURSUANT TO FEDERAL LAW
In order to avoid being fined by the Federal Trade Commission I hereby declare that I received no compensation for the above review, except that an unidentified person, who may or may not have been an agent of the author, has promised me a vacation at a tropical resort with a call girl who allegedly serviced Elliot Spitzer. Further affiant sayeth not.
The most obvious symptoms of the Panic, Bank failures and refusals to redeem notes presented for specie, started at the end of August 1857 and subsided by the end of the year. But the banks righted themselves only by calling in demand loans and thereafter strictly limiting credit, thereby starving their manufacturing and shipping customers of capital. This led to widespread layoffs and unemployment in the Northeast. At the same time, the end of the Crimean War led to a catastrophic decline in European demand for Northwest wheat, which rippled through the Northern economy as railroad tonnage nosedived. Prof. Huston opines that the Panic was not fully over until the beginning of 1860, when the economy returned to pre-Panic levels. The South was less affected. While the price of cotton dipped in late 1857, prices of Southern export crops quickly recovered because demand remained high.
The Panic and its economic effects, principally continued unemployment, represented a fundamental challenge to those Northern political leaders who adamantly maintained that Free Labor was the best form of labor organization. In particular, Northern leaders were shaken by bread riots that occurred during the Fall of 1857. Defenders of Free Labor developed a three-part solution that, they asserted, would right the ship: higher tariffs, homesteading, and education.
A primary reason for continued unemployment and underemployment, they argued, was that American laborers were competing against degraded European workers and peasants who toiled for subsistence wages. So long as this continued, the laws of economics would reduce American workers to the same subsistence levels. Raising import duties would cure this situation by increasing the price of the competing European goods. High tariffs were not a pro-boss tactic, they were are pro-Labor measure. Think of labor opposition to NAFTA in the 1990s.
Another reason for unemployment and low wages, so the argument went, was an excess of labor supply in urban areas of the Northeast. The answer to this was to encourage increased migration to the West via a Homestead Act that rewarded settlers with land that was free or virtually free.
The third leg – education – was more in the nature of a long-term solution that reaffirmed the core principles of American social mobility By providing for institutions of learning such as agricultural colleges, the government would insure that American labor would not descend to the degraded condition of European workers. Thrifty, industrious workers and farmers would be able to improve themselves and climb the social and economic ladder to success.
The Republican coalition did not come to these answers quickly or easily. In fact, at the outset Republicans were badly divided and confused. These Whiggish solutions came more readily to those members of the party who had been Whigs. But former Democrats were a critical component of the Republican coalition, and ironically (as I have mentioned elsewhere) former Free Soil Democrats tended to hail from the radical Locofoco wing of the party – precisely the element that embraced free trade and low tariffs. Only under the pressure of events was the party as a whole able to forge a consensus on economic matters.
Meanwhile, the Democrats and the South played directly into the Republicans' hands, allowing the Republicans to formulate a message that demonstrated that the Slave Power was the economic enemy of Northern labor. The Panic resulted in dramatically reduced federal government revenues, all of which were derived from import duties and Western land sales. During the legislative sessions of 1858-59 and 1859-60, the Buchanan administration was therefore confronted with a dilemma. It could either recommend an increase in tariffs, or float debt and cut the budget.
To make a long story short, the Southern wing of the party (silently abetted by Northwestern colleagues) took the lead to block even a modest upward revision in the tariffs. The administration was left with the second option: debt and spending cuts – spending cuts that precluded a homestead act, college land grants, and river and harbor improvements for which the Great Lakes region was clamoring. The Republicans could not believe their luck, and the Democrats' stupidity. Here was proof that the Democratic party was the pawn of the Slave Power, and that the Slave Power was intent on destroying the farmers and workers of the North. The end of the Lecompton controversy in mid-1858 had ended the immediate crisis over slavery in the territories. But the Panic of 1857, and the Democrats' response to it, breathed new life into the Republicans.
Pennsylvania is not called the Keystone State for nothing. In the late 1850s, it was the key to the presidency. The proto-Republicans had lost the state resoundingly in 1856. Everyone recognized that it would be the crucial state in 1860. Unfortunately for the Democrats, the Pennsylvania mining and iron industry was the epicenter of the downturn in employment that persisted through the late 1850s, and the epicenter of worker demands for pro-Labor tariff increases. The 1858 mid-term elections in Pennsylvania were a disaster for the Democrats. The House delegation, previously composed of 14 Democrats and 11 Opposition, was transformed into a 21 to 4 Republican majority.
Through regression analysis, Prof. Huston demonstrates that the tariff and related economic issues arising out the Panic were crucial to this dramatic transformation of the political landscape. Both former conservative Whigs and Americans (who either voted for Millard Fillmore in 1856 or sat out the election), as well as thousands of workers who had previously voted Democratic, were convinced that the Republicans were no longer merely an anti-slavery party, but had the economic answers they needed.
Thereafter, intransigent Southern Democrats continued to play into the Republicans' hands, rejecting, despite the pleas of their Pennsylvania colleagues, upward tariff revisions. The Republicans were able to hone their message into a species of Grand Unified Theory. The Democrats were the Slave Power, and the Slave Power was intent on destroying the North. In its lust for power, the South would deprive Northerners of the ability to settle in the West, grind Northern workers into the dust by depriving them of a meaningful tariff, obstruct desperately needed internal improvements in the Northwest and elsewhere, and block the ability of Northerners to improve themselves through education.
In the process, by 1860 the Republicans were able to present themselves in Pennsylvania and other conservative areas (such as New York City and New Jersey) as a multi-issue political party that did not obsessively focus on slavery alone. They had positions on, and answers to, unemployment, tariffs, internal improvements, homesteading and education. In the 1860 election, their selection of an apparently moderate, Whiggish candidate who had regarded Henry Clay as his idol, reinforced this perception. They swept Pennsylvania, and with it the presidency. Although the economic effects of the Panic had abated by early in the year, the Republicans' comprehensive message persuaded most of the voters who had defected to them in 1858 that they had the better answers in 1860.
* * *
This is obviously a specialized book, but for the right reader it will be a revelation. Among other things, it helps explain how and why various apparently disparate elements of the Republican program complemented each other and fit together. It also explains what to me had been something of a mystery: how and why the Republicans were able to survive and gain strength even after the last major pre-War territorial crisis (Lecompton) ended in the first half of 1858, when over two years remained before presidential balloting began. Highly recommended.
NOTICE PURSUANT TO FEDERAL LAW
In order to avoid being fined by the Federal Trade Commission I hereby declare that I received no compensation for the above review, except that an unidentified person, who may or may not have been an agent of the author, has promised me a vacation at a tropical resort with a call girl who allegedly serviced Elliot Spitzer. Further affiant sayeth not.
Thanks for this review. In light of the recent economic events, I have been doing some reading of 19th C bank panics and their ramifications. Your analysis seems to me consistent with the general ideas in Foner.
ReplyDeleteA,
ReplyDeleteI hope I made clear that I was trying to convey Prof. Huston's argument, not my own. That said, I found Prof. Huston's analysis convincing, and the connection with Foner's discussion occurred to me as well.
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