Panic Of 1837: Who Did Americans Blame?

The Panic of 1837 was a major economic crisis that hit the United States hard, lasting until the mid-1840s. It was a tough time, and people were looking for someone to blame. So, who did many Americans in the North and West point the finger at? Let's dive into the historical context to understand the blame game during this tumultuous period. The Panic of 1837 wasn't just a blip; it was a full-blown economic disaster that touched nearly every aspect of American life. Businesses failed, unemployment soared, and land values plummeted. Imagine waking up one day to find that everything you had worked for was suddenly worth a fraction of what it used to be. This is the reality that many Americans faced, and naturally, they wanted answers and someone to hold accountable. The economic policies of the time were complex and often controversial. President Andrew Jackson, who preceded Martin Van Buren, had implemented several significant changes, including dismantling the Second Bank of the United States. This decision was highly contentious, with supporters arguing it curbed the power of the financial elite and detractors warning it would destabilize the economy. When the panic hit, these debates intensified, and blame was readily assigned. Understanding the context of these policies is crucial to grasping why certain figures and institutions became scapegoats. The Second Bank, in particular, had been a lightning rod for criticism, accused of wielding too much influence and favoring certain economic interests over others. Jackson's actions were seen by some as a victory for the common man, but by others as a reckless gamble with the nation's financial stability. When the economy tanked, these pre-existing fault lines in public opinion deepened, creating a fertile ground for blame and recrimination. So, as we explore who got the blame, keep in mind that the Panic of 1837 was more than just a financial crisis; it was a culmination of political tensions, economic policies, and widespread uncertainty about the future of the country.

Andrew Jackson's Policies

Many Americans in the North and West blamed President Andrew Jackson and his policies for the economic downturn. Jackson's decision to dismantle the Second Bank of the United States created a power vacuum in the banking system. This decision, intended to curb the power of the financial elite, inadvertently led to a proliferation of state banks, often referred to as "pet banks." These banks, lacking the regulatory oversight of a national institution, engaged in risky lending practices, fueling speculative bubbles, particularly in land. The consequences were far-reaching and contributed significantly to the economic instability that culminated in the Panic of 1837. Jackson's supporters, primarily in the South and West, lauded his actions as a victory for the common man, liberating the country from the clutches of a powerful, centralized bank. However, critics in the North and East, particularly those with strong ties to the business and financial communities, warned of the potential for economic chaos. These critics argued that the Second Bank, despite its flaws, provided a crucial stabilizing force in the financial system, regulating state banks and ensuring a degree of fiscal responsibility. When Jackson dismantled the bank, he removed this regulatory mechanism, opening the door for unchecked speculation and risky lending. The "pet banks," flush with federal deposits, eagerly extended credit to land speculators and other ventures, driving up prices to unsustainable levels. This created an artificial sense of prosperity, masking the underlying fragility of the economy. When the bubble finally burst, the consequences were devastating, and many Americans pointed directly to Jackson's policies as the root cause of the crisis. Furthermore, the Specie Circular, issued by Jackson in 1836, added fuel to the fire. This executive order required that public lands be purchased with gold or silver, rather than paper money. The intent was to curb land speculation and stabilize the currency, but the effect was to create a sudden demand for specie (gold and silver), which many banks lacked. This triggered a contraction of credit and further destabilized the financial system, accelerating the onset of the panic. The Specie Circular was widely criticized for its unintended consequences, with many blaming it for exacerbating the economic downturn. In summary, Jackson's policies, particularly the dismantling of the Second Bank and the implementation of the Specie Circular, were seen by many in the North and West as the primary drivers of the Panic of 1837. These actions created an environment of financial instability and contributed to the speculative bubbles that ultimately burst, plunging the nation into a severe economic crisis.

Martin Van Buren's Challenges

While Andrew Jackson set the stage, President Martin Van Buren inherited the crisis. Many held him responsible for not effectively addressing the economic problems. Van Buren's adherence to laissez-faire economic principles meant he was hesitant to intervene directly in the economy. This hands-off approach was seen by many as a failure of leadership, as the crisis deepened and spread. Van Buren believed that the government should not interfere with the natural cycles of the economy, allowing it to correct itself without intervention. This philosophy, rooted in classical economics, was popular among some segments of the population, particularly those who feared government overreach. However, it proved to be deeply unpopular during the Panic of 1837, as people struggled with unemployment, business failures, and plummeting land values. Critics argued that Van Buren's inaction allowed the crisis to fester, prolonging the suffering of ordinary Americans. They called for government intervention to stabilize the banking system, provide relief to struggling businesses, and create jobs for the unemployed. Van Buren's refusal to heed these calls fueled resentment and contributed to his image as an aloof and uncaring leader. The establishment of the Independent Treasury system, one of Van Buren's signature policies, further exacerbated his unpopularity. This system aimed to separate the government's finances from the banking system, preventing public funds from being used for speculative purposes. While intended to promote financial stability, the Independent Treasury was seen by many as a blow to the already struggling economy. Critics argued that it further restricted the availability of credit and hampered economic recovery. Furthermore, Van Buren faced the difficult task of navigating a deeply divided political landscape. The Whig Party, formed in opposition to Jacksonian policies, gained strength during the crisis, capitalizing on the widespread discontent with the Democrats' handling of the economy. Van Buren's inability to unite the country behind a coherent economic policy further weakened his position and made it difficult to address the challenges of the Panic of 1837. In conclusion, while Andrew Jackson's policies laid the groundwork for the crisis, Martin Van Buren bore the brunt of the blame for his perceived inaction and adherence to laissez-faire principles. His failure to effectively address the economic problems of the Panic of 1837 contributed to his unpopularity and ultimately led to his defeat in the 1840 presidential election.

The Role of Banks and Speculators

Banks and speculators were also heavily criticized for their role in the Panic of 1837. The proliferation of state banks, fueled by Jackson's dismantling of the Second Bank of the United States, led to rampant speculation, particularly in land. These banks issued paper money with little backing, contributing to inflation and unsustainable bubbles. When the bubble burst, the banks were unable to redeem their notes, leading to widespread bank failures and economic chaos. Speculators, driven by greed and a desire for quick riches, exacerbated the problem by engaging in risky investments and artificially inflating land values. They borrowed heavily from the banks, using paper money to purchase vast tracts of land, often with the intention of reselling them at a profit. This created an artificial demand for land, driving up prices to unsustainable levels. When the market corrected, many speculators were left with worthless land and crippling debt, contributing to the economic collapse. The public's anger towards banks and speculators was fueled by a sense of betrayal and injustice. Many ordinary Americans felt that they had been taken advantage of by unscrupulous individuals who prioritized personal gain over the well-being of the community. This resentment led to calls for greater regulation of the banking system and stricter measures to curb speculation. Furthermore, the close ties between banks, speculators, and political elites fueled a sense of corruption and cronyism. Many believed that these individuals were working together to enrich themselves at the expense of the common man. This perception further eroded public trust in institutions and contributed to the widespread discontent during the Panic of 1837. The failures of banks and the excesses of speculators highlighted the need for greater financial oversight and more responsible economic practices. The crisis served as a stark reminder of the dangers of unchecked speculation and the importance of a stable and well-regulated banking system. In the aftermath of the Panic of 1837, there were calls for reforms to prevent similar crises from happening in the future. These reforms included measures to strengthen bank regulation, curb speculation, and promote greater financial transparency. While these reforms were not always successful in preventing future economic downturns, they represented an important step towards creating a more stable and equitable financial system.

In summary, during the Panic of 1837, folks in the North and West pinned the blame on several key players: Andrew Jackson for his controversial banking policies, Martin Van Buren for his hands-off approach, and the banks and speculators for their risky financial practices. This crisis was a complex event with deep roots, but these were the main targets of public anger and frustration. It's a reminder that economic downturns often lead to a search for scapegoats, and understanding the historical context can help us better understand those reactions.