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The Influence of Depression Upon American Opinion, 1857–1859

Published online by Cambridge University Press:  03 February 2011

Samuel Rezneck
Samuel Rezneck
Affiliation:
Rensselaer Polytechnic Institute
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Extract

On August 26, 1857, just two days after the New York branchthe Ohio Life Insurance and Trust Company suspended payment, of, the New York Herald predicted that the financial difficulties then beginning were certain to acquire the proportions of a great crisis. It boasted, moreover, that it had foreseen and warned of this impending calamity for the preceding twelve months, but its warnings had been spurned. The Herald's vaunted prescience perhaps stemmed chiefly from the long-standing prejudice of its publisher, James Gordon Bennett, against the operations of speculators in Wall Street. As early as 1854, when the speculative boom in railroad stocks was halted by a sharp decline of prices, the Herald had predicted the imminent approach of a crisis, one that would mark the end of the current “Fitful Spasmodic System” of American business. During the winter of 1854–1855 business stagnated, unemployment increased greatly, and there was considerable distress and popular unrest, especially in New York City. Here was an advance view, as it were, of the pattern of depression which was to develop in 1857.

Type
Articles
Information
The Journal of Economic History , Volume 2 , Issue 1 , May 1942 , pp. 1 - 23
Copyright
Copyright © The Economic History Association 1942

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References

1 New York Herald, August 26, 27, September 4, 1857; see also Train, G. F., Young America in Wall Street (New York, 1857), viiiGoogle Scholar.

2 New York Herald, January 4, 6, February 25, 1855; New York Tribune, October 25, December 6, 18, 1854; see the Twelfth Annual Report of the New York Association for Improving the Condition of the Poor (New York, 1855), 20ffGoogle Scholar.

3 Sumner, W. G., A History of Banking in the United States (New York, 1896), 424.Google Scholar

4 The contrasting trends of commodity and stock prices between 1854 and 1857 are illustrated statistically in Smith, W. B. and Cole, A. H., Fluctuations in American Business, 1790–1860 (Cambridge, Mass., 1935), 93ff., 108 ff.Google Scholar The Index Table of Railroad Stock Prices on page 184 reveals, for example, that by the end of 1854 the index was down to 67 from the base of 100 for 1853. It hovered at that level until July 1857, when it declined further, and was down to 39 by October. The index remained in the neighborhood of 50 for more than two years thereafter. Wholesale commodity prices, however, continued to rise after 1854, reaching a high peak of 133 in the summer of 1857 (the index being based on the average for the decade 1848–1858 as 100). This index did not decline sharply until October, and by the end of the year was down to 108. It was to hover at or below 100 until late in 1861 (table at page 167). See, however, Hutchinson, W. T., Cyrus H. McCormick (New York, 1935), II, 75,Google Scholar for the report that grain prices began to decline in 1856, after the conclusion of the Crimean War, and that poor crops and poor prices kept the West in a state of depression for several years thereafter.

5 Hunt's Merchants' Magazine (January 1858), XXXVIII, 100.

6 Gibbons, J. S., The Banks of New York and the Panic of 1857 (New York, 1858), 344 ff.Google Scholar The banks of Philadelphia and Baltimore had already suspended specie payments on September 24 and 25; and, after October 16, the only exception to the general bank suspension were the banks of Kentucky and five of the nine banks of New Orleans (Dunbar, C. F., “The Crisis of 1857,” in Economic Essays, New York, 1904, 280, 283).Google Scholar There was no real shortage of specie, however, and the premium was never higher than three per cent. The New York banks quickly accumulated a large supply of specie, so that they were able to resume payments in December. The Philadelphia and Baltimore banks did not resume until February, 1858, and resumption was general by midsummer of 1858 (Dunbar, 288; The American Almanac, Boston, 1859, 364 ff.)Google Scholar.

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12 Quoted in Smith, T. C., Parties and Slavery (American Nation Series, Boston, 1907), 180Google Scholar; The South in the Building of a Nation (Richmond, 1909), V, 440. SeeGoogle Scholar Dunbar, 291, 294, for the opinion that the South withstood the depression better than the rest of the country.

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32 Medbury, 317, 327, Hunt's Magazine (09, 1857), XXXVII, 325, 378, 665.Google Scholar Admitting that the railroads had not averaged one per cent a year in dividends, the argument, nevertheless, concluded that they were “a success.” Under the heading “Advice to the Wise,” people were urged “to buy now that the prices of the stocks were low” (p. 646). On “the extensive absorption of capital from the floating to the fixed state,” see Miller, H. E., Banking Theories in the United States Before 1860 (Cambridge, Mass., 1927), 206; alsoCrossRefGoogle ScholarNew Englander (11, 1857), XV, 705Google Scholar.

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41 Quoted in Miller, 199.

42 Gibbons, 365, 369 ff., 387.

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48 Train, 330 ft. This, together with other similar theories, bears resemblance to the better known ideas of Edward Kellogg, whose speculations about some kind of national currency dated back to the panic of 1837 and first appeared in published form in 1843 (Currency, The Evil and the Remedy).

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55 New York Tribune, 12 24,1858, January 20, 1859, March 11, 1859Google Scholar; Harper's Weekly, 10 10, 1857; Gibbons, 364Google Scholar; Bankers' Magazine (05, 1858), XII, 849Google Scholar; Fourth Annual Report of the Boston Board of Trade (Boston, 1858, 11,Google Scholar which cautioned, however, against the overexpansion of domestic industry and recommended that manufacturing corporations be required to keep adequate working capital as a safeguard against excessive borrowing for commodity speculation. A similar plea, coupled with the recommendation of “moderation in business, in private and public expenditure, in legislation and in everything else,” appeared also in the New Englander (XV, 715).

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67 '37 and '57, 56. During the hard winter of 1854–1855, unemployment and distress among the workers had also brought forward a similar harvest of “Plain Words to Mechanics,” advising them, for example, to “boggle at nothing which will save a few pennies,” or “No American has ever fairly tried what he can live upon, if driven to a stress.” (See The New York Times, 12 26, 1854Google Scholar; New York Tribune, 12 28, 1854.)Google Scholar

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69 Journal of Commerce, 11 4, 10, 1857Google Scholar; New York Tribune, 11 11, 1857Google Scholar.

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76 Weiss, John, Life and Correspondence of Theodore Parker (New York, 1864), II, 248–249.Google Scholar Only Garrison, the abolitionist, protested that “the whole thin g is an emotional contagion without principle …” (Garrison, W. L., The Story of His Life [New York, 1899], 111, 463)Google Scholar.