What Hath God Wrought (22 page)

The Panic of 1819 has been called “a traumatic awakening to the capitalist reality of boom-and-bust.”
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This was the first time that the American public had experienced collectively what would become a recurrent phenomenon, a sharp downward swing of the business cycle. Because it was the first time, people had no perspective from which to judge the events. Previous economic troubles had not been universal and had had more obvious causes in war, natural disaster, or the political paralysis of the Articles of Confederation. By 1819, economic relationships had become strongly interconnected; more people were producing for national or international markets rather than home or local consumption. With the advantages of such commercial ties went a corresponding exposure to risk. It was profoundly disturbing that a change in personal fortunes could be unrelated to personal merit, yet the hardworking and honest suffered along with the undeserving. The United States had been hit harder than Europe by the downturn. Today economists recognize that less developed, staple-producing economies are especially vulnerable to the international business cycle. No such frame of reference existed then. Who was to blame?

The Bank of the United States, said some. This was not altogether inaccurate; if the BUS had not been ultimately responsible for the panic, it had certainly made matters worse than necessary. William Jones, who had been culpably lax in extending credit during the boom years, resigned as its president early in the crisis; Langdon Cheves of South Carolina replaced him. Cheves’s policy of contraction rescued the Bank’s solvency but not its popularity. “The Bank was saved but the people were ruined,” a bitter commentator observed.
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Feeling ran especially high against the Bank in Maryland, where the managers of the Baltimore branch had not only mismanaged the panic but also embezzled something in excess of $1.5 million (the equivalent of $19 million in 2006). Reflecting public outrage, the state legislature levied a tax of fifteen thousand dollars on the Baltimore branch. When the Bank refused to pay, Maryland sued the branch cashier, James M’Culloh, one of the embezzlers, and the tax case went up to the United States Supreme Court. (In their separate, later trial for embezzlement, M’Culloh and his two friends won acquittal by claiming their prosecution was politically motivated.)
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John Marshall used the opportunity presented by
McCulloch v. Maryland
to render what may have been the most important of his many important judicial decisions. The first question he had to decide was whether Congress had been within its rights to incorporate the Bank. Endorsing the line of argument used by Alexander Hamilton to justify the first national bank, Marshall held that the power of Congress to charter corporations, while not explicitly mentioned in the Constitution, was implied. The Constitution enumerates a list of powers of Congress and then authorizes it “to make all laws which shall be necessary and proper for carrying into execution the foregoing powers.” Marshall adopted a broad construction of the phrase “necessary and proper,” defining it so as to approve not merely “indispensable” measures but whatever means seemed “appropriate,” “plainly adapted” to a constitutional objective, and “not prohibited” explicitly. Having confirmed the constitutionality of the Bank, Marshall then went on to ask whether the state had the right to tax it. The power to tax was the power to destroy, as the Bank’s lawyer Daniel Webster had argued. States must not be allowed to frustrate the legitimate authority of Congress. “The states have no power, by taxation or otherwise,” Marshall concluded, “to retard, impede, burden, or in any manner control, the operations of the Federal Government, or its agencies.”
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The chief justice had made great law, but in the political context of 1819 he had also inflamed great controversy. His decision demonstrated insensitivity to public resentment of the BUS, and there was difficulty enforcing it. The state of Ohio had just enacted a tax heavier than Maryland’s on its own two branches of the Bank, and the Ohio state treasurer seized the money by force—six months after the
McCulloch
decision! This case too reached the Supreme Court—though not until 1824—when Marshall reaffirmed his position.
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The BUS decided it was the better part of valor to close down its Ohio branches.

Actually, a decision upholding the constitutionality of the Bank did not in itself surprise observers, since the Republican Party had come around to endorsing it in 1816. The controversial parts of Marshall’s opinion were the extremely broad interpretation he gave to the powers of Congress, his insistence that the Constitution rested on the sovereignty of the American people as a whole and not on a compact among the states, and his denial that the states possessed any concurrent authority over the BUS. Marshall treated the Bank as if it were entirely a government agency, ignoring the fact that it was also a private corporation operated for profit. Plenty of constitutional lawyers disagreed with his position—including seventy-one-year old Luther Martin, Maryland’s chief counsel in the case, who as a young man in 1787 had attended the Constitutional Convention. Prolonged criticism of Marshall’s opinion in the press led the chief justice himself to respond in print (under a pseudonym). Among those publishing critiques was his old adversary Spencer Roane.
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Beyond the question of blame for the panic was the question, Where do we go from here? Some people argued that the most urgent priority must be economic recovery. They advocated restoration of business confidence, the reconstitution of the banking system, more tariff protection for producers, government-sponsored transportation projects, and renewed expansion of credit. Others, however, thought the most important issue was reform, moral as much as economic, to make sure no more panics occurred. To prevent another round of speculative frenzy, they advocated retrenchment of government spending, called for controls to curb the irresponsible issue of banknotes, and urged consumers to live within their means. On the state level, other battles revolved around relief legislation like “stay laws” to postpone the foreclosure of mortgages and the issue of paper money by state banks with no specie reserves. In
Sturges v. Crowninshield
(1819) the Marshall Court invalidated a New York state law facilitating bankruptcies as a violation of the constitutional rule against “impairing the obligation of contracts.” Desperate for solutions, people did not necessarily adopt consistent positions on all these issues. Pro-debtor politicians might, for example, back inflationary schemes to make debts easier to pay off and then switch to a “hard money” policy to discourage speculation and fraud.
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Probably because this was the first depression in national history, the citizenry did not assume the administration in Washington could have prevented it. The blame that attached to the Bank of the United States did not rub off on the Monroe administration. In any case, no organized opposition stood ready to provide an alternative government. Monroe was reelected with no difficulty in 1820. Even the thirty-four Federalist presidential electors (from Massachusetts, Connecticut, and Delaware) backed him, though they couldn’t stomach his running mate, Daniel Tompkins of New York, and scattered their vice-presidential votes, as they had in 1816, among several candidates. Monroe wound up with every electoral vote except one, which was cast for John Quincy Adams by a maverick New Hampshire elector. (The elector did not do so in order to protect George Washington’s record as the only unanimously elected president but simply because he thought Adams would make a better chief executive.)
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The Panic of 1819 remains the only nationwide depression in American history when the voters did not turn against the administration in Washington.
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V

Although the Panic of 1819 did not prevent the reelection of Monroe, another crisis occurred simultaneously that gave the administration a bad scare: the Missouri Controversy.

By 1819, enough settlers had crossed the Mississippi River that Missouri Territory could meet the usual population criterion for admission to the Union. Accordingly, an “enabling act” was presented to Congress authorizing Missouri voters to elect a convention to draft a state constitution. On Saturday the thirteenth of February, a congressman from Poughkeepsie, New York, tossed a bombshell into the Era of Good Feelings. Representative James Tallmadge proposed that as a condition of Missouri statehood, further importation of slaves should be prohibited and all children of slaves born after Missouri’s admission to the Union should become free at the age of twenty-five. Tallmadge was an independent-minded Republican, allied at the time with DeWitt Clinton’s faction in New York state politics. The year before, he had objected to the admission of Illinois on the (well-founded) grounds that its constitution did not provide enough assurance that the Northwest Ordinance prohibition of slavery would be perpetuated. In 1817, he had helped speed up the gradual emancipation of the remaining slaves in his own state. The number of blacks in Missouri, ten thousand, was about the same as the number remaining in New York in 1817, and the emancipation plan Tallmadge proposed for Missouri resembled the one adopted in New York. Masters could hardly complain that their vested interests were being disregarded; the plan would have freed no one already enslaved. But what might have proved a constructive step toward peaceful emancipation provoked consternation in the House of Representatives.
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On behalf of the Tallmadge amendment, northern members invoked morality, religion, economics, and the Declaration of Independence. They reminded southerners that their own revered statesmen, led by Thomas Jefferson, had often expressed the hope to find a way out of perpetuating slavery. Yet now, the South presented a virtually solid and implacable opposition (in which the aged Jefferson himself joined) to mandating emancipation in a new state. Through days of rancorous debate, the two sides rehearsed arguments that would be used by the North and South for many years to come. Before it was over, not just the extension of slavery on the frontier but the existence of slavery throughout the whole Union would be challenged. Thomas W. Cobb of Georgia fixed Tallmadge in his gaze: “You have kindled a fire which all the waters of the ocean cannot put out, which seas of blood can only extinguish.” But Tallmadge defended his moderate proposition with a steadfastness not at all moderate: “If a dissolution of the Union must take place, let it be so! If civil war, which gentlemen so much threaten, must come, I can only say, let it come!”
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Like the overture to an operatic drama, the Missouri Controversy prefigured the coming forty-five years of sectional conflict.

The Missouri debate revealed—to the surprise of some observers—that the South had quietly become much more committed to slavery than it had been during the Revolutionary generation. The opening of the Southwest to cotton cultivation, providing a vast new demand for slave labor, had caused the value of slave property to soar. A prime field hand worth four to five hundred dollars in 1814 commanded a price of eight to eleven hundred dollars by early 1819.
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Though the price then fell back with hard times, everyone expected it would rise again. As tobacco became less profitable, the Chesapeake had come to rely more and more on selling off some of the region’s human increase. Slave children represented capital gains. So a respected Virginia planter could advise his son-in-law in 1820: “A woman who brings a child every two years [is] more valuable than the best man of the farm.”
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To restrict the expansion of slavery into the West threatened to snatch away this lucrative market permanently. Missouri was not a cotton-growing region, but slave-exporting areas like Virginia and South Carolina reacted with horror to what looked like a bad precedent.

Reflective southerners had long regretted the introduction of black slavery but feared that emancipation would invite race war, at least in areas with substantial black populations. To the economic fear of losing western slave markets was added the physical fear of living amidst an ever-increasing population of potential rebels—“dammed up in a land of slaves,” as Judge Spencer Roane put it.
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Southern statesmen on record as deploring slavery, such as ex-president Jefferson, now found themselves having to argue that it would be better if the institution were diffused thinly into newly settled areas rather than concentrated in the older states. “Diffusion” of slaves “over a greater surface,” as Jefferson explained it, would “facilitate the accomplishment of their emancipation” by making local white populations more willing to contemplate the possibility of freeing them and by spreading the burden of paying compensation to masters. So the extension of slavery actually would help long-term prospects for bringing an end to slavery! What makes the argument so unconvincing is that it was being used to prevent gradual emancipation in a place where blacks constituted no more than 16 percent of the population. In the last analysis, even those white southerners who regretted slavery and hoped to eliminate it would not tolerate northern participation in planning how to end it.
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In one respect the Missouri debates were not representative of later ones: Only a few of the participants actually defended slavery as a positive moral good at this time. Most southern spokesmen preferred to talk about constitutional issues. Jefferson, for example, refused to take northern antislavery professions seriously and defined the issue instead as an attempt to deprive the sovereign (white) people of Missouri of their constitutional equality.
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But northern legislators did not lack for constitutional arguments of their own. Restrictionists observed that the Constitution authorized Congress to “make all needful rules and regulations” for the territories and to control the “migration” of slaves across state lines after the year 1808. The power to admit new states seemed to imply the power to set conditions for their admission. Some slavery restrictionists also argued that the constitutional duty to “guarantee to each state in this Union a republican form of government” created a presumption against the introduction of slavery into new areas. But southerners replied to all this that once a state had been admitted, it became the equal of the original states, so there would be no constitutional way to prevent it from altering or revoking whatever scheme of gradual emancipation had been imposed by Congress.
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