Not long after the Panic of 1837 had set in and gripped America’s economy, a second shock came: the Panic of 1839.
Land speculation ran rampant leading up to 1839, with cotton prices rising as well. Daniel Walker Howe, What Hath God Wrought: Transformation of America, 1815-1848, 504. By 1839, there was a “cotton glut” and the price of cotton dropped dramatically, which would bring cotton prices to half of the 1836 price. See id.
Cotton was fundamental to America’s trade, and many Americans found that they were stuck with their inventory as the Panic set in. Id. To exacerbate this, the land speculation was coming to an end, which would leave field hands out of work as well. See id.
Given President Andrew Jackson’s destruction of the national bank just years prior, there was no “lender of last resort” for Americans to rely on. See id. at 504-05 citing Peter Rousseau, “Jacksonian Monetary Policy, Specie Flows, and the Panic of 1837,” Journal of Economic History 62 (2002): 487.
The Panic reverberated throughout the American economy. Production was cut back or failed altogether, workers lost their jobs, and the government’s ability to respond was hamstrung, as its money was spread amongst pet banks all over the country. Daniel Walker Howe, What Hath God Wrought: Transformation of America, 1815-1848, 505.
In response to this economic turmoil, from the Panic of 1837 to the Panic of 1839, President Martin Van Buren said to Congress: “Those who look to the actions of this Government for specific aid to the citizen to relieve embarrassments arising from losses by revulsions in commerce and credit lose sight of the ends for which it was created and the powers with which it is clothed.” Martin Van Buren, “Third Annual Message,” (Dec. 4, 1839), Presidential Messages, III, 554. Some would call him “Martin Van Ruin” after these developments. Daniel Walker Howe, What Hath God Wrought: Transformation of America, 1815-1848, 505.
All of this turmoil fueled the newly emerging Whig Party. William Henry Harrison, future president, would observe: “We have many recruits in our ranks from the pressure of the time.” Id. at 506 quoting William Henry Harrison, quoted in Michael F. Holt, The Rise and Fall of the American Whig Party, 64.
The economic developments of the 1830s would pave the way for the Whigs to take power, and for the discrediting of Democrats as economic gurus. It is important to remember this came after President Jackson had come to define politics in America for nearly a decade. He was a fixture, and his policies were revered by the common man, because it was presumed that he would not do anything to harm ordinary Americans. The Panics of 1837 and 1839 proved otherwise, and many Americans began looking outside of the Democratic Party for guidance.
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