Published by EH.Net (September 2014)

Jessica M. Lepler, The Many Panics of 1837: People, Politics, and the Creation of a Transatlantic Financial Crisis. New York: Cambridge University Press, 2013. xvii + 337 pp. $30 (paperback), ISBN: 978-1-107-64086-3.

Reviewed for EH.Net by Peter L. Rousseau, Department of Economics, Vanderbilt University.

In this richly-detailed monograph, Jessica M. Lepler of the University of New Hampshire offers cultural context for the Panic of 1837 that earlier treatments have lacked. Navigating impressively through a wealth of business correspondence and private letters of various merchants and financiers, large and small, as well as the contemporary press, Lepler paints a vivid picture of the thoughts that passed through the minds of individuals as their fortunes took a fateful turn in the spring of that year. Individuals on both sides of the Atlantic “panicked” in anticipation of the bankruptcy and financial ruin that was to come, and their riveting stories illustrate how overextended financiers viewed their failures as both personal and a result of general economic conditions beyond their control.

When viewed as descriptions of many personal panics, the monograph is aptly titled. And so long as the reader approaches the monograph from this perspective, there is much to be learned. The reader quickly becomes acquainted with a number of merchant bankers employed by the major discount houses in the market for exchange bills, and in the process benefits from how Lepler makes the complex interactions of this market easy to understand. The monograph form is ideal for fleshing out details in a way that economic journal articles cannot. There is also a careful review of timelines and information paths within the United States and across the Atlantic over the two months that preceded the suspension of specie payments by banks in New York City on May 10, 1837. The timelines seem to reveal a less immediate role for the Bank of England in the crisis than earlier accounts, and the role of U.S. domestic policies is for the most part characterized as non-substantive Whig rhetoric.

It is important to understand from the onset that the monograph will not offer its own view on macroeconomic causes of the panic, and the book becomes a more pleasant read once this point is accepted. Indeed, economists will find it difficult to distill general principles from the detailed narratives. Some of this is due to Lepler’s focus on the two-month period between President Martin Van Buren’s inauguration on March 4, 1837 and the general suspension of payments. This sets the book apart from most economic analyses of the period, which suggest that factors leading to the suspensions were in motion by mid-1836 or before, and that the suspensions were all but inevitable before Van Buren ever took the oath of office.

The monograph sharply dismisses the role of economic analysis in explaining phenomena such as commercial failures and business downturns, yet two facts about the monetary pressure of 1836 are inescapable: 1) Jackson’s policies on public land sales (i.e., “Specie Circular”) drew more than $2 million of coin to the West; and 2) The Deposit Act of June 1836 further dislocated the monetary base by forcing the Treasury to move specie about the country in preparation for distributing the government’s $38 million surplus revenue to the states. Many economists would also agree that the removal of the government’s deposits from the Bank of the United States in 1833 and their wide disbursement into state banks led to their multiplication at a time when the base itself was rising due to specie flows from abroad. Given these observations, it is not surprising that domestic policies worked to drain eastern banks of their reserves, bringing the crisis to a head by March of 1837.

These facts also suggest that merchant bankers in New York and New Orleans would be unable to obtain the specie required to settle international obligations in the face of even a modest decline in cotton prices. But one can easily imagine other events that could have ignited the tinder already piled high in New York. Of course the merchants and bankers panicked, and did so for good reason! When the commercial and financial failures finally undermined the confidence of the working class, they initiated a run on the New York banks as a rational response to the deteriorating economic conditions.

The monograph emphasizes how personal and cultural factors led to the collective excesses of 1837 rather than the role of national and international events in the crisis. The thread seems to be that these individual “panics” are too complicated for aggregate economic analysts, both past and present, to adequately sort out. This echoes recent critiques of macroeconomics that have found currency in light of the recent financial crisis. And while these critiques ring far more true than many economists can readily accept, reliance on historical narrative from a selection of primary sources without the discipline of quantitative evidence is subject to its own perils.

Lepler does succeed, however, in illustrating how the transatlantic trade of the time depended upon a very complex system of local and international credits, and how the disruption, dysfunction, and ultimate failure of these mechanisms became proximate causes of the suspensions. Although these disruptions were also symptoms of political and real-side factors over which most individuals had little or no control, the monograph provides ample evidence of just how fragile the international economy was in the 1830s. It is in this respect that the book represents a useful contribution to our understanding of the cultural history of the 1830s, and reminds us of the potential of cross-disciplinary research in reaching more complete understandings of historical events as important as financial crises.

Peter L. Rousseau is the author of “Jacksonian Monetary Policy, Specie Flows, and the Panic of 1837,” Journal of Economic History (2002).

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