Published by EH.NET (June 2009)

Clyde A. Haulman, Virginia and the Panic of 1819: The First Great Depression and the Commonwealth. London: Pickering & Chatto, 2008. xi + 197 pp. $99 (hardcover), ISBN: 978-1-85196-939-5.

Reviewed for EH.NET by James Karmel, Department of History, Harford Community College.

Clyde Haulman?s new book on the Panic of 1819 and Virginia is a thorough treatment of the Panic?s economic impact on the state. It is chockfull of tables, charts, and statistics that describe the state?s economy from approximately 1816 through 1823. Indeed, the book is very heavy on numbers, though the qualitative story is not neglected entirely. It is an important contribution to early American economic history and provides an interesting and far-reaching perspective on the significance of the first major financial crisis and recession of early Republic. Moreover, the financial crisis and ?Great Recession? of 2007-09 necessitate a greater understanding of historical declines and recoveries, making Haulman?s book timely.

The book?s first two chapters provide a summary of the post-War of 1812 American economy and a broad overview of the Panic. Haulman explains that the American and Virginia economies boomed from 1815 to 1819, with increases in land sales, strong commercial exchange, and efforts to stabilize the money supply via the Second Bank of the Unites States (SBUS). Yet, the boom turned into a big bust by mid-1819: a phenomenon explained in various ways by specialists in the context of other similar economic crises in American history. Mainly, they have characterized the Panic of 1819 by noting 1) a sharp decline in demand for American exports to Europe, 2) an extensive financial contraction, and 3) the ?debt-deflation? theory favored by current Federal Reserve Chairman Ben Bernanke (among others), in which bad debt-asset ratios lead to a deflationary, downward spiral. Haulman applies each of these theories in his narrative on Virginia. Yet, he clearly favors the ?debt-deflation? theory to explain the severity of the Panic of 1819 and his assessment that it ?ranks with the depression of 1839-1843 as the worst of the contractions experienced by the United States in that century? (p. 33). The Bernanke and Haulman-favored explanation has particular resonance for its parallel to the recent global recession.

Haulman?s narrative addresses the role of the SBUS in the third chapter, where he argues that the national bank was pivotal in both the post-war boom (1816-18), panic and recession (1818-23). In Virginia?s case, the SBUS?s decision to cal in loans precipitated a state-wide dearth of specie by 1819. Significantly, this hampered the ability of the otherwise sound lending policies of the Old Dominion?s state banks to make loans. However, they drew the wrath of the public and politicians who shifted towards a hard money position by 1820 and ratcheted up anti-banking rhetoric. A very similar pattern occurred in Pennsylvania, which had increased its state-chartered banks ten-fold in the years following the war, only to see many crash and burn via the SBUS contraction and extreme specie policy beginning in mid-1818. Haulman?s analysis continues in chapters four and five by comprehensively reviewing the Panic?s impact on Virginia?s agriculture and business sector. Haulman?s analysis here relies upon an examination of factors such as agricultural prices and wages, land values, business licenses issued, and fluctuations in the number of retail and wholesale merchant partnerships.

An important component to the book is a long analysis of Virginia?s poor relief efforts that took place in the years of the Panic and ensuing depression (chapter six). Indeed, Virginia developed an extensive relief network in these years, and rose above states such as New York and Rhode Island in its legal framework for support to both ?poorhouses? and ?outdoor relief? (for paupers not residing in poorhouses). Where other states decreased financial resources for the poor in the Panic years, most areas of Virginia increased support for paupers and poorhouses. The analysis of the downtrodden and efforts to help them is one of the more interesting parts of the book. Haulman effectively uses data to show the regional breakdown of the Panic?s impact across the state. The hardest hit area was the older, developed and export-dependent Tidewater region as measured by poor relief data. By contrast, the western Trans-Allegheny region suffered less ? probably owing to its relative economic self-sufficiency and regional independence. This regional analysis provides an interesting juxtaposition to other financial analyses of the Panic, in which speculative western banks are often placed at the center of the crisis. The Virginia pauper and relief data also showed that there was an urban-rural dichotomy to the Panic?s impact, with urban Virginians more severely affected by the downturn than rural Virginians. Consequently, counties with substantial towns and cities provided much greater poor relief than rural counties.

Finally, the book concludes (chapter 7) with a sweeping essay that utilizes the Virginia experience to demonstrate the Panic?s powerful legacy for the early American republic. The concluding chapter ties the Panic to the ultimate demise of the SBUS in the 1830s, and emphasizes how it sharpened both hard money and soft money ideologies that persisted through the first half of the nineteenth century. Virginia?s devotion to poor relief also set a precedent that other states eventually followed as the boom-and-bust cycle took its periodic toll on Americans in these years. They enacted legislation to provide more direct relief beyond poorhouses, curtailed debtors? prisons and increased public safety expenditures. In addition, the Panic intensified the protectionist wave of the 1820s, culminating in the 1828 ?Tariff of Abominations.? Finally, it directly fed the economic and democratic populism of the Jacksonian years (and Andrew Jackson himself) by bringing into question the financial policies of the Republican establishment represented by the presidencies of Virginians James Madison and James Monroe. In Haulman?s view, the Panic?s popular impact helped create the political conditions that energized the states? rights approach to slavery issues and criticism of government finance beholden to private interests.

In summary, Virginia and the Panic of 1819 is a valuable, well-documented case study of this significant phase of American economic history. It should have particular appeal to historians comfortable with statistical analysis and quantitative determinism. At times, the narrative could really use a personal perspective: who are some of the actual persons behind the voluminous data presented? Otherwise, there?s not much to criticize: this is a very good study and an important addition to the literature.

James Karmel is an Associate Professor of History at Harford Community College in Bel Air, Maryland. He is the author of Gambling on the American Dream: Atlantic City and the Casino Era (2008). He can be reached via e-mail at