The Panic of 1819 (35 page)

⁸³
Connelley and Coulter,
History
, p. 605.

⁸⁴
Baylor,
John Pope
, p. 150.

⁸⁵
Kentucky General Assembly,
Journal of the House of Representatives, 1818–19
(December 19, 1818): 87–91.

⁸⁶
Connelley and Coulter,
History
, p. 605. See also Bray Hammond,
Banks and Politics in America
(Princeton, N.J.: Princeton University Press, 1957), p. 608.

⁸⁷
The charters were repealed at the end of 1820 to take effect in May 1821. See Stickles,
Critical Court Struggle
, p. 22.

⁸⁸
Niles’ Weekly Register
20 (June 17, 1820): 296.

⁸⁹
Spencer came from a leading New York family. He was a leading Clintonian, later a Whig and Secretary of War under Tyler, and a rejected Tyler appointee to the United States Supreme Court.

⁹⁰
Annals of Congress
, 15th Congress, 2d Session (February 18, 1819), p. 1254; (February 24, 1819), pp. 1404–09; also see M. St. Clair Clarke and D. A. Hall,
Legislative and Documentary History of the Bank of the United States
(Washington, D.C.: Gales and Seaton 1831), pp. 682ff.

⁹¹
Representative Kent to House of Representatives,
American State Papers: Finance
3, no. 575 (February 2, 1820): 470. Kent was a leading politician and farmer who later became a leading Whig, a senator and three times governor.

⁹²
“One of the People” (Cambreleng),
An Examination of the New Tariff
, pp. 189–202.

⁹³
Professor Schur, in a recent article, seriously underweights both the inflationary role of the bank in 1817–18, and the extent to which the reaction against the bank stemmed from hard money views. Leon M. Schur, “The Second Bank of the United States and the Inflation After the War of 1812,”
The Journal of Political Economy
68 (April 1960): 118–34.

The depression of 1819 was a great tonic to the movement for a protective tariff for American industry. Domestic industry, particularly in textiles, had expanded greatly under the impetus of the War of 1812, which virtually blocked foreign trade and imports of manufactured goods. The textile industry, in particular, was hit by the impact of foreign and especially British competition in the postwar period. Leading the complainants were the cotton manufacturers, and they were joined, among others, by the woolen manufacturers, the paper manufacturers of New England, the bar iron manufacturers, and the Louisiana sugar planters.
¹
Many protectionists charged that there was a British conspiracy afoot to dump their goods in the United States and crush infant American competitors.
²

The tariff of 1816, adjusting American rates after the abnormal restrictions of the war period, established a moderate tariff, largely for revenue, averaging about 20 percent of value. Duties on cotton and woolen goods were set at 25 percent, but were supposed to fall in 1819. Thus, the higher rates were conceived as a temporary measure
to ease the adjustment of domestic manufactures to the new competitive conditions. Probably the most protective feature of the new tariff was the adoption of a specific duty on cheap cottons.
³
The effect was to exclude cheap cottons from India, and thus remove the major threat to the mass market of new plants such as the factory at Waltham, Massachusetts. The first advocate of this duty, in fact, was the Massachusetts cotton manufacturer, F. C. Lowell.

The other major victory achieved by the protectionists before the depression was an increase in the duty of bar iron in 1818, and the indefinite extension of the 25 percent duty on cotton goods in the same year.

To further their cause, the protectionists established at the end of 1816 an American Society for the Encouragement of American Manufactures.
⁴
This was soon followed by affiliated subsidiary societies: the Delaware Society for Promoting United States Manufactures; the Pennsylvania Society; the Philadelphia Society for the Promotion of National Industry; and others in Washington, D.C., Baltimore, New York and New England. Head of the American Society was Vice-President of the United States, Daniel D. Tompkins; many leading political figures joined, including Madison, Jefferson and John Adams.

The society set its aims at making the temporarily high cotton and woolen duties permanent; the absolute prohibition of the import of cotton from India; a proviso that all government officials clothe themselves in domestic fabrics, and any other necessary protection. The first objective was soon attained; the second objective had been achieved
de facto
though not
de jure
by the minimum provisions of the Tariff of 1816. By the spring of 1818, under the impact of the boom, as well as the attainment of their goals, the protectionist movement had become more or less dormant.
⁵

The advent of the depression in late 1818 came, therefore, as a particular boon to the protectionist cause. Societies for the Promotion of Industry blossomed with renewed vigor, expanded, and flourished throughout New England and the Middle Atlantic states—the relatively industrialized areas—and deluged Congress and the press with protectionist petitions and manifestos. The unquestioned leader in this drive was the energetic Matthew Carey, Philadelphia printer and leader of the Philadelphia Society.
⁶
Carey and his associates were ever ready to emphasize and maximize the extent of the distress, as a prelude to the call for a protectionist remedy.
⁷

Carey organized, in the winter of 1819, a Convention of the Friends of National Industry, which included protectionist leaders from nine states—Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, Delaware, Maryland and Ohio.
⁸
The delegates met in New York on November 29, with Carey as secretary and William Few, president of the New York Society, as president. The memorial that the convention sent to Congress, written by Carey, set the protectionist “line,” which they were to repeat in countless monographs, letters, and petitions.
⁹
Its main proposal was
an increase in duties on imported goods to protect American manufactures; two subsidiary proposals were a tax on auction sales, and the abolition of time payments on import duties. The memorial began by pointing to the nation’s great economic difficulties; in addition to the depression of manufactures, commerce and shipping were prostrated, real estate depreciated in value, and “a great portion of our mechanics and artists are unemployed.” Agricultural staples were reduced in price, and Americans were deeply indebted to foreign nations. In the midst of this distress, the cities were being filled with foreign manufactured products. Excessive importation of manufactured goods was the cause of the depression, particularly the pernicious China and East India trade in cheap cottons, which drained American specie in exchange for “worthless fabrics.” The solution to the depression was, therefore, sharply increased protective duties.

Carey’s theory of prosperity and depression was simple: free trade caused depression, protection would bring prosperity.
¹⁰
Summing up his position in a comparative “table,” he asserted that the results of free trade were, in turn: immense imports; bargain purchases of foreign goods; a drain of specie abroad; decay of national industry; discharge of workmen; growth in unemployment and poor relief; bankruptcy of manufactures; failure of merchants; agricultural distress and decline in prices of staples; stoppage of specie payments by banks; and sacrifice sales of property. Full protection, on the other hand, would lead to: imports in moderation only; a prosperous industry; full employment for every person able and willing to work; disappearance of bankruptcies; rising property values; a secure home market for such agricultural products as cotton and wool; and prosperity to merchants. Carey contended that the distress among the merchants was due to their excess number, caused by free trade. Lack
of protection deprived many young men of employment opportunities in manufactures, forcing them into overemployment in the merchants’ field. Protection would shift the excessive number of merchants into manufacturing, thereby benefiting manufacturing as well as the remaining merchants who would face less competition.
¹¹

To Carey, the condition of the United States was empirical evidence of the evils of nonprotection and the alleged adoption of the pernicious maxims of Adam Smith, while France and other European countries exemplified the benefits of protection. Carey brusquely dismissed arguments of critics that many fully protected countries of Europe were at that moment suffering also from depression. Their depression, he asserted, followed from wartime exhaustion of resources. Carey did not explain why this “exhaustion” required several years after the war to bring about a depression.
¹²

Carey’s chief associate, Dr. Samuel Jackson, developed a particularly significant facet of the protectionist argument. Jackson stressed that protection was necessary to bring about full employment. During the Napoleonic wars, he declared, American commerce was active enough so that “the labor-power of the country . . . was employed to the full.” Now this source no longer existed, and a growing portion of the population was unemployed. The development of domestic manufactures was necessary to absorb the growing class of now surplus producers. Not only idle labor but also idle capital could become employed.
¹³
Similarly, a leading Pennsylvania protectionist, Peter S. Du Ponceau, countered the opposition argument that subsidized manufacturing would withdraw capital from
the more profitable field of farming. He declared that idle capital, as well as unemployed textile workers, would enter manufacturing.
¹⁴

To the contention of free traders that free trade would not cause unemployment, since labor would shift from the inefficient to the efficient industries, Carey replied that people were generally idle and lax, hence immobile in their occupations. Therefore, they required protection wherever they were situated. Carey did not see that this concession shifted much of the blame for unemployment from the free trade system to the unemployed themselves.
¹⁵

To the free trade assertion that unemployed workers in manufacturing should return to the soil, Carey countered with an interesting argument: that manufacturing employees were largely women and children, who were unsuitable for farm work and would thus remain unemployed. Another Carey argument held that low agricultural prices demonstrated an agricultural overproduction, just as failures of merchants proved an oversupply in trade.
¹⁶

An interesting argument was developed by the protectionist journal,
Patron of Industry
, in commenting on inflationist proposals to increase the quantity of money.
¹⁷
The proponents assumed, declared the
Patron
, that the root difficulty was scarcity of money. There was, however, a much more significant problem: the impossibility of
employing
money in a safe and profitable manner. The very fact that people were in such straits as to clamor for governmental loans indicated that they could not employ the money to advantage. In other words, there was an absence of productive employment, for money as well as labor. Protection was the remedy to bolster industry and give confidence to the economy. An article with a similar point of view, by “Plain Truth,”
printed in the Pittsburgh
Gazette
, stated that there was an abundance of idle money capital which would be available for lending, except that no profitable employment could be found.
¹⁸

An influential voice for protection was raised by the prominent New England Presbyterian clergyman, the Reverend Lyman Beecher. In a Thanksgiving sermon in 1819, later reprinted in pamphlet form, Beecher called for protection as the chief “means to national prosperity” and recovery.
¹⁹
Beecher was one of the most lucid of the protectionists. He included the general arguments: that protection would provide employment for the idle and a steady home market for depressed agriculture. He laid particular stress on the monetary drain caused by an adverse balance of trade and the use of protection in ending this drain. Beecher also stressed, far more than Carey and his groups, that American manufactures as
infant
industries specifically needed protection. Beecher was one of the few protectionists to take cognizance of the charge that tariffs might promote domestic monopoly and tyrannize over consumers. His answers to the argument were thoughtful. In the first place, consumers could repeal the tariff if this result ensued. Furthermore, Beecher declared, tariffs would not insure an entire domestic monopoly for all products—just partial protection for some products. Finally, Beecher asserted that any rise in the prices of manufactured goods would only be temporary, that new firms would be attracted to the industry and old firms would expand, until the prices fell.

Protectionists, of course, had little use for
laissez-faire
theories. A particularly clear example was presented by “A Manufacturer” of Philadelphia. Lamenting over the depressed conditions, he asserted that the government had the duty as well as the power under the “general welfare” clause of the Constitution to regulate trade and commerce. For the “government is the national physician.” Furthermore, since the welfare of the manufacturer was clearly identical with the nation’s welfare, permanent and full protection was
required in the interest of the nation as a whole. And “if our manufacturers shall become wealthy, they will circulate and retain the precious metals in this country.”
²⁰