In Philadelphia, the streets were deserted. In Chicago, business had ‘vanished like smoke’. Along the riverfront in Cincinnati, workers were going door-to-door, offering to work for board. The price of cotton had dropped by half. Slaves were selling for a fifth of their former price in Mississippi. Plantation owners fled west to avoid their creditors, ‘Gone to Texas’ scribbled on many a door. In Illinois, the market for crops and livestock had collapsed: all wished to sell, ‘and nobody cares to buy’. In Milwaukee, land that had changed hands for fabulous prices a few years before now had no commercial value. On Wall Street, trading was next to nothing. In New York’s harbour, ships were rotting on the wharves. The year was 1842, perhaps the trough of what Alasdair Roberts calls America’s first Great Depression, initially triggered by the Panic of 1837.footnote1 ‘The calamities of the times’, wrote one commentator, ‘have covered the place with a settled gloom. There is no business, there is no money, no confidence and little hope.’

Roberts provides a striking picture of the decade’s economic woes, drawing extensively on contemporary commentaries from both sides of the Atlantic and informed by a vivid sense of American geography. Against those who would backdate the self-sufficiency of the us economy—restricted for Roberts to a brief post-1945 period—he underlines its vulnerability within the global economic order. The author of a damning critique of the Bush White House, as well as books on government secrecy and on the architecture of neoliberal regulation, he is not an economist but a scholar of public administration. A principal aim of America’s First Great Depression is to assess the political outcomes of the economic turmoil, at both domestic and international level: what were its effects on the nascent party system, on tensions between states’ rights, federal efficacy and executive power, on territorial expansionism?

To the three sectors of the American economy—Northeastern manufacturing and finance; Southern slave plantations; Midwestern grain and livestock—Roberts adds a fourth: Britain, the destination for America’s cotton exports and its main source of credit. As he shows, the origins of the 1837 financial crash lay in the credit-fuelled boom that preceded it. The exponential growth of the Lancashire cotton industry in the post-Napoleonic era—from 14,000 power looms in 1820 to 100,000 in 1833—drove a corresponding expansion of plantation slavery. The area under cotton in the us grew from 300,000 acres in 1800 to 2 million in 1830, more than doubling to 5 million acres by 1840; the slave population rose from 1.5 million in 1820 to 2.4 million in 1840, above all in the new Gulf Plains states: Louisiana, Mississippi, Alabama. The plantation system was capital-intensive and lubricated by debt, written on the paper of the day. The financial markets cast long webs across the Atlantic, as a host of intermediaries authored bills of exchange between bankers, planters, cotton brokers, merchants and textile manufacturers, while speculators battened on each stage of the trade.

Three other factors drove the 1830s bubble. Andrew Jackson, the seventh us president, had pushed through the Indian Removal Bill in 1830 to clear the Native Americans east of the Mississippi from their ancestral lands. He now initiated a vast sell-off of Federal territory, described by Roberts as ‘one of the most massive privatizations of public assets in history’. Land offices on the frontier were ‘besieged’ on auction days: speculators connived with corrupt land officers to corner the best land, then re-sold the tracts for immense profits to farmers, who mortgaged themselves to the hilt through the local banks. Accompanying the Jacksonian land bubble was a frenzied burst of state-level construction projects, above all transport infrastructure—roads, rail, canals—financed via newly chartered state banks. International investors, mainly English and Dutch, were lured by promotional lithographs depicting yet-to-be-built metropolises and by the high returns on state-backed bonds; us foreign debt rose from $110m in 1833 to $220m in 1836. The third factor driving the bubble was Jackson’s monetary policy. As part of his campaign against the Bank of the United States, the country’s only national financial institution, Jackson withdrew the Federal government funds that had traditionally been deposited there and distributed them among thirty state banks in the South and West, fuelling the speculative boom. By the summer of 1836 his Treasury was alarmed enough to halt the use of paper currency for Federal land purchases with the Specie Act; the result was to drain eastern bank reserves, leaving the nation’s gold and silver ‘locked up in the coffers of land offices and deposit banks bordering the great western wilderness’, wrote a London commentator.

Jackson’s hand-picked successor, Martin Van Buren, was inaugurated early in 1837, ‘King Andrew’ congratulating himself in his parting remarks to Congress on ‘the high state of prosperity which our beloved country has attained’. European investors were less sanguine about the chaotic state of us finances. After five years of easy credit, the Bank of England raised interest rates; Barings and Rothschilds began to cull their paper, demanding that American borrowers settle debts with specie. Compounding us problems, cotton prices fell sharply at the start of 1837, as the rising price of wheat in Britain, outcome of a poor harvest, weakened domestic demand for cotton goods. New Orleans cotton factors who had borrowed on the New York money market to lend to planters, in anticipation of high prices, were now squeezed into bankruptcy, leaving their Wall Street creditors exposed. The reverberations multiplied as the webs of credit broke down. In May, the ‘Panic of 37’ saw runs on New York banks and the onset of a major credit crunch. Businesses failed and unemployment soared. ‘Commercial distress and financial embarrassment pervade the whole nation’, lamented a Manhattan financier, who set the blame squarely on mismanagement by the Democrat presidents and their Treasury Secretary: ‘Jackson, Van Buren and Benton form a triumvirate more fatal to the prosperity of America than Caesar, Pompey and Crassus were to the liberties of Rome.’