Panic Of 1837 Research Paper

Evolution Through Connections: Examining Scholarship on the Panic of 1837

Outside of The Great Depression in the 20th century, the Panic of 1837 stands as one of the most prominent financial disasters in American history. For that reason, the topic has intrigued economists and historians alike, as scholars have spent decades attempting to untangle the intricacies of the collapse. With cotton being the driving force of the economy during this time period, opportunistic investors, both in the United States and England, attempted to partake in the boom and earn a significant return on their investments. Unfortunately, this gigantic rush to participate in the cotton industry led to a tremendous influx of loans and credit, creating very fragile

Historian Scott Nelson, after studying the historiography of the Panic of 1837, believed that a combination of domestic and foreign causes caused the financial collapse. Nelson suggested that domestic factors, such as Jackson’s redistribution of deposits and destruction of the national bank, led to a speculative cotton bubble burst by the Bank of England’s precautionary actions. Hence, Nelson contributed to the evolution of the field by demonstrating the connection between foreign and domestic factors that were discussed in the decades prior.4 While assessing modern takes on the Panic of 1837, Nelson also acknowledges Phillip McMichael and his ideas regarding the domestic slave trade. McMichael made an important claim by observing that the cheap credit provided by the Bank of England and the involved American intermediaries proliferated the domestic slave trade.5 Edward Baptist added upon McMichael’s work regarding the slave market, claiming that big banks or Jackson’s presidential actions did not cause the Panic of 1937. Rather, Baptist attributes the Panic to Americans’ desire for “greater efficiencies,” referring to how Southerners attempted to utilize the cheap credit market to purchase slaves and maximize cotton production.6 This expansion of credit for cotton and slavery ultimately led to speculation on both of these “commodities.” When the Bank of England cut the credit chain, the bubbles burst, causing turmoil and bankruptcy amongst planters.7 Hence, the American slave trade market was connected to a foreign cause of the Panic, as the Bank of England provided cheap credit that convinced planters to overtrade and speculate with slaves. Baptist’s and McMichael’s contributions to the field demonstrates another