Martin Van Buren

by Edward Morse Shepard

By this circular, issued on July 11, 1836, the secretary of the treasury had required payment for public lands to be made in specie, with an exception until December 15, 1836, in favor of actual settlers and actual residents of the State in which the lands were sold. The enormous sales of land in this year, and the large payments required for them under the circular, at once made the banks realize that there ought to be an actual physical basis for their paper transactions. Gold was called from the East to the banks at the West to make the land payments. Into the happy exaltation of unreal transactions was now plunged that harsh demand for real value which sooner or later must always come. The demand was passed on from one to another, and its magnitude and peremptoriness grew rapidly. The difference between paper and gold became plainer and plainer. Nature's vital and often hidden truth that value depends upon labor could no longer be kept secret by a few wise men. The suspicion soon arose that there was not real and available value to meet the demands of nominal value. The suspicion was soon bruited among the less as well as the more wary. Every man rushed to his bank or his debtor, crying, "Pay me in value, not in promises to pay; there is, I at last see, a difference between them." But the banks and debtors had no available value, but only its paper semblances. Every man found that what he wanted, his neighbors did not have to give him, and what he had, his neighbors did not want.

This is hardly an appropriate place to attempt an analysis of the elements of a commercial crisis. But it is not possible rightly to estimate Van Buren's moral courage and keen-sighted wisdom in meeting the terrible pressure of 1837 without appreciating what it was which had really happened. The din of the disputes over the refusal to re-charter the bank, over the removal of the deposits, over the refusal to pay the last installment of the distribution among the States, and over the specie circular, resounds even to our own time. To many the crisis seemed merely a financial or even a great banking episode. Many friends of the administration loudly cried that the disaster arose from the treachery of the banks in suspending. Many of its enemies saw only the normal fruit of administrative blunders, first in recklessness, and last in heartless indifference. To most Americans, whatever their differences, the explanation of this profound and lasting disturbance seemed to lie in the machinery of finance, rather than in the deeper facts of the physical wealth and power of the trading classes.

Speculation is sometimes said to be universal; and it was never nearer universality than from 1830 to 1837. But speculation affects after all but a small part of the community,—the part engaged in trade, venture, new settlement or new manufacture; those classes of men the form of whose work is not established by tradition, but is changing and improving under the spur of ingenuity and invention, and with whom imagination is most powerful and fruitful. These men use the surplus resources of the vastly greater number who go on through periods of high prices and of low prices with their steady toil and unvaried production. In our country and in all industrial communities it is to the former comparatively small class that chiefly and characteristically belong "good times" and "bad times," panics and crises and depressions. It is this class which in newspapers and financial reviews becomes "the country." It chiefly supports the more influential of the clergy, the lawyers, the editors, and others of the professional classes. It deals with the new uses and the accumulations of wealth; it almost monopolizes public attention; it is chiefly and conspicuously identified with industrial and commercial changes and progress. But if great depressions were as nearly universal as the rhetoric of economists and historians would literally signify, our ancestors fifty years ago must have experienced a devastation such as Alaric is said to have brought to the fields of Lombardy. But this was not so. The processes of general production went on; the land was tilled; the farmer's work of the year brought about the same amount of comfort; the ordinary mechanic was not much worse off. If some keen observer from another planet had in 1835 and again later in 1837 looked into the dining-rooms and kitchens and parlors of America, had seen its citizens with their families going to church of a Sunday morning, or watched the tea-parties of their wives, or if he had looked over the fields and into the shops, there would have seemed to him but slight difference between the two years in the occupations, the industry, or the comfort of the people. But if he had stopped looking and begun to listen, he would in 1837 at once have perceived a tremendous change. The great masses of producing men would have been mute, as they usually are. But the capitalists, the traders, the manufacturers, all whose skill, courage, imagination, and adventure made them the leaders of progress, and whose voices were the only loud, clear, intelligible voices, until there arose the modern organizations of laboring men,—all those who in 1835 were flushed and glorious with a royal money-getting,—he would now have heard crying in frenzy and desperation. It is not meant to disparage the importance of this smaller but louder body of men, or to underrate the disaster which they suffered. In proportion to their numbers, they were vastly the most important part of the community. If they were prostrated, there must not only suffer the body of clerks, operatives, and laborers immediately engaged in their enterprises, and who may for economical purposes be ranked with them; but later on, the masses of the community must to a real extent feel the interruption of progress which has overtaken that section of the community to which are committed the characteristic operations of material progress; and whether through the fault or the misfortune of that section, the injury is alike serious. A wise ruler, in touching the finances of his country, will forget none of this. He will look through all the agitation of bankers and traders and manufacturers, the well-voiced leaders of the richer classes of men, to the far vaster processes of industry carried on by men who are silent, and whose silent industry will go on whatever devices of currency or banking may be adopted. This wisdom Van Buren now showed in an exalted degree.

The disaster which in 1837 overtook so large and so important a part of the community was, in its ultimate nature, not difficult to comprehend.

There had not been one equal and universal increase in nominal values. Such an increase would not have produced the crisis. But while the great mass of the national industry went on in channels and with methods and rates substantially undisturbed, there took place an enormous and speculative advance of prices in the cities where were carried on the operations of important traders and the promoters of enterprises, and in the very new country where these enterprises found their material. When a new canal or road was built, or a new line of river steamers launched and an unsettled country made accessible, several things inevitably happened in the temper produced by the jubilant observation of the past. There was not only drawn from the ordinary industry of the country the wealth necessary to build the canal or road or steamers; but the country thus rendered accessible seemed suddenly to gain a value measured by the best results of former settlements, however exceptional, and by the most sanguine hopes for the future. The owners of the prairies and woods and river bottoms became suddenly rich, as a miner in Idaho becomes rich when he strikes a true fissure vein. The owners of the canal or road or line of steamers found their real investment at once multiplied in dollars by the value of the country whose trade they were to enjoy; for, new as that value was, it seemed assured. Like investments were made in banks, and in every implement of direct or indirect use in the conduct of industries which seemed to belong as a necessity to the new value of the land. The numerous sales of lands and of stocks in roads or canals or banks at rapidly advancing prices did not alter the nature, although they vastly augmented the effect, of what was happening. The so-called "business classes" throughout the country, related as they quickly became, under the great impetus of the national hopefulness and vanity, to the new lands, to the new cities and towns and farms, and to the means of reaching them and of providing them with the necessities and comforts of civilization, found their wealth rapidly and largely increasing. Then naturally enough followed the spending of money in personal luxury. This meant the withdrawal of labor in the older part of the country from productive work, for which the country was fitted, to work which, whether suitable or not, was unproductive. The unproductive labor was paid, as the employers supposed, from the new value lately created at the West. So capital, that is, accumulated labor, was first spent in improvements in the new country, and then, and probably in a far greater amount, spent in more costly food, clothes, equipage, and other luxuries in the older country. The successive sales at advancing prices simply increased the sense of new wealth, and augmented more and more this destructive consumption of the products of labor, or the destructive diversion of labor from productive to unproductive activity at the East by the well-to-do classes.

On the eve of the panic the new wealth, whose seeming possession apparently justified this destructive consumption or diversion to luxury of physical value, was primarily represented by titles to lands, stocks in land, canal, turnpike, railroad, transportation, or banking companies, and the notes issued by banks or traders or speculators. The value of these stocks and notes depended upon the fruitfulness of the lands or canals or roads or steamboat lines. Prices of many commodities had, indeed, been enhanced by speculation beyond all proper relation to other commodities, measured by the ultimate standard of the quantity and quality of labor. But important as was this element, it was subordinate to the apparent creation of wealth at the West.

Before the panic broke, it began to appear that mere surveys of wild tracts into lots made neither towns nor cities; that canals and roads and steamboats did not hew down trees or drain morasses or open the glebe. The basis of the operations of capitalists and promoters and venturers in new fields, if those operations were to have real success, must lie in the masses of strong and skillful arms of men of labor. The operations were fruitless until there came a population well sinewed and gladly ready for arduous toil. In 1836 and 1837 the operators found that there was no longer a population to give enduring life to their new operations. They had far outstripped all the immediate or even the nearly promised movements of settlers. Men, however hardy, preferred to work within an easier reach of the physical and social advantages of settlements already made, until they could see the superior fruitfulness of labor further on. The new cities and towns and farms and the means of reaching them would be mere paper assets until an army of settlers was ready to enter in and make them sources of actual physical wealth. But the army stopped far short of the new Edens and metropolises. There was no creation among them of the actual wealth, the return of physical labor, to make good and real the popular semblances of wealth, upon the faith of which in the older part of the country had arisen new methods of business and habits of living. The withdrawal of actual wealth from the multifarious treasuries of capital and industry, to meet the expense of the improvements at the West and the increased luxury at the East, had reached a point where the pressure caused by the deficiency of physical wealth was too great for the hopefulness or credulity of those who had been surrendering that wealth upon the promises of successful and opulent settlements at the West. Nor was all this confined to ventures in the new States. Almost every Eastern city had a suburb where with slight differences all the phenomena of speculation were as real and obvious as in Illinois or Mississippi.

Jackson's specie circular toppled over the house of cards, which at best could have stood but little longer. In place of bank-notes, which symbolized the expectations and hopes of the owners of new towns and improvements, the United States after July, 1836, required from all but actual settlers gold and silver for lands. An insignificant part of the sales had been lately made to settlers. They were chiefly made to speculators. The public lands, which sold invariably at $1.25 an acre, were enormously magnified in nominal value the instant the speculators owned them. Paper money was freely issued upon these estimates of value, to be again paid to the government for more lands at $1.25. But now gold and silver must be found; and nothing but actual labor could find gold and silver. A further stream of true wealth was summoned from the East, already denuded, as it was, of all the surplus it had ready to be invested upon mere expectation. Enormous rates were now paid for real money. But of the real money necessary to make good the paper bubble promises of the speculators not one-tenth part really existed. Banks could neither make their debtors pay in gold and silver, nor pay their own notes in gold and silver. So they suspended.

The great and long concealed devastation of physical wealth and of the accumulation of legitimate labor, by premature improvements and costly personal living, became now quickly apparent. Fancied wealth sank out of sight. Paper symbols of new cities and towns, canals and roads, were not only without value, but they were now plainly seen to be so. Rich men became poor men. The prices of articles in which there had been speculation sank in the reaction far below their true value. The industrious and the prudent, who had given their labor and their real wealth for paper promises issued upon the credit of seemingly assured fortunes, suffered at once with men whose fortunes had never been anything better than the delusions of their hope and imagination.

It is now plain enough that to recover from this crisis was a work of physical reparation to which must go time, industry, and frugality. There was folly in every effort to retain and use as valuable assets the investments in companies and banks whose usefulness, if it had ever begun, was now ended. There was folly in every effort to conceal from the world by words of hopefulness the fact that the imagined values in new cities and garden lands had disappeared in a rude disenchantment as complete as that of Abou-Hassan in the Thousand and One Nights, or that of Sly, the tinker, left untold in the Taming of the Shrew. Their sites were no more than wild lands, whose value must wait the march of American progress, fast enough indeed to the rest of the world, but slow as the snail to the wild pacing of the speculators. Every pretense of a politician, whether in or out of the senate chamber, that the government could by devices of financiering avoid this necessity of long physical repair, was either folly or wickedness. And of this folly or even wickedness there was no lack in the anxious spring and summer of 1837.