A Brief History of Panics | Page 3

and only twice in our history,
from 1789 to 1808, and from 1846 to 1860, have enough of the
minority found their interests sufficiently identical with that of the
unorganized farmer-majority to join votes, and thus secure at once their
common end. In consequence of this coalition during these two periods,
two remarkable things happened: 1st, agriculture flourished, and
comfortable living was more widely spread: 2d, panics were very
infrequent, and the hardships and far-reaching discomforts that must
ever attend adjustments to new financial conditions after disturbances
were, of course, minimized.
It is not fair to deduce very much from the first period of prosperity
among the farmers, 1789 to 1808, for, during this time, there were no
important business interests unconnected with agriculture; but we may
summarize the facts that from 1789 to 1808, there was, 1st, no
protection, the average duty during this time being 5 per cent., and that
laid for revenue only; 2d, that agriculture flourished; 3d, that there was
not a single panic.
"The Embargo" of 1808, followed by the Non-Intercourse Act in 1809
and the War of 1812-15, and the war tariff, by which double duties
were charged in order to raise money for war purposes, caused us to
suffer all the economic disasters flowing from tariffs ranging between
absolute protection, and those practically prohibiting, and intensified by
the sufferings inseparable from war.
During this period agriculture, for the first time in our history, was in a
miserable condition. It is significant that for the first time too, we had a
protective tariff. Though our people made heroic efforts to make for
themselves those articles formerly imported, thus starting our
manufacturing interests, they had, of course, lost their export trade and
its profits. When the peace of 1814 came, we again began exporting our
produce, and aided by the short harvests abroad, and our own
accumulated crops, resumed the profitable business which for six years
our farmers and our people generally had entirely lost. Our first panic,
that of 1814, came as a result of our long exclusion from foreign
markets, being followed by the stimulation given business through

resumption of our foreign trade in 1814, which was immensely
heightened by the banks issuing enormous quantities of irredeemable
paper, instead of bending all their energies to paying off the paper they
had issued during the war.
But worse than the suffering entailed by this panic, was the engrafting
upon our economic policy of the fallacious theory made possible by the
Embargo and the Non-Intercourse Act, (which was equivalent, let me
enforce it once more, to that highest protective tariff, a prohibitory one)
that _all infant manufactures must be protected, that is, guaranteed a
home market_, though such home market be one where all goods cost
more to the purchaser than similar goods bought elsewhere, and this in
order that the compact little band of sellers in the home market may
make their profit. This demand for protection was made by those who
had started manufactures during the years from 1808 to the end of the
war of 1815, when, as we have seen, imports were practically excluded.
In 1816 their demand met explicit assent, for, in the tariff of that year,
duty for protection, not for revenue, was granted; and an average of 25
per cent. duties for six years, to be followed by an average of 20 per
cent. duties, was laid upon imports. For a few years bad bread crops in
Europe, demand for our cotton, and an inflation of our currency
delayed a panic.
But, we had started on our unreasoning course. We had tried to ignore
the laws of demand and supply, and had forgotten that it is also
artificial to attempt preventing purchases in the cheapest, and selling in
the highest markets; and to help a few manufacturers we had put up
prices for all that a large majority of our population,--the agriculturists
mainly--had to buy. In a short while the demand for what the farmers
had to sell fell away, and bills could not be met, and their troubles were
added to those of the minority of the consumers of the country; the
volume of business fell off, and a panic came in 1818. The influences
that led up to it continued until 1846, as follows: The great factors in
producing this state of affairs were the successive tariffs of 1818, with
its 25 per cent. duty upon cottons and woollens, and its increased duties
on all forms of manufactured iron, (the tariff of 1824 which increased
duties considerably), and the tariff of 1828, imposing an average of 50
per cent. duties, and in which the protective movement reached its
acme (omitting, of course, the present McKinley Bill with its 60 per

cent. average duty). In 1832, consequently, a great