The Panic of 1819 in Cumberland County

Introduction

The Panic of 1819 was the first great depression in the U.S. In this bicentennial year, the article will first present background about the event. It will then attempt to answer four questions related to the Panic of 1819 and Cumberland County, Pennsylvania.1

  1. Did the Panic of 1819 impact Cumberland County residents?
  2. Did it have more, less, or the same impact in Cumberland County as in an area closer to Philadelphia?
  3. By occupation, who did it harm?
  4. Was there any circular chain of insolvency?

Background

The period 1815 to 1818 experienced a rapid increase in land speculation financed by paper. Credit multiplied with printed notes, prices rose, and property appreciated. But the expansion bubble burst because the economy was based on paper. Suddenly land values and cotton prices collapsed.

During the Panic of 1819 and the years following it, credit business declined, monetary supply contracted, and federal debt was retired, particularly that associated with the Louisiana Purchase.2 Prices deflated about 30% between 1818 and 1821.3 Banks became insolvent, debtors were overextended, and unemployment rose.4 Property values declined, and old debts were liquidated by forced sheriff’s sales which exacerbated the price situation.5 The chain of entangled debts lengthened.6 In an attempt to control the expansion, Pennsylvania chartered banks reduced notes in circulation by one-half between 1815 and 1818 while increasing bank species reserves.7 Fewer funds were available to be loaned, and those that were available were made at higher interest rates.

Many people suffered. The rapid rise in prices increased debts. This affected farmers, laborers, and tradesmen. Merchants also suffered from dropping prices, lower demand, and growing debts.8 The results were calamitous. People lost land and personal goods at sheriff's sales, bankruptcies rose, businesses stagnated, and some businesses closed.9

Was the Panic of 1819 Felt by Cumberland County Residents?

An excellent source for learning about the effect on Cumberland County residents is the collection of insolvent petitions of the period.10 Insolvent petitions document those who petitioned the court for protection under the laws of insolvency but also those who did not declare insolvency but were indebted to insolvents. Using these documents may enable one to find a partial answer to the gap in knowledge pointed out by George Dangerfield in The Era of Good Feelings: “the ultimate loser in all this was, of course, the man at the bottom of the chain of debt. We cannot say exactly who he was … but it is not unsafe to assume that the chief burden was borne by those farmers …”11

To get a sense for the overall impact of the Panic of 1819 on Cumberland County residents, one can examine the trend over time of the percent of insolvencies in relation to the adult male population. To calculate that, one can consult the U.S. census population schedules using a compound growth formula to estimate populations in the years between the U.S. censuses that were taken on ten-year intervals. This also requires taking into account the creation of Perry County from part of Cumberland County in 1820. The resulting graph is charted in Figure 1. From this can be seen the rapid relative rise in insolvencies between 1818 and 1819, 1819 and 1820, and 1820 to 1821. While there was a drop-off from 1821 to 1822, the 1822 level was still much higher than before 1819, and that remained the case through the end of 1828.

Individual insolvent debtors explained their plight often by referring to the era of depression. Such phrases as “money becoming scarcer,” “goods sold for low price at public sale,” “could not make land payments,” “labor has been scarce,” and “property sold at low price” occur in the petitions. Allusions to the times appear in such phrases as “the times changing,” “darkness of the times,” “difficulty of the times,” “situation of the times,” “present hard times,” “pressure and difficulty of the times,” “present and recent difficulty and pressure of the times,” and “unfortunate situation of the times.”

What Impact Did It Have on Cumberland County Compared to an Area Close to Philadelphia?

One can use the same measure for Chester County, Pennsylvania as for Cumberland County because of the excellent repository containing its insolvent petitions.12 Figure 2 shows the plot lines of percent of insolvencies to the adult male population for Chester and Cumberland counties.

Several observations may be made. On the whole, the pattern shapes between the two counties are remarkably similar. However, there are significant differences. First, the increase in percentage of people becoming insolvent in Cumberland County began about four years prior to Chester County. Second, the percentage of insolvents in Cumberland County was significantly higher than in Chester County. In 1821, the Chester County percent of insolvents was 0.96% while the Cumberland County percent was 1.96%, about twice the impact of Chester County. Third, the recovery after the Panic, especially in 1827 and 1828, was stronger in Chester County. It may be hypothesized that all three differences were due to the proximity of Chester County to the important trade and commercial center of Philadelphia. Unfavorable and favorable economic conditions had less of an impact in the area near Philadelphia than in the area near Carlisle.

By Occupation, Who Did It Harm?

The short answer is that it harmed people in all, or almost all, occupations. In terms of absolute numbers, farmers, laborers, and tradesmen/craftsmen were hit hardest.

Using the occupations self-reported by insolvents, and other data available to document occupations, the numbers of people in each occupation represented in insolvency petitions 1819–21, in descending order by quantity are:

  1. Laborers
  2. Farmers
  3. Carpenters
  4. Shoemakers
  5. 3-way tie among weavers, blacksmiths, and innkeepers
  6. Wagoners
  7. Millers
  8. Masons
  9. Constables
  10. Various trade, retail, and professional occupations including plasterer, tanner, hunter, tailor, saddler, cooper, confectioner, nailor, wagon maker, distiller, butcher, sheep driver, brick maker, windmill maker, coppersmith, turnpike builder, mechanic, tool maker, locksmith, printer, grocer, storekeeper, school master, attorney, and doctor.

There were more people working as farmers and laborers than in specific trades, so it is not surprising that those two occupations rank at the top in terms of absolute numbers. The drop in housing values explains the lowering demand for houses and therefore work for carpenters and masons. With less money, people made their clothes last longer which reduced the work for shoemakers and weavers. People traveled less as trade diminished, so the work for wagoners, wagon makers, saddlers, blacksmiths, innkeepers, and turnpike builders dropped. All groups in the community suffered economically.13

Was there any Circular Chain of Insolvency?

By circular chain of insolvency is meant that creditors and debtors named by insolvent petitioners themselves filed for insolvency. Of the 238 people who filed insolvent petitions 1819–21, 60 (25%) had debtors who also filed insolvent petitions in the period 1805–26. Some of those 60 had multiple debtors who had been or were to become insolvent, and this increased debtor entanglement. In fact, there were 164 case–debtor combinations all involving insolvent debtors in those same time periods.

But the situation was even more complex. Creditors also were forced to file insolvent petitions because they were not paid or were paid at much less than the amount owed. Of the 238 people who filed petitions 1819–21, 143 (60%) had at least one creditor who filed an insolvency petition 1805–26. The insolvent case–creditor combinations numbered 331, a surprisingly large number.

With so many creditors and debtors of insolvents themselves becoming insolvent, the circularity of the chain of insolvency was complex. Those numbers do not include the large number of debtors to insolvents who could neither pay the insolvents nor found it necessary to petition for protection. It also does not include the large number of unpaid creditors of insolvents who managed to stay afloat. The economic impact on the community was much larger than is indicated in the insolvency petitions, but these petitions give one a good window into the dire situation of the time. It can now be seen that because the chain of debt was circular, there was no bottom of the debt chain.

Conclusion

The adverse economic impact of the Panic of 1819 remained in Cumberland County for well over ten years. It lowered people’s faith in the banking system and in the national economy. People hesitated to invest in improvements, buy land, and start or restart businesses. Many of those who suffered financial setbacks may never have fully recovered. Illness and weakness resulted from undernourishment from lack of money to buy sufficient food, and from poorer living conditions.

References (Sources Available at CCHS in bold)

[1] A Contributor, “Cumberland County in the Panic of 1819,” Cumberland County History vol. 13, no. 1 (1996), 42–47.

[2] Clyde A. Haulman, “The Panic of 1819: America’s First Great Depression,” Financial History 2010, 20–21, www.moaf.org; Daniel S. Dupre, “The Panic of 1819 and the Political Economy of Sectionalism,” in The Economy of Early America: Historical Perspectives and New Directions, ed. Cathy Matson (University Park: Pennsylvania State University, 2006), 264.

[3] Haulman, “The Panic of 1819,” 21.

[4] C. J. Maloney, “1819: America’s First Housing Bubble,” Mises Daily, Ludwig von Mises Institute, 40, mises.org.

[5] Samuel Rezneck, “The Depression of 1819–1822: A Social History,” American Historical Review 39 (1933), 32; Murray N. Rothbard, The Panic of 1819: Reactions and Policies (New York: Columbian University Press, 1963), 38.

[6] Rezneck, “The Depression of 1819–1822,” 38.

[7] Robert M. Blackson, “Pennsylvania Banks and the Panic of 1819: A Reinterpretation,” Journal of the Early Republic 9 (1989), 351.

[8] Rothbard, The Panic of 1819, 14.

[9] Rothbard, The Panic of 1819, 72.

[10] Barbara Bartos, “Insolvent Debtor Petitions of Cumberland County,” Cumberland County History vol. 27, no. 1 (2010), 59–68.  The archives are at https://ccweb.ccpa.net/archives/.  The author read and analyzed all insolvent petitions between 1800 and 1828 for this project.

[11] George Dangerfield, The Era of Good Feelings (Chicago: Ivan R. Dee, Inc., Publishers, 1989), 186.

[12] https://www.chesco.org/1392/Insolvent-Debtor-Petitons-1724-1850

[13] Rothbard, The Panic of 1819, 14.

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