The following review was posted last night on the Books page of the History News Network site.
By now, the scenario is a familiar one: a sovereign state, deeply indebted by many years of public sector spending, is making foreign lenders nervous. The state needs more money; lenders insist on austerity. But government officials, chary of offending voters, prevaricate while various schemes for restructuring get floated and clamor builds in the streets. Eventually, the underlying realities assert themselves and retrenchment takes place.
We know this as a story of Greece and Ireland. But the states Alasdair Roberts are talking about are Illinois, Pennsylvania and Mississippi, among others. And the financial crisis in question erupted not in 2007, but in 1837. Welcome to what he calls the First Great Depression.
As he explains in his note on method, Roberts comes to this history from a relatively unusual angle. A professor of law and public policy at Suffolk University Law School, his previous three books have dealt with contemporary subjects. This well-documented tale, grounded in primary sources, is embedded between discussions of the current economic crisis. His larger point is geopolitical: Americans today fret about finding themselves at the mercy of foreign powers for the first time in its history. In fact, he says, in the broad sweep of U.S. history, autonomy has been the exception, not the rule. The past is prologue.
Roberts begins America's First Great Depression with an impressionistic survey of hard times, rich with anecdote. He does not outright reject the widespread view that the Panic of 1837 resulted from the foolish actions of the Jackson administration, which in destroying the Bank of the United States created a boom and bust by channeling cash to smaller banks that lacked the experience to manage it properly. But, he says, the origins of the crisis are closer to London than Washington; Great Britain had its own problems with credit, food supply, and a global marketplace that was far less well understood and fluid than it is today. And since Britain essentially underwrote the economic development of the whole western hemisphere, a Barings sneeze caused American flu.
Roberts's analysis of the American scene draws heavily on foreign perceptions of the United States, particularly British ones, which are quite critical. For such people, the American experiment is simply not working. He explains why in the most focused and satisfying chapter of the book, which looks at government policy on the state level, where politicians typically found the wrath of voters more frightening that that of lenders. A British ditty at the time captures the caustic mood of foreign elites, which would sting national pride for some time to come:
Yankee Doodle borrows cash,
Yankee Doodle spends it,
And then his snaps his fingers at
The jolly flat who lends it
Ask him when he means to pay,
He shews no hesitation,
But he say's he'll take the shortest way
And that's repudiation!
In snubbing foreign lenders, however, the states also short-circuited internal improvement projects that died on the vine (so much for Pennsylvania's effort to compete with the Erie Canal by linking Philadelphia to Pittsburgh). They also essentially shut themselves out of the credit markets for many years.
The situation at the federal level wasn't much better. Washington never slumped into bankruptcy the way a series of states did; the government actually ran a surplus in the early 1830s that it promised to redistribute to the states. Ironically, however, the perception of plenty made matters worse when the feds began hemorrhaging revenue and pulled the plug on the program, sending desperate states into even more distress.
But Roberts shows the reverberations of the crisis went far beyond economic policy. Economic hard times corroded trust in political institutions, creating government gridlock. The Whig Party swept to power in 1840 by riding a wave of exasperation with Martin Van Buren's Democrats, only to find themselves similarly hobbled and tossed in subsequent congressional and presidential elections. Fiscal difficulties also constrained the nation's military. Though public opinion at the time was militantly expansionist with regard to borders in Maine, Oregon, and Texas, informed government officials realized that war -- especially war with hegemonic Great Britain -- would be folly at best. (Here it's worth noting in passing that Roberts portrays the ninth president of the United States, "His Accidency" John Tyler, who got the job when Whig William Henry Harrison died, as one of the architects of a stronger executive branch. To a great degree that's because he used his authority to trim national sails in the face of realpolitik.)
Finally, Roberts describes the depression as a crisis of civic order. He situates the obscure and often mystifying Rhode Island insurrection known as the Dorr War in the context of an outdated colonial constitution finally breaking down in the face of economic pressures. Ditto for the Anti-Rent uprisings in the upper Hudson Valley. The situation in Philadelphia, where riots broke out in 1844, was perhaps more a function of labor politics in the blast furnace of industrial capitalism. But it too derived directly from populist grievances with financial elites. As governor William Seward of New York observed at the time, there was widespread anger that "none but the educated, the refined, the financial, the brokers, the great commercial interests of society have the right to suspend the their just debts." His recognition of fiscal hypocrisy would sound familiar to the protesters of Occupy Wall Street.
In his laudable attempt to understand the economic mechanics of the nation from a broader perspective, Roberts sometimes seems to stretch his perspective a bit far. It's not clear, for example, that we need the kind of detailed assessment of the U.S. navy in the Age of Jackson that we get in this book. Nor it it clear that finance can really explain why the U.S. never went to war with Great Britain in the 1840s: even a flush nation would have had very good reasons to avoid one with a global superpower whose resources outmatched the United States in just about every meaningful sense at the time. Roberts makes a good case that the Mexican War was in some respects a proxy fight with Great Britain, though less so that credit markets were central to the rivalry (indeed, he seems to stray pretty far from them even in his own telling). But he's surely right that the ease with which the nation was able to borrow money again in its aftermath signaled the degree to which the nation had finally, fully, and visibly recovered from the Panic of 1837.
While this svelte book could have trimmed a bit more, it remains a valuable case study, because it's both detailed and resonant at the same time. As a snapshot of the United States at what might be considered an "in-between" moment of its history, the picture here is rich in suggesting where the nation had come from and where it was going. And as an invitation to consider the U.S. place in a post-hegemonic world, the book offers a glimpse of a plausible future which, while undeniably sobering, is not exactly apocalyptic. In that regard, America's First Great Depression is an oddly hopeful reality check.