Economic crisis of 1857

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Bank rush 1857

The economic crisis of 1857 is one of the first world economic crises . It began in New York City on August 24, 1857 , when the Ohio Life Insurance Company bank had to stop making payments. From there the crisis spread rapidly across the world and lasted until 1859. The financial centers of Europe and America were particularly hard hit, but the effects of the crisis were also felt in the colonies.

Economic crisis in the USA

The economic crisis started in the United States of America . It was triggered by speculation in the railway sector by bank clerk Edward Ludlow . Its consequences had a decisive influence on government policy.

American economy before the crisis

The American economy can be divided into three regions in the 1850s. Each of these areas was dominated by a particular type of economy, although of course other branches of the economy were also present on a small scale. This created a network of economic relationships that were important for the economic crisis. The south produced tobacco , rice , sugar and especially cotton , which was sold to Europe on a large scale. In the northwest , wheat , corn and pork were the main agricultural products . The northeast was the furthest advanced in industrialization with many factories , and many traders and bankers were based there.

The south needed the banks and traders in the north-east, but England was far more important for the prosperity of the south , as most of the products were sold there. The northwest was closely linked to the northeast. Many railway lines brought the food from the west to the east, from where it was often sold on to Europe. The east, in turn, was able to sell many manufactured goods to the west.

As a starting point for the crisis, the Dictionary of American History gives the strong speculation : After the Mexican-American War , there was wild speculation in the construction of railroads, growth of industry, enlargement of the wheat belt ("Grain Belt") and land. It is particularly important that the financial market in the north-east speculated on high prices in the west, which was newly opened up by railways, and on high freight volumes from the railways there.

Course of the economic crisis

The economic crisis of 1857 came from the banks . It was only through their failure that other major branches of the American economy were damaged, leading to a depression .

The banks in the economic crisis

There are various reasons for the failure of the banks.

When far fewer people moved west from 1856 than before, presumably due to political uncertainties in Kansas , land prices fell due to lower demand. In addition, the share prices of the railroad companies fell as there was less transport. As a result, the speculating banks had less money available. C. W. Calomiris and L. Schweikart see this as a direct reason for the banking crisis.

August 24, 1857 is seen as the beginning of the economic crisis. That day, Charles Stetson, president of Ohio Life Insurance Company stated:

"The unpleasant duty has devolved upon me to state that this company has suspended payment."

"I had the unpleasant duty to report that the company had stopped making payments"

- Charles Stetson

The bank had invested too much in speculative bonds for railroad companies. The Ohio Life New York office had made a number of mistakes, including possible fraud.

Because many New York banks had given credit to the Ohio Life Insurance Company , the banks withdrew their loans from other smaller banks and corporations. As a result, many of these small banks and businesses became insolvent . This in turn caused fear among the creditors of these banks, who then withdrew money from the banks, so that the banks had to demand more loans back.

This downward spiral was fueled by the following factors, which further challenged the banks' credibility : First, British creditors decided to withdraw money from American banks. Second, a ship, the Central America , sank with about 13 tons of gold to be shipped from California's gold mines to the New York banks.

Many were still hoping at the end of September that the farmers of the south and west would sell their crops and thereby improve the general business situation. However, wheat prices fell significantly, presumably because now that the Crimean War was over, Europe could again import large quantities of wheat from Russia at cheaper prices than from America. With the low wheat prices, many farmers in the West refused to sell their goods, so they could not repay their debts to the ailing banks.

Many banks could not withstand the unfavorable circumstances for long, the small and soon also the larger banks had to stop paying in order not to have to declare bankruptcy. The particularly important Philadelphia's Bank of Pennsylvania was unable to pay out any more money to its customers on September 25th, and other small banks followed. The most important banks in New York and Boston remained open for the time being, but they too could no longer lend money to entrepreneurs. After a mob with more than 20,000 people tried to withdraw money on October 13th, the New York banks were no longer able to pay out any more money, and most of the other banks in America stopped their payments.

Two months later, the first banks had enough reserves to be able to withdraw money again. The banking crisis was short, but painful for industry. More than 5000 companies were unable to meet their financial obligations by the end of 1857 and had to close.

American economy after the banking crisis

The farmers in the northwest of the United States could not sell their grain at higher prices in 1858 because the previously important export market to Europe had collapsed. The economy of the north-east was dependent on the market in the west. Consumer goods were sold there before the economic crisis. But since the farmers were heavily in debt, they could hardly buy anything from the northeast. The 1858 marketing year was therefore regarded by contemporaries in the northern states as one of the worst.

The economy could sell fewer goods. Thousands of workers have been laid off due to low demand. For many of the remaining workers, wages have often been cut by more than ten percent. As a result, so-called bread lines formed in which the poor stood in line for food. Numerous strikes took place with demands for unions and higher wages. The largest of these strikes began on February 22nd, 1860, when the Lynn shoemakers went out of business . More than 35,000 workers went on strike across the state in March, but the strike broke up when the strikers ran out of money to support themselves.

The situation in the south was completely different. The effects of the banking crisis were felt there too, but the products of the South, especially cotton, could already be sold to Europe at good prices as early as 1858. As a result, there was no serious crisis in the south. In contrast to the northern railways, the railways there were also able to continue to pay good dividends . Since the companies in the north-east could hardly sell their products in the north-west, they looked for new sales markets. Since the financial strength of the people in the south was greater, the northeast sold more and more to the south in the course of the crisis. This made the north as a whole more dependent on the economy of the south.

The economy in the northeast slowly recovered from the spring of 1859. However, the upswing in the north did not come until the summer of 1860, when Europe again bought seven times the amount of wheat exported in previous years. As a result, the farmers and the railways in the north-west earned well again, so that money was again available to buy the products of the industries in the east. Industrial production returned to the level it was before the crisis. Thus the economic crisis of 1857 was over by the summer of 1860.

Follow in the United States

Government financial crisis

Due to the economic crisis, the government got into serious financial difficulties. Since 1817 the government has made most of its income from tariffs and the sale of the land. However, revenue from both sources fell sharply due to the crisis. First, many goods were imported from industrialized Europe before the economic crisis. Due to the economic crisis, however, the demand for European goods in America had fallen sharply. As a result, the government could only earn little money through tariffs on the import of goods. Second, the lands in the west could hardly be sold during the economic crisis, as people and companies had no money left to buy their own farm or to speculate in land. In addition, the farmers who had already bought their farm but not yet paid for it were often unable to service their debts. Normally the land was then auctioned, but this was politically unenforceable in times of crisis, so the land sales were temporarily suspended.

In order to face the financial crisis, the government had to save. In addition, the Congress allowed to take up further bonds . This took place at several meetings, but the Congress could not find other compromises, since they would have favored either the North or the South. By July 1, 1857, through July 1, 1860, the debt had more than doubled from $ 28 million to $ 64 million.

Contrasts between northern and southern states are intensifying

The crisis has some contradictions between the North and the South intensified further, so that it ultimately to the secession came the South that the American Civil War triggered.

In the course of the crisis, the northern states, especially Pennsylvania , demanded protective tariffs for goods from Europe to support their own economy. For the south, however, the government's financial crisis was an advantage, as they feared a strong government in Washington that could resist the expansion of slavery .

Some northern states continued to demand that lands in the west be given away. It was hoped that unemployed people could then open their own farm and thus provide for their own income. For the southern states, however, such a law was unacceptable, as it was to be expected that settlers from the north would then vote against slavery in the territories and thus the slavery would be restricted. Therefore, the Homestead Act could not be enacted until 1862.

The presidential election in 1860 must also be seen against the background of the crisis that has just passed.

Economic crisis in Europe

European economy before the crisis

The years after the revolutionary events of 1848/49 were marked in Europe by increasing market integration; Customs barriers were successively dismantled or reduced, the last remaining remnants of the feudal system abolished.

At the same time, gold discoveries in California , Australia and Mexico resulted in an increase in the money supply in Europe as well, which had a stimulating effect on the economy. A growing population had a positive effect in that food production kept pace with this development; at the same time, numerous people emigrated to North America, especially from Ireland and the German states, thereby relieving the economic situation in Europe. With the overseas emigration, the sales areas of the European economy also expanded.

The railroad was the main driver of growth in the 1850s. With the construction of railway lines, new markets were opened up, transport costs fell, and industrial production was boosted. On the European continent, it was mainly the newly founded joint stock banks that financed the construction of the railway; this type of company mobilized capital to a previously unknown extent. In Germany, share prices doubled between 1850 and 1856.

In addition, thanks to innovations in the banking sector on the European continent, loans have been granted on a large scale. The loans from the new deposit banks were only partially covered by deposits. In addition to cash, bank money increasingly circulated as a means of payment. This expansion of the money supply had a stimulating effect on economic activity.

Outbreak and course of the crisis

The Prussian government responded in 1855 to the emerging overheating with a gradual lifting of the private list banking . The governments of Saxony , Baden , Bavaria and Württemberg followed suit. The Prussian Bank, on the other hand, was given the right to issue unlimited notes. From then on, the shares of the private banks fell in price. At the same time, from 1856 onwards, the French government took steps to regulate the Paris Stock Exchange more closely: there was a fee to visit the stock exchange and foreign stocks were no longer allowed to be listed. From the summer of 1856, share prices on the Central European stock exchanges began to decline.

News of the suspension of payments by the Ohio Life Insurance Company on August 24, 1857 in New York reached London two months late, as a result of which banks in Scotland and northern England ran into financial difficulties. The British government then suspended the bank record and authorized the central bank to issue new notes worth two million pounds at high interest rates. The pressure on the banks eased, but numerous trading houses got into difficulties.

The crisis in Hamburg

The crisis broke out in November in Hamburg , then a hub for international trade in goods. Hamburg merchants were heavily involved in speculative merchandise deals, which they financed by means of bills of exchange . These had increasingly been issued in the form of blank loans or on a fictitious basis. In the third quarter of 1857, bills of exchange totaled 273 million Bancomark ; In 1855 it was only 162 million.

After the events in America and England, there was fear in Hamburg that there would be extensive payment defaults . In order to limit this as much as possible, Hamburg merchants agreed to set up a private guarantee-disconto association, which should guarantee bills of around 12 million Bancomark. By the end of November, however, the association's funds were exhausted.

In Hamburg, the legislature had initially refused to help the private sector with public funds. After the private funds were exhausted so quickly, a change of heart began in the Hamburg council . A commission was formed on November 27th to provide advances on goods or securities totaling fifteen million Bancomark. This should be financed by chamber mandates issued as promissory notes on the Hamburg state treasury. However, these were high-interest; the demand for the bills was low.

In view of the increasingly panicky mood in the commercial world and following a passionate debate, the Hamburg Council decided on December 6, 1857 to open an account for five million Bancomark, in which Hamburgers could deposit bills of exchange for cash. In addition, the finance department was authorized to take out a silver loan of ten million marks. This was granted by the Austrian government after consultations ; on December 15th the Viennese silver bar arrived in Hamburg. Eight large Hamburg trading houses (so-called “corner houses”) benefited from this money. The company HJ Merck & Co. alone received five million Bancomark, which met with some fierce criticism.

In total, the public authorities in Hamburg had approved 35 million Bancomark to support trade - an amount that was almost five times the budgeted state expenditure for 1857 . These interventions proved to be effective and the panic in Hamburg ended after about two weeks. Nevertheless, between the beginning of December 1857 and March 1858 there were a total of 288 bankruptcies in Hamburg - seven times as many as two years earlier.

Elsewhere on the European continent, the crisis widened gradually and less suddenly. The year 1858 was dominated by the economic downturn, prices fell and the volume of foreign trade fell. There was no upturn again until 1859.

literature

English speaking

  • Charles W. Calomiris, Larry Schweikart: The panic of 1857: origins, transmission, and containment. In: The journal of economic history. 51/4 (1991), Cambridge Univ. Press, pp. 807-834.
  • David Morier Evans: The History of the Commercial Crisis, 1857-58 and the Stock Exchange Panic of 1859. Groombridge, London 1859 Digitized
  • William Romaine Callender: The commercial crisis of 1857. Its causes and results being the substance of a paper read before the Manchester Statistical Society with an appendix comprising a list of upwards of 260 English failures in 1857-8. Longman, London 1858.
  • Jonathan Duncan: The Bank Charter Act. Ought the Bank of England Or the People of England to Receive the Profits of the National Circulation? Second edition. With Remarks on the Monetary Crisis of November, 1857. Oakey, London 1858 Digitized
  • James L. Huston: The Panic of 1857 and the Coming of the Civil War. Louisiana State University Press, Baton Rouge, LA [u. a.] 1987, ISBN 0-8071-1368-9 .
  • David Mendell: Shipwrecks's Gold has Tale to be told . In: Chicago Tribune , August 8, 1999, Metro Chicago, p. 1.
  • Kenneth M. Stampp: America in 1857: a nation on the brink. Oxford University Press, New York [u. a.] 1990, ISBN 0-19-503902-5 .
  • George Washington Van Vleck: The Panic of 1857: An Analytical Study. 1943.

German speaking

  • Max Wirth : History of the Trade Crises . 4., presumably u. verb. Edition, Sauerländer, Frankfurt a. M.1890, pp. 245-418. Digitized
  • Hans Rosenberg : The Great Depression 1857-1859. Vandenhoeck & Ruprecht, 2nd edition. Göttingen 1974, ISBN 3-525-33359-5 (1st edition Stuttgart 1934).
  • Jürgen Kuczynski : On the problem of the cyclical overproduction crisis . In: the same: On the correspondence between Engels and Marx . Akademie Verlag, Berlin 1976, pp. 11–84. (= Studies on a History of Social Sciences . Volume 3)
  • Gerhard Ahrens : Overcoming the Hamburg economic crisis of 1857 in the field of tension between private initiative and state intervention . On: Journal of the Association for Hamburg History , Volume 64 (1978), pp. 1–29. Digitized version (PDF)
  • Bernd Hasloop: The economic crisis of 1857. Shown using the example of Lübeck. Lübeck 1981.
  • Jörg Goldberg : The observation of the capitalist world economic crisis of 1857/58 by Marx and Engels and the development of the crisis theory . In: IMSF Yearbook 12/1987 , Frankfurt am Main 1987, pp. 163–175, digitized
  • Werner Plumpe: Economic crises. History and present. 2nd Edition. Munich 2011.
  • Till Hein: The ticking breakdown . In: Die Wochenzeitung , August 9, 2007
  • Wolfgang Uchatius : World economy: everything is gone . In: Die Zeit , No. 42/2007

Web links

Commons : Panic of 1857  - Collection of Images, Videos and Audio Files

Individual evidence

  1. ↑ a b The Great Depression of 1857 (Part 1 USA). ( Memento of the original from September 28, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. boerse.de finance portal, December 17, 2001. @1@ 2Template: Webachiv / IABot / nachrichten.boerse.de
  2. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , pp. 3-4.
  3. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , pp. 4-5.
  4. ↑ a b James Truslow Adams (ed.): Panic of 1857 . In: Dictionary of American History . 2nd ed., Revised. Charles Scribners's Sons, New York 1940.
  5. ^ Charles W. Calomiris, Larry Schweikart: The panic of 1857: origins, transmission, and containment . In: The journal of economic history , Vol. 51, No. 4, 1991. Cambridge Univ. Press, p. 809.
  6. ^ Charles W. Calomiris, Larry Schweikart: The panic of 1857: origins, transmission, and containment . In: The journal of economic history , Vol. 51, No. 4, 1991. Cambridge Univ. Press, pp. 810-813, 816, 818
  7. ↑ Quoted from Kenneth M. Stampp: America in 1857: a nation on the brink . Oxford University Press, New York [u. a.] 1990, ISBN 0-19-503902-5 , p. 222
  8. ↑ a b Kenneth M. Stampp: America in 1857 - a nation on the brink. Oxford University Press, New York [u. a.] 1990, p. 222 ISBN 0-19-503902-5
  9. ↑ Panic of 1857 in the English language Wikipedia
  10. ↑ David Mendell: Shipwrecks's Gold has Tale to be told . In: Chicago Tribune , August 8, 1999, Metro Chicago, p. 1
  11. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , p. 18 f.
  12. ↑ a b Kenneth M. Stampp: America in 1857: a nation on the brink . Oxford University Press, New York [u. a.] 1990, ISBN 0-19-503902-5 , p. 224
  13. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , p. 30 ff.
  14. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , p. 220 ff.
  15. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , p. 33
  16. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , p. 216
  17. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , p. 210 ff.
  18. ↑ United States Department of the Treasury: Fact Sheets: Taxes - History of the US Tax System ( Memento of the original dated November 29, 2006 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . March 15, 2006. @1@ 2Template: Webachiv / IABot / www.treas.gov
  19. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , p. 129.
  20. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , pp. 133, 193.
  21. ↑ Historical Debt Outstanding - Annual 1850–1899. ( Memento of the original from July 21, 2006 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. United States Department of the Treasury, Bureau of the Public Debt, Oct 6, 2004. @1@ 2Template: Webachiv / IABot / www.publicdebt.treas.gov
  22. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , p. 175 ff.
  23. ^ Congressional Globe: Homestead Bill. 35th Congress, 1st Session. P. 2425 . 1858.
  24. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War. Louisiana State University Press, Baton Rouge, LA [u. a.] 1987, p. 102 ISBN 0-8071-1368-9 .
  25. ↑ James L. Huston: The Panic of 1857 and the Coming of the Civil War . Louisiana State University Press, Baton Rouge LA [u. a.] 1987, ISBN 0-8071-1368-9 , pp. 127 f., 197, 247 f ..
  26. ↑ Hans Rosenberg, The World Economic Crisis 1857-1859. Vandenhoeck & Ruprecht, 2nd edition Göttingen 1974, pp. 17-26.
  27. ↑ Hans Rosenberg: The world economic crisis 1857-1859. 2nd Edition. Vandenhoeck & Ruprecht, Göttingen 1974, pp. 39-44.
  28. ^ Werner Plumpe: Economic crises. History and present. 2nd Edition. Munich 2011, p. 56 f.
  29. ^ Werner Plumpe: Economic crises. History and present. 2nd Edition. Munich 2011, p. 56.
  30. ↑ Hans Rosenberg, The World Economic Crisis 1857-1859. 2nd Edition. Vandenhoeck & Ruprecht, Göttingen 1974, p. 108 f.
  31. ^ Werner Plumpe: Economic crises. History and present. 2nd Edition. Munich 2011, p. 60.
  32. ^ Gerhard Ahrens : Crisis Management 1857. State and merchants in Hamburg during the first world economic crisis . Verlag Verein für Hamburgische Geschichte , Hamburg 1986, pp. 16–19.
  33. ^ Gerhard Ahrens: Crisis Management 1857. State and merchants in Hamburg during the first world economic crisis . Verlag Verein für Hamburgische Geschichte, Hamburg 1986, pp. 24–26.
  34. ^ Gerhard Ahrens: Crisis Management 1857. State and merchants in Hamburg during the first world economic crisis . Verlag Verein für Hamburgische Geschichte, Hamburg 1986, pp. 34–37.
  35. ^ Gerhard Ahrens: Crisis Management 1857. State and merchants in Hamburg during the first world economic crisis . Verlag Verein für Hamburgische Geschichte, Hamburg 1986, pp. 61–67.
  36. ^ Gerhard Ahrens: Crisis Management 1857. State and merchants in Hamburg during the first world economic crisis . Verlag Verein für Hamburgische Geschichte, Hamburg 1986, pp. 41, 99.
  37. ^ Werner Plumpe: Economic crises. History and present. 2nd Edition. Munich 2011, p. 61. Hans Rosenberg : The world economic crisis 1857-1859. 2nd Edition. Vandenhoeck & Ruprecht, Göttingen 1974, p. 132.