What's in a Word? - The Many Panics of 1837 by Jessica Lepler (2013)

In this week's read, the author of The Many Panics of 1837 exposes the interconnected financial system of the TransAtlantic world. Focusing on the political economies of New Orleans, New York City and London, Lepler examines a range of primary sources to determine if people today experience the economy differently than people in the past? If so, is this measurable, or even comparable? Her argument that "the Panic of 1837" was actually the aggregation of "the many panics of 1837" becomes manifest in her evidence of acute financial uncertainty on both sides of the Atlantic.

Lepler pulls from a range of sources for her text. Much of her research is made up of archival data, such as that of national banks or private collections run by an institution or the state. Other information from the time period comes from personal correspondence, art, sermons, music, satire (the rise of the dichotomous melodrama makes its first cameo during this age) and of course, that ubiquitous spreader of (interesting) information: rumors.

The main vehicle the author identifies as responsible for these panics is information. During the early 19th-century, financial information between metropolitan areas arrived by letter on ships. So there was a value put on paper and verbal confirmations and contracts, arguably more so than present day. The book returns again and again to a concept of "confidence" which takes its importance directly from trusting another party in a credit market arrangement (9). When "confidence" is lacking, there is less hope in the credit markets and thus a reaction by all stakeholders: the southern planter class, financiers, and antebellum market makers called 'cotton factors.' Strangely absent is a reaction by the real underlying asset: the slave. More on that later.

Sticks and Stones May Break My Bones, but Words...?
Other terms and phrases display the lexicon and theories of an age past. 19th-century contemporary newspapers and textbooks relate the word 'panic' to a physical condition, according to the scientists and "the times" according to preachers and moralists alike. Phrenologists attributed a panic to "over stimulated Acquisitiveness;" a type of "cerebral disease of a mercantile country," (9) a reference from George Combe's Principles of Physiology (1845). There's also repeated use of the "Anglo-American economy" to describe the geographical credit markets that are the book's subject. Credit markets which do not exist without slave labor.

Lepler is strangely silent on this aspect of Jacksonian credit. Much attention is given to the creation and structure of high-yield securities, those (still) infamous paper promises of cash-poor Americans sought by Europe. Strangely, because historian Seth Rockman notes in "What Makes Capitalism Newsworthy?" (Journal of the Early Republic, Fall 2014) that the "financing of slavery" is that "which scholars attribute such macroeconomic crises at the South Sea Bubble and the Panic of 1837" (452). Rockman proves this with evidence of 1828 networks of finance featuring American brokerage houses marketing state-chartered bonds to European investors. The money these houses raised was used to make loans to local slaveholders (456). The bonds were simultaneously backed by taxpayers, many of whom were paying taxes on the slaves they owned as private property. Lepler's historiography chooses to focus on a Swiss-born financier in America who takes his own life as the panics of 1837 begin to close in on him: plummeting cotton prices, tightening credit markets, failing businesses, lost fortunes. Her monograph might be described as a case of disassociation of the commodity (black people) from its inherent role in an economy, a classic characteristic of capitalism studies. An interesting question might then be how slave agency encouraged or exacerbated the decline in cotton prices and thus the panics of 1837, if at all?

Capitalism for $1000, Alex...
This leads to a discussion on capitalism, infinite in its multivalence. Capitalism is perhaps best inspected inductively, taking an interdisciplinary approach to its meaning across time and space. When examining what capitalism is to America, slavery must be included, as it has provided the collateral for subsequent securitization. That the shifting chronological boundaries of capitalism be considered is paramount. One interesting take away are the partisan Free Labor ideologies of this era which were wholly incompatible with slave regimes. That is, the idea of working for wage (proletarianism) was seen as an offense during this era, akin to that of being a slave (see Eric Foner's Free Soil, Free Labor, Free Men: The Ideology of the Republic Party Before the Civil War, 1970). In the same vein, what is an economy? Substantial work has been done on the origins of an economy (see Margaret Shabas, Timothy Marshall, David Grewal and Tim Shenk for more on this) and how this definition is rubbery too. So "what capitalism is" is gray and fuzzy, definitely not black and white, and by nature, dynamic.

Homo Economicus
Economic thought in Lepler's book was perhaps then, neoclassical, but in hindsight, nowhere close. Neoclassical economics borrows from Adam Smith's early "capitalist" notions of self-interested, rent-seeking, profit-(or utility-) maximizing rational actors pressing toward some optimum outcome called equilibrium. Homo economicus was easily conjured in theory but seldom seen in real life. What is rational behavior in the face of a never before seen financial catastrophe? Agency is the power of an individual to make the choice to act. Lepler seems to suggest that agency was suspended in the face of these panics, resulting in physical and physiological manifestations of anxiety. It became a "sign of the times" or "providence," or more commonly, partisan politics as the harbinger of the pronounced uncertainty in the financial markets. Less than 20 years old, the two-party political squabbles were an easy scapegoat for the crisis. Whigs blamed Democrats who blamed businesses who blamed paper currency. Like slaves, affected parties in New Orleans, New York and London claimed they had no agency, no power in the commencement or current of what was occurring around them. An interesting contrary to this is the concept of 'clerk agency,' those cogs of capitalism who not only process market behaviors, but take an active role in spreading information - insider and otherwise. Perhaps the most (in)famous clerk and Free Laborer was John D. Rockefeller, a bastion of American capitalism.

The book's legacy to modern economic thought are early musings on business cycles, government interventions, central bank policy, monetarism, bailouts and constricted credit markets following prolonged periods of prosperity and even longer periods of scarcity. To say the panics of 1837 is like that of 1929 or 2008 is too easy. The more difficult question is why these three eras are so similar to the economist and the historian?


- dls