The Economy

First Bank of the United States, Philadelphia, Pennsylvania

Westward migration during the early 19th century was supported by the government so that settlers could farm more arable land and prosper. The eastern coast did not offer the fertile, flat land that was better suited for agriculture. With the purchase of the Louisiana Territory in 1803, there was much unsettled land to be farmed. Farmers were buying acres of land from speculators who had bought huge parcels of land to sell for a large profit. President Thomas Jefferson supported this endeavor because he wanted the American West to be settled by farmers. Farmland was at a premium, and the government, backed by the First Bank of the United States, wanted to support the economy.

With the invention of the cotton gin by Eli Whitney in 1793, cotton production in the Southern states of Mississippi and Alabama was booming. By 1820, these states were producing half of the cotton in the United States. Farmers were using the Ohio and Mississippi Rivers to transport their wheat and corn to New Orleans where it could be easily shipped to other places and traded. The economy was at its peak during this time. Westward Expansion created a booming economy in the agriculture and land markets, with the state banks willing to accept money in all forms, including silver and gold, to help farmers purchase land.

Unfortunately, the First Bank of the United States was chartered for only twenty years; in 1811, President James Madison did not renew the charter. Soon after the War of 1812, the United States was heavily in debt and European demand for American goods was declining. This caused a strain on farmers whose livelihood depended upon exporting their wheat and corn. Eventually, the banks had to foreclose on many farms because the farmers did not have the means to pay their loans.

The land speculators held on to land that was once worth as much as $69 an acre but had fallen to $2 an acre. This resulted in many going bankrupt. By 1816, President Madison agreed to charter the bank for another twenty years and the Second Bank of the United States was opened. Immediately, the bank requested that all states collect their debts and halt all credit to settlers who wanted to begin farming. Prices of agricultural commodities dropped, people lost their jobs, and the economy was at an all time low. At this point, the Panic of 1819 was well under way and westward migration came to a temporary halt.

-Lorenia