Effect the Louisiana Purchase Had on America

The Panic of 1819 was the first great depression in American History, where the regular cycle of boom and bust first appear in the United States (Browning, 2019). Unlike previous economic crisis, where is confined to a specific class and region and relatively short (such as the panic of 1792 where the crisis is largely confined in NY and hurt mostly debaters and merchants and lasted only for a few months), the 1819 one struck all regions and economic classes and was a serve depression over a few years. The Panic of 1819 first started on the east coast where factories affected by the British dumping of cheap imports into the American market simply couldn’t compete with the cheap imports and were forced to shut down. Then the depression was spread to the Ohio River Valley where the industrial powerhouse went silent as demand tapered off. The pinnacle of the crisis was when the BUS (Bank of the United States) facing the enormous task of redeeming the Louisiana Purchase with a low specie reserve called on the state banks to fulfill their obligation to the BUS.

When the state banks largely couldn’t or paid the specie, a banking crisis ensured. The depression then hit the southern and western region of the United States as a glut in real estate prices fueled by an ill-guided boom in wheat prices following the 1815 Tambora Volcano Eruption and consequently when the boom went bust due to the climates of the European market recovering around 1818, the commodity prices couldn’t support the glut. This led to a wave of bankruptcy and foreclosure in the territory due to farmers can’t meet their financial obligation to their creditors. The ensuing panic further lifted the veil of sectional discord in the “Era of Good Feeling” where the states have the illusion of national unity. To elaborate, the Panic exacerbated the regional division by aggregating the difference of regional economics and formed the southerner later justification of opposition to involvement in internal improvement projects The Missouri Compromise following the Panic of 1819, is commonly characterized as a rare moment where the sectional difference was put aside for the sake of persevering the union. On the contrary, the compromise set the sectional divide between the regions by fixing partisan lines to geographic criteria.

The consequences of the panic can be attributed to the policies the Jeffersonian implemented in Jefferson's presidency, where he pursued land expansion in the name of moralist philosophy, of retarding national growth (Mccoy,1980). James Madison in a letter to Jefferson on Aug. 30, 1784, wrote,
The vacant land of the U.S. lying on the waters of the Mississippi is perhaps equal in extent to the land actually settled. If no check is given to emigrations from the latter to the former, they will probably keep pace at least with the increase of people, till the population of both become nearly equal. For 20 or 25 years we shall consequently have few internal manufactures in proportion to our numbers as at present, and at the end of that period, our imported manufactures will be doubled… Reverse the case and suppose the use of the Miss: denied to us, and the consequence is that many of our supernumerary hands who in the former case would [be] husbandmen on the waters of the Missipi will on this other supposition be manufacturers on this [side] of the Atlantic: and even those who may not be discouraged from seating the vacant lands will be obliged by the want of vent for the produce of the soil and of the means of purchasing foreign manufactures, to manufacture in a great measure for themselves (Mccoy,1980, P. 197).

This show that the Jeffersonian is deeply influenced by the Malthusian dogma of population growth and the adverse effect of internal manufactures on the population. In the line, “Reverse the case and suppose the use of the Miss … [settlers] obliged by the want of vent for the produce of the soil and of the means of purchasing foreign manufactures (Mccoy,1980, P. 197),” it is clear that James Madison wanted the frontier land to be settled by farmers who grow crops and sell their excess to the European markets in return of foreign manufactured goods. He expressed his hopes that the blot of population growth can be dented by the settlement of vacant lands thus delaying the 3rd stage of excess and effeminacy warned by John Brown when the economy becomes too commercialized. Thus, the Louisiana Purchase was a way for the Jeffersonian to checked development and to preserve their vision of an unadulterated citizenry.

The Louisiana Purchase is regarded as a pivotal achievement in American foreign policy by many scholars which is exemplified when Douglas Brinkley, the director of the Eisenhower Center for American Studies, asserted that “this is one of the three things that created the modern United States … if we have not made this purchase … mean our ideas on freedom, and democracy would carry less weight with the rest of the world (Harriss, 2003).” Mr. Brinkley is corrected in asserting that the Louisiana Purchase is one of the main pillars of the country's identity. However, he has mistaken in what effect the Louisiana Purchase has on the country. In the immediate and midterm aftermath of the purchase, the effect is largely adverse in America.

To elaborate, Jefferson's vision of “An Empire of Liberty” did nothing of the sort as credited to the name, and instead allowed the Peculiar Institution’s death to be delayed (Brands, 2018). As an example of the dying practice of slavery in the south, Randolph's large plantation estates in the late 18th century have fallen on difficult times as the soil of the south was poisoned by the over-cultivation of tobacco. Randolph was a member of the elite landed gentry and was relatively well-traveled compared to his counterparts. With this in mind he contrasts the life quality of the Virginian compared to the European as, “Poverty stalking through the land, while we have engaged in political metaphysics [Rousseau], and amidst our filth and vermin, like the Spaniards and Portuguese, look down with contempt on other nations, England France especially (Brands, 2018).” This emphasizes the state of destitution of the elites and they began to sell their estate to finance their living expenses. This trend of planters switching to other trades was suddenly reversed by the Louisiana Purchase, a large swath of land tracts was opened up for planters to grow cotton. This can be seen in the migration of southerners to the west where the Raleigh Star writes in an article in 1816, “Great numbers are disposing of their property, and preparing to emigrate to the West and South (Browning, 2019, p. 103).' The newspaper is based in North Carolina, a region that is extensively based on tobacco tilling, and as such it is appropriate to draw a connection from the exhausted soil of the land to planter migrating out west.

This migration consequently changed the demographics of the territory and the state of the country, by making the settlers of the territory to be majority southerners and as such the electors of the western states overwhelming elected presidential candidates that were pro-slavery and largely inclined toward state power. This can be seen in 1824 and subsequently the 1828 election as the settlers voted for Andrew Jackson, a populist president, who implanted disastrous policy in the country such as the “War on the Bank” and “South Carolina Nullification Crisis”. Furthermore, the Louisiana Purchase entrenched the Republican (Jeffersonian) hold on power by manipulating the balance of power between the states. The political machine of the day (and the present-day too) viewed voters as blocks with similar interests. As such, by opening up land for people to settle, the Republicans create a new class of voters whose interest lays in agrarian policy and objected to the Hamiltonian policies of manufacturing as it diverted resources from agriculture to industrialization and the plan often involve the active governance of the market which will make the artificially low prices of the British good substantially higher which will be burdensome to the debt-riddled planters. This was a massive stroke of genius, as the Republicans create a voting block that is exclusivity loyal to them, and their mutual interest allowed for the country to be in a perpetual state of agriculture.

Let’s move onto the Louisiana Purchase origin (Browning, 2019). France got the territory from Spain in the treaty of San Ildefonso in the year 1800. During this time, France was distracted by the Napoleonic conflict which hinders its ability to manage its colonies in the Caribbean leading to the Hatti rebellion. France's position was precarious in North America, and Napoleon fearing a British invasion of the newly acquired territory. A dilemma was present here, if he diverted troops to the Americas, he would be losing valuable troops against the Second Coalition. On the other hand, if he didn’t guard the territory, the British with their installation in the British West Indies and Canada could cut off the vital trading with the Americans and the West Indies. Likely for him, the timing was perfect. The acquisition coincided with the election of 1800. A French-friendly government was now in power, and Napoleon would act on this opportunity.

Likewise, Jefferson was open to a possible deal as he regarded New Orleans as a vital trading post and the chock point of the Louisiana River has to be in the control of the American as to the eye of Jefferson, “There is on the globe one single spot, the possessor of which is our natural and habitual enemy. It is New Orleans (Browning, 2019, pp 19).” Jefferson tries to trump Napoleon by telling his envoy to tell the French that if they refused to sell then the United States will be aligned with the UK.
Napoleon saw through this flimsy threat and counter with an offer of $15 million for the entire territory (The US original offer was $10 million just for New Orleans). The cost came down to 4 cents per acre and the United States quickly inked the agreement. Napoleon was ecstatic as the United States just tied itself to France and for the conceivable future will act as a bulwark agonist British meddling. The American’s purchase would have deep monetary implications.

In addition, the Louisiana Purchase degraded the credit of the country. To exemplify this, the Louisiana Purchase was funded through a series of bonds whose redemption was to be paid in the form of species. This was a massive oversight, as the $11.25 million ($3.75 million was discounted off the price as the Jeffersonian agreed to drop damage claims against French attacks against American merchant) far exceeded the Treasury’s reserve of specie. So, in order for the United States to pay France this amounted, they borrowed the specie from foreign banks, which was issued in 6% bonds that will be redeemable in 1818 (the date is extremely important). The assumption was to pay the redemption through the BUS, state banks would get banknotes from the BUS, and in exchange, the state banks would exchange species for the de facto tender. However, given the condition of the state banks where inflationary practices and fraud run rampant, this assumption can be only enforced through IOU notice from the state bank, promising that they will pay the BUS back at a later date and that BUS reserve the right to direct the state bank to give it the specie at any notice. This, however, was quite idealistic as the currency market of the country was very convoluted as discount rates between regions vary and the health of each state bank is different. These conditions caused the banking system at times to freeze (before the panic of 1819) as there was an accumulation of banknotes against a dwindling supply of species (due to the Jeffersonian reliance on foreign trade and the sly foreign merchants who saw the American banknotes as worthless). This ultimately leads to events where Condy Raguet, PA banker commented on the state of the banking system during the war of 1812, “The stoppage of specie payments . . . in 1814 commenced in Baltimore about the 27th of August, soon after the Battle of Bladensburg and the capture of Washington, which events took place on the 24th of the month, and was followed by Philadelphia on the 30th and by New York on the 1st of September (Browning, 2019, p. 37).”

The deteriorating state of finance has partly attributed to the favoritism of the state banks of the Jeffersonian but coupled with the recovery of Europe after the Napoleonic Conflict set the stage for a currency crunch. After the war, much of the European finances were in chatter. So, in order to mend the economy, they place their country back onto the gold standard which further dwindles the supply of species. In fact, one historian, Clyde Haulman, “attempts by European countries to return to a specie standard in the years after 1815 further exacerbated the monetary problem in the U.S. These efforts meant nations were all trying to build up gold and silver reserves at the same time, thus placing intense pressure on the world’s species supply (Browning, 2019, p. 25).” In addition, a revolution in Latin America, cut off the specie supply of the world and the remaining specie reserves was driven up in prices. This, in turn, have a calamitous effect on the country as viable sources of foreign species were closed off. The purchase simply didn’t allow the United States to have the reserve on hand to deal with all of the calamities at once.

Though the Jeffersonian sincerely believed that the purchase will wane of UK influences and ultimately of the “political evils …Traced up to our commercial ones, as most of our moral may to our political (McCoy, 1980, p. 196),” as asserted by James Madison in 1786, the purchase has the exact opposite effect and instead contrary to the wish of the Jeffersonian further tightened UK grip over the country. British merchants have implicit approval by its government to flood the American markets to punish the Americans for the war of 1812. This is evident in the address of the MP Brougham who in an address to parliament stated, “It was well worthwhile to incur a loss upon the first exportation in order by glut to stifle in the cradle those rising manufactures in the United States which the war has forced into existence contrary to the usual course of nature (Browning, 2019, p. 40).” The cradle in the speech refers to the industrial hubs of the American Industry and the war is a reference to the war of 1812. The political party to which Brougham belongs is the Whig (UK), where the interest of the UK merchants is represented.

English merchants act as agents for the government policy and one merchant, Thomas Baring noted that “[prime minster] saw nothing in our conduct but to approve. He appears to consider Louisiana in the hands of America as an additional means for the vent of our manufacturers ... besides other motives which we did not discuss directly, of a political nature (Browning, 2019, p. 20).” This additional comment by one of the members of the merchant class confirmed the existence of a conspiracy to exploit the untamed markets of the western states of the US and this has important consequences. NYC becomes the country leading port of entry then Boston as the incident of smuggling increases. The contempt of the law grows, as North Englanders is driven by desperation at the lack of sympathy showed by the Jeffersonian, resorted to siding the rules of the embargo in order to feed their family and secure their household. Thus, the purchase aided in the commercialization of the country rather than the preservation of the “pure republic”. Now let’s examine the lead up to the boom.