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This chapter discusses the impact of the First Great Depression on national politics. On the eve of the onset of the First Great Depression in spring 1837, the United States was a fragile compound, made up of sections and classes with sharply divergent views about the role of central government in taxing, spending, and regulating. The negotiation of these differences was difficult even in the best of times, and sometimes punctuated by moments of resistance to central authority so fierce that they stoked fears about the survival of the union. Holding the nation together under such circumstances required constant bargaining and the careful cultivation of good will, and often resulted in legislative pacts or mutual understandings. Prosperity made it easier to negotiate such pacts. But when times were hard, it became more difficult to keep the peace in Washington. Good will collapsed, old animosities were revived, and delicately wrought truces were unwound. As a result, the depression years became a long, painful test of the federal government’s capacity to manage sectional and class conflict.

This chapter discusses events surrounding the 1836–1848 economic crisis. The crisis not only imposed massive economic costs on the nation, but also threatened to undermine social order and the integrity of the nation’s major public institutions. It is for this reason that it can be called the country’s First Great Depression. The crisis was a test of the maturity of the American polity. Since its founding, the United States professed its commitment to a decentralized system of government and broad political enfranchisement. But it was also an open economy, vulnerable to unexpected shocks from abroad, and dependent on the goodwill of foreign merchants and lenders. The question was whether the country’s political culture and institutions could accommodate the pressures that followed from its place in the international economy. In essence, an expansive and increasingly fractious polity would have to negotiate its response to economic problems that were poorly understood.

This chapter discusses the impact of the First Great Depression on law and order. In cities and farms across the United States, economic decline awakened old grievances about inequities in the distribution of economic and political power. Disgruntled Americans were organized more easily to push for change, and many were willing to resort to violence to demonstrate their resistance to the status quo. This was most clearly the case in the northeastern United States, where agrarian and industrial laborers, not shackled by the institution of slavery, had the capacity to organize and articulate their grievances. The violence raised questions about the capacity of citizens to regulate themselves, and also about the ability of a nation organized on democratic principles to maintain civil peace. In Rhode Island, New York, and Philadelphia, authorities responded to severe outbreaks of violence in similar ways. Tentative attempts to maintain order eventually gave way to the ruthless suppression of resistance against established authority. Law and order had to be preserved, and police power became one of the essential requirements for the survival of a fragile, open economy.

This chapter discusses how the U.S. victory in the Mexican War marked the end of the First Great Depression. First, the war revived the nation’s spirits. For many Americans, military success restored national honor, redeemed the democratic way of governing, and gave proof to Europe of the nation’s vitality. Second, the war was an unexpected tonic for the economy, and the mechanism by which the United States was fully reintegrated into international financial markets. Within weeks of the peace settlement, Americans—and also, critically, European investors—learned of a mining bonanza in the newly acquired territory of California. The unexpected cost of the war forced the Democratic administration of President James Polk to offer U.S. bonds in London for the first time since 1842. These were taken up by European investors, an expression of renewed confidence in the American economy.

This concluding chapter discusses the changes to the American political community resulting from the First Great Depression. These include institutional change: new restrictions on the role of state governments, undertaken to reassure foreign investors and avoid a reprise of default; an expansion of police power, in response to domestic disorders caused by economic disruption; and an expansion of presidential power, partly as a consequence of legislative dysfunction, and partly because of the need to manage increasingly fragile relations with a more powerful nation, Britain. It then compares the 1836–1848 economic crisis to the most recent one that began in 2007. It concludes that Americans now have an intimation of what politics will be like in a world in which it is no longer the hegemon. It is a difficult kind of politics, unfamiliar to those born in the era of dominance.

This chapter discusses the profound impact of the First Great Depression on state government. In the 1830s, many American states borrowed heavily from British investors to finance canals, railroads, banks, and other projects. When the economy collapsed the states could not repay these loans unless they established new taxes, which they refused to do. And so many states defaulted. Outraged British investors, lacking any effective remedy in American courts, hurled angry rhetoric instead, and sent lobbyists to state capitals to campaign for repayment of their loans. State governments were faced with a choice: should they levy new taxes or simply repudiate their debts? Here was a direct collision between the ideal of political sovereignty and the expectations of the international financial markets.