Panic of 1837

Definition

The Panic of 1837 was a major economic crisis in the United States that led to a severe economic depression. It was characterized by a collapse in land and commodity prices, a series of bank failures, and high unemployment, with lasting impacts on the country's financial and political landscape.

5 Must Know Facts For Your Next Test

1. The Panic of 1837 was triggered by the failure of several major banks and the collapse of the international economy, which led to a severe economic downturn in the United States.
2. The crisis was exacerbated by President Andrew Jackson's policies, including his decision to withdraw federal funds from the Second Bank of the United States, which had been a stabilizing force in the economy.
3. The Panic of 1837 had a significant impact on the Nullification Crisis, as the economic turmoil undermined the South's ability to resist federal tariffs and led to a compromise.
4. The Panic of 1837 also contributed to the rise of the Whig Party, which emerged as a political force in opposition to the policies of the Democratic Party and Andrew Jackson.
5. The crisis highlighted the potential for the tyranny of the majority, as the economic hardships disproportionately affected certain segments of the population, such as farmers and laborers.

Review Questions

• Explain how the Panic of 1837 was connected to the Nullification Crisis and the Bank War.
  • The Panic of 1837 was closely linked to the Nullification Crisis and the Bank War during the presidency of Andrew Jackson. The economic turmoil caused by the Panic undermined the South's ability to resist federal tariffs, leading to a compromise that defused the Nullification Crisis. Additionally, Jackson's decision to withdraw federal funds from the Second Bank of the United States, a key stabilizing force in the economy, was a contributing factor to the Panic, highlighting the connection between the Bank War and the economic crisis.
• Describe how the Panic of 1837 exemplified the concept of the tyranny of the majority.
  • The Panic of 1837 and the subsequent economic depression disproportionately affected certain segments of the population, such as farmers and laborers, while the wealthier classes were better able to weather the crisis. This dynamic highlighted the potential for the tyranny of the majority, as the economic hardships faced by the majority were not adequately addressed by the political system, which was dominated by the interests of the more prosperous classes. The crisis demonstrated the need to protect the rights and interests of minority groups in a democratic system.
• Analyze the long-term political and economic impacts of the Panic of 1837 on the United States.
  • The Panic of 1837 had far-reaching consequences for the United States, both politically and economically. The crisis contributed to the rise of the Whig Party, which emerged as a political force in opposition to the policies of the Democratic Party and Andrew Jackson. The economic hardships caused by the Panic also undermined public confidence in the government and its ability to manage the economy, leading to a decline in support for the Democratic Party. Additionally, the Panic highlighted the need for greater financial regulation and stability, setting the stage for the eventual establishment of the Federal Reserve system and other measures to prevent similar economic crises in the future.

Related terms

Nullification Crisis: A conflict between the state of South Carolina and the federal government over the issue of tariffs, which nearly led to secession and civil war.

Bank War: A political struggle between President Andrew Jackson and the Second Bank of the United States, which resulted in the bank's charter not being renewed.

Tyranny of the Majority: A concept introduced by Alexis de Tocqueville, referring to the potential for the majority to oppress the minority in a democracy.