A Vibrant Capitalist Republic Quiz

PDF page 240: By the 1840s, the United States economy bore little resemblance to the import-and-export economy of colonial days. It was now a market economy, one in which the production of goods, and their prices, were unregulated by the government. Commercial centers, to which job seekers flocked, mushroomed. New York City’s population skyrocketed. In 1790, it was 33,000; by 1820, it had reached 200,000; and by 1825, it had swelled to 270,000. New opportunities for wealth appeared to be available to anyone.

PDF page 240: By the 1840s, the United States economy bore little resemblance to the import-and-export economy of colonial days. It was now a market economy, one in which the production of goods, and their prices, were unregulated by the government. Commercial centers, to which job seekers flocked, mushroomed. New York City’s population skyrocketed. In 1790, it was 33,000; by 1820, it had reached 200,000; and by 1825, it had swelled to 270,000. New opportunities for wealth appeared to be available to anyone.

PDF page 240: By the 1840s, the United States economy bore little resemblance to the import-and-export economy of colonial days. It was now a market economy, one in which the production of goods, and their prices, were unregulated by the government. Commercial centers, to which job seekers flocked, mushroomed. New York City’s population skyrocketed. In 1790, it was 33,000; by 1820, it had reached 200,000; and by 1825, it had swelled to 270,000. New opportunities for wealth appeared to be available to anyone.

PDF page 240: However, the expansion of the American economy made it prone to the boom-and-bust cycle. Market economies involve fluctuating prices for labor, raw materials, and consumer goods and depend on credit and financial instruments—any one of which can be the source of an imbalance and an economic downturn in which businesses and farmers default, wage workers lose their employment, and investors lose their assets. This happened for the first time in the United States in 1819, when waves of enthusiastic speculation (expectations of rapidly rising prices) in land and commodities gave way to drops in prices.

PDF page 240: In the early nineteenth century, people poured into the territories west of the long-settled eastern seaboard. Among them were speculators seeking to buy cheap parcels from the federal government in anticipation of a rise in prices. The Ohio Country in the Northwest Territory appeared to offer the best prospects for many in the East, especially New Englanders. The result was “Ohio fever,” as thousands traveled there to reap the benefits of settling in this newly available territory (Figure 9.7).

PDF page 241: The federal government oversaw the orderly transfer of public land to citizens at public auctions. The Land Law of 1796 applied to the territory of Ohio after it had been wrested from Native people. Under this law, the United States would sell a minimum parcel of 640 acres for $2 an acre. The Land Law of 1800 further encouraged land sales in the Northwest Territory by reducing the minimum parcel size by half and enabling sales on credit, with the goal of stimulating settlement by ordinary farmers. The government created land offices to handle these sales and established them in the West within easy reach of prospective landowners. They could thus purchase land directly from the government, at the price the government had set. Buyers were given low interest rates, with payments that could be spread over four years. Surveyors marked off the parcels in straight lines, creating a landscape of checkerboard squares.

PDF page 241: The federal government oversaw the orderly transfer of public land to citizens at public auctions. The Land Law of 1796 applied to the territory of Ohio after it had been wrested from Native people. Under this law, the United States would sell a minimum parcel of 640 acres for $2 an acre. The Land Law of 1800 further encouraged land sales in the Northwest Territory by reducing the minimum parcel size by half and enabling sales on credit, with the goal of stimulating settlement by ordinary farmers. The government created land offices to handle these sales and established them in the West within easy reach of prospective landowners. They could thus purchase land directly from the government, at the price the government had set. Buyers were given low interest rates, with payments that could be spread over four years. Surveyors marked off the parcels in straight lines, creating a landscape of checkerboard squares.

PDF page 241: The federal government oversaw the orderly transfer of public land to citizens at public auctions. The Land Law of 1796 applied to the territory of Ohio after it had been wrested from Native people. Under this law, the United States would sell a minimum parcel of 640 acres for $2 an acre. The Land Law of 1800 further encouraged land sales in the Northwest Territory by reducing the minimum parcel size by half and enabling sales on credit, with the goal of stimulating settlement by ordinary farmers. The government created land offices to handle these sales and established them in the West within easy reach of prospective landowners. They could thus purchase land directly from the government, at the price the government had set. Buyers were given low interest rates, with payments that could be spread over four years. Surveyors marked off the parcels in straight lines, creating a landscape of checkerboard squares.

PDF page 241: FIGURE 9.8 Thomas Cole, who painted Home in the Woods in 1847, was an American artist. Cole founded the

PDF page 242: Hudson River School, a style renowned for portrayals of landscapes and wilderness influenced by the emotional aesthetic known as romanticism. In what ways is this image realistic, and how is it idealized or romanticized?

PDF page 242: A native of Vermont, Gershom Flagg was one of thousands of New Englanders who caught “Ohio fever.” In this letter to his brother, Azariah Flagg, dated August 3, 1817, he describes the hustle and bustle of the emerging commercial town of Cincinnati. “DEAR BROTHER, Cincinnati is an incorporated City. It contained in 1815, 1,100 buildings of different descriptions among which are above 20 of Stone 250 of brick & 800 of Wood. The population in 1815 was 6,500. There are about 60 Mercantile stores several of which are wholesale. Here are a great share of Mechanics of all kinds. Here is one Woolen Factory four Cotton factories but not now in operation. A most stupendously large building of Stone is likewise erected immediately on the bank of the River for a steam Mill. It is nine stories high at the Waters edge & is 87 by 62 feet. It drives four pair of Stones besides various other Machinery as Wool carding &c &c. There is also a valuable Steam Saw Mill driving four saws also an inclined Wheel ox Saw Mill with two saws, one Glass Factory. The town is Rapidly increasing in Wealth & population. Here is a Branch of the United States Bank and three other banks & two Printing offices. The country around is rich. . . . That you may all be prospered in the world is the anxious wish of your affectionate Brother GERSHOM FLAGG”

PDF page 243: The first major economic crisis in the United States after the War of 1812 was due, in large measure, to factors in the larger Atlantic economy. It was made worse, however, by land speculation and poor banking practices at home. British textile mills voraciously consumed American cotton, and the devastation of the Napoleonic Wars made Europe reliant on other American agricultural commodities such as wheat. This drove up both the price of American agricultural products and the value of the land on which staples such as cotton, wheat, corn, and tobacco were grown. Many Americans were struck with “land fever.” Farmers strove to expand their acreage, and those who lived in areas where unoccupied land was scarce sought holdings in the West. They needed money to purchase this land, however. Small merchants and factory owners, hoping to take advantage of this boom time, also sought to borrow money to expand their businesses. When existing banks refused to lend money to small farmers and others without a credit history, state legislatures chartered new banks to meet the demand. In one legislative session, Kentucky chartered forty-six. As loans increased, paper money from new state banks flooded the country, creating inflation that drove the price of land and goods still higher. This, in turn, encouraged even more people to borrow money with which to purchase land or to expand or start their own businesses. Speculators took advantage of this boom in the sale of land by purchasing property not to live on, but to buy cheaply and resell at exorbitant prices.

PDF page 243: During the War of 1812, the Bank of the United States had suspended payments in specie, “hard money” usually in the form of gold and silver coins. When the war ended, the bank continued to issue only paper banknotes and to redeem notes issued by state banks with paper only. The newly chartered banks also adopted this practice, issuing banknotes in excess of the amount of specie in their vaults. This shaky economic scheme worked only so long as people were content to conduct business with paper money and refrain from demanding that banks instead give them the gold and silver that was supposed to back it. If large numbers of people, or banks that had loaned money to other banks, began to demand specie payments, the banking system would collapse, because there was no longer enough specie to support the amount of paper money the banks had put into circulation. So terrified were bankers that customers would demand gold and silver that an irate bank employee in Ohio stabbed a customer who had the audacity to ask for specie in exchange for the banknotes he held.