The wise navigation laws of 1792 provided that only American built vessels should be employed in American commerce. Following this was the enlightened foreign policy of neutrality during the Napoleonic wars, by which our shipping was unmolested, while that of other nations suffered. Then the "Tonnage Laws" previously alluded to helped to develop our merchant marine. During the war of 1812 New York and Baltimore ship-builders became famous for producing the swiftest fleet of privateers called "clipper ships" that ever spread sail on the ocean, scarcely one of the newly-built being captured by the enemy. After the war of 1812 New York and Philadelphia merchants established sailing packets to Liverpool and other foreign ports. Stephen Girard was one of these merchants. From 1815 to 1850 may be called a period of reciprocity in shipping. The law of 1815 equalized the tonnage and import duties on all ships and produce of nations which were willing to extend the same privileges to American ships and cargoes, and to all other nations we offered the severe terms, that "no produce should be imported into the United States except in vessels of the United States or in the vessels of the citizens of the country of which the goods are the growth, production or manufacture." This was an enactment of the English Navigation Laws. Under these laws our foreign commerce flourished and ship-building became a prosperous industry. Our coasting trade and fisheries have always been kept exclusively to ourselves, and about 1830, owing to increased production of cotton, rice and tobacco for export and also for the factories of New England, our coasting trade developed extensively. Another great increase in the coasting trade set in about 1846, owing to the settlement of California. Our merchant marine reached its zenith of size and prosperity in 1857. Seventy percent of our foreign trade was then carried in American vessels. About 1850 the period of steam and steel began, and this proved a period of decadence for our merchant marine. The construction of iron vessels returned to the British Isles. The English could build these vessels cheaper than we, and they have since possessed almost a monopoly of the industry, although there are now indications of a decided change in this respect. From seventy per cent in 1857 the proportion of our commerce carried in American vessels has steadily declined, until in 1881 to 1885 it averaged barely twenty per cent., and in 1900 it was less than ten per cent. Seven-tenths of our total export trade, and nearly two-thirds of our total foreign trade, both export and import, is carried in British vessels. Let us hope that this condition of affairs will not long continue.

Merchant Marine

Congress in 1811 refused to renew the twenty year charter of the United States Bank organized by Hamilton. During the war which followed, the financial system was badly disarranged. Specie payment had been suspended and the country was filled with paper currency circulating at 15 to 30 per cent below its par value. To remedy this evil and resume specie payment, a second United States Bank was organized in 1816 with a capital of $35,000,000, power to establish branches, etc. The parent bank was in Philadelphia, and twenty-five branches were established throughout the country. President Jackson was hostile to the bank, as he believed it had been opposed to his election. Accordingly in 1833, on the pretext that the bank was unsafe, he ordered the Secretary of the Treasury to remove the deposits of public funds and to place them in state banks. This was almost a death-blow to the Bank. It was obliged to call in its loans and reduce the volume of its business almost to that of an ordinary bank.

During the decade 1825 to 1835, the country had been very prosperous. The national debt had been steadily reduced since the close of the war, and in 1835 the last dollar was paid. The public lands were being sold in the west at a rapid rate, and this brought a stream of money into the treasury. The receipts of the government far surpassed its expenditures. Congress declined to reduce the tariff for fear of injuring the manufacturing interests of the country, and instead of using this surplus revenue for internal improvements, which the strict constructionists claimed would be unconstitutional, or for harbors and fortifications along the coast, as urged by Senator Benton, decided that the amount should be distributed among the states to be used by them in public works as they chose. The surplus amounted on January 1, 1837, to $37,000,000. Three installments were paid, but before the fourth could be made ready, the great financial panic struck the country and left the treasury bankrupt.

The Second United States Bank

National Debt and Surplus Panic Of 1837.

The cause of the panic was attributed by the friends of the United States Bank to the crippling of that concern, and by the manufacturers to the reduction in the tariff, but while these may have been factors, the most potent cause was, without doubt, overspeculation. For ten years prior to the panic the country had been upon a general wave of prosperity. Trade was active and a general expansion in business was in progress. Merchandise of all kinds was in demand at advancing prices. Cotton was six cents a pound in 1830 and twenty cents in 1837. New business enterprises were commenced and old ones enlarged. Buying and selling of western land became a mania. Town sites were laid out in the western prairies and lots were sold at inflated prices. It is said that so many towns were laid out in Illinois that there was little land left for farms. Banks were multiplied, and paper money printed to meet the demand for capital with which to carry on the business of the country, irrespective of the amount of specie back of it all. The volume of paper money in circulation in 1837 ran up to one hundred and forty-nine millions, while the specie supporting it was less than forty millions. Speculators were buying up public lands at one dollar per acre, and as soon as the government land agents deposited the cash in the banks, the speculators borrowed it and bought more land. Thus the cash went its rounds and property changed hands. Finally the government issued its "specie circular," requiring that payment for public lands be made in specie. This embarrassed the speculators and began the feeling of distrust. Banks began to call in their loans, and depositors began to withdraw their funds. Cotton fell from twenty cents to eight cents, and other products proportionately. English investors began to try to withdraw their capital, and then suddenly the crash came. This was probably the worst panic in point of severity the country has ever seen, although the volume of business involved was far less that those of later dates. "Cheap money," rashness and overspeculation, and wild financiering by the treasury department of the government, were the combined causes which led to this disastrous result.