America was plagued by periodic financial and economic debacles during the nineteenth century. Serious crises occurred in 1819, 1837, 1857, 1873, and 1893. The Panic of 1837, in particular, jarred American society and illustrated the central role of cotton.
The decade of the 1830s was central to the ascendancy of the cotton economy, with more than twenty million new acres made available in the cotton-growing states. The expansion was financed by capital from the North and from Europe, and cotton, in turn, became the critical underpinning of America’s ability to borrow money. European capital flowed to America because of its financial system, cotton exports, and perceived investment opportunities. From the beginning America had depended on foreign capital and in particular on European banks, which had extended the new republic $130 million in loans to finance American businesses, canals, and railroads. All the Eire Canal bonds….