Land Reform American Style—Screwing the Speculators

This map shows Land Districts and Offices in charge of selling Western land--a primary income source for the Federal government which helped keep taxes and tariffs low.  Some land agents, however, were corrupt and scandals common.  Individual speculators  and organized stock companies borrowed money to buy vast tracts of land in the hopes of selling at inflated prices to settlers.  But most settlers could not afford the asking prices, the speculators and companies often could not pay their loans.  The result was financial failure and instability on one hand and a huge pent-up demand for cheaper land by.  The Land Act of 1820 was meant to address both problems.

The Land Act of 1820 is a nearly forgotten piece of legislation passed by Congress which opened the Old Northwest Territory and Missouri to an avalanche of new settlement.  It was a byproduct of the Missouri Compromise. 

Population growth in the west had been stymied by the almost constant bloody Indian warfare in the region from the end of the Revolution through the War of 1812 and by the high land prices and large minimum parcels required by the Land Ordinance of 1785. 

When a financial panic swept the nation in 1819 it became impossible for most would-be settlers to borrow the money needed to legally buy the land.  To escape high land prices mostly Scotch-Irish pioneers often pushed out ahead of land surveyors and squatted on land.  When the government caught up with them they argued that their improvements on the land should be subtracted from the cost.  They were often displaced and pushed further west.  

A deed to land in Indiana sold to James Benton McMurry in 1831 under the terms of the Land Act of 1820.  Note the document is attested to and initialed by President Andrew Jackson (or by a designee in the Executive Mansion under his authority) which was required by law for all sale of Federal land.  An example of the administrative minutia early Presidents were saddled with.

To make settlement more affordable and thus to reduce squatting, the new act reduced the minimum tract from 160 to 80 acres, a manageable family farm in the generally rich soil of the west. 

Buying land exclusively on credit—as was common among land speculators—was eliminated.  The price was reduced from $1.65 (set in 1804) to $1.25 per acre with a relatively affordable $100 down payment.  The very poorest, who probably could not even afford the necessary tools and equipment necessary to bring the land into production, were eliminated, but the cost was low enough to be manageable by many. 

Although speculators could still form land companies and buy large blocks of tracts, the recurring financial panics over the next few years drove many to bankruptcy while owner-operated farms could endure hard times on a subsistence basis. 

New Salem in Illinois was first settled in 1828 and was typical of the communities that sprang up across the west with liberalized land sale policies.  Even there not everyone could afford land.  Newcomer Abraham Lincoln from Indiana had to hire out as a wood cutter, river boatman, and store clerk .

In the end most of the farm land in the region sold at, or not much above the Federal price.  The success of the policy was astounding.  Illinois, for instance, had a population of about 55,000 in 1820.  Over the next 40 years the population doubled every ten years to almost 900,000 in 1860.  

Land sales were vigorous enough that even at the reduced price enough revenue was generated to operate the nearly skeletal Federal government. In fact they provided enough income that they were largely responsible for the Federal Debt to be completely paid off and retired—if only briefly—during the administration of Andrew Jackson.

Such a rapid explosion for population also had a dramatic effect on government as new Congressional seats were allotted with every new census giving the west considerable regional clout.  By the eve of the Civil War the states covered by the act were no longer on the frontier.  They were well settled, prosperous, and with the advantages of easy access to markets via the great river system and the new railroads, had become the bread basket to the nation.