The Land Act of 1820 was a critical piece of Federal legislation that helped stimulate settlement of the Northwest Territory, the Missouri Territory, and Ohio following the War of 1812.
Thanks for reading The Economic Historian!
Subscribe for free to receive new posts.
Subscribe
Speculation and Debt
Between 1785 and 1804, Congress had passed legislation to create reasonable terms for the purchase of public lands for private settlement in what was then America’s western frontier. The Harrison Land Act of 1785 set the price at $2 per acre for tracts of 320 acres or more. Very few average Americans had access to $640 in that era, so Congress passed the Land Act of 1804, which lowered the minimum purchase to 160 acres and allowed buyers to put down half the sale price in cash and pay the rest in installments.
By 1812, this system of land sales had grown into an orderly bureaucratic process that helped move tens of thousands of settlers into the territories, but it also created problems. At one end of the spectrum were land speculators who bought up huge tracts of land in hopes of profiting rising land prices. At the other end were squatters, who paid nothing. In the middle were a large number of settlers who were threatened with losing their land when they couldn’t come up with the cash for their next installment.
This came to a head during the Panic of 1819, when a sudden financial downturn caused inflation to spike and for the amount of cash circulating through the economy to fall. By the time the crisis began to ease, countless settlers were faced with foreclosure or forfeiture of their land.
Among the settlers caught up in the crisis was Abraham Lincoln’s father, Thomas Lincoln. The Lincoln family moved to Indiana from Kentucky in the fall of 1816. Thomas utilized the government installment plan, putting $80 down for his 160-acre tract in Spencer County, Indiana. When the Panic of 1819 hit two years later, he still owed $240 on the property. Lincoln was more fortunate than most; he was able to hang on until Congress passed a relief bill in 1821. But it was a full decade before he had a clear title to the land.
In 1838, a commentator looked back on those years and noted that the 1819 crisis must have presented “a vast scene of desolation [across the territories] ..it is not to be inferred that the people were destitute , or desperately poor; far from it — they were substantial farmers , surrounded with all the means of comfort and happiness – except money.”
Impact of the Land Act of 1820
The nation’s long-term financial stability lay, in part, in creating booming new communities to the west of the Appalachians, and by April 1820, Congress was ready to scrap the old system of land sales in favor of something more stable. Under the new Land Act of 1820, buyers had to pay the full price of land in cash. To reduce land speculation, Congress removed the option to pay for land in installments. To make all this more feasible, the price of an acre dropped from $2.00 per acre to $1.25 per acre, and the minimum tract size dropped from 160 acres down to just 80. The bill passed on April 24, 1820 and went into effect on July 1.
As expected, the Land Act of 1820 decreased the level of land speculation and created a better environment for settlers, spurring increased settlement in the American West. In Indiana alone, public land sales grew from 1.9 million acres in between 1820 and 1829; between 1830 and 1837, land sales exceeded 5 million acres. The population swelled from 148,000 in 1820 to 686,000 in 1840.
Further Reading
Lehmann, Scott. Privatizing Public Lands. Oxford University Press, USA, 1995.
Onuf, Peter S. Statehood and Union: A History of the Northwest Ordinance. University of Notre Dame Press. 1987.
Van Atta, John R. Securing the West: Politics, Public Lands, and the Fate of the Old Republic, 1785–1850. Johns Hopkins University Press, 2014.