Economics and the Civil War by Marc Schulman Introduction
Americans in the West were divided on the issue. In the Southwest, where cotton was a primary commodity, people generally promoted low tariffs. In the Northwest and parts of Kentucky, where hemp (used for baling cotton) was a big crop, people supported high tariffs. Economic Factors in Secession As the 1850s proceeded, the divide between the North and Northwest and the South and Southwest widened. The bitter debates over the slave status of newly-admitted states, which had been going on since at least the Missouri Compromise of 1820, were signs of the very real fear Southerners had of having their voice in Congress drowned out by "Yankee industrialists." Incidents such as the Southern protests against the "Tariff of Abominations" in the 1820s and the Nullification Crisis of the 1830s demonstrated how deep a rift the tariff controversy was creating between North and South. In Congress, Southern Representatives and Senators were concerned that their interests would not be suitably addressed. As immigrants flocked to the Northern areas, swelling the ranks, Southerners were afraid the Northern states would increase their representation in the House of Representatives, blocking "Southern-friendly" legislation. The interests of Southern Americans who were African Americans, however, did not seem to concern a large number of Southern Congressmen. By the late 1850s, the fear of Northern domination in national economic policy, combined with the desire to maintain Southern institutions (including slavery), became a major influence on the people who eventually chose to secede from the Union. What did the Confederacy hope to accomplish by seceding from the Union? The clearest goal was to defend and preserve the right of Southern Whites, including the right to own slaves. While the concept of owning another human being would obviously be a moral and criminal issue today; many slaveowners either ignored or tried to justify their way out of that dimension, focusing on the economic aspects of slavery. They held that the right to own people was a property right, just like owning land or buildings. Thus, when Northern politicians tried to ensure that new states admitted to the Union were "free-soil" (i.e., that no slavery was allowed), slaveowners felt that their right to settle in the West with their "property," including slaves, was being infringed. In addition, in the minds of secessionists, the threat of national abolition not only had the potential of reducing the wealth of many prominent Southerners, but also interfered with the "property" rights of Southern Whites. Thus, secession seemed to be the only way of preserving those rights. In addition, some secessionists were interested in preserving the "Southern way of life." While the image of the large plantations and elegant Scarlet O'Hara-esque Southern belles sipping mint juleps was applicable to only a small minority of southern farms, the gentility and clearly-defined class system was something of a comfort, even for those Southerners who did not live in that world. In addition, some accepted the myth of the happy, subservient slave, who was not quite a human being and would benefit from the civilizing influence of Southern gentility. At the foundation of the "Southern way of life," however, was its oppressive economic system. In addition to reducing millions of Americans to the status of chattel, it made it very difficult for non-landed, unskilled Whites to succeeded in the face of labor competition from slaves. Part of the "Southern way of life" was the European flavor and aspirations of the planter class. This cultural influence grew out of and was fed by the long-standing mutual economic relationship between England and the South. In order to ensure that the British market for Southern cotton remained open, Southern planters and others had to maintain relatively sizable importation of goods from Britain. At the same time, the European influence on Southern gentile society; in education, fashion, arts, and other fields; created a large demand for European imports. An imbalance in this relationship, such as would be caused by the abolition of slavery or increases in tariffs, would have cultural implications for the South. Economics and the Union Victory Despite the advantages the Confederacy had in well-trained officers and dedication to a cause, it was inevitable that the Union would win the war. The only hope for the Confederacy would have been that the Union would not resist secession, or that foreign nations would assist the Confederate cause. Once the Union decided to fight for unity and European nations chose to remain largely neutral, there was little long-term hope for the Confederacy. The Union's resources, although far from unlimited, were much greater than the Confederacy's resources, and would eventually last longer. The Union had more than double the population of the Confederacy (including slaves), and almost four times the number of men of combat age. Even with only 50% of eligible men enlisted, relative to the Confederacy's 75%, the Union still had more than twice the number of people in the armed forces. In addition to being more industrialized than the South (see "Contrasting Economies" Section), the North had better infrastructure. By the time of the Civil War, an extensive railroad system had been built, with new lines through the Northwest being added. In the South, disputes between states prevented the construction of interstate railroad systems. In all, the North had 20,000 miles of railroad compared to the South's 9,000 miles. In addition to possessing 70% of the total miles of railroad in the United States, the North had 96% of the United States' railroad equipment. The long-standing shipbuilding industry in New England ensured that the North would have a large merchant marine, as well as easy access to naval resources. Because of interstate conflicts, there were few continuous interstate railroad systems through the South. In addition, although there was a small Southern industry producing naval stores, there were few merchant ships or naval vessels in the South. In the North, the US government was able to fund the war effort with the nation's treasury. The Union had strong banking institutions, and controlled at least 70% of the nation's wealth. To raise more funds, the US government raised taxes on goods and services and set high imports tariffs;. In addition, the Treasury issued paper money ("greenbacks") which was not backed by gold, but by government credit, thus reducing the amount of specie necessary for a given amount of money. The US government also raised money by selling bonds to individuals and banks. The Southern economy, with its agricultural emphasis and relative lack of industrialization, did not have the money or capacity to support a war effort. The Confederacy had less than $1 million in specie in its treasury. Because of the Union blockade, Southern imports fell drastically, reducing the amount of import customs duties the Confederate government could collect. The blockade also prevented Southern farmers to export their goods; Southern cotton exports, for example, fell to 2% of their prewar volume. Thus, farmers and planters had little income with which to pay taxes. Because of issues of states rights, central Confederate taxation was too controversial to be effective, and the states were not contributing enough to the Confederate coffers to support its needs. The existence of slavery in the South and the unlikeness of Confederate victory made foreign governments generally reluctant to loan money to the Confederacy. The Confederacy tried to raise money by borrowing from its citizens, in exchange for Confederate bonds. The Confederate government issued over $150 million in bonds, none of which was ever repaid. In order to raise money, the Confederacy printed more currency, about $1 billion, causing drastic inflation. By 1864, Confederate dollars were worth about $.05 in gold. Prices shot up, and many basic foods were out of the price range of most Southerners. In the spring of 1862, bread riots began in many Southern cities, the worst being the Richmond Bread Riot of April 2, 1862. More than a thousand women marched and rioted in downtown Richmond, shouting "bread or blood." Jefferson Davis himself ended the riot by appearing in person and threatening to order the militia to open fire. By the end of the war, the South was economically devastated, having experienced extensive loss of human life and destruction of property. Poverty was widespread, and many resented the many Northerners and Southerners who took advantage of the needy in the South as the war came to an end. These conditions made it more difficult for the nation to heal the wounds which its union had suffered. Conclusion |