(Thus, for example, the estimated “economic” losses from casualties ignore the emotional cost of 625,000 deaths, and the estimates of property destruction were quite conservative.) The Tariff. Inflation surged in 1862-1864 and by war’s end, the price level had almost doubled. Nearly every sector of the Union economy witnessed increased production. Northerners, not surprisingly, wanted a Northern route. Transportation Improvements. In all, Northerners bought almost $2 billion worth of treasury notes and absorbed $700 million of new currency. By the end of the war, inflation had reached a point where the value of the Confederate currency was virtually zero. “Economics of the Civil War”. Table 4 presents data on prices and wages in the United States and the Confederacy. Newspapers were the dominant media of the Civil War era. Westport, CT: Greenwood Press, 1990. By contrast, less than 7 percent of people in the 11 Southern states of Table 2 lived in urban counties. In 1834 President Andrew Jackson created a major furor when he vetoed a bill to recharter the Second Bank of the United States. By itself, the South’s economic investment in slavery could easily explain the willingness of Southerners to risk war when faced with what they viewed as a serious threat to their “peculiar institution” after the electoral victories of the Republican Party and President Abraham Lincoln the fall of 1860. Western agriculture with its emphasis on foodstuffs encouraged urban activity near to the source of production. In the North the situation was not as severe, but wages certainly did not keep pace with prices; the real value of wages fell by about 20 percent. 2. New York: Cambridge University Press, 1990. The coal industry experienced similar growth, in 1861-65 enjoying an expansion rate 21% higher than that for the nation as a whole during the 4 years immediately preceding civil strife. In the South, a smaller industrial base, fewer rail lines, and an agricultural economy based upon slave labor made mobilization of resources more difficult. The North produced 3,200 firearms to every 100 produced in the South. c Includes: Illinois, Indiana, Iowa, Kansas, Minnesota, Nebraska, Ohio, and Wisconsin. In the North, "free soilers" had clamored for the bill for decades, while abolitionists viewed it as a means to populate the West with small farmers vehemently opposed to slavery's expansion. The bill passed, but President Buchanan vetoed it. What had been an almost purely agricultural From the era of Reconstruction to the end of the 19th century, the United States underwent an economic transformation marked by the maturing of the industrial economy, the rapid expansion of big business, the development of large-scale agriculture, and the rise of national labor unions and industrial conflict. By the 1990s a new generation of economic history textbooks once again examined the “economics” of the Civil War (Atack and Passell 1994; Hughes and Cain 1998; Walton and Rockoff 1998). As a result, in 1860, the Northern states produced half of the nation's corn, four-fifths of its wheat, and seven-eighths of its oats. Economic policy had played a prominent role in American politics since the birth of the republic in 1790. El Salvador - El Salvador - Economy: El Salvador’s economy was predominantly agricultural until industry rapidly expanded in the 1960s and ’70s. What had been an almost purely Second edition. Here again, the western states were caught in the middle. Goldin, Claudia Dale. The high cost of emancipation was not the only way in which economic forces produced strong regional tensions in the United States before 1860. your own Pins on Pinterest While the increase in the national debt seemed enormous at the time, events were to prove that the economy was more than able to deal with it. The costs are divided into two groups: the direct costs which include the expenditures of state and local governments plus the loss from destruction of property and the loss of human capital from the casualties; and what Goldin and Lewis term the indirect costs of the war which include the subsequent implications of the war after 1865. Prices and the stock of money had risen at roughly the same rate. Egnal, Marc. Gilchrist, David T., and W. David Lewis, editors. Weingast, Barry. Two volumes. Under such a scheme, the federal government would purchase slaves. Union invasions into the South resulted in the capture of Southern transportation and manufacturing facilities. “The Economic Role of Political Institutions: Market Preserving Federalism and Economic Development.” Journal of Law, Economics and Organization 11 (1995): 1:31. Beard and Hacker focused on the narrow economic aspects of these changes, interpreting them as the efforts of an emerging class of industrial capitalists to gain control of economic policy. The region along the north Atlantic Coast, with its extensive development of commerce and industry, had the largest concentration of urban population in the United States; roughly one-third of the population of the nine states defined as the Northeast in Table 2 lived in urban counties. The efforts of the Confederate government to pay for their war effort were far more chaotic than in the North, and reliable expenditure and revenue data are not available. In the South, the picture was very different. By the time of the Second World War, Louis Hacker could sum up Beard’s position by simply stating that the war’s “striking achievement was the triumph of industrial capitalism” (Hacker 1940: 373). (All the figures for the costs in Table 3 have been adjusted to reflect their discounted value in 1860.) A major problem here was that the costs of such a scheme would have been enormous. Source. However there were far more small towns scattered throughout settled regions of Ohio, Indiana, Illinois, Wisconsin and Michigan than in the Southern landscape. August 24, 2001. The financial infrastructure collapsed during the war as inflation destroyed banks and forced a move toward a barter economy for civilians. The period is notable for the rise of the penny press, forerunners of the modern newspaper. From the outset, the Confederates relied heavily on funds borrowed outside the South to purchase supplies abroad. 4. This all came to a head with the “Homestead Act” of 1860 that would provide 160 acres of free land for anyone who wanted to settle and farm the land. “The Market for Confederate Bonds.” Explorations in Economic History 37 (2000): 76-97. Not just a Marx can observe that the Civil War involved a conflict between powerful, rival economic interests. Goldin, Claudia, and Frank Lewis. War is like the anti-thesis of economic development. These effects went either way during the civil war, but obviously, the south suffered greater … Norwell, MA: Kluwer Academic Publishers, 1998. The Rise of American Civilization. Washington: U.S. Government Printing Office, 1975. To illustrate the extent to which the rise of urban centers and increased market activity in the North led to a growing crisis in economic policy, historians have re-examined four specific areas of legislative action singled out by Beard and Hacker as evidence of a Congressional stalemate in 1860 (Egnal 2001; Ransom and Sutch 2001; 1989; Bensel 1990; McPherson 1988). The Union also experienced inflation as a result of deficit finance during the war; the consumer price index rose from 100 at the outset of the war to 175 by the end of 1865. New York: Cambridge University Press, 2002. This unprecedented national investment in higher education also required instruction in military tactics. By 1860, 26 percent of the Northern population lived in urban areas, led by the remarkable growth of cities such as Chicago, Cincinnati, Cleveland, and Detroit, with their farm-machinery, food-processing, machine-tool, and railroad equipment factories. Source: United States Population Census, 1860. Southerners feared that such a policy would make it more difficult to keep areas open for settlement by slaveholders who wanted to establish large plantations. Northerners wanted to encourage the settlement of farms which would depend primarily on family labor by offering cheap land in small parcels. The government seized needed supplies and livestock (paying with certificates that were to be paid off after the war, but never were). Free states attracted the vast majority of the waves of European immigration through the mid-19th century. Lerner, Eugene. Another major initiative was the Pacific Railway Act, approved by President Lincoln on July 1, 1862. In the years after World War II, a new group of economic historians — many of them trained in economics departments — focused their energies on the explanation of economic growth and development in the United States. Second edition. While this is nowhere near the degree of economic disruption caused by the increase in prices experienced by the Confederacy, a doubling of prices did have an effect on how the burden of the war’s costs were distributed among various groups in each economy. After the adjustments, the estimated costs for the war totaled more than $10 billion. Table 1 presents Gunderson’s estimates. The American economy was caught in transition on the eve of the Civil War. Second edition. By the end of the war, the treasury had printed more than $250 million worth of these “Greenbacks” and, together with the issue of gold-backed notes, the printing of money accounted for 18 percent of all government revenues. But why did the North fight a war rather than simply letting the unhappy Southerners go in peace? In the East, General Ulysses S. Grant threw men and materiel at Robert E. Lee's depleted and increasingly desperate army. Furthermore, the United States needed money in order to grow and strengthen its economy by investing in major projects like the railroad industry. The federal government’s role in the chartering and regulation of banks was a volatile political issue throughout the antebellum period. Englewood Cliffs: Prentice Hall, 1961. The most comprehensive effort to answer this question is the work of Claudia Goldin and Frank Lewis (1978; 1975). The growth of an urbanized market society in the North produced more than just a legislative program of political economy that Southerners strongly resisted. In 1860, the South was still predominantly agricultural, highly dependent upon the sale of staples to a world market. A large proportion of the state’s white population supported the Confederacy; of the approximately 150,000 white men in North Carolina between the ages of 15 and 49 when the Civil War began, almost 125,000 (or more than 80 percent) served in the Confederate Army at some point during the war. In the Northeast, where over 60 percent of all banks were located, there was strong support by 1860 for the creation of a system of banks that would be chartered and regulated by the federal government. Manufacturers in the Northeast, on the other hand, supported a high tariff as protection against cheap British imports. The costs could be reduced substantially if instead of freeing all the slaves at once, children were left in bondage until the age of 18 or 21 (Goldin 1973:85). New York: W.W. Norton, 1994. Perhaps the best single indicator of how pervasive the “market revolution” was in the Northern and Western states is the rise of urban areas in areas where markets have become important. Indices of Prices and Real Wages During the Civil War. While the majority of Americans in every part of the country lived and worked on farms, their economic lives differed fundamentally from each other. Princeton: Princeton University Press, 1998. That is not to say that either side wanted war — for economic or any other reason. Economic Change in the Civil War Era. Economic historians viewing the event fifty years later could note that the half-century following the Civil War had been a period of extraordinary growth and expansion of the American economy. CIVIL WAR AND INDUSTRIAL AND TECHNOLOGICAL ADVANCES. The North produced 17 times more cotton and woolen textiles than the South, 30 times more leather goods, 20 times more pig iron, and 32 times more firearms. Despite its traditional concentration on agriculture, the country is not self-sufficient and must import food. The low price of raw cotton produced by slave labor in the American South enabled textile manufacturers — both in the United States and in Britain — to expand production and provide benefits to consumers through a declining cost of textile products. Southerners had for years opposed the idea because it would severely hamper any opportunity to expand slavery into the areas where settlement would be likely. With so much to lose on both sides of the Mason-Dixon Line, economic logic suggests that a peaceful solution to the slave issue would have made far more sense than a bloody war. The Southern burden was two and a half times that amount — $376 per man, woman and child. However, Beard and Hacker — and a good many other historians — mistook this increased wartime activity as a net increase in output when in fact what happened is that resources were shifted away from consumer products towards wartime production (Ransom 1989: Chapter 7). The slave-driven Southern economy rested upon the export of commodities to Britain and the rest of Europe—primarily cotton but also tobacco and other foodstuffs—while the North was an emerging industrial power whose ambition was to displace these same established powers. What is clear is that neither the dreams of those who fought for an independent South in 1861 nor the dreams of those who hoped that a “New South” that might emerge from the destruction of war after 1865 were realized. The construction of the first transcontinental railroad meant jobs for thousands in factories producing tracks and tools as well as those that labored for years to lay the tracks across rough terrain. Ransom, Roger L., and Richard Sutch. In fact, as Northern forces traveled further south to fight and occupy the Confederacy, the War Department created the United States Military Railroads, designed to build rails to carry troops and supplies as well as operating captured Southern rail lines and equipment. Fully seven-eighths of foreign immigrants settled in free states. Ransom, Roger L. “Fact and Counterfact: The ‘Second American Revolution’ Revisited.” Civil War History 45 (1999): 28-60. The term most historians have used to describe these changes is a “market revolution.”. Several economic historians have suggested that at this point the prices reflect people’s confidence in the future of the Confederacy as a viable state (Burdekin and Langdana 1993; Weidenmier 2000). New York: Oxford University Press, 1988. This translated directly into the Union having 3.5 million males of military age - 18 to 45 - as compared to 1 million for the South. Allowing the South to leave the Union would mean that the North could no longer control the expansion of slavery anywhere in the Western Hemisphere (Ransom 1989; Ransom and Sutch 2001; Weingast 1998; Weingast 1995; Wolfson 1995). Wolfson, Murray. In the cotton regions the importance of slave labor was even greater. Southern farmers (including cotton growers) were hampered in their ability to sell their goods overseas due to Union naval blockades. If the Confederacy had been a separate nation, it would have ranked as the fourth richest in the world at the start of the Civil War.The slave economy had been very good to American prosperity. Crop output in the South fell dramatically at the end of the war, and had not yet recovered its antebellum level by 1879. C&O Canal National Historical Park, Fredericksburg and Spotsylvania National Military Park, Governor's Island National Monument, Harpers Ferry National Historical Park, Mammoth Cave National Park, Springfield Armory National Historic Site, Richmond National Battlefield Park, Shiloh National Military Park. Only about a tenth of the southern population lived in urban areas. Huston, James L. “Property Rights in Slavery and the Coming of the Civil War.” Journal of Southern History 65 (1999): 249-286. Harold Faulkner devoted two chapters to a discussion of the causes and consequences of the war in his 1943 textbook American Economic History (which was then in its fifth edition), claiming that “its effects upon our industrial, financial, and commercial history were profound” (1943: 340). But in the South, which had little need for local banking services, there was little enthusiasm for such a proposal. In addition to this, Richmond’s industry produced a number of different war materials such as ammunition, guns and swords as well as supplied uniforms, tents and leather goods to the Confederate Army. Most writers argue that the decision for war on Lincoln’s part was not based primarily on economic grounds. Historians who argue that economic forces were an underlying cause of sectional conflicts go on to point out that war was probably the only way to settle those conflicts. Ransom, Roger L., and Richard Sutch. Historical research has a way of returning to the same problems over and over. The South did experiment with using slave labor in manufacturing, but for the most part it was well satisfied with its agricultural economy. Hacker, Louis. They see the economic conflict of North and South, in the words of Richard Brown, as “the conflict of a modernizing society” (1976: 161). Governor Francis R. Lubbock employed prison labor from the state penitentiary in Huntsville to make shoes and weave cloth for uniforms, which were manufactured in both Texas and Louisiana. This turned out to be a monumental task; far larger than anyone at the time imagined. The Civil War - Economic Impact. The American economy was caught in transition on the eve of the Civil War. The economy continued to suffer during 1864 as Union armies battered Confederate troops in the eastern and western theaters. The magnitudes of the indirect effects are detailed in Table 3. (1975; 1978). In the 11 states that eventually formed the Confederacy, four out of ten people were slaves in 1860, and these people accounted for more than half the agricultural labor in those states. The best measure of this instability and eventual collapse can be seen in the behavior of prices. Robertson, Ross M. History of the American Economy. While the economic situation of laborers deteriorated during the war, one must remember that wage earners in 1860 were still a relatively small share of the total labor force. Indeed, several economic historians have claimed that the creation and subsequent retirement of the Civil War debt ultimately proved to be a significant impetus to post-war growth (Williamson 1974; James 1984). One bright spot, if any, was the growth in GDP, which averaged a respectable 3.4%. With more developed markets and an industrial base that could ultimately produce the goods needed for the war, the Union was clearly in a better position to meet this challenge. Grant took advantage of railroad lines and new, improved steamships to move his soldiers and had a seemingly endless supply of troops, supplies, weapons, and materials to dedicate to crushing Lee's often ill-fed, ill-clad, and undermanned army. URL http://eh.net/encyclopedia/the-economics-of-the-civil-war/, To join the newsletters or submit a posting go to, http://eh.net/encyclopedia/the-economics-of-the-civil-war/, Percent of the Population That Were Slaves, Per Capita Earnings of Free Whites (in dollars), Slave Earnings per Free White (in dollars), Percent of Region’s Population Living in Urban Counties, Region’s Urban Population as Percent of U.S. Urban Population, Source: Union: (Atack and Passell 1994: 367, Table 13.5). The need for government- sponsored improvements was particularly urgent in the Great Lakes region (Egnal 2001: 45-50). By 1860, the free states had nearly twice the value of farm machinery per acre and per farm worker as did the slave states, leading to increased productivity. Only about 40 percent of the Northern population was still engaged in agriculture by 1860, as compared to 84 percent of the South. EH.Net Encyclopedia, edited by Robert Whaples. The Goldin and Lewis estimate for the discounted value of lost consumption for the South was $6.2 billion; for the North the estimate was $1.15 billion. The “Beard-Hacker Thesis” had become the most widely accepted interpretation of the economic impact of the Civil War. Those remaining behind could continue to manage the farm through the use of labor-saving devices like reapers and horse-drawn planters. Walton, Gary M., and Hugh Rockoff. The freedmen and their families responded to emancipation by withdrawing up to a third of their labor from the market. Ransom, Roger L., and Richard Sutch. OUTLINE & THESIS STATEMENT Impact of Industrialization after the Civil War on American Society (Thesis & Outline) [Strayer University] [U.S History 105] ] Impact of Industrialization After the Civil War on American Society (Thesis & Outline) Part 1- Thesis Statement … The remainder came in the form of bonds, many of which were sold abroad in either London or Amsterdam. Even though greenbacks were not backed by similar amounts of gold and silver, creditors were required to accept them at face value. Typing Pool at NCR Corporation, ca. While they were able, for the most part, to cling to their landholdings, the ex-slaveholders were ultimately forced to break up the great plantations that had been the cornerstone of the antebellum Southern economy and rent small parcels of land to the freedmen under using a new form of rental contract — sharecropping. New York: Harper & Brothers, 1943. The 11 states of the Confederacy had only 51 urban counties and they were widely scattered throughout the region. Oct 21, 2017 - This Pin was discovered by Catherine Rosenzweig. United States, Bureau of the Census. In the western theater of the war, William T. Sherman's Union troops laid waste to much of the Georgia countryside during the Atlanta Campaign and the subsequent "March to the Sea." Before the war, the South imported most manufactured goods from the North or overseas. The Gross National Product (the total of goods and services produced) more than doubled between 1939 and 1945. An economic case for the North is more problematic. The destruction of slavery meant that the entire Southern economy had to be rebuilt. Start studying 42. The value of capital invested in slaves roughly equaled the total value of all farmland and farm buildings in the South. Foremost among these bills was the Homestead Act, a popular measure regularly debated in Congress since the 1840s. By mid-1864 the costs of paying interest on outstanding government bonds absorbed more than half all government expenditures. More recently, historians have taken a broader view of the situation, arguing that the sectional splits on these economic issues reflected sweeping economic and social changes in the Northern and Western states that were not experienced by people in the South. “Conflicting Visions: The American Civil War as a Revolutionary Conflict.” Research in Economic History 20 (2001). The Southern economy, while shaky throughout the war, grew markedly worse in its later years. In part this reflects the enormous effort expended by both sides to conduct the war. If slavery was the corner stone of the Confederacy, cotton was its foundation. d Includes: Delaware, Kentucky, Maryland, and Missouri. Slavery had been an uncomfortable fact of life in the United States since the founding of the republic. In 1805 there were just over one million slaves worth about $300 million; fifty-five years later there were four million slaves worth close to $3 billion. Civil war shatters Syrian economy Only agriculture has been saving the country - and a new, more sinister industry is thriving. Second was the impact of emancipation. This still left a huge shortfall in revenue that was not covered by either taxes or the printing of money. During the American Civil War, the Union’s bold economic policies laid the foundation for a truly national economy. When the Union offensives in Georgia and Virginia stalled in the summer of 1864, prices stabilized for a few months, only to resume their upward spiral after the fall of Atlanta in September 1864. The United States, on the verge of civil war, contained two distinct economies. Stanley Engerman expanded Cochran’s argument by attacking the Beard-Hacker claim that political changes — particularly the passage in 1862 of the Republican program of political economy that had been bottled up in Congress by Southern opposition — were instrumental in accelerating economic growth (Engerman 1966). By 1860 many were inclined to support the Republican proposal for a National Banking System, however Southern opposition killed the National Bank Bill in 1860 (Ransom and Sutch 2001; Bensel 1990). Yet there would remain the problem of how even those reduced costs could be distributed among various groups in the population. In late 1863 and early 1864, following the Confederate defeats at Gettysburg and Vicksburg, prices rose very sharply despite a marked decrease in the growth of the money supply. Governments on both sides were forced to resort to borrowing on an unprecedented scale to meet the financial obligations for the war. CIVIL WAR, ECONOMIC CAUSES OF (ISSUE). About 75 percent of Southern males fought the war, as compared to about half of Northern men. In order to make the farms more efficient and to help industries develop new and better equipment, as well as provide opportunities for students in the "industrial classes," in 1862 Congress passed the Morrill Act (Land-Grant Colleges Act), by which each state was granted land for the purposes of endowing Agricultural and Mechanical (A and M) colleges. The American economy was caught in transition on the eve of the Civil War. From a situation where tenancy was extremely rare, the South suddenly became an agricultural economy characterized by tenant farms. The series for wages has been adjusted to reflect the decline in purchasing power due to inflation. Northern merchants gained from Southern demands for shipping cotton to markets abroad, and from the demand by Southerners for Northern and imported consumption goods. By the mid 1830s, cotton shipments accounted for more than half the value of all exports from the United States. In 1862 Congress finally passed legislation creating the National Banking System. He made good on his promise by signing the Homestead Act into law on May 20, 1862. One “economic” solution to the slave problem would be for those who objected to slavery to “buy out” the economic interest of Southern slaveholders. The same was not true in the South. The failure of the postbellum Southern economy to recover has spawned a huge literature that goes well beyond the effects of the war. (The 1860 Census Office defined an “urban place” as a town or city having a population of at least 2,500 people.) While these figures are only a very rough estimate of the actual costs, they provide an educated guess as to the order of magnitude of the economic effort required to wage the war, and it seems likely that if there is a bias, it is to understate the total. Two volumes. Southerners, with their emphasis on staple agriculture and need to buy goods produced outside the South, strongly objected to the imposition of duties on imported goods. Consequently, the Northern economy was able to finance the war without a significant reduction in private consumption. As they looked for the keys to American growth in the nineteenth century, these economic historians questioned whether the Civil War — with its enormous destruction and disruption of society — could have been a stimulus to industrialization. First, the idea that the South was physically destroyed by the fighting has been largely discarded. By 1860, 90 percent of the nation's manufacturing output came from northern states. “Who Pays for Slavery?” In The Wealth of Races: The Present Value of Benefits from Past Injustices, edited by Richard F. America, 31-54. Southerners wanted a railroad built along a southern route. Bensel, Richard F. Yankee Leviathan: The Origins of Central State Authority in America, 1859-1877. Ransom, Roger L. “The Economic Consequences of the American Civil War.” In The Political Economy of War and Peace, edited by M. Wolfson. More famously, the first U.S. income tax was imposed in July 1861, at 3 percent of all incomes over $800 up to 10 percent for incomes over $100,000 to help pay for the war effort. Another contrast was the much higher fraction of revenues accounted for by the issuance of currency on the part of the Richmond government. No war in American history strained the economic resources of the economy as the Civil War did. However the tariff was also the main source of federal revenue at this time, and Westerners needed government funds for the transportation improvements they supported in Congress. Cotton cultivation with slave labor did not require local financial services or nearby manufacturing activities that might generate urban activities. The reliance on borrowed funds proved to be a growing problem for the Confederate treasury. Over the last quarter of the nineteenth century, gross crop output in the South rose by about one percent per year at a time when the GNP of United States (including the South) was rising at twice that rate. Most people at that time were willing to accept the fact that the 700,000 enslaved African Americans living in the United States would be treated as property, not people.
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