MOOC | Confederate Finances | The Civil War and Reconstruction, 1861-1865 | 2.5.4
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MOOC | Confederate Finances | The Civil War and Reconstruction, 1861-1865 | 2.5.4


>>The trouble with this argument of our great scholar McKitrick, again, is that it purely is a political argument. In other words, it argues that a flaw in the political structure of the South is the real problem. But another way of looking at it is the organization of Southern society itself generated policies which were counterproductive, and also created irreconcilable opposition, which a different political structure might not have been able to deal with anyway. Planter control determined how the war would be waged. Start at the very basic, with money, right? How do you finance? A war requires a lot of money, far more money than the federal government had ever had to raise before the Civil War. Where do you get this money? Well, there are three ways to finance a war. (This is oversimplifying.) One, taxation, right? Tax is a way to raise money. Two, borrowing. Issue bonds, which will be repaid down the road with interest. That’s future taxation. To pay the bonds, you’re going to have to have more taxation, but you’re putting it off for a while. And third, issuing paper money, like we just saw. You know, paper money to pay for things. Now, both North and South used all three. Both issued a lot of paper money and suffered, therefore, from inflation, because the more money there is in circulation, the more prices go up, because there’s more money chasing scarcer goods. But the Union derived far more, a far higher percentage of its income from taxation than the South did. This is one of the problems of the — I mean this is one of the complaints of the libertarian critique of Lincoln, that he instituted all these taxes. It’s the modern state. The income tax. Everything was taxed. Excise taxes. The tariff, yes, they raised the tariff to enormous levels in the Civil War, not because Charles Beard was there in 1860, saying the tariff is the cause of the war, but that’s the way you raise money. You tax imported goods. Now later, the tariff became a fixture to protect Northern industrialists. But it’s instituted in the Civil War to get money to help pay the war. Then they issue a lot of bonds. But in the South, far more is from paper money. In other words, what I’m saying is: the planters didn’t want to pay the taxes to finance the war they had themselves brought on. They’re the ones with the money. If you’re going to tax people in the South, the planters are going to pay the bill. Yeah, you could tax merchants. You could tax poor people, but you’re not going to get much money by doing that. The planters have the money, and if you have a tax system, you got to go after where the money is. But they didn’t want to pay taxes. I mean, I can well understand that, but that created a great problem for the Confederate finance system. They did eventually… Now also, as we’ll see next time, the paper money issued in the North was declared to be what they called “legal tender,” that is to say, you’ve got to accept this money. I don’t care if you don’t think it’s worth anything. If I owe you money, I borrowed money from you — yeah, see that guy? I can borrow a lot of money from him. But let’s say, but if I borrowed before the war, it’s gold, or it’s money backed with gold. That’s real money. Now, I’ve got all this paper money, it’s legal tender. I can pay you back with this money. Creditors run for the hills. They don’t want to be paid back in money which is worthless, but nonetheless, legally you can. So that makes the money acceptable everywhere. It’s legal tender. The South did not make their paper money legal tender. Therefore you could accept it or not, as you saw fit, which meant its value deteriorated far faster than in the North, because people just wouldn’t accept it, unless they were, you know, strong patriots, etc., etc. They did institute, in 1863, what they called the tax-in-kind, where the army would simply appropriate goods from farms and plantations (crops, you know, equipment) and give you receipts and everything. But that caused enormous resentment, as we’ll see in a minute, from poorer families who found it, you know, who found it really a gigantic burden for the army to come along and take a bunch of their growing crops or what farm equipment they have, etc. The main economic resource of the South, of course, were slaves, but also cotton. And they could never figure out what to do with their cotton. That was the most valuable thing they had. Do you just — some people said the government should just seize all the cotton. The crop of 1860 was gigantic, four million bales. The government should appropriate that cotton and sell it overseas, and that’s the way to get money. Even though there’s a blockade, it’s not very effective. But they actually took the opposite plan, which was the cotton embargo, because remember, the “king cotton” idea had gotten very deeply built into the Southern psyche, the notion, as Hammond said, “cotton is king.” “No power on earth dares to make war [on cotton].” 1858. Well, the theory was, since the British, we know, are just, you know, interested in money, right, they don’t care about anything except money, if we withhold our cotton, the British, you know, industrial sites, the factories, will run out of cotton very soon, and they’ll start losing money and they’ll have to throw people out of work. It will cause all sorts of disruption in Britain. And they will be forced to recognize the Confederacy. This will be a, well, sort of like today, you know, with our economic sanctions we’ve put onto Russia, which usually don’t really work all that well, but that, you know, use economic power to force another country to do something you want them to do. Well, so, but it didn’t work. It didn’t work for a number of reasons. One, the previous cotton crop, 1859, was also so big that there were giant stockpiles of cotton still in existence in England. So the cotton famine, which does happen, doesn’t really take hold for another year or so, until late 1862. So the first year or so of the war, king cotton diplomacy, or the cotton embargo, is not really having any particular effect. Secondly, a lot of people are secretly shipping cotton anyway, through the blockade or to the North, selling to the North. Again, I don’t mean — you know, these planters, most of them were certainly loyal Confederates, but quite a few of them wanted to make a buck also. And they would, particularly when the Union army gets into the Mississippi Valley, you’ll find a lot of planters selling cotton, even though it’s totally against the Confederate policy, to speculators and others in the Union army, for sale to the North. Because one of the things that happens, because of the cotton embargo, is the price of cotton goes sky high on the world market. Cotton becomes even more valuable, if you can get it out and sell it. One result of that, since all policies have unintended consequences, one result of that is that Britain makes an avid effort to promote other sources of cotton. They move to start growing cotton in Egypt and in India. So when the war ends, the South no longer has the kind of monopoly on cotton that it had before the Civil War. And that means (this is down the road, we’ll see) in the late 19th century, there’s a giant overproduction of cotton in the world. Cotton is no longer as valuable in the South in the late 19th century, because it’s being produced in many, many places now, and far more of it than is really needed. So after the war, the price of cotton goes down to almost nothing by the 1890s. Nobody understood, you know, knew this when the war was going on, but it was one of the effects. But as the war goes on, the economic situation in the South deteriorates, partly because the areas under Northern control grow in size, and economic resources are taken away from the South and now under Northern control. There’s scarcities of all sorts of goods. Salt. Interesting book long ago about salt in the Confederacy. It doesn’t seem that interesting, salt. But salt was essential for preserving meat, right? That’s how they killed their hogs and they preserved it as bacon and other stuff over the winter. But without salt, you couldn’t do that, which was a tremendous hardship to poor families. Another book about ersatz. Ersatz. In other words, artificial things. When they ran out of leather, they made shoes out of cardboard and stuff, always trying to substitute. So scarcity was a problem. Inflation was a problem. The excessive issuing of paper money was a problem. By the middle of the Civil War, you have, wait a minute, let’s see if we can find it. Here it is. This is the Mobile Bread Riot of 1863, where a crowd of women (McCurry talks about this kind of thing), a crowd of women is rioting for bread. Bread or peace, they say. This is a fanciful lithograph from a newspaper at the time, it’s not an eyewitness account. But it’s these Richmond, Mobile, these bread riots where women took to the streets because they couldn’t feed their families. And it just shows the economic disruptions that were going on in the South.

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