The Economics of the Civil War

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. 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. In the cotton regions the importance of slave labor was even greater. The value of capital invested in slaves roughly equaled the total value of all farmland and farm buildings in the South.

.. Looking at Figure 1, it is hardly surprising that Southern slaveowners in 1860 were optimistic about the economic future of their region. They were, after all, in the midst of an unparalleled rise in the value of their slave assets.

.. The Northern states also had a huge economic stake in slavery and the cotton trade. The first half of the nineteenth century witnessed an enormous increase in the production of short-staple cotton in the South, and most of that cotton was exported to Great Britain and Europe. Figure 2 charts the growth of cotton exports from 1815 to 1860. By the mid 1830s, cotton shipments accounted for more than half the value of all exports from the United States. Note that there is a marked similarity between the trends in the export of cotton and the rising value of the slave population depicted in Figure 1. There could be little doubt that the prosperity of the slave economy rested on its ability to produce cotton more efficiently than any other region of the world.

.. The income generated by this “export sector” was a major impetus for growth not only in the South, but in the rest of the economy as well. Douglass North, in his pioneering study of the antebellum U.S. economy, examined the flows of trade within the United States to demonstrate how all regions benefited from the South’s concentration on cotton production (North 1961). Northern merchants gained from Southern demands for shipping cotton to markets abroad, and from the demand by Southerners for Northern and imported consumption goods. 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. As manufacturing of all kinds expanded at home and abroad, the need for food in cities created markets for foodstuffs that could be produced in the areas north of the Ohio River. And the primary force at work was the economic stimulus from the export of Southern Cotton. When James Hammond exclaimed in 1859 that “Cotton is King!” no one rose to dispute the point.

.. One “economic” solution to the slave problem would be for those who objected to slavery to “buy out” the economic interest of Southern slaveholders. Under such a scheme, the federal government would purchase slaves. A major problem here was that the costs of such a scheme would have been enormous. Claudia Goldin estimates that the cost of having the government buy all the slaves in the United States in 1860, would be about $2.7 billion (1973: 85, Table 1). Obviously, such a large sum could not be paid all at once. Yet even if the payments were spread over 25 years, the annual costs of such a scheme would involve a tripling of federal government outlays (Ransom and Sutch 1990: 39-42)! 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). Yet there would remain the problem of how even those reduced costs could be distributed among various groups in the population. The cost of any “compensated” emancipation scheme was so high that even those who wished to eliminate slavery were unwilling to pay for a “buyout” of those who owned slaves.

.. 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. 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. The term most historians have used to describe these changes is a “market revolution.”

.. In 1860 6.1 million people — roughly one out of five persons in the United States — lived in an urban county. A glance at either the map or Table 2 reveals the enormous difference in urban development in the South compared to the Northern states. More than two-thirds of all urban counties were in the Northeast and West; those two regions accounted for nearly 80 percent of the urban population of the country. By contrast, less than 7 percent of people in the 11 Southern states of Table 2 lived in urban counties.

.. In the South, the picture was very different. Cotton cultivation with slave labor did not require local financial services or nearby manufacturing activities that might generate urban activities. The 11 states of the Confederacy had only 51 urban counties and they were widely scattered throughout the region. Western agriculture with its emphasis on foodstuffs encouraged urban activity near to the source of production. These centers were not necessarily large; indeed, the West had roughly the same number of large and mid-sized cities as the South. However there were far more small towns scattered throughout settled regions of Ohio, Indiana, Illinois, Wisconsin and Michigan than in the Southern landscape.

.. Settlement of western lands had always been a major bone of contention for slave and free-labor farms. The manner in which the federal government distributed land to people could have a major impact on the nature of farming in a region. Northerners wanted to encourage the settlement of farms which would depend primarily on family labor by offering cheap land in small parcels. 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. 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. Northern and western congressmen strongly favored the bill in the House of Representatives but the measure received only a single vote from slave states’ representatives. The bill passed, but President Buchanan vetoed it.

.. 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. Manufacturers in the Northeast, on the other hand, supported a high tariff as protection against cheap British imports. People in the West were caught in the middle of this controversy. Like the agricultural South they disliked the idea of a high “protective” tariff that raised the cost of imports. 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.

.. In 1834 President Andrew Jackson created a major furor when he vetoed a bill to recharter the Second Bank of the United States. Jackson’s veto ushered in a period of that was termed “free banking” in the United States, where the chartering and regulation of banks was left entirely in the hands of state governments. Banks were a relatively new economic institution at this point in time, and opinions were sharply divided over the degree to which the federal government should regulate banks. 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. But in the South, which had little need for local banking services, there was little enthusiasm for such a proposal.

.. They see the economic conflict of North and South, in the words of Richard Brown, as “the conflict of a modernizing society”

.. James McPherson, argues that Southerners were correct when they claimed that the revolutionary program sweeping through the North threatened their way of life

.. Most writers argue that the decision for war on Lincoln’s part was not based primarily on economic grounds. However, Gerald Gunderson points out that if, as many historians argue, Northern Republicans were intent on controlling the spread of slavery, then a war to keep the South in the Union might have made sense. Gunderson compares the “costs” of the war (which we discuss below) with the cost of “compensated” emancipation and notes that the two are roughly the same order of magnitude — 2.5 to 3.7 billion dollars (1974: 940-42). Thus, going to war made as much “economic sense” as buying out the slaveholders.

.. the only way that the North could ensure that their program to contain slavery could be “enforced” would be if the South were kept in the Union. 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

Trump’s Tariffs Prompt Global Threats of Retaliation

The European Union detailed a three-step plan to penalize $3.5 billion of American trade — the same amount of European steel and aluminum the bloc estimates would be harmed by the planned tariffs. It proposed taxing American exports including bourbon, bluejeans, orange juice, cranberries, rice and motorcycles.

A European Union official said that the bloc had been preparing for the announcement for months and that everything was in place for a swift, proportionate response.

.. The measures were intended to put pressure on politically sensitive areas, trade analysts said. Harley-Davidson motorcycles are made in the home district of Speaker Paul D. Ryan, Republican of Wisconsin. Orange juice comes from the swing state of Florida. Restrictions on Kentucky bourbon could add pressure on the Senate majority leader, Mitch McConnell, who is from the state.

.. Retaliation could hit hardest in many of the rural communities that were strongholds for Mr. Trump. Farmers are among America’s largest exporters, and often become a target in trade spats

.. She said the agricultural community was “rightly nervous” about the prospect.

.. Canada and Mexico were America’s No. 1 and No. 3 largest agricultural markets in 2016, and South Korea is a major market for beef, corn, pork and fresh fruit

.. The United States exports cotton to Turkey and wheat and dairy to Brazil, other major suppliers of steel.

.. Peter Navarro, a top White House trade adviser, said he did not believe any country would retaliate, “for the simple reason that we are the most lucrative and biggest market in the world.”

“They know they’re cheating us, and all we’re doing is standing up for ourselves,” he added.

.. if the United States was willing to impose penalties like these on its close trading partners, other countries would be less eager to negotiate trade deals with the United States. “What is the benefit of having a special relationship?” he asked. “I think there could be a lot of unintended and unforeseen consequences.”

How the American Civil War Built Egypt’s Vaunted Cotton Industry and Changed the Country Forever

The battle between the U.S. and the Confederacy affected global trade in astonishing ways

.. It took just a couple of weeks after the outbreak of hostilities in South Carolina for farmers the world over to realize the scope of the bounty that had landed in their lap. Agricultural laborers from Australia and India to the West Indies ditched wheat and other food staples and hastily planted up their fields with cotton. Prices had risen by up to 150 percent. As soon as it became clear that England wouldn’t enter the war as allies of the Confederacy, many farmers doubled down and gave over every scrap of their acreage to this enriching crop.

.. In 1861, Egypt had only exported 600,000 cantars of cotton (a traditional measurement equal to about 100 pounds), but by 1863 it had more than doubled this to almost 1.3 million cantars, the New York Times reported at the time. By the end of the 19th century, Egypt derived 93 percent of its export revenues from cotton, which had also become “the major source of income for almost every proprietor in the Delta,”

.. For just as the expansion in the trafficking of slaves to the southern United States is often explained in part by the pick up in cotton production, so too the arrival of this tremendously labor intensive crop in Egypt led to the introduction of a variation of the feudal system. Farmers who had previously spent much of their time planting land that was for all intents and purposes theirs, now found themselves pressed into work on large estates. Where once poorer townspeople had had access to cheap produce, soon they discovered that the cultivation of cotton at the expense of food meant much higher prices for fruits and vegetables.

.. Ismail was so intent on building up cotton infrastructure and transforming Cairo into a ‘Paris on the Nile’ that he encouraged the “establishment of banks like the Anglo-Egyptian from which he might borrow heavily in return for certain favors,” writes Owen. Very soon he’d built up such big debts to mostly British and French creditors that he couldn’t hope to ever pay them back. Additionally, the end of the American Civil War in 1865 led to a steep fall in global cotton prices as the U.S. crop came back on the market and proved particularly damaging for Egypt. It created a sharp budget deficit and ultimately a declaration of national bankruptcy a decade later

.. “I think you can say that the American Civil War – and the effects on cotton – made the British change their policy towards Egypt,” says Mohamed Awad, director of the Alexandria & Mediterranean Research Center at the Bibliotheca Alexandrina. “Indirectly it was one of the main reasons for the occupation of Egypt.”

.. But the stellar reputation of Egyptian cotton still holds, even though in the United States, linen manufacturers can use the name on products with just five percent of the Egyptian crop.