Confederate Economics

 

Why was the Confederate States economy so mismanaged throughout the entire Civil War? For example, the high amount of inflation, the souring debt, etc.

The issue was that all you have been told about the economy of the south is a lie invented by the Lost Cause movement.

By 1820 even with the introduction of the cotton gin the southern economy was circling the drain at the start of the industrial revolution. The rest of the industrializing nations were using a system of what were called tariffs to in essence maintain a cold war in the realm of trade. The tariffs were not debilitating to anyone with a technology and industrial base, but could devastate the economy of a primary producing / agricultural system. At the same time math and actuarial science were making strides in accounting and economic numbers could be measured.

In 1827 a new tariff system was proposed which was designed to match the European powers and balance the United States economic ship, with a goal of increasing industrialization and increasing the wages of common wage earners along with allowing companies to flourish. Many of the European powers became upset because in essence the United States would join their ranks instead of, for example, being a feeder for raw materials and a buyer of hard goods such as India, Brazil, and other less advanced nations.

The founding fathers always believed slavery was unsustainable and that it would die on its own if no action was taken to save it. This was proving prescient. However, the southerners had an issue. Their culture was based on the aristocratic ownership of large landed estates fed by slave labor and selling exportable agricultural products. This created an economic reality where 10% or so of the population was massively wealthy living an unheard of luxury, the so called antebellum dream. 40% of the southern population was slaves, who had an average lifespan of 21 years and lived short, brutal lives. 50% of the south was rural and in some cases urban poor, living hand to mouth as “dirt farmers” often on rented land using poor agricultural practices and making very little if any money for their labor. Ironically, their tax rate in the slave system was almost 50% because plantation owners were excluded from taxation.

Changing the model on which tariffs were based threatened this. The south in essence produced subsidized cotton, indigo, and tobacco selling it to Europe. The money they made was spent in Europe on luxuries. This money had little acceleration and with the taxation system in place in southern states, encourage the buying of foreign products. European nations actually made deals with southern politicians to keep the tariff system in this manner.

In this model no major industrial firm could prosper, there was no call for technicians or innovation, colleges did not teach advanced engineering - the College of South Carolina sold itself as a place where vicious and violent children of slave owners could be civilized so that they restricted torture and sexual violence to slaves. Tregdar Iron works, when it was created, could not hire any local employees and brought people in from foreign nations. All of the Southern Armories in the US armory system had northern educated managers.

The effect in the north was devastating as well in that the industry was hampered and not competitive. In the company history of Krupp arms they speak of their first industry - making silver ware, and how the craftsman of the north in the United States had a head start on them (Paul Revere was a silversmith) but how the lack of organized tariffs killed the improvement of the silver industry. Americans bought German table ware. This did not completely kill northern industry - the north had so many advantages that if let off the leash for a decade or two it could have becomes the largest provider of industrial goods to the world, but it choked it off.

The 1827 tariff would have been an amazing victory for the advancement of the average free worker in the United States - an example is the 1861 tariff which caused the US productivity to sky rocket despite losing the foreign trade of cotton and fighting a very expensive war. But European countries threatened to choke off cotton sales, which could be purchased elsewhere.

The south threaten violence. Jackson, then president, threatened to hang anyone in the south that lifted a finger against the nation. The south “backed down” but then Jackson moderated and eliminated the tariffs advantageous to industry and England in turn gave him “most favored trading partner” status, which simply means we could sell them what they wanted and they could sell us what they wanted, and we could buy what they wanted to sell. This set the stage for the South in essence being a foreign agent for European nations against the best interest of their own nation. It also made Cotton become our best export, despite being a weak valued seller.

Progressively the tariffs were applied in a way that kept the south in profits and the north hobbled. When the midwest developed grain export to Europe the south even moved to hobble this for fear of the agricultural center of the country moving to the midwest. Cotton in 1855 was the largest export of the US but very few people received money from it. US railroads actually bought german tires and rails because the tariff system punished US purchase of US made Pittsburg product. Attempts to expand technical education were stopped by the south.

In 1857 a new tariff came around that further pushed the European advantage, and it actually caused a massive depression that crushed midwest grain farmers, northern manufacturers, and caused starvation not just in the US but in Europe and across the south. The sole winner - slave plantations gained a few more years of gravy.

Then the insurrection started. The south dissolved their states and created what would be called the CSA. Without foreign recognition, which foreign nations said had to be attached to their embassy’s in Washington City, no one would deal directly with the south as a nation. Southern diplomats who did show up were rude, offending many people in several nations, and really only finding welcome in businesses who bought their cotton.

So now we come to the reasons why. The United States at war’s start with an ethical leader and a group of highly educated people in the new republican party immediately put into place economic policies that benefited the whole nation rather than just the aristocratic class of slavers. This includes the land grant system, the tarriff of 1861, the various monetary easement policies. The north was not a giant arms manufacturer because of the drag of policies to keep slavers happy, and would not be by wars end (it would take thirty years before northern arms manufacture could rival Europe.) so both the United States and the insurrection sought arms outside of their regions from Europe, but the north had real money and the south used promissory notes. (Remember the Constitution and the amendment about foreign debt? ) To make this easier at this point I will summarize.

1. The south followed self-centered and destructive economic policy designed to keep the slave owners rich even during the war. Most souther plantations did not even switch to any staple production until the 1864 planting season. Taxation of the poor 50% was so high that many farmers quit planting food and closed up shop. The south handed out worthless money and expected taxes “in kind” meaning that a taxation person would come and take all you had and tell you good luck. Gun control policy took all of the guns from civilian hands so even those who could find game could not really put it into the pot.
2. Most smuggling until 1864 was vastly expensive luxury goods for the slave holders who expected to sit out the war and make a killing on cotton stored during the conflict.
3. Cotton turned out to be worthless to the south. Egypt and India came on line by 1863 and the world wide shortage of cotton became a glut. The north had factories that could use cotton in New England and railroads to move it when it was captured from the south to the north, but the south simply had piles of it.
4. fully 30% of the south was not confederate. The slaver class, 10%, few of which fought, were gung ho, the slaves hatred it and fled when they could. But one in three free people in confederate states took up arms against the south, downed tools, fled for the woods, or otherwise stopped producing, and as we can see their economic product was being taken anyways. Despite tens of thousands of non-judicial killings (the south did not believe in habeas corpus except one state and decided judges were to much bother, so if you were accused, you were convicted, usually by being executed in some woods.
5. By 1864 the south was still fighting because as one slaver said, as long as we have poor farmers willing to rush the cannons, we cannot lose. After the outrages caused to northerners during Gettysburg the northern gloves came off, and slave plantations were authorized to be burned, and were in Sherman's march.
6. In 1864 the rules about smuggling luxury items to slavers and the ports that could be smuggled to meant that smugglers mostly stopped trying to cross the lines. The sudden loss of luxury goods from Europe - Madiera wine, french fashions, and so forth collapsed the little trade that was happened and saw plantation owners hide there gold and stop even pretending to support the war financially. The result was that an economy that was based on theft from farmers died, leaving no economy what so ever.

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I have had to take care of the basically violent and demanding Lost Cause posts here and elsewhere, and I will offer some logic to back up recorded history. Why would the United States congress pass a set of tariffs to “ruin the south.” Can you imagine today passing a set of tariffs designed to ruin Alaska or Iowa?

Maybe a tariff can have a hard affect on a region in the country. But the tariff is never designed to hurt the US as its purpose.

Did slavery have anything to do with the civil war? Well, the Lost Cause depends on tariffs to claim it did, they were reacting to tariffs not slavery, but the south won every tariff battle from 1830 to 1860. So why start an insurrection when you were winning over tariffs? The tariff act pf 1861 only passed after the South left the union.