In Roger Lowenstein’s latest book, Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War, Secretary of the Treasury Salmon Chase, the 37th Congress, and banker Jay Cooke are the stars leading the drama that ends with Robert E. Lee’s surrender to Gen. Ulysses S. Grant at Appomattox. Abraham Lincoln, The Great Emancipator, looms large but plays a supporting role.
Nominated as treasury secretary a month before Fort Sumter, Chase, a former U.S. senator from Ohio and fervent abolitionist, knew immediately that shoring up the Union’s finances was key to winning a conflict in which, Lowenstein wrote, “both North and South reckoned that … money would be decisive.”
But in March 1861, the federal government had no authority to borrow in the hodgepodge of state-issued bank notes acting as currency and, save the tariff, no way to increase revenue through taxation. Over the next four years, Chase lobbied Congress to levy new taxes, including the nation’s first income tax, pushed for a paper currency known as “greenbacks,” and, with the help of Philadelphia financier Jay Cooke, arranged a mass selling of bonds to private investors.
These measures not only kept the Union solvent even as its national debt reached unprecedented levels, but they also bolstered the Union government’s credibility at home and abroad.
Richmond’s first fateful error, Lowenstein argued, was limiting cotton exports to Europe, hoping deprivation would prompt England and France, with over a million textile workers, to force an early peace and partition the country.
After Fort Sumter, Judah P. Benjamin, who later served a short tenure as treasury secretary of the Confederacy, proposed buying and shipping 100,000 bales of cotton to England. Benjamin was ignored, and Europe, having received a record shipment of crops from the previous year’s harvest, found new markets in Egypt and India.
By 1863, the Southern economy was crumbling under the weight of “one of history’s great inflations.” Confederate Treasury Secretary Christopher Meminger had printed $400 million in “Dixies,” and everyday commodities such as bacon, sugar, and tea were selling for over five times more than their prewar price (coffee cost 40 times more). Demoralization spread, more so after Richmond resorted to forcing farmers to sell agricultural goods, already scantly available, well below market value.
That March, Lowenstein wrote, women in Richmond “began to beg in the streets” for bread, a situation the rebel army precipitated when, under orders from the government, it began seizing flour from mills and warehouses. By the next month, those women, “many wielding axes,” started the Richmond Bread Riot, “breaking into stores and seizing provisions.”
Efforts to de-inflate the Dixie, which depreciated to the point that consumers began bartering cotton, failed. With little revenue to be gained from selling bonds and raising taxes, Richmond issued a 10% in-kind tax on agricultural goods and hired 3,000 agents to seize what crops there were. By this point, many Southerners had lost sight of the war’s aims. “I would like to know what [my husband] is fighting for,” one woman wrote North Carolina Gov. Zebulon Baird Vance. “I don’t think he is fighting for anything, only for his family to starve.”
Desperate for cash, the Confederacy issued “cotton bonds” on the European market backed by cotton it could not export without paying high premiums to “runners” willing to violate the Union’s blockade of Southern ports. When prices of the cotton bond fell after investors came to doubt promises that cotton would be shipped from an independent Confederacy once the war ended, Richmond moved to “prop them up” by repurchasing the bonds with money it had already amassed from the initial sale. King Cotton was dethroned.
Meanwhile, Lowenstein notes, across the Potomac, Washington’s revenues had doubled. The greenback was accepted as money. Chase, a former Jacksonian Democrat, oversaw the Treasury’s selling $1 million in government bonds every day and resurrecting national banking. Additionally, the 37th Congress’s passage of the Homestead Act, Pacific Railway Act, and Land-Grant College Act, as well as the creation of the Office of the Commissioner of Internal Revenue, transformed the federal government from a mediator to an agent of national prosperity. Europe never intervened in the war.
There were bursts of civil unrest in the North, however. In New York, “Copperhead” Democrat newspapers and politicians such as Richard O’Gorman spread racist conspiracies accusing Lincoln of planning to emancipate slaves to force whites out of work. The propaganda stoked a “fear of competition with Negroes” and triggered a wave of mob violence against blacks that Horace Greeley, editor of the New York Tribune, attributed to the “persistent effort of the pro-slavery press of this city to strengthen the prejudices, and embitter the hatred of its readers.”
Emancipation did come, pauperizing the South’s tycoons of cotton, not white Northerners. After the war’s end on April 9, Edmund Ruffin, the agronomist and Virginia slave owner who traveled to South Carolina to fire the first shot at Fort Sumter, was ruined. So, too, was Mary Boykin Chesnut, whose diaries left posterity a first-hand account of the fall of the antebellum era. She and her husband, James Chesnut Sr. (a former U.S. senator from South Carolina and aide to Jefferson Davis), lost 1,000 slaves. A larger look at the region shows a bleaker picture. By 1870, the South’s share of national wealth fell from 30% to 12%. It did not achieve economic parity with the North until after the abolition of Jim Crow.
Roger Lowenstein’s Ways and Means is a valuable and original addition to the four score and umpteen books published about the American Civil War, showing that the conflict was more than a battle of ideas and arms and that the South’s loss of the economic phase of the war was as demoralizing to the Confederacy as Grant and Sherman’s military prowess and Lincoln’s moral and legislative assault on the slaveocracy. I highly recommend it.
Dion J. Pierre is the campus correspondent for the Algemeiner. He has previously worked at the National Association of Scholars and is the author of Neo-Segregation at Yale.
