Introduction
This paper focuses on an important but often overlooked reason for the defeat of the Confederate States of America: its economic infirmity. As Cicero stated: “The sinews of war are unlimited money.” We see this principle applied today in the war in Ukraine where NATO is attempting to deprive Russia of the funds necessary to wage war through economic sanctions and caps on oil and gas prices.
This paper reviews the economic condition of the Confederacy before the war, during the war and during Reconstruction. It examines the Confederacy’s economic base and Richmond’s policies to finance the war. That said, it is important to note that at the war’s beginning, the Union was more than two times as populous as the Confederacy (twenty-two million people vs nine million, Black and White), and, significantly, the Union had an industrial base that was probably five times as great.
The Confederacy’s bedrock philosophical principle informing its economic policies was “states’ rights,” which held that the Union was a compact and loose affiliation of sovereign states. This principle, along with the social and economic domination of the planter class, made it virtually impossible for the Confederate government to enact the fiscal and monetary policies necessary to finance the war. The result was a South that did not prosper during the war years but, rather consumed what limited resources it had, until there were no more.
Before the War
Confederacy Less Industrialized; Cotton is King; Slaves the Major Asset
In 1860, those states that would eventually become the Confederacy were more rural, less educated, and much less industrialized than northern states. Per capita invested manufacturing capital was more than three times higher in the North and its transportation infrastructure was far more extensive. For example, Ohio had twelve times as many railroad miles as Alabama, which is a little larger.
Secessionists did not want war, nor did they believe secession would inevitably lead to it. The South produced 75% of the world’s cotton, which accounted for 60 percent of American exports. As James Hammond, South Carolina’s senator at the time, boasted: “No power on earth dares to make war upon it. Cotton is king.” Cotton provided a more than adequate living, particularly for the planter class, so southern farmers didn’t feel the need to plant other crops or to industrialize. In the 10 years prior to the start of the War, cotton production rocketed from 2.8 million bales to more than 4 million. Southern planters made little investment in machines or other capital goods because it was cheaper to breed Negroes who had had a market value in 1861 of $2.7 billion or $675 per enslaved person. This was more than all the capital invested in the entire country’s railroads and manufacturing. Hence, the southern states had a huge economic interest in preserving slavery.
1861 and War
Cotton Embargo; Inflation & Shortages; Blockade Runners; Monetary Chaos
At the War’s beginning, the South’s strategy for financing the war was to leverage its control over the world’s cotton supply to force an early peace. Richmond prohibited all exports of cotton, with the goal of halting textile production in England and France. In England, the textile industry provided employment for nearly half a million people, with more than 75% of the cotton used by England’s textile industry coming from the Confederacy. The South believed halting exports would create intolerable economic pressure in Europe. Just how the cessation of textile production in Europe would force the Union to stop its war with the Confederacy was never spelled out. The plan was naïve—while the South produced the cheapest cotton, it was not the only source. Egypt, for example, also produced and sold it in European markets. The plan was also contrary to the South’s economic interests and played into the Union’s hands, which, in 1861 began to implement a naval blockade of Southern ports to strangle the South economically and force it into poverty and ruin. Ironically, while the Union’s blockade attempted to starve the world of the South’s cotton, the South was doing the same thing by refusing to export it. The South’s self-imposed embargo was catastrophic—the foregone revenue was well over a hundred million dollars.
A much more viable plan was offered by Judah Benjamin (President Jefferson Davis’ closest advisor and the Confederacy’s Attorney General). Benjamin proposed that the South purchase 100,000 bales of cotton and ship them to England. There, they would be stockpiled and sold to European buyers to finance the War. This plan would have bankrolled the Confederacy for some time, but, in 1861 when Benjamin made his proposal, Davis (and other Southern leaders) could not envision that the South was in for a long and expensive war, and they rejected the idea.
The Confederacy’s Secretary of the Treasury was Gustavus Memminger. After selling $15million in bonds, he asked the Confederate Congress for a small tariff, which was enacted but the proceeds were meagre. So, he issued $1.1 million in short-term notes, which soon began circulating like money.
It is very important to understand that these notes were not purchased by anyone nor were they backed or secured by gold or silver reserves; rather, they relied solely on the good faith and confidence of the South’s people and were just a promise to pay the bearer after the war. When first issued, they were accepted throughout the Confederacy as a medium of exchange with great purchasing power. Most notes stated: “SIX MONTHS AFTER THE RATIFICATION OF A TREATY OF PEACE BETWEEN THE CONFEDERATE STATES AND THE UNITED STATES, CONFEDERATE STATES OF AMERICA WILL PAY [x] TO BEARER.” However good printing these notes was in the short-term, it was a dangerous solution because printing money is inflationary.
Memminger was aware of the potential for inflation but because the Confederacy was encountering great difficulty raising money, he didn’t know how else to meet Richmond’s needs. Memminger asked the Confederate Congress for a tax, which was enacted, but it was very small—0.5 percent on real estate and other property and it was unlikely that the tax could be collected.
Memminger tried to sell 20-year war bonds but sale of these bonds was disappointing and, again, the Confederacy’s cash needs remained unmet. So, Memminger had to print more short-term notes. Congress authorized issuance of an additional $100million, which would mature six months after a peace treaty with the Union. However inflationary this was, there was no alternative—Richmond had no hard cash, no tax system and the only asset it could sell (cotton) was embargoed.
Not long after the $100 million was authorized, inflation became a reality. By September 1861, prices had increased a whopping 25 percent since the War’s beginning. Of course, as prices increased, the South needed more money to pay for the War. Congress, therefore, authorized another $50million in notes, and, when issued, prices rose again.
We see this cycle in our country today as we struggle with inflation. The Covid relief bill put more money into circulation and prices and inflation increased. Our Inflation at 8.6% caused great consternation; at a rate of 25%, you can imagine what consternation was occurring in the Confederacy.
Richmond struggled to find commercial paper that would fund Confederate war operations without causing inflation. The solution, of course, was to persuade investors to take long term bonds and squirrel them away. But Southerners were reluctant to purchase long term bonds because they were afraid of getting stuck with worthless paper if the South lost the war.
Significantly, not only were prices increasing, shortages were beginning to appear. The shortages and the inflation did not sit well with either working families or the rich who were becoming increasingly concerned that the growing scarcity was a harbinger of frightening economic instability, which, in turn, posed a threat to the established social order that worked very well for the planter class.
The South’s slave-based economy was an agricultural economy but to make war, the Confederacy needed an industrial economy. Therefore, the Confederacy was dependent for manufactured goods (like rifles) on imports from Europe. 75% of its arms was sourced from Europe. These circumstances gave rise to “runners,” which could get through the ever-tightening Union blockade. These runners made quick trips from Southern ports to and from Bermuda and Nassau; larger merchant ships under the British flag made the trans-Atlantic crossing. Scarcity of goods and high prices provided runners with enormous profits and thus the necessary incentive to risk all to breach the blockade. While runners were free to trade in whatever commodities paid, the Confederate government made military needs (like small arms, powder and saltpeter) a priority. Richmond paid for these items in the only currency it had---cotton. It had little gold and its printed money was worthless in Europe. [1]
As the war went on, the Confederacy had an inadequate and depreciating national currency so states began to issue notes that people would use as currency. In addition, railroads and corporations issued IOU’s, which amounted to private money. Small businesses like innkeepers, grocers, bakers and barbers also issued notes that could be redeemed in goods and services. In other words, there was a spontaneous explosion of a variety of commercial paper that substituted for a national currency. People trusted notes issued by their local baker because they could always be redeemed for bread whereas they soon began not to trust notes issued by the Confederate government whose longevity and solvency were suspect. The upshot of this proliferation of what served for a national currency was monetary chaos.
1862
Shortages Continue; Blockade; Disintegrating Economic Infrastructure; Lack of Centralized Government
In 1862, the Confederate Treasury and Congress, facing increasing military expenses, had to continue to print short term notes. At the end of 1861, these likely amounted to $100million but by March of 1862, they probably amounted to $200million and, at that rate of increase, even more inflation was inevitable.
The Confederacy lacked military supplies and it lacked machinery, spare parts, clothing and, most importantly, food. Some farmers switched from cotton to corn, but production was insufficient to meet the great need. Richmond’s mayor tried imposing price controls on food but farmers would not sell at the controlled prices, forcing the mayor to lift the controls.
The sea was the South’s economic lifeline and by the winter of 1862, the blockade was hurting. Runners were only able to move a trickle of cotton out of the South. Cotton shipments to Great Britain had fallen to 4 percent of their prewar level. Edmund Ruffin, a wealthy civilian diarist who fired the first shot at Ft. Sumter and who was part of the planter class, stated: “The continuation of the Yankee blockade threatens more danger to our cause, by the consequent scarcity & high prices of necessaries of life, than do the Yankee arms & armies & fleets.” We shall encounter Mr. Ruffin again later on.
The Confederacy’s economic infrastructure was disintegrating--- with the war fought mostly on Southern soil, marauding Yankees waged war on the South’s economy by destroying factories, bridges, railroads and plantations. Slaves fled the plantations and without slaves, planters could not raise crops. Economic scarcity followed and posed a threat to the Confederacy’s survival. The South now faced destabilizing inflation. Only the price of slaves was declining---a sign the planter economy was in trouble.
Note that the South’s capital was fixed in slaves and real estate, and it was unable to convert its slave labor or real estate to cash on any scale or with any speed. Thus, the South’s assets were practically immobile and could not be put to their highest and best use, which was a serious handicap to the war effort.
Prior to the war, 16 steamers ran between Savannah, Charleston and New York and other boats brought foodstuffs down the Mississippi--the South appeared to have plenty of everything. However, the reality is that the South was totally dependent on the outside world. The war brought all commerce with the outside to a halt, and the Confederacy now had to feed itself. It had to replant millions of acres of cotton with corn and other grains and it faced a huge problem doing that because Southern soil wasn’t compatible with these new crops nor were her farmers experienced with them. Moreover, because the South relied on slaves and not machines to grow its crops, the yields from the new crops were meager, despite farmers working longer and drafting children into the fields.
The shortcomings with industrialization were even more severe. Stores were empty, homes had no carpets because they were cut up into blankets for the army and curtains and drapes were turned into shirts for soldiers.
The Confederacy needed to tax its citizens; it needed liquid assets and it needed an infrastructure. But these were all facets of a centralized government, which the South abhorred. The lack of rail infrastructure was also a significant problem. Transport for salt, hay, lead & copper was essential to the war-effort but the Confederacy had few rail lines and the Union Army’s constant attacks on those severely crippled the Confederacy’s ability to make war and ultimately to survive.
1863
Military Primacy; Civilians Suffering; Rich Man’s War; Blockade Hurting
By early in 1863, virtually all Southern resources were devoted to military operations. This caused shortages in every aspect of civilian life and inflation was rampant. One Confederate War Department clerk wrote: “By degrees, quite perceptible, we are approaching the condition of famine.”
Even though virtually all Richmond’s resources were going to the military, not all was well there either. This is how First Sergeant Anthony Gardner Graves Jr of the 44th NY Volunteer Infantry described the Confederates he encountered. His unit assaulted a Confederate position during the Battle of Second Manassas where he was captured. He was a POW for 5 days. His letter states that the Rebel troops gave him nothing to eat. He goes on:
“The rebels are nearly starved themselves. I think they would of fed us if they had it to give. They treated us very kindly and done the best that they could for us. They are awful hard up for food and clothing. The most of them have no shoes to their feet. In fact, they don’t look like civilized people. They look more like a lot of Indians—a dirty, filthy, greasy-looking set of devils. I saw Stonewall Jackson and he looks as bad as the common soldier. You could not tell that he was a general.”
Confederate notes had swelled to more than $400million but, if bank notes and other forms of currency are included, there was likely $600million worth of paper in circulation. Moreover, at the rate the Confederate government was spending to finance the war, it would have to issue another $200million in the next 6 months. Prices had ceased to be relevant to the goods being purchased; rather, prices bore a relationship only to the ever-increasing supply of paper and, thus, price increases were astronomical.
In March 1863, Richmond’s scarcity problems multiplied and produced a serious political and social crisis that caused civilian morale to plummet. As noted earlier, the war forced the Confederacy to divert food and supplies from the civilian population to the military. Southern civilians went hungry. Military authorities “impressed” food from farmers, which meant taking it from them at artificially low prices—essentially stealing it.
Authorities in Richmond seized flour from warehouses and mills, which caused shops to quickly run out of bread. Women began begging in the streets. In April, hundreds of women rioted breaking into stores and seizing provisions. A recent article by Jonathan S. Jones, an historian at the Virginia Military Institute, describes the Richmond riot this way:
“On April 2, 1863, several hundred poor White women met at a Baptist church in Richmond and determined to march downtown to the Capitol and present demands to the governor of Virginia. When he did nothing, the political march turned into a mob. Hatchet wielding women broke into stores and commandeered hoarded food, shoes and other scarce goods, shouting ‘Bread, Bread! Our children are starving!’ and ‘Bread or blood!’ Before the women’s army was dispersed, Davis appeared. He cajoled, then threatened to fire on the women. And yet ‘bread riots’ persisted in over a dozen cities.”
In the Spring of 1863, the Confederate Congress adopted laws designed to reduce the volume of notes and, thereby, reduce inflation. The plan was to induce Southerners to surrender their notes in exchange for long-term bonds. Only 15% of the Confederacy’s debt was long term because investors did not know how long the Confederacy would exist. Congress also enacted taxes to shore up the government and slow inflation. But there was little tax enforcement and taxpayers delayed paying, which, given the rate of inflation, was really tax avoidance. Congress also enacted a tax on all agricultural products payable in kind, which allowed the government to sidestep the crumbling financial system. Significantly, land and slaves were exempt from the tax, which exposed the Confederacy for what it was---a planter-class oligarchy. Opposition to the tax was greatest outside the Cotton Belt and resentment among poor soldiers led to increasingly high desertion rates. Small farmers on whom the tax fell hardest decried the “rich man’s war,” which was underscored by the “Twenty Negro Law,” which benefited rich enslavers by exempting from conscription one White male per 20 enslaved people on any planation.
The blockade resulted in fewer and fewer provisions reaching the South. Confederate naval records state that from the beginning of the war through October 1863, only 200,000 bales of cotton had run the blockade, an amount roughly equal to the amount shipped in a single month before the war. While only one vessel in ten was caught early in the war, by 1863, the rate had climbed to about one in four. By December, the blockade had captured more than a thousand runners. These captures exacerbated Richmond’s deficit in machinery and spare parts, which aggravated shortages in the South’s factories, machine shops and rail transport. Runners brought in high-paying goods, which were not ordinary consumer goods, thereby causing consumer good shortages to become more acute. The diarist and War Department clerk mentioned earlier wrote: “I have lost 20 pounds, and my wife and children are emaciated to some extent. We are a shabby-looking people.”
1864
Famine; Rampant Inflation; Atlanta Falls
By late in 1863 and early 1864, civilians were really suffering proving the Confederate economic model had been wrong from the start. The belief and attitude that cotton was king led the South to forego building factories and it was now too late to do that. Rationing and currency problems were aggravated by Richmond’s failure to export cotton early in the war when it could have financed the war for years. As we have seen, the South’s reliance on printing money rather than taxation caused inflationary price increases. The Confederacy’s lopsided allocation of men and material to the military drained the civilian sector and caused great hardship. Resistance to a strong central government and to using African American troops gravely wounded the Confederacy’s ability to make war. Davis’ popularity plunged to the point that concern was expressed that he ought not to go on rides unaccompanied.
Richmond’s most urgent issue was relieving the famine, which was most acute in cities. Markets fix such problems but markets depend on prices and prices must have a currency. Southern farmers didn’t trust Confederate money.
The first nine months of 1863 saw Confederate government revenues of $601million but only a very small amount ($5million) was raised from taxes. Bonds accounted for about $150million or 25%. Unfortunately for the South, the balance or $442million was obtained by issuing short-term notes. From October 1861 to March 1864 retail prices rose by an incredible 10 percent per month! Inflation was far greater and faster than wages increased. The situation was disastrous.
During the Confederacy’s first three years, the money in circulation multiplied eleven times. But this does not tell the entire sad story. As the Confederacy’s land mass shrank because of the Union Army’s incursions into previously held Confederate territory, the area where Confederate money was accepted shrank. Therefore, the number of notes increased over an ever-smaller geographic area.
Merchants felt compelled to increase prices even faster than the rate of inflation. An elevenfold increase in the money in circulation resulted, by late 1863, in wholesale prices eighteen times higher. The exchange rate in gold for Confederate notes before July 1863 was seven to one. Before September 1863, the exchange rate plummeted to twelve to one and by December, it was eighteen to one. To characterize the monetary collapse as “epic,” is no understatement. The government responded by imposing price controls for essential goods, but it was difficult to find goods at the regulated prices.
The ever-decreasing value of Southern currency caused people to do illogical things. For example, they paid extravagant prices for junk just to be rid of their currency. The wealthy purchased items they had no use for. Moreover, farmers wouldn’t accept Confederate money and stopped selling meat and grain.
Forced requisitions to supply the army was broadened to include horses, cows, wagons, railroad cars, slaves and forage to assure the army’s horses didn’t starve. This, in turn, worsened civilian conditions.
As skilled workers were drafted into the army, Confederate industry was hurt. Bottlenecks occurred due to the lack of metalworkers and machinists. Mills ceased operation and, therefore, their employees were out of work. We see this scenario in Russia today in connection with the war in Ukraine. Bloomberg Business reports:
“Vladimir Putin’s call up and conscription of hundreds of thousands of Russians for his war on Ukraine, not to mention the hundreds of thousands more who fled to safety, is gutting Russia’s already unstable economy. A record depletion of workers is fast spreading across a country already hobbled by an aging and shrinking population and with unemployment near the lowest ever. Whole industries are in distress.”
Richmond’s control over rail transport favored the military. Civilian transportation became chaotic, which affected food distribution. For example, while corn cost $40 a bushel in Richmond, in Alabama and Georgia, it cost only $1.25 a bushel. It was virtually impossible to get commodities from where there was a surplus to where there was a need—the army had all the rolling stock.
This situation was not sustainable. Cities became insecure and crime ridden. Richmond suffered many burglaries but no garbage heaps due to starving human scavengers. It was beginning to dawn on poor Whites that slavery, and the Confederacy, were not of much use to anyone but the planter class. Starving Southerners were angry that planters continued planting cotton instead of growing food. Desertions increased and some deserters even banded together to fight against the central government. Sentiment in some states like North Carolina began to run decidedly against Jefferson Davis and his government. Impressment and the draft were among the biggest reasons. Davis was also losing support among Confederate leaders.
Davis and Memminger turned to a new strategy—they would force note holders to return their short-term notes in exchange for long-term bonds. The Confederacy had forced farmers to part with their crops and forced the male population into the army. Why, then, couldn’t it force the population to part with its money in exchange for Confederate debt? But even a forced loan must be repaid, which means it has to be supported by a revenue stream. So, Davis decided to tax slaveholders, which was a significant change in the South’s taxing policy. This was met with vehement opposition, but, in the end the Confederate Congress had to enact legislation mandating that note holders give up their notes in return for either 20year bonds or new notes to be redeemed after the war. The thinking was that this would reduce the number of short-term notes in circulation by a third and inflation would thereby be reduced. The Confederate Congress also enacted new taxes.
This monetary reform did cause prices to fall but they were still much higher than before the war. The contraction in the money supply didn’t solve the Confederacy’s fiscal imbalance. It had no money until taxes were collected and thus it had no way to fund the war except to print more short- term notes.
While tax revenue did increase, the war severely hampered collection. The Confederacy did not have the manpower to assess property and collect taxes and, as the Union seized more and more Confederate territory, the tax base shrank. Unsurprisingly, the people being taxed were disinclined to support a losing cause and evasion was rampant. There was little tax revenue so it was never even close to meeting more than a small part of Richmond’s revenue budget.
Expenses to fund the war effort could not be pared—troops had to be paid and arms and other military supplies purchased, which meant more notes had to be issued. The South was chasing its tail---no program based on exchanging paper can substitute for an increase in productivity nor can citizens be taxed beyond their ability to pay.
In another attempt to raise revenues, the Confederate Congress gave Davis authority to control both cotton exports and blockade runners. The new law required runners to reserve half their space (outgoing and incoming) for the government. Runners’ practice of bringing in high priced consumer goods was prohibited. The government gained a virtual monopoly over exports. Cotton brought ten times the price in England than it was yielding within the Confederacy and Davis wanted to be sure the Confederate government was able to participate in this bonanza by using the runners to carry cotton to England.
Opposition was fierce because the new shipping regulations preempted what had been a state responsibility. Several states were even in the business of running the blockade. Davis refused to concede the issue claiming that if exceptions were made for states or their enterprises, all runners would soon be under state ownership leaving nothing for the central government.
This new initiative was probably counter-productive because those engaged in running the blockade (who were the South’s lifeline) were unlikely to risk their ships and cargo just to work for the government. It wouldn’t pay them enough to undertake the risk involved.
Davis’ fidelity to the planter class stopped him from requiring food to be planted instead of cotton. His economic mismanagement, as we have seen, caused grievous harm to the Rebel cause. He hoarded the South’s scarce resources for the military and thereby failed to feed civilians. The erosion of the civilian economy due to Richmond’s economic policies cost Davis the support of Southern citizens and accelerated Richmond’s financial collapse.
In September 1864, General Sherman captured Atlanta, which was a significant manufacturing center, hub for rail transport and nerve center for the Rebel economy. Losing Atlanta was a death blow because the Confederacy could no longer transport supplies and factories could no longer source materials. Richmond’s response was to print more notes. As stated above, the number of Confederate notes shrunk after the February compulsory order to exchange notes for long-term bonds, but as the economy contracted, Richmond had to print more money. $70million in notes was printed by August 31 and nearly $300million by October. Of course, these new notes produced exactly the same effect as the old and their value collapsed to three cents on the dollar and by winter, their value was reduced to 1.5 cents on the dollar. The Confederacy printed so many notes that it ran out of paper and had to use wallpaper. The Confederacy raised 60 percent of its revenue by printing it. By comparison, the Union raised only one-sixth of its revenue this way.
Monetary collapse soon followed-- Confederate notes were no longer a real currency. Merchants, tradesmen and farmers wouldn’t accept them and the wealthy quickly converted their notes into property at extremely high prices. Trade was impossible and this led to a further decrease in the food supply, particularly in the cities.
The South was in deep trouble. Hyperinflation was rampant and supplies were scarce. The South was facing both an economic and monetary crisis. Supply chains broke and people went hungry.
The Confederacy could no longer pay its troops and troop rations were no longer available. The army responded by increasing impressment and paying one-seventh or less of the market price for rations. Farmers, when they could, refused to sell. The price of goods in notes became meaningless and the population resorted to barter.
Only the price of slaves was falling. The price for an able-bodied male fell to $100, which was a 90 percent drop from the price at the beginning of the war. This price drop reflected that Southerners thought they were going to lose the war. Things got so bad that Davis was now contemplating recruiting Negros into the army. The planter class remained adamantly opposed equating enlisting Negroes with emancipating them. Nevertheless, with Lee’s public endorsement, the Confederate Congress ultimately approved Black enlistment but without emancipation; it was too late to make any difference.
1865
Ft. Fisher Falls; Lee Surrenders
The final nail in the Confederacy’s coffin was driven when, in January of 1865, the Union captured Fort Fisher, which guarded Wilmington, North Carolina, the South’s last seagoing port. Wilmington was difficult to blockade and was thus a significant link for the Confederacy to Europe. With the fall of Fort Fisher, no more cotton could get to Europe nor could supplies from Europe enter the Confederacy. The Confederacy’s economy was decimated and shorn of white working-age males. By March, the South suffered widespread hunger. Rebel currency was one seventy-sixth of its nominal value, which resulted in the evaporation of the savings of millions of Southerners. Even General Lee was financially ruined.
Lee surrendered on April 9 and Reconstruction became the primary focus of Lincoln’s second term. Lincoln felt business renewal was the medicine the country needed to heal its wounds. He said he had no wish to harm a hair on any head; he wanted Southerners working again, at their farms and in their shops.
Reconstruction
Southern Wealth Gone; War’s Economic Verdict Ignored
Offering generous economic support to the South during Reconstruction and after might have assisted the former Confederacy to move past White Supremacy, but the North thought former Confederates were lucky to avoid treason charges and federal policies toward the South were unhelpful. For example, Federal spending disfavored the South-- from 1865 to 1873, the former Confederacy received less than 10 percent of total spending for public works, which was less than New York State received. And, while the US provided pensions to Union veterans, it excluded Confederate veterans and thus the region catastrophically destroyed by the war.
The result was that the existing economic gap between North and South widened. Enormous sums in Southern wealth were gone by virtue of the North’s destruction of the South’s infrastructure and other property including the looting and burning of cotton. Nor was this loss restored soon after the war’s end. By 1870, the South’s total agricultural and manufacturing capital was half of what it was in 1860 before the war started and this does not include the loss of slaves. Over the same 10 years, the South’s share of national wealth dropped from 30 to 12 percent. The plantation system was replaced by a less efficient system of smaller farms and sharecroppers. Commodity production fell by 40 percent. In 1860, the South’s per capita personal income was 70 percent of the national average; in 1880, it was only 50% and remained there until 1900. Consequently, relative living standards collapsed throughout the former Confederacy and this was particularly true in the deep South cotton states.
Southern agricultural output was 30 percent less in 1870 than it was in 1860 because there were no slaves to work the fields and because farmers worked with primitive tools and little or no machinery. Cotton production did not return to its high point for almost 20 years. The South’s businesses had little credit and only 60 percent of its children were enrolled in school. Most schools were open fewer than 100 days a year.
Immigration to the South from other parts of the United States was small. Social mobility in the South after the war was much the same as it was before the war, which is to say, very little. The bottom line: the South ignored the economic verdict of the war, which was that slavery was holding back the majority of Whites. Poor Whites had few possibilities open to them. For as long as the South perpetuated Jim Crow, it remained an economic backwater.
Conclusion
The war financially ruined the South. Edmund Ruffin, the diarist mentioned earlier, was one of those Southerners who were made destitute by the war. He is symbolic of unreconstructed Confederates who wanted nothing to do with the new world order. He wrote of the specter of living with the “evils of emancipation… the general intrusion and mastership of swarms of Yankee immigrants…the negroizing of the people.” In June of 1865, he draped a Confederate flag over his shoulders and shot himself.
[1] As I have noted in a prior paper, in 1862, Confederate General Henry Sibley presented a plan to President Davis to invade New Mexico and then obtain the gold and silver in Colorado and California. The fact that the Confederacy had very little specie was one of the aspects of Sibley’s plan that likely made it very attractive to Davis.
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