- The Economics of the Civil War / mises.org - - Elli -, 07.12.2004, 15:43
The Economics of the Civil War / mises.org
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<h3><font size="5">The Misnamed Conflict</font></span></h3>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="4">by Laurence M.
Vance</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">[Posted
December 7, 2004]</font>
<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2"><em><img alt src="http://www.mises.org/images3/tariffs.gif" align="right" border="0" width="175" height="261">Tariffs,
Blockades, and Inflation: The Economics of the Civil War</em>, by Mark
Thornton and Robert B. Ekelund. Wilmington, Delaware: Scholarly Resources,
2004. xxix +124 pages.</font>
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<p class="MsoNormal" dir="ltr"><font face="Verdana, Helvetica" size="2">The
continual stream of books about the Civil War generally focus on soldiers,
generals, weapons, uniforms, medical procedures, and battlefield maneuvers—along
with the usual accounts of suffering, misery, and death.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">The calm picture
of businessmen and clerks engaged in their business of buying and selling cotton
at the New Orleans Cotton Exchange is not the typical image one finds on the
cover or dust jacket of books about the Civil War. But the Edgar Degas painting
that graces the cover of Tariffs, Blockades, and Inflation: The Economics of
the Civil War tells the reader that this is no ordinary book on the Civil
War.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">This is an
insightful book that breaks much new ground. The authors apply economic theory
to historical events to illuminate the causes and consequences of the Civil War
as no other book about that misnamed conflict. Although more accurate names
would certainly be the War Between the States, the War of Northern Aggression,
or more simply, Lincoln’s War, in keeping with the book’s title, I will use
the more common term throughout this review.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">Tariffs,
Blockades, and Inflation is part of the American Civil War Series—books
that offer concise overviews of important persons, events, and themes in the
Civil War period of America’s history. The authors, Mark Thornton and Robert
Ekelund, have collaborated on many articles on the Civil War era in a variety of
publications. They believe that the Civil War drastically altered “the very
substance and concept of the American nation.” It was “a watershed in our
nation’s development.”</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">Although the
authors do acknowledge that “slavery and its opposition were interwoven into
the economic, political, social, and religious fabric of America,” they do not
consider slavery to be the sole cause of the war. Instead, they emphasize
politics and economics as the major factors that led to the war. This does not
mean that the issue of slavery is ignored. To the contrary, Thornton and Ekelund
acknowledge that many economic interests were indeed “at least somewhat
related to slavery.” But instead of the Civil War being about just slave
holders and abolitionists, the authors see the war as a sectional conflict with
a number of related parallels: free trade vs. protectionism, Jeffersonians vs.
Hamiltonians, agrarian society vs. industrial society, states’ rights vs.
strong central government. These dichotomies are all explored in the book along
side of the misguided economic policies that both sides undertook to their
detriment.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">The strength of
this book lies in its introductions. The introduction that precedes the four
chapters that make up the book is especially crucial. Entitled “How Economics
Illuminates the Civil War,” it imparts to the reader, with clear explanations,
the basic economic principles necessary to begin the book on a firm economic
footing. Those trained in economics will certainly feel right at home when they
read of normal goods, inferior goods, rent seeking, agency problems, the free
rider problem, price discrimination, mercantilism, elasticity of demand, and
opportunity cost. But to the neophyte whose only introduction to economics might
be this small book, there are also basic descriptions of supply and demand,
shortages, inflation, wealth, tariffs, trade, money and banking, the division of
labor, specialization, subsidies, and the gold standard. Each chapter also
contains a brief introduction that not only introduces, but surveys, the
contents of the chapter.
</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">This is a book
that actually makes good on its title, for tariffs, blockades, and inflation are
indeed the focus of the three main chapters in the book. The tariff question in
chapter one is really a study of the cultural differences between the North and
South. The agrarian South, which relied heavily on imports of finished goods,
saw high protective tariffs as a detriment to its economy. The authors argue
that economic interests “were a major factor in the emergence of the conflict.”
With no income tax, the tariff was the primary source of revenue for the federal
government, but it was also means by which politically connected Northern
businessmen sought to dampen foreign competition and enrich themselves. The
agrarian economy of the South had always resisted high protective tariffs. This
resistance was later enshrined in the new Confederate Constitution. In this
chapter, Thornton and Ekelund review the antebellum tariff while explaining the
economics of tariffs in general.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">The Union blockade
of the South is the focus of chapter two. The authors make the case that the
most important battle that took place was that one at sea between the blockade
runners and the blockading fleet. The blockade resulted in not only reduced
production and trade, but hoarding and speculation. In addition to the economics
of the blockade, Thornton and Ekelund discuss the effectiveness of the blockade
and the peculiar effect of the blockade on the supply of “luxury” goods.
This is not dry reading, for here we read of the Anaconda Plan, the “King
Cotton” strategy, and the Rhett Butler Effect—not the terminology one
usually finds in an economics book.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">How both sides
used inflation—the creation of new money—to finance the war and disguise its
costs is explained in chapter three. Inflation hampers the ability of producers
and consumers to make sound economic decisions by distorting capital values,
prices, and wages. The authors relate how the South in particular resorted to
the printing press to help disguise the cost of the war, devastating its economy.
But in addition to illuminating the Civil War monetary policies of the Union and
the Confederacy, this chapter also explores money and banking in the United
States before the war, as well as its monetary legacy. The authors trace
inflation and financial panics to the federal government intervening into
banking, which had up until that time been primarily a state matter. The book by
Frank Baum, The Wonderful Wizard of Oz, is shown to be an allegory to the
growing monetary concerns of Populist movement of the late nineteenth.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">Following the
three main chapters, there is an extra chapter on the economic consequences of
the war. Here is exploded the myth that the scourge of war can actually benefit
the economy as a whole. Like about the Civil War itself, what has been written
about the post-war period we call Reconstruction is likewise “rarely from the
perspective of economic theory.” The authors go about to correct that as well.
They see technological improvements, the intercontinental railroad, large-scale
heavy industry, and the basic national science institutions as beginning before
the war. The Civil War retarded economic development, but because of the
exclusive focus by historians on the abolition of slavery, it has been viewed as
a national benefit instead of a national disaster. The war also caused
distortions in the economy that harmed rural populations and led to the rise of
Populism.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">The book concludes
with a bibliographical essay that discusses and recommends additional books on
the topics of slavery, secession and war, money and banking, reconstruction and
racism, war and the economy, the growth of government, and the blockade. The
book is very well documented, with notes at the end of each chapter. Numerous
figures and tables and a detailed index serve to enhance this slender volume
even more.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">Features that
further enhance the book are numerous tables and figures, a detailed index, and
a bibliographical essay that recommends enough additional reading on slavery,
secession, banking, and war to keep one’s mind intellectually stimulated for
quite some time.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">There are a number
of topics that Thornton and Ekelund explore in detail that relate to the
economics of the Civil War. Pre-Civil War political and economic interest groups
are perhaps the most important of such topics. The authors see the ideological
origins of the war as stretching back to the early part of the 1800s. Thus,
instead of the exploits of Lee and Grant (who are not even mentioned in the book),
we are introduced to the politics and policies of John Adams, Thomas Jefferson,
Alexander Hamilton, Andrew Jackson, Henry Clay, and John C. Calhoun. And instead
of the traditional Democratic/Republican division, we read of the
Democratic-Republicans, Federalists, Anti-Federalists, Free-Soilers, Whigs, and
anti-immigrant parties.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">The authors
correctly view the mercantilist agenda of the new Republican Party (protective
tariffs, national bank, and public works) as being anathema to the agrarian
South, and reminiscent of the policies of the Federalist Alexander Hamilton and
the Whig Henry Clay. The Southern States saw the election of Lincoln as harmful
to them economically, and left the Union—an action that Lincoln himself
endorsed in a speech in Congress on January 12, 1848: “Any people anywhere,
being inclined and having the power, have the right to rise up and shake off the
existing government, and form a new one that suits them better. This is a most
valuable, a most sacred right—a right which we hope and believe is to liberate
the world. Nor is this right confined to cases in which the whole people of an
existing government may choose to exercise it. Any portion of such people, that
can, may revolutionize, and make their own of so much of the territory as they
inhabit.”</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">Because of the new
role of government that emerged from the war, the authors make the case that the
Confederate defeat resulted in an “ideological downfall” for the limited
government established by the Founders. They view Lincoln’s massive
intervention of the federal government into the economy and subsequent increase
in the size and scope of the national government as the starting point of the
growth of the federal leviathan. The great emancipator was an even greater
centralizer.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">An interesting
comparison is made between the economic policies of Lincoln and Franklin
Roosevelt. Thornton and Ekelund compare the “flurry of new laws, regulations,
and bureaucracies” created by the Lincoln administration to that of Franklin
Roosevelt’s New Deal in the 1930s. Indeed, they point out that the term “New
Deal” was actually coined by a newspaper editor in 1865 to characterize
Lincoln and the Republicans. They also take time out to comment on the origin of
the term Dixie.</font>
<p class="MsoNormal"><font face="Verdana, Helvetica" size="2">One does not have
to be particularly fond of economics to benefit from this book. It will be
valuable to anyone with an interest in American history, culture, or politics.
Although it is only 124 pages, Tariffs, Blockades, and Inflation is an
extremely penetrating work that goes along way toward furthering our
understanding of the great sectional conflict we call the Civil War—a war that
not only altered the culture of the United States, but fundamentally changed the
role of government envisioned by the Founders. This is a scholarly book that
deserves an equal place on the shelf next to the recent books of Thomas
DiLorenzo, Jeffrey Hummel, Charles Adams, and Clyde Wilson—works that question
the traditional establishment view of the conflict that forever changed the
course of American history.</font>
_______________________________
<font face="Verdana, Helvetica"><font size="2">Laurence M. Vance teaches
economics at Pensacola Junior College.</font> <font face="Verdana, Helvetica" size="2">Vancepub@juno.com</font><font size="2">.
Shorter versions of this review have previously appeared in"Southern
Partisan" (November/December 2003) and"Chronicles" (September
2004). Comments on this essay can be posted on the </font><font face="Verdana, Helvetica" size="2">blog</font><font size="2">.
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