Comparative economies of the Union and Confederacy

“Invented” in 1793 by Eli Whitney though historical records show primitive single wheel gins existed as early as the 5th century AD

The cotton gin caused cotton production to skyrocket in the South during the early 1800’s

More slaves were required to work the cotton fields.

Slaves, as a capital investment were fairly expensive. A fully capable male slave in could cost as much as $1600 ($35,000 today).

$1600 spent on a slave is money that is not going into R&D, industrial development or growth.

By the time Lincoln was elected the south was irreversably married to a labor intensive agrarian economy.

This left it ill prepared for the upcoming war.

Railroads and canals facilitated the growth of industry in the North

This industry was easier to convert to wartime production than the agrarian base in the south.

Transportation in the north made for easier transport of goods during wartime

http://www.nps.gov/history/NR/twhp/wwwlps/lessons/113corinth/113locate1.htm

Major Railroads as of 1860

Export Dependent Southern states

accounted for 70% of all us exports in 1860

Ongoing Union blockade as outlined in Anaconda Plan reduced exports while local hoarding kept millions of bales of cotton from being sold.

Ironically, the biggest trading partner for southern cotton continued to be the North Map depicting the Anaconda Plan

Imports Before war, south

relied heavily on North for industrial products.

During war was required to import through Mexico, also forced to rely on Britain and France as trading partners.

"...the seceded South, even before the outbreak of hostilities, was faced with the necessity of securing the basic materials of war. It lacked guns, cannon, and munitions of every sort; it lacked most of the raw materials from which they could be manufactured. The South needed clothing, medicine, tools, and, later on, food. It lacked the factories, too, with which to manufacture the sinews of war, and the machinery and skilled labor with which to establish and run factories. As a result the Confederacy, at the very start, turned it eyes towards Europe."

William Diamond Imports of the Confederate Government from Europe and Mexico The Journal of Southern History, Vol. 6, No. 4 (Nov., 1940), p. 470

North Larger industrial tax

base Greater borrowing

capacity Single Currency Financial system better

able to handle the strains and costs of wartime economy

CPI went from 100 to 175 by wars end

South Smaller tax base Forced to print more

currency rather than bonds or treasury borrowing

Multiple state currencies Weaker banking system

less able to handle stresses of war.

CPI went from 100 to 4000 by the fall of Atlanta

By the end of the War, southern currency was worthless and northern currency was worth about 50% of its 1860 value.

Real wages in the north fell approx. 18% while in the south the real wage collapsed nearly 90 %

The slave based economy of the Confederacy left it ill prepared for the Civil War.

Poor economic decisions (hoarding cotton) further crippled the southern economy at the time of its greatest need.

The confederate nature of southern government magnified the uncertainty surrounding the value of its currency.

Union industrialization put it in a much better position to outlast the confederacy.

Costs of the war disproportionately impacted the south, mainly due to the loss of slave based capital. Those losses continued to plague the south for decades after the war.

eyewitnesstohistory.com wikipedia.org The Economics of the Civil War Roger L.

Ransom, University of California, Riverside