CONCLUSION

THE LENGTH AND SCALE OF THE CIVIL WAR RADICALLY TRANS-formed the American economy. As Table 3 indicates (overleaf), total federal government spending in the last year of the war was over sixteen times as great as in the first year. From 1860 to 1865, the gross national product increased from $4.3 billion to $9.9 billion, which translates to an 18 percent compounded annual growth rate. Furthermore, since the economy in the South was shrinking, the growth rate applicable to the Northern states was probably well above 20 percent annually. Despite the abundance of death and sacrifice among the soldiers, it was a time of unprecedented prosperity in the North. As a result, after the war, the North was far less economically reliant on the South than previously. Of course, nobody knew that would be the result when the war started.

In antebellum America, the economies of the North and South were much more interdependent. Lincoln correctly observed in his first inaugural address that commerce between the two sections could not abruptly end.

Since its economy depended primarily on cash crops such as cotton and tobacco, the South relied on the states northwest of the Ohio River for provender and customarily purchased much of its manufactured goods from states in the Northeast. Similarly, the economy in the North depended on the South for cotton and its massive exports that supported important Northern commercial sectors such as shipping, finance, insurance, warehousing, and other services connected with cotton finance and maritime trade. Centered in New England, cotton textiles was the country's biggest manufacturing industry and obtained almost all its raw materials from the South. About 80 percent of the nation's exports originated in the South, and cotton alone accounted for two-thirds of it. Without Southern exports, America would have been required to reduce imports in order to avoid an unfavorable trade balance. Such a reduction would have cut customs duties, which were the chief source of federal tax revenue. In 1860, total federal taxes were $65 million, of which $53 million (82 percent) were from tariffs.1

Consequently, the monetary volume of intersectional trade that continued while the two sides were fighting the four-year Civil War remained important. Owing to the widespread bribery, fraud, smuggling, and theft characteristic of the shadowy commerce, it is difficult to know how much cotton the North obtained from the South during the war. However, despite the higher profile in our public memory for blockade-runners like the fictional Rhett Butler, economist Stanley Lebergott concluded the amount of cotton exported to Europe through the blockade was only about half as much as what was traded through enemy lines to the Northern states, which he estimated at nine hundred thousand bales.²

Lebergott's estimate is probably low, however. The ports of Boston and New York alone imported nine hundred thousand bales during the war. Of that amount, only one hundred sixty thousand came from Great Britain and little arrived from Brazil and the West Indies.3 Thus, about seven hundred forty thousand bales must have come from occupied Southern ports such as New Orleans, or blockade-running centers like Nassau and Bermuda. At a minimum, it is necessary to increase the seven hundred forty thousand by adding the number of bales shipped north from the hinterlands from depots such as Memphis. Lebergott estimated hinterland trade at over six hundred thousand bales. So the two components (600,000 + 740,000) total more than 1.3 million bales.⁴

Other sources point to similar estimates. For example, in Federal Trade with the Confederate States, Robert Futrell estimated that almost nine hundred thousand bales went North during the three years from 1862 to 1864. On March 1, 1865, a House Committee investigation concluded that “not less” than two million bales had been contracted for, although not necessarily yet delivered, under Treasury regulations adopted less than a year earlier, in July 1864.⁵ Finally, cotton smuggled into the North without permits was unreported, thereby implying that reported statistics necessarily understate the total volume.

Considering all factors, it seems likely that at least 1.25 million bales of cotton were shipped from the South to the North during the war. Assuming the ultimate buyer paid seventy-five cents per pound, the total value was over $465 million, which equates to about $7.1 billion in 2013 dollars.⁶ Based on the 1860 US population of 31.4 million, the $7.1 billion is equivalent to about $225 per person. By comparison, an economic sector averaging $225 per capita for the 2010 census population of 309 million would total $69 billion, which is nearly twice the size of the $38 billion in auto sales by all US dealers in 2012.⁷

Most of the value for the wartime intersectional trade was due to inflated cotton prices resulting from shortages. For example, the seventy-five cents-per-pound price assumed in the $465 million figure noted above compares to a prewar price of thirteen cents, as indicated in Table 2 in chapter 1. Similarly, only about two million bales departed the Confederacy through a combination of exports and interbelligerent trade during the war, whereas antebellum peacetime production implies that a normal four-year period would have totaled about 18 million bales. Thus, the drop in physical volume during the war was probably over 85 percent.

There can be little doubt that interbelligerent trade was of greater benefit to the South than to the North and that it prolonged the war. In 1864, Senator John Ten Eyck of New Jersey stated, “Under the permission to trade, supplies have not only gone in, but bullets and powder, instruments of death, which our heroic soldiers have been compelled to face…upon almost every field…in which they have been engaged in the South.”8 As noted, the 1865 congressional investigating committee determined that trade with the Confederacy “is believed to have led to the prolongation of the War and cost the country thousands of lives and millions upon millions of treasure.”⁹ Historian Sellew Roberts estimated it lengthened the war by a year.¹⁰ Historian James Ford Rhodes concluded:

 

If accurate statistics could be obtained it would surprise [no one] that the North received more cotton from the internal commerce than did Great Britain from the blockade-runners; the greater portion of this staple came from a region under control of the…Confederacy…. This trade was a greater advantage to the South than to the North…. [T]he South obtained salt, quinine, powder, and arms, absolute necessaries for carrying on the War.¹¹

 

Despite numerous complaints from military officers, Lincoln allowed the trade to continue until the end of the war. In response to objections from General Edward Canby, the president answered that higher cotton prices caused by scarcity enabled the Confederacy to acquire as much specie as prior to the war by exporting only a small fraction of the antebellum tonnage. He reasoned it was better to let Northern commercial interests buy and transship the cotton to Europe than to permit the Rebels to do it directly. He closed his letter to Canby with a specious argument borrowed from New England textile baron Edward Atkinson: “[It is] better to give [the enemy] guns for [cotton], than to let him, as now, get both guns and ammunition, for it.” In assessing the president's explanation, historian James McPherson wrote, “Lincoln's rationalization did not satisfy [Canby], nor does it fully satisfy the historian.”12

Yet owing to his roots as a Whig capitalist, Lincoln had faith that the profit motive could work to the advantage of reunion. He believed that commerce was the glue that held the Union together. The more intersectional trade, the stronger the binding ties. “If pecuniary greed can be made to aid us in such effort,” he said, “let us be thankful that so much good can be got out of pecuniary greed.”¹³

He was consistently more lenient toward trade with the enemy than was either Congress or the military. When in the first year Congress gave him an act to restrict trade, he waited five weeks before implementing it because he wanted to craft procedures that would enable intersectional commerce to continue. When New York industrialist August Belmont opined in 1862 that cotton trade could weaken the Confederacy, Lincoln replied that he had been in agreement for some time. Even near the end of the war, he pocket vetoed a nearly unanimously passed bill intended to block nearly all trade. The president most frequently defended his permissive interbelligerent trade policy “for its bearing on our finances,” by which he meant the conservation of Treasury gold reserves.¹⁴

Although the profit motive might serve as a glue to hold the country together, the privileged access required to exercise it in the cotton market was a tar baby to which each corrupting incident adhered. Historian William C. Harris concluded:

 

Lincoln's trade policy may have contributed to Northern financial stability…but the abuses and corruption…including his granting of permits to Illinois associates, contributed to the decline of values that he held dear…. When it became clear in 1864 that the commerce had become a lucrative operation for dishonest and unpatriotic entrepreneurs and was helping to keep the rebellion alive, Lincoln…should have acted vigorously to end the trade. He did not. The erosion of moral standards…would become increasingly apparent during the postwar period. Some blame for this condition…should attach to Lincoln.15

 

The corruption that accompanied interbelligerent trade was scandalous. Government officials and even military officers were bribed to shut their eyes. In January 1863, Charles Dana, who was a special investigating agent for War Secretary Stanton, wrote from Memphis “the mania for…cotton has…corrupted and demoralized the army.”¹⁶ Five months later, Lincoln himself admitted to Illinois friend William Kellogg, “The officers of the army in numerous instances are believed to connive and share in the profits.”¹⁷ Historian Ludwell Johnson wrote that “cotton permits were sold on the streets of New York; soldiers were bribed; traders were blackmailed; Treasury agents were disgraced.”¹⁸

Secretary Chase's agent in New Orleans repeatedly wrote he could not check “unwarranted” trade because it profited General Butler's elder brother, Andrew.¹⁹ Lincoln was besieged by many politicians and business leaders seeking privileges and promoting schemes for cotton buying, including Ohio governor William Dennison, Illinois senator Orville Browning, former Whig associate James Singleton, Illinois attorney William Weldon, and New York political boss Thurlow Weed, among others.²⁰

General Ulysses Grant's brother-in-law, Samuel Casey, was given a special permit signed by Lincoln to travel multiple times behind enemy lines to buy cotton and transport it back to the Union side. The Confederate government owned the cotton Casey sought, and he contracted to pay for it with British pounds even though US Treasury regulations at the time prohibited the use of anything but greenbacks. Lincoln's friend William Butler was a member of the Casey partnership.²¹

Bribery and misconduct were also rife on the Confederate side of intersectional trade. For example, cavalry officers might be bribed to prevent them from burning cotton that planters wanted to sell to Northern traders. Similarly, pickets were sometimes bribed to allow cotton to be transported beyond Confederate military lines. However, such actions were less detrimental to the Confederate cause than the reciprocal conduct on the Northern side was to the Union.22 That is because Southerners principally exchanged noncontraband items such as cotton, tobacco, and turpentine, whereas the Northerners traded supplies that enabled the Rebel armies to remain in the field, including weapons, munitions, medicine, and salt, among many others. In contrast, cotton sold to Northerners was typically consumed by the New England textile mills, which, beyond providing some clothing (uniforms were made mostly of wool rather than cotton) and tents, did little to sustain the Union armies. Nonetheless, intersectional trade had a demoralizing effect among Confederate citizens because it made a few wealthy, while the war impoverished nearly all others. One Southerner enriched by such trade was Richard King, who founded the famous King Ranch in Texas. He made a fortune on wartime Rio Grande trade and was granted a pardon after the war, like most ordinary Southerners.

There are at least two reasons that knowledge of Civil War trading with the enemy should be more widely understood. First, it is a neglected part of the whole story. Second, it prompts inquiry into the rarely investigated reasons why the North fought, as opposed to inquiry into why the cotton states seceded.

Contemporary historians almost unanimously deny that the war resulted from a general disagreement over states' rights. They correctly note that the chief right the cotton states wanted to protect was the right to slavery. But most fail to appreciate that it was the widely anticipated economic consequences of disunion that motivated influential politicians and businessmen in the North to “save the Union.” The willingness to trade gold, weapons, munitions, and other contraband to the South in order to avoid such consequences underscores the importance that Lincoln attached to the North's need for intersectional trade. Although not without a humanitarian benefit to destitute Southerners, the bilateral commerce was mostly a bogus “need” for Northerners that unnecessarily protracted the war and lengthened the casualty lists.