Roger L. Ransom, university of California, Riverside

The civil War has actually been something of one enigma for scholars researching American history. During the first half that the twentieth century, historians viewed the battle as a significant turning allude in American economic history. Charles Beard labeling it “Second American Revolution,” claiming that “at bottom the so-called Civil battle – was a social war, ending in the unquestioned establishment of a new power in the government, making huge changes – in the food of industrial development, and in the structure inherited from the Fathers” (Beard and Beard 1927: 53). By the moment of the second World War, louis Hacker might sum increase Beard’s position by merely stating that the war’s “striking accomplishment was the triumph of commercial capitalism” (Hacker 1940: 373). The “Beard-Hacker Thesis” had become the many widely accepted interpretation of the economic affect of the civil War. Harold Faulkner committed two chapters come a discussion of the reasons and after-effects of the war in his 1943 textbook American financial History (which was then in its fifth edition), claiming the “its impacts upon ours industrial, financial, and also commercial history were profound” (1943: 340).

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In the year after people War II, a new group of economic historians — many of lock trained in business economics departments — focused their energies top top the explanation of economic growth and breakthrough in the joined States. As they looked for the tricks to American growth in the nineteenth century, these financial historians wondered about whether the Civil war — with its enormous destruction and disruption of culture — might have been a stimulus to industrialization. In his 1955 textbook top top American financial history, Ross Robertson mirrored a new view the the polite War and also economic growth when he argued that “persistent, an essential forces to be at job-related to create the economic system and also not also the disastrous of internecine strife can greatly influence the outcome” (1955: 249). “Except because that those through a specific interest in the economics of war,” claimed Robertson, “the four year period of problem <1861-65> has had small attraction for financial historians” (1955: 247). Over the following two decades, this came to be the leading view of the civil War’s duty industrialization that the unified States.

Historical research has a way of return to the same problems over and over. The efforts to explain regional patterns of financial growth and also the time of the united States’ “take-off” right into industrialization, in addition to extensive research into the “economics” that the slave device of the South and the influence of emancipation, carried economic historians back to questions dealing with the polite War. By the 1990s a brand-new generation of economic background textbooks once again examined the “economics” the the Civil battle (Atack and also Passell 1994; Hughes and Cain 1998; Walton and also Rockoff 1998). This reconsideration that the Civil war by economic historians can be loose grouped into four broad issues: the “economic” reasons of the war; the “costs” of the war; the difficulty of jae won the War; and also a re-examination that the Hacker-Beard thesis the the battle was a transforming point in American financial history.

Economic reasons of the War

No one serious doubts the the enormous financial stake the South had in its servant labor pressure was a major factor in the sectional disputes that erupted in the middle of the nineteenth century. Number 1 plots the complete value of all servants in the United claims from 1805 to 1860. In 1805 over there were just over one million slaves worth around $300 million; fifty-five years later there were 4 million slaves worth close to $3 billion. In the 11 claims that eventually formed the Confederacy, 4 out the ten civilization were slaves in 1860, and these world accounted for much more than fifty percent the farming labor in those states. In the cotton areas the importance of servant labor was also greater. The worth of capital invested in slaves around equaled the complete value of all farmland and farm buildings in the South. Despite the worth of slaves fluctuated from year to year, there was no an extensive period throughout which the value of the slaves owned in the United claims did not boost markedly. Looking at number 1, it is hardly how amazing that southern slaveowners in 1860 were optimistic around the economic future of their region. They were, after all, in the midst of an unparalleled rise in the value of their servant assets.


A significant finding of the research right into the financial dynamics of the slave device was to demonstrate that the rise in the value of servants was not based top top unfounded speculation. Servant labor was the foundation of a prosperous financial system in the South. To illustrate just how important slaves were to the prosperity, Gerald Gunderson (1974) estimated what fraction of the earnings of a white human being living in the south of 1860 was acquired from the revenue of slaves. Table 1 presents Gunderson’s estimates. In the seven says where many of the cotton was grown, almost one-half the population were slaves, and they accounted because that 31 percent that white people’s income; for all 11 Confederate States, slaves stood for 38 percent of the populace and contributed 23 percent the whites’ income. Small wonder the Southerners — even those that did not very own slaves — viewed any attempt through the federal federal government to border the legal rights of slaveowners over their property as a perhaps catastrophic danger to their entire economic system. Through itself, the South’s financial investment in slavery might easily describe the willingness that Southerners to hazard war when confronted with what they perceived as a severe threat to your “peculiar institution” after the electoral to win of the Republican Party and President Abraham Lincoln the autumn of 1860.

Table 1

The fraction of Whites’ incomes from Slavery

StatePercent that the population That to be SlavesPer Capita revenue of cost-free Whites (in dollars)Slave income per free White (in dollars)Fraction that Earnings due to Slavery
South Carolina571595735.8
Seven noodle States461635030.6
North Carolina331082119.4
All 11 States381353525.9
Source: Computed from data in Gerald Gunderson (1974: 922, Table 1)
The northern states likewise had a large economic stake in slavery and also the noodle trade. The first half of the nineteenth century saw an huge increase in the manufacturing of short-staple cotton in the South, and most the that cotton was exported to good Britain and Europe. Figure 2 charts the expansion of cotton exports native 1815 to 1860. By the mid 1830s, noodle shipments accounting for an ext than fifty percent the worth of every exports from the unified States. Keep in mind that over there is a significant similarity between the fads in the export of cotton and the increasing value of the slave population depicted in number 1. There might be tiny doubt that the prosperity that the slave economic situation rested ~ above its ability to develop cotton an ext efficiently than any other an ar of the world.


The income generated by this “export sector” was a significant impetus for development not just in the South, yet in the remainder of the economic situation as well. Douglass North, in his pioneering examine of the antebellum U.S. Economy, examined the flows of trade within the United says to show how all areas benefited native the South’s concentration top top cotton manufacturing (North 1961). Northern merchants obtained from Southern demands for shipping cotton to industries abroad, and also from the need by Southerners because that Northern and imported consumption goods. The low price of life cotton created by slave labor in the American South allowed textile manufacturers — both in the united States and also in britain — to increase production and provide benefits to consumers through a declining cost of textile products. As manufacturing of every kinds expanded at home and abroad, the need for food in cities developed markets for foods that can be produced in the locations north the the Ohio River. And also the primary force at work-related was the economic stimulus native the violin of southern Cotton. Once James Hammond exclaimed in 1859 the “Cotton is King!” no one climbed to conflict the point.

With so much to shed on both sides of the Mason-Dixon Line, financial logic argues that a tranquil solution to the slave concern would have actually made far an ext sense than a bloody war. However no equipment emerged. One “economic” systems to the slave difficulty would be because that those who objected to slavery to “buy out” the financial interest of southern slavaramuseum.orgolders. Under such a scheme, the federal federal government would purchase slaves. A major problem below was that the costs of such a system would have been enormous. Claudia Goldin estimates that the price of having the federal government buy all the slaves in the United says in 1860, would be about $2.7 exchange rate (1973: 85, Table 1). Obviously, together a large sum can not it is in paid all at once. Yet even if the payment were spread out over 25 years, the yearly costs of together a plan would involve a tripling of federal federal government outlays (Ransom and Sutch 1990: 39-42)! The prices could be decreased substantially if instead of freeing all the slaves at once, kids were left in bondage until the age of 18 or 21 (Goldin 1973:85). However there would stay the difficulty of how even those reduced expenses could be distributed among various teams in the population. The expense of any “compensated” emancipation system was therefore high that even those who wished to get rid of slavery to be unwilling come pay for a “buyout” of those that owned slaves.

The high expense of emancipation was not the only method in which financial forces developed strong local tensions in the unified States before 1860. The regional economic specialization, previously detailed as critical cause the the financial expansion the the antebellum period, additionally generated really strong regional divisions on financial issues. Current research through economic, social and also political historians has actually reopened few of the arguments very first put forward by Beard and Hacker that economic changes in the northern states to be a major factor leading to the politics collapse that the 1850s. Beard and Hacker concentrated on the narrow economic aspects of these changes, interpreting them as the initiatives of an emerging class of industrial capitalists to gain regulate of financial policy. More recently, historians have actually taken a wider view of the situation, suggesting that the sectional splits on these economic problems reflected sweeping economic and social transforms in the Northern and also Western states that to be not knowledgeable by civilization in the South. The term many historians have actually used to describe these transforms is a “market revolution.”


Source: joined States population Census, 1860.

Perhaps the best single indicator of how pervasive the “market revolution” was in the Northern and Western says is the rise of urban areas in locations where markets have become important. Map 1 plots the 292 counties that reported an “urban population” in 1860. (The 1860 Census Office defined an “urban place” as a city or city having a populace of at least 2,500 people.) Table 2 gift some added statistics top top urbanization by region. In 1860 6.1 million human being — about one out of 5 persons in the United states — lived in an urban county. A glance at either the map or Table 2 reveals the enormous distinction in urban development in the South contrasted to the northern states. An ext than two-thirds of all city counties were in the Northeast and West; those two regions accounted for almost 80 percent the the urban populace of the country. Through contrast, less than 7 percent of people in the 11 Southern states of Table 2 stayed in urban counties.

Table 2

Urban population of the United claims in 1860a

RegionCounties v Urban PopulationsTotal Urban populace in the RegionPercent of Region’s population Living in city CountiesRegion’s Urban populace as Percent that U.S. Metropolitan Population
Far Westf799,14515.191.54

a Urban populace is people living in a city or town of at least 2,500

b Includes: Connecticut, Maine, Massachusetts, brand-new Hampshire, new Jersey, new York, Pennsylvania, Rhode Island, and also Vermont.

c Includes: Illinois, Indiana, Iowa, Kansas, Minnesota, Nebraska, Ohio, and Wisconsin.

d Includes: Delaware, Kentucky, Maryland, and also Missouri.

e Includes: Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, north Carolina, south Carolina, Tennessee, Texas, and also Virginia.

f Includes: Colorado, California, Dakotas, Nevada, brand-new Mexico, Oregon, Utah and Washington

g has District the Columbia

Source: U.S Census that Population, 1860.

The region along the phibìc Atlantic Coast, through its extensive breakthrough of commerce and industry, had actually the biggest concentration that urban populace in the joined States; approximately one-third that the population of the nine states defined as the Northeast in Table 2 lived in urban counties. In the South, the snapshot was very different. Cotton cultivation with slave labor did no require regional financial services or surrounding manufacturing tasks that can generate city activities. The 11 states of the Confederacy had actually only 51 metropolitan counties and they were widely scattered transparent the region. Western farming with its focus on foodstuffs motivated urban activity near to the source of production. These centers were no necessarily large; indeed, the West had approximately the same number of large and mid-sized urban as the South. However there were far more small communities scattered throughout settled regions that Ohio, Indiana, Illinois, Wisconsin and also Michigan than in the southern landscape.

Economic policy had actually played a prominent role in American politics because the birth of the republic in 1790. Through the formation of the Whig Party in the 1830s, a number of an essential economic concerns emerged at the national level. To highlight the degree to which the rise of metropolitan centers and increased market activity in the North caused a growing situation in financial policy, historians have re-examined four particular areas of legislative action singled out by Beard and Hacker as evidence of a congressional stalemate in 1860 (Egnal 2001; Ransom and Sutch 2001; 1989; Bensel 1990; McPherson 1988).

Land Policy

1. Land Policy. Settlement of west lands had always been a significant bone the contention because that slave and free-labor farms. The path in which the commonwealth government spread land to people could have actually a significant impact ~ above the nature of farming in a region. Northerners wanted to encourage the negotiation of ranches which would depend generally on family labor by offering cheap land in little parcels. Southerners feared that such a plan would do it more difficult to keep areas open for negotiation by slavaramuseum.orgolders that wanted to establish huge plantations. This all pertained to a head with the “Homestead Act” the 1860 the would provide 160 acre of totally free land because that anyone who wanted to settle and also farm the land. Northern and also western congressmen strong favored the invoice in the residence of Representatives yet the measure received just a solitary vote from servant states’ representatives. The bill passed, but President Buchanan vetoed it. (Bensel 1990: 69-72)

Transportation Improvements

2. Transportation Improvements. Adhering to the opened of the Erie Canal in 1823, there was cultivation support in the North and the Northwest for government support of innovation in transportation framework — what to be termed in those job “internal improvements”. The need for government- sponsored renovations was particularly urgent in the an excellent Lakes an ar (Egnal 2001: 45-50). The figure of the rail in the 1840s gave included support for those advocating federal government subsidies to promote transportation. Southerners required much fewer internal enhancements than human being in the Northwest, and they tended to check out federal subsidies for such jobs to be part of a “deal” in between western and also eastern interests that held no evident gains for the South. The bill that best illustrates the local disputes on transportation was the Pacific Railway bill of 1860, which proposed a transcontinental railway attach to the West Coast. The invoice failed to pass the House, receiving no votes indigenous congressmen representing districts the the south where there to be a far-reaching slave populace (Bensel 1990: 70-71).

The Tariff

3. The Tariff. Southerners, v their focus on staple farming and must buy goods developed outside the South, strong objected to the imposition that duties top top imported goods. Manufacturers in the Northeast, ~ above the various other hand, sustained a high tariff together protection against cheap brothers imports. World in the West were caught in the center of this controversy. Prefer the farming South they disliked the idea that a high “protective” tariff that elevated the cost of imports. Yet the tariff was additionally the main resource of commonwealth revenue in ~ this time, and also Westerners needed government funds for the transportation renovations they supported in Congress. As a result, a compromise got to by western and eastern interests throughout in the tariff discussions of 1857 to be to support a “moderate” tariff; with duties collection high sufficient to create revenue and also offer some protection to northern manufacturers when not placing too much of a burden on Western and Eastern consumers. Southerners complained that even this level of security was excessive and that it to be one much more example of the willingness that the West and the phibìc to make economic bargains at the price of the south (Ransom and Sutch 2001; Egnal 2001:50-52).


4. Banking. The commonwealth government’s function in the chartering and also regulation of financial institutions was a volatile political issue throughout the antebellum period. In 1834 president Andrew Jackson created a major furor once he vetoed a bill to recharter the second Bank that the joined States. Jackson’s veto introduced a period of that was termed “free banking” in the joined States, where the chartering and also regulation of banks was left completely in the hand of state governments. Banks were a relatively new economic college at this allude in time, and opinions were sharply divided over the level to i beg your pardon the federal government should manage banks. In the Northeast, where over 60 percent the all financial institutions were located, over there was solid support by 1860 because that the development of a mechanism of banks that would certainly be chartered and regulated by the federal government. Yet in the South, i beg your pardon had small need for regional banking services, there was little enthusiasm for such a proposal. Here again, the western claims were captured in the middle. While lock worried that a device of “national” financial institutions that would certainly be controlled by the currently dominant east banking establishment, west farmers discovered themselves in require of local banking solutions for financing your crops. Through 1860 plenty of were skinny to support the Republican proposal because that a national Banking System, however Southern opposition eliminated the National financial institution Bill in 1860 (Ransom and Sutch 2001; Bensel 1990).

The growth of one urbanized market society in the phibìc produced much more than just a legislative regime of political economic climate that Southerners strongly resisted. Number of historians have taken a much wider view of the market change and industrialization in the North. They see the economic conflict of North and South, in the indigenous of Richard Brown, as “the conflict of a modernizing society” (1976: 161). A leading historian of the civil War, James McPherson, argues that Southerners to be correct when they declared that the revolutionary routine sweeping v the North endangered their means of life (1983; 1988). James Huston (1999) tote the discussion one step further by arguing that Southerners to be correct in your fears the the triumph of this coalition would ultimately lead come an attack by north politicians on slave residential property rights.

All this provided ample discussion for those clamoring for the south to leaving the Union in 1861. Yet why go the phibìc fight a war rather than simply letting the dissatisfied Southerners walk in peace? It seems unlikely the anyone will ever have the ability to show the the “gains” native the war outweighed the “costs” in financial terms. Still, war is constantly a gamble, and also with the neither the prices nor the benefits easily calculated before the fact, leaders are regularly tempted to take it the risk. The evidence over certainly lent solid support for those saying that the made sense for the southern to fight if a belligerent North endangered the college of slavery. An economic situation for the north is much more problematic. Most writers argue the the decision for battle on Lincoln’s component was no based mostly on economic grounds. However, Gerald Gunderson points the end that if, as countless historians argue, northern Republicans were intent on managing the spread of slavery, then a war to store the southern in the Union could have make sense. Gunderson compares the “costs” of the battle (which we comment on below) v the expense of “compensated” emancipation and notes the the 2 are roughly the very same order of magnitude — 2.5 come 3.7 billion dollars (1974: 940-42). Thus, walking to battle made as much “economic sense” together buying the end the slavaramuseum.orgolders. Gunderson renders the further point, which has actually been echoed by various other writers, that the only means that the North might ensure the their regime to contain slavery could be “enforced” would certainly be if the south were maintained in the Union. Permitting the south to leaving the Union would typical that the North can no longer manage the expansion of slavery all over in the western Hemisphere (Ransom 1989; Ransom and Sutch 2001; Weingast 1998; Weingast 1995; Wolfson 1995). What is novel about these interpretations that the battle is the they argue it was financial pressures the “modernization” in the North the made northern policy towards secession in 1861 far much more aggressive 보다 the traditional story that a North forced into military activity by the South’s attack on ft Sumter.

That is no to say the either side wanted war — for economic or any other reason. Abraham Lincoln most likely summarized the situation and also anyone once he it was observed in his 2nd inaugural address that: “Both next deprecated war, but one of them would certainly make war fairly than allow the country survive, and also the various other would accept war fairly than let that perish, and the war came.”

The “Costs” of the War

The Civil battle has often been referred to as the an initial “modern” war. In part this mirrors the enormous initiative expended through both political parties to command the war. What was the price of this conflict? The most an extensive effort come answer this concern is the occupational of Claudia Goldin and Frank Lewis (1978; 1975). The Goldin and Lewis approximates of the prices of the war room presented in Table 3. The expenses are divided into two groups: the direct expenses which encompass the expenditures of state and also local federal governments plus the lose from destruction of property and also the ns of human capital from the casualties; and what Goldin and also Lewis ax the indirect costs of the battle which include the subsequent implications of the war after 1865. Goldin and also Lewis calculation that the an unified outlays the both governments — in 1860 dollars — totaled $3.3 billion. To this they include $1.8 exchange rate to account for the discounted financial value the casualties in the war, and they add $1.5 exchange rate to account because that the damage of the war in the South. This gives a complete of $6.6 billion in direct expenses — v each region incurring roughly half the total.

Table 3

The expenses of the polite War

(Millions of 1860 Dollars)




Direct Costs:

Government Expenditures




Physical Destruction



Loss of person Capital




Total Direct prices of the War




every capita




Indirect Costs:

Total decline in Consumption





Effect of Emancipation


Effect of noodle Prices


Total Indirect prices of The War




per capita




Total costs of the War




per capita




Population in 1860 (Million)




Source: Ransom, (1998: 51, Table 3-1); Goldin and Lewis. (1975; 1978)

While these figures are just a an extremely rough estimate of the really costs, they provide an education guess as to the order of size of the economic effort required to fairy the war, and also it seems most likely that if there is a bias, the is to understate the total. (Thus, because that example, the approximated “economic” losses native casualties neglect the emotional expense of 625,000 deaths, and also the approximates of property damage were quite conservative.) also so, the direct price of the battle as calculated by Goldin and also Lewis to be 1.5 times the total gross nationwide product of the United says for 1860 — an huge sum in compare with any type of military effort by the United claims up to the point. What stands the end in enhancement to the enormity that the bill is the disparity in the burden these expenses represented to the human being in the North and the South. Top top a per capita basis, the expenses to the North population were around $150 — or approximately equal to one year’s income. The southerly burden was two and also a half times the amount — $376 per man, woman and child.

Staggering though these numbers are, they represent just a fraction of the full costs of the war, which lingered long after the fighting had actually stopped. One means to measure the full “costs” and “benefits” of the war, Goldin and also Lewis argue, is to calculation the worth of the observed postwar currently of intake in each region and compare that figure to the estimated hypothetical present of usage had there been no war (1975: 309-10). (All the figures for the prices in Table 3 have been readjusted to reflect your discounted value in 1860.) The Goldin and also Lewis estimate for the discounted value of lost intake for the southern was $6.2 billion; for the north the estimate was $1.15 billion. Ingenious despite this methodology is, that suffers from the severe drawback that usage lost because that any factor — not simply the war — is contained in the figure. Particularly for the South, no all the decline in output after 1860 could be straight attributed to the war; the development in the need for cotton that fueled the antebellum economic climate did no continue, and there to be a dramatic readjust in the it is provided of labor as result of emancipation. Consequently, Goldin and Lewis subsequently changed their estimate of lost intake due to the battle down come $2.56 billion for the southern in order to exclude the effects of emancipation and the fallen of the cotton market. The magnitudes that the indirect results are detailed in Table 3. After the adjustments, the estimated prices for the battle totaled an ext than $10 billion. Allocation the prices to each region produces a per capita load of $670 in the South and also $199 in the North. What Table 3 does not show is the degree to i m sorry these expenses were spread out end a long duration of time. In the North, intake had regained its prewar level through 1873, however in the South intake remained listed below its 1860 level to the end of the century. We shall go back to this problem below.

Financing the War

No battle in American history strained the financial resources the the economic climate as the Civil battle did. Governments on both political parties were required to will to take out loan on an unmatched scale to meet the financial duties for the war. With much more developed markets and an commercial base that might ultimately create the products needed because that the war, the Union was plainly in a better position to meet this challenge. The South, top top the other hand, had always relied on either north or foreign funding markets for their financial needs, and also they had virtually no manufacturing establishments to create military supplies. From the outset, the Confederates relied heavily on funds borrowed outside the southern to purchase provides abroad.


Figure 3 mirrors the sources of revenue accumulated by the Union government during the war. In 1862 and 1863 the federal government covered less than 15 percent that its full expenditures v taxes. V the imposition that a greater tariff, excise taxes, and the development of the an initial income tax in American history, this instance improved somewhat, and also by the war’s end 25 percent that the federal federal government revenues had been gathered in taxes. Yet what that the other 75 percent? In 1862 conference authorized the U.S. Treasury to issue currency notes that were no backed by gold. By the end of the war, the treasury had actually printed an ext than $250 million precious of this “Greenbacks” and, together with the concern of gold-backed notes, the printing of money accounted for 18 percent of all federal government revenues. This quiet left a substantial shortfall in revenue the was not spanned by either taxes or the print of money. The remaining revenues were obtained by borrowing funds from the public. In between 1861 and also 1865 the debt duty of the Federal federal government increased indigenous $65 million to $2.7 billion (including the boosted issuance of note by the Treasury). The financial sectors of the North were strained by this demands, yet they showed equal to the task. In all, Northerners bought almost $2 billion worth of treasury notes and absorbed $700 million of brand-new currency. Consequently, the Northern economic climate was able come finance the war without a far-ranging reduction in exclusive consumption. If the boost in the nationwide debt seemed substantial at the time, events were come prove that the economic situation was an ext than able to deal with it. Indeed, several economic historians have asserted that the creation and subsequent retirement the the Civil battle debt ultimately proved to be a far-ranging impetus to post-war expansion (Williamson 1974; James 1984). Wartime finance likewise prompted a far-ranging change in the banking system of the united States. In 1862 Congress lastly passed legislation creating the national Banking System. Your motive was not only to institute the regimen of banking reform pressed for countless years by the Whigs and the Republicans; the newly-chartered federal financial institutions were additionally required to purchase big blocs of commonwealth bonds to organize as security versus the issuance of their national financial institution notes.


The initiatives of the Confederate government to salary for their war initiative were far more chaotic than in the North, and also reliable expenditure and also revenue data space not available. Number 4 gift the ideal revenue estimates we have for the Richmond federal government from 1861 despite November 1864 (Burdekin and also Langdana 1993). Several features of Confederate finance automatically stand the end in comparison come the Union effort. First is the fail of the Richmond federal government to finance their battle expenditures v taxation. End the food of the war, tax profits accounted for just 11 percent of all revenues. One more contrast was the much higher portion of profits accounted because that by the issuance of money on the part of the Richmond government. End a third of the Confederate government’s revenue came from the print press. The remainder come in the type of bonds, countless of i m sorry were marketed abroad in either London or Amsterdam. The dependency on obtained funds showed to be a farming problem for the Confederate treasury. By mid-1864 the expenses of paying interest on outstanding government bonds absorbed more than fifty percent all government expenditures. The difficulties of collecting taxes and floating brand-new bond issues had end up being so significant that in the last year of the battle the total revenues accumulated by the Confederate federal government actually declined.

The print of money and also borrowing on together a huge scale had actually a dramatic impact on the financial stability the the Confederacy. The finest measure that this instability and eventual collapse can be watched in the habits of prices. An table of contents of customer prices is plotted together with the stock on money from early on 1861 come April 1865 in figure 5. Through the start of 1862 prices had currently doubled; by middle of 1863 they had actually increased through a variable of 13. As much as this point, the inflation might be greatly attributed to the money placed in the hand of consumer by the substantial deficits of the government. Prices and also the stock of money had actually risen at approximately the same rate. This stood for a classic instance of what economists speak to demand-pull inflation: too lot money chasing too few goods. However, indigenous the center of 1863 on, the baramuseum.orgavior of price no much longer mirrors the money supply. Several economic historians have said that at this suggest the price reflect people’s confidence in the future of the Confederacy as a viable state (Burdekin and also Langdana 1993; Weidenmier 2000). Figure 5 identify three major military “turning points” in between 1863 and 1865. In late 1863 and also early 1864, complying with the Confederate defeats at Gettysburg and Vicksburg, prices rose really sharply in spite of a significant decrease in the development of the money supply. Once the Union offensives in Georgia and Virginia stalled in the summer the 1864, price stabilized because that a couple of months, just to resume their increase spiral after the autumn of Atlanta in September 1864. By that time, the course, the Confederate reason was clearly doomed. Through the end of the war, inflation had actually reached a suggest where the worth of the Confederate currency was basically zero. People had required to engaging in barter or using Union dollars (if they can be found) to conduct your transactions. The collapse of the Confederate monetary mechanism was a have fun of the all at once collapse the the economy’s efforts to sustain the war effort.


The Union also experienced inflation as a result of deficit finance during the war; the customer price index increased from 100 in ~ the outset that the battle to 175 by the finish of 1865. If this is nowhere close to the degree of economic disruption caused by the increase in prices experienced by the Confederacy, a copy of prices did have an impact on exactly how the burden of the war’s costs were distributed among various groups in every economy. Inflation is a tax, and it tends to autumn on those that are the very least able to afford it. One group that has tendency to be breakable to a sudden increase in prices is wage earners. Table 4 gift data on prices and wages in the joined States and the Confederacy. The series for wages has been adjusted to reflect the decline in purchasing power due to inflation. No surprisingly, wage earners in the south saw the actual value of your wages almost disappear by the finish of the war. In the north the case was not as severe, but wages absolutely did not keep pace with prices; the actual value that wages dropped by around 20 percent. The is not noticeable why this happened. The require for manpower in the army and also the demand for battle production have to have created a labor shortage that would drive salaries higher. When the economic instance of labor deteriorated throughout the war, one must remember the wage earners in 1860 were still a relatively small re-superstructure of the total labor force. Agriculture, no industry, to be the largest financial sector in the north, and also farmers fared much in terms of their income throughout the war than did fairy earners in the manufacturing sector (Ransom 1998:255-64; Atack and Passell 1994:368-70).

Table 4:

Indices that Prices and Real Wages during the polite War


YearPricesReal WagesPricesReal Wages
Source: Union: (Atack and also Passell 1994: 367, Table 13.5)

Confederate: (Lerner 1954)

Overall, the is clear the the phibìc did a far better job that mobilizing the financial resources needed to carry on the war. The higher sophistication and also size of Northern markets meant the the Union federal government could contact upon institutional arrangements that enabled for a an ext efficient device of redirecting resources right into wartime manufacturing than was feasible in the South. The Confederates depended far an ext upon exterior resources and also direct intervention in the manufacturing of goods and also services for their battle effort, and also in the finish the domestic economy could not bear increase under the stress, overload of the effort. The is worth noting in this regard, the the Union blockade, i m sorry by 1863 had actually largely closed down not just the external trade that the southern with Europe, but also the coastal trade that had been an essential element in the antebellum transport system, may have actually played a more an essential part in bringing around the eventual collapse that the southern war effort than is regularly recognized (Ransom 2002).

The Civil battle as a Watershed in American economic History

It is straightforward to watch why contemporaries thought that the Civil war was a watershed occasion in American History. With a cost of billions the dollars and also 625,000 males killed, slavery had been abolished and also the Union had been preserved. Financial historians city hall the occasion fifty years later could note that the half-century following the civil War had actually been a duration of extraordinary growth and expansion that the American economy. However was the battle really the “Second American Revolution” together Beard (1927) and also Louis Hacker (1940) claimed? that was absolutely the prevailing watch as late together 1960, once Thomas Cochran (1961) published an article titled “Did the Civil war Retard Industrialization?” Cochran stated that, until the 1950s, there to be no quantitative proof to prove or disprove the Beard-Hacker thesis. Current quantitative research, the argued, proved that the war had actually actually slowed the price of industrial growth. Stanley Engerman broadened Cochran’s debate by attack the Beard-Hacker case that political transforms — specifically the passage in 1862 the the Republican program of political economic climate that had been bottled up in congress by southerly opposition — were instrumental in accelerating economic growth (Engerman 1966). The major thrust of these debates was that neither the war nor the legislation was necessary for industrialization — which was already well underway by 1860. “Aside from commercial banking,” listed one commentator, “the civil War appears not to have actually started or developed any new patterns of financial institutional change” (Gilchrist and also Lewis 1965: 174). Had there been no war, these critics argued, the trajectory of economic growth that arised after 1870 would have actually done therefore anyway.

Despite this criticism, the id of a “second” American transformation lives on. Plainly the Beards and also Hacker were in error in their case that commercial growth accelerated during the war. The civil War, choose most contemporary wars, affiliated a vast effort to mobilize sources to carry on the fight. This had the effect of make it appear that the economy was broadening due to the manufacturing of armed forces goods. However, Beard and also Hacker — and a good many other historians — mistook this raised wartime activity as a net increase in output as soon as in reality what taken place is that sources were shifted far from consumer commodities towards wartime production (Ransom 1989: thing 7). Yet what of the bigger question that political adjust resulting from the war? critics of Beard and Hacker asserted that the Republican program would have ultimately been enacted even if there been no war; hence the war was not a an important turning suggest in financial development. The problem with this heat of dispute is the it completely misses the allude of the Beard-Hacker argument. Castle would readily agree that in the absence of a battle the Republican routine of political economic climate would triumph — and also that is why there was a war! historians who controversy that economic forces to be an underlying cause of sectional disputes go on to allude out that battle was probably the only means to clear up those conflicts. In this view, the battle was a watershed occasion in the economic development of the unified States because the Union armed forces victory ensured that the “market revolution” would not it is in stymied by the South’s effort to break up the Union (Ransom 1999).

Whatever the results of the battle on industrial growth, economic historians agree that the war had a profound result on the South. The destruction of enslavement meant the the entire Southern economy had to be rebuilt. This turned the end to it is in a monumental task; much larger 보다 anyone at the time imagined. As listed above in the conversation of the indirect prices of the war, Southerners boring a disproportionate share of those costs and also the load persisted long after the war had actually ended. The fail of the postbellum Southern economic climate to recover has actually spawned a large literature the goes well past the impacts of the war.

Economic historians who have examined the immediate results of the war have actually reached a few important conclusions. First, the idea that the southern was physically damaged by the fighting has actually been largely discarded. Many writers have accepted the argument of Ransom and Sutch (2001) that the major “damage” to the southern from the war was the depreciation and neglect of residential or commercial property on ranches as a far-reaching portion of the masculine workforce went off to battle for numerous years. 2nd was the impact of emancipation. Slavaramuseum.orgolders lost their enormous investment in slaves as a an outcome of emancipation. Planters were consequently strapped for resources in the years immediately after the war, and this influenced their choices with regard to labor contracts through the freedmen and also in their dealings with resources markets to obtain credit because that the planting season. The freedmen and also their housaramuseum.orgolds responded to emancipation by withdrawing up to a 3rd of their labor native the market. When this to be a perfect reasonable response, it had actually the impact of creating an obvious labor “shortage” and it persuaded white landlords the a complimentary labor system could never work with the ex-slaves; thus further complicating an currently unsettled job market. In the longer run, as Gavin bright (1986) placed it, emancipation reinvented the white landowners from “laborlords” come “landlords.” This was not a straightforward transition. When they to be able, because that the most part, to cling to their landholdings, the ex-slavaramuseum.orgolders were at some point forced to rest up the good plantations that had actually been the cornerstone that the antebellum southerly economy and rent little parcels that land come the freedmen under using a new type of rental contract — sharecropping. Indigenous a instance where tenancy was extremely rare, the southern suddenly ended up being an farming economy identified by tenant farms.

The result was an economy that remained greatly committed not just to agriculture, however to the staple crop of cotton. Crop output in the south fell significantly at the end of the war, and had no yet recovered its antebellum level by 1879. The lose of revenue was particularly hard ~ above white Southerners; every capita revenue of white skin - man in 1857 had actually been $125; in 1879 the was just over $80 (Ransom and Sutch 1979). Table 5 to compare the economic growth that GNP in the United says with the gross chop output that the Southern says from 1874 come 1904. Over the last 4 minutes 1 of the nineteenth century, gross crop output in the South rose by around one percent per year at a time as soon as the GNP of United states (including the South) was climbing at twice that rate. Through the end of the century, southerly per capita income had fallen to roughly two-thirds the nationwide level, and also the southern was locked in a bicycle of poverty the lasted well into the twentieth century. Exactly how much the this fail was due solely to the war remains open up to debate. What is clean is that neither the desires of those who fought for an independent south in 1861 nor the desires of those that hoped that a “New South” that might emerge native the destruction of war after 1865 to be realized.

Table 5Annual prices of expansion of Gross nationwide Product that the U.S. And the gross Southern crop Output, 1874 to 1904
Annual portion Rate that Growth
IntervalGross nationwide Product that the U.S.Gross Southern crop Output
1874 to 18842.791.57
1879 to 18891.911.14
1884 to 18940.961.51
1889 to 18991.150.97
1894 come 19042.300.21
1874 come 19042.011.10
Source: (Ransom and also Sutch 1979: 140, Table 7.3


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