Effect Of Civil War On American Economy

The Economic Effects of the Civil War
The Economies of the North and South, 1861-1865
In 1861, a great war in American history began. It was a civil war between the north and south that was by no means civil. This war would have great repercussions upon the economy of this country and the states within it. The American Civil War began with secession, creating a divided union of sorts, and sparked an incredibly cataclysmic four years.

Although the actual war began with secession, this was not the only driving force. The economy of the Southern states, the Confederacy, greatly if not entirely depended on the institution of slavery. The Confederacy was heavily reliant on agriculture, and they used the profits made from the sale of such raw materials to purchase finished goods to use and enjoy. Their major export was cotton, which thrived on the warm river deltas and could easily be shipped to major ocean ports from towns on the Mississippi and numerous river cities. Slavery was a key part of this, as slaves were the ones who harvested and planted the cotton. Being such an enormous unpaid work force, the profits made were extraordinarily high and the price for the unfinished goods drastically low in comparison; especially since he invention of the cotton gin in 1793 which made the work all that much easier and quicker.

In contrast, the economical structure of the Northern states, the Union, was vastly dependent on industry. Slavery did not exist in most of the Union, as there was no demand for it due to the type of industrial development taking place. As the Union had a paid work force, the profits made were lower and the cost of the finished manufactured item higher. In turn, the Union used the profits and purchased raw materials to use. This cycle is referred to as interdependency.

By 1860, ninety-five percent of the United States manufacturing occurred in states north of the 36’30? line conceived for the Missouri Compromise. Many of these states were also non-slave states, and against slavery at that. Since the population in the Northern states was mostly free whites, and the population in the south mostly slaves, in the voting booths the South was greatly at a disadvantage. Also, to add to this, the Democrats who were mostly pro-slavery had split into two factions because they could not agree on a candidate. The Republican Party, formed only 4 years before the election of 1860, had Abraham Lincoln as candidate for president.

Because the Democratic Party was split, many southerners were unable to vote, and Lincoln was incredibly popular in the Northern states, the Republican Party candidate won. Now southerners were convinced that the North had put an abolitionist in the White House, and would proceed to abrogate slavery. This enraged the Southern states who proceeded to secede from the Union.

In Mississippi’s secession convention, they stated that, ?Our position is thoroughly identified with the institution of slavery… A blow at slavery is a blow at commerce and civilization? There was no choice left to us but submission to the mandates of abolition or dissolution of the Union.? This quote forces us to consider that if slavery had been immediately abolished the wreckage and destruction that would have been rendered to the Southern economy.

At the beginning of the war, to make France and Europe recognize the Confederacy as a separate power, no attempt was made to export cotton to them. Before long, no cotton could be exported because of the invading Northern troops that were seizing and or blocking the ports. These effective sieges decimated the foreign trade for the Confederacy.

Every aspect of the Southern economy was stimulated by the war, and domestic production especially because of the need to supply the army and replacing the goods that could no longer be imported. This was, however, offset by the invading Union troupes that destroyed many businesses.

The Civil War augmented the nation greatly, and one of these changes was the routine use of paper currency. In 1861, Congress issued Demand Notes to finance the civil war. It was the first paper money issued since Continentals, which were first issued in 1775. In 1862, Congress