The Confederate Economy
The blockade of the Southern ports, beginning in the spring of 1861, was much less spectacular than the operations of the army, but was quite as effective in breaking down the Confederacy. It cut off the South from obtaining foreign war supplies, and reduced it to dependence upon its own products, which were almost exclusively agricultural.
Manufacturing industries hardly existed in the South. A few iron works attempted with little success to meet the demand for ordnance. This and small-arms were obtained from the Federal arsenals in 1861, by capture and to some extent by eluding the blockade. Powder factories were established and vigorously operated. The scarcity and high price of clothing put a large premium on the establishment of textile factories, but their product was far below the demand.
One result of the effective blockade of the Southern seaports in our Civil War was to produce the cotton famine which, while advantageous to the valley of the Merrimac and southeastern New England, was ruinous to the English Midlands, the valley of the Rhine, and to the world at large. In all the warmer regions of the world every district in which cotton might be made to grow was exploited for the production of the great staple. The very life of Hamburg and Bremen and Liibeck depended upon the supply of cotton.
The South was unfortunate in having a poorly developed railway system. As compared with those of the North, its railways were inadequately equipped and did not form connected systems. During the war, the inroads of the Federal troops, and the natural deterioration of the lines and their rolling stuck, greatly reduced the value of the railroads as a military factor. They continued to be active in distributing the relatively small amount of imports through the blockaded ports of Charleston, Savannah and Wilmington. Their usefulness to the array and the city population in collecting food material from the country districts was much impaired.
The harvests in the South during the war were fairly abundant, as far as they were not destroyed by the advancing Northern armies. Corn was raised in large quantities, and, in general, the raising of food products instead of tobacco and cotton was encouraged by legislation and otherwise. The scarcity of food in the armies and cities was chiefly due to the breaking down of the means of transportation, and to the paper money policy and its attendant repressive measures.
The redundant currency drove the price of commodities to exorbitant heights, and deranged all business. It affected different classes of commodities differently. Those the supply of which was entirely from abroad, like coffee, rose to the greatest height owing to their scarcity produced by the blockade. Ingenious substitutes were found for such articles, and enormous profits were secured by the merchants who successfully ran the blockade and imported such much-needed articles of foreign origin. These speculators were continually abused for making such importations instead of confining themselves to supplying the government with foreign war supplies. Articles that were produced in the South and marketed abroad or in the North during normal times rose least in value. Tobacco and cotton, for instance, which found no buyers owing to the blockade, actually fell in value as quoted in gold. The great divergence of the price of these two commodities in the South and abroad - the Northern price of cotton increased more than tenfold during the war - offered the strongest inducement to evade the blockade and export them. A small amount of cotton reached the world's market by way of the Atlantic ports or Mexico, and netted those concerned in the venture handsome profits.
The same motive operated to encourage trade with the enemy. Tobacco and cotton were smuggled through the military lints in exchange for hospital stores, coffee and similar articles. The military authorities tried to suppress this illicit trade, but at times even they were carried away by the desire to secure the much-desired foreign supplies. The civil government also vacillated between the policy of encouraging exports, especially to Europe in exchange for foreign goods, and the policy oi forbidding such trade in view of the supposed advantage an r i1 to foreigners, who it was hoped would be compelled to acknowledge the independence of the Confederacy in order to secure Southern cotton.
The derangement of prices, their local differences and fluctuations, produced wild speculation in the South. Normal business was almost impossible, and the gambling element was forced into every transaction. Speculation in gold was especially pronounced. Legislation and popular feeling were aimed at it, but without avail. Even the government itself was compelled to speculate in gold. Speculation in food and other articles was equally inevitable and was much decried. Laws were formed to curb the speculators, but had no effect.
The policy of the Southern banks during the war encouraged speculation. The New Orleans banks had been well managed, and remained solvent until September 1861. The banks of the other states suspended specie payments at the end of 1862, and thereafter enlarged their note issue and their loans, thereby adding to the general redundancy of the currency and stimulating the prevalent speculative craze. They did a large business by speculating in cotton, making advances to the planters on the basis of their crops. The state governments also used their note issues for this purpose, the planters urgently demanding relief as their cotton could not reach a market. The Confederate government also made advances on Cotton and secured large quantities by purchase, to serve as the basis of cotton bonds. The rise of prices reflecting the redundancy of the currency was no advantage to the producer.
Frequent efforts were made by legislation and otherwise to reduce the prices demanded especially by the agriculturists. As a result, the production of food products fell off, at least the agriculturists did not bring their products to market for fear of being forced to sell then at a loss. Supplies for the army were obtained by impressment, the price to be paid for them being arbitrarily fixed at a tow figure. As a result, the army administration found it almost impossible to induce producers of food willingly to turn over their products, and the army suffered from want. Under the confused industrial circumstances the sufferings of the debtor class were loudly asserted, and laws were passed to relieve them of their burdens, making the collection of debts difficult or impossible. The debts of Southerners to Northerners contracted before the war were confiscated by the Confederate government, but did not amount to a large figure.
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