The Economics of the Civil War

Black reconstruction after the Civil War did much better than the dire predictions made. The black population recovered quickly. Many moved to urban areas. They deliberately had fewer children. Mortality declined. Income increased. No government assistance was handed out.Black women became homemakers and educators. Most of the former slaves shared tenancy with the landowners, splitting crops at the end of the season. But, in 1896 the Supreme Court upheld Jim Crow laws. This set economic convergence of the races back. “Separate but equal” remained doctrine until its repudiation in 1954’s Brown v. Board of Education.Lincoln’s burgeoning of governmental agencies was a direct consequence of the Civil War. It was the first New Deal. The war crisis allowed government to ratchet up its scope and power. The war was really the origin of central state authority in America.Lecture 8 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.

There was a sea change in money and banking in the U.S. as a result of the Civil War. Government became the primary regulator. Metal coins gave way to paper. Mistakes of one bank infected others – it was contagion.Southerners were left bankrupt. Many desired the free minting of silver coins because the gold coins were so dear. The Wizard of Oz spoke to monetary problems in the U.S. The yellow brick road was the gold standard.Consequences of war reveal the fallacy of broken windows. All wars are disastrous. Resources are used in short-sighted ways without noticing all the long term opportunity lost costs. Prosperity cannot be created through destruction. The Republican agenda was not true laissez-faire. They were mercantilists, using government to grow their businesses and to keep competition away.Lecture 7 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.

Inflation is a giant rip off, a stealth tax stealing purchasing power. Money is not neutral. The first receivers of new money benefit. Savers and those on fixed incomes struggle. From 1857 until the war was a period of “free banking” where the fed had nothing to do with the banks and the states had little control over them. High economic growth and prosperity prevailed.The money the banks issued was backed by one-third gold and the rest backed by short term securities. Thus, the banknotes were pretty secure, as in Louisiana, and widely circulated outside of New Orleans. The ten dollar note was a “Dixie”. Dixieland was born.Payment for war was done by taxation, borrowing, printing, or direct confiscation. All four venues were used and all four have negative consequences on the economy.Lecture 6 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.

The Confederate government blockaded the Southern economy by bad policies like impressment and trying to run the blockade themselves. The government declared that fifty percent of all cargo space had to be for the Confederate government.Lecture 5 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.

Blockade boat owners turned to engines for speed instead of sails. Blockade running became more expensive as the blockade became stricter. Certain prices increased much faster and higher. Most goods desired in the South had to be imported.Luxuries were available, but necessities were not, because the fixed costs of transportation made it more profitable to ship high end goods rather than low end. Essentially, luxury items became cheaper to import relative to necessities. This was the Rhett Butler Effect which was really the blockade effect.Lecture 4 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.

Tariffs were generally favorable for the North and unfavorable for the South. They were a key political battle for forty years. The Union General Scott developed the anaconda plan to squeeze the breath out of the South. The Union Blockade was the first part of that plan. This battle at sea won the war for the Union. The land battle was a stalemate.The South’s King Cotton strategy was to get the Europeans to intervene on the South’s behalf, but there was no real push for the Europeans to do so. The South should have aggressively exported their cotton into Europe, but they did not.Lecture 3 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.

Opportunity cost is the proper economic basis for specialization and trade in resources. Opportunity cost is the highest value you give up when you make a choice. It was Confederate government policy that caused misallocations on the part of the South, making it inefficient and wasteful. A few of those bad policies were: drafting soldiers, confiscating resources, and monetary inflation.Rent-seeking and interest groups are also tools. They speak to why the North and the South split up in the first place. The key to understanding the Civil War was resource allocation. It was greed for resources not grievances between races. The South produced tobacco and cotton and they fought for these tradable exports. Lecture 2 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.

The Economics of the Civil War should instruct us in ways that the history of the Civil War might not. Cotton had much to do with what the war was about. Slavery as a cause of the Civil War is a modern development. How did the Union win the war? How did the aftermath of the war affect our own lives? What lessons can benefit us?The blockade was the source of the Union victory. As it became more and more effective, the Union position strengthened until the last port in North Carolina fell. So, it was the war at sea, not on land that determined the outcome.Lecture 1 of 8 from Mark Thornton's The Economics of the Civil War, presented to the Auburn University Academy for Lifelong Learners.