The Confederacy Was NOT a Viable State.
By Peter Holman
The Cleveland Civil War Roundtable
Copyright © 2008, All Rights Reserved
Editor’s note: The subject of the annual Dick Crews Debate at the January 2008 Roundtable meeting was: “The Southern Victory of 1865: Was the Confederacy a Viable State?” Five members made presentations on the topic; the article below was one of those five presentations.
After the order of secession had passed the South Carolina legislature in December 1860, the old anti-nullification attorney James L Petigru was asked if he would now, at last, support his native state. “I should think not!” he replied. “South Carolina is too small for a republic and too large for a lunatic asylum!” And that, despite the fantastical notions we discuss tonight, is the key to answering the question – was the Confederacy a viable state following their victory of 1865?
Seven states had seceded by February 1, 1861: South Carolina, Mississippi, Florida, Alabama, Georgia, Louisiana and Texas. These seven could not form a viable nation – their human, social and material resources made them too small for a republic and too large for a lunatic asylum.
After the firing on Fort Sumter and Lincoln’s call for troops, four more states seceded: Virginia, Arkansas, North Carolina and Tennessee. Now the size might be right – even the social, human and material make-up might be right for a nation if allowed to depart in peace – but war was joined and the brute fact of war ensured that the Confederacy could not become a viable nation regardless of success on the battlefield.
The Confederate States were overwhelmingly rural and agrarian. Towns of more than 1,000 were few, and typical county seats had a population of less than 500. New Orleans was the only Southern city with a population above 100,000 and the only one in the list of top 10 largest U.S. cities in the 1860 census. New Orleans was captured by the Union in April 1862. The great industrial center of Atlanta, GA had a population of 9,553 in 1860.
“Too small for a republic and too large for a lunatic asylum”
Benson J Lossing LLD in his 3-volume book on the Civil War remarked that “The old South rested everything on slavery and agriculture, unconscious that these could neither give nor maintain healthy growth.”
He could have added that the old South rested everything on states’ rights – a disease which, along with slavery and agrarianism, made the Confederacy non-viable as a nation no matter what the result of individual battles.
Mary Lyde Williams gave the Presentation Address at the unveiling of the North Carolina Memorial at Gettysburg on July 3, 1929. She intended to make a great compliment when she began with the words, “They wrote a constitution in which each state should be free.” Ironically it was none other than Zebulon Vance, the governor of North Carolina who was notoriously hostile to the national government. Opposition to conscription in North Carolina was intense and disastrous for recruiting. Vance’s faith in states’ rights drove him to stubbornly oppose the Davis administration. And he was not alone.
Governors and state legislatures refused to give the national government the soldiers and money it needed because they feared encroachment on the rights of the states.
Georgia’s governor Joe Brown warned of a deep-laid conspiracy on the part of Jefferson Davis to destroy states’ rights and individual liberty. Brown declared, “Almost every act of usurpation of power, or of bad faith, has been conceived, brought forth and nurtured in secret session.” Giving the Confederate government power to draft soldiers was the “essence of military despotism.”
In 1863 Governor Pendleton Murrah withheld Texas troops claiming they were needed for self-defense of the state and refused to send them east to defend the nation.
Vice President Stephens warned that to allow Davis to make “arbitrary arrests and to draft state officials conferred on him more power than the English Parliament had ever bestowed on the king. History proved the dangers of such unchecked authority.” Stephens thought that Southerners should never view liberty as “subordinate to independence” because the cry of “independence first and liberty second” was a “fatal delusion.” Independence was not evidently the primary goal for Stephens.
While the Confederate Constitution did not specifically include a provision allowing states to secede, the Preamble spoke of each state “acting in its sovereign and independent character.” But it also declared the formation of a “permanent federal government.” The Constitution prohibited the use of revenues collected in one state for funding internal improvements in another state. State legislatures were given the power to impeach officials of the Confederate government in some cases.
It is in such contradictory grounds that the seeds of inevitable defeat were sown.
No nation becomes a nation unless other nations recognize it and treat it as such. For the South, recognition was essential – and there were only two nations whose recognition meant a hill of beans – England and France. No one cared if Belgium recognized the South; Mauritania was irrelevant; Germany did not even exist.
But England’s government, anxious as it was to strengthen any threat to U.S. hegemony in the region, could not politically recognize a nation based upon slavery because the working classes of England and the Christian church had learned to detest slavery.
Louis Napoleon, although keen to step in, would not make a move without English cooperation. Indeed, he preferred to let the South hang alone in order to seize Mexico while the US military was too busy to intervene.
The growth and indeed existence of nations in the 18th and 19th centuries was predicated upon access to and control of the seas or full cooperation with those who had it. Without such access, no nation could long endure. The Southern states had no navy, no finances to build or purchase one and no tradition of sea-faring to outfit one. Innovation could not stand in for the quantity and quality of ships, both military and merchant, and the skilled sailors enjoyed by the North. This lack of ability to control the seas ensured the Union a stranglehold to prevent exports and imports desperately required by the South. The North might lose battles, but it could not lose the war as long as it controlled the seas, ports and rivers of the continent.
Prior to the war, the states that formed the Confederacy accounted for 70% of total US exports and paid about 60-70% of the tariffs raised in the US. Far from indicating strength and importance, these figures illuminate core weaknesses of the Confederate economy – not strengths.
Confederate leaders believed that exports would give the new nation a firm financial basis, while the ability to shake off tariffs would strengthen their economy – after all, it was tariffs that had driven the pre-war nullification crisis which particularly offended South Carolina.
Cotton was the primary potential export, accounting for 75% of Southern goods either shipped to Northern US states or exported in 1860. The Confederate States entered the war with the hope that its near monopoly of the world cotton trade would force the European importing countries, especially Great Britain and France, to intervene in the war on her behalf. In 1861, Southerners at the local level imposed an embargo on cotton shipments. Millions of bales of cotton went unshipped, and by summer 1861 the Union blockade closed down all normal trade. The Confederate government was forced to make a virtue of necessity – driven into error by states’ rights enthusiasts.
The main purchasers of cotton, Britain and France, turned to Egyptian cotton. British and French traders invested heavily in cotton plantations, and the Egyptian government took out substantial loans from European bankers and stock exchanges. After the Civil War, British and French traders abandoned Egyptian cotton and returned to cheap American exports, sending Egypt into a deficit spiral that led to the country declaring bankruptcy, a key factor behind Egypt’s annexation by Britain in 1882.
During the war cotton cultivation in the British Empire, especially India, also greatly increased to replace the lost production of the American South.
And the much hated tariffs? The Union blockade solved that problem for the South. Almost all of the essential materials to pursue an industrial war and support a civilian population were denied landing – the South had no imports upon which to pay duties.
The specie holdings of various banks largely found their way into the Confederate treasury as part of a $15,000,000 loan early in 1861. In addition, the government seized specie from various Federal offices. However, this was soon sent to Europe to pay for war supplies. Gold and silver in general circulation also soon left the CSA almost entirely, much of it going to the North. The government never secured any specie revenue, and was driven headlong into the wholesale issue of paper money.
The first interest-bearing notes were issued in March 1861 and were soon followed by others, bearing no interest and payable in two years, with still more payable six months after peace. New issues were continuous, so that from $1,000,000 in circulation in July 1861, the amount rose to $30 million before December 1861; to $100 million by March 1862; to $200 million by August 1862; to perhaps $450 million by December 1862; to $700 million by the autumn of 1863; and to a much larger figure before the end of the war.
This policy of issuing irredeemable paper money was copied by the individual states and other political bodies. Alabama began by issuing $1,000,000 in notes in February 1861, and added to this amount during each subsequent session of the state legislature. The other states followed suit. Cities, corporations and other business concerns tried to meet the rising tide of prices with the issue of their individual promissory notes intended to circulate from hand to hand.
As a result of this redundancy of the currency, its value collapsed. Gold was already quoted at a premium in Confederate notes as early as April 1861. By the end of that year, a paper dollar was quoted at 90 cents in gold; during 1862 that figure fell to 40 cents; during 1863, to 6 cents; and still lower during the last two years of the war. The downward course of this figure, with occasional recoveries, reflects the popular estimate of the Confederacy’s chance of winning and maintaining independence as a viable nation.
The oversupply of currency drove the price of commodities to exorbitant heights, and disarranged all business. Frequent efforts were made by legislation and otherwise to reduce the prices demanded, especially by the agricultural sector. As a result, the production of food products fell off, or at least farmers did not bring their products to market for fear of being forced to sell them at a loss.
Supplies for the army were obtained by impressment, the price to be paid for them being arbitrarily fixed at a low 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 these 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 effectiveness of the Union blockade and the peculiar industrial development of the Confederate States removed the possibility of an ample government revenue. Though import duties were levied, the proceeds amounted to almost nothing. A small export duty on cotton was expected to produce a large revenue sufficient to base a loan upon, but the small amount of cotton exports reduced this source of revenue to an insignificant figure.
There being, moreover, so few manufactures to tax under an internal revenue system such as the US government adopted, the Confederacy was cut off from deriving any considerable revenue from indirect taxation. The first Confederate tax law levied a direct tax of twenty million dollars, which was apportioned among the states.
These, with the exception of Texas, contributed their apportioned share to the central government by issuing bonds or notes, so that the tax was in reality but a disguised form of loan. Real taxation was postponed until the spring of 1863, when a stringent measure was adopted taxing property and earnings. It was slowly and with difficulty put into effect, and was re-enacted in February 1864. In the states and cities there was a strong tendency to relax or postpone taxation in view of the other demands upon the people.
With no revenue from taxation, and with the disastrous effects of the wholesale issue of paper money before it, the Confederate government made every effort to borrow money by issuing bonds. The initial $15 million loan was soon followed by an issue of one hundred million in bonds, which it was, however, difficult to place. This was followed by even larger loans. The bonds rapidly fell in value, and were quoted during the war at approximately the value of the paper money, in which medium they were paid for by subscribers. To avoid this circumstance, a system of produce loans was devised by which the bonds were subscribed for in cotton, tobacco and food products. This policy was subsequently enlarged and enabled the government to secure at least a part of the armies’ food supplies. But the bulk of the subscriptions for these bonds was made in cotton, for which the planters were thus enabled to find a market.
In the autumn of 1862, Confederate law attempted to compel note-holders to fund their notes in bonds in order to reduce the redundancy of the currency and lower prices. Disappointed in the result of this legislation, the Congress, in February 1864, went much farther in the same direction by passing a law requiring note-holders to fund their notes before a certain date, after which notes would be taxed a third or more of their face value. This drastic measure was accepted as meaning a partial repudiation of the Confederate debt, and though it for a time reduced the currency outstanding and lowered prices, it wrecked the government’s credit and made it impossible for the treasury to float any more loans. During the last months of the war, the treasury led a most precarious existence, and its actual operations can only be surmised.
As the war entered its final year, it was becoming evident that the Confederacy’s lack of industry and the destruction of its transportation infrastructure helped to play a part in its eventual demise.
Defeat saved the Confederacy from total ruin. A victorious Confederate government would have collapsed under its total inability to pay debts, obtain new loans, rebuild infrastructure and stabilize its currency. But a defeated and non-existent Confederacy could safely repudiate debt and rely upon the governmental and commercial acumen of the hated Yankees to rebuild a society.
Abraham Lincoln liked to tell the story of a frugal farmer who saw no need to feed a male pig all year just to service his sow. Early one spring morning he put the sow in the wagon, traveled to a nearby farm, and the sow was serviced. The next morning, in order to make more certain of the efficacy of the servicing and to make sure he had lots of bacon come winter, he packed the sow in the wagon and again brought her to be serviced. He did this on each of the next two days. On the fifth day his wife asked if he was going to have the sow serviced. He replied “I’m too tired to tote her down the road again,” to which his wife replied, “Well, you ought to tell the sow, ‘cause she’s a sittin’ in the wagon.”
This question of the viability of the Southern Confederacy has been long settled by history. It has been settled here tonight. We should all be too tired to tote it down the road again – but there it is, sitting in the wagon. I ask for your votes tonight to remove it once and for all.
Thank you ladies and gentlemen.