Comparative economies of the Union and Confederacy

 “Invented” in 1793 by Eli Whitney though historical records show primitive single wheel gins existed as early as the 5 th century AD

 The cotton gin caused cotton production to skyrocket in the South during the early 1800’s  More slaves were required to work the cotton fields.  Slaves, as a capital investment were fairly expensive. A fully capable male slave in could cost as much as $1600 ($35,000 today).

 $1600 spent on a slave is money that is not going into R&D, industrial development or growth.  By the time Lincoln was elected the south was irreversably married to a labor intensive agrarian economy.  This left it ill prepared for the upcoming war.

 Railroads and canals facilitated the growth of industry in the North  This industry was easier to convert to wartime production than the agrarian base in the south.  Transportation in the north made for easier transport of goods during wartime Major Railroads as of 1860

 Export Dependent  Southern states accounted for 70% of all us exports in 1860  Ongoing Union blockade as outlined in Anaconda Plan reduced exports while local hoarding kept millions of bales of cotton from being sold.  Ironically, the biggest trading partner for southern cotton continued to be the North Map depicting the Anaconda Plan

 Imports  Before war, south relied heavily on North for industrial products.  During war was required to import through Mexico, also forced to rely on Britain and France as trading partners.  "...the seceded South, even before the outbreak of hostilities, was faced with the necessity of securing the basic materials of war. It lacked guns, cannon, and munitions of every sort; it lacked most of the raw materials from which they could be manufactured. The South needed clothing, medicine, tools, and, later on, food. It lacked the factories, too, with which to manufacture the sinews of war, and the machinery and skilled labor with which to establish and run factories. As a result the Confederacy, at the very start, turned it eyes towards Europe."  William Diamond Imports of the Confederate Government from Europe and Mexico The Journal of Southern History, Vol. 6, No. 4 (Nov., 1940), p. 470

 North  Larger industrial tax base  Greater borrowing capacity  Single Currency  Financial system better able to handle the strains and costs of wartime economy  CPI went from 100 to 175 by wars end  South  Smaller tax base  Forced to print more currency rather than bonds or treasury borrowing  Multiple state currencies  Weaker banking system less able to handle stresses of war.  CPI went from 100 to 4000 by the fall of Atlanta

 By the end of the War, southern currency was worthless and northern currency was worth about 50% of its 1860 value.  Real wages in the north fell approx. 18% while in the south the real wage collapsed nearly 90 %

 The slave based economy of the Confederacy left it ill prepared for the Civil War.  Poor economic decisions (hoarding cotton) further crippled the southern economy at the time of its greatest need.  The confederate nature of southern government magnified the uncertainty surrounding the value of its currency.  Union industrialization put it in a much better position to outlast the confederacy.  Costs of the war disproportionately impacted the south, mainly due to the loss of slave based capital. Those losses continued to plague the south for decades after the war.

 eyewitnesstohistory.com  wikipedia.org  The Economics of the Civil War Roger L. Ransom, University of California, Riverside