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The Misnamed Conflict

Mises Daily: Tuesday, December 07, 2004 by

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Tariffs, Blockades, and Inflation: The Economics of the Civil War, by Mark Thornton and Robert B. Ekelund. Wilmington, Delaware: Scholarly Resources, 2004. xxix +124 pages.

The continual stream of books about the Civil War generally focus on soldiers, generals, weapons, uniforms, medical procedures, and battlefield maneuvers—along with the usual accounts of suffering, misery, and death.

The calm picture of businessmen and clerks engaged in their business of buying and selling cotton at the New Orleans Cotton Exchange is not the typical image one finds on the cover or dust jacket of books about the Civil War. But the Edgar Degas painting that graces the cover of Tariffs, Blockades, and Inflation: The Economics of the Civil War tells the reader that this is no ordinary book on the Civil War.

This is an insightful book that breaks much new ground. The authors apply economic theory to historical events to illuminate the causes and consequences of the Civil War as no other book about that misnamed conflict. Although more accurate names would certainly be the War Between the States, the War of Northern Aggression, or more simply, Lincoln’s War, in keeping with the book’s title, I will use the more common term throughout this review.

Tariffs, Blockades, and Inflation is part of the American Civil War Series—books that offer concise overviews of important persons, events, and themes in the Civil War period of America’s history. The authors, Mark Thornton and Robert Ekelund, have collaborated on many articles on the Civil War era in a variety of publications. They believe that the Civil War drastically altered “the very substance and concept of the American nation.” It was “a watershed in our nation’s development.”

Although the authors do acknowledge that “slavery and its opposition were interwoven into the economic, political, social, and religious fabric of America,” they do not consider slavery to be the sole cause of the war. Instead, they emphasize politics and economics as the major factors that led to the war. This does not mean that the issue of slavery is ignored. To the contrary, Thornton and Ekelund acknowledge that many economic interests were indeed “at least somewhat related to slavery.” But instead of the Civil War being about just slave holders and abolitionists, the authors see the war as a sectional conflict with a number of related parallels: free trade vs. protectionism, Jeffersonians vs. Hamiltonians, agrarian society vs. industrial society, states’ rights vs. strong central government. These dichotomies are all explored in the book along side of the misguided economic policies that both sides undertook to their detriment.

The strength of this book lies in its introductions. The introduction that precedes the four chapters that make up the book is especially crucial. Entitled “How Economics Illuminates the Civil War,” it imparts to the reader, with clear explanations, the basic economic principles necessary to begin the book on a firm economic footing. Those trained in economics will certainly feel right at home when they read of normal goods, inferior goods, rent seeking, agency problems, the free rider problem, price discrimination, mercantilism, elasticity of demand, and opportunity cost. But to the neophyte whose only introduction to economics might be this small book, there are also basic descriptions of supply and demand, shortages, inflation, wealth, tariffs, trade, money and banking, the division of labor, specialization, subsidies, and the gold standard. Each chapter also contains a brief introduction that not only introduces, but surveys, the contents of the chapter.                         

This is a book that actually makes good on its title, for tariffs, blockades, and inflation are indeed the focus of the three main chapters in the book. The tariff question in chapter one is really a study of the cultural differences between the North and South. The agrarian South, which relied heavily on imports of finished goods, saw high protective tariffs as a detriment to its economy. The authors argue that economic interests “were a major factor in the emergence of the conflict.” With no income tax, the tariff was the primary source of revenue for the federal government, but it was also means by which politically connected Northern businessmen sought to dampen foreign competition and enrich themselves. The agrarian economy of the South had always resisted high protective tariffs. This resistence was later enshrined in the new Confederate Constitution. In this chapter, Thornton and Ekelund review the antebellum tariff while explaining the economics of tariffs in general.

The Union blockade of the South is the focus of chapter two. The authors make the case that the most important battle that took place was that one at sea between the blockade runners and the blockading fleet. The blockade resulted in not only reduced production and trade, but hoarding and speculation. In addition to the economics of the blockade, Thornton and Ekelund discuss the effectiveness of the blockade and the peculiar effect of the blockade on the supply of “luxury” goods. This is not dry reading, for here we read of the Anaconda Plan, the “King Cotton” strategy, and the Rhett Butler Effect—not the terminology one usually finds in an economics book.

How both sides used inflation—the creation of new money—to finance the war and disguise its costs is explained in chapter three. Inflation hampers the ability of producers and consumers to make sound economic decisions by distorting capital values, prices, and wages. The authors relate how the South in particular resorted to the printing press to help disguise the cost of the war, devastating its economy. But in addition to illuminating the Civil War monetary policies of the Union and the Confederacy, this chapter also explores money and banking in the United States before the war, as well as its monetary legacy. The authors trace inflation and financial panics to the federal government intervening into banking, which had up until that time been primarily a state matter. The book by Frank Baum, The Wonderful Wizard of Oz, is shown to be an allegory to the growing monetary concerns of Populist movement of the late nineteenth.

Following the three main chapters, there is an extra chapter on the economic consequences of the war. Here is exploded the myth that the scourge of war can actually benefit the economy as a whole. Like about the Civil War itself, what has been written about the post-war period we call Reconstruction is likewise “rarely from the perspective of economic theory.” The authors go about to correct that as well. They see technological improvements, the intercontinental railroad, large-scale heavy industry, and the basic national science institutions as beginning before the war. The Civil War retarded economic development, but because of the exclusive focus by historians on the abolition of slavery, it has been viewed as a national benefit instead of a national disaster. The war also caused distortions in the economy that harmed rural populations and led to the rise of Populism.

The book concludes with a bibliographical essay that discusses and recommends additional books on the topics of slavery, secession and war, money and banking, reconstruction and racism, war and the economy, the growth of government, and the blockade. The book is very well documented, with notes at the end of each chapter. Numerous figures and tables and a detailed index serve to enhance this slender volume even more.

Features that further enhance the book are numerous tables and figures, a detailed index, and a bibliographical essay that recommends enough additional reading on slavery, secession, banking, and war to keep one’s mind intellectually stimulated for quite some time.

There are a number of topics that Thornton and Ekelund explore in detail that relate to the economics of the Civil War. Pre-Civil War political and economic interest groups are perhaps the most important of such topics. The authors see the ideological origins of the war as stretching back to the early part of the 1800s. Thus, instead of the exploits of Lee and Grant (who are not even mentioned in the book), we are introduced to the politics and policies of John Adams, Thomas Jefferson, Alexander Hamilton, Andrew Jackson, Henry Clay, and John C. Calhoun. And instead of the traditional Democratic/Republican division, we read of the Democratic-Republicans, Federalists, Anti-Federalists, Free-Soilers, Whigs, and anti-immigrant parties.

The authors correctly view the mercantilist agenda of the new Republican Party (protective tariffs, national bank, and public works) as being anathema to the agrarian South, and reminiscent of the policies of the Federalist Alexander Hamilton and the Whig Henry Clay. The Southern States saw the election of Lincoln as harmful to them economically, and left the Union—an action that Lincoln himself endorsed in a speech in Congress on January 12, 1848: “Any people anywhere, being inclined and having the power, have the right to rise up and shake off the existing government, and form a new one that suits them better. This is a most valuable, a most sacred right—a right which we hope and believe is to liberate the world. Nor is this right confined to cases in which the whole people of an existing government may choose to exercise it. Any portion of such people, that can, may revolutionize, and make their own of so much of the territory as they inhabit.”

Because of the new role of government that emerged from the war, the authors make the case that the Confederate defeat resulted in an “ideological downfall” for the limited government established by the Founders. They view Lincoln’s massive intervention of the federal government into the economy and subsequent increase in the size and scope of the national government as the starting point of the growth of the federal leviathan. The great emancipator was an even greater centralizer.

An interesting comparison is made between the economic policies of Lincoln and Franklin Roosevelt. Thornton and Ekelund compare the “flurry of new laws, regulations, and bureaucracies” created by the Lincoln administration to that of Franklin Roosevelt’s New Deal in the 1930s. Indeed, they point out that the term “New Deal” was actually coined by a newspaper editor in 1865 to characterize Lincoln and the Republicans. They also take time out to comment on the origin of the term Dixie.

One does not have to be particularly fond of economics to benefit from this book. It will be valuable to anyone with an interest in American history, culture, or politics. Although it is only 124 pages, Tariffs, Blockades, and Inflation is an extremely penetrating work that goes along way toward furthering our understanding of the great sectional conflict we call the Civil War—a war that not only altered the culture of the United States, but fundamentally changed the role of government envisioned by the Founders. This is a scholarly book that deserves an equal place on the shelf next to the recent books of Thomas DiLorenzo, Jeffrey Hummel, Charles Adams, and Clyde Wilson—works that question the traditional establishment view of the conflict that forever changed the course of American history.

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Laurence M. Vance teaches economics at Pensacola Junior College. Vancepub@juno.com. Shorter versions of this review have previously appeared in "Southern Partisan" (November/December 2003) and "Chronicles" (September 2004). Comments on this essay can be posted on the blog.