Introduction

Were ever any people, civilized or savage, persuaded by argument, human or divine, to surrender two thousand million dollars [of property]?
- James Henry Hammond,
South Carolina, 1845

Under extreme and prolonged stress, both human and mechanical systems sometimes reveal strengths they did not recognize before. They may unexpectedly also show fatal weaknesses. As both the North and the South mobilized for war, the relative strengths and weaknesses of the "free market" and the "slave labor" economic systems became increasingly clear - particularly in their ability to support and sustain a war economy. In hindsight, we can see that the growing divergences between the economies of the North and the South in the immediate prewar years had a decisive influence upon the conduct and outcome of the war itself.

The American economy was caught in transition on the eve of the Civil War. What had been an almost purely agricultural economy in 1800 was in the first stages of an industrial revolution which would result in the United States becoming one of the world's leading industrial powers by 1900. But the beginnings of the industrial revolution in the prewar years was almost exclusively limited to the regions north of the Mason-Dixon line, leaving most of the South far behind.

In 1860, the South was still predominantly agricultural, highly dependent upon the sale of staples to a world market. But it was neither weak nor unproductive. By 1815, cotton was the most valuable export in the United States; by 1840, it was worth more than all other exports combined. Indeed, while the southern states produced two-thirds of the world's supply of cotton, the South had practically no manufacturing capability, had about 25% of the railroad tracks, and only 13% of the nation's banks. The South did experiment with using slave labor in manufacturing, such as at the Tredegar Iron Works in Richmond, but for the most part it was satisfied with its agricultural economy.

The North, by contrast, was well on its way toward a commercial and manufacturing economy. By 1860, 90% of the nation's manufacturing output came from northern states. This manufacturing capacity in the North would have a direct impact on its war making ability. The North produced 17 times more cotton and woolen textiles than the South, thirty times more boots and shoes, twenty times more pig iron, and thirty-two times more firearms. When carrying this last comparison further, the North produced 3,200 firearms to every 100 produced in the South. As a result of the industrialization and urbanization of the North, only 40% of its population was still engaged in agriculture by 1860, as compared to 84% of the South.

Even in the agricultural sector, northern farmers were out-producing their southern counterparts in several important areas, as southern agriculture remained traditionally labor intensive while northern agriculture became increasingly mechanized. By 1860, the free states had nearly twice the value of farm machinery per acre and per farm worker as did the slave states, leading to increased efficiency. As a result, in 1860, the northern states produced half the nation's corn, four-fifths of its wheat, and seven-eighths of its oats. The North even had twice as many pack animals as did the South.

The industrialization of the northern states had an impact upon urbanization and immigration. By 1860, 26% of the northern population lived in urban areas, lead by the remarkable growth of cities such as Chicago, Cincinnati, Cleveland, and Detroit, with their farm-machinery, food-processing, machine-tool, and railroad equipment factories. Only about a tenth of the southern population lived in urban areas.

As a consequence of urbanization and industrialization, free states attracted the vast majority of the waves of European immigration through the mid-19th century. Fully seven-eighths of foreign immigrants settled in free states. Internally, the same preference prevailed; twice as many southerners emigrated to the North during this period as did northerners moving south. Partially as a consequence, the population of the states that stayed in the Union was approximately 22 million as compared to a population of 9 million in the states of the Confederacy. This translated directly into the Union having 3.5 million males of military age - 18 to 45 - as compared to 1 million for the South. About 4 out of every 5 southern males fought the war, as compared to less than less than half of the northern men.

The southern lag in industrial development did not result from any inherent economic disadvantages. There was a great deal of wealth in the South, but it was tied up in the slave economy. The best evidence is that in 1860, despite all the North's wealth, the economic value of slaves in the United States exceeded the invested value of all of the nation's railroads, factories, and banks combined. On the eve of the Civil War, cotton prices were at an all-time high. The Confederate leaders were confident that the importance of cotton on the world market, particularly in England and France, would provide the South with the diplomatic and military assistance they needed for victory.