Civil War, Economic Impact of (Issue)

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The economic consequences of the American Civil War (18611865) are largely due to Northern control of the federal government during and for several decades after the War. During the sectional debates over the tariff and the expansion of slavery that characterized the thirty years before the War, the North had been forced to forgo or compromise several of its national economic policy objectives because of Southern opposition and the strong position the Southern states held in the Senate. As soon as the Southern states seceded and the legislators resigned their seats in Congress, the legislators from the North and West began enacting this delayed agenda, while simultaneously prosecuting the War. Northern victory in the War insured their continuing control of the federal government and implementation of their economic policies.

There were four pieces of legislation that passed during the Civil War which were critical to Northern economic development during the decades after the War. The Morrill Tariff of 1861 raised rates to 20 percent on average, ending more than thirty years of declining rates. Funding for three transcontinental railroads was enacted in the Transcontinental Railroad Act. The Morrill Land Grant Act (1862) established agricultural and mechanical colleges by allotting each state that remained in the Union 30,000 Acres of land for each member of Congress. The National Bank Act of 1863 created a set of standards for the banking system. Finally, the Homestead Act (1862) provided 160 Acres (a quarter section) in western territories free to anyone who settled on it for five years and declared their intention to become a citizen. Each of these policies profoundly shaped the development of the American economy for the rest of the century.

Another Civil War development with powerful implications for the nation's economy was the wartime devastation visited on the South. The war had been mostly fought in the South and much of its wealth had been destroyed. In South Carolina before the war, for instance, there were 965,000 hogs. After the surrender of the Confederate Army in 1865 at Appomatox, the hog population in South Carolina had dropped to 150,000. Confederate bonds and currency were now worthless, depriving the region of a great proportion of its wealth. Emancipation of the slaves also destroyed a large part of the South's capital, as well as creating the need for a new labor system. (The slaves accounted for the lion's share of capital investment in the South, more expensive than the very land.) The war had destroyed virtually all the banks in the South. There was little capital available to finance reconstruction.

By 1877, when Reconstruction ended with the withdrawal of the Union Army, native white rule returned in every former Confederate state. The South, however, remained largely agricultural, producing staple crops for northern factories or for export. Economic recovery in the South was slow. Cotton did not reach its 1859 level of production until 1879. As cotton production increased, however, the price fell. Tobacco, the other major cash crop in the South, followed a similar pattern. The sharecropping system that replaced slavery had few incentives for soil conservation innovation or the cultivation of new crops. The region remained capital poor and grew slowly in population. In 1860 the population of the slave slates was 1l,133,361 compared to 12,288,020 in 1870, an increase of only about 10 percent, compared with a 29 percent increase for the rest of the country.

The South failed to attract many immigrants after the War because of limited economic opportunities. Its reliance on staple crop agriculture and slowly growing population did not create demand for expanded infrastructure, one of the factors driving the rapid expansion of the national economy outside the former Confederate states. For at least two generations after the Civil War the South remained predominantly agricultural and largely outside the industrial expansion of the national economy.

The Compromise of 1877 which ended Reconstruction solidified Northern control of Congress. This control led to ever higher tariffs, reaching an average of 57 percent with the Dingle Tariff of 1897, and a continuation of government subsidies for railroad expansion. Behind the protective wall of these tariffs U.S. industry grew and agriculture expanded ever westward to feed the growing populations of the industrial cities. Northern and Midwestern populations grew much faster than that of the South and the expansion of the nation's railroad system tied the two regions ever more closely together. A large part of the industrial expansion of the immediate post Civil War years was based on connecting the industrial northeast with the farm and grazing area of the Midwest and plains states and completing the transcontinental railroads. Railroad mileage in the U.S. doubled between 1865 and 1873 and increased by an additional 50 percent between 1873 and 1881. Freight carried increased from 2.16 billion ton/miles in 1865 to 7.48 in 1873 and 16.06 in 1881. The iron and steel industry was one direct beneficiary of the expansion of the railroad system. Steel production increased from 19,643 long tons in 1867 to 198,796 in 1873 and 1,588,314 in 1881. The expansion of steel led to comparable increases in mining and other basic industries.

The North and Midwest attracted growing numbers of immigrants, drawn by the promise of economic opportunity and inexpensive land. The growing population spurred construction of housing and infrastructure, which in turn attracted more immigrants in a circular process that continued until the Panic of 1893, which slowed the economy. The economy after the Civil War was initially driven by the construction of railroads connecting the industrial communities of the northeast and the agricultural regions of the Midwest and plains. In 1886, the railroads standardized the gauge (width) of the track, bringing the South into a national railway system. As it matured the industrial area expanded to include communities in the Midwest with an expansion of agricultural regions further west. The economy that developed after the Civil War was still sharply divided regionally along the same lines as the antebellum economy had been.

See also: Civil War (Economic Causes of), Homestead Act


Ayers, Edward L. The Promise of the New South: Life after Reconstruction. New York: Oxford University Press, 1992.

Higgs, Robert.The Transformation of the American Economy, 18651914. New York: Oxford University Press, 1971

Jones, Howard Mumford. The Age of Energy: Varieties of American Experience, 1865-1915. New York: Viking, 1971.

Vatter, H. C. The Drive to Industrial Maturity: The U.S. Economy, 1860-1914. New York: Oxford University Press, 1975.

Wright, Gavin. Old South, New South: Revolutions in the Southern Economy Since the Civil War. New York: Basic Books, 1982.

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Civil War, Economic Impact of (Issue)

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