The long-term effect of
the Civil War on the US economy was to accelerate
the development of big business manufacturing in
the North initiated by the demands of war
production. The shortage of labor created by the
war pushed industrialization in the Northeast and
the spread of mechanized farming in the Middle
West and the opening of new farms and mines in the
West, with post-war decommissioned soldiers facing
unemployment.
Inflation reached 117%
during the war years but wages rose only 43% in
the name of patriotic sacrifice, yielding high
war-profit margins for corporations. War
speculation fueled the rise of the finance sector,
causing sharp disparity of income and wealth
between financiers and workers
hitherto unknown in the US economy.
Protectionism and
corporatism The Republican Party before
Lincoln raised tariffs with the Morrill Tariff Act
to 47% to protect domestic industries from foreign
competition, and after Lincoln to provide revenue
to help finance war costs. In 1862, keeping the
promise made by the Republican platform of the
1860 election, the Homestead Act had become law.
It granted all US residents, citizens or aliens
who had declared an intention to become
naturalized the right to receive ownership title
to 160 acres of free public land after he had
lived and worked on it for five years.
From the inception of the United States,
there had been a clamor for ever-increasing
liberalism in the disposition of public lands.
From 1830 onward, free distribution of public
lands became a demand of the Free-Soil Party,
which saw such distribution as a means of stopping
the spread of slavery into the new territories,
and the policy was subsequently adopted by the
Republican Party in its 1860 platform. The
Southern states had been the most vociferous
opponents of the homesteading policy, and their
ill-fated secession cleared the way for its
adoption by the victorious North.
In the
arid region west of the Rocky Mountains, 160 acres
was generally too little land for a viable farm or
range. In these areas, homesteads were instead
used for strategic control of scarce resources,
especially water, by big business. Eventually 1.6
million homesteads were granted and 270 million
acres of public land were privatized between 1862
and 1964, a total of 10% of all lands in the
United States. Much of this land ended up
controlled by big business.
The Federal
Land Policy Act of 1976 ended homesteading with
the recognition that the best use of public lands
can only be achieved under government control. The
only exception to this new policy was in Alaska,
for which the law allowed homesteading until 1986.
In 1862, Congress further promoted
agricultural development by passing the Morrill
Land-Grant Act to set aside public land in every
state for the support of colleges to provide
scientific training in agriculture. While this was
a populist program, much of the research aided the
development of large-scale agribusiness.
The year 1862 also saw the passage of the
legislation for government subsidy for building a
transcontinental railroad starting from the west
in California and the east at Nebraska, which
linked up in Utah in 1869. Railroad lines were
given public land up to 40 square miles for every
mile constructed, to be located in alternative
sections on each side of the track. The total
federal acreage awarded to railroads exceeded 100
million plus another 50 million acres from the
states, adding to an area as large as the state of
Texas falling into private hands. The 30 years
following the Civil War have been called the
railroad age, with a five-fold increase in
mileage. There is another meaning for the phrase
"the railroad age". It described an era when the
government was controlled by the railroads.
Government becomes a ward of big
business The sale of war bonds pushed the
passage of the National Bank Act of 1863, which
allowed banks of a certain capital minimum to
qualify for a Federal charter if they used at
least one third of their capital in the purchase
of war bonds. In return, the Treasury would give
them national bank notes up to the value of 90% of
their bond holdings.
The measure was
profitable to the banks, which could collect
interest on their capital form the treasury and
simultaneously lend out the bank notes at higher
interest rates. Since the quantity of bank notes
in circulation was limited by the war bond
purchases, the effect was a stable paper currency.
The influence of banks on government policy
increased to change the dynamics of national
politics.
Final defeat of Southern
agrarianism Civil War era legislative
commitments laid the groundwork for rapid economic
expansion of the US economy via the private sector
in the later decades of the 19th century. By
attempting to secede from the Union to preserve
its agrarian economy, the agricultural South
brought about the final defeat of the agrarian
principles she sought to protect and assured the
final victory of industrialism based on the
centralized ideals of Alexander Hamilton
(1755-1804) and the economic nationalism of Henry
Clay (1777-1853), reigning triumphant over the
popular democracy of Thomas Jefferson (president
1801-09) and the populist politics of Andrew
Jackson (president 1829-37).
The post-war
South came under the rule of the "Bourbons", the
mercantile elite of the Confederacy who shared
more affinity with Northern moneyed interests than
with the plantation aristocracy of the old South.
The pejorative term was analogous to the restored
bourgeois French monarchists after the fall of
Napoleon. The Southern Bourbons adopted a laissez
faire economic policy, reduce taxes and cut public
spending on education and social welfare. Their
ill-considered policies revived the collapsed
Southern economy minimally in the short term but
condemned the South to the fate of an
underdeveloped region for more than a century.
After the war, with the abolition of
slavery, cotton production in the South increased
dramatically, doubling the size of the pre-war
crop and doubling again by 1914. This historical
fact is often ignored by neo-liberal economists
who insist that high wages depress growth. New
plantations worked by small tenant farmers were
established in Arkansas and Texas while the
worn-out soil from single crop planting in Georgia
and South Carolina was revived with fertilizers.
The average white tenant farm had 84 acres while
the average newly-freed former slave tenant farm
was less than half in size.
Still, the
expansion of cotton growing did not bring
prosperity to the small tenant growers, black or
white, as they were perpetually in debt to cotton
merchants in the North, who would charge interest
at rates up to 40%. The merchants in turn were
exploited by large wholesale houses linked to
British capital. The debt economy not only drained
wealth from the South to the North, it also
prevented the development of a diversified
agriculture in the South. Creditors in the North
insisted on cotton as the only exportable cash
crop and the surplus of low-wage Southern labor
prevented any market incentive for
industrialization.
Many Southerners
realized the need to develop industry but the
South had to depend for capital on the North,
which preferred to keep industry up there and to
use the South as a source of raw material. As a
result, even the profit from industrialization of
raw material production did not stay in the South.
Moreover, typical of conditions of the
early phases of industrialization, wages stayed
low, working hours were long and working
conditions were unbearable in both the South and
the North. Workers, often all members of a family,
including women and children, were required to
routinely work 75-hour weeks at below living
wages. Children under 16 constituted over 30% of
the work force. Even though corporate profit
remained consistently high, wages and benefits
stayed low and working condition inhumane,
justified by the need to compete with more
advanced foreign factories. Nothing was done to
correct the situation until the Great Depression,
which brought into being progressive New Deal
legislation of the 1930s.
By the late
1880s, the small farmers of the South and the West
began to resist the oppression of the landlords,
the industrialists and the financiers. They wanted
increased government spending on education,
infrastructure and social welfare. They called for
a
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