Writing in the years between World War I and World War II, Charles and Mary Beard (1927) and Louis Hacker (1940) provided a captivating economic interpretation of the Civil War—namely, that the war spurred northern industrial expansion. The Beard-Hacker thesis emphasized the transfer of political power from southern agrarians to northern industrial capitalists. With new power in Congress, northern legislators passed laws intended to unify markets and propel industrialization. The range of new programs established during the war was remarkable, including the establishment of the national banking system, an increase in tariffs (to protect American industry from foreign competition), the land-grant college act, and grants of land to transcontinental railroads.
The Beard-Hacker thesis also emphasized that the war stimulated the economy and increased investment. This part of the thesis, however, has been rejected in subsequent research, based on estimates of economic activity that were not available when the thesis was formulated (Economic Reasoning Proposition 5, evidence and theory give value to opinions, in Economic Insight 1.1 on page 9). Perhaps this is less surprising when we realize that nearly 1 million men—or almost 15 percent of the labor force of 7.5 million— were normally involved in the fighting each year. Of these working-age soldiers, 259,000 Confederate men and 360,000 Union men were killed and another 251,000 southerners and 356,000 northerners were wounded. One person was killed and another wounded for every six slaves freed and for every 10 southerners kept within the Union. Claudia Goldin and Frank Lewis (1975) have assessed these permanent losses of labor and human capital (Economic Reasoning Proposition 2, choices impose costs) to have had economic values approaching $1.8 billion ($1.06 billion in the North and $787 million in the South—all lost). In addition, the North spent $2.3 billion directly on the war effort; the South spent $1 billion through direct government outlays. Another $1.5 billion worth of property was destroyed, most of this in the South.
$6.6 billion were probably more than twice the size of our national income in 1860 and exceeded eight times the value added of total U. S. manufacturing that year.
The tragedy of the Civil War is compounded by the fact that in 1860, the total market value of slaves was approximately $3.06 billion (Ransom and Sutch 1988, 151). The costs of the war were more than twice the cost of purchasing the slaves. This does not mean that peaceful abolition was realistic before the war. After 1845, peaceful abolition like that undertaken by the British in the West Indies was viewed in the South as a complete disaster. Southerners were convinced that the economy of the West Indies was in shambles and that slave owners there had lost fortunes in the process of emancipation.
The work of Stanley Engerman (1971a and 1971b) and Robert Gallman (1960) provides further ground for rejecting the Beard-Hacker thesis that the Civil War stimulated postwar industrialization. As shown in Table 14.1, growth rates of total commodity output and manufacturing output were no higher, and possibly lower, after the Civil War than they were before the War.
Even within the various war industries of the North, there was no great spurt; by and large, the new dimensions of output in the North were modest adjustments in the various sectors. In fact, the most startling aspect of the war years was the minute stimulus to manufacturing. Iron production for small arms increased, but iron production for railroads declined. Although the demand for clothes and boots for servicemen stimulated manufactures, the loss of the southern market more than offset this. For example, in Massachusetts—the center of boot and shoe production—employment and output in that important industry decreased almost one-third during the war. Similarly, without raw cotton, the textile mills were underutilized. True, the enlistment and conscription of men ameliorated unemployment, and speculation offered opportunities for enrichment for a select few. Overall, however, expenditures by the federal government did not spur rapid industrialization or economic expansion.
We have considered the debate over the Beard-Hacker thesis in detail because it illustrates so clearly the importance of quantitative evidence. An argument may be persuasive, and it may be supported by numerous illustrative examples, but it can still be wrong (Economic Reasoning Proposition 5, evidence and theory give value to opinions).
World History
