Civil War History - Secession and PoliticsWas it Slavery, or was it States Rights? Perhaps it was the election of Lincoln? What were the real reasons for Southern Secession and what were the political issues in this time of war? Find your answers here in the Secession and Politics Disussion.
Tim, I have read Carlander and Majewski.
How do you think that a tariff like the 1857 tariff impacts international trade? Do you deny that it raises domestic prices? Do you deny that it causes some consumers to switch from consuming foreign goods (pre-tariff) to consuming domestic products (or substitutes)?
John, of course normal economics still apply. Why would anyone think otherwise? Every government that thinks different (there have been many, not just the Southerners who believed fantasies like King Cotton) discovers the hard realities sooner or later.
But that means ALL the rules of economics still apply. Products don't miraculously get produced cheaper just because you'd like to think they would. Transportation costs remain fairly constant -- and distance adds cost. Shipping iron stoves from England or France is not the same as shipping them from New York.
In 1860, some 68% of the Tariff was collected in New York City alone; some 7.2% was collected in the Southern ports. That is skewed a bit because NY dominated the coastal trade (followed by Boston, Philadelphia, and Baltimore), but even with English or French trade going directly to the South there would be no miraculous change in this.
One of the things you are not addressing is that the Confederacy was now going to put a tariff on goods that were not taxed in the US Tariff. That will only raise their domestic prices; it will not lower them. It will be the Southern consumer who ends up paying for this.
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Originally Posted by JohnTaylor
The impact of any tariff will depend on the elasticity of demand (and possibly the elesticity of supply) for that commodity. Let me give you an example (not a civil war example, but the principles are the same. If the US government imposed a 400% tariff in insulin used by diabetics, the amount consumed would not drop very much, and the incidence of the tariff would be mostly on consumers. If you pass a 400% tariff on coffee, a lot of people would switch to tea, or some other product, so the incidence of the tariff is consumption society decides to forego. The elasticity of demand determines a lot about who pays for the tariff. And the US share of the world market goes a long way in determining the elasticity of demand.
I was 3 Economics credits short of a double major when I was an undergrad, I run my own business, and I used to write software for arbitrage trading of commodities and financial instruments a few years ago. You can assume I have the basic concepts of supply and demand and valuation under control for future discussions.
I can tell you from experience -- mine and my customers in various businesses over the years, but with a heavy concentration on manufacturing/distribution in the last ten years -- that there are far more inputs to the equation than you show here, and the rates you are showing are, as I am sure you are aware, not relevant to the situation in 1857-61.
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Originally Posted by JohnTaylor
The people of the South would be paying a lower tariff after independence from the US, and would pay lower post-tariff prices, since they would be freed from the 1857 (and later, the Morrill tariff). If the only suppliers of the goods they consumed was the US, then you would be right. Which American-made commodities do you think fit that bill? No comment on that?
Well, no. One point of the Confederate Tariff of 1861 is that it expands the number of items that are taxed, and so Southern consumers would now be paying a tariff on items they were not paying before the war.
For example, you use coffee and tea in your example above. You have also referred in other places to the Morill Tariff passed in 1860 (House) and March 1861 (Senate). Yet there was no tariff on coffee, tea, or sugar in the Morill Tariff (supposedly so objectionable) of that date. Those items were on the free list. There was a substantial argument even in the emergency session of Congress in July 1861 about removing them from the free list -- after the war started, after the Confederates passed their Tariff, after defeat at Bull Run, when the need for revenue was pressing.
But if we look at the Confederate Tariff, we find that there is a Tariff of 20% on brown sugar and 10% on tea. Does the brown sugar tariff benefit LA planters at the expense of other Southerners? You'll find more if you like to look. There is a 25% rate on cigars -- none of which came from the North in 1860, all from other sources. How does that lower Confederate consumers' costs -- or is it merely a protectionist tariff for Southern manufacturers, or a revenue measure for the Confederacy?
The south, although a major producer of sugar, had but little capacity to refine it. They had but little capacity to turn their wealth of cotton into fabric or thread; ditto, wool. The non-cotton agricultural enterprises were unable to feed the entire population, let alone their animals -- and not mentioning at all the inability to transport such as they did have throughout the south. They would have had to import many, many things from abroad. And what do you suppose the price of refined sugar would become if it didn't come from the north? You got it -- exactly what the north would have charged for it, or as much more as they could get away with by trading on the hatred of the north.
The south was more dependent on northern manufacture or imports than their leaders lead them to believe.
One indication: in the 1850s, Virginia was looking for a way to build up their own manufacturing (intra-state tariffs were suggested, but then that would be unconstitutional as a restraint of trade). They came up with the idea of forcing Virginia businesses to buy local iron and steel products. The biggest objectors? Virginia RR companies, who objected very much to paying higher prices for RR spikes, rails, etc.
Well, no. One point of the Confederate Tariff of 1861 is that it expands the number of items that are taxed, and so Southern consumers would now be paying a tariff on items they were not paying before the war.
Tim, did you take Econ 101? If the commodity consumed was produced only in the US, then yes, Southern consumers would be paying a tax that they didn't pay before. But, and this is the critical point, if there were foreign producers of the commodity, then the Southern consumers would be freed from the higher US tariff, and real post-tariff prices would drop after secession.
Let me use a couple of examples to illustrate the point. Say that Southerners really liked cranberries, and (for the sake of argument) the world's only source of cranberries was New England. In this case, any Confederate tariff would increase prices of cranberries in the Confederacy. If, on the other hand, we are talking about cotton fabric, there are European producers of cotton cloth as well as American producers. Southerners don't have to buy Yankee-made cotton cloth; they can buy British cotton cloth. While in the US, under the tariff of 1857, Yankee cotton cloth is cheaper than European (barely), because of the operation of the tariff. After secession, the Confederate consumer has a choice of buying Yankee cotton cloth or European. Since both are now subject to the same Confederate tariff (which is lower than the old US tariff), Yankee cotton cloth is more expensive, and European cotton cloth is cheaper than it was. So Confederate consumers switch from buying Yankee cotton cloth, and buy the cheaper European cloth. Now, if a consumer really insisted in buying Yankee cloth, he can, but he will pay more, but due to the operation of the lower Confederate tariff. But, most would buy the now-cheaper European cloth.
Respectfully,
John Taylor
__________________ "In this Constitution, the citizens of the United States appear dispensing a part of their original power in what manner and what proportion they think fit. They never part with the whole; and they retain the right of recalling what they part with." James Wilson of Pennsylvania, October 28th, 1787
JT: So Confederate consumers switch from buying Yankee cotton cloth, and buy the cheaper European cloth. Now, if a consumer really insisted in buying Yankee cloth, he can, but he will pay more, but due to the operation of the lower Confederate tariff. But, most would buy the now-cheaper European cloth.
Let's remember that part of pricing strategy is what the market will bear. The Brit's would have been fools not to charge exactly the Yankee price plus import tax. Maybe a little more --counting on the Confederates to pay a skosh more just to spite the Yankees.
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Tim: One of the things you are not addressing is that the Confederacy was now going to put a tariff on goods that were not taxed in the US Tariff. That will only raise their domestic prices; it will not lower them. It will be the Southern consumer who ends up paying for this.
And the Confederacy had also enabled itself to levy a duty on exports.
Ole
__________________ I never knew a man who wished to be himself a slave. Consider if you know any good thing that no man desires for himself. A. Lincoln
Let's remember that part of pricing strategy is what the market will bear. The Brit's would have been fools not to charge exactly the Yankee price plus import tax. Maybe a little more --counting on the Confederates to pay a skosh more just to spite the Yankees.And the Confederacy had also enabled itself to levy a duty on exports.
Ole, the supplier doesn't get to charge whatever price he wants. He charges what the market will bear. (If it were otherwise, OPEC would charge $500 per barrel of oil). How much that market will bear will depend on elasticities of demand (and supply). Let's say that the US of 1859 consumed 30% of the world's cotton cloth. After secession, the South consumes 10%, the new US 20%. Within the CSA, since Yankee-made cloth is now more expensive, most Confederate consumers shift to buying European cotton cloth. Thus, since the 10% now consumes European cloth on the world market, the demand for non-US cotton cloth just went up by 14%, and the supply for US cloth on the global economy went up. Prices for European cloth will go up, slightly, and the price Yankee cloth makers can get goes down, by more. Yankee cloth-makers can survive in this new global economy by becoming more efficient and cutting their prices to compete with cheaper European cloth. Or they can go out of business. Two daunting alternatives to northern manufacturers, if secession were allowed to stand.
Respectfully,
John Taylor
__________________ "In this Constitution, the citizens of the United States appear dispensing a part of their original power in what manner and what proportion they think fit. They never part with the whole; and they retain the right of recalling what they part with." James Wilson of Pennsylvania, October 28th, 1787
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Originally Posted by trice Well, no. One point of the Confederate Tariff of 1861 is that it expands the number of items that are taxed, and so Southern consumers would now be paying a tariff on items they were not paying before the war.
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Originally Posted by JohnTaylor
Tim, did you take Econ 101? If the commodity consumed was produced only in the US, then yes, Southern consumers would be paying a tax that they didn't pay before. But, and this is the critical point, if there were foreign producers of the commodity, then the Southern consumers would be freed from the higher US tariff, and real post-tariff prices would drop after secession.
John, please just stop and read what I said. If there was *NO* import tariff on an item in the US and there *WAS* an import tariff on it in the Confederacy, why would Confederate consumer prices go down?
Take tea, for example. To the best of my knowledge, there was either no tea produced in the US at that time or it was produced in such miniscule amounts as to make no difference. Tea was on the free list of the Morrill Tariff President Buchanan signed into law on March 2, 1861. In May of 1861, the Confederate Congress passed and Jefferson Davis signed a tariff bill that would charge 10% on tea. Please explain how the Confederate 10% tariff is going to lower prices on tea.
Import tariffs on tea, coffee and sugar were generally considered revenue tariffs, not protectionist tariffs. (The only place you can really grow sugar cane commercially in the continental US is Louisiana, so most states were against that one.) The US had used these tariffs heavily in the early years of the Republic, and started phasing them down/out around 1840. The average person grumbled about them.
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Originally Posted by JohnTaylor
Let me use a couple of examples to illustrate the point. Say that Southerners really liked cranberries, and (for the sake of argument) the world's only source of cranberries was New England.
Actually, the cranberry crop was probably an American exclusive, and only the North American varieties are known to have health benefits. Even today, the Ocean Spray cooperative is about 60% of the world-wide market, and the rest is also overwhelmingly US-Canadian cultivation, maybe entirely. While cranberries grow wild in the upper regions of the northern hemisphere across Europe and Asia, the first known commercial farming of them was by American Revolutionary War veteran Henry Hall in Dennis, MA on Cape Cod in 1816. I do think it had moved down to NJ by the Civil War, though.
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Originally Posted by JohnTaylor
In this case, any Confederate tariff would increase prices of cranberries in the Confederacy.
Just like the real life example of tea did.
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Originally Posted by JohnTaylor
If, on the other hand, we are talking about cotton fabric, there are European producers of cotton cloth as well as American producers. Southerners don't have to buy Yankee-made cotton cloth; they can buy British cotton cloth. While in the US, under the tariff of 1857, Yankee cotton cloth is cheaper than European (barely), because of the operation of the tariff. After secession, the Confederate consumer has a choice of buying Yankee cotton cloth or European. Since both are now subject to the same Confederate tariff (which is lower than the old US tariff), Yankee cotton cloth is more expensive, and European cotton cloth is cheaper than it was. So Confederate consumers switch from buying Yankee cotton cloth, and buy the cheaper European cloth. Now, if a consumer really insisted in buying Yankee cloth, he can, but he will pay more, but due to the operation of the lower Confederate tariff. But, most would buy the now-cheaper European cloth.
What makes you think so?
The Confederate tariff is 15%, IIRR; the pre-war US tariff of 1857 averaged out to 18% in 1860 over all imports. In addition, there was a 10% discount on tariffs for many years if the ship carrying the imported goods was US owned (not sure if this is still in effect in 1860).
So how much of a difference in the actual tariff is there actually? Does it come down to a 1 or 2 percent drop for the European goods? If that 10% discount was still in effect in 1860, doesn't that come down to essentially a zero change?
While European costs might be lower, how much surplus capacity do they have? Can they cover ALL of the pre-war Northern sales? Only 50% of it? Maybe 5% of it in the short term? If so, why would prices change at all? Might it not be that European producers would just pocket the small difference to increase their own profit margin?
Since most of the goods you are buying came from the North and you have just increased their cost of goods sold without really lowering European manufacturers' costs, might the end result of this not be that Southerners paid more, Northern margins shrank, and European profits went up? If the Northerners understand that the Europeans can't supply the demand, why won't they just pass the tariff on to Southern consumers, and why won't Europeans increase their price to make more money?
Since most European goods went to New York first for transhipment in 1860, haven't you just increased European shipping costs to get the goods to New Orleans or Mobile? Reduced the carrying capacity of the European flag merchant fleet by requiring them to make longer voyages with longer turn-arounds at ports less suited to handling their traffic?
While cotton is valuable and in demand, that isn't the only thing the Europeans want. Does an English merchant really want to have his ship now engage in a triangle trade route (say Liverpool-New Orleans-New York) because they want the wheat from the North? Isn't the distribution system much more efficient with New York as a hub?
No offense, but I am feeling a bit cranky after your "Econ 101" crack. I have already told you I have an economics background and that I wrote software for arbitrage trading of commodities and financial instruments. I work with customers in distribution and manufacturing now, where deals are made daily on razor-thin margins. If you actually think global trade works in the cardboard-cutout closed-system way you describe, you need to go back and retake the course or get some practical experience. But then, so did the "King Cotton" believers of the secessionist South who thought they had an eternal money machine in a boom-and-bust commodity product, and that they could make the world bow down to their power.
Let's remember that part of pricing strategy is what the market will bear. The Brit's would have been fools not to charge exactly the Yankee price plus import tax. Maybe a little more --counting on the Confederates to pay a skosh more just to spite the Yankees.And the Confederacy had also enabled itself to levy a duty on exports.
Yes.
If Yankee prices go up, the Europeans can raise theirs and make a higher profit margin.
In JT's other example, if the South consumes 10% of the world cotton cloth demand and they won't buy from the Yankees, what makes anyone think the Europeans have the short-term production capacity excess to take that on without a massive industrial expansion? If they do not, then prices will go up as the most immediate result of this.
Also, since the South is so heavily dependent on cotton exports, what happens when their is a supply glut (as their would have been in about 1862-65 as the new cotton fields in Egypt and Ceylon came into production)? If cotton prices fall, how does the South pay for what they want? If cotton prices go up, doesn't that make the price of the finished cotton good go up as well?
Ole, the supplier doesn't get to charge whatever price he wants. He charges what the market will bear. (If it were otherwise, OPEC would charge $500 per barrel of oil). How much that market will bear will depend on elasticities of demand (and supply). Let's say that the US of 1859 consumed 30% of the world's cotton cloth. After secession, the South consumes 10%, the new US 20%. Within the CSA, since Yankee-made cloth is now more expensive, most Confederate consumers shift to buying European cotton cloth. Thus, since the 10% now consumes European cloth on the world market, the demand for non-US cotton cloth just went up by 14%, and the supply for US cloth on the global economy went up. Prices for European cloth will go up, slightly, and the price Yankee cloth makers can get goes down, by more. Yankee cloth-makers can survive in this new global economy by becoming more efficient and cutting their prices to compete with cheaper European cloth. Or they can go out of business. Two daunting alternatives to northern manufacturers, if secession were allowed to stand.
It is a nice theory, but practice doesn't work that way.
For example, what makes you think the European manufacturers have the capacity to supply the Southern market in your example? Can they suddenly increase producttion to that extent? Or will they decide to ship to the Confederacy and not sell in their own home market? If so, won't that raise prices in England or France, etc.? If prices in Europe rise, won't it be more profitable for the English and French to sell in Europe, where margins would be better and shipping costs, etc. lower? Won't that in turn disrupt supply to the South and allow Yankees to raise prices?
Worldwide supply pricing, assuming equal access and product quality, is like a lake: you drink from the edges and the level rises or falls over the entire surface and perimeter. But global trade is not like that in most cases. Tariffs, transportation and distribution costs create vast differences from one area to another. Europeans will sell to the Confederacy based on profit, not price, and if they can make more profit selling elsewhere, they will. The same for Americans.
The basic truth was the United States was not going to let the land go without a fight. And it wasn't a fight just for the land within the Confederacy! It was also a fight for the territories. The South needed the territories to sell excess slaves within their states.
The United States may have been many things, but it was the Union of the land. And that involved economics and taxes.
By 1863, the U.S. had endebted itself for billions fighting the war, and I doubt any group could have ended the war, without victory over the Confederacy.
In my mind, economically there was no way the U.S. could end the war without disasterous results. The war bonds, owned by many in the U.S., would have fell in value, probably resulting in affecting an economic recession/depression, often referred to in those days as Panics.
Southerners could politically take themselves out of the Union; taking the land out of the Union meant war.
The basic truth was the United States was not going to let the land go without a fight. And it wasn't a fight just for the land within the Confederacy! It was also a fight for the territories. The South needed the territories to sell excess slaves within their states.
Hmm. No, not in the short term. The problem in the Deep South was that they were net importers of slaves. They also had some areas (certain counties in SC and parishes in LA, for example) where the slave death rate was higher than the slave birth rate, requiring constant purchase/import of new slaves just to keep a constant level and even more if you wanted to expand your sugar or rice plantation.
MD and VA were the big net exporters of slaves. They were making a lot of cash selling slaves to SC-GA-FL-AL-MS-LA-TX-AR for the clearing of land and raising of crops down there. With a tight supply and a big demand, slave prices kept rising.
Southern expansionists thought more in terms of "Manifest Destiny", a term coined during the Mexican War. The real hard-core was thinking in terms of conquest/aacquisition of Central America and Cuba.
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Originally Posted by whitworth
...The United States may have been many things, but it was the Union of the land. And that involved economics and taxes.
By 1863, the U.S. had endebted itself for billions fighting the war, and I doubt any group could have ended the war, without victory over the Confederacy.
In my mind, economically there was no way the U.S. could end the war without disasterous results. The war bonds, owned by many in the U.S., would have fell in value, probably resulting in affecting an economic recession/depression, often referred to in those days as Panics.
There was a possibility of one occurring in early 1861. One reason for the Morrill Tariff Buchanan signed March 2, 1861 was that the Buchanan Administration was a financial disaster for the US. In March 1861, northern bankers were declining the opportunity to loan money to the US government, and Europeans thought the various state governments looked more solvent individually than the US government looked.
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