The Confederate Fiscal and Monetary Policy" an All-Encompassing Failure

lurid

First Sergeant
Joined
Jan 3, 2019
After studying the Confederates economic strategy under Christopher Memminger It has me wondering why in the world the south engaged in the CW. The bottom line is that once the Union blockaded southern ports the south could not export cotton, which is how it accrued the majority of its revenue. Consequently, there was no way the Confederates could have funded the war within a an economically sound sphere. Christopher Memminger implemented some awful economic polices that worsened the Confederates economic position. However, can we blame Memminger or just the south didn't have the wherewithal to fund the war?

Revenue sources:

1). Tariffs: could not collect money because of the Union blockade on southern ports.

2). Taxation: collected only 8.2% taxes of its total revenue.

3). Loans: the Confederacy accepted a $15 million loan from the French banking house of Emile Erlanger that yielded much less than its face value (about $8.5 million).

4). Government securities: The South successfully sold some long-term government securities during the early stages of the war. Bond issues proved a limited source of war financing as Southern prospects diminished, however. Investors increasingly shied away from purchasing securities offered by a government with little or no tax base and a deteriorating military situation.

5). Exports: some 2.5 million bales of cotton were burned in the South to create a cotton shortage. Indeed, the number of southern cotton bales exported to Europe dropped from 3 million bales in 1860 to mere thousands. The South, however, had made a pivotal miscalculation. Southern states had exported bumper crops throughout the late 1850s and in 1860, and as a result, Great Britain had a surplus of cotton. Too, apprehension over a possible conflict in America had caused the British to accumulate an inventory of one million bales of cotton prior to the Civil War. Couldn't unload its primary crop.

6). Bonds: In 1861 the Confederacy sold bonds worth $150 million in the so-called Bankers Loan, which secured much-needed specie. The government also tapped agricultural staples through the Produce Loan, in which planters pledged their produce in exchange for government paper. Against the receipts of these loans, Memminger issued Treasury notes, circulating paper money with which the government paid its bills. In August, 1861 the Confederate Congress passed a War Tax on various kinds of property to increase government resources. Unfortunately Memminger's department was inefficient in collecting the produce subscribed to the Produce Loan, and he allowed taxes to be paid in inflated state currency.

7). Printing paper money: 1 billion in Confederate notes were printed, double the number of Greenbacks with north had a much higher population. This caused hyperinflation, at 9,000%. A Confederate dollar worth eighty-two cents in gold or silver in 1862 plummeted to $.017 in 1865. The hyperinflation was a inverse tax put on southerners.

8) Impressment: confiscating goods, property and all other commodities was the last resort of a desperate government trying to accrue revenue.


In conclusion, the Confederates created a $700 million national debt along with 9,000% hyperinflation, which are leading indicators that it should have never engaged in the Civil War because they could not afford to finance it. I just wonder why the south even bothered when the debacle was on the horizon and the writing was on the wall.








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Burdekin, Richard C. K. and Farokh K. Langdana. “War Finance in the Southern Confederacy.” Explorations in Economic History 30, no. 1 (1993): 352-376.


Burdekin, Richard C. K. and Marc D. Weidenmier. “Inflation is Always and Everywhere a Monetary Phenomenon; Richmond vs. Houston in 1864. American Economic Review 91, no. 5 (2001): 1621-1630.


Burdekin, Richard C. K. and Marc D. Weidenmier. “Legal Restrictions Theory and Interest-Bearing Money: Lessons from the Southern Confederacy.” Cato Journal, in press, 2002a.


Burdekin, Richard C. K. and Marc D. Weidenmier. “Suppressing Asset Price Inflation: The Confederate Experience, 1861-1865.” Economic Inquiry (forthcoming).
 
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