rhp6033
Sergeant Major
- Joined
- Aug 4, 2011
- Location
- Everett, Washington
In 1861, before the blockade was really in place, Judah Benjamin suggested that the Confederate government buy up all the cotton it possibly could and ship it to Europe, where it could be used as collateral to float government loans in European bond markets. This would have had a significant impact on the subsequent course of the war, since it would have kept inflation at lower rates than actually happened historically. Inflation was as much a cause of the Confederacy's collapse as anything else. The Civil War, like most wars, was won and lost on the bond market just as much as on the battlefield.
I agree, Benjamin's plan made sense. Instead, they were burning cotton at the dockside with the idea that somehow this would create enough of a shortage to compel Britain to intervene. Under Benjamin's plan, the South could have created a cartel in cotton, similar to OPEC, which sold just enough to keep Britain from growing their Indian and Egyption cotton, and made a huge profit to boot.
I was thinking of the Confederacy's economic policies as being a major contributor to their demise. You would have thought that with less than a hundred years between the American Revolution and the Civil War, they might have appreciated the difficulty in financing a war, much less a government, all from scratch. Take a look at the financing the Continental Congress had to use during the American Revolution:
(a) Buying up goods (mostly wheat) and selling it abroad, shipped in the hulls of merchant ships and using the profits to fund the war. This was okay as far as it went, but it was a pittance of the amounts needed to pay and supply an army.
(b) Issuing promissory notes to farmers and others in exchange for supplies, to be paid after the war was over. Of course, once the initial fever of patriotism passed it became harder and harder to find suppliers willing to part with goods in exchange for notes, especially in an inflationary economy.
(c) Issuing bonds to be repaid after the war. The rather meagre interest rates by today's standards didn't compensate for the risk involved, so this limited it's ability to raise money.
(d) Issuing paper currency which quickly devalued as inflation took hold due to shortages.
(e) Allowing the states to compete with the national government in all of these money-raising schemes.
The Confederacy went through exactly the same path, and at just about the same rate, as the Continental Congress did. But the success of the revolution was a very near thing, by the time of the movement from near New York City south to entrap Cornwallis, large portions of the army were threatening to go directly to Congress in a coup to obtain the money owed to the soldiers for years. Only the arrival of French forces, and more importantly large loans in the nature of hard currency in strongboxes, prevented that from occuring as an initial payment on a portion of the debt owed the solders was distributed to them. The Confederacy never had a foreign government willing to shell out large amounts of hard currency to support them.
