Battle Cry of Freedom: The Civil War Era (90 page)

19
. John B. Robbins, "The Confederacy and the Writ of Habeas Corpus,"
Georgia Historical Quarterly
, 55 (1971), 86.

20
. Foote,
War
, II, 951; Frank L. Owsley,
State Rights in the Confederacy
(Chicago, 1925), 162–64.

did the South have as large a disloyal population—sizable though it was—in its disaffected upland regions as the Union contained in the border states. These areas accounted for most of the Lincoln administration's suspension of civil liberties.

For a few months in the spring of 1862, however, the rise in Union military fortunes caused a relaxation of northern procedures. Since July 1861, Secretary of State Seward had been in charge of internal security—an odd arrangement resulting probably from Lincoln's distrust of Secretary of War Cameron. Seward had organized a corps of agents whose zeal to ferret out treason brooked no restraint by rules of evidence. Seward seemed enamored of his power to throw into prison anyone he suspected of aiding the rebellion. Cries of outrage arose from Republicans as well as Democrats. Perhaps it was necessary to arrest pro-Confederate legislators in Maryland, wrote Horace Greeley, but when the government imprisoned such a prominent northern Democrat as James Wall of New Jersey (soon to be elected to the Senate) "you tear the whole fabric of society."
²¹

Lincoln recognized the justice of these protests. By February 1862 the detention of some two hundred political prisoners was doing more harm than good to the Union cause. The appointment of Edwin M. Stanton as secretary of war provided an opportunity for a change. On February 14 Lincoln transferred enforcement of internal security to the War Department. At the beginning of the rebellion, explained the president, harsh measures had been necessary because "every department of the Government was paralyzed by treason." Now the government had established itself and possessed armed forces sufficient to suppress rebellion. "The insurrection is believed to have culminated and to be declining. . . . In view of these facts and anxious to favor a return to the normal course of the administration," Lincoln therefore ordered the release of all political prisoners upon their taking an oath of loyalty. Stan-ton appointed a review board that applied liberal criteria for determining loyalty. Riding the crest of confidence in imminent victory, the North released most of its political prisoners during the spring of 1862. The
New York Tribune
rejoiced that "the reign of lawless despotism is ended." Stanton won praise as a humane civil libertarian—an ironic preview to his subsequent reputation as a ruthless tyrant.
²²

21
. Nevins,
War
, II, 312.

22
.
O.R
., Ser. 2, Vol. 2, pp. 221–23;
New York Tribune
, Feb. 17, 1862.

Stanton was also responsible for another optimistic policy decision in the spring of 1862. On April 3 he ordered all recruiting offices closed. The public perceived this as a sign that the armies were large enough to win the war. Stanton may have shared this belief; in any case he considered the existing system of raising troops inefficient. State governors, prominent individuals, and officers on detached service from active regiments were all beating the same bushes for recruits. Stanton closed down these operations in order to reorganize and rationalize them—if necessary. With the rebellion evidently collapsing in the West and McClellan poised for the final thrust up the Peninsula, many northerners believed it would not be necessary. By July they realized their mistake.

II

Events on the battlefields affected each side's ability to finance the war. The Confederate economy had started with two strikes against it. Most of the South's capital was tied up in the nonliquid form of land and slaves. While the Confederate states possessed 30 percent of the national wealth (in the form of real and personal property), they had only 12 percent of the circulating currency and 21 percent of the banking assets. The cotton embargo prevented the South from cashing in on its principal asset in 1861–62. Instead of possessing money to invest in Confederate bonds, most planters were in debt—mainly to factors who in turn were financed by northern merchants or banks.

The South initially hoped to turn that planter debt into a means of making Yankee bankers pay for the war. On May 21, 1861, Congress enacted a law requiring Confederate citizens to pay into the Treasury the amount of debts owed to U.S. citizens, in return for which they would receive Confederate bonds. Later legislation confiscated property owned by "alien enemies." Like so many other southern financial measures, however, these laws yielded disappointing results—no more than $12 million, a far cry from the estimated $200 million owed to northern creditors. Enforcement was difficult and concealment of debts easy. And some planters preferred to retain their credit rating with northern factors as an aid to selling cotton illegally across the lines.
²³

Of the three principal methods to finance the war—taxation, borrowing,

23
. John C. Schwab,
The Confederate States of America: A Financial and Industrial History
(New York, 1901), 110–20; Richard C. Todd,
Confederate Finance
(Athens, Ga., 1954), 157–65, 174.

and fiat money—taxation is the least inflationary. But it also seemed the least desirable to southerners in 1861. Antebellum Americans had been one of the most lightly taxed peoples on earth. And the per capita burden in the South had been only half that in the free states. A rural society in which one-third of the people were slaves, the South had few public services and therefore little need for taxes. Except for tariff duties —which despite southern complaints were lower in the late 1850s than they had been for almost half a century—virtually all taxes were collected by state and local governments. The Confederate government possessed no machinery for levying internal taxes and its constituents had no tradition of paying them. Congress enacted a tiny tariff in 1861, but it brought in only $3.5 million during the entire war. In August 1861 a direct tax of one-half of one percent on real and personal property became law.
²⁴
The Richmond government relied on states to collect this levy. Only South Carolina actually did so; Texas confiscated northern-owned property to pay its assessment; all the other states paid their quotas not by collecting the tax, but by borrowing the money or printing it in the form of state notes!

Loans seemed a better and fairer way to pay for the war. Risking their lives for liberty, southerners expected future generations to bear the financial cost of the independence won for them by the men of '61. The first bond issue of $15 million was quickly subscribed. Subsequent action by Congress in May and August of 1861 authorized the issuance of $100 million in bonds at 8 percent interest. But these sold slowly. Even those southerners with spare cash to invest had to dip deeply into their reserves of patriotism to buy bonds at 8 percent when the rate of inflation had already reached 12 percent a
month
by the end of 1861. Recognizing that willing investors might lack cash but possessed cotton, tobacco, and other crops, Congress permitted them to pledge the proceeds from such crops in return for bonds. This "produce loan," the brainchild of Treasury Secretary Christopher Memminger, was more ingenious in concept than successful in results. Some planters, having pledged part of their cotton, changed their minds and sold it instead on the open market or to agents of northern purchasers for higher prices. Only $34 million was eventually realized from the produce loan.

Investors bought most of the remainder of the $100 million bond issue with treasury notes. These notes came off the printing presses in

24
. By exempting a head of family if his property was worth less than $500, this tax was partly progressive in nature.

ever-increasing volume. The South resorted to this method of financing the war from necessity, not choice. Memminger warned in 1862 that the printing of notes was "the most dangerous of all methods of raising money. . . . The large quantity of money in circulation today must produce depreciation and final disaster."
²⁵
Indeed it did. But from the onset of war, bills accumulated on Memminger's desk faster than he could pay them with the proceeds of loans or taxes. He had no choice but to ask Congress to authorize treasury notes. Congress did so in amounts of $20 million in May 1861, another $100 million in August, a further $50 million in December, and yet another $50 million in April 1862. During the first year of its existence the Confederate government obtained three-quarters of its revenues from the printing press, nearly a quarter from bonds (purchased in part with these same treasury notes), and less than 2 percent from taxes. Although the proportion of loans and taxes increased slightly in later years, the Confederacy financed itself primarily with a billion and a half paper dollars that depreciated from the moment they came into existence.

These notes were to be redeemable in specie at face value within two years of the end of the war. In effect they were backed by the public's faith in the Confederacy's potential for survival. Some congressmen wanted to make the notes legal tender—to require by law all persons to accept them in payment for debts and obligations. But a majority of Congress, along with Memminger and President Davis, considered this unconstitutional, inexpedient, or both. A law to
compel
acceptance of the notes, they reasoned, would rouse suspicion, undermine confidence, hasten depreciation, and hence defeat the very purpose it sought to accomplish. The promise to redeem in specie after the war, said Memminger, was a better way to assure acceptability.

Southern states, counties, cities, even private businesses also began to issue notes and small-denomination "shinplasters." Shortages of high-quality paper and skilled engravers in the South meant that these as well as the Confederate notes were crudely printed and easily counterfeited. Some counterfeit notes could be detected because of their superior quality to the real thing. Awash in a sea of paper, the South experienced runaway inflation. At first the currency depreciated slowly, because Confederate victories in the summer of 1861 bolstered confidence. In September the price index stood only 25 percent above its January level.

25
. Eugene M. Lerner, "The Monetary and Fiscal Programs of the Confederate Government, 1861–1865,"
Journal of Political Economy
, 62 (1954), 509–ion.

But the issuance of new notes caused the index to jump 35 percent in the next three months. Military reverses in the spring of 1862 moved the index up 100 percent in the first half of the year; continued expansion of the currency caused it to double again in the second half. By the beginning of 1863 it took seven dollars to buy what a dollar had bought two years earlier.

This kind of inflation became, in effect, a form of confiscatory taxation whose burden fell most heavily on the poor. It exacerbated class tensions and caused a growing alienation of the white lower classes from the Confederate cause. Wage increases lagged far behind price increases. In 1862 wages for skilled and unskilled workers increased about 55 percent while prices rose 300 percent. Conditions on the small farms where most southern whites lived were little better. Although farm families grew much of what they consumed, the absence of adult males from many of the farms reduced crop yields and caused severe hardship.

The worst problem on many farms was the shortage of salt (the only means of preserving meat) and its catastrophic rise in price—from $2 a bag before the war to $60 in some places by the fall of 1862. Prior to 1861 the South, despite plentiful saline deposits, had imported most of its salt from the North or abroad. The war forced the rapid development of southern salt mines, but transportation priorities for war matériel, the deterioration of southern railroads, and shortages of labor kept supplies scarce and prices high. "There is now in this country much suffering amongst the poorer classes of Volunteers families," wrote a Mississippian in December 1862, "for want of
corn and salt
. . . . In the name of God, I ask is this to be tolerated? Is this war to be carried on and the Government upheld at the expense of the Starvation of the Women and children?" A rise in desertions from the army in 1862 resulted in part from the distress of the men's families. A mother of three children whose father was in the army wrote to Jefferson Davis in March 1862 that she could get no food. "If I and my little children suffer [and] die while there Father is in service I invoke God Almighty that our blood rest upon the South." A soldier from Mississippi who had overstayed his furlough wrote to the governor on December 1, 1861: "Poor men have been compelled to leave the army to come home to provide for their families. . . . We are poor men and are willing to defend our country but our families [come] first."
²⁶

26
. The first and third letters are quoted in Charles W. Ramsdell,
Behind the Lines in the Southern Confederacy
(Baton Rouge, 1944), 28–30; the second letter is quoted in Escott,
After Secession
, 122. For the salt problem, see Ella Lonn,
Salt as a Factor in the Confederacy
(New York, 1933).