Economic history of the American Civil War

[2] In Washington, D.C., the United States Congress wrote an elaborate program of economic modernization that had the dual purpose of winning the war and permanently transforming the economy.

[4][5] The industrial advantages of the North over the South helped secure a Northern victory in the American Civil War (1861–1865).

[6] After the war began in April 1861, President Abraham Lincoln and Secretary of the Treasury Salmon P. Chase faced the massive challenge of funding it.

[7] Congress quickly approved Lincoln's request to assemble a 500,000-man army, but initially resisted raising taxes to pay for the war.

However, after the Union defeat at the First Battle of Bull Run in July, Congress passed the Revenue Act of 1861, which imposed the first federal income tax in U.S. history.

This taxation of income reflected the increasing amount of wealth held in stocks and bonds rather than property, which the federal government had taxed in the past.

Greenbacks were the first banknotes issued by the federal government since the end of the American Revolution, when the "Continentals" caused runaway inflation and became almost worthless.

[13] They were highly effective and (after borrowing) were the major solution the Treasury needed to finance the war[14][15] As military expenses soared, the Union armies faltered in their plan to capture Richmond.

According to one newspaper account, it set a federal tax on:[17] Liquor, beer, tobacco, cigars, lard, linseed oil, paper, soap, salt, shoe leather, flour, railroad passengers (per mile), steamboat passengers, ferry boats, trolleys, advertisements, and carriages.

Britain was the largest trading partner, and its protests were ignored by Americans annoyed that it had created and funded a system of blockade runners to supply the South with food and munitions.

[23] The government continued to issue greenbacks and borrow large amounts of money, and the United States' national debt grew from $65 million in 1860 to $2 billion in 1866.

Those acts established the Office of the Comptroller of the Currency to oversee "national banks," which would be subject to federal, rather than state, regulation.

He organized highly publicized campaigns that enabled ordinary middle class citizens to purchase $50 savings bonds in monthly installments.

[26] The purchasers of bonds gave up money that would have been spent on civilian goods, in return for the promise that they would be repaid with interest after the war.

The money was mostly wasted on ships that were never delivered (because of the Union blockade) and in futile efforts to prop up the price of Confederate bonds to fool Europeans that the new nation was doing well.

[34] When the Union began its blockade of Confederate ports in the summer of 1861, exports of cotton fell 95 percent and the South had to restructure itself to emphasize the production of food and munitions for internal use.

After losing control of its main rivers and ports, the Confederacy had to depend for transport on a weak railroad system that, with few repairs being made, no new equipment, and destructive raids, crumbled away.

The financial infrastructure collapsed during the war as inflation destroyed banks and forced a move toward a barter economy for civilians.

[35] The financing of war expenditures by the means of currency issues (printing money) was by far the major avenue resorted to by the Confederate government.

According to William Hesseltine:Throughout the South, fences were down, weeds had overrun the fields, windows were broken, live stock had disappeared.

Every Confederate state was affected, but most of the war was fought in Virginia and Tennessee, while Texas and Florida saw the least military action.

Paul Paskoff calculates that Union military operations were conducted in 56% of 645 counties in nine Confederate states (excluding Texas and Florida).

By the time the fighting took place, undoubtedly some people had fled to safer areas, so the exact population exposed to war is unknown.