Economy of the Confederate States of America

The Confederate States of America (1861–1865) started with an agrarian-based economy that relied heavily on slave-worked plantations for the production of cotton for export to Europe and to the Northern US.

[1] But, when the Union began its blockade of Confederate ports in the summer of 1861, exports of cotton fell 95% 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 on a delicate railroad system for transport that, with few repairs being made, no new equipment, and destructive raids, crumbled away.

[2] The main prewar agricultural products of the Confederate States were cotton, tobacco, and sugarcane, with hogs, cattle, grain and vegetable plots.

[4] In 1862, there was a severe drought that, despite efforts to switch from cotton planting to grain farming, caused food shortages and even bread riots in 1863–64.

Compounding the problem was the ever-increasing number of refugees flooding into cities; food distribution became increasingly harder, and at times, impossible.

[7] The progressive destruction of the Southern railroad network, along with rapid inflation, affected women in the cities especially hard as they found food prices too high to afford.

In Richmond, at the end of a long supply chain, the crisis exploded in bread riots in April 1863, when a large mob of starving women in the city looted stores for food, ignoring the pleas of President Jefferson Davis who stood upon a cart to toss coins to the women, who dispersed only after he threatened to order a company of militia to open fire.

[8] In dozens of small towns across Georgia in 1863, working-class women raided stores and captured supply wagons to get such necessities as bacon, corn, flour, and cotton yarn.

[13] During the war, Columbus, Georgia became one of the most important centers of industry in the Confederacy, ranked second to Richmond in the manufacture of supplies for the Confederate army.

[17] When the war turned negative, many industries in the South struggled as they faced steadily growing shortages of raw materials and skilled labor, as well as worsening financial opportunities.

His firm made bayonets, sabers, Bowie knives, and sheathes or scabbards for these weapons, as well as thousands of metal buttons for military uniforms.

[20] The most famous was the CSS Virginia, a steam-powered ironclad warship built in 1861-62 using the raised and cut down original lower hull and steam engines of the scuttled USS Merrimack.

[30] Finding this approach inadequate, the government moved to consolidate finished-goods production into military-run textile shops concentrated in larger cities.

[42] Disputes over the proper tariff rate had been a sectional political issue between Northern and Southern states at one point almost leading to a prior dissolution of the Union.

Southerners mostly opposed protectionist tariffs for finished goods, fearing they would lessen the value of their raw material exports, as foreign manufactures would be blocked sale back to the United States.

[45] Despite these efforts, the first shipment did not leave England until August, and didn't arrive in the South till November, a full 8 months after the outbreak of hostilities.

[46] The slow rate of importation continued from September 1861 to February 1862, with a grand total of 15,000 small arms procured for the Confederate's war effort.

[51] Only the Confederate steamer, the Alabama, after finding the Atlantic too hostile, set sail for Pacific waters in an attempt to wreck America's Far-East trade.

[53] Smuggling over land, from either Mexico or Union territory, also provided a profitable trade in luxury items, though it also became a useful means of acquiring much-needed medicine.

The main international bankers in Europe were reluctant to finance the Confederacy, so Richmond turned to smaller houses and speculators, who bought $15,000,000 in Confederate bonds with gold.

Night blindness caused by malnutrition reduced the combat effectiveness of Confederate troops, who also lacked adequate blankets, clothing, and shoes.

The people at the time however primarily blamed speculators, who acquired an evil victorious image they could never shake off, as typified by the character Rhett Butler in Margaret Mitchell's 1936 novel Gone with the Wind.

Other critics claimed the Commissary Department because of its inefficiency and corruption, the collapse of the internal transportation system, with priority given to military needs over shipment of farm products, and the lack of cloth sacks and plows and the declining supervision of slaves, deliberate destruction caused by stragglers and union raids, as well as wasteful harvesting methods by inexperienced poorly supervised workers.

These, with the exception of Texas, contributed their apportioned share to the central government by issuing bonds or notes, so that the tax was in reality but a disguised form of loan.

In the autumn of 1862 Confederate law attempted to compel note-holders to fund their notes in bonds to reduce the redundancy of the currency and to lower prices.

This drastic measure was accepted as meaning a partial repudiation of the Confederate debt, and though it for a time reduced the currency outstanding and lowered prices, it wrecked the government's credit, and made it impossible for the Treasury to float any more loans.

The French banking house of Erlanger & Company undertook to float a loan of $3,000,000, redeemable after the war in cotton at the rate of sixpence a pound.

The Confederate agents mismanaged the placing of the bonds in Europe, but notwithstanding, a considerable sum was secured from the public and used for the purchase of naval and military stores.

This was aided in part by the (incorrect) assumption of some investors that, even should the Confederacy lose the war, the United States government would honor and redeem the bonds.