Targeting Lost Causers

My oh my, what would the critics, the Civil War publications, publishers, and bloggers do if it weren't for the bad boys of the Confederacy and those who study them and also those who wish to honor their ancestors who fought for the Confederacy?

Our good friend non-sequitur casually asked for an explanation of the tariff problem facing the South in 1861.

He implies that it must be a two sentence explanation....but does not acknowledge that for years such fine posters as GOPCapitalist, Rustbucket, lentulusgracchus, 4CJ, and many others have spent hours telling him that which he asks for again.

Well, let's give it to him again. Pardon the bandwidth useage, but I think it is important that we all make the issue CRYSTAL clear to him.

Post 1 of 3

To: DomainMaster; 4CJ; Gianni; rustbucket; Restorer; stand watie
From the perspective of an historian, I couldn't agree more.

The history of countries, from early Greece and Rome, to modern European Spain, France and Great Britain, teaches that the economic foundation of every single empire is the successful flow of money. Strong countries became the dominant countries. Their leaders focused on building better and stronger economies, and as a consequence, a better and stronger military. One part of the revenue went to improve the living standards of the country; the other part went to strengthen the military dominance often necessary to enforce the collection of more revenue from outside sources.

It was the common belief among the leaders of the emerging European powers that the economic health of a nation could be measured by the amount of precious metal, gold, or silver, which it possessed. The rise of a money economy, the stimulation produced by the influx of bullion, the fact that taxes were collected in money, all seemed to support the view that hard money was the source of prosperity, prestige, and strength. Financial supremacy dictated a favorable balance of trade. That is, for a nation to have precious metals on hand at the end of the year, it must export more than it imported.

In many examples, foreign trade led to domination of emerging foreign nation-states by others. As these trading partners became subjects of the developing empires, the dominant country began taxing these states. The taxing of the subject state came in various forms - usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources-whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.

While empires such as the British and French taxed other nation-states, the fledgling United States, which had emerged from the status of subject-state via the American Revolution, did not have access to other nation states to generate revenue. This hegemonic-subservient relationship did not appeal to the new American consciousness, as displayed in its Constitution, and with liberty in mind, it also did not choose to direct tax its own citizens.

Instead, the new United States government chose to institute a system of taxation on foreign trade by using tariffs on imported goods. American production was not taxed as it left the country, but goods bought overseas and delivered to American ports were taxed, with the revenue going directly to the U.S. Treasury.

Many in government in the developing United States, who saw the necessity of achieving economic self-sufficiency, wanted to protect the nascent new industries that would produce goods to be exported. Often, infrastructure improvements that would either provide low cost transportation, or improve market access were underwritten by the government. In the case of domestic manufactured goods for sale within the country, tariff rates would be raised over the going rates elsewhere in order to encourage the United States citizens to purchase American made goods.

Thriving agriculture was carefully encouraged. Domestic production not only would preclude imports of food, but serve as exports that became the currency to buy overseas finished goods instead of bullion being transferred. Farmers also provided a base for taxation because of their demand for implements and finished goods.

As the 1850s drew to a close, there arose in Congress those that championed the goal of regulated commerce that could produce a planned and regulated favorable balance of trade. In general, tariffs should be high on imported manufactured goods and low on imported raw material. They essentially realized that the Southern states and its vast market were captive markets for manufactured goods while being primary sources of raw material for Northern consumption or export.

Post 2 of 3

In essence, the domestic production of the South eliminated the need for the United States to export valuable metals to obtain goods. Since cotton, tobacco, rice, sugar, and flax were used to obtain the English goods, the production of the South was the currency of the trade of the country.

Those in power in the government that understood the necessity of a successful economic strategy, including the incoming President, Abraham Lincoln, knew that a large population of inexpensive workmen was needed to provide a domestic labor force that would produce the agricultural products to be exported. In his first inaugural speech, President Lincoln flatly stated that he would not interfere with slavery where it currently existed. He knew that the economic system of production should not be disturbed, and he promised not to change that status if the Southern states would remain in the Union.

By the 1850s, over 95% of the total revenue collected by the Treasury department was from tariff revenues. The expenses of the government, including operations, the military, and internal projects, were essentially totally financed by tariff revenue. When the Southern Confederacy was formed, not only was the revenue stream of the US Treasury broken, but the government would need to borrow.

The finances of the Federal Government had been in a very disordered condition due to business downturns resulting from the political disturbances, and which by reducing the imports of overseas goods, had reduced the customs income, the chief source of revenue for the Treasury.

In June, 1860, a loan of twenty million dollars had been authorized by Congress. Of this amount, ten million was offered in October in a five per cent stock, and it had been taken by investors at a small premium.

Before any installments were paid up, the panic that attended the election had affected credit, and many bids were withdrawn.

This so seriously affected the Treasury Department, that as the New Year approached, it seemed likely there would be no funds with which to meet the interest on the National debt.

By the Act of December 17th, 1860, an issue of ten million dollars, in treasury notes, was authorized, to bear such a rate of interest as might be offered by the lowest bidders, but so shaken was credit, few bids were made, and some of them at a rate of thirty six per cent interest per annum.

The capitalists interested in the Government credit finally took one million five hundred thousand dollars of one year treasury notes, at twelve per cent per annum (the amount was subsequently raised to five million dollars), on condition that the money should be applied to paying the interest on the national debt.

This was certainly a dark day in the Capitol, when the Federal Government, which had earned the honor of being the only nation that had ever paid its debts in full—principal and interest—and which in 1856, with an overflowing treasury, had paid twenty-two per cent premium for its own stock, was now reduced to give twelve per cent interest, for a few millions, and to engage to protect its credit with the money.

Post 3 of 3
This, combined with the specter that as soon as the primary cotton and tobacco producing states seceded with the subsequent massive loss in exportable products, that the US Treasury was in great jeopardy.

Just as Lincoln took office, the United States Congress voted a doubling of the tariff rates. This aggressive tax and protectionist policy had been advocated for decades by political groups seeking to protect their interests. Just as the new president was organizing his government, the Confederacy announced its tariff rates—one half the of the new Union rates.

With New Orleans already the gateway to the Midwest, and with Charleston having a newly dredged harbor, Lincoln and his supporters realized that direct trade with Europe would now be possible for Southern business interests. This would supplant the shipping, banking, insurance, and freight companies that flourished with the movement of Southern goods through northern ports into the overseas trade. Northern ports, supplying the mid west would also be damaged by the trade that would move back through New Orleans, Galveston, and Mobile.

After the tariff rates were announced, newspapers, politicians, businessmen, and industrialists called on Lincoln to take action to obviate the Southern competition. Since essentially the Southern states were forming their own cotton, rice, and tobacco world exchange, he had to halt it.

His options were not plentiful. He could not sabotage the Confederate market without initiating a blockade, and because that would be an all out unilateral act of war that no one in his cabinet would support. He could use the United States Army and Navy to materially force the Confederacy back into the Union, however he knew that the citizens of the country and world opinion would be against him. He could not risk his new administration by being an obvious aggressor to the new Confederacy.

He could not underwrite a change in government, or ‘coup d’etat’ since the Confederate government had just been formed with essentially the same Constitution as that to which he had just pledged to support. Again, he would be seen as the aggressor against a country with the same laws to which he and his party swore loyalty.

He did have the option of negotiating acceptable terms and limitations that would be acceptable to both parties. However, this would involve dismantling the tariff system, changing the taxation traditions of the government, and opening up American manufacturing to foreign competition. Also, since the less influential individual Southern states had now formed essentially a powerful trading block that could require cooperation that they could not achieve as members of the Union, the new government faced the fact that a new country had been founded and must be dealt with.

He could not depend on any European countries to aid the government in the institution of trading sanctions because they wanted a less powerful United States.

However, since his ‘house divided’ speech, Lincoln had demonstrated an unassailable inclination towards confrontation with the Southern leadership. He, therefore, chose a course of action that was coercive but not obviously aggressive, and enabled plausible deniability over the actions that eventually led to the outright war that most of the era expected.

Without notifying Congress, Lincoln sent a fleet of Union warships under command of a retired junior Naval officer under orders to send supplies to a group of Union soldiers that were about to surrender and leave a fort with no function other than to force taxation of the local people. Their resistance became labeled rebellion, despite the absence of any other higher authority from which to rebel, except a sitting U.S. president who had vowed to protect the revenue stream from Southern production.

The new President would accept slavery but not the loss of revenue for the country. He essentially treated the Southern Confederacy as subject states of which he demanded that they remain under the taxing authority of the government.

It is interesting that an earlier poster postulated that states that ignored the 'runaway slave' act were noble in their effort to resist the government. It can equally be said that the Confederacy, and particularly the people of Charleston were noble in their efforts to resist the Union naval invasion of Charleston Harbor and Lincoln's openly stated and absolute objective of protecting the revenue flow to the Treasury. These people were resisting the efforts of Lincoln to reduce them to minor nation-states to be taxed as the Europeans had done in Africa and in the far East.

He implies that it must be a two sentence explanation....

Not at all. But coming from you I'm sure it will be highly imaginative.

As the 1850s drew to a close, there arose in Congress those that championed the goal of regulated commerce that could produce a planned and regulated favorable balance of trade. In general, tariffs should be high on imported manufactured goods and low on imported raw material. They essentially realized that the Southern states and its vast market were captive markets for manufactured goods while being primary sources of raw material for Northern consumption or export.

And you didn't disappoint. What you ignore is that the tariffs hit all parts of the country equally, North as well as South. A consumer of a good protected by a tariff in New England paid the very same inflated price for it that the consumer in South Carolina did. So your claim that the South was some sort of captive market is absurd. They had the very same choice that any other consumer had - pay the high price for the domestic made good or the higher price for the imported good. The idea that the tariff singled out the South is absurd.

I now understand. It's fear. You neoYankees see the writing on the wall. The country is turning marxist/statist. Without the south the north is finished. You know it's true. Your lost cause is trying to tamp down any separatist notion that pops up. No one gets out alive, we all sink togethet is your lost cause. Screw all Yankees.

Wow. Self-centered much?

What gets me about you guys is how you constantly play the whiny, put-upon, victimized minority, oppressed by "the man," who, in your mind, does nothing all day but figure out ways to keep you down.

Change "southern" to any other self-identified victim group and the rhetoric is the same, right down to the "One of these days, we'll show you. Just you wait."

I guess the south's switch from voting Democrat to Republican was only for show. You guys are still Dems at heart.

In his first inaugural speech, President Lincoln flatly stated that he would not interfere with slavery where it currently existed. He knew that the economic system of production should not be disturbed, and he promised not to change that status if the Southern states would remain in the Union.

Or could it have been because Lincoln knew he did not have the authority to interfere with it, or sufficient support to change the Constitution to give him that authority? But accepting it where is was is a far cry from tolerating its expansion into the territories, and in that Lincoln was completely opposed.

When the Southern Confederacy was formed, not only was the revenue stream of the US Treasury broken, but the government would need to borrow.

I would disagree that the revenue stream was broken. Reduced, certainly, by as little as 5% in best case scenario, or as much as 25% in the worst case. But the majority of the tariff income would still be flowing into the government coffers. And the government had borrowed in the past.

This was certainly a dark day in the Capitol, when the Federal Government, which had earned the honor of being the only nation that had ever paid its debts in full—principal and interest—and which in 1856, with an overflowing treasury, had paid twenty-two per cent premium for its own stock, was now reduced to give twelve per cent interest, for a few millions, and to engage to protect its credit with the money.

Rather an overstatement.

This, combined with the specter that as soon as the primary cotton and tobacco producing states seceded with the subsequent massive loss in exportable products, that the US Treasury was in great jeopardy.

Another overstatement.

With New Orleans already the gateway to the Midwest, and with Charleston having a newly dredged harbor, Lincoln and his supporters realized that direct trade with Europe would now be possible for Southern business interests.

It had always been possible. In fact, according to figures printed in "Lifeline of the Confederacy: Confederate Blockade Running During the Civil War" Stephen Wise notes that well over 90% of all cotton exported from the U.S. left from Southern ports. And he also notes that this trade was one-sided, with the vast majority of exports leaving from Southern ports and the overwhelming majority of imports arriving at Northern ports. Why wouldn't this continue? The confederacy could ship its goods on U.S. ships just as easily after the separation as before.

After the tariff rates were announced, newspapers, politicians, businessmen, and industrialists called on Lincoln to take action to obviate the Southern competition. Since essentially the Southern states were forming their own cotton, rice, and tobacco world exchange, he had to halt it.

Competition in what? After the separation the U.S. would not be competing in producing cotton or tobacco. The confederacy, with zero merchant marine to begin with, would not be competing in that area. Finance, insurance, brokering, exporting, all had been contracted out to Yankees before the separation, why wouldn't the South continue that arraingement? There certainly wasn't any alternative available to them in the confederacy.

He did have the option of negotiating acceptable terms and limitations that would be acceptable to both parties.

That was not an option. Lincoln was offered the change to recognize the legitimacy of the Southern acts of secession and accept confederate sovereignty, period. No negotiations on that point were offered by the confederacy. Repeating this canard of your's again and again doesn't make it true.

However, this would involve dismantling the tariff system, changing the taxation traditions of the government, and opening up American manufacturing to foreign competition.

Why? What impact would confederate independence have on U.S. tariffs?

He could not depend on any European countries to aid the government in the institution of trading sanctions because they wanted a less powerful United States.

If that was true then why didn't the European powers jump at the chance and recognize the confederacy on day 1? Wouldn't that weaken the U.S. right away, if that was their goal?

However, since his ‘house divided’ speech, Lincoln had demonstrated an unassailable inclination towards confrontation with the Southern leadership.

Complete nonsense. The person who wrote this obviously never read the speech.

He, therefore, chose a course of action that was coercive but not obviously aggressive, and enabled plausible deniability over the actions that eventually led to the outright war that most of the era expected.

He chose the course which allowed Davis to decide if it was to be war or the status quo. Davis chose war.

Without notifying Congress...

Why did he have to notify Congress?

...and leave a fort with no function other than to force taxation of the local people.

That's past nonsense and approaching bullshit territory. As does the rest of it.

Kudos to you sir. The Panic of 1857 affected the NORTHERN states, but lightly affected Southern states, due to the demand for Southern exports. Losses in the North and West were estimated at 142 MILLION (back when a million was an immense sum), while Southern losses were only 17 million. The world was not beating down the doors to import Northern manufactures, especially when they could purchase superior products from Great Britain. But the world needed Southern products badly, with cotton exports single-handedly rescuing the economy.

In 1857 bitterness arose between the sections increased, as millions of Southerners - including slaves - remained prosperous and well-fed, but in the North some 200,000 had lost their jobs, and "Bread" riots occurred in the North, not the South. Parson Brownlow of Tennessee stated that Northen industrialists should refrain from attacking slavery, and instead find means to feed the starving Northern poor.

The net result of the Panic of 1857 [the worst up to that point in time] was a massive shift in fortunes, as money vanished from Northern pockets and found it's way South.

Anyone wanting to understand the economic motivations of Lincoln and the North should study the Panic of 1857 and it's aftermath, and understand the increased bitterness and hatred of Southerners and slavery.

Their resistance became labeled rebellion ...

Of course it must, otherwise the secessionists were morally and legally correct, and Lincoln and his cadre were the despots and dictators.

Again, during the convention, one James Madison, motioned for the power of the militia to PREVENT SECESSION, and force the secessionists to rejoin the union. Giving credit where it is due, the framers REJECTED his insane motion overwhelmingly.

Those framers knew that they had seceded from Great Britain, and were about to secede from the Articles of Confederation and ~~Perpetual~~ Union.

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