Hawk1981
VIP Member
- Apr 1, 2020
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The start of the American Civil War forced both the Confederate and Union governments to rapidly develop strategies to fund their military efforts. Both governments had to mobilize their armies and navies, develop military strategies, and finance these efforts effectively. Given their common heritage and history, and that the key decision makers on the two sides knew each other well from their previous experiences in Washington, it would seem plausible, and even expected, that both the Confederate and Union governments would pursue similar financial policies to set in motion and maintain their military forces.
The Union and Confederate governments had nearly identical decision making processes, political institutions, and knowledge of prior American financial policies, but decided to employ very different financial strategies.
In 1861, the hastily assembled Confederate government lacked the bureaucratic infrastructure to levy or collect internal taxes. Its citizens possessed neither a tradition of compliance nor a means to remit payment. Land and slaves comprised the bulk of southern capital; liquid forms of wealth like specie or paper currency were hard to come by in a predominantly agrarian region.
Confederate efforts to raise war revenue proved ineffective. The Confederate Congress enacted a minor tariff and a small indirect tax on real and personal property. But the government in Richmond was forced to rely on the individual states to collect the tax. Most states did not collect the tax at all, preferring to meet their quota by borrowing money or printing state notes to cover it. The Union blockade of Southern ports and the South's self-imposed embargo on shipping cotton, intended to "starve" Europe of cotton and force diplomatic recognition of the Confederacy, reduced tariff receipts to minimal amounts throughout the war.
The regional ideological predispositions developed over the antebellum period were carried over into Civil War politics. Generally, the northern Republicans’ support of a national banking system, a large national debt, and taxes turned out to be vital to finance the Union war effort. While the southern Democrats’ opposition to national financial institutions, a large public debt, as well as taxes to protect their most valued assets, slaves and land, led to financial policies that proved to be disastrous for the Confederacy.
The Union and Confederate governments had nearly identical decision making processes, political institutions, and knowledge of prior American financial policies, but decided to employ very different financial strategies.
In 1861, the hastily assembled Confederate government lacked the bureaucratic infrastructure to levy or collect internal taxes. Its citizens possessed neither a tradition of compliance nor a means to remit payment. Land and slaves comprised the bulk of southern capital; liquid forms of wealth like specie or paper currency were hard to come by in a predominantly agrarian region.
Confederate efforts to raise war revenue proved ineffective. The Confederate Congress enacted a minor tariff and a small indirect tax on real and personal property. But the government in Richmond was forced to rely on the individual states to collect the tax. Most states did not collect the tax at all, preferring to meet their quota by borrowing money or printing state notes to cover it. The Union blockade of Southern ports and the South's self-imposed embargo on shipping cotton, intended to "starve" Europe of cotton and force diplomatic recognition of the Confederacy, reduced tariff receipts to minimal amounts throughout the war.
The regional ideological predispositions developed over the antebellum period were carried over into Civil War politics. Generally, the northern Republicans’ support of a national banking system, a large national debt, and taxes turned out to be vital to finance the Union war effort. While the southern Democrats’ opposition to national financial institutions, a large public debt, as well as taxes to protect their most valued assets, slaves and land, led to financial policies that proved to be disastrous for the Confederacy.