Ways and Means by Roger Lowenstein
Government finance is not generally a riveting topic, however important it may be. And the details of fiscal policy 150 years ago aren’t even relevant today. So good luck with a history of “the Financing of the Civil War”.
But I’m happy to say that Lowenstein’s book is actually readable and interesting. Well done!
(It also features one of my favorite tid bits of US government trivia–the wonderfully names “ways and means” committee.)
Like most well educated Americans, I have a working knowledge of the US Civil War. (Sadly, this understanding has become surprisingly current in the last fifty years of US politics.)
However, the financial engineering, especially by the Lincoln administration, was far beyond the grit and romance of combat and politics. As Lowenstein makes clear, it was also transformative and revolutionary.
At the start of the war, the US was a large economy with a tiny government. The rebellion and ensuing war was far larger than anyone would have imagined, and, as they might say, it was pretty darned expensive. All those thrilling and horrifying battles and speeches had to be paid for somehow. And that ‘somehow’ had to be invented.
Looking back from today, we see many financial and government practices that have become standard procedure in the ensuing decades. We also see the birth of a more centralized government, and, indeed, the very concept of the US as a nation, a single polity, rather than a loose confederation of states.
The Lincoln administration invested in infrastructure, education, technology, as well as a massive armed force. Many of these initiatives were sharp breaks from the past, and, indeed, they were considered unconstitutional by many. These initiatives were possible largely because the conservative southerners were, by their own action, not participating in the US government. For this brief window the interests of the south were not represented, leaving the field open to Lincoln’s whiggish ideology.
In contrast, the Confederacy codified and amplified earlier decentralized and low tax practices. Where the US innovated radically, the CSA hued to conservative principles, or at least sought to. In the end, the CSA central government did resort to many of the same tactics as the US, or tried to.
Lowenstein documents the results. The USA raised huge amounts of money, even in the face of battlefield losses, corruption, and political divisions. The CSA suffered drastic shortages and runaway inflation almost from the start. The effects were devastating.
From our perspective more than 150 years later, we see a lot of interesting lessons.
One theme throughout the book is that it was not easy to convert the overwhelming economic power of the north to government funds. The USA (and the CSA) was fiscally minute at the start of the war. The respective governments had to invent and boot up an array of macroeconomic mechanisms that are now common. Broad taxation including income tax. Government borrowing including mass bond sales to the public and foreign banks. Fiat currency. The works.
The combatants had to boot all this up as fast in the middle of a chaotic and destructive war, which is not a great environment for instilling confidence in investors. Or for getting support from the general public for painful taxation and other “ways and means”.
At every step economic policies were pushed, pulled, resisted, and enforced in a soup of political ideology, ambition, corruption, and ignorance (both justified and inexcusable). They were also inextricably tied to other political winds, including class, race, immigration, and above all regional geography. The details are slightly different, but we see the same thing today.
There are also a lot of lessons for what not to do. At the top of the list is the CSA’s deep aversion to federal taxation. Relying on states to fund the country and run the economy really didn’t work. And the CSA’s national efforts, hamstrung by a lack of tax revenue, did not work, and could never have worked.
There were also “own goals”, especially the southern belief that holding back cotton—their only actual asset—would somehow pressure European powers to intervene. Considering that the US was working hard to blockade this same trade in order to cripple the CSAs economy, you have to wonder what they were thinking.
And, of course, as the war ground on it became primarily a defense of slavery. Despite the propaganda of southern apologists, southern independence was an independence in order to maintain slavery. Slavery could never win the war, and generally was a hindrance. And, of course, the US was easily able to strip the south of its slaves—the enslaved people self liberated as US troops approached. And as soon as they were allowed, took up arms for their own liberation.
So all these things (white supremacy, states rights, no taxes) didn’t work the first time, why would anyone think they will work this time?
Sadly, we have also seen the resurrection of Jim Crow, nullification, and attempted coup d’etat by radical racists—by constitutional maneuver and by armed force. The zombies are very, very dangerous. Just read about the Civil War.
Just what do we have to do to kill these zombie ideas?
- Roger Lowenstein, Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War, New York, Penguin Press, 2022.
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