The Economics of the Civil War Mises Institute

Black reconstruction after the Civil War did much better than the dire predictions made. The black population recovered quickly. Many moved to urban areas. They deliberately had fewer children. Mortality declined. Income increased. No government assistance was handed out.

There was a sea change in money and banking in the U.S. as a result of the Civil War. Government became the primary regulator. Metal coins gave way to paper. Mistakes of one bank infected others – it was contagion.

Inflation is a giant rip off, a stealth tax stealing purchasing power. Money is not neutral. The first receivers of new money benefit. Savers and those on fixed incomes struggle. From 1857 until the war was a period of “free banking” where the fed had nothing to do with the banks and the states had little control over them. High economic growth and prosperity prevailed.

The Confederate government blockaded the Southern economy by bad policies like impressment and trying to run the blockade themselves. The government declared that fifty percent of all cargo space had to be for the Confederate government.

Blockade boat owners turned to engines for speed instead of sails. Blockade running became more expensive as the blockade became stricter. Certain prices increased much faster and higher.  Most goods desired in the South had to be imported. 

Tariffs were generally favorable for the North and unfavorable for the South. They were a key political battle for forty years. The Union General Scott developed the anaconda plan to squeeze the breath out of the South. The Union Blockade was the first part of that plan. This battle at sea won the war for the Union. The land battle was a stalemate.