Ways and Means
Lincoln and His Cabinet and the Financing of the Civil War
Reviewed by Lieutenant Colonel (Retired) Jess Rankin
Ways and Means: Lincoln and His Cabinet and the Financing of the
Civil War1is a unique book on the Civil War because it provides an important financial and economic analysis of how the Union and Confederacy waged war. Every judge advocate, legal administrator, and paralegal specialist should read it to learn multiple lessons that are relevant in our era of competition with Russia and China. The economic choices and experiences of the Union and Confederacy in waging war still hold value for today’s decision-makers.
The strength of this work is author Roger Lowenstein’s clear fluency with financial markets and explaining how they and free-market capitalism helped the Union conquer the Confederacy. The book’s most valuable insight is the interplay between battlefield success—or lack thereof—and financial strength. When Union forces fell back from Richmond during the Seven Days battle in 1862, Union currency, the greenback, plummeted in purchasing value.2
When General Sherman captured Atlanta, the Union’s ability to sell bonds
to finance deficit spending dramatically improved.3
This feedback loop between tactical success and economic power is
important to understand as a military professional. Almost every Civil
War historical account, including the reviewed work, starts by listing
the Union’s overwhelming economic and demographic strengths. However,
the Union was not guaranteed victory; even with those noted advantages,
the Union still had to win battles, lots of them in fact, to subdue
fierce resistance across a huge geographic range.4
The Union’s ability to fund the pay, transport, and supply of large
armies worked in tandem with the generals’ ability to employ those
armies and Soldiers executing their orders at the bayonet’s pointy end.
Military failure, such as the Seven Days battle, imperiled the Union’s
ability to further finance the raising of armies. Victory in Atlanta
strengthened the Union’s financial hand while conversely wrecking the
Confederacy’s manufacturing and logistical system, creating a financial
death spiral.5
To fund raising and supporting armies, both the Confederacy and Union had limited choices. They could raise taxes, borrow money, or print it.6 As befitting our revolutionary roots, taxes were low in the United States prior to the firing on Fort Sumter.7 The Confederacy never seriously raised taxes and instead relied on borrowing and printing money.8 The lack of revenue combined with borrowing and profligate printing eventually led to massive hyperinflation.9 This inflation, a cautionary tale for our current moment, undermined the Confederacy’s economy and social cohesion.10
The Confederacy also chose to turn its one economic strength, cotton,
into a weapon by withholding it from the market to pressure Great
Britain and France—whose economies depended on cheap cotton—to support
the Confederacy.11 Reading about cotton as an economic weapon brings to mind Russia’s current efforts to wield oil and gas as a bludgeon over the West. Readers can take solace from this historical comparison; it backfired on the Confederacy. The Confederacy lost valuable income and created a market incentive for other nations to fill the void.12
Lowenstein skillfully contrasts the Confederacy’s economic choices with the Union’s more hard-headed decisions to raise taxes on foreign goods and then, for the first time, income. Additionally, the Union created a new national currency, the greenback.13
By creating a national currency that was not redeemable in gold or
silver but was legal tender, the Union created a more flexible currency
that spurred spectacular economic development. But this required a leap
of faith from tangible cold hard cash to an ephemeral full faith and
credit of the Government.14
The author also discusses the Union’s ability to mass market bonds to the public. These bonds were a precursor to World War I liberty bonds and World War II victory bonds.15 Selling bonds to the general public as opposed to a few wealthy investors ensured a broad base was emotionally and financially invested in Union victory.16 They also raised significant revenue for the war.17
One of the most fascinating parts of
Ways and Means is the author’s description of the Federal economy’s transformation through Government intervention during the war.18 This intervention is often mentioned in passing or in footnotes in standard history, but it receives pride of place in Lowenstein’s narrative. The Morrill Land Act,19 which used public land to fund state schools, dramatically increased the accessibility of college for Americans.20
Creating a national banking system improved the Federal Government’s
financial power.21 Investment in railroads powered Union economic growth and helped to bind the country more closely, particularly the Transcontinental Railroad.22
These various historical developments could tend toward the tedious, but Lowenstein presents them with verve and clear explanation (although, the narrative does suffer when the author wades into some of the background shenanigans involving railroad speculation). In all, the economic changes the author describes proved to be strategic multipliers in powering the Union economy during the war.
The Confederacy, on the other hand, failed to match these economic reforms and investments and chose instead to remain with their states’ rights doctrine of decentralized power. By 1863, these choices began to seriously impact the Confederacy’s ability to wage war.23 The most notable choice was the failure to assess taxes and the inability to adopt a national currency. The former led to inflation, while the latter prevented the free market from correcting market shortages in edible crops.24 Both contributed to food shortages.25
When the Confederacy did intervene in the economy by trying to control prices on wheat and other goods the Army needed, it did more harm than good. The price controls created a perverse market incentive for farmers to grow cotton and tobacco, which in turn made the food shortages even worse.26 The economic prioritization of the Confederate Army also created resentment and undermined Confederate authority.27
The Confederacy in 1864 did try to apply some financial lessons learned by increasing taxation and reducing some of the bank notes in circulation.28 However, it was too late. This is due in part to the Union continually shrinking the Confederacy’s tax base through conquest, which, again, illustrates the interplay between military and financial success.29
Another valuable contribution from the book was the author’s focus on the Union’s attempts to trade for cotton from the Confederacy. This historical example again resonates with our current support to Ukraine in its war with Russia. As the United States and its allies sanction Russia and supply economic and military aid to Ukraine, trade continues with Russia in energy and food.30 Union commanders, most notably General Grant, opposed the Union policy of trading for cotton.31 They argued whatever economic benefits the Union received in procuring cotton were disproportionate to the gain the Confederacy received in usable financial currency.32
Ways and Means is an exceptional addition to the Civil War literature. The author has a comfortable confidence with finance and economic theory. This allows for an easily understood narrative of economic development and devastation during the Civil War. Lowenstein provides valuable analysis on how economic choices affected governance and war making. Occasionally, the book veers into less fruitful but perhaps more well-known topics like the Trent affair or political machinations of Lincoln’s cabinet. These diversions are still well written, but they are covered more effectively in other works, like Doris Kearns Goodwin’s Team of Rivals.33 They also prevent the author from sticking with his strength in economic analysis and detract from presenting a tighter, more narrowly focused work. This is a minor critique, and the desire to appeal to a wider audience by including the cabinet rivalries is understandable.
Finally, as a contract law specialist, the reviewer would be remiss in failing to note the issues the Union had in its contracting process. The failure to use open bids and competition led to repeated fraud and shoddy products.34 Also, the Union at various points struggled to timely pay its Soldiers because it lacked revenue. Despite resulting in short periods of lower morale, Union Soldiers, impressively, continued to serve. Concerns about the acquisition process and funding remain with us in the present day. It would be wise to avoid such self-inflicted risks through better planning and oversight.
Inflation, energy as an economic weapon, and the necessity of trade while opposing Russian aggression are current issues. That similar issues impacted the Civil War shows that history is never quite as long ago as we would like to think. Judge advocates, legal administrators, and paralegal specialists with interest in the Civil War should consider this work. Explaining how the Union and Confederacy’s economic choices impacted the war makes Roger Lowenstein’s work an excellent contribution to the Civil War pantheon. TAL
LTC(R) Rankin is a Principal Decision Analyst, Acquisition Strategy & Management, Cost Acquisition Management Sciences at MITRE.
Notes
1. Roger Lowenstein, Ways and Means: Lincoln and His Cabinet and the
Financing of the Civil War (2022).
2. Id. at 130.
3. Id. at 130, 299-300.
4. Williamson Murray & Wayne Wei-Siang Hsieh, A Savage War: A Military History of the Civil War 12 (2016).
5. Lowenstein, supra note 1, at 299.
6. Id. at 44.
7. See id. at 58.
8. See id. at 68-70.
9. See id. at 180-82.
10. Id. at 101-03. By the fall of 1864, the Confederacy was printing so much money that wallpaper was being used. Id. at 299. Inflation also contributed to bread riots in Richmond in April 1863, where the Confederate Army had to arrest some forty women, many of whom were mothers or wives of Soldiers. Id. at 186.
11. Id. at 38.
12. Id. at 39-40.
13. Id. at 90-92, 104.
14. Id. at 90-92. At the beginning of the War, neither the Confederacy nor the Union had a national currency. Instead, economic transactions were conducted in state bank notes redeemed in hard currency (i.e., gold).
15. See id. at 190.
16. See id. at 191.
17. Id. at 190-92.
18. Id. at 314.
19. Act of July 2, 1862 (Morrill Act), Pub. L. No. 37-108, 12 Stat. 503.
20. Lowenstein, supra note 1, at 112.
21. Id. at 174-75.
22. Id. at 195, 323.
23. Id. at 240-41.
24. Id. at 241-42.
25. Id. at 242.
26. Id. at 243.
27. Id. at 255. Confederate forces always had sufficient arms and had first call on food supplies. See id.
28. Id. at 251-52.
29. Id. at 252.
30. See, e.g., Ukraine and Russia Sanctions, U.S. Dep’t of State, https://www.state.gov/ukraine-and-russia-sanctions (last visited Dec. 1, 2023); Ukraine Supplemental Appropriations Act, Pub. L. No. 117-128, 136 Stat. 1211 (2022) (allocating more than $13 billion in military, humanitarian, and economic aid to Ukraine’s defense); Russia: Russia Trade & Investment Summary,
Off. of U.S. Trade Rep., Exec. Off. of President,
https://ustr.gov/countries-regions/europe-middle-east/russia-and-eurasia/Russia
(last visited Dec. 1, 2023).
31. Lowenstein, supra note 1, at 213.
32. Id.
33. Doris Kearns Goodwin, Team of Rivals: The Political Genius of Abraham Lincoln
(2005). Winner of the Pulitzer prize, Goodwin brilliantly captures
Lincoln’s ability to harness his political rivals’ abilities for the
common purpose of restoring the Union. President Obama consciously
referred to this work when selecting cabinet officials for his
administration. See Michael Nelson, Barack Obama: Domestic Affairs, Miller Ctr., U. of Va., https://millercenter.org/president/obama/domestic-affairs (last visited Dec. 1, 2023).
34. See Lowenstein, supra note 1, at 77, 275.