How Did the North Win?

0:00Well, it's great to be with you here at the Ludwig von Mises Institute and giving a seminar for the Auburn University Academy of Lifelong Learners. The title of this seminar is the same title as the book, Tariffs, Blockades, and Inflation, the Economics of the Civil War. And I want to begin today by talking about some of the preliminaries, some of the general issues about the book, and maybe get into part of the first chapter, core chapters of the book as well. I'll try to lecture for about 45 minutes until 3.15 and then we'll take a break and then we'll come back and discuss some of the issues that have been raised or some of the ideas that you've sort of hit on as we go through the material and discuss that or continue on with that first chapter.

1:05in this class there's a lot of things that I'd like to cover and like to accomplish the Civil War, America's Civil War and of course it goes by many different titles especially around Auburn but it really is a very important issue for Americans and I think a lot of people around the world are interested in this particular historical episode that is so important to Americans and of course if you look out there in the world what you'll find is that shows about the Civil War factual and fictional are on the television all the time there's movies being made about the Civil War and various battles books and other books continue to pour out about this subject, both of an academic nature, fictional, even science fiction books about the Civil War.

2:07So it's a tremendous interest to Americans and it has a tremendous entertainment value for us and that interest only seems to be growing over time. However, it's also about some very serious matters. War is definitely one of the most important issues that we discuss and that we debate. War is something that brings out the very best in people, and it also is something that brings out the very worst in people. So it is something that's very destructive and yet if we learn from war then it can also be tremendously instructive and that's hopefully what we're going to accomplish here is to take that importance of America's Civil War and turn it into instructive material for us, something that's going to benefit us all.

3:10Now, this book, which was published in 2004, my co-author on the book is Robert Eakland, Bob is the Edward and Catherine Lauder eminent scholar at Auburn University, recently retired, and a co-author on all of my academic papers on this subject, as well as my co-author on the book and of course he deserves tremendous credit for all of this as well. But what we do that's very unique amongst the thousands and thousands of books out there in the marketplace that you could pick up and if you went to amazon.com and typed in Civil War I'd hesitate to think of how many hundreds and hundreds of books that would currently be available or if you went up to the Auburn University Library and looked in the section on the Civil War, how many stacks and stacks of books that you'd find on the subject, what we try to do is to present an economic perspective on the Civil War.

4:22We're not really interested in the battles, we're not really interested in the tactics, the heroism, the strategies, The individual people who play various important roles, all of that is tremendously important, and that is really covered in just tremendous detail by historians, who have done just a wonderful job, and I'm not talking about just the high flight academic historians, but there's all sorts of amateur historians that have contributed so much, every regiment, many, many individual soldiers, The stories have been told in book-length treatments, towns and cities and battlefields, particular battles, types of armaments, and the list goes on and on.

5:17But that's really the historical perspective, the description of what went on, and the development of stories from facts to convey our history. The Economic Perspective is going to be very different. It's about the same material, but it's going to be very different. And we try to show that to our readers on the cover itself. Now, I don't see anybody who bought the hardback copy, but it's a beautiful book, and my royalties are actually much better on the hardback. I encourage you all to also buy a copy of the hardback book. But the paperback copy, I think, is actually much better looking and a much nicer treatment and more informative.

6:15and I've got a poster, a little poster of our book up here. On the cover is a painting by Edward Degas, the famous French painter and this was done right after the war and it's a picture, it's called the Cotton Exchange and Degas visited the United States, he had relatives in New Orleans, in New Orleans, who were cotton brokers, who basically bought and sold cotton for shipment to Europe, and of course most of the cotton that was produced in the South, a lot of that was shipped through New Orleans, and this is a picture that he, a painting that he did while here in the United States, and this is the office of the cotton exchange, where Where his uncles and family members worked and it's one of his more famous paintings.

7:16And what does it tell us? Well, first of all, if you look at other civil books about the Civil War, what you'll find is what? You'll find pictures of soldiers with their uniforms on or you'll see pictures of iron clad ships or cannons being fired or horses charging into battle or battle scenes or There's soldiers marching into battle. It's all about the battlefield. It's all about the war more directly itself. What we're trying to convey here is ultimately what is going beyond, behind the lines of engagement. What's going on away from the battlefield on the home front and also what was really the important issue with respect to the war with the economic issue as we're going to find has a whole lot to do with cotton and so that's one of the reasons if you in the very beginning of the book there's actually a map of mostly of the southern United States and what we have highlighted on the map is is the areas in which cotton was grown and also there's a layover of the railroads that were in existence in the southern economy.

8:40So, the whole cover really is designed to redirect our attention away from the battlefield and back to the economy as a very important issue. Now, one of the things that we're going to cover is what was the cause of the war. And what we argue in the book, and of course we'll go into this in a great deal of detail, is that the role of slavery versus the role of cotton. So we're going to look at that issue in great detail, and I'm going to explain our perspective here today before we get to the actual issue, Because over time, slavery has become the cause of the Civil War.

9:34In fact, it's really become the only cause of the Civil War. That is a very modern development. Even when I was a college student, the cause of the war was described as being multiple causes, that there There were multiple causes that coalesced into the Civil War and we go from there but we look very carefully and place a lot of prominence on economic factors and a lot of those are related to cotton. We're also going to look at the outcome of the Civil War. How did the Union government win this war?

10:22Very important question because it's something they weren't supposed to do. Nobody thought that the Union could win the Civil War when it first started. We're going to look at the aftermath of the war. How did this impact American society? How has, in other words, how did the results of those historical events, how do they feed into what we are living today? So we're going to look at the direct aftermath of the war, but we're also going to look at the fallout of the Civil War as it comes into our own daily lives. The economic impacts, the impact on our economic institutions, our government, how did it change our form of government?

11:10In particular, we'll take a look at how did it affect the former slave population? And then, of course, we'll want to look at, in retrospective, what are the lessons that we can learn about the Civil War that would benefit us today. So those are some of the things that we're going to cover and that we hope to accomplish. First, I'd like to talk a little bit about the background of this book. Where did it come from? Reading a book, this is something you wouldn't normally be exposed to. But if you're getting it directly from the horse's mouth, you might benefit from a little of the background from how this project came to be.

11:55It actually started when I was writing my dissertation in economics here at Auburn University. My dissertation was on the economics of prohibition and I was explaining in the dissertation I had a footnote in my dissertation about this subject, and it basically said this phenomenon is very similar to what happened in the Confederacy during the Civil War. And of course it had to do with goods coming into the country. In the case of drugs, it was illegal drugs being shipped from South America into the United States.

12:46In the case of the Civil War, it was goods being shipped in from Bermuda and the Bahamas into the United States. In the case of drugs, of course, they had to get through the drug enforcement agency, the Coast Guard, and all of our other agencies that try to prohibit drugs from getting into the country. In the Civil War, the smugglers had to get through the Union blockade. So you had a similar situation and you had a similar type of effect on the type of commodities that were coming across the border and into the ports. Well, my dissertation chairman at the time made note of that and said that, you know, that I should write an article about that, Subject Extending it into the Civil War and that actually was the first paper that we wrote on this subject where we looked at why was it that blockade runners were bringing in party dresses and candy and all sorts of fancy things and and they weren't bringing in gunpowder and flour to make bread and

14:04and things of that nature and that that was a very demoralizing effect on southerners because they were going hungry, clothing was very difficult to buy or to acquire and yet, you know, fancy luxury goods were coming into the country and party dresses and parasols and jewelry even and so that was very demoralizing and in the paper we basically This article basically explained why smugglers or drug runners do what they do, and we called it the Rhett-Butler Effect, because Rhett-Butler was one of those, of course, fictional, but still a blockade runner who always had, you know, fancy cognacs and party dresses to give away to his girlfriends and things of that nature.

14:59First article, and based on the success of that, we did another article, which we called the Confederate Blockade of the South. And in that article, we described all of the policies that the Confederate government put into place that actually made it more difficult for the blockade runners to do their job. So in effect, they were putting taxes on the blockade runners The papers who were bringing, trying to bring them guns into the country, trying to bring products into the country, they were putting all sorts of restrictions and taxes on cotton, and so it made it more difficult for them to run goods in and to run cotton out, and that was of course the economic bloodline of the southern economy.

15:49Now, that paper was probably more controversial, let's say, and we had a journal editor who had agreed to publish it, and then the journal editor got into trouble with his publisher and resigned, and our paper, and discouraged at that point, we decided to drop the project, Until a number of years later, when that same journal editor became the Civil War history editor for a publisher called Scholarly Resources who ultimately ended up publishing this book. And so he remembered our paper and the work that we had done on that subject and he contacted us and said, you guys really need to write a book on this subject.

16:39And so, encouraged with all that, we resurrected the paper that had been rejected and we started in on the manuscript for this book. The paper, The Confederate Blockade of the South, was recently published in the Quarterly Journal of Austrian Economics. We had another paper that was published in the Eastern Economic Journal called The Unintended Consequences of Confederate Trade Policy. And we even have another future article that's in production on this subject. So it's been a rather long and difficult route to bring this project to fruition, but it's also been a very satisfying one at the same time.

17:25The book itself actually seems to have a secret mission that was unintended when I first started studying the Civil War and actually when I was reading about the Civil War it was something The book itself has a secret mission and that is to explain the outcome of the Civil War. That's not emphasized a lot in the book directly, but it is touched on throughout the book. Why did the Confederate government fail? Why did the Union government succeed when by and large the odds were not for that type of outcome?

18:19The North and the South were relatively equally matched until the Midwestern states joined with the Union. And the South was fighting a defensive battle. They essentially had the same type of population, the same type of military training, the same type of military technology. And so when you have two groups who are fighting one another that are essentially the same in terms of personnel, in terms of training, in terms of technology, the one that's on the defense almost always wins. And so it was very unclear that the Union could have actually won this victory, which it did.

19:13The modern explanation of the Union victory is simply that the Union was bigger, that it had more people, that had a larger economy, that had larger capital stock than the South. So the bigger battalions theory of the Union Victory. We see the source of Union Victory not on the battlefield at all, as most historians would, but rather in the blockade. Most of our research is on the blockade, but we really do feel that that was the source of Union Victory.

19:58And so there's a pretty good emphasis on that in the book itself. And I think if you look at that issue, you'd say, first of all, the land battle, if you study the battles, the land war was really a stalemate. Most of the battles where large armies would come together, both sides would lose a large number of troops, but the lines of engagement wouldn't change that much. Okay, so that the North and the South were relatively evenly matched on the battlefield, relatively even number of victories, and none of the victories were really very compelling until towards the end of the war.

20:53And as we get towards the end of the war, the blockade itself becomes stricter and stricter and stricter, the Union controls more and more southern ports, they have more and more blockade ships, and the Confederate policy becomes more and more difficult for blockaders to deal with. So as the blockade becomes more effective, southern prospects in terms of the war diminish greatly. And then, of course, right after the blockade became completely effective, when Wilmington, North Carolina fell as the last open port to blockaders, Lee's army dissolved shortly thereafter. So I think that we're going to make a good case that it was the war at sea, not the war on land, that really was the key aspect of the war.

21:50The first chapter of the book is mostly a step back to economics. So some of this I'm going to go through in a cursory fashion in terms of the technical economics and explain it in more detail as we get to the actual meat of the matter in the chapters that follow. And of course you're free to bring up some of that subject for questions or discussion. I'd be happy to provide more than enough detailed information about all that. So how does economics illuminate the Civil War? Well, economics can help us understand politics and commerce.

22:50We open by looking at the whole issue of democracy and war. That's a pretty important issue. Today it is assumed that democracy is something that minimizes war. That if countries are only democratic, that we wouldn't have war and we wouldn't have all sorts of problems in economies. But the evidence to support that notion that we all like to uphold is less than satisfactory. Actually, if we take a serious look at war and democracy versus dictatorship or kings or monarchy or confederations or other forms of government, we find that wars actually are very much associated with democracies, and democracies often, very often go to war.

23:51and that most of the major wars are between democracies and so when we look at the cause of war one of the things that we want to be very cognizant of is democracy itself not as something that prevents war but something that actually can lead to war and the civil war is a good illustration of this because it's very often assumed that the mechanism of democracy of the antebellum period is one that pitted one side against another, a mechanism that couldn't handle the tremendous pressures that had built up in American society and ultimately failed to prevent both secession on the Part of the South and War Between North and South. There's also an ideological sea change that's going to be going on during the Civil War. The sort of transference of ideology from one that can be sort of give a shorthand symbolization of it one of Jeffersonian philosophy where our country was dominated by individualism, state's rights, laissez-faire, limited government, those sorts

25:32A series of notions, not clear-cut obviously, but very much in that direction, very much guided by Jeffersonian principles, but there was always a battle with another ideological viewpoint, which I put under the heading in the book, in several places, of the philosophy of Alexander Hamilton. and these two philosophies were battling one another and continue to battle one another but in the Civil War basically what you see is a transference of dominance from Jeffersonian to Hamiltonian and with the Hamiltonian point of view you have much less emphasis on states rights and more emphasis on on the National State.

26:36You have much less emphasis on individualism and more emphasis on government regulation of the economy, where individuals do not regulate their behavior through markets, but the government plays an important role in controlling everything in terms of the economy and with Hamilton, you have an activist economic policy, national currencies, national debt, central banks or a national bank, industrial policy, so it's a much more aggressive, more centralized philosophy, of Society, and the Civil War creates a sea change in the United States in which the Jeffersonian point of view is displaced as the majority view by the Hamiltonian philosophy.

27:38The monetary system changes dramatically at this point too. Before the Civil War, the American monetary system was basically gold and silver coins. People made exchanges either through barter or with gold and silver coins and banks were unregulated by the federal government at all and very few states placed much restrictions on banks and there was a lot of distrust of banks especially when they issued paper money. Jefferson for example said that we shouldn't trust the banks, you might use them but you and we don't trust them. With Hamilton and the post-war monetary system, that changes dramatically.

28:25The National Banking Act was passed during the war in 1863, and we've had paper money, government-issued paper money basically ever since. We've had a government debt as a result of the Civil War, and of course that national debt has continued on through time, The Federal Reserve, fiat money, fractional reserve banking, Human Action, Man Economy and State, The Theory of Money and Credit

29:17News, but we just use it, it's very effective, we have cash and we have checks and we have credit cards and debit cards and ATM cards, but it's really the system through which we all communicate and make exchanges in the economy, it's a very, very important institution in Society, and that institution changed fundamentally with the Civil War. The whole organization of government in this country changed radically with the Civil War. Before the war, the country was generally guarded, guided, excuse me, by states' rights.

30:02The state governments were really the level of government at which most government activity took place. Your average person in Auburn in the antebellum period might not ever come across a federal employee during their entire lives except the postman, would never even ever see a federal employee. So that was the type of system of government we had. And then Then after the war, of course, the national government becomes much more prominent. States' rights issues before the war, very important, were tariffs and, of course, slavery.

30:47But states had rights before the Civil War. They were the controlling level of government. After the war, there was, of course, no right of secession. The United States gradually became simply branch offices of the federal government. Some aspects of the Bill of Rights really no longer apply in some sense that the, for example, the 14th Amendment sort of outrules Amendments 9 and 10. and that we now have become, we've gone from a nation of states to really one very powerful state, in matter of fact the most powerful government in the world by a great margin.

31:35Now, are there any historians in the audience? Well, it is a very dangerous and very touchy aspect of this book, making bold claims about the power of economics, but it's not meant to put down historians or history in any form or fashion. Both Bob and I are big readers. We both very much enjoy reading history and reading good historians or watching movies or TV programs about history.

32:27We have the greatest admiration for historians and we have good friends who are historians. But we do draw a line. Historians and history, we feel, have a comparative advantage in describing history, of actually describing events, of digging up the details, of painting the pictures, and of telling the stories. And we consider that very important. What about Malcolm Ludwig's statement, history is the propaganda of the victor?

33:28through all of the various theories about history and put forth an hypothesis about how things occurred in a scientific way that can be examined and debated, but I think it brings up that issue because I think that quote is absolutely right, that history is written by the victors and that we need to be very critical of historians, very critical of history. We have to be very wary that historians are encouraged to be the cheerleaders of the victors so that whoever wins a war or whoever is in power at any one point in time, historians Students have a tendency to be very favorable to those people, those rulers, those leaders, those armies, those states.

34:32And that only when someone becomes out of favor or who is discredited or who is found to have been doing something wrong like Richard Nixon, well it's okay to criticize Richard of Nixon because he's been discredited. But, you know, that's different. You're talking about an American president. It's very difficult for an American historian to write critically and negatively about that person and achieve any degree of success. Certainly possible, but the overriding influence you correctly suggest is that history is written by the Victors. Well, history has a comparative advantage in describing history. We feel that economics has a comparative advantage in explaining history and I want to go into that in a little bit of detail. History is just one damn thing after another. But it's a series of events that could be described as a series of cause and effect events, where every event has a cause, a decision maker, and all the influences that come in on that decision maker. But these cause and effect links are really invisible. You know, we don't have a piece of paper

36:07tell us exactly why George Crispin organized this class. We can't see it. It's not written on his jacket or on his forehead, but we can still investigate what caused George to do that. But essentially the cause is invisible. We have to find some other way to discern what that cause is. Behind every Every explanation of historical events rests a theory about what that cause is. How to connect these events in a cause and effect chain of events. But all of these theories can be right or wrong. For example, if people on a particular day start carrying umbrellas around and later around the day it rains, does the fact that people carried umbrellas cause it to rain?

37:05No, absolutely. It's not the umbrellas that cause it to rain, in other words. So there, you know, you can have the theory that umbrellas cause it to rain is wrong. We can analyze

37:52and only one correct one. I would suggest that the idea that larger armies always cause victory, in this case the Union armies were larger than the Confederate armies and this caused victory, is an incorrect one and it's not sustained by historical evidence. How about the Greeks at Marathon? The version is far outnumbered. So it's strategy and all kinds of factors in there.

38:47with fewer resources can beat a larger, more prepared, more supplied army. So that's not going to give us a theory that we can easily apply in all cases. And economics is going to focus in on rationality, money as well, but we will not ignore things Things like ideology, ideas, patriotism, etc. Another example about this cause and effect is, take for example the case of Ireland, a country that has gone from really the worst economy in Europe to be one of the best performing economies in Europe, one where the standard of living is now higher than in Great Britain, which didn't seem possible at all in the past, you know, is that the result of A, tax cuts, B, declining church attendance or C, increases in rugby teams and you know, I think if we look at the tax cut, The economic motive to explain why the economy grows, we find a very consistent theory of why Ireland has become so successful.

40:11So, we are going to hit on the issue of slavery in this class, but what we're going to find ultimately that in contrast to the currently perceived view that slavery caused the war, that it was really the most important sole cause of the war, that that really does not hold up too well to investigation. It did play a role. It was obviously, slavery was obviously intermingled in economic issues. It was of primary importance to the southern economy, to the plantation economy, to the cotton economy, and there was no slavery in the northern states.

41:01So there's a definite dividing line there that slavery causes. But let's just take a couple of aspects of this problem. First of all, slavery was gotten rid of or emancipations occurred throughout the Western hemisphere. Dozens and dozens and dozens of countries got rid of slavery both before and after the American Civil War. And in no other case did it really require the type of military option that was used in the United States. So if slavery was the cause of our civil war, why didn't it cause all of these other countries to melt down into civil wars?

41:54So if we look backwards in time, we find that, you know, emancipating slavery doesn't seem to match up too well with civil wars. And if we look at all the other civil wars that have occurred, we find a couple scholars, Paul Collier and Enki Hoffler, this is reported in the book, they looked at all of the other civil wars that have taken place in history, most of which had taken place after the American Civil War in the 20th century, and they looked at all of the economic statistics in those countries to try to find out what circumstances were likely The Theory of Money and Credit

43:04Where it's produced in the country, but not consumed in the country, it's sent abroad. So things like oil, for example, or mineral resources, where the resources are fixed, they can't be moved around, but they produce products which are used for export in order to obtain money or imports. In countries where they had that situation, there was a higher probability of civil war, which basically, they concluded, was a fight for tradable resources, and a lot of these civil wars took place in Africa, the ones that they studied, and they found that countries with lots of mineral resources, lots of oil resources, and farmland that produced products for Export Markets were the ones that were most likely to find themselves in the Civil War.

44:00And we quote them in the introduction, quote, We interpret this as being due to the taxable base of the economy constituting an attraction for rebels wishing to capture the state. And we find that basically their description is very similar to what existed in the United States. The big economic base of tradable, exportable products in the U.S. was in the South. The South produced cotton, tobacco for export in exchange for gold, which we used to pay for other foreign products. So it was a source of wealth. It wasn't something you lived on the land and you produced for yourself.

44:49This was something you could produce and sell for something else. You could tax it in the process. And so they found that not only that sort of situation, but that situations where greed caused the Civil War to start Provided much better explanation than of grievances between races and tribes and ethnic groups. That the greed for resources was essentially much more important. The economic aspects of the question were much more important than racial or tribal or ethnic differences. The colonial period, the immigration was just from Europe through to all of the colonies up and down the coast.

45:42Now after the nation is established and we get into the antebellum period, there's a diminished flow of immigrants into the south. In the south, there is an increased immigration into the north, and then that pattern actually accelerates after the war. After the war, everybody basically is immigrating into the north, where there's more manufacturing jobs and things of that nature. And getting away from the oppression in Europe, in other words, the constriction and all that stuff.

46:44I mean, there are exceptions to this. For example, there's a lot of German and Nordic-type immigration into Texas through this period. But there is a drift of southern population to the north and northwest. My own research indicates that my family actually probably entered the country in Virginia and went Pennsylvania to New York, Although that's not certain, at least on one side of the family. So, as we get into the antebellum period, the population of the North and Northwest is, if you combine those two regions, is going to be much larger than the South, if you include both free and slave populations.

47:37And there's a lot of interesting aspects about the composition. The northern population was more diverse in the sense of coming from more areas of the European continent, where the south tended to be dominated by the British islands, Ireland, in the United States, in Scotland, Britain, and of course the slave population from Africa, so it was more homogeneous, a more homogeneous population, and the wages, the wages, there tended to be a competitive balance, so that the population would move north, south, east and west, and of course southerners were moving west, from, you know, you got the South Carolina, Georgia immigrants and then they move into the new southwest which is Alabama and Mississippi and then, well in Texas and then Louisiana territory opens up and Tennessee, Western Tennessee and Arkansas opens up and so there's a gradual diffusion of the population and a lot of that goes with opportunities for land and differences in wage rates And actually the wage rates were a little higher in much of the South, but...

49:12Because they had less, the population was less because of the war, the casualties of the war? I mean... No, this is a lead up to the war. Oh, you were talking about hand-in-hand. Yeah. The southern economy was, of course, mostly agriculture, mostly for export. As a matter of fact, the south really didn't produce 100% of its food stuffs. There was importing food and grain from the northwest down the Mississippi and from Tennessee into Alabama. The South was really a one-crop thing. England supported the South because they cut off the continent and all their machines, textiles would be put out of business.

50:07I mean, didn't they, in other words, supply, for instance, built the cruiser Alabama and supplied muskets and all that stuff? And I was thinking about the then secretary of the fellow that became the president of the Confederacy in the years before the war. He was the Secretary of War, and he saw to it, looking forward to the war, he saw to it that he even imported camels and things for the southwest deserts, and he also, I don't know if this is absolutely true, but I think that the history that I read is that he provided for the coast in the south, And the things that they purchased, even from the North, for what they envisaged as the Southern Army, was done by him.

51:33in Mississippi and was secretary of war before the war. I do believe you're right. I do believe he had a big impact, a big input in terms of building the coastal forts of the south, big grandiose projects. What I was saying, though, is that he, before the war, he was in the states' rights, in other words, these Southerners, I can't think of the name, the guy from South Carolina, the firebrand from South Carolina, John Calhoun? Calhoun and Jefferson Davis and those people were state rights men and well they ought to be because I mean you look after your state overall, when you look at the state and the nation state, you should be concerned with your own state and I think that that's one of the reasons that these people, They weren't hotheads in that sense. They were looking forward, like any decent guy, towards the good of the country, not the federal, but the state.

52:59And that, again, you had strong-willed people, and whenever anybody thinks, you take two forces, two countries, and I think Churchill said that the trouble with keeping the peace is that if one nation thinks they have a chance to win, They're much more willing to jump in there on the other guys than if they just, they think well no, I don't think we could take these guys.

53:53At that time, we were appointed by the state legislators. They were not voted on by the people in a democratic process. It was representative government where the senators were representing their states and their state legislators. And so that's another reason why senators in general, both north and south, were much better, or much stronger in terms of states' rights position. And Calhoun also is an important illustration of the fact that the states' rights issues, one of the most important ones was the tariff. The tariff in the United States was basically the sole source of financing for the federal government to pay for those forts, to pay for the soldiers, to pay for operations in The Central Government had charge of the tariffs? The states couldn't set their own tariffs?

55:11of the States to set their own tariffs. It established a free trade zone in the United States so that there were no internal trade barriers. It was a free trade zone. But externally, the Constitution prevented taxes on exports, but it did not prevent taxes on imports. Given all of those constraints, the U.S. government financed itself with those tariffs on imports. And that became really the pivotal issue. That's why South Carolina was threatening to secede, why Calhoun was so up in arms was because of the tariff of abominations where the federal government threatened and did raise the tariff rate to a much higher level and we're going to get to the economics and some of the technical aspects of how this works out.

56:39Unfairly.

57:09The Southerners would have to pay to buy high-priced Yankee products rather than lower-priced European products. In an indirect way, they were called upon to pay for the vast bulk of Federal expenditures, most of which they felt were actually occurring up north. in the North, and there's good evidence that that probably was the case, that except for these forts that were being built around the southern coast, most of the expenditures would actually be happening in the North, or at least the bulk of them, so that, yeah, I mean, there's much more to, you know, this thing called states' rights, it actually, you know, is going to focus on particular issues, And the power of what goes on in the federal government, those two senators that each state have is going to become a pivotal issue leading up to, during the antebellum period, to the Civil War itself.

58:17One more thing. Why were they building all these forts around the perimeter, the coast and so forth? I mean, what enemy did they have to fear? That's another thing. It's been done many times. Build unnecessary things so that you can get profit from the cost of these things.

59:00The Austrian Prince came over and took over Mexico, I mean he was offered, you know, the... Yes, Jack. I'm a big believer in economics as being a primary fundamental cause of conflict. I'm wondering if we are going to get into the question of leadership as causes for the war, not only southern leadership in various states, but leadership in certain northern states, Well I mean that's you know that's got to be part of the the overall calculus of how things worked out. The typical democratic calculus that we are used to The biggest issue in this country is two major parties battling it out with roughly equal sizes, having to make compromises, and so forth.

1:00:21And as we go into the end of the Bellum period to the war, all those ties start to break down a little bit. And you have the emergence of the Republican Party. You know, the Southern Democratic leaders are often criticized for seceding from the United States of, you know, why did they secede when nothing had actually happened yet? You know, that Lincoln had been elected and that the Republicans were in control up north, But much of what they were hoping to do couldn't have been done if the Democrats from the South just simply stayed and did not secede.

1:01:12But on the other hand, you have, you know, in the North, you have the Republicans, which would be considered radical Republicans, in the sense that they were looking for a radical departure from the status quo, that they had a fundamental different view as a party of the way the United States should be reconstructed, and I'm not referring to reconstruction itself, then had existed. And to underline that point, what we must remember is that those political factions and those political leaders from their party were coming together in the Republican Party from a variety of what otherwise might be considered fringe groups.

1:02:10So that you had the Know-Nothing Party, which was anti-immigrant, pro-free land for Americans, you had the Prohibitionist Party, which was against alcohol, you had the radical emancipation movement, you had the Whig Party, which wanted a big extension of government, of a central bank, of paper money, of public projects like intercontinental railroads and canals and things of that nature. And so these were things that were sort of boiling and festering below the surface that weren't really part of federal policy.

1:03:01And as we come into the war, all of these fringe groups come together as the Republicans, emerge surprisingly victorious, and rather than offsetting them in Congress, the Democrats from the South simply withdraw into secession, leaving them, leaving the Republican coalition as, you know, as an unstoppable force in Congress. The Republican Party.

1:04:00are leaders, which we see, Lincoln, his cabinet, his cabinet was probably even more, in some sense more radical than Lincoln himself, and the leadership of Congress and the leadership of the Senate, and so, you know, there's a, it's a real big change in leadership when When you go from before the election in 1860 to inauguration in the following year, the picture changes very dramatically. The slave and free states coming into the Union, the violence of power there, before that occurred, about equal, and to maintain the power structure of the South, they had to have those slave states, but why couldn't they, using the power that they had of the Congress, to prevent a lot of the things that were done outside of the slavery issue.

1:05:39between North and South and you also have the issue of slavery which has caused a dividing line between the states and the agreement basically is that if we admit a free state that we have to admit simultaneously a slave state so to keep that competitive balance in the Senate. Now why is that important? Well that is important because through time these economic interests have been well defined. It wasn't you know in the beginning of the country Americans up and down the coast a lot of economic similarities even though they come from different ethnic and religious groups. Well over time those economic interests become divided in the sense the south The North becomes this staple export-based economy, the North becomes an economy of industry, agriculture and commerce.

1:06:39Okay, now demographically what's happening is that the South has always dominated the nation politically. The South has always dominated the presidency. The South, for a long time, had a majority in the Senate, and they had a seniority in the Senate, and a balance in the House of Representatives, and they also tended to have a, because they controlled the presidency in many votes, in many elections, they also tended to have a balance of power on the Supreme Court. Well, as we get up to 1860, this population movement into the North and the diffusion of population in the South and the fact that, of course, the slave population would have made any difference, but they weren't counted as full citizens in all of these, counting for House of Representatives seats, and so the South is getting to be a minority of the voting population, so its prospects for winning the presidency aren't that good.

1:07:47It's prospects in the House mean that there's more representatives in the North than there is in the South. And so the Senate, you know, and of course, eventually, as there were more Yankee presidents, the Supreme Court would become dominated, as it did, by Northerners. So that the Senate was the last line of veto for federal policy. And if the North ever got an advantage in the Senate, then the South could be, economic policy could be ramrodded through that would adversely affect the South. And so that's why you had to have this free and slave state agreement.

1:08:33And of course, I think a lot of the Southern leaders didn't feel that the Republican government, that the Republican party was going to stick to that agreement because as part of their coalition, they had, you know, important members of their coalition included the groups that wanted to emancipate the slaves, The Free Land for Free Men, The Homestead Act

1:09:30And the thing itself was another negative for the southern economy, I'm thinking it was the competition, the economic.

1:10:00which generated income, right, and if it's generating income and then the Republicans come in and want to give it away, that hurts the land value for Southerners as well as Northerners, but it also means that there's less money going into Federal coffers. that hurts the land value for southerners as well as northerners, but it also means that there's less money going into federal coffers. Land sales was not a big factor in the overall federal budget, but it was probably the third largest source of federal revenue. The Southerners wanted a tariff on imports for revenues plus land sales to finance the Federal Government.

1:10:46The Republicans wanted no land sales and a very high tariff. and the Lincoln and the supporters of Henry Clay, for example, wanted not just the tariff to provide for all the federal revenue, they wanted it to be even more protective, so they wanted to raise the rate even higher than would be necessary to finance all federal expenditures. What are they going to do with the extra money? Well, they don't really care about the extra money for the federal government. They'll always find a new fort to build, or they'll always find a new canal to construct, or a new building in Washington D.C., or whatever it happens to be.

1:11:36They were big for public projects, so if there was extra money around, they could always spend it on something. Washington D.C. hasn't changed that much, the more money, the merrier. and so and plus if you raise those tariffs higher higher like on if you raise the tariff on steel higher than was necessary to finance government well that would mean that foreign steel would be more expensive and therefore domestic steel could you know if you were selling cast-iron skillets you could raise your Raise Price, because the British had to raise their price, or if you were selling axes, you know, you could raise your price, and so the supporters of Henry Clay in what's called his American system, they wanted, you know, government money, paper money, government debt, they wanted public roads, public works projects, they wanted and the government regulation of the economy and they wanted protectionism for domestic industry which they perceived as providing immediate tangible results to those industries and that was the American system and so that was really the economic divide between north and south and there weren't really very many southern protectionists.

1:13:11There were free traders in the north, but there weren't a whole lot of protectionists in the south, because there wasn't as much industry in the south. The... Now sugar was protected by tariffs. So Louisiana had some sugar protectionists. We've been protecting sugar from the very beginning. We've been paying through the nose or rather through the mouth for the entire history of this country. We've been paying, I think we now pay Like five times the world price of sugar to sweeten our coffee so there were some you know these broad generalizations about Jeffersonian, Hamiltonian philosophy America is way too diverse to say every northerner was this and every southerner was that there's a great vast diversity of opinion but it's just when you're talking about a significant Minority and a Significant Majority.