Confederate States of America, the title of the independent government, formed by the seceding Southern States at the opening of the American Civil War, in the winter of 1860-1861. These States contained roughly half the population of the Northern States which remained in the Union. In proportion to their population they had played a more important part in the previous political history of the United States than was their share.
The formation of the new Confederacy was in the hands of experienced statesmen, well schooled in the politics of their respective states and in the halls of the Federal Congress to undertake such a task. Jefferson Davis of Mississippi was almost naturally chosen president, his rival candidates being Alexander H. Stephens, subsequently chosen to fill the vicepresidency of the Confederacy, an important exponent of states' rights, and during the war a strong antagonist of President Davis's policy, and Robert Toombs of Georgia, a strong secessionist. The latter became a prominent member of the Confederate Congress, and, like Stephens, opposed the despotic powers of the Richmond government. President Davis had been trained in the Federal army, as well as in the Congress and in the National administration. His administration of the Confederate presidency cannot be called brilliant. The difficulties he contended with, however, were insurmountable; but his official acts were always the result of an unselfish desire to do what seemed best for the cause he espoused.
The president's cabinet contained, among others,
- Judah P. Benjamin, secretary of state;
- C. G. Memminger (1803-1888), and later
- George A. Trenholm (1806-1876), secretaries of the treasury;
- G. W. Randolph (1818-1878) and James A. Seddon (1815-1880), secretaries of war;
- S. R. Mallory (1813-1873), secretary of the navy, and
- John H. Reagan, postmaster-general.
Of these Benjamin was distinctly the most powerful intellectually. Memminger, with little training or aptitude for his difficult position, did not distinguish himself as a financier, and was succeeded in the summer of 1864 by Trenholm, a Charleston banker, of high intelligence and good training, who, however, found it impossible to save the Confederacy from financial ruin. Of other Confederates prominent in official positions the following may be mentioned: Howell Cobb, a former member of the Federal Congress and of President Buchanan's cabinet, serving as speaker of the provisional Confederate congress and later in the field; Robert W. Barnwell (1801-1882) and William L. Yancey; Benjamin H. Hill (1823-1882) and A. H. Keenan of Georgia; John A. Campbell (1811-1889), before the war a judge of the U.S. Supreme Court; Judge A. G. Magrath (1813-1893), a prominent judge of the Confederate court in South Carolina; Governors Z. B. Vance of North Carolina, and J. E. Brown of Georgia (1821-1884).
In framing their provisional and permanent constitutions in 1861 the Confederate statesmen emphasized the points of view which had characterized them in the great constitutional discussions of the previous half-century. They also aimed to correct certain defects in the United States Constitution by amending that document in various directions. The Southern "States' Rights" view of the sovereign and independent position of the individual states was emphasized in the Confederate constitutions, which even went so far as to allow a state legislature to impeach a Confederate official acting within that state. Moreover, in the provisional Confederate constitution state officials were not bound by oath to support the central government. The powers of the executive were increased as against the prerogatives of the congress. The president was allowed to veto particular appropriations and approve others in the same bill. His term of office was lengthened to seven years, and he was declared ineligible for a second term of office. The cabinet officers were allowed seats in either house of congress, in imitation of the practice in United Kingdom, which Alexander H. Stephens especially was anxious to transplant to the American continent. The congress could appropriate money for particular purposes only by a two-thirds majority, unless the appropriation were asked for by the head of that department. Every bill was to refer to one subject, and that subject was to be expressed in the title, a provision aimed at preventing "omnibus" and confused legislation, in which it signally failed.
The Southern attitude toward a protective tariff was emphasized by the constitutional provision that no bounty should be paid and no taxes levied for the benefit of any branches of industry. Similarly the central government could not authorize internal improvements except for aids to navigation. Also the expenses of the post office were not allowed to exceed its receipts. The old Constitution had carefully avoided the use of the word "slave," but the Confederate constitutions had no such scruples, and, moreover, recognized the legitimate existence of slavery, and forbade all legislation which might impair the right of property in negro slaves.
These changes all had reference to times of peace. The war powers of the government were left unchanged from those provided for by the Federal Constitution. Provisions of that document as to suspending the writ of habeas corpus and the provisions regarding conscription were left equally vague in the new Confederate Constitution. These led to acrimonious discussion and much bitter feeling against the centralized war powers of the government at Richmond. As the war progressed, the Richmond authorities became necessarily more and more oppressive and aroused the "States' Rights" feeling prevalent in the South. It became evident that a confederated form of government, such as was planned by the Southerners, was unsuited to the stringent requirements of war times and contributed doubtless somewhat to the final cataclysm.
The provisions of the new constitution regarding the issue of legal tender paper money remained the same as of old. In the North such legal tender paper began to be issued in the spring of 1862, and later opened the question of the constitutionality of such a practice. No Confederate legal tender act was ever passed, though the agitation in that direction was often strong. The objections which prevented the passage of such an act were the same as those offered by the minority in later years against the constitutionality of the Federal legal tender act. The Southerners were too true to their strict constructionist views of the constitution to admit the constitutionality of a legal tender act.
The personnel of the Confederate congress and administration was materially weakened by the military field's drawing off the most brilliant Southern leaders. It was largely owing to the strategical skill of these generals that the Southern armies, smaller and more poorly equipped than their opponents, maintained the unequal contest for four years. In the naval operations the North had an overwhelming advantage, which was promptly and effectively used. The blockade of the Southern ports, beginning in the spring of 1861, was much less spectacular than the operations of thearmy, but was quite as effective in breaking down the Confederacy. It cut off the South from obtaining foreign war supplies, and reduced it to dependence upon its own products, which were almost exclusively agricultural. Manufacturing industries hardly existed in the South. A few iron works attempted with little success to meet the demand for ordnance. This and small-arms were obtained from the Federal arsenals in 1861, by capture and to some extent by eluding the blockade. Powder factories were established and vigorously operated. The scarcity and high price of clothing put a large premium on the establishment of textile factories, but their product was far below the demand.
The South was unfortunate in having a poorly developed railway system. As compared with those of the North, its railways were inadequately equipped and did not form connected systems. During the war, the inroads of the Federal troops, and the natural deterioration of the lines and their rolling stock, greatly reduced the value of the railroads as a military factor. They continued to be active in distributing the relatively small amount of imports through the blockaded ports of Charleston, Savannah and Wilmington. Their usefulness to the army and the city population in collecting food material from the country districts was much impaired.
The harvests in the South during the war were fairly abundant, as far as they were not destroyed by the advancing Northern armies. Maize was raised in large quantities, and, in general, the raising of food products instead of tobacco and cotton was encouraged by legislation and otherwise. The scarcity of food in the armies and cities was chiefly due to the breaking down of the means of transportation, and to the paper money policy and its attendant repressive measures.
The specie holdings of the Southern banks largely found their way into the Confederate treasury in payment for the $15,000,000 loan effected early in 186r. In addition, the government secured the specie in the various Federal offices which fell into its power. These sums were soon sent to Europe in payment of foreign war supplies. The gold and silver in general circulation also soon left the country almost entirely, driven out by the rising flood of paper money. Aside from the payment of the above loan the government never secured any specie revenue, and was driven headlong into the wholesale issue of paper money. The first notes were issued in March 1861, and bore interest. They were soon followed by others, bearing no interest and payable in two years, others payable six months after peace. New issues were continually provided, so that from an initial $1,000,000 in circulation in July 1861, the amount rose to 30 millions before December 1861; to 100 millions by March 1862; to 200 millions by August 1862; to perhaps 450 millions by December 1862; to 700 millions by the autumn of 1863; and to a much larger figure before the end of the war.
This policy of issuing irredeemable paper money was copied by the individual states and other political bodies. Alabama began by issuing $1,000,00o in notes in February 1861, and added to this amount during each subsequent session of the state legislature. The other states followed suit. Cities also sought to replenish their treasuries in the same way. Corporations and other business concerns tried to meet the rising tide of prices with the issue of their individual promissory notes intended to circulate from hand to hand. As a result of this redundancy of the currency the price of gold rose to great heights. It was quoted at a premium in Confederate notes in April 1861. By the end of that year a paper dollar was quoted at 90 cents in gold; during 1862 that figure fell to 40 cents; during 1863, to 6 cents; and still lower during the last two years of the war. The downward course of this figure, with occasional recoveries, reflects the popular estimate of the Confederacy's chance of maintaining itself against the Northern invasion. The fluctuations of the gold premium in the North during the same years are a complementary movement, and correspondingly reflect the periods of popular elation and depression as to the final outcome of the war.
The redundant currency drove the price of commodities to exorbitant heights, and deranged all business. It affected different classes of commodities differently. Those the supply of which was entirely from abroad, like coffee, rose to the greatest height owing to their scarcity produced by the blockade. Ingenious substitutes were found for such articles, and enormous profits were secured by the merchants who successfully ran the blockade and imported such much-needed articles of foreign origin. These speculators were continually abused for making such importations instead of confining themselves to supplying the government with foreign war supplies. Articles that were produced in the South and marketed abroad or in the North during normal times rose least in value. Tobacco and cotton, for instance, which found no buyers owing to the blockade, actually fell in value as quoted in gold. The great divergence of the price of these two commodities in the South and abroad - the Northern price of cotton increased more than tenfold during the war - offered the strongest inducement to evade the blockade and export them. A small amount of cotton reached the world's market by way of the Atlantic ports or Mexico, and netted those concerned in the venture handsome profits.
The same motive operated to encourage trade with the enemy. Tobacco and cotton were smuggled through the military lines in exchange for hospital stores, coffee and similar articles. The military authorities tried to suppress this illicit trade, but at times even they were carried away by the desire to secure the much-desired foreign supplies. The civil government also vacillated between the policy of encouraging exports, especially to Europe in exchange for foreign goods, and the policy of forbidding such trade in view of the supposed advantage accruing to foreigners, who it was hoped would be compelled to acknowledge the independence of the Confederacy in order to secure Southern cotton.
The derangement of prices, their local differences and fluctuations, produced wild speculation in the South. Normal business was almost impossible, and the gambling element was forced into every transaction. Speculation in gold was especially pronounced. Legislation and popular feeling were aimed at it, but without avail. Even the government itself was compelled to speculate in gold. Speculation in food and other articles was equally inevitable and was much decried. Laws were formed to curb the speculators, but had no effect.
The policy of the Southern banks during the war encouraged speculation. The New Orleans banks had been well managed, and remained solvent until September 1861. The banks of the other states suspended specie payments at the end of 1860, and thereafter enlarged their note issue and their loans, thereby adding to the general redundancy of the currency and stimulating the prevalent speculative craze. They did a large business by speculating in cotton, making advances to the planters on the basis of their crops. The state governments also used their note issues for this purpose, the planters urgently demanding relief as their cotton could not reach a market. The Confederate government also made advances on cotton and secured large quantities by purchase, to serve as the basis of cotton bonds. The rise of prices reflecting the redundancy of the currency was no advantage to the producer. Frequent efforts were made by legislation and otherwise to reduce the prices demanded especially by the agriculturists. As a result, the production of food products fell off, at least the agriculturists did not bring their products to market for fear of being forced to sell them at a loss. Supplies for the army were obtained by impressment, the price to be paid for them being arbitrarily fixed at a low figure. As a result, the army administration found it almost impossible to induce producers of food willingly to turn over their products, and the army suffered from want. Under these confused industrial circumstances the sufferings of the debtor class were loudly asserted, and laws were passed to relieve them of their burdens, making the collection of debts difficult or impossible. The debts of Southerners to Northerners contracted before the war were confiscated by the Confederate government, but did not amount to a large figure.
The effectiveness of the Federal blockade and the peculiar industrial development of the South removed the possibility of an ample government revenue. Though import duties were levied, the proceeds amounted to almost nothing. A small export duty on cotton was expected to produce a large revenue sufficient to base a loan upon, but the small amount of cotton exports reduced this source of revenue to an insignificant figure. There being, moreover, no manufactures to tax under an internal revenue system such as the North adopted, the Confederacy was cut off from deriving any considerable revenue from indirect taxation. The first Confederate tax law levied a direct tax of twenty millions of dollars, which was apportioned among the states. These, with the exception of Texas, contributed their apportioned share to the central government by issuing bonds or notes, so that the tax was in reality but a disguised form of loan. Real taxation was postponed until the spring of 1863, when a stringent measure was adopted taxing property and earnings. It was slowly and with difficulty put into effect, and was re-enacted in February 1864. In the states and cities there was a strong tendency to relax or postpone taxation in view of the other demands upon the people.
With no revenue from taxation, and with the disastrous effects of the wholesale issue of paper money before it, the Confederate government made every effort to borrow money by the issue of bonds. The initial i 5-million loan was soon followed by an issue of one hundred millions in bonds, which it was, however, difficult to place. This was followed by even larger loans. The bonds rapidly fell in value, and were quoted during the war at approximately the value of the paper money, in which medium they were paid for by subscribers. To avoid this circumstance a system of produce loans was devised by which the bonds were subscribed for in cotton, tobacco and food products. This policy was subsequently enlarged, and enabled the government to secure at least a part of the armies' food supplies. But the bulk of the subscriptions for these bonds was made in cotton, for which the planters were thus enabled to find a market.
It was hoped to keep the currency within bounds by holders of paper money exchanging it for bonds, which the law allowed and encouraged, but as notes and bonds fell in value simultaneously, there was no inducement for holders to make that exchange. On the contrary, a note-holder had an advantage over a bond-holder, in that he could use his currency for speculation or for purchases in general. In the autumn of 1862 the Confederate law attempted to compel note-holders to fund their notes in bonds, in order thereby to reduce the redundancy of the currency and lower prices. Disappointed in the result of this legislation, the Congress, in February 1864, went much farther in the same direction by passing a law requiring noteholders to fund their notes before a certain date, after which notes would be taxed a third or more of their face value. This drastic measure was accepted as meaning a partial repudiation of the Confederate debt, and though it for the time reduced the currency outstanding and lowered prices, it wrecked the government's credit, and made it impossible for the Treasury to float any more loans. During the last months of the war the Treasury led a most precarious existence, and its actual operations can only be surmised.
During the entire war the notion that the South possessed a most efficient engine of war in its monopoly of cotton buoyed up the hopes of the Southerners. The government strained every effort to secure recognition of the Confederacy as a nation by the great powers of Europe. It also more successfully secured foreigners' financial recognition of the South by effecting a foreign loan based on cotton. This favourite notion was put into practice in the spring of 1863. The French banking house of Erlanger & Company undertook to float a loan of £3,000,000, redeemable after the war in cotton at the rate of sixpence a pound. As cotton at the time was selling at nearly four times that figure and would presumably be quoted far above sixpence long after the establishment of peace, the bonds offered strong attractions to those speculatively inclined and in sympathy with the Southern cause. The placing of the bonds in Europe was mismanaged by the Confederate agents, but notwithstanding a considerable sum was secured from the public and used for the purchase of naval and military stores. At the close of the war these foreign bonds were ignored by the re-established Federal authorities like all the other bonds of the Confederate government. Compared with the partial success of this financial recognition by Europe, the South conspicuously failed in securing the political recognition of the Confederate government. Early in 1861 W. L. Yancey and others went to Europe to enlist the sympathy of foreign governments in the Southern cause. J. M. Mason and John Slidell followed early in 1862, after a short detention by the Federal government, which had removed them from a British vessel en route to Europe. Though these Confederate commissioners made every effort to induce foreign governments, especially those of Great Britain and France, to recognize the Confederacy, they were foiled in their efforts, largely by the skill and persistence of the Federal minister in London, Charles Francis Adams.
The political history of the Confederate States is the culmination of an inevitable conflict, the beginnings of which are found in the earlier history of the Union. The financial and industrial history of the South during 1861 to 1865 is the story of a struggle with overwhelming odds. The mistakes of the Confederate government's policy are overshadowed by its desperate efforts to maintain itself against the irresistible attacks of the North. In making that effort the South sacrificed everything, and emerged from the war a financial and industrial wreck.
- Jefferson Davis (₩) (February 4, 1861 - May 5, 1865)
- Alexander Stephens (₩) (February 4, 1861 - May 5, 1865)
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