THE FAILURE IN FINANCE.
When the competent historian shall at last undertake a thoughtful work
upon our great struggle, there can be little doubt that he will rank
among the primary causes of the Confederacy's dissolution the grave
errors of its financial system.
These errors he will find not only in the theory and framework of that
system--founded upon a fallacy, but also in the detailed workings of
its daily management; and in persistent adherence to a line of policy,
each day proved more fatal.
In a previous chapter, allusion has been made to the feeling of
conscious superiority, pervading all classes of government and people
at the inception of the struggle, at Montgomery. This extended to all
classes of the people; and the universal belief in the great dogma of
secession--"Cotton is king!"--was doubtless the foundation of that
cardboard structure of Confederate finance, which the first rude shock
toppled to pieces, and the inexorable breath of demand shriveled into
nothingness.
At Montgomery, the promises of ease in money matters were all that
could have been asked. The people, everywhere, had come forward with
frank, unanimous selflessness. They had faith in the cause--faith in
the Government--faith in themselves; and they proved it by their works,
giving with lavish hand from their substance. It was felt that the
great prosperity of the North had, in a great measure, come from the
South; that the looms of New England were fed with southern cotton;
that the New York custom house was mainly busied over southern exports;
that the soil of the South was, by the alchemy of trade, transmuted
annually into three-fifths of the gold in the Federal treasury.
"Egad, sir!--money is our last trouble, sir!" my old friend, the colonel,
had cried with enthusiasm. "The country teems with riches--actually
teems, sir! with gold. We have only to stretch out our hands to gather
it in--more than we want, egad! _Men_ we need, sir!--but _money_, never!"
And the colonel was right in theory. But that very overweening
confidence in her strength proved the South's greatest weakness; and
where was needed the strong, nervous grasp of a practical and practiced
hand, to seize at once the threads of gold, and weave them into a solid
cord of system--weak and shifting fingers were allowed to tangle and
confuse them, till each in turn was snapped and rendered worse than
worthless. Mr. C. G. Memminger, whom the President elevated to the
Treasury Department, was untried and unknown out of his own State; but
so great was the confidence of the people in their financial power--so
simple did the problem of its development seem to them--that they were
trustful and satisfied, until the stern grasp of necessity roughly
shook them from their golden dream. And they awoke, like the sleeper of
German legend, to find their hands filled with worthless yellow leaves
and grains of chaff, where they had dreamed of treasure beyond compare.
Immediately upon his appointment, thoughtful men--who could look a
little beyond the rose-colored clouds of the present--had pressed upon
Secretary Memminger the necessity for establishing heavy foreign
credits, to draw against in case of future need. The currency of the
southern banks was comparatively nothing, in view of increased
expenditures. The cotton which was gold--food--clothing--everything to
the South, with the open ports of the North, would be more worthless
than the wampum of the Indians, so soon as the threatened blockade
might seal up her ports and exclude the European purchaser. But, on the
contrary, if that cotton were bought on the faith of the
Government--and planters would willingly have sold their last pound for
Confederate bonds; if it were shipped to Europe at once and sold in her
market, as circumstances might warrant, the Confederacy would, in
effect, have a Treasury Department abroad, with a constantly accruing
gold balance. Then it could have paid--without agencies and middlemen
beyond number, who were a constant moth in the Treasury--in cash and at
reduced prices, for all foreign supplies; those supplies could have
been purchased promptly and honestly, and sent in before the blockade
demanded a toll of one-half; but above all, the interest and principal
of such bonds to the planters could have been paid in coin, and a
specie circulation thus been made, instead of the fatal and endless
paper issues that rendered Confederate credit a scoff, and weakened the
confidence of the southern people in the ability and integrity of that
department.
In this sense--and this sense alone--_Cotton was king!_ But the hands
that could have lifted him safely upon a throne and made every fiber a
golden sinew of war, weakly wrested the scepter from his grasp, and hid
him away from the sight and from the very memory of nations.
It was as though the youngest of the nations aped the legendary
traditions of the oldest. After the potent and vigorous King Cotton was
killed by starvation, Confederate finance treated him as Jewish myth
declares dead King Solomon was treated. In his million-acred temple, he
stood--cold, white and useless--leaning upon his broken staff; while
timorous leadership gaped at his still majesty--
"Awed by the face, and the fear, and the fame
Of the dead king standing there;
For his beard was so white and his eyes so cold,
They left him alone with his crown of gold!"
Had the Government bought--as was urged upon it in the fall of '61--all
the cotton in the country, at the then prices, and paid for it in
Confederate bonds at six per cent., that cotton--according to
calculations of the best cotton men of the South--would have produced
in Liverpool, during the next three years, at rapidly-increasing prices,
_over one thousand millions of dollars in gold!_ Granting this erroneous,
even by one-half, it follows that the immense specie balance thus held,
would--after paying all accruing interest--have left such a surplus as
to have kept the currency issue of Confederate States' notes merely
nominal, and even then have held them at a par valuation.
The soldier, who freely bared his breast to the shock of a hundred
battles for his country, his fireside and his little ones, could then
have sent his pittance of eleven dollars a month to that fireside, with
the consciousness it might buy those dear ones bread at least. But long
before the darkest days fell upon the South, his whole month's pay
would not buy them _one pound of bacon_!
Secretary Memminger would seem to have had some theory, or reasons of
his own, for refusing to listen to the plain common sense in these
suggestions from practical sources. With a strictly agricultural
population to supply, he insisted on the issue of Confederate notes in
such volume that the supply far exceeded the demand. For, had there
been a large manufacturing population actively employed in the South,
as there was in the North, the inflation of currency might have been
temporarily concealed by its rapid passage from hand to hand. But with
no such demand--with only the daily necessities of the household and of
the person to relieve--the plethora of these promises to pay naturally
resulted, first in sluggishness, then in a complete break-down of the
whole system.
Still, from the joyous days of Montgomery, and the triumphant ones
after Manassas--through the doubtful pauses of the next winter and the
dark days of New Orleans--on to the very _Dies irae_--there pervaded
government and people a secure belief that the finances of the North
would break down, and the war collapse for want of money!
And so tenacious were people and rulers of this ingrained belief, that
they cherished it, even while they saw the greenbacks of the Federal
Government stand at 25 to 30 per cent. depreciation, while their own
Treasury notes dropped rapidly from _one hundred_ to _one thousand_!
Let us pause for one moment to examine upon what basis this dream was
founded, before going into the sad picture of want--demoralization--ruin!
into which the errors of its Treasury plunged the southern people.
Accepting the delusive estimate that all the property of the United
States, in 1861, represented but one-fifth more than that of the
Confederate States; and that over three-fifths of the gold duties were
from cotton and cotton fabrics, and products of the South alone, it was
easy for the southern eye to see a future of trial, if not of ruin, for
the North. Then, too, at the beginning of the war it was reasoned that
the northern army of invasion, working on exterior lines, must
necessarily be greater far in numbers and in cost, than the army of
defense, working on interior lines. Moreover, the vast-proposed
blockade, by increasing to a point of anything like efficiency the
vessels, armament, and personnel of the United States navy, would cost
many millions. Thus, in short, the southern thinker could very readily
persuade himself that the annual expenditures of the Federal Government
must--even with the strictest economy and best management--run to
unprecedented and undreamed-of sums.
The demand for increased appropriations with the very first call of Mr.
Lincoln for troops, justified this belief; the budget of '62 to the
United States Congress went far beyond all expectation; and the wild
waste, extravagance, and robbery that swelled each succeeding estimate,
were but more and more proof to the southern thinker, that he must be
right. But he had made one grave miscalculation.
Into the woof of delusion which he continued to weave, for enwrapping
his own judgment, such reasoner omitted wholly to cross the warp of
combined result. He neglected that vastly-important filament--proper
and value-enhancing handling of his valuable production; the reality
that southern cotton, sugar and rice had become so great a factor in
national wealth, mainly through manipulation by northern hands. He did
not stop to calculate that--those hands removed and, in addition, the
ports of the South herself hermetically sealed--all product, not
consumable, must become as valueless as the leaves and dross of the
German's dreamer!
The expenses of the North have ever been paid by the South, he
reasoned. This sum now withdrawn, it follows that not only will the
increased expenses of the North not be paid; but the heavy balance will
be efficient in the southern Treasury, to meet our far smaller
expenses.
With equal ability in management, this result _might_ have happened;
for there is no sort of doubt that depreciation in southern money was,
in some regards, reason for appreciation in northern. But while the
policy of the southern Treasury was weak, vacillating and destructive,
that of the northern was strong, bold and cautious. While Mr.
Memminger--instead of utilizing those products which had heretofore
been the life-blood of northern finance--allowed the precious moments
to pass; and flooded the country with paper, with only future, instead
of present and actual, basis of redemption, the northern Secretary
struck boldly at the very root of the matter and made each successive
disaster to northern arms another link in the strengthening chain of
northern credit.
The Union finances did indeed appear desperate. The stoppage of a sure
and heavy means of revenue, at the same moment that the spindles of New
England stood still for want of food; the increased demand for fabrics
and supplies, that had now to be imported; and the vast increase of
expenditure, coincident with decrease in revenue, left but had one door
open to escape. The North was flooded with greenback promises to pay,
issued with one sole basis of redemption--the chance of absolute
conquest of a people roused, warlike, and determined to yield nothing
save their lives.
To meet this issue and the interest of the vast debt incurred, taxation
in the North rapidly increased, until the oppressive burden represented,
in one or another shape, _near 20 per cent._ of the real property of
the people!
Besides, the North, unlike ourselves--argued the hopeful southern
financier--does not go into the war as a unit. New York, the great
money center, is entirely opposed to the war; New England is
discontented at the stoppage of her factories and the loss imposed upon
her people; and the great West, ever more bound to the South than to
the East, by community of interest and of pursuit, must soon see that
her only road to salvation is down the great river that has heretofore
been the one lung that gave her the breath of life! Will the cute
Yankee of New England submit to be ruined, and starved, and taxed in
addition? Will the great commercial metropolis let the grass grow in
her streets and the vessels rot at her wharves, that once laughed with
southern cotton? Will the granary and meat-house of the Union yield all
her produce for baseless paper promises and, in addition pay heavy tax
to carry on a war, suicidal as she must see it?
Such were the delusions of the South--based, it may be, upon reason,
and only delusions because underestimating and despising the great
ingenuity of the enemy, and the vast cohesive power of _interest_!
If the Washington government could not make the war popular, it could
at least make it a great money job. If it could not bring it at once to
the hearts of its people, it could at least force it directly upon
their pockets.
The vast increase in army and navy gave sudden and excitingly novel
employment to thousands of men then out of situations; the unprecedented
demand for materials of war--arms--munitions--clothing--supplies--turned
the North and East into one vast armory and quartermaster's store;
while the West was a huge commissary department. Then the Government
paid well and promptly, if it did pay in greenbacks. These daily
changed hands and nobody stopped to inquire on what the promise to pay
was based.
Great contracts were let out to shrewd and skillful moneyed men; these
again subdivided became the means of employing thousands of idle
hands--while each sub-contractor became a missionary to the mob to
preach the gospel of the greenback!
But above all was the shrewdness and finesse with which the bonds were
manipulated. The suction once applied, the great engine, Wall street,
was pumped dry; and self-preservation made every bondholder a _de
facto_ emissary of the Treasury Department.
Banker and baker, soldier and seamstress, were equally interested in
the currency. It became greenback or nothing, and the United States
used the theory of self-preservation on which to build a substantial
edifice of public credit.
These were the hard, real reasons that dissipated at last the dream of
the South; that kept the greenback promise of the manufacturing North
at little below gold, while the grayback of the producing South went
down--down--from two--to ten--twenty--at last, to one thousand dollars
for one.