Published by EH.NET (April 2004)
Mark Thornton and Robert B. Ekelund, Jr., _Tariffs, Blockades, and Inflation: The Economics of the Civil War_. Wilmington, DE: Scholarly Resources, 2004. xxix + 124 pp. $19.95 (paper), ISBN: 0-8420-2961-3; $65 (cloth), ISBN: 0-8420-2960-5.
Reviewed for EH.NET by David G. Surdam.
A fundamental axiom in show business is to leave the audience begging for more. Professors Thornton and Ekelund, at the Ludwig von Mises Institute and Auburn University respectively and both economists utilizing the Austrian approach, fulfill this axiom. They present a libertarian interpretation of economic issues involved during the American Civil War. For readers unfamiliar with the Austrian approach to economics, the two authors offer a readable, enjoyable treatise that introduces the works of many economists operating under the Austrian approach. Yet, they leave many intriguing questions
unanswered.For libertarians who view a nascent Confederacy as a laissez-faire
paradise (except for blacks), the authors provide a valuable
corrective. They recognize the ironic paradox: the states’ rights
Confederacy had strong central government action while the Federal
government’s policies were less centralized.
Thornton and Ekelund’s book contains a lengthy introduction and four
chapters. The first chapter emphasizes the tariff as a key economic
factor driving regional friction. The second chapter examines the
blockade and finds it effective, albeit helped by clumsy Confederate
policies. The third chapter describes the inflationary experiences of
both sectors and uses an Austrian monetary model to analyze the
causes and effects. The final chapter describes the war’s effects
upon the economies of the two regions.
I want to stress that the book is an interpretation; the authors
provide little new data. Their chapter on the blockade has an
original use of data compiled by John Christopher Schwab, while in
most of the other discussions the authors employ theories and data
used by previous commentators.
The authors assert that the tariff was a crucial, if not the main,
economic source of divisiveness during the antebellum era. They
de-emphasize slavery, although, they are moderate on this belief
compared with some libertarian writers who claim that slavery was an
unimportant issue in precipitating the war.
There are some difficulties with their presentation of the tariff
issue. Their Figure 1-2, which shows the sources of Federal
government revenues as percentages, should have been accompanied by a
table or a figure showing the actual amounts collected. Otherwise,
their statements on page 12 that tariff revenues were volatile and
uncertain and that the increase in tariff rates in 1842 led to
drastic reductions in tariff revenue are not necessarily sustained by
changes in the percentages. For instance, the figure only shows a
modest dip in the percentage of Federal revenue emanating from the
increased tariff rates.
Certainly a prohibitive tariff did engender inefficiency and arguably
an inequitable redistribution of wealth and income. Southerners may
well have had reason to feel aggrieved by contemporary tariff policy
and fearful of future policies, as the authors point out.
However, the authors do not explain what alternative peacetime
revenue policies would have been superior. Was the system of tariffs
more injurious to southerners than, say, an income tax or a property
tax? Southerners surely would have disliked a property tax and an
income tax might have proven intrusive and difficult to enforce. The
authors allude to the issue much later in their book when discussing
wartime public finance: “Despite all of its flaws, taxation can be
the best method of public finance because the burden is relatively
well-known and certain” (page 66, see also page 68). They suggest
that a low rate that would have been applied to the largest possible
base would have sufficed. Unfortunately, they do not cite Douglas
Ball’s work on Confederate finance, who offers a detailed analysis of
Confederate public finance (see pp. 22-23 in _Financial Failure and
Confederate Defeat_, University of Illinois Press in 1991). Still, I
believe Austrian economists have useful things to say about public
finance, and I wish these authors had more completely developed their
Their later discussion of public finance with regards to inflation
also raises a key issue that is rarely broached in discussions of the
Civil War. Aside from the well-known (at least where economists
congregate) fact that volatile changes in general price levels due to
printing money obscure underlying changes in relative prices, making
economic calculus tenuous, at best, the authors point out that, “it
also impedes the ability to calculate the true cost of government
activities, such as war” (p. 68). This statement is certainly
correct, but given the reticence of southern legislators to enact any
taxes or for southerners, in general, to favor taxes, an unsettling
question arises: How much did southerners value independence?
The chapter on the blockade is bedeviled by a paucity of data. I am
certain that Thornton and Ekelund’s argument that blockade runners
preferred to import items with high value relative to weight is
correct. I am less certain that their comparison of coffee to sugar
and molasses prices suffices to prove the contention. In particular,
their use of terms such as _luxury_ (coffee) and _necessity_ (sugar
and molasses) is, as they discuss, fraught with ambiguity.
Unfortunately, time series of, say, fine wine and silk cloth prices
are not available. Their attempt to contrast coffee as a high
value-to-bulk commodity versus sugar or molasses as low value-to-bulk
item is an improvement.
Unfortunately, the data underlying their Figures 2-3 and 2-4 are
suspect. John Christopher Schwab collected price data from various
southern cities during the Civil War and compiled price series. He
presented the prices in terms of comparisons with 1860 prices.
Thornton and Ekelund use Schwab’s data to show that the high
value-to-bulk coffee fell in terms of relative price compared with
sugar and molasses, except for a spike in 1865. The authors attribute
the increase in coffee’s relative price in 1865 to a loosening of the
blockade, but this is unlikely. The Union capture of Fort Fisher
removed Wilmington, North Carolina as a seaport for blockaders;
Charleston, South Carolina was rendered useless for the Confederacy
the next month. More troubling for demonstrating their thesis is the
strange behavior of sugar and molasses prices in 1864 reported by
Schwab. A particularly bizarre episode occurred between January and
February 1864. The combined sugar and molasses index doubled (going
from 47 to 99), but sugar’s index fell from 59 to 14! Molasses only
increased from 36 to 59 between January and February. Sugar’s index
price remained low for the remainder of the war, while molasses
generally increased. The combined index continued to rise. It is
possible that Schwab’s 1864 sugar prices are typographical errors,
but the figures occur in both his article and book. An alternate set
of prices compiled by Eugene Lerner (“Money, Prices, and Wages in the
Confederacy, 1861-65,” Ph.D. dissertation for the University of
Chicago, 1954) better support the contention of continually rising
I also believe that the authors rely too much upon capture rates of
blockade runners. Similar capture rates in the face of a dwindling
number of attempts would suggest an increasingly effective blockade.
Steamers that ran the blockade evolved but required inefficient cargo
holds, special “smokeless” coal, and skilled navigators. Since steam
vessels normally did not carry bulky grains during peacetime, for
instance, a switch to steamers and away from sailing vessels would
generate the results predicted by Thornton and Ekelund.
The Austrian economic approach can provide valuable insights into the
Civil War. The authors have capably introduced readers to the
burgeoning corpus of Austrian analysis of the war. Yet, I feel there
are other insights they could have investigated, and I hope they will
further their efforts.
David G. Surdam is an independent scholar. His book, _The Postwar New
York Yankees and America: A Revisionist View of Baseball’s “Golden
Age”_ is wending its way through the publication process. His
_Northern Naval Superiority and the Economics of the American Civil
War_ (University of South Carolina Press) was published in 2001.
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