The Civil War and Political Nationalization; C. Carson

32 of capital, of materials, and of man power. It has been shown, too, that the most immediate impact of the Civil War was a decline in the growth of production of consumer goods, and that it took several years before the rate of growth that had been going on before the war was achieved again. Certainly, the devastation and political disruptions within the South were anything but conducive to eco nomic development. Rather, my point has to do with the control and disposition of politi cal power. The secession of the South brought a new political party, the Republican party, to power. The vic tory of the North and the policies followed during Reconstruction con solidated the Republican party in power for several decades. Involved in this development was a basic shift of political power from the South to the Northeast and Midwest. Most THE CIVIL WAR AND POLITICAL NATIONALIZATION 33 important, it meant a change in the ends for which the power of the United States government was to be used.

The Gilded Age An understanding of the shift in the role of government in the econ omy is critical to the interpretation of the period which historians have long called the Gilded Age. But by .whatever name it may be called, the period from 1870 to 1910, or there abouts, left a distinctive mark on America. It was the age of the great entrepreneurs, of John D. Rockefel ler, Jay Gould, Philip Armour, Le land Stanford, Andrew Carnegie, James J. Hill, Jim Fiske, Collis P. Huntington, Cornelius Vanderbilt, J. P. Morgan, and many others. It was an age of spectacular economic developments: of great rail systems thrust across the plains, over the mountains, and to the Pacific, of the emergence of large industrial cor porations, of the growth of large cit ies as manufacturing and commer cial centers, and of the opening up of millions of acres of land to farming and ranching. These dramatic developments provided the substance, such as ex isted, for a number of myths, some of which have been given generic names, such as the Robber Barons myth, the Horatio Alger myth, and so on. Probably, the most persistent myth. is the one that the economic thrust in the. latter part of the nine teenth century was simply a result of freedom. This position was force fully stated by Vernon L. Parring ton in these words: It was an abundant harvest of those freedoms that America had long been struggling to achieve, and it was making ready the ground for later harvests that would be less to its liking. Freedom had become individualism, and individual ism had becom~ the inalienable right to pre-empt, to exploit, to squander ....

From the sober testraints of aristocracy, the old inhibitions of Puritanism, the niggardliness 'o:f an exacting domestic economy, it swung far back in reaction, and with the discovery of limitless oppor tunities for exploitation it allowed itself to get drunk. Figures of earth, they fol lowed after their own dreams. Some were builders with grandiose plans in their pockets; others were wreckers with no plans at all. It. was an anarchistic world of strong, capable men, selfish, unen lightened, amoral-an excellent exam ple of what human nature will do with undisciplined freedom.! The other side of the coin of this myth of unlimited economic freedom was that it provided a justification for government regulation, restric tion, and control of the economy. Freedom must' be curbed, obviously, if it produces such results as Par rington and other mythmakers de scribe. Freedom is nothing short of a destructive :menace by their inter pretation.

There is a profound misunder34 THE FREEMAN January standing of the free market and free enterprise entangled in this myth. What some, at least, of the myth makers are leaving out of account is that government was intervening in the economy during these years, and doing so to a significant and some times determinate extent. There are two distinct types of government in tervention. One is when govern ment grants favors to some kinds of economic development, promotes some industries, grants class privi leges, and aids and abets in the es tablishment of monopolies. The other type is government regulation and restriction of economic undertak ings. Both types of intervention are in terferences with the market. Each produces its own kinds of distor tions, favors some and disadvan tages others. That some business men, for example, may seek and get government privileges should not be taken to mean that such things are in accord with freedom. That much of the intervention between 1860 and 1900 was of the first type means as surely that there was intervention and distortion as it would if the sec ond type had prevailed.

CurbingIntervention The main political thrust of the first half of the nineteenth century was to get the United States govern ment out of involvement with or in tervention in the economy. There were two main elements behind this thrust. One was that many of the intellectual and political leaders fa vored a free market in principle. The other was that the South (or slave states, as they became known, in cluding not only those states which would eventually be a part of the Confederacy but also Maryland, Delaware, Kentucky, and Missouri) both generally opposed intervention by the United States government in the economy and favored a free mar ket. The South was the major ex porting region during this era, fa vored the development of inter national trade, and looked toward Europe both as a market for its goods and as a source of imports. And, the South dominated na tional politics from 1800 to 1860, or, at least, Southerners did. Southern ers served in the Presidency for ap proximately 41 years from 1801 to 1861. There were only two Chief Justices of the Supreme Court from 1801 to 1864, John Marshall of Vir ginia and Roger Taney of Maryland.

Southerners served as Speaker of the House of Representatives for ap proximately 49 years between 1801 1861. SouthernDominance How or why the South should have been so dominant politically is not readily apparent. From the outset, the South had a minority. If disfran chised blacks had not been counted 1982 THE CIVIL WAR AND POLITICAL NATIONALIZATION 35 in the census, their minority status would have been even more pro nounced. It was the prominence· of the South in one political party that enabled Southerners to exercise their dominant political role. The Jeffer sonian Republican party and the Jacksonian Democratic party, which succeeded it, were in control of the government for all but a few years from 1801 to 1861. While both these parties, if they be considered dis tinct from one another, had a na tional following, their greatest strength was in the South. So it was that Southerners maintained their leverage over the government dur ing these years.

So it was, too, that the opposition to using the power of the general government to develop a nationally integrated economy triumphed dur ing the era before the Civil War. Both the Jeffersonians and Jackson ians were basically states' rights parties. Both generally opposed gov ernment intervention and favored free trade and free markets. J effer son's party had been born out of op position to what might be called the economic nationalism of Hamilton's policies. Jackson's party was shaped in opposition to the National Repub licans and Whigs, at least in part, in opposition to Henry Clay's "Ameri can System" and John Quincy Ad ams' nationalist ideas. The critical economic issues from 1800 down to about 1845 were the protective tariff, a national banking system, and internal improvements (roads and canals mainly, to that date). These were joined from about 1845 onward: QY immigration, slav ery expansion,: and railroad promo tion for internal improvement. Gen erally, the J efl'ersonians and Jack sonians opposed a protective tariff, a national bank, federal appropria tions for internal improvements, and, in the years 'before the Civil War, favored the expansion of slavery. The opposition to the national bank and federally aided internal improve ment reached· its peak during Jack son's presidency, and is symbolized by his veto of, the Maysville Road Bill and the Bin for rechartering of the Second United States Bank.

Jackson got. caught in political crossfires on the tariff question, but his followers generally opposed the protective tariff as well. Seeds of Conflict Those who would use the power of the United Sta~es government to de velop a national economy were gen erally thwarted up to the Civil War, and undoubtedly they were more than a little frustrated. Some histo rians have maintained that the frustration mOUl1tedin the years just before the war. Charles A. Beard held that it wasi.Northern capitalists ranged against 'Southern slavehold ers that precipitated the conflict. The desire for a protective tariff did ap36 THE FREEMAN January parently spread after the depression which began in 1857. There is no doubt that the necessity for expand ing slavery if the South was to re gain its parity in the Senate became more pressing after 1850. That slaveholders (actual and potential) suffered from a capital (or credit) crunch attributable mainly to the rising cost of slaves can be, and has been, documented ad nauseam. That made them competitors, at the least, with Northern industrialists for capital.

But it is neither my purpose to make an economic interpretation of a portion of United States history nor to explain the coming of the Civil War. Rather, I· wish to show the change· in direction that took place by way of political centralization or nationalization during and after the war. To do that at all effectively, it needs to be done against the back ground of what had happened before the war. Sectional Interests The main features ofpre-Civil War America were: widespread economic freedom, decreasing intervention in the economy by the national govern ment, and developing sectionalism, regionalism, and localism. The sec tionalism was not a consequence of economic freedom, but of slavery, which is its opposite. The regional ism and localism were, however, at least according to its critics, a product of non-involvement by the United States. One thing is clear: while the Constitution removed or forbade the erection of political obstacles to a common market in the United States, the general government did very lit tle to overcome the natural obsta cles to a nationwide market. A case can be made that building roads, ca nals, and railroads is not the busi ness of government, and that posi tion had vigorous advocates during these years. Also, it should be noted that much building of transporta tion routes and linking of regions was done during this period, both by private investors and with the aid of state governments. But for virtually the whole period they were links from the inland to seaports, not con nections between inland areas.

Aside from the difficulties of transportation, one of the greatest obstacles to a national market dur ing much of this period was the ab sence of a generally agreed upon and acceptable currency. To put it more precisely, a good many differ ent kinds and varieties of money, or would be money, vied to become the currency. The Constitution seemed to bend the United States toward a gold and silver coin currency. That ran into trouble early on, however, because of Hamilton's effort to es tablish bimetallism. He set a ratio of 15 to 1 between silver and gold. This undervalued gold and overval ued silver. In consequence, only sil1982 THE CIVIL WAR AND POLITICAL NATIONALIZATION 37 ver was presented to the mint for coining. But that ran into difficul ties, too, because the American dol lar was slightly lighter than the Spanish silver dollar. It tended to leave this country to be exchanged for the Spanish dollar. The mint had little to employ it, so the ever frugal Jefferson had it closed in 1806.2 Thereafter, until the 1830s, Ameri cans relied mainly on foreign coins for minted money.

Government Control of Banking Meanwhile, banks took up the slack by issuing paper money which was sometimes redeemable in spe cie. The First United States Bank was chartered in 1791 and lasted until 1811. The Second United States Bank was chartered in 1816 and ex pired in 1836. During their tenure, these banks usually supplied a com mon currency for the United States, one limited in its quantity by law and redeemable ordinarily in specie. Further, they held in check the is sues of paper money by state banks by discounting their paper money. Thus, the United States Banks pro vided a standard of measurement of the value of all circulating media of exchange in the country. With the demise of the second bank there was no longer any generally acceptable measure of the worth of state bank issues. Before its demise, however, a new mint had been established by the United States, and a 16 to 1 ratio between gold and silver promul gated. This overvalued gold and un dervalued silver. In consequence, gold was brought in for minting. 3 Whether thelJJnited States then had a gold standard may be debatable, but it is certain that thereafter sil ver dollars,. ,following Gresham's Law, did not remain long in circu lation. After·. t~e gold discoveries of the late 1840~, even the subsidiary silver coins had to be debased to keep them in circulation.

MarketPossiibilities If governments had withdrawn entirely from the monetary field, ex cept for specifying in what forms they would ac~ept payment of taxes and for land, i~ is quite possible that a common currency would have de veloped in the United States. Pri vate mints could have supplied the coins, and the troublesome question of a fixed ratio between precious metals could·.nave been settled by having none .•The weight in ounces of what metal \could have been en graved on all cQins. Merchants could have set their! prices, and adjusted them from time to time, in terms of ounces of gold, silver, copper, or what have you. Paper money might even have circulated with a guarantee of redeemability certified by 100 per cent reserve in,specie backing it. (A major difficulty! with this scenario is that there would be little profit, if 38 THE FREEMAN January any, for the mints and none, so far as I can see, for the issuers of paper money. Counterfeiting and fraud might not be prohibitive difficulties, but they would remain as problems nonetheless.) There was a movement, of sorts, against banks and against their is suance of paper money which mounted in the 1830s and probably reached a peak in the 1840s.

4 It got underway with Jackson's veto of the bill to recharter the Second Bank of the United States. Animosity mounted following Jackson's issu ance of the Specie Circular, requir ing the payment for government lands in specie. There were numer ous bank failures as banks were pressed to redeem their paper money in specie. President Martin Van Buren proposed an Independent Treasury, which was eventually passed into law in the 1840s. This meant that money received and held by the United States would not go into the banking system (or lack of system) at all, and could not, there fore, be used by banks as a reserve against their paper money. Several states in the West adopted constitu tional provisions prohibiting their legislatures to charter banks. Oth ers adopted strenuous limitations upon banking. Even so, governments remained entangled in the monetary situa tion. The federal government was minting gold coins and had set a ratio between gold and silver. Most states continued to charter banks which could and did issue paper money. Those states that did not were usually flooded with paper money from surrounding states. The paper money was not legal tender, of course, but it did pass as currency, or at least some of it did. It is prob ably true that good money will drive bad money out of circulation, in the absence of tender laws, but while it is doing so the paper continues to pass as currency. Moreover, during the 1840s and 1850s, as well as ear lier, there were usually plenty of new banks to put out some more.

Besides, some of the paper was not bad money, and it was not readily apparent which was which in many cases. In Massachusetts, the currency was stabilized by a consorti urn of bankers. In New York, the state en forced a reserve system that worked tolerably well. Elsewhere, there was usually chaos. A contemporary de scribed the situation this way: In the West, the people have suffered for years from the issues of almost every state in the Union, much of which is so irredeemable, so insecure and so unpop ular as to be known by opprobrious names ... There the frequently worth less issues of the State of Maine, the shinplasters of Michigan, the wildcats of Georgia, of Canada and Pennsylvania, the red dogs of Indiana and Nebraska, the miserably engraved notes of North Carolina, Kentucky, Missouri and Vir1982 THE CIVIL WAR AND POLITICAL NATIONALIZATION 39 ginia and the not-to-be-forgotten stump tails of Illinois and Wisconsin are mixed indiscriminately with the par currency of New York and Boston.... 5 For Lack of a CommonCurrency The main point that I would make is that there was considerable diffi culty in having a common market without a common currency, that trade between manufacturing cen ters, such as there were, and the hinterlands, for example, was made unusually difficult by the variety of currencies and the absence of up-to date discount rates. (Discount rates were published, but some of them were apt to be obsolete by the time they were printed.) In consequence of this, as well as other obstacles, most production of manufactured articles was for local markets up to the Civil War. As one historian says, "Most firms sold only in certain nat ural geographic regions, shipping only limited distances and depend ing upon consumer satisfaction and local advertising for the spread of their wares."6 With one or two exceptions, the federal government's posture was neutral toward economic develop ment. A good example of this neu trality is what happened following the Panic of 1837. Many states had become deeply involved in road, ca nal, and some railroad building in the 1830s. Large issues of bonds had been sold, especially to foreign investors, particularly the English.

When hard times hit, many of the states defaulted on the payment of the debts. Effprts to get the federal government to bail them out, to as sume the loans or enforce payment, were of no avail. In consequence, foreign sources of capital almost dried up for Americans. Not even the se curities of the United States could find subscribers in the 1840s. "You may tell your government," said one of the Rothscllilds, "that you have seen the man 'who is at the head of the finances of Europe, and that he has told you,that they cannot bor row a dollar, not a dollar."7 States did offer the means for the consolidation of capital from inves tors by way of the limited liability corporation. ·,In the early 1800s, however, corporate charters could only be obtained by special acts of legislatures. Such charters were dif ficult to obtain, were conducive to bribery, and '. were tainted because they were special privileges. To overcome these objections, a move ment began in the 1830s for states to pass general acts for incorpora tion. By 1860, the following states had passed SUCh acts: Connecticut, Maryland, New Jersey, New York, Pennsylvania,. Indiana, Massachu setts, and Virginia. 8 There was ai difficulty with state incorporation, however. It was not clear what rights a corporation chartered in one state would enjoy 40 THE FREEMAN January in others, ifit chose to operate there.

Would its property be secure there? Might it not be subject to disabling taxation, regulation, or other puni tive measures? Whether the United States government had the author ity to protect foreign (i.e., out of state) corporations, or whether it would if it could, were open questions. A Pro-Slavery Trend The political trends of the 1840s and 1850s were not very reassuring. This brings us to the major excep tion to the neutrality of the federal government toward economic devel opment, its position regarding slav ery. It is possible to argue that prior to the 1840s the government was neutral toward sla very, except for prohibiting the importation of slaves. But in the last decade or so before the war, the Southern leverage over the government was being used to expand and protect slavery. The annexation of Texas and the territorial acquisitions from Mexico following the Mexican War were viewed at the time as moves to ex pand territory open to slavery. A Fugitive Slave Act was passed in the wake of the Compromise of 1850 which put the government in the business of capturing runaway slaves and returning them to their owners.

The Kansas-Nebraska Act opened up Kansas to slavery, if the voters wanted it. The revelations of the Os tend Manifesto brought out into the open proposals for annexing Cuba as a potential slave state. The Dred Scott decision held that Congress had no power to determine where slaves could be taken in the United States. The trend was to circumscribe the powers of the federal government and augment those of the states. Southern leaders were becoming less and less willing to compromise, and they were bending the United States Constitution in the direction that they would write into fundamental law in the Confederate Constitu tion. A Republican Party The modern Republican party was brought into being to counter these trends and directions. It ran its first presidential candidate in 1856. The platform called for the repeal of the Missouri Compromise, the admis sion of Kansas as a free state, the stamping out of slavery in the un organized territories, federal aid to build a Pacific railroad, and a fed eral program for internal improve ments. The appeal of the new party was clearly demonstrated, for it car ried several Northeastern and Mid western states. 9 The Democratic party broke up in 1860. The Northern Democrats nominated Stephen A. Douglas, the Southern Democrats, John C.

Breckinridge, and a new party, the Constitutional Union, was devised 1982 THE CIVIL WAR AND POLITICAL NATIONALIZATION 41 for those who wanted neither. It nominated John Bell of Tennessee as its candidate. With the disruption of the Democratic party went almost certainly the Southern dominance of national politics. The Republicans seized the opportunity, nominated Abraham Lincoln for President, and adopted a platform which had no discernible appeal in the South. While the Republican platform did not come out in favor of the abolition of slavery, did not even condemn the Fugitive Slave Act or slavery in the District of Columbia, it did reaffirm its opposition to slavery expansion in the territories. It denied that Congress had the authority "to give legal assistance to slavery in the territories," viewed with horror the illegal reopening of the slave trade, and once again demanded the ad mission of Kansas to the union as a free state. In contrast to the plat form of 1856, it came out in favor of a protective tariff, declaring that duties should be adjusted so as "to encourage the development of the industrial interests of the whole country."l0 It opposed any change in the naturalization laws, i. e., fa vored a liberal immigration policy, and came out for a new homestead law which would make government land available virtually free. Or, as one contemporary newspaper ex pressed it, the platform offered pro tection for industry, "economy in the conduct of the government, homesteads for settlers on the public do main, retrenchment and account ability in the' public expenditures, appropriation for rivers and har bors, the adroi$sion of Kansas, and a radical reform in the govern ment."ll As soon as it became certain that Lincoln had been elected, Southern states began to secede to form a Confederacy . When all who would had seceded, control over the United States governntlent was fully in the hands of the Republican party. The control was consolidated during Re construction, .• mainly by Congres sional dictation of the terms of read mission to the! Union of Southern states. Not until 1884 was a Demo crat elected to. the presidency, and he was the only one to serve (if An drew Johnson be excepted) from 1861 to 1913. One or the other houses of Congress was .. from time to time Democratic, but in general Republi cans dominated 1the government from the Civil War to the eve of World War I.

The South Dis,possessed Not only was the South dispos sessed of most of its political power by secession, war, and reconstruc tion but also of much of its wealth and the basis of its economy. The ab olition of slavery resulted in a loss of capital (in slaves) reckoned at something on the order of $400 mil lion. The Fourteenth Amendment 42 THE FREEMAN January prohibited both the United States governments and those of any states from compensating owners for any loss of property in slaves. Moreover, neither were permitted to assume or pay any debts contracted for the prosecution of the war by the Con federacy. The Confederate money was then worthless as were all bonds and securities sold by the Confeder acy or states that were in rebellion. On top of this, many of the larger. cities were burned or destroyed, railroads destroyed, plantations pIundered, and so on. Whatever power and fortune there had been in the South to defend the powers of the states or thwart centralizing and nationalizing tendencies was, as Margaret Mitchell well said, Gone With the Wind.

With the South as an obstacle to centralization removed, with a war to fight and a South to remake, a large scale nationalization of power took place. The most far-reaching step toward nationalization was made in Section 1 of the Fourteenth Amendment, which said, in part: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or prop erty, without due process of law; nor deny to any person within its juris diction the equal protection of the law." In theory, at least, this gave Congress and the federal courts oversight over all state acts and leg islation, for there was little they could do that would not involve in one way or another, privileges and immunities or life, liberty, and property. When the courts later ruled that a corporation was a "person" in the sense intended by the amend ment, they also enjoyed this protec tion from state governments.

Protectionism But well before the Fourteenth Amendment had been either pro posed or ratified the government had adopted considerable legislation with a nationalizing tendency. The Re publicans in power moved with a right good will to use the govern ment to promote economic develop ment along lines congenial to them. While there is hyperbole in his sum mation, there is truth too in Wilbur 'Cash's harsh assessment of North ern aims, when he said: "The Civil War and Reconstruction represent in their primary aspect an attempt on the part of the Yankee to achieve by force what he had failed to achieve by political means: first, a free hand in the nation for the thievish aims of the tariff gang, and secondly, and far more fundamentally, the satis faction of the instinctive urge of men in the mass to put down whatever differs from themselves .... "12 Whether the aims were thievish or not, the Southern representatives were hardly out of Congress before 1982 THE CIVIL WAR AND POLITICAL NATIONALIZATION 43 the movement was afoot to adopt a fullfledged protective tariff. It came to fruition in the Tariff Act of July 14,1862, which "increased the rates on articles of non-American produc tion, gave protective increases in the case of many articles which could not be produced at home, and greatly reduced the free list. "l3 Tariffs reached a wartime peak after the passage of the Tariff Act of 1864.

The average of duties on imports was 47 per cent and some rose as high as 100 per cent. 14 Nor was Congress any slower in getting around to authorizing the building of a railroad to the Pacific. Federal corporations to be named the Union Pacific and Central P~ cific were authorized to build and operate the roads. Large induce ments were offered to the builders of the road, first in 1862, but these were supplemented by another act in 1864. Among the inducements were the full use of the power of the federal government to obtain rights of way: the extinguishment of any Indian titles to land along the route; the availability of armed forces to drive off any trespassing Indians; the power of eminent domain would be exercised to acquire land. In ad dition large land grants were made, and millions of dollars in bonds. 15 With such privileges in hand, finan ciers were able to raise much capital for the undertaking.

State bank notes were finally banished once and for all after the pas sage of the National Bank Act of 1864. This act authorized the for mation of national banks, granted them the power to issue bank notes, made them depositories of federal funds, and required them to pur chase United States bonds to the ex tent of one-tHird of their capital. When banks did not rush to become national bank~, Congress levied a 10 per cent tax on state bank notes, and those banks which remained state banks stopped issuing paper money. FinancialConcentration It should be noted that reserves against both bank notes and depos its had to be· kept in specified "re serve cities." So it was that much of the reserves of'llational banks came to be held in New York City banks. 16 It is worth pointing out, too, that af ter the war ba.nk note issues were concentrated i.n the Northeast. They were supposed·.to be distributed on the basis of population, or at least along those lines. It did not happen that way: New England and the Middle Atlantic states got the lion's share, and the ISouth hardly any at all. As one historian pointed out, "The little sta.te of Connecticut had more national bank circulation than Michigan, Wisqonsin, Iowa, Minne sota, Kansas,. Missouri, Kentucky and Tennessee3 H7 Much of the liquid wealth in the 44 THE FREEMAN January country was bound up with, tied to, and dependent on the national gov ernment in the course of the war and its aftermath. This came about mainly by way of the financing of the war. The National Bank Act was, in part, a device for financing a part of the cost of the war initially. The requirement that banks buy bonds served that purpose, and the bank notes augmented the money supply.

Taxes were more widely levied dur ing the war than had ever been the case under the Constitution. An in come tax was even imposed. Mainly, though, the war was financed by the selling of bonds and the issue of Greenbacks. The Greenbacks were not quite fiat money, for they did carry a promise of eventual redemp tion, though no time was specified. They were made legal tender both for the payment of government ob ligations, except interest on bonds, and for taxes to the United States. The largest portion of the cost of the war was paid for by the sale of bonds. Another way to look at it is that a great concentration of wealth, hence, of potential capital, took place dur ing the war. The instrument for this concentration was the federal gov ernment. The concentration was ac complished in two ways during the course of the war: by taxation and by promises to pay in the future. The national bank notes, the Green backs, and government bonds were promises to pay, or debt, and the concentration took place by way of the wealth they drew into the trea sury at the time.

Government Distorts the Economy This concentration had two major impacts on the accumulation and concentration of private capital. In the first place, it was paid out by the government for goods and services, for ships, for munitions, for army and navy supplies, for salaries and bonuses, and such like. Government contracts for supplies brought prof its, and, when they were saved, fu ture capital for industrialists. For example, in meat packing, one his torian says: "It was no accident that the men who obtained Civil War government contracts-Jacob Dold, Philip D. Armour, Nelson Morris were to emerge by 1865 ... as the packers of modern-day capitalist en terprise."18 The other major impact occurred as the debts were paid and the cur rency redeemed. Unlike what has happened since WorId War II, the government did not long continue most of its inflationary war prac tices. It moved toward retirement of the bonded indebtedness as the bonds matured. Eventually it redeemed, or offered to redeem, the Greenbacks in specie. National bank notes in circulation were reduced or retired as the government reduced its debt.

Since the bonds had floated in the market and the Greenbacks depre1982 THE CIVIL WAR AND POLITICAL NATIONALIZATION 45 ciated after they were issued, it was possible to trade in these for profit. Since interest on the bonds was al ways payable in specie, exceedingly good returns were possible by buy ing them at discount and collecting interest in premium money. There were widespread accusations, too, in the decades after the war that gov ernment bonds had been bought with 50-cent dollars and paid back with IOO-cent dollars. There was some substance to the charge, but my point is that handsome private accumula tions of capital could be had at the expense of taxpayers generally in this situation. Since it is easy to misinterpret these events, and since it has been done often enough, let me restate the broad point I am making and summarize what has been presented so as to bring it as directly as possi ble to bear on that point. The con ception I am working with is that when government intervenes in the economy it produces distortions and may have determinative impact on the direction of economic develop ment. Further, my broad point is that a sectional party, the Republi can party, came to power at the time of the Civil War, that it centralized power in the national government, and used that power to intervene in the economy so as to promote a na tionally integrated economy, espe cially by the promotion of capital concentration, manufacturing, and the developm¢nt of transportation.

The developm¢nts which followed in the latter part of the nineteenth century were shot through with the impact of government intervention. The Destructionof Wealth The most d~astic intervention, of course, was the destruction of a large portion of theiwealth of the South. The emancipa~ion of the slaves surely, a desirable outcome-was accomplished in the most disruptive and vindictive;manner conceivable, and the canceling of all debts left many Souther:q.ers in financial ruin. The protective tariffs were the most direct sort of intervention, aimed at discouraging fqreign trade and pro moting domestjc manufactures and goods. The gONernment commenced a policy of large grants for the pro motion of transportation. The inter ventions in the money supply were multiple: fostering national banks, giving precedence to their bank notes, stopping redemption in specie during the war,':issuing Greenbacks, and gaining na~ional control of the money supply. It was this surrepti tious financing! of the war rather than the later r~demptions that was the interventioh and the source of the ills.

It was these and other interven tions that contr~buted so heavily to the ills most historians have identi fied in the latter part of the nine teenth century: the greatly acceler46 THE FREEMAN ated, hasty and shoddy railroad building, the lopsided thrust to in dustrialization, the financial she nanigans, the surge of farmers into Western lands that could not sup port them, and the booms and busts that followed upon expansions and reductions of the money supply. Economic freedom does no more than provide opportunities; government intervention thrusts economic de velopment along political lines that are dangerous to the well-being of the populace. ® -FOOTNOTESIVernon L. Parrington, The Beginnings of Critical Realism in America: 1860-1920 (New York: Harcourt, Brace and World, 1930), p. 17. Emphasis added. 2Clarence H. Cramer, American Enterprise: Free and Not So Free (Boston: Little, Brown and Co., 1972), p. 145.

3/bid., p. 159. 4See Bray Hammond, "Banking in the Early West: Monopoly,Prohibition, and Laissez Faire" Causes of War in Thomas C. Cochran and Thomas B. Brewer, Views of American Economic Growth, vol. I (New York: McGraw-Hill, 1966), pp. 171-88. 5Quoted in Louis M. Hacker, The Triumph of American Capitalism (New York: Columbia University Press, 1947), pp. 333-34. 6Thomas C. Cochran, "Business Organiza tion and the Development of an Industrial Dis cipline" in Cochran and Brewer, op. cit., p. 227. 7Thomas C. Cochran and William Miller, The Age of Enterprise (New York: Harper & Row, 1961), pp. 48-49. 8Cochran, "Business Organization," op. cit., p.218. 9Hacker, op. cit., pp. 315-16. IOQuoted in James F. Rhodes, History of the United States, vol. II (New York: Harper & Brothers, 1893), p. 464. llQuoted in Hacker, op. cit., p. 338. I2Wilbur J. Cash, The Mind of the South (Garden City, N. Y.: Doubleday Anchor Books, 1954), p. 113.

I3J. G. Randall and David Donald, The Civil War and Reconstruction (Boston: D. C. Heath, 1961, 2nd ed.), p. 287. I4Ibid. I5/bid., pp. 288-89. I6/bid., p. 351. I7Quoted in ibid., p. 352. I8Hacker, op. cit., pp. 256-57. IDEAS ON LIBERTY REFERENCE to the just and unjust causes of war can be particularly valuable when we try to expose the fallacy in what is perhaps the "lib erals' " most persuasive contention: that the programs of the welfare state aim to help those who are really in need of great help. They usually do not deny that the "social gains" they are seeking are attain able only if the money of some is forcibly seized and granted to others. They do deny that any impropriety is involved in the process; on the contrary, they proudly announce, the welfare state merely enforces the undoubted axiom that one man's need has precedence over another man's luxury. CRAIG HOWELL, "Aggression Is Always Wrong"