Q&A with Roger Lowenstein on the financing of the U.S. Civil War
On his new book, “Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War”
There is a line from William Faulkner’s 1931 novel, Sanctuary, that I keep turning over, when the protagonist, Harry Benbow, refers to “that irony which lurks in events.” That has always seemed to me to be a succinct definition for what any thinking person ought to be doing in their engagement with the world. It is also, unfortunately, a rarity, with most people preferring to impose a straight line over certain events, to stitch together a narrative that provides great ideological comfort, but otherwise explains little.
I thought of this line again while reading Roger Lowenstein’s latest book, Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War (2022). In part, this may be because Faulkner was himself obsessed with the U.S. Civil War, and its consequences; but mainly, it was because Lowenstein is a one of those rare writers that hews closely enough to the events themselves that such ironies that lurk beneath are brought to the fore, and strengthen, rather than debilitate, his narrative; the outcome of which is that such a narrative therefore explains much, even as it unsettles readers expectations.
For example, in the course of outlining this financial history of the Civil War period, Lowenstein references in passing the New York Times’ “The 1619 project” and the claim that modern American capitalism developed from Southern slaveholding, but then he states: ‘Actually, for all its faults, present-day capitalism is the antithetical inverse of the southern system. Modern financial capitalism is dynamic and transactional: everything is mutable, no business (or employee) is worth retaining a minute more than the market imperative.... The slaveholders had built their fortresses for an improbable perpetuity. Labor was locked in place, as surely as medieval serfs, and given the difficulty of converting property to cash on any scale or with any dispatch, assets were practically immobile.’ But before the other side of the ideological divide can raise a cheer at this we read about how the blind devotion to the ideology of states’ rights contributed greatly to the strategic weakness of the South; but also about how many of the foundations for the modern national economic system in America – such as the Union Pacific Railroad – were imagined and willed into being by the central government, in large part because capitalists lacked these capacities and (despite their self-image to the contrary) are averse to such risk. ‘And although the Union Pacific had some illustrious directors, none of the major industrialists of the era had been willing to invest,’ Lowenstein writes. ‘This is not surprising – established capital rarely bets on the new thing.’
In this, the central thesis of Lowenstein’s book is, as stated in the introduction:
Lincoln’s party formulated a new notion of what the federal government could do. They raised and spent unprecedented sums. They launched the country’s first truly national currency, pushing aside an inchoate system of thousands of disparate bills issued in the states. They created a national banking system and the first credible program for federal taxation. They inserted the government into railroads, education, agriculture, immigration, the sciences, financial regulation. The war government interposed a visible (and at times dubious) hand into industry by enacting a series of high protective tariffs. Most important, the Lincoln government ended slavery.’
This last sentence is usually the focus of much of what the popular imagination considers regarding the consequences of U.S. Civil War, but what is remarkable about Lowenstein’s book is that, even as it is the ‘most important’ of these acts, he shows how ending slavery would have been impossible without the strategic advantage of each of these other acts during that period, in order to win the war. And undergirding each of these was the North’s reimagining of the national financial system.
After I finished reading the book, Roger Lowenstein was kind enough to respond to a few questions from me, and has allowed me to publish the Q&A below.
Public Things: What was it about this topic, about this period, that initially drew you to wanting to research and write about it?
Roger Lowenstein: My previous book was about the founding of the Federal Reserve [America's Bank: The Epic Struggle to Create the Federal Reserve], seemingly a technical subject that fell like an arrow into the underlying issue of the Civil War — the antipathy of the American political culture to central government. More specifically, the system that the Fed replaced (in 1913) had been founded in 1863. I was intrigued that in the midst of the Civil War the Union had thought to remake the banking system. It turned out that they had remade far more than that. I got curious and then I got hooked.
PT: During the research and writing, was there anything in particular that you didn’t know before you started, or that changed your thinking about what you’d previously thought about this historical period? Or about economic history generally?
RL: I didn’t know most of what was in the book. My knowledge of the 1860s was pretty sparse. I’ll pull out one aspect. Lincoln presided over, and to some extent directed, the economic and social changes I wrote about. Let’s tick them off: new banking system, new tax system, new paper currency (fiat money), transcontinental rail-road, the Homestead Act, landgrant colleges. And there were more. Here’s what I hadn’t realized. These weren’t just wartime adaptions for Lincoln. They had been the driving force in his career. Ever since his days as a legislator in Illinois, he had been consumed with one issue — economic progress for the common man. Antislavery came much later.
PT: It is rare for actual history to provide a situation in which a comparative method can be applied to a real-world experimental setting. But, in many respects, the economic settings of the Union and the Confederacy during the Civil War do provide such an opportunity, particularly with regards the creation of a ‘national’ currency – paper money – uncoupled from gold and issued by government fiat, in order to fund the war on both sides. The book opens, even before the introduction, with two graphs, showing the fate of the Greenback and the Dixie, respectively, during the war. What does this twinned-experiment tell us about the printing of money generally, and how one side managed inflation, while the other sank into hyperinflation?
RL: Yes — to use the social scientist’s term, the North and South side by side made for a “natural experiment.” Neither had enough gold coin to fund the war, so each turned to paper. But the North, as you point out, maintained its value reasonably well (inflation in the Union was about the same as during each of the later World Wars). In the South, there was hyperinflation. The biggest difference was that the North exercised restraint. It used greenbacks for only about a sixth of the war debt. Much of the rest was funded with long-term borrowing. The South was unable to borrow longterm in anything like the same quantity. So it just had kept printing notes. Why its relative inability? The North had an industrial base and was willing to tax it. The South had neither the base nor the political will to tax. This gets to a central truth. All governments have essentially three choices — taxing, borrowing, or printing money. The success of each is interdependent with that of the others. A government that taxes, and therefore convinces creditors of its solvency, is more able to borrow. A government that overly relies on money-printing poisons its credit.
PT: Inevitably, readers are going to draw comparisons between the period in this book and the present day, to seek in your narrative lessons for the current moment. Do you think that is prudent? And if so, what lessons should we take from this?
RL: Obviously, we want to be careful about that. (Remember your Twain: “it rhymes rather than repeats”). The sectional difference is essentially the same as in 1860. Elites on the coast would like to improve society in all sorts of ways that folks in the interior, especially the South, would just as soon ignore. As alluded to above, direction by the federal government is still a huge issue, in healthcare, abortion, and much more. That said, slavery made the Civil War period fairly unique. The war and the antecedent period was informed by a moral clarity. As Lincoln once said, “If slavery is not wrong, nothing is wrong.” I don’t see that clarity today. Nor do I see a leader of Lincoln’s wisdom, humility, stoicism, and compassion. It’s hard—for me as writer—to give him up.
PT: And – as importantly – what lessons should we resist taking from this account? What limitations are there to this historical analogy? What challenges are unique to each period?
RL: Continuing from above, I don’t think secession (today) would lead to war. Horace Greely said, after South Carolina bolted and the other cotton states were readying same, “Erring sisters, go in peace.” That view was widespread. Lincoln felt differently and sent a resupply mission to the federal garrison at Fort Sumter, in Charleston. That started it. I could see secession happening today, theoretically, in some of the red states, over taxes or gun restrictions (if they were ever imposed) or in opposition to woke culture or over related issues in the schools. But I don’t think it gets to shooting. I hear people in liberal areas in essence repeating Greeley. In the 21st century, I’m not sure the North would fight to keep the Rebels from departing. And don’t forget, in the 19th century, patriotism was a big deal. It mattered to the northern people that their troops were fired on — that their flag was taken down. It’s hard to see that today.
PT: Finally, are you already thinking about your next project? Any hints?
RL: Of course. I’m looking at an historical period slightly more recent, but still in the past. I’m interested — always have been — in the tension between individualism and demagoguery. Between the individual and the crowd, especially in the context of mass hysteria, whether financial, or in opposition to, say, foreigners. Lincoln turned to the law because it was the last bulwark of civilization against populism, or what he termed “mobocracy.” That theme resonates with me.
A few things for interested readers:
Make sure you get a copy of Roger’s book discussed above: Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War
You can read an excerpt from the book here on Literary Hub
Roger also has a Substack called Intrinsic Value, which you should all subscribe to.
The latest instalment actually draws a useful comparison between the U.S. Civil War and the current war in Ukraine (Russian Oil = Confederate Cotton). “Vladimir Putin is making the same miscalculation that doomed Jefferson Davis's Confederacy a century and a half ago,” Lowenstein writes: “The West can learn from it.” Read more here.
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