Panic, Prosperity, and Progress: Five Centuries of History and the Markets

CHAPTER 7

The American Civil War

For well over a century, schoolchildren in America have learned about the Civil War—the War between the States—and the narrative has usually focused on the slave-holding South versus the freeman North. The economic aspects of the American Civil War are hardly even considered, however, and the capital transformation that took place between 1861 and 1865 in the United States brought profound changes that are with us to this day.

■ Antebellum Nation

Eli Whitney’s cotton gin was a deceptively simple device, but the change it brought to the world’s economy was tremendous. At last, large volumes of cotton could be separated from the numerous, nettlesome seeds interspersed, and this new tool made the fiber a far more profitable and productive business (see Figure 7.1).

FIGURE 7.1 A deceptively simple but ingenious device, the cotton gin made the tedious, time-consuming task of separating cotton fiber from seeds easy, transforming the economy of the antebellum South.

By 1815, the southern United States’ most valuable export was cotton, and 25 years later, it was worth more than all the other exports of the entire country combined. The ideal soil and weather of the South put it in a position to produce two-thirds of the world’s cotton, and a “triangle” economy was formed between the northern United States, the southern United States, and England. England ...