America Aflame (51 page)

In the Far West, gold and silver generated an economic surge. The Pike's Peak gold rush of 1859 set off a stampede to Colorado. Two years later, Congress granted Colorado territorial status, and Denver was the nation's newest instant city, a raucous boomtown where every fifth building was a saloon. In Nevada, the Comstock silver strike in 1859 touched off another wave of migration. Nevada became a state in 1864. By then, silver mines had produced $43 million for the U.S. Treasury. Gold flowed from Montana, Idaho, and the Dakotas as well, all benefiting the Union cause.

Quartermaster General Montgomery C. Meigs, a West Pointer and a talented engineer, orchestrated the procurement of government contracts that helped to generate such wealth. Meigs assumed the position when his predecessor, Joseph E. Johnston, joined the Confederacy. The Lincoln administration could not have hoped for a more efficient and honest official to organize a system that dealt with hundreds of firms, large and small, transportation logistics involving trains, ships, and wagons, and attending to quality control and financial issues. By the end of the war, Meigs's department had distributed over $1 billion dollars in U.S. Treasury funds, accounting for over 90 percent of all government spending. Lincoln remarked of his quartermaster general, “I do not know one who combines the qualities of masculine intellect, learning and experience of the right sort, and physical power of labor and endurance as well as he.”
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Meigs drew on established firms for many of the army's needs. New England, for example, led the world in small-arms technology. Supplementing the U.S. government's Springfield Arsenal in Massachusetts were the factories of Colt and Sharps in Hartford, Connecticut. For gunpowder, Meigs relied heavily on the Delaware-based firm DuPont. When these companies could not supply weapons fast enough, the quartermaster's office purchased guns from abroad, a vanishing option for the Confederate government, with its devalued currency. The South had few established firms for military ordnance and lacked the technology employed by northern factories. The Davis administration had to build from scratch, a difficult and expensive strategy. The output of the Tredegar Iron Works in Richmond and the artillery firms in Selma, Alabama, was remarkable given the limited resources. But time and money were not on the Confederacy's side. Machines lacked parts, and distribution became increasingly difficult.

The federal government was a willing and enabling partner in many of these enterprises. The Republican-dominated Congress passed a series of measures that transformed the nation's economic landscape for all time. The weakness of the northern Democratic minority and the defection of southern lawmakers enabled Republicans to enact a legislative agenda that significantly expanded the role and financial reach of the government and helped to create a national economy that dwarfed its predecessor both in scale and in wealth.

When Lincoln took office, the main role of the federal government was to deliver the mail. The government also conducted foreign policy, defended the frontier with a small army, and collected import duties, but primarily, Washington was a post office. By the end of the Civil War, the government supported an army of a million men, carried a national debt of $2.5 billion, distributed public lands, printed a national currency, and collected an array of internal taxes. This transformation in national power was not the “new birth of freedom” Lincoln envisioned at Gettysburg, but it overshadowed the liberation of four million slaves in terms of its long-range impact on all Americans.

The Republicans did not set out to establish a strong national state or to facilitate the industrial revolution. They believed strongly in the American dream of hard work and upward mobility. They saw no contradiction between capital and labor, between wealth accumulation and equality. Even in the exigencies of war, they directed their legislation to their political base, the farmers and the small-town merchants. Their vision assumed the virtue of rural and small-town America. The majority of Republicans who enacted the legislation grew up on farms. Yet they created an industrial juggernaut that flung railroads across the continent and grew great cities from seaboard to seaboard that attracted thousands from those small towns and farms. These results must be counted among the most sterling examples of unintended consequences in American history.
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The 1862–63 congressional session was among the most productive ever. A number of Republican leaders (including Lincoln) had benefited from western migration. They transformed their personal stories into the Homestead Act that offered 160-acre tracts of public land for a twelve-dollar registration and filing fee. If a homesteader lived on it for five years, built a house, and farmed, he owed an additional six dollars. Owen Lovejoy of Illinois, the “Farmer Congressman,” as his constituents called him, introduced the bill. Over time, the act helped to settle 10 percent of the entire land area of the continental United States. Prior to the Civil War, Americans mainly lived east of the Mississippi with outposts along the Pacific Coast. The Homestead Act helped to “fill in” some of the spaces between the Mississippi and the Pacific, knitting a nation together, providing passenger and freight traffic for the coming transcontinental railroad, contributing to the abundance of food for the rising cities, and running off the Indians. Western settlement also stoked the federal treasury. Horace Greeley, the editor who had supposedly offered the famous advice “Go West, young man,” wrote, “Every smoke rising from a new opening in the wilderness marks the foundation of a new feeder to Commerce and the Revenue.”
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The war sparked an interest in science. Lincoln was the first president to hold a patent for an invention. He received a patent in 1849 for devising a series of bellows located in a ship's hold to be deployed to loft the boat over shoals or other obstructions in river beds. The purpose of the invention was to enable new and larger cargo vessels to navigate rivers further upstream than accustomed, thereby reviving the prosperity of river towns. Lincoln built a model to secure his patent but could not raise the funding for a prototype. The telegraph, the sewing machine, vulcanized rubber, the mechanization of agriculture, and the introduction of ready-made clothing and shoes fueled the widespread impression that this was the age of invention. Science and scientific inquiry, efficiency, and professionalism all received boosts from the war effort. Venerable Harvard modified its classical education and introduced the nation's first science curriculum before the war ended.
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The Union became a synonym for “modern,” and a ready counterpoint to the “unmodern” South. Slavery was not a progressive institution. It was a relic from a bygone era that strangled man's ambition. Herbert Spencer, the British philosopher who would coin the phrase “survival of the fittest,” believed that slavery's elimination was emblematic of man's progress. An American admirer wrote to him in affirmation in 1864, “The great slave system … had well nigh paralyzed the mind of the nation, but the war has broken the spell.” Like the Indian, slavery and the slaveholder were stale mementos from a primitive past that must be eliminated if mankind were to progress.
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Congress passed the Morrill Land Grant Act, another measure designed to further science and efficiency. The federal government granted public lands to the states to finance colleges that would offer training in scientific agriculture and the mechanical arts. Justin S. Morrill, a Vermont congressman who had been too poor to attend college, spoke of the bill's benefits in economic terms: “Science, working unobtrusively, produces larger annual returns and constantly increases fixed capital, while ignorance routinely produces exactly the reverse.”
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Creating the Department of Agriculture fulfilled scientific objectives, too. Lincoln hoped that such a department would generate statistics and publicize best practices that would help not only the farmer but merchants and manufacturers as well. As the
Philadelphia Inquirer
noted in support of the legislation, armed with statistics, the government could reduce social theories “to a certainty. A nation … with such analytic self-inspection at periodic intervals might mould its growth, and forecast its future with a knowledge of all the resources and all the forces operating to shape its destiny.” Scientific agriculture would also increase crop production to feed the rapidly growing population.
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The Lincoln administration employed lavish grants of public lands to finance a transcontinental railroad. Many Americans had dreamed of a railroad spanning the country. Stephen A. Douglas had acted on that dream with disastrous political consequences for himself and the country. With southerners absent from Washington and slavery no longer a sticking point, Republicans resurrected the vision in the Pacific Railway Act of 1862. The Union Pacific Railroad could not afford to build across the vast and lightly populated Plains unless the government subsidized the project with land grants. Republicans viewed the railroad as a military necessity to move troops quickly against the Indians and secure the West for the Union, as well as to stimulate commerce with Asia. The railroad never realized the Asian trade, but it helped settle the West and, like the telegraph, created a country more closely resembling a national state than a series of disparate regions. As one of its congressional advocates observed, “Unless the relations between the East and the West shall be the most perfect and most intimate which can be established,” the American “empire” would risk “breaking on the crest of the Rocky mountains.” The railroad was part of a broader Republican effort to remake America in the image of the North. “The cultivated valley, the peaceful village, the church, the school-house, and thronging cities”—key elements of northern culture—would spread west, making America “the greatest nation of the earth.” The Lincoln administration gave away 158 million acres to railroads during the war.
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Giving away land, the federal government had to rely on tariffs and taxes for revenue. In wartime, however, these streams were insufficient.
Harper's
put the matter succinctly in May 1861. “In modern warfare … success is won not so much by numbers as by money. The longest purse, in the long-run, infallibly wins the day.” While the war on the battlefield tilted toward the Union by the end of 1863, victory was not assured. In finance, however, the federal government was winning handily, as both the ragged Confederate soldiers and the protesting southern women attested.
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Among the ways the Republican administration raised money was the passage for the first time in American history of a progressive income tax, raising $55 million during the war. The government also floated large bond issues, sold not to banks but to the general public. The bonds not only raised money to wage the war but also drew northerners closer to the Union cause by giving them a financial stake in victory.
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The Treasury Department hired Jay Cooke, a Philadelphia banker, to market $500 million worth of bonds at 6 percent interest to the public. The bonds were redeemable after five years and matured after twenty. The so-called five-twenties were wildly successful thanks to Cooke's effective advertising and his army of agents. At one point, Cooke was selling a million dollars' worth of bonds per day. One out of four northern households invested in the instruments. The bonds, however, were not enough to cover the war's mounting expenses. The army spent over $1 million a month just on forage for its horses, or more than the cumulative federal budget for the first two decades of the nineteenth century.

The Lincoln administration resorted to the printing press and churned out $150 million in “greenbacks” (they were printed on green paper). To heighten confidence in the paper money, the government made them convertible to the five-twenties. The increased flow of gold and silver from the West also helped public confidence. After Gettysburg and Vicksburg, there was such a run on the five-twenties that the Treasury Department had to close the sale. By the end of the war, the Lincoln administration had run up a national debt of $2.5 billion, much of it absorbed by northern citizens.

The National Bank Act of 1863 resurrected the Hamiltonian idea of a national banking system. It established a national currency and permitted the creation of a network of national banks. The banks issued federal greenbacks as well as their own “national” banknotes, driving out the confusing array of state-issued money and increasing the stability of financial markets. Lincoln heartily approved these measures, predicting accurately, “Finance will rule the country for the next fifty years.”
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All told, the war's direct costs amounted to $6.7 billion. If, upon Lincoln's inauguration, the government had purchased the freedom of four million slaves and granted a forty-acre farm to each slave family, the total cost would have been $3.1 billion, leaving $3.6 billion for reparations to make up for a century of lost wages. And not a single life would have been lost. No one, of course, foresaw the enormous cost of the war in dollars and lives in 1861. Based on the refusal of several border states to agree to a compensation program during the war's early years, it was also doubtful the Lincoln administration would have found willing partners for such a proposal in other parts of the South.
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With all this money injected into the marketplace, and contracts for clothing, shoes, food, horses, weapons, ammunition, and transportation let at a dizzying pace, several entrepreneurs launched spectacular careers as financial and industrial moguls. John D. Rockefeller was twenty-one years old when he cast his first presidential ballot for Abraham Lincoln in 1860. At that young age he was already a partner in a lucrative commodity business in Cleveland, Ohio. Mature beyond his years, he had assumed responsibility for his family, as his father disappeared for long periods of time. He sold grain, meat, and other foodstuffs, items that soared in price after the war began. When the war shut down the Mississippi River as an artery of commerce for the Old Northwest, the Great Lakes and the railroads became commercial lifelines for the region. By 1862, Rockefeller's profits topped seventeen thousand dollars annually, a large sum for a small commodity house.