The Economics of the Civil War


The Civil War remains a defining moment in American history. In the course of the war were industrial revolution and the establishment of new governmental powers, coupled with vast changes. However, the striking achievement of the Civil War was the inclusion of industrial capitalism into American society. Industrial capitalists, including the Republicans, successfully captured the state to strengthen their economic position during the war. Baptist and Hyman present a dramatic narrative on America’s economic and political crisis during the nineteenth century to the dynamics of the Civil War.1 Therefore, the paper pursues a twofold goal: the economic costs of the Civil War and the mechanism through which the war impacted the American economy. The Republicans successfully established an economy in regards to the freedom of contract during the Civil War.

The Civil War

The aftermath of tension between southern and northern states over territorial expansion, state rights, and slavery, was the Civil War. During the mid-nineteenth century, the United States was experiencing dramatic growth in terms of diversification and modernization, resulting in economic differences between the northern and southern regions. Industry and manufacture took root in the North such that the Northerners invested heavily in communication networks, financial industries, and transportation systems. By contrast, agriculture drove the South’s economy that principally relied on free labor, especially on the growth of cotton and sugar.

During the war, America experienced a surge of wheat exportation, which was an object of financial speculation. By 1856, the volumes of grain transported from Chicago to Europe tripled, bringing about the telephone that made future contracts possible and necessary. The Chicago Board of Trade helped institutionalize trading in oats and pork as the Civil War progresses.2 Therefore, the city of Chicago significantly influenced the development of American Capitalism. Capitalism supported prisons and other interventions like educating children from slums and giving them access to better living environments.3 However, it underpinned political liberty and the forces of progress.4

Between 1880-1960, white legislators significantly contribute to the profusion of regulations that maintained racial hierarchy.5 The importance of maximum efficiency was overlooked.6 For instance, landowners used debt and false bookkeeping to bound black farmers to their service, especially for sharecroppers who received supplies from landowners and merchants at high prices.7 False pretense laws were applied in the south to prosecute sharecroppers who failed to perform services.8 Besides, criminal surety laws gave landowners the right to employ involved sharecroppers for no pay until they paid off their fees.9 The wage system eventually divided the society into the working and capitalist class, resulting in guerrilla warfare.10

Slavery significantly shaped America’s political and social landscape. Over time, opposition to slavery gained traction in the North to limit slavery’s expansion to new territories, threatening the backbone of the South’s economy. While Southerners argued that the federal government did not influence state governments to end slavery, northerners claimed that the South wielded more power in the Senate and the House than warranted. Syndicalist proposed to exclude the State from future society since it is an instrument of oppression with poor industrial administration.11 Therefore, the Civil War of 1861 to 1865 sought to resolve two issues: dissolving the United States into sovereign states and the equal rights to liberty. Northern victory in the Civil War preserved the country as a united nation and ended slavery. However, the peace came at a cost of several lives and other devastating consequences.

The Republican Party

Amid the devastating impact of the Civil War, the Republic Party advocated for economic opportunities and ethnic diversity. As the elected Republican president in 1860, Abraham Lincoln condemned slavery but as an antislavery moderate; Lincoln also supported racial inequality and black social.12 Nonetheless, Lincoln’s election triggered slavery’s secession. The Civil War contributed to the Republicans’ domination in the national legislature after the southerners left Congress. Subsequently, the federal government extended its authority through Republican policies like the Freedman’s Bureau that concerned itself with refugee freedmen.13 The policy fed and clothed the freedmen established schools and imposed work contracts and imposed work contracts for freed people to work for landowners. On the other hand, New Departure democrats contested the republican policies of federal power and welfare.14 Some northerners also argued that the Freedman’s Bureau violated property rights.

In 1865, William Sherman provided an economic foundation for the freed people through Field Order No. 15 after the war.15 Moreover, the 1845 Kansas Nebraska Act allowed states to choose to be slave or free states, invoking the war to independence. In this regard, the Republicans called for the federal government to shape the country’s laws and economic system. The party also called Congress to provide funding for businesses, industries, and railway construction to harbor economic growth. Therefore, the Republican Party emphasized the federal government’s role in enforcing America’s economic and moral welfare. In 1871, liberal republicans advocated for an end to federal intervention, local autonomy, civil service reform, and a reduction in taxes and tariffs.16 Plus, along with the increasing influence of economic doctrines like laissez- faire, The Republicans supported the freedom of contract as a universal principle in ensuring free competition.

At the end of the nineteenth century, the Populist Party (National People’s Party) rose to power.17 The Populist movement sought to shape governance and the national economy. They believed that industrial and financial triggered inequality and innovation. Plus, progress and modernity swept across the nineteenth century, an ethos shared by the Populists.18 Likewise, the Settlement supported the vision of economic change and believed that solutions to inequalities of industrialization were possible.19

The Economic Impact of the Civil War

Out of the Civil War, new economic systems emerged in the place of slavery. The economic lives of freedmen, landowners, and planters transformed dramatically. The war brought about the industrial revolution, which impacted urbanization and immigration. The North recorded a remarkable growth of various cities with their railroad equipment plus food-processing industries. Agricultural mechanization boomed during the Civil War since it allowed farmers to grow, harvest, and process crops more conveniently.20 Additionally, free states significantly attracted European immigration through the nineteenth century, which translated to more military men for the North. The mass immigration contributed toward less poverty, higher income, greater industrialization, increased agricultural productivity, less unemployment, plus more innovation and urbanization. Other industrial sectors like weapon manufacturing, textile, and iron production grew as the Civil War progressed.

The Morill Land Grant Act, Transcontinental Railroad Act, Homestead Act, and the National Bank Act are some of the legislations that were passed during the war, imposing substantial costs on the American economy and altering the monetary system. For example, the Morill Land Grant Act promoted agricultural development by setting aside land for scientific training in agriculture. It triggered land-grant college system, producing considerable economic and educational returns that earned the United States the leading status. Therefore, the war’s impact on economic growth stemmed from investment, human capital, and migration. In essence, foreign investment changed the dynamics of the American economy and politics. As the Civil War ended, the United States became a large debtor nation. Local, state, and federal government securities attracted foreign investors yet foreign investment was small in the mid-nineteenth century. The private sector became a major recipient of foreign investment to finance the development of the railway system, which was critical during and after the war. The war essentially increased commercial opportunities and other industrial changes.

Another significant impact of the war was the disruption of trade. For instance, cotton had political and financial influence during the nineteenth century. The North used cotton for its textiles, financing warships and depriving the southerners of their financial power. Apart from funding economic developments, cotton exports were used to stabilize monetary affairs and reduce federal debts.21 As such, the need for cotton labor persisted.22 The war in the south targeted black elites, forcing them to give up their lands and accept oppressive labor arrangements.23 Inequality in resource allocation results in stimulating effects on the economy, leading to more investment in human capital. However, after the war and the abolition of slavery, cotton production increased dramatically. Generally, the impact of the war on American economy was persistent and substantial.


As per America’s Declaration of Independence, all citizens are equal, having unalienable rights including liberty and life. The Republicans’ foundations continue to resonate in the country’s consciousness. However, the rights to liberty took hold after the Civil War when the Thirteenth Amendment abolished involuntary servitude and slavery. Central to the Republicans’ advocacy was the freedom of contract. The development of the contract law influenced the rise of capitalism and enlightenment. Therefore, the contract law is a fundamental institution underpinning America’s market system. Simply stated, the Republicans successfully established an economy in regards to the freedom of contract during the Civil War.


Baptist, Edward, and Louis Hyman. 2017. American Capitalism: A Reader. eBook. Simon & Schuster. Web.

Jim Crow and Persistence of Unfree Labor. [PowerPoint Slides].

The Republican Party and the Gospel of Free Labor. [PowerPoint Slides].


  • 1 Baptist, Edward E., and Louis Hyman, eds. American capitalism: a reader. (Simon and Schuster, 2017)
  • 2 Baptist, Edward, and Louis (2017), 236-242.
  • 3 Baptist, Edward, and Louis (2017), 266-282.
  • 4 Baptist, Edward, and Louis (2017), 315-318.
  • 5 Baptist, Edward, and Louis (2017), 329-305.
  • 6 Baptist, Edward, and Louis (2017), 337.
  • 7 Jim Crow and Persistence of Unfree Labor. [PowerPoint Slides], Slide 4
  • 8 Jim Crow and Persistence of Unfree Labor, Slide 9.
  • 9 Jim Crow and Persistence of Unfree Labor, Slide 9.
  • 10 Baptist, Edward, and Louis (2017), 323-329.
  • 11 Baptist, Edward, and Louis (2017), 325.
  • 12 Baptist, Edward, and Louis (2017), 232-235
  • 13 The Republican Party, Slide 3.
  • 14 The Republican Party, Slide 5.
  • 15 The Republican Party, Slide 4.
  • 16 The Republican Party, Slide 10.
  • 17 Baptist, Edward, and Louis (2017), 270.
  • 18 Baptist, Edward, and Louis (2017), 275-289.
  • 19 Baptist, Edward, and Louis (2017), 290-294.
  • 20 Baptist, Edward, and Louis (2017).
  • 21 Baptist, Edward, and Louis (2017), 124-136.
  • 22 Baptist, Edward, and Louis (2017), 15.
  • 23 Baptist, Edward, and Louis (2017), 323-329.

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