Published by EH.Net (October 2022).

Roger Lowenstein. *Ways and Means: Lincoln and His Cabinet and the
Financing of the Civil War*. New York: Penguin Press, 2022. xii + 432 pp.
$27.00 (hardcover), ISBN 978-0735223554.

Reviewed for EH.Net by Lynne P. Doti, Professor Emeritus of Economics,
Chapman University.



Among the myriad books written about the Civil War, it is hard to believe
that virtually none focus on how it was financed. War, and all government
expenditure, is paid from taxes, borrowing, and/or expansion of the money
supply. Lowenstein covers all three sources of funding by the Union and by
the Confederate states. He explores the factors that influenced the choices
among these three sources of funding, including success on the battlefield,
blockades and embargoes, politics, European support, cotton markets, and
public attitudes toward slavery and race. This coverage makes for a
readable book as well as a complete view of the challenge of financing the
war.

The Civil War centralized the country’s government in several important
ways. The Federal government broadened its power of distributing land with
the Homestead Acts and support of transportation projects like the
transcontinental railroad. With tax increases, and creating money and debt
to finance the war, both the Union and the Confederate governments
demonstrated the benefit of centralized actions. While Lowenstein accepts
the view of most historians that these centralized actions contributed to
the nation’s long-term growth, he acknowledges the cost of the war to most
of the population, particularly to the Native Americans cruelly displaced
from their homes.

A wrenching description of Civil War-era Indian removal is not the only
seeming digression from finance. Lowenstein gives attention to the role of
the slavery issue in the war and attitudes of Northerners and Southerners
toward the enslaved. Northerners began the war generally against slavery as
a social system. They were less concerned with the plight of the enslaved
individuals, but gradually come to the view that elimination of slavery was
important, if not essential to the preservation of the Union.

Salmon Chase served as Secretary of the Treasury during the Civil War
through Lincoln’s second inauguration. When Chase started the job, federal
finances were in crisis. Government employees were owed pay. The
two-million-dollar Treasury balance had been raised by the previous
administration’s sales of bonds paying 10 ¾ percent. Federal revenue came
mostly from duties on imports, and one-third of the duty ports were in the
South. As states seceded, they took duty revenue. When Louisiana left the
Union, the state seized nearly $600,000 in gold from the customs house.

The Confederacy chose a damaging strategy early in the war. Confident in
their dominance of the world cotton supply, they withheld their cotton from
the market. Prices were a low $0.10 a pound due to a large harvest the
previous year and maturing rivals in India and Egypt, but the Confederacy
could probably have collected over $100 million dollars in 1861 by selling
the cotton they withheld. At the beginning of the war, when the Confederate
Treasury holdings consisted of about $6 million in seized duties, the
Confederacy floated a $15 million bond issue that drained the gold from
private citizens in southern states.

The Union also made a strategic blunder. The British, who had a strong
public opposition to slavery, favored the north, but they also favored free
trade. The very high Morrill Tariff was increased in 1861 and was a major
reason that Britain chose neutrality.

During Chase’s first three months in office, the Treasury collected $6
million in revenue but spent $24 million. Chase issued $3 million in bonds
and $5 million in notes. But as both matured quickly, in May and then June,
he had to borrow again. He approached major bankers to buy the bonds, but
they insisted on discounts and at the interest rate demanded Chase felt the
cost was too high. He developed the romantic vison of placing the notes
directly with ordinary people who would buy out of patriotic motives rather
than for profit.

At this point, the most decisive partnership in America’s financial history
developed. Jay Cooke was a Philadelphia merchant also new to the New York
financial world. His brother, a publisher, knew Chase. Chase was a widower,
with young daughters whom Cooke hosted at his family home. Cooke also
thought the bonds could be marketed directly, rather than through banks.
When Cooke sold $3 million in bonds at par by hiring agents and advertising
in newspapers, the partnership was born.

Jay Cooke was a major figure in Union bond sales. Generally portrayed as a
pioneer of bond marketing to the middle class, he is described here as
Chase’s savior when bond sales lagged. Cooke had great success in selling
bonds. By the end of 1863, $2 million in bonds sold every day, except for a
brief period before the 1864 election. Cooke was the main agent for bonds
issued by the Northern government. However, his success in selling was
achieved with great increase in his own wealth and the use of bribery to
get advertising that was not only free, but also deceptive. Supposedly
objective newspaper articles that promoted the bonds and portrayed the
buyers as individuals of modest means were actually supplied by Cooke to
the editors along with large payments.

In July 1861, Lincoln asked Congress for $400 million to fight the war.
Chase trimmed the cost estimate to $318 million and asked for $80 million
and the right to borrow the rest. Congress gave him authority to sell
20-year bonds, three-year notes and $50 million in “demand notes”
redeemable in coin. In the winter of 1861-62, Congress approved notes that
paid no interest, but were legal tender (accepted payment for all debts).
With these “Greenbacks,” the federal government eventually took control of
the currency away from the individual states.

Chase understood that battleground success equaled improved opportunities
for selling bonds and the value in gold of the Greenback currency. He tried
to involve himself in cabinet discussions on military strategy, but his
jealous rival William H. Seward, the Secretary of State, effectively
blocked him. Chase’s strong anti-slavery views turned out to be a strength,
as any shift in Union policies toward abolishing the institution or
assisting enslaved people increased bond sales and the value of the
Greenback.

The Confederacy experienced a history-making hyperinflation and ended the
war in financial ruin to rival the physical ruin, whereas, thanks in large
part to Chase, the Union ended the war with a healthy economy. The
Greenback fell in value perhaps 80 percent and the Union debt was $1.74
billion, but new industries, immigration, public works projects, and land
reform placed the Northern economy on a path to growth. After serving as
Secretary of the Treasury for all of Lincoln’s first term, Chase became
Chief Justice of the United States.

This book is suitable for, and should be accessible to, the general reader
with an interest in finance or the Civil War. It also would be of interest
to academics in either of these areas. Roger Lowenstein has written several
outstanding books on business history. As usual, his research is thorough
and accurate. My only complaint is that the author, while revealing his
biases, does not display much passion in support of his views. A little
more drama could enhance a very good book.



Lynne Pierson Doti is Professor Emeritus of Economics, Chapman University
Argyros School of Business and Economics. She has authored or coauthored
five books and many articles on financial history and entrepreneurs.

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