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Confederate Political Economy: Creating and Managing a Southern Corporatist Nation

Author(s):Bonner, Michael Brem
Reviewer(s):Pecquet, Gary M.

Published by EH.Net (September 2016)

Michael Brem Bonner, Confederate Political Economy: Creating and Managing a Southern Corporatist Nation. Baton Rouge: Louisiana State University Press, 2016. x + 260 pp. $48 (hardcover), ISBN: 978-0-8071-6212-5.

Reviewed for EH.Net by Gary M. Pecquet, Department of Economics, Central Michigan University.

Historian Michael Bonner examines how the government, bureaucrats, industrial leaders and ordinary citizens interacted under the pressures of emergency wartime conditions to create a distinct Confederate political economy. The Confederate war economy dispensed with many of the normal features of a market economy just as the United States did in prosecuting the two world wars during the twentieth century.

Although the extent of the Confederate government’s economic control was unprecedented by American standards, Bonner correctly contends that the Confederate political economy was never a top-down command economy, as Louise Hill (1936) and as William Davis (1994) have contended. Bonner correctly dispatches the claim that the Confederacy adopted a “State Socialist” model. According to him, “The State Socialism argument overlooks the capitalists, both the agricultural capitalist slaveholders and the growing class of industrial capitalists, who facilitated the dramatically increased production of war materiel” (p. 222, fn. 44).

Instead, Bonner draws from Nobel-laureate Edmund Phelps’ Mass Flourishing (2013) and finds the Confederate war economy to be neither free market, nor state socialism. Bonner finds that the Confederate war economy compared more closely to the authoritarian “corporatist” economic model (aka “Fascism,” aka “crony capitalism”) adopted throughout Europe during the early-to-mid twentieth century to preserve traditional social values from dynamic capitalistic.  Markets are tolerated, but subject to significant government oversight and regulation.

Confederate leaders did not intentionally set up an authoritarian regime, but the corporate model emerged out of wartime expediency. Special provisions in the new Confederate Constitution conferred additional powers to the executive branch: a six-year Presidential term, a line-item veto and executive control over government expenditures. In addition, The Confederate Supreme Court was never appointed and approved; nor did the Congress even establish federal courts for judicial review. Moreover, although Confederate congressmen and senators continued to stand for elections, wartime pressures for patriotism reduced the role of political parties and prevented gridlock. This gave President Jefferson Davis a free hand to contract with selected private firms to secure war supplies. Initially, the Confederacy lacked a bureaucracy and trained public servants so it often relied upon the assistance from states for enforcement.

The Confederate authorities had to negotiate with private interests in order to ensure reliable supplies of essential military goods. They also developed an ad hoc policy towards railroads. The Confederacy conscripted men into military service and imposed a system of wartime passes upon civilians to prevent espionage.

Bonner describes thorough narratives the corporatist interworking between the Confederate government and private manufacturers. These included the Tredegar Iron Works of Richmond and the Shelby Iron Works of Alabama, near Birmingham. Drawing largely from Charles Dew (1966), Bonner describes the rise of entrepreneur/businessman Joseph Reid Anderson, who built the Tredegar Iron Works ten years before the beginning of the war. Tredegar secured early contracts from the emerging Confederate government in February 1861 and continued to sell to both private railroads as well as the government. Bonner does a good job describing the contractual negotiations between Tredegar and government purchasing agents. Due to the onslaught of rampant inflation, the company faced rising costs and accusations of price gouging by Confederate politicians. These complaints increased and by late 1862, an army ordinance officer accused the company of yielding excessive profits of 30 to 50 percent or even as high as “60-80% in recent months” (p. 80). After 1863 the company asked five more times for price increases and the accusations of profiteering only got worse. But Tredegar was the major supplier of iron to the Confederacy and continued to obtain contracts. We may regard this process of price increases followed by accusations and new contracts as a bi-lateral negotiating process taking place during times of depreciating currency values. (Incidentally, this process was not substantially different from the union-management negotiations under periods of continuous price inflation in certain twentieth-century corporatist nations.)

Compared to Tredegar, Shelby Iron Works of Alabama was a latecomer. Largely from new primary sources, Bonner uncovers details of crony capitalism between the Shelby Company and government purchasing agents. At Shelby, prospective owners sought to expand operations, but wanted government protection from risks, so with the help of an influential Confederate purchasing agent, they secured a $75,000 loan from the Confederacy. But the private/public partnership created conflicting expectations that undermined the effectiveness of the operation. The company was supposed to repay the loan, but the government expected that the added facilities should be used to fill government orders, not private orders. The government officials feared that Shelby iron might be sold at higher prices to private buyers. The government also aided the Shelby works by exempting key employees from the draft. The major point of contention between Shelby and government was the means of payment (sound money or depreciated Confederate notes and bonds). Eventually, however, Shelby agreed to accept payment in fixed prices, with an eye to renegotiating new terms as prices increased. But in this case, Confederate officials could threaten Shelby’s labor supply by denying draft exemptions, so they may have held an advantage.

The Confederacy did embark upon a major government-run business. At the beginning of the war, the South had only four small local gunpowder mills. The Confederate government decided to create a single, large government-owned gunpowder factory at a secure location to provide its wartime requisitions. This single factory successfully supplied the Confederate armies for most of the war.

Bonner does a good job showing how Woodrow Wilson’s administration adopted the Confederate corporatist model as it mobilized the economy for participation in World War I. Although the Confederacy stumbled into cozy business-government relationships, the Wilson Administration consciously followed the same pattern. The Wilsonian World War I regime was not a top-down command-and-control system, but one that mixed government force and favors with private cooperation. Like the Confederacy, the WWI selective service relied upon the cooperation of local draft boards. Wilson’s government takeover of the railroads worked much the same way as Confederate control over rails. In both cases, the governments had to rely upon the railroad owners’ expertise giving business the upper hand in setting policy.

Bonner’s book provides a helpful addition to the study of early twentieth century Progressive economic policy. His book exploring Confederate mobilization provides a complimentary narrative to Robert Higgs’ (1987) analysis of the growth of government in Crisis and Leviathan. Bonner does not consider the role of intellectual history. Corporatism originated in Europe as the “German Historical School” and adherents taught its doctrines in American universities. Wilson adopted the theories of corporatism from his university professors (Pecquet and Thies, 2010). What Bonner shows us is that the practice of wartime mobilization also flowed out of a preexisting pattern that remained in the memories of contemporary historians.

References:

Davis, William C. 1994. A Government of Our Own: The Making of the Confederacy. New York: Free Press.

Dew, Charles B. 1994. Bond of Iron: Master and Slave at Buffalo Forge. New York: W. W. Norton.

Higgs, Robert J. 1987. Crisis and Leviathan: Critical Episodes in the Growth of American Government. Oxford University Press.

Hill, Louise B. 1936. “State Socialism in the Confederate States of America,” in Southern Sketches, Charlottesville, VA: Historical Publishing.

Pecquet, Gary M. and Clifford F. Thies. 2010. “The Shaping of the Political-Economic Thought of a Future President: Professor Ely and Young Woodrow Wilson at ‘The Hopkins,” The Independent Review, 15 (2) 257-277.

Phelps, Edmund. 2013. Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change. Princeton, NJ: Princeton University Press.

Gary M. Pecquet has published numerous articles on nineteenth and early twentieth century American economic history. The most recent of these works (with Clifford F. Thies) is “Reputation Overrides Record: How Warren G. Harding Mistakenly Became the Worst President of the United States,” The Independent Review (Summer 2016). He can be reached for comment at pecqu1g@cmich.edu.

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Subject(s):Government, Law and Regulation, Public Finance
Military and War
Geographic Area(s):North America
Time Period(s):19th Century