Northern Naval Superiority and the Economics of the American Civil War

Published by EH.NET (November 2001)

David G. Surdam, Northern Naval Superiority and the Economics of the

American Civil War. Columbia: University of South Carolina Press, 2001.

xiv + 286 pp. $34.95 (cloth), ISBN: 1-57003-407-9.

Reviewed for EH.NET by Roger L. Ransom, Department of History, University of

California, Riverside.

Historians have argued for years whether the effort of the Union Navy to cut

off trade to the Confederacy during the Civil War was an effective weapon that

hastened the end of the war. At present it appears that there is still some

question whether the glass is half full — or is it half empty? Those who see

the glass as half full point to the enormous fall in commerce during the war

along with the evidence of shortages in the Confederacy; those who see it as

half empty argue that it was not until mid 1863 that the blockade was fully

in place, and even then enough blockade runners got through to provide the

South with the essential military supplies to carry on the war. In this

well-researched study of Union naval activities during the war, David Surdam

seeks to provide an answer to this enduring puzzle by examining the problem

from an economist’s perspective. Surdam begins by pointing out that counting

the number of ships and tons of supplies that did or did not “get through” the

blockade is an inadequate way to measure of the success or failure of the

closing of Confederate ports. “The focus on imports,” he notes “has been

almost myopic and misses what may have been two of the blockade’s most

important achievements: disrupting intraregional trade and denying the

Confederacy badly needed revenue from exporting raw cotton and other staple

products” (p.6).

Part I of the book presents an overview of the Southern economy on the eve of

the Civil War. Surdam provides ample quantitative evidence to demonstrate that

the South was more than capable of producing enough food to support itself

during a war — a result that will hardly surprise those familiar with earlier

debates on antebellum Southern self-sufficiency. The problem, Surdam points

out, is that the food production was either scattered over large areas, or —

in the case of meat — concentrated in areas that were remote from the scene

of fighting. In normal times, a combination of coastal and river traffic could

move supplies to central markets and on to their final destination. A point

that is often ignored by those who stress the importance of smuggling military

goods into the South during the war is that the blockade not only made it

difficult to carry on foreign commerce from Southern ports; it also shut down

the coastal trade that had been so active in antebellum times. Without that

water transport, the Southern rail system had to pick up the slack. It was

not equal to the task. The result, argues Surdam, was a serious problem of

moving goods within the CSA.

Part II of the book examines the effect that this disruption of trade had on

the Confederate economy and military effort. An important element of Surdam’s

argument is that he includes the Union control of New Orleans and the

Mississippi Valley as part of the “blockade.” Chapters 3 and 4 examine the

extent to which Union forces were able to seriously restrict the flow of meat

from the trans-Mississippi area, thereby creating severe shortages of meat in

the Eastern Confederacy. There is no question that access to the coastal trade

and inland waterways could have alleviated this problem. Chapter 5 presents

an excellent analysis of the shortcomings of the Southern rail system in

meeting this challenge. This is the best chapter of the book. Surdam clearly

shows how the Union Navy’s blockade and control of the Mississippi Valley

strained an already overtaxed rail system in the South to the breaking point.

The impact of the blockade was two-fold. On the one hand, the closing of water

transport meant that there was increased traffic on a rail system that was not

designed for heavy shipments of through freight. Nor was the Southern rail

system built to handle shipments along an east-west axis rather than

north-south axis. Increased traffic meant that rolling stock and equipment

wore out faster. The second impact of the blockade on the transportation

system was to eliminate the possibility of importing materials that would

allow the railroads to be maintained — or in some cases to have new railroads

built. The result was that rail service deteriorated steadily throughout the

war and problems of supply increased everywhere.

Chapters 6 and 7 examine in greater detail the effects of this collapse of the

transportation system on military and civilian efforts to support the war

together with a brief examination of the supply situation in Virginia in

Chapter 9. There are no surprises here; my main complaint is that Surdam

devotes too little space (a total of twenty pages for all three chapters) to

problems that are central to the debates on the effects of the blockade. The

major thrust of his argument is that the blockade raised costs of

transportation to the point where it cost $2 to get $1 of imports. In an

economy that depended on imported goods for some of its basic needs, this is a

serious problem. Yet Surdam says very little about the role of the blockade in

adding to inflationary pressures, and apart from some anecdotes from reports

of riots and personal hardships he does not explore the effects on civilian

morale of the reduced supply of imported goods whose availability Southerners

had taken for granted before the war. As Avner Offer has pointed out with

regard to the effects of the Allied blockade of Germany in World War I, the

rapid elimination of goods that were an important part of people’s consumption

package can force a drastic change in consumption patterns that eventually had

a deleterious effect on the morale at home (The First World War: An

Agrarian Interpretation, 1989).

Surdam presents a convincing case that there were serious problems of supply

within the CSA during the war. My sense is that looking further into these

problems would reveal that the total impact of the transportation collapse on

civilian life was even greater than the picture that Surdam portrays. Yet

there remains the question: How great was the role of the blockade in creating

this problem? Granted, taking away the coastal shipping hindered movements of

supplies. But Surdam admits that even had there been no blockade the CSA would

have encountered extreme difficulties in meeting demands for shipping goods

to all parts of the country. And the armies posed a special problem for even a

well-developed transportation network. Each of the two major armies of the CSA

was a “mobile population center” of 40,000 to 90,000 people (p. 98). Even

without a blockade feeding the Armies would have been a challenge for the

Southern transportation network — a situation that on two occasions caused

Lee to take his army into the North for forage — with disastrous

consequences. What emerges from the discussion of this part of the book is the

crucial role of the Union Navy in greatly compounding the problems of the

Southern transportation problems by capturing New Orleans early in the war.

Because Texas and Arkansas were the major meat producers in the CSA, the

interdiction of trade across the Mississippi created a serious shortage of

meat for Southern Armies throughout the war.

Part III of the book moves on to the question of “King Cotton” and the efforts

of the CSA to maximize the earning power of their staple crop. “Cotton

revenues,” claims Surdam, “remained the Confederacy’s best economic asset, but

realization of that asset depended upon the South’s ability to properly play

its cotton card in the face of Northern naval superiority” (p.132). Surdam

begins with a discussion in Chapter 9 of how the South could have manipulated

the supply of cotton to its advantage by placing an export tax on the staple

and perhaps encouraging producers to cut back on cotton production. Whatever

their theoretical appeal as economic policies, neither of these proposals made

a great deal of political sense. Surdam himself admits that efforts to impose

an export tax met with little enthusiasm in the Confederate Congress. Efforts

to control exports offered little basis for confidence that the CSA would play

its “cotton card” right. The one effort to manipulate cotton supply — the

embargo of 1861 — produced a miscalculation that threatened to deprive the

CSA of its chance to get cotton to European markets even before the blockade

became effective. Surdam correctly notes that the effect of the embargo was

not as great as often believed, inasmuch as the 1860 crop had already been

shipped and the 1861 crop had not yet been harvested (pp.161-62). Nonetheless,

a perusal of Confederate policy towards “manipulating” cotton hardly leads one

to the conclusion that this is a policy area with great possibilities for

success, and by the middle of 1862 the question was rendered moot by the

increasing effectiveness of the Blockade.

In Chapter 10 Surdam engages in a prolonged discussion of the future of world

cotton market in the period after 1860. While the econometric analysis

presented in this chapter might be of interest to those interested in what has

been a spirited debate over the stagnation of cotton prices after the Civil

War, it seems to me that this discussion is largely irrelevant to an

assessment of the effects of the Northern blockade in 1862-65. As Surdam

points out, the effect of the blockade was to drive up the price of cotton in

Britain. But since the blockade also denied cotton shipments to Europe, the

Confederates were unable to reap the potential revenue such exports might have

brought in the form of both foreign exchange and export taxes. Surdam contends

that had those cotton exports been shipped, the South could have paid for

imports needed in the war effort, and coupled with clever management of the

CSA finances, obtained revenues from export taxes to finance the war. He

regards this as a “catastrophic loss” of revenues to the South that crippled

their military effort.

This is an interesting argument, but I do not find it convincing. There is no

question that the South would have been better off if it were free to ship

cotton to Europe. But I would argue that the inability to ship cotton exports

to Europe was not as “catastrophic” as Surdam suggests. The South was still

able to play a “cotton card” in Europe without having to actually ship the

cotton. The Confederate government raised money abroad by issuing bonds based

on the expectation that the existing supply of cotton could be shipped to

Europe as soon as the war ended. The success of the “Erlanger Bonds,” which

were backed by cotton, underscored this point. They actually held their value

better than bonds backed by gold. In short, Confederates could and did

mortgage the cotton crops to pay for the war — but they still needed to win

the war! The role played by the Blockade in disrupting the Southern economy

outlined in Part II of this book, rather than the inability of the South to

ship cotton to Europe was what ultimately worked to defeat the Confederate war

effort. One of the issues Surdam does not raise in connection with the

“cotton card” was the possibility that Southern producers continued to produce

cotton long after the blockade had made such production almost worthless. The

loss in manpower employed in useless cotton production was probably a more

severe loss to the Confederate war effort than the loss of revenue from a

cotton export tax that was never collected.

One of the ironies of the Union naval blockade was that the North cut itself

off from the supply of raw cotton. In Chapter 13 Surdam presents a brief

analysis of the Northern efforts to obtain cotton through the blockade. This

was a fairly easy task once Union forces occupied New Orleans and secured

Memphis on the Mississippi. Both sides gained in this trade, and each had

difficulty weighing net gains. As Surdam points out, Lincoln recognized this

and when asked what his policy was with regard to trading cotton for supplies

with the rebels he replied “My policy is to have no policy!” (p. 202). After

noting the advantages to both sides, Surdam concludes that “it would be unfair

to expect that either government would have maximized the potential gains”

from the exchange of cotton.

In the final chapter of the book, Surdam notes that the U.S. government

commissioned 700 vessels and spent $567 million — or about 8 percent of the

total expenditures of the war — on the navy (p. 206). He then raises the

obvious question that should be asked by an economist: Was such an elaborate

blockade necessary to cripple the South? Clearly, the South was harmed by the

blockade. The real question is therefore whether a lesser effort might have

produced almost as powerful a result. We noted above that Surdam’s argument on

the centrality of the Mississippi Valley suggests that the capture of New

Orleans by itself was a crippling blow that could not be offset by a different

pattern of shipments within the South, and a blockade of several major gulf

ports would have been sufficient to virtually shut down the cotton trade. But

there remains the blockade’s success in shutting down the coastal trade. Just

how successful this was can be seen in the numbers on ships that successfully

ran the blockade. Over the course of the war, blockade runners made 5,400

successful runs. However, to put this number in perspective we should note

that 3,500 of those were in the first year of the war, and that before the

war New Orleans alone had an average of more than 1,900 vessels enter annually

(p.5). My assessment of Surdam’s analysis of the strain this put on the

transportation system is that, even allowing for some ambiguity as to how much

of the disruption was due to the blockade, he is correct in his conclusion

that “for the resources expended, the blockade appears to have been a

worthwhile investment” (p. 209).

For those interested in studying the blockade or the economy of the South

during the war, this book is a worthwhile investment. In addition to the

compelling argument that the transportation infrastructure of the South was

crippled by the strain of the Northern naval blockade, the book includes a

wealth of well-organized data and several excellent maps of the Confederate

transportation system. And, for those who wish to explore some of the issues

in greater depth, the author has added appendices dealing with the estimates

of meat supply, the potential revenue from raw cotton in the CSA and three

appendices on the demand for cotton in the U.S. and Britain.

Roger Ransom is author of “The Economics of the Civil War” in EH.Net’s

Encyclopedia of Economic and Business History.

http://eh.net/encyclopedia/ransom.civil.war.us.php