Civil wars usually impose substantial costs on the involved countries economy. The wars are destructive to both human lives and the economic infrastructure. They also undermine the legitimacy of the state by threatening its institutions, the security of property rights, and the rule of law. Still, internal wars bringing tremendous uncertainty into the economic environment, making both public and private investments riskier. The U.S civil war was caused by several issues including regional conflicts between the North and the South, economics forces, and humanitarian concerns for the welfare of enslaved people. This war pitted both sides of the country against one another with devastating economic, social and political effects. So, how costly are the civil wars? This pap.er shows how the economic cost of the war strips a country of its growth potential.
The U.S civil war was caused by several issues including regional conflicts between the North and the South, economics forces, and humanitarian concerns for the welfare of enslaved people. This war pitted both sides of the country against one another with devastating economic, social and political effects. The economic effects were many and gave direct
The first and foremost point to note is that the American civil war was very expensive.In 1860,the U.S. national debt was $65 million(Goldin,(1975).To put this in perspective, the national debt in the year 1789 ,when George Washington took office ,was$77million.This shows that the U.S was reducing its national budget. However, four years of civil war changed this economic status forever .In the year 1865, for example, the national debt was standing at $2.7billion.The annual interest on this debt was twice higher than the national budget what the federal government spent before 1860r debt was more than twice that of the year 1860.Indeed the Civil War debt was twice what the federal U.S government spent before the beginning of the year 1860.
In terms of taxation, Jefferson’s vision turned into a big time nightmare .Earlier, the U.S had an excise tax, an estate tax, and progressive tax system systems l. With an expanded revenue department, the tax gathering became an important part if the federal government bureaucracy. In addition to this, the effect was a highly tainted economy. The Union government had to release in excess of $430 million in paper money (greenbacks) and ordered that it become legal tender for kinds of debts (Ransome, 1998). There were no gold back notes.
On the side of the military, the civil war ended when Generals Robert Lee and Ulysses Grant shook hands at the Appomattox Court House. However, the economic side of the war was to continue having devastating effects on the American economy. The effect is witnessed in the annual budget before and after the civil war. In 1860, federal budget was $63million, but after the war, it went well past $300 million. So why was there such a sharp increase?
The first reason was that aftermath of the war was very expensive to the overall economy of the U.S.A lot money was spend on the bureaucracy in the reconstruction governments in the Southern region(Ransom,1998).Besides this, the federal pension schemes to the Union veterans of the civil war became a the single biggest part of the federal government, except for the payment of interest on the Civil War debt ( Ransom,1998).Pensions became part of the war costs .However, this payment was imposed on future generations. The civil war veterans only got pensions if they had sustained injuries which could keep them out of holding jobs. This payment was also extended to the widows who remained married as well as their children until they became adults.
Another aspect of economical effects of the U.S civil was the choice by Americans to consume both tobacco and alcohol in large quantities. The aim here was to help pay the debt each year for most of the regions of the country. American industries recovered and the civil war era paved the way for economic greatness in many years to come, as a result of such increased domestic market and other factors .This took place in spite of limited government .The post civil war generation overcame the economic damage resulting from the war.
The civil war impact on the southern area was not only profound but also permanent. It reduced the industrial production by more than 50 percent( Goldin,1975),and the Southern manufacturing sector remained severely damaged for years after the civil war ended .The former Confederate states did not permanently surpass their I886Oleveless of production until the early 1870s.The analysis of on the economic effects of the war show that although the southern region’s industrial production grew by close to nine percent ,most industries such as those of machinery ,shipbuilding iron manufacturing and textile production. These industries only recovered full in the 1880s.
The American civil war was a turning point in the American economy. It did not only devastate the economy but resulted in the economic growth of America. The economic growth here resulted due to the post war generation that put in place measures to ensure that the U.S economy is the strongest all over the world.
Walton, Gary M., and Hugh, Rockoff. History of the American Economy: Eighth edition. New York: Dryden, 1998.
Ransom, Roger L. The Economic Consequences of the American Civil War. In The Political Economy of War and Peace, edited by M. Wolfson. Norwell, MA: Kluwer Academic Publishers, 1998.
Goldin , Claudia, and Frank Lewis. "The Economic Costs of the American Civil War: Estimates and Implications." Journal of Economic History 35 (1975): 299-326.
Engerman, Stanley L. "The Economic Impact of the Civil War." Explorations in Entrepreneurial History, second series 3 (1966)
Faulkner, Harold Underwood. American Economic History. Fifth edition. New York: Harper & Brothers, 1943.