Cotton & War Economics

My topic has evolved over time.  Originally, I planned to pick up where Paul Champlin had left off on the subject of taxes in the Civil War.  But I then decided to broaden things by talking about financing the war in general, but at the same time focusing primarily on this crop of cotton and how it affected both sides.  That focus caused me to get into the whole issue of trading with the enemy.  And along the way, I delved into various tangential topics that I found interesting.  So if tonight’s talk seems like a hodgepodge that is because of my research journey.

Abraham Lincoln in his first inaugural address said that, “Physically speaking, we cannot separate.”  And that proved prophetic because as much as the South tried to forge a new country, it just wasn’t possible due to existing economic bonds.  Late in the war, for example, Jefferson Davis became particularly incensed over the wide circulation of greenbacks within the Confederacy itself.  And remember that greenbacks were something entirely new, even in the North.  And so the preference of people in Confederate-controlled areas to use them, despite laws prohibiting such circulation, says a lot about how viable Southern nationhood ultimately was.   

I want to start out on the Southern side with an incident early in the war.  We all know that much second-guessing or Monday-morning quarterbacking occurred over military affairs during the war, with probably the most controversy being over Longstreet and Pickett’s Charge, but there was also an ongoing fiscal dispute as well.

At the very beginning of the Confederacy in 1861, Judah P. Benjamin [SLIDE], the jack-of-all-trades in Jeff Davis’s cabinet, suggested that all the cotton that could be laid hands on should be shipped to Europe posthaste for safekeeping, either in Britain or France.  And then as needs arose, the cotton, being reasonably imperishable, could be sold off to obtain necessary supplies.  Much of the cabinet objected to this plan, with then-Secretary of the Treasury, Christopher Gustavus Memminger [SLIDE], being most prominent in opposition.  He found the proposal unconstitutional and economically unwise.

So they didn’t do it.  After the war, Jeff Davis [SLIDE], mouldering away in prison, complained that if only we hadn’t listened to that darn Memminger, we would have won the war.  The Yankees wouldn’t have strangled us with their blockade [SLIDE], and the South would have gained its independence.  Also, former General Joseph E. Johnston, no friend of Davis’s, agreed, writing in his memoirs, that the Confederacy collapsed not because of military weakness, but of financial.  So again, we have another one of those “what if” questions we often run into in history. 

Now does anyone find anything disingenuous or even downright bogus about the complaints of Davis and Johnston as to this supposed lost opportunity?  Let me give you a hint:  Embargo.  Benjamin’s plan really never had a chance because everyone, including Davis, was embargo-crazy.  This was the application of King Cotton diplomacy [SLIDE], the idea that Europe could not survive without Southern cotton.  In 1861, then, the approach was to withhold cotton from Europe, causing wide-spread economic disruption and thereby leading to recognition from the European powers and possibly even military assistance.  And that was even a grass-roots movement at the time, whereby local vigilance committees were set up at ports to make sure no cotton left the South, burning it if need be.

The embargo did not work, primarily because Europe actually had a glut of cotton at the time due to bumper crops in 1857-1860 and was even exploring alternative sources of supply in Egypt and India.  And historians often point to this as example of folly and note how it actually only served the purposes of the Union as the blockade was not yet operational.  Only when it was starting to become reasonably effective, the South realized their embargo strategy was not working and so they would have to start exporting. 

At this point, I want to take a moment to question the conventional wisdom about the embargo strategy by saying that just because something doesn’t work, doesn’t mean it’s stupid.  And I bring this up because in my research, I found that as the war dragged on, both Britain and France suffered terrible economic devastation due to the lack of cotton.  I know we like to remember how the unselfish workingmen of Manchester wrote to Lincoln after the Emancipation Proclamation to support the Union’s cause.  And there’s even a statue of Lincoln in Manchester today, but still the suffering caused cannot be glossed over.  And in France, with its own significant textile industry, the government was particularly worried as there were still people alive who could recall the Reign of Terror, as well as subsequent episodes of social unrest.  You all saw Les Miserables, right?  

And there have even been suggestions that Lincoln preferred that the blockade be somewhat “leaky,” so that Europe was not too starved of cotton just for these reasons of global stability.  In other words, this was a “safety valve” to let off some pressure.   

So what I’m getting at is that maybe Jeff Davis and company were not entirely nuts in pushing the embargo; they do not necessarily deserve to be the subjects of ridicule that they have been for all these years.  Embargoes can be quite effective.  I think most people in this room might remember a little matter in 1973 when we were subject to an embargo, and that ended up leading to the largest transfer of wealth in human history.  So give OPEC credit for that.  But in the end, we find that Davis did not count on that initial glut of cotton in Europe, and he also didn’t expect the British and French elites to arrive at the calculation that they did in balancing domestic unrest with antagonizing the Union.  So ultimately, Davis gambled and lost. 

Also, I want to take a little swipe at Judah Benjamin’s plan.  He wanted to store all this cotton overseas, and as I understand it, cotton can be stored for relatively long periods of time, although I could never determine if there was a true expiration date for raw cotton.  But would this cotton be just as safe as money in a Swiss bank account used to be?  Possibly not.  After all, what would prevent Britain and France from just one day renouncing their declarations of neutrality and then seizing the cotton either on behalf of their now-Yankee allies or in their own national interests?  After all, Russian assets had been seized during the Crimean War.  As Davis later said, “Put not your trust in princes.” 

Also, I need to mention that in a recent post in the New York Times’s Disunion blog, Professor Terry Jones of the University of Louisiana threw cold water on this argument by noting that while the South certainly suffered privations during the war, it has never been documented that it lost a battle for lack of armaments.  Rather, it was at a natural disadvantage for want of men and an efficient railroad system. 

But let’s go off on one of my tangents, and talk about Secretary Memminger a little more [SLIDE].  This is him on $5 Confederate bill.  He’s not often mentioned as a leading light of the Davis cabinet, but he’s intriguing nonetheless.  While both Memminger and Benjamin were lawyers and both were foreign-born, the resemblance pretty much ends there.  Judah Benjamin was an outsized personality, but Memminger was apparently something of a nerd.  Born in Germany, he was brought to Charleston, South Carolina as an infant by his widowed mother who herself died shortly after their arrival, leaving him to grow up in an orphanage, and so despite all his later successes, he was always known as a foundling.  Luckily, he was essentially adopted by one of the trustees of the orphanage, and even entered the University of South Carolina at age 11, graduating at age 14, so he must have been quite the prodigy.  Also at that time, South Carolina maybe wasn‘t the party school it is now. 

He began practicing law, concentrating in business matters.  He first made his mark with the so-called Bank Case.  He represented the State of South Carolina suing certain banks that had suspended specie payments in the aftermath of the Panic of 1837.  When I say “specie,” I mean gold and silver.  The State sought to have the charters of these banks revoked.  Memminger ended up winning, and by doing so, he helped to actually burnish the reputation of the banks in South Carolina for exceptional soundness.  And he himself, became known as a “Sound Money” man, which we will shortly learn came to be way ironic.

At the start of the war, Memminger was appointed Treasury Secretary not so much for his business background but as part of the dust settling over how to have the cabinet represent all the seceded states, while also allowing Jeff Davis to settle old scores with his enemies. 

Once in office, Memminger was suspect as he was not a true aristocrat but a foundling.  Further, he was seen as foreign, often being referred to as “the Hessian,” even though I found no indication that he could actually even speak German since he immigrated as an infant, much less that he spoke English with other than a South Carolinian accent.

But Memminger had as much business background as anyone else that Davis could have appointed, and he soon put that to good use in arranging loans for the newborn Confederacy.  And that was the traditional means of financing American wars.  That is how U.S. Treasury Secretary Chase initially wanted to do it.  But it was especially difficult for the South as it had always depended on the North for the infrastructure of finance.  You might recall how Thomas Jefferson abhorred the “paper-men” and stock jobbers of Wall Street.  All the bank notes and bonds had been engraved in New York.  They didn’t even have the right paper. 

In any event, Memminger was able to arrange a number of loans, probably the most successful was in May, 1861, which he obtained from individual Southern citizens in the approximate amount of $15 million in gold and silver.  In a flush of Southern nationalism, a healthy slug of the specie in private hands in the South was acquired by the Confederate treasury.  These loans, known collectively as the “Specie Loan,” were for 10 years’ duration with 8% interest payments payable in gold from the export tax on cotton that was also payable only in gold.  (If you’re a fancier of Confederate money, you know that that disclaimer is printed on every bill [SLIDE].)  Further, the Confederacy seized about $5 million in gold from Federal customhouses and mints.  They start out, then, in that first year of the war with about $20 million in specie.  So Memminger sets out to honor his sound money background. 

So what did they do with that initial $20 million?  Soon most of it was promptly on its way to Europe to acquire needed war supplies.  This is how the Alabama and other commerce raiders were paid for.  That’s how the European suppliers were paid.  How did the Confederate soldiers and civil servants get paid?  Well, Memminger now had to rapidly change his spots and crank up that old printing press and churn out more examples of what I showed you earlier [SLIDE].  (This is of course Lincoln printing money, but likely there were similar cartoons of Davis and Memminger in Southern newspapers.)  And this matter of fiat currency is easily a whole college course, but for our purposes, if you print too much, it’s not good. 

And as we know, this is not ancient history.  We still have questions of reliability and soundness.  You might recall a few years ago when we were facing the fiscal cliff, and some suggested that President Obama simply mint a trillion dollar coin.  Many dismissed the idea at the time as hare-brained, but was that really any different than a lot of expedients that Governments resort to over time.  Would it have been much different than those giant stone coins you’ve seen in National Geographic on the Yap Islands in the south Pacific.  If people put faith in them, they are worth something.  But as I suggested earlier, this was so awful for Memminger, Mr. Sound Money, in that he had to preside over this sorry spectacle. 

And on another tangent, I want to address a common view:  Often it is suggested that because there was so much counterfeit Confederate money the Southern economy collapsed.  Without doubt, there was a lot of counterfeit Confederate money circulating, much of it printed in the North.  And Memminger himself even accused the Union Government of being behind this effort.  But at the end of the day, the Confederates did not need much help in destroying their own economy.  The South was so awash in these shinplasters rolling off the official printing presses that it’s hard to believe the counterfeit bills made much difference.  And don’t forget the states of the Confederacy printed money too, as well as the Indian Territory and Confederate-occupied Arizona [SLIDE].  Now interestingly, much scholarly study has been devoted to the Confederate economy, but the highest estimate I have found is that 2.5% of the money supply in the South was counterfeit.  And remember that’s what the economists call M0, the base money supply.  We have to assume that after the first few years, so many transactions were through barter.  If you read that wonderful novel “Cold Mountain,” you recall all the trading going on just to survive.   

Back to Memminger, he was not a man of imagination.  But in a few years, on his watch at least, and this is also wildly ironic, a remarkable financial device comes into being, one that is still discussed today in financial studies.  In late 1862, Europe was getting squeezed with an increasing cotton famine, the earlier glut having been worked through and with Egypt and India apparently unable to make up the shortfall.  And I have read in some sources that the quality of cotton from those other countries was not up to the standard of Southern cotton.  Buy American.  At this point, an enterprising French financier named Emil Erlanger comes on the scene [SLIDE].  He proposes to the Confederacy that his family’s bank, which rivaled Rothschild in prominence, would underwrite a bond offering to the tune of $15 million.  Each bond would be denominated in pounds sterling or French francs.  It was to pay out an annual rate of interest of 7%, which was not bad then and is great now.  And payment was to be in either pounds or francs, not Confederate money.

But that’s not all.  Unlike conventional bonds, which typically rely on the confidence residing in the issuing party, these bonds had a conversion feature.  At any time, you could surrender your bond for a set amount of cotton, typically 20,000 pounds, at the set price of the equivalent of 12 cents a pound, regardless of the prevailing market price, which at the time could be as high as a dollar a pound.  So this is the famous Erlanger Cotton Bond [SLIDE].

Now to this day, finance scholars and economic historians write about this device as it was so innovative.  You see it is more than a common debt instrument.  It has the quality of a derivative as we would call it today.  Its value derives from an underlying commodity, here the cotton.  And more specifically, we would say it’s a call option, that is, the holder can decide to “call” on the counterparty to deliver the goods, so the holder can exercise the option at a time of his choosing or not.  The need was to entice investors by allowing them flexibility, so that they’d take the risk [SLIDE].  Notice this detail of Liberty leaning on bales of cotton. 

But there was a catch:  The Confederates would deliver up the cotton, but they would only deliver it up inside the Confederacy.  The bond’s issuer was only obligated to deliver the cotton to a point “within ten miles of a navigable river or railhead,” and then you had to arrange your own transportation.  Wouldn’t that be a little like have to obtain a shipment today inside Syria?  But the Erlanger folks being a full-service firm had a solution for their clients.  They had their own blockade-runner [SLIDE] called the Denbigh, named after a town in Wales, and for an additional fee, they would get it out of the Confederacy and to Havana.  And their ship made 13 round trips between Mobile or Galveston and Havana before the war ended.  If you didn’t want to pay the fee, then you had to just content yourself with the coupon payments and hope the South wins.  But for the South, that was a good thing as these investors had a stake in the Confederacy.   

When they were first issued in early 1863, they were quite popular, even Chancellor of the Exchequer William Gladstone bought some.  Union diplomats soon started a whisper campaign, oddly enough not about the vulnerability of the South, but about how Jefferson Davis as a U.S. Senator had supported Mississippi’s action in defaulting on bonds held primarily by European investors.  The Confederates for their part, tried to buttress the bonds by suggesting that even if the South lost the war, the U.S. Government would honor the obligations under the bonds.  This was probably not completely an insane idea.  After all, Alexander Hamilton set something of a precedent when he convinced the Federal Government to assume the Revolutionary War debts of the states, and thereby creating our National Debt, when that was considered a good thing. 

But of course, honoring the debts of an enemy is different from honoring the debts of a constituent part of yourself.  And after the war, with this situation in mind, one provision of the 14^th Amendment explicitly provides that any debt incurred in aid of insurrection or rebellion is illegal and void.  So deal with that, Gladstone.  I hope you diversified [SLIDE]. 

Now the trading value of the bonds obviously fluctuated with the fortunes of the Confederacy.  Not long after issuance, they buoyed with the Union defeat at Chancellorsville, and then sagged after Gettysburg.  They edged up again in the summer of 1864 with war-weariness in the North and the possibility of a McClellan election victory on a peace plank, but then Sherman stepped in.  Ultimately, the Confederacy obtained about $8.5 million from the bonds, but then it is hard to know exactly how much was offset by the cotton that was redeemed.  Generally, however, most observers think it ended up being a pretty good deal for all concerned, all things considered.  Undoubtedly, many investors lost out and only saw three coupon interest payments before the Confederacy collapsed, but is that much different from many business opportunities today?  High risk, high reward and all that.  The South did get much-needed foreign exchange and some investors got a dandy deal on cotton.   

One final footnote, it is sometimes suggested that the only reason the Cotton Bonds were floated was because Emile Erlanger was simultaneously romancing Marguerite Slidell, the daughter of the James Slidell, of the Trent Affair and the Confederate envoy to Napoleon III.  I’m not sure how much that had to do with it, but the two did end up marrying.  She gained some kind of noble title, and he did philanthropic work in the South after the war, even establishing a hospital in Chattanooga, which is still there today.  It is a prestigious teaching hospital associated with the University of Tennessee.  And there’s a town in Kentucky named Erlanger due to his beneficence.

So the South initially tried to weaponize cotton in a way, but later saw the need to monetize it.  In contrast, the Union needed cotton as a raw material, as well as to keep the South from using it for barter.  As the Union Army moved South, early on, the need was seen for Treasury agents or buyers authorized by the Treasury to obtain cotton.  Ideally, the Army would seize cotton from disloyal growers under one of the confiscation acts.  But when seizure wasn’t possible, you had to haggle, and that brought on the ongoing debate of how to pay.

Different methods were thought up at different times.  Earlier in the war, one arrangement was to make an immediate payment 2/3 payment in greenbacks [SLIDE], with the remaining 1/3 payment in U.S. Government bonds to be held in escrow in a Union-controlled bank until hostilities ended and the seller had maintained loyalty to the Union throughout the intervening period.  So that was a fairly stiff condition subsequent to the deal.  But from the Union standpoint, this was desirable as it would mean these growers had a definite economic stake in a Union victory, something like those European investors who bought the cotton bonds betting on a Confederate victory.

Later in the war, in January 1864, the Treasury issued rules whereby sellers had to take a loyalty oath to the Union under Lincoln’s December 1863 amnesty proclamation, and then you would get 25% of the price in greenbacks, with a receipt for the rest to be cashed after the war, assuming the holder had been loyal throughout.  So the Union was improving its own terms of payment with the growers getting less up front. 

That was the ideal, but the reality was that either unlicensed traders or corrupt licensed traders or even Government employees, both military and civilian, would pay in gold, that is, in specie.  Like Memminger, these were “sound money” men.  Sometimes this practice was winked at, even at the highest levels.  It was certainly not popular with folks like Grant and Sherman as it appeared to be downright treason, aid and comfort to the enemy and all that.  General E.R.S. Canby [SLIDE] wrote to Lincoln complaining how the Government’s policies hampered the military effort because cotton traders would tip off the Confederates of pending invasions to prevent them from burning cotton.  But Lincoln, was a little more pragmatic, or a little more shrewd.  Lincoln explained that since the price of cotton had jumped six times since the war started and since the enemy usually ran the blockade with one-sixth the amount exported in peacetime, he was getting the same deal without planting the other five crops and raising provisions instead.  And it was better to give him guns for his cotton, than let him get it to Europe where he’d get guns and ammunition.  So Lincoln was betting that he could outlast the South even when giving them aid.  And he made the calculation that it was worth it.  I can just imagine if Grant or Sherman read this letter. 

Now with that as economic background, we have the tale of three cities:  Memphis, Tennessee, Helena, Arkansas, and New Orleans, Louisiana.  By the summer of 1862, all three of these Mississippi River ports had been taken. 

The occupation of Memphis was eagerly awaited by Northern merchants seeking to open it for trade.  Sherman [SLIDE] was initially put in charge and he had no truck with inter-belligerent trade, particularly banning the use of gold to buy cotton.  But he was forced to back down by Secretary of War Stanton.  Even though Stanton certainly agreed in principle with Sherman, Secretary of State Seward had pressured him to try and help relieve the cotton shortage in Europe as a foreign policy matter.  Due to the vibrancy of trade through Memphis, both licit and Illicit, Sherman complained that Cincinnati ended up providing more supplies to the Confederacy than Charleston, South Carolina, a chief entrepôt for blockade-runners. 

Another busy river town was Helena, Arkansas, which was overseen by General Samuel Curtis [SLIDE], a West Pointer and also one of the first Republicans elected to Congress.  Further, despite being outnumbered, he was the victor of the Battle of Pea Ridge, an important fight in the Western Theater.  Unfortunately, his stewardship of Helena did not leave him similarly cloaked in glory.  Less than three months after taking control, he reportedly deposited $100,000 with a Chicago financier.  And it was alleged that Curtis only occupied Helena, rather than the state capital at Little Rock, because that was where the cotton was.  Despite denials of impropriety, he was soon transferred out of Helena, although the apparent corruption continued there among the lower ranks. 

And now we come to the star of our show, old Beast Butler[SLIDE], and his stage, the Crescent City.  Now assigning Butler to New Orleans is a little like carrying coals to Newcastle as the place was not previously a model of rectitude and civic integrity.  But Butler, along with his conniving brother, Andrew Jackson Butler, quickly got to work in the filthy lucre department.  For some perspective, when Butler arrived in New Orleans in May 1862, he had a personal wealth of $150,000.  Six years later, he was worth about $3 million. 

What were his specific methods?  Soon after assuming occupation duties, he promised any planter who brought cotton into his lines would not see it confiscated, even if it was actually owned by a high Confederate official.  That was clearly against stated Union policy, and so it must have otherwise been worth his while to proclaim such a policy.  Further, he arranged with the Confederate commander of Mobile to establish a regular exchange of cotton for salt.  Salt, of course, was essential to food preservation in those days.  And this intercourse was apparently of quite some volume.   

Well, soon enough, however, New Orleans got a new sheriff.  This man [SLIDE] Nathaniel Banks was directed to assume command in December 1862.  Banks was a prominent politician in his home state of Massachusetts, and, interestingly, had started his working life as a “bobbin boy” in a textile mill, so this matter of cotton was somewhat in his blood.  It was hoped that Banks could undo the culture of corruption overseen by Butler and his brother, and it was hoped that Banks could use New Orleans as a jumping off point for more aggressive campaigning.  You see when New Orleans was first captured, many hoped that the city would serve as a conduit for cotton to pass on its way to the New England mills.  But despite all Butler’s innovative approaches, such as his salt trading schemes, and Banks’s later clean-up efforts, New Orleans turned out to be a disappointment as an export center; not that much cotton was coming through.

One problem was that many of the plantation slaves in the area under Union control had fled, meaning cotton couldn’t be harvested.  Banks dealt with this situation as had other Union commanders, such as on the South Carolina coast, by setting up a system that essentially ordered the slaves back to work.  Even though occupied Louisiana was exempt under the Emancipation Proclamation, Banks decreed that they were to be paid, somewhat fairly, but they were still also to be subservient to the planters.  And while Banks explained that he hoped to rely mostly on moral suasion to get the workers back on the plantations, everyone understood that the Union Army would make them if they didn’t.  Presumably, if they didn’t return to work, they’d be arrested for loitering or vagrancy, with the punishment being the work farm.  You see how the seeds are planted for the later Jim Crow system.  But even with this approach, the appetite of the North and of Europe for cotton remained great.

As a result, an old dream revived, that of invading and occupying Texas.  Now the idea of Yankees getting into Texas actually pre-dated the war.  Edward Everett Hale, the author of “The Man Without a Country,” had long suggested that Northerners settle in Texas, a concept akin to what the New England Emigrant Aid Company was doing in Kansas before the war.  The idea was later propagated more broadly by this man [SLIDE] Edward Atkinson, a life-long agitator, who coincidentally was also a mill owner in New England.  He published a brochure entitled “Cheap Cotton by Free Labor” promoting the idea.  He argued that cotton could be grown more efficiently by free workers, and as support, he pointed to the existing German population in Texas that was growing cotton without slaves.  In his accounting, free labor would be three times more productive raising cotton than slave labor, and this example would force the rest of the South to abandon slavery.  That was the dream. 

Once the war began, Atkinson and his like-minded fellows became even more aggressive in pushing their ideas, along with a number of prominent Texan refugees now camped out at the Willard Hotel in Washington.  And they even raised the stakes and recommended not just an armed invasion and occupation of Texas, but also that land should be confiscated from disloyal owners and awarded to troops in the invasion force as a kind of bounty. 

Back to Atkinson for a moment, in the wake of the Spanish-American War, he became one of the founders of the Anti-Imperialist League, which objected to our annexation of the Philippines and Hawaii.  But it is okay to colonize Texas.

And one more tangent if I may, a similar proposal was made regarding Florida.  And in fact, if you recall the novel The Yearling, later made into the movie with Gregory Peck, which was set in Florida, and one of the characters was a Yankee settler, not a carpetbagger, but someone who put down roots.  So if you think the first Northerners to come to Florida were Jerry Seinfeld’s parents, you would be wrong. 

Now obviously, a big part of why they wanted to invade Texas was for the cotton, so you have this Texas-New England axis going, but also many, such as McClellan, thought it would be good to succor pro-Union parties in Texas, especially those Germans we were talking about.  You might have seen this gruesome lithograph of a mass hanging of suspected Unionists.  [SLIDE.]  And of course, in 1862 with the arrival of the French in Mexico [SLIDE], a proposed campaign into Texas assumes a foreign policy dimension as it would signal that the U.S. is not completely distracted by its internal wrangling, but also, as many suggested, it may ward off the French from themselves trying to occupy Texas. 

Okay, so great idea.  Let’s do it.  And originally, the grand scheme had been for a two-pronged approach, with one army invading Texas for all the above-mentioned reasons and  another army taking New Orleans as a preliminary to opening the Mississippi.

Well, there is a problem with manpower.  Remember the Eastern Theater too.  You just don’t have enough men.  And politics intervenes as Midwestern governors urge the opening of the Mississippi as critical to their local economies, and since the Republicans had taken a “shellacking” in these same states in the 1862 fall elections, they have Lincoln’s ear, and that becomes the priority.  Also, things just generally get bogged down in New Orleans, with Banks having to set up shop and try and clean up after Butler’s mess.

Also another assignment that hampered Banks in plans to invade Texas was that Lincoln expected him to make Louisiana viable as a reconstructed state.  During the war itself, Lincoln and Congress had a tug-of-war over reconstruction policies, which is itself a discrete topic that could occupy an evening.  Briefly stated, to the Lincoln Administration, the rebel states had not truly left the Union, it was just that some traitors had temporarily assumed control, and so the President, under his authority to suppress insurrections, could determine how they were restored.  To the Congress, the rebel states would be conquered territory, as if they’d been taken from the Indians or from Mexico, and so Congress had the authority to set the terms of admission.  Suffice it to say that Lincoln wanted Banks to serve as a kind of Roman Procounsul, and sort out the local politics so that the state would count for purposes of the 10% of the population swearing loyalty under his amnesty plan.

But Banks did try a few forays, mostly along the Texas coast.  These ended up being mostly “pinprick” efforts without much lasting effect.  Further, Banks was confounded by vague instructions from Henry Halleck.  He kept “intimating” that Banks may wish to proceed up the Red River in northwest Louisiana [SLIDE], where the cotton was and that could also serve as jumping off point for Texas, but he was never all that clear in expressing himself.  Now the problem of Civil War generals writing inadequate orders is hardly an isolated problem, and we even find research from World War II about how communication between Eisenhower and his subordinates was not always crystal clear.  In any event, Banks eventually got organized and moved up the Red River, along with the Navy under Admiral David Porter [SLIDE]. 

I’m not here to provide a campaign narrative.  I’ll just say what many of you probably already know, and that is that the Red River Campaign was a failure.  I’m not sure you could call it an utter disaster, but it certainly wasn’t what many had hoped for.  And many historians believe that it actually ended up lengthening the war due to the diversion of resources that could have been better applied elsewhere.  I think the most distinct image of failure from the campaign was how they had to retreat back to New Orleans more quickly out of fear that many of the Navy’s ships would be stranded when the river’s level dropped in the spring.  Also memorable was Banks’s senior officers seriously considered putting him under arrest.  And it wasn’t unalloyed glory for the Confederates either as you had Edmund Kirby Smith [SLIDE], of the Trans-Mississippi Department or Kirby-Smithdom, feuding with General Richard Taylor, the irritable son of the former President. 

For our economic purposes, the Red River campaign was a shameful matter as you have the Army and Navy competing against each other to obtain the most cotton.  You have the Navy under Admiral Porter, becoming quite inventive in seizing cotton under the maritime prize system, as was more typically done on the high seas against truly foreign enemies.  But this incentivized the Navy as prize money was doled out according to rank.  The Navy was quite notorious for sending Marines far inland to seize cotton, even going to the trouble of bringing along engine-room mechanics to repair damaged gins so they could themselves bale recently harvested cotton.  I’ve never baled cotton, but I’ve baled hay, and I can’t imagine in those days that it would have been very easy.  So that shows how anxious they were to make a buck out of this valuable commodity.  The Southerners even gave Porter the nom de guerre “Thief of the Mississippi.”  And the action of the Navy caused friction with the soldiers along whom they were serving.  I assume this is the only instance of Army-Navy friction in our history.  But there are indications that the Army also made out well in this grab for cotton. 

After the war, Congress decided to investigate the Red River campaign to uncover mismanagement and graft.  Admiral Porter testified and not only laid the blame on General Banks of course but also perjured himself by claiming the Navy never seized cotton for prizes, when he himself profited handsomely.  Generally, the verdict on the campaign was that it was just a commercial venture to obtain cotton with redeeming military value.

But once again, I feel sorely obliged to play devil’s advocate and note that just because something fails due to poor execution does not mean it should not have been done.  I’m not sure the economic goal necessarily taints the exercise.  And further, there was the need to demonstrate some ability to project power in that theater to ward off the French.   Also it would shore up the reconstructed states of Louisiana and Arkansas.  And more concretely, if they had taken Texas, that would have cut off another vital avenue of cotton export across the Rio Grande.

[SLIDE]  In the end, the South also came away with a bad taste as to its cotton strategy.  I mentioned earlier Benjamin’s plan to ship cotton to Europe.  But also many in the South were disturbed by the corrupting influence of the trade across the lines.  As one Confederate officer wrote in early 1865, “The fact is that cotton, instead of contributing to our strength, has been the greatest element of our weakness here.  Yankee gold is fact accomplishing what Yankee arms could never achieve—the subjugation of this people.” 


Much of what I’ve been discussing tonight has certainly been tawdry.  You see the spectacle of the Northern  profiteers, embodied most fulsomely by Spoons Butler, but what should be seen as even more awful is the example of all the Southern planters, the planter class, the ones who started the war, the backbone of the rebellion, blithely selling out.  After all, Yankees are supposed to be ruthless and without honor.  But now you have these gallant Southrons more than anxious to abandon ship. 

Now maybe they can’t be blamed too much because of the geography. In his book  “Terrible Swift Sword,” Bruce Catton wrote, “In any war, the men who die for patriotism die also for the enrichment of cold-eyed schemers who risk nothing, and every battlefield is made uglier by the greed of men who never fight.  But what was happening here, although it included all of that, went far beyond it.  This was conclusive evidence that the warring states were tragically and mysteriously bound together.  Fighting to destroy each other, the two nations still had to have each other’s help.”

In reviewing all the various accounts of greed, I can’t help thinking of Joseph Heller’s book “Catch-22.”  That was set during World War II, and if you read it or, more likely, saw the movie by Mike Nichols, you may remember a character named Milo Minderbinder, who began as a mess officer at a fictional bomber base in Italy but who rose to prominence as an off-duty entrepreneur who traded in a certain commodity.  Does anyone remember what that commodity was?  Exactly, cotton, and specifically, Egyptian cotton. 

And at one point, Minderbinder acquired cotton with the intent to sell it at a profit when the bottom drops out of the market and he is stuck.  But never fear, being a good capitalist, he arranges to sell the cotton to the Germans, in a little inter-belligerent trade.  There was only one wrinkle:  He had to have the B-29s bomb their own base.  And since everyone on the base effectively worked for him, he was able to have it done.


Now the book and the movie were obviously absurdist and exaggerated, which was especially appreciated in those cynical Vietnam days, but at the same time, Grant and Sherman would have surely pointed at Butler and others of his ilk as being quite willing to do what Minderbinder was willing to do, all for the almighty dollar.  But then, Butler and Minderbinder and all those other great entrepreneurs would have come back and said something like, what is good for GM is good for the country.  And when you read Lincoln’s letter to Canby, the one about the price going up six times, and the exports going down six times, maybe it is hard to draw bright lines. 

Questions?

Delivered May 20, 2015