The Money War: Democracy, Taxes and Inflation in the U.S. Civil War

Southern Methodist University SMU Scholar History Faculty Publications History 3-2023 The Mone The Money War: Democr ar: Democracy, Taxes and Inflation in the U.S. Civil es and Inflation in the U.S. Civil War Ariel Ron aron@smu.edu Sofia Valeonti American University of Paris, svaleonti@aup.edu Follow this and additional works at: https://scholar.smu.edu/hum_sci_history_research Recommended Citation Ron, Ariel, and Sofia Valeonti. 2023. “The Money War: Democracy, Taxes and Inflation in the U.S. Civil War.” Cambridge Journal of Economics 47: 263–88. doi:10.1093/cje/bead006. This document is brought to you for free and open access by the History at SMU Scholar. It has been accepted for inclusion in History Faculty Publications by an authorized administrator of SMU Scholar. For more information, please visit http://digitalrepository.smu.edu.

  THE MONEY WAR Democracy, Taxes, and Inflation in the U.S. Civil War (accepted version)

Ariel Ron / Southern Methodist University / aron@smu.edu Sofia Valeonti / The American University of Paris & Paris 1 Panthéon-Sorbonne University / svaleonti@aup.edu (corresponding author)

Abstract Both sides in the U.S. Civil War financed military spending by issuing new fiat currencies. The Union “greenback” underwent moderate inflation (by wartime standards), but the Confederate “grayback” suffered hyperinflation. Existing explanations for these price movements typically treat only one of the two cases and adopt either a quantity-theory or rational-expectations approach. We compare Union and Confederate policies directly and highlight the importance of taxation for assuring the value of inconvertible money. Combining monetary and fiscal history literatures, we find that tax policies were determined by long-term development of democratic governing institutions. Higher levels of democracy in the North, as compared to the slaveholding South, meant greater tax policy legitimacy and administrative competence. The Union drew on this legacy to back its money effectively, while the Confederacy failed to do so. We contribute to credit-money theories by drawing attention to the political determinants of effective fiscal policy. Keywords hyperinflation, fiat currency, Confederate States of America, U.S. Civil War, taxation JEL Classifications B52, E52, N110

Acknowledgments 

We wish to thank the participants of the 2019 European Historical Economics Society Conference, the Early American Money Symposium at Brown University, the Colorado State PhD seminar, the H2M seminar of Paris 1 Panthéon-Sorbonne University, and the Paris School of Economics Economic History Seminar, as well as Jeff Althouse, Nicolas Barreyre, Ghislain Deleplace, Claire Federspiel, Laurent Le Maux, Noam Magor, John Majewski, and Romain Svartzman for their comments and suggestions. All errors remaining are our responsibility.

  1. INTRODUCTION In the spring of 1864, the U.S. Civil War still had a year of hard fighting ahead, but the outcome already seemed clear to some observers. The situation was expressed by a political cartoon l (figure 1) showing the Union president, Abraham Lincoln, and his Confederate counterpart, Jefferson Davis, slugging it out with sacks of cash. “Better give in Jeff,” Lincoln boasts, “you haven’t a chance! don’t you see I’ve the LONGEST PURSE.” Piled boxes lie at the feet of the combatants, the ones beside Lincoln marked “gold bars,” the ones beside Davis, “uncurrent money.” The caption declares a “Final Issue of the War”—a double entendre that evokes Union victory and the last emission of worthless Confederate paper. But the cartoon goes awry in suggesting that the health of the Union’s treasury notes rested on its gold inventories, for both sides had abandoned gold-backed currencies early in the conflict. Something else, then, supported the Union’s monetary superiority, which enabled it to convert a substantial advantage in raw economic capacity at the start of the war into the much larger edge in the mobilization of real resources needed to conquer the vast geographic expanse of Confederate America. The Union and the Confederacy each issued huge quantities of inconvertible paper money to pay for unprecedented wartime expenses. Both experienced price changes, but in completely different proportions (figures 2 and 3). Whether measured in gold, wholesale or consumer indices, Union prices rose by roughly a factor of two over the course of the war. This was a rate of inflation similar to the American experience in the First and Second World Wars and one wholly adequate to sustaining a relatively booming wartime economy (McPherson, 1988, p. 447; David and Solar, 1977, pp. 16-17; Warren et al.1932, pp. 6-10; Mitchell 1908, p. 279). The Confederacy, however, suffered hyperinflation, with both wholesale and gold prices rising nearly sixtyfold by the start of 1865, a situation that left its economy in chaos (Lerner,  

1955, p. 24; Todd, 1954, p. 189). If the cartoon is wrong to suggest that gold accounted for the difference, what did? Most scholars attribute Civil War price movements either to the amount of money issued (the quantity theory, or QT) or to rational expectations regarding money’s future value (RE). For the Confederate case, Lerner (1954, 1955, 1956) emphasizes the rise in the stock and velocity of money, as well as the southern economy’s declining output. Godfrey (1978) similarly highlights the importance of changes in the money supply. By contrast, several scholars adopt the rational-expectations approach and correlate price movements with news items. Burdekin and Langdana (1993), McCadless (1996), and Weidenmier (2002) each adopt the rational expectations approach and show that price movements tracked news about military, fiscal and monetary events. 1 The Union’s price history is also typically explained within the QT and RE traditions. For Friedman and Schwartz (1963, p. 59, ft. 1964), and Studenski and Krooss (1963, p. 147), the determining factor was the quantity of money in circulation. They argue that inflation would have been limited if a greater part of the war had been funded with taxes rather than money issues. Alternatively, Calomiris (1988B) demonstrates that the Union’s price level was not determined by the current money supply but rather by rational expectations about its future supply, which, in turn, depended on fiscal news.2 For Calomiris, any policy concerning the political will to resume specie payments in the future was a form of fiscal news. Two other approaches of note, though distinct, can be grouped together as especially concerned with historically specific interactions between policies and institutions. Wray (1998, pp. 65-69) deploys modern monetary theory (MMT) to attribute the Confederacy’s hyperinflation to insufficient taxation, which caused a shortfall of demand for its note issues. From an older institutionalist perspective, Mitchell (1903, p. 198) argues that the value of the greenbacks “depended upon the credit of the issuer,” which refersto the confidence that holders  

of greenbacks accorded to the “government’s ability to ultimately redeem its notes.” Confidence in the government’s ability depended on both structural and contingent factors, including the quantity of paper money issued (the more money, the more difficult the repayment) and the occurrence of “financial, military, political, and diplomatic events” (p. 201), such as reports from the Secretary of the Treasury and news about the government’s ability to borrow or the military’s battlefield advances and reverses. Each of these accounts has its merits, yet while all accord fiscal policy a prominent role in controlling either the current or expected money supply, none consider how fiscal policy was actually made and implemented. Nor do any of these accounts attempt a consistent comparison of the Union and Confederate cases. We aim to remedy these deficiencies by arguing for systemic differences between Union and Confederate fiscal capacities that resulted from larger historical divergences in governing philosophy and practice. We differ from QT and RE scholars not only in method but in what we seek to explain. Rather than examine precise price movements, we ask why the Union currency succeeded where the Confederate currency failed. It is surely instructive to ascertain the reasons for short-term price changes, but it is at least as important to understand why one policy achieved its basic aims—facilitating a winning war strategy—while the other did not. Our approach is closer to Mitchell’s and Wray’s, each of which regards state action as decisive. Yet we pay far more attention to the actual taxation measures that in one case reinforced monetary design and in the other case undermined it. A comparative investigation of Union and Confederate money creation requires a theoretical framework that can account for the political and administrative capacities of the state. We begin with Christine Desan’s “constitutional approach to money.” Contrary to the standard economic interpretation of money that sees it as the spontaneous result of private exchange, Desan regards money as a “governance project” (Desan 2014, p. 1, 7, 12; see also Desan, 2017). Money, in her view, is a product of institutions and state designs that make it  

possible for certain materialized practices—the coining of silver, the printing of paper notes, the coding of magnetic strips mounted on plastic cards—to take on the attributes of money. The successful implementation of such projects depends on the state’s fiscal actions and legal norms. The state creates money, in the first instance, by making purchases with designated tokens that it will subsequently accept for the discharge of the tax obligations it imposes. This “fiat loop,” by which the state issues payments and takes them back, confers on money what Desan calls “fiscal value.” In other words, tax obligations generate the demand for state monies that endow them with worth. The state can also make its designated tokens transferable among private parties by agreeing to accept them from anyone (not just the original payee) and by enforcing a legal order that recognizes money as lawful clearance of private contractual obligations (legal tender). Monetary tokens’ resulting general acceptance—“the capacity to travel from hand to hand as carriers of value recognized by all participants”—adds what Desan calls a “cash premium,” enhancing their value further.3 These basic criteria can be operationalized in many ways, each with its own social and political implications. The constitutional approach to money is particularly apposite for comparing the Union and the Confederate monetary experiences. Public acceptability of the new currencies could not be taken for granted, for while Americans were well acquainted with paper money in the form of bank notes, which were backed in principle by gold convertibility, they had little experience with inconvertible government notes. The essential difference in monetary designs lay in diverging tax capacities: the Union was able to implement an operative taxing system, while the Confederacy largely failed to do so. In Desan’s terms, the Confederacy failed to close the fiat loop. It was therefore unable to confer fiscal value on its paper emissions, nor a cash premium, leaving its citizens without adequate means to carry on ordinary business transactions. The result was a badly malfunctioning economy even in the vast areas of the South  

where Union armies remained distant and the slave system continued to function relatively undisturbed. As a practical matter, it is easier for governments to put money out than to call it back in (e.g. Rockoff, 2015, p. 8). The taxing part of Desan’s equation requires not only a willingness to impose obligations but an ability to collect on them. This ability cannot be realized overnight. At one level, there is the administrative challenge of setting up a competent taxing authority. At a deeper level, there is the political challenge of fostering a reasonable degree of popular compliance. Because, therefore, designing a sound monetary system in theory is not the same thing as implementing a functional one in reality, we argue that Union and Confederate monetary experiences were strongly conditioned by their respective prior taxing capacities. The Union’s antebellum legacy allowed it to massively scale up and significantly transform its revenue system; the Confederacy’s did not. It is here that the constitutional approach proves its relevance, because it expands the study of price movements to encompass the underlying monetary architecture within which QT and RE factors took shape. This draws our attention to the long-term institutional trajectories revealed by Einhorn’s (2006) comparative study of northern and southern tax regimes from the colonial era to the antebellum periods. Einhorn’s conception of taxing capacity can be decomposed into two distinct but correlated competencies: skilled tax administration and deliberative tax politics. This means that, at least in the United States, more democracy has tended to generate better taxation for public purposes desired by the electorate.4 Conversely, slaveholders’ distrust of democratic institutions—engendered by their philosophical commitment to social hierarchy and their pragmatic fear that ordinary voters might want to tax slavery out of existence—led to colonial and state governments that were “more aristocratic, weaker, and less competent where slavery was a major institution in the economy and society,” as compared to their freer northern peers (Einhorn 2006, p. 7).5  

Taking the joint perspective of Desan and Einhorn, Civil War monetary and tax policies appear intrinsically linked, forming distinctive Union and Confederate fiscal regimes fundamentally reflective of their respective state-making projects. These fiscal regimes profoundly structured the manner in which the state made claims on its society and even on how society’s members made binding claims upon one another in their private interactions. It is little surprise, then, that a slave society should differ substantially, perhaps inevitably, from a relatively free and democratic one even in its money. Because the Civil War split a polity and society that shared many things in common— an English Protestant cultural heritage, common law and constitutionalist legal tradition, capitalist and settler-colonial ethos, and more—it offers something like a natural experiment able to contribute broader insights to credit theories of money.6 We stress the long-run significance of state formation and the institutional history of taxing capacity to provide statebacked credit-money theories with a more realistic conception of how states operate and develop. While it is often useful and appropriate to make analytical distinctions between the legal, political, and economic spheres, in the case of credit theories of money such categorical boundaries are artificial and misleading. For the chartalist approach, money is tax-driven and thus inextricably bound up with the historically determined capacities of the state. Consequently, it is necessary to account for the capacities and debilities of the fiscal authority, that is, the determinants of fiscal policy horizons, if one is to give a convincing account of transformation in the monetary architecture, such as occurred during the US Civil War. In this paper, we sketch our proposed argument by way of a synthesis and critique of the existing literatures on American fiscal and monetary regimes before and during the Civil War. Our approach is necessarily narrative in order to capture the essential dynamics of the problem. In future, we may subject elements of the argument to more rigorous testing with additional archival research and empirical detail.  

2. THE COLONIAL AND REVOLUTIONARY LEGACIES The Union’s policy of paper money issuance coupled with robust tax increases harked back to the “currency finance” practices of the British North American colonies during the seventeenth and eighteenth centuries (Spaulding, 1869, pp. 39-40). In these earlier episodes, colonial governments financed wartime expenditures by issuing paper money on a temporary basis and simultaneously passing commensurate tax increases that would eventually call the notes back. This combination endowed the notes with fiscal value, giving the government purchasing power that effectively anticipated future tax receipts. Given the chronic scarcity of specie associated with the colonies’ structural trade deficits, the public also tended to demand notes for ordinary business transactions. Desan’s two key elements, fiscal value and the cash premium, were thus firmly in place (Ferguson, 1961; Perkins, 1997; Newell, 1998; Grubb, 2006; Goldberg, 2014). At the outbreak of the Civil War, both northern and southern policymakers proposed something similar. Interestingly, their primary point of reference seems not to have been the colonial legacy but rather the British use of inconvertible bills of credit during the French Revolutionary and Napoleonic Wars, which they saw as a successful means for preserving England’s “imperilled existence” (Spaulding, 1869, p. 39).7 The reason for this amnesia was probably the disastrous experience with paper note issues, known as “continentals,” during the American Revolution. The continentals’ rapid depreciation resulted from the national state’s inability to tax. Under the Articles of Confederation, the Continental Congress lacked this crucial fiscal power, but even had it been granted such a power, it could scarcely have executed it in practice, because the creation of a continental taxing authority was beyond both the political and administrative capacities of a nascent postcolonial state (Einhorn, 2008, pp. 127- 28). Consequently, there was no mechanism to generate demand for the continentals or to retire  

them (Calomiris, 1988A; Grubb, 2006, pp. 46-47; Goldberg, 2014, p. 481). Instead of taxing directly, Congress depended on the individual states to do so in compliance with requests for funds, known as requisitions. But the states preferred to save revenues for their own needs, including support for their own paper issues, which nevertheless suffered depreciation because of wartime disruptions to their fiscal apparatuses. The general fiasco led subsequent US officials to repudiate the policy of currency finance and virtually to erase it from public memory.8 The Revolutionary story underscores the fact that successful implementation of currency finance depended not only on calibrating money issues to tax increases, but also on executing tax collections. In the Civil War, the Union was able to do both while the Confederacy was able to do neither. Although most of the fighting occurred on southern soil and the Union’s naval blockade prevented the Confederacy from receiving significant customs duties, the slaveholders’ problem was not fundamentally about wartime disruptions. Union armies did not penetrate the enormous southern interior until late in the war and large areas remained undisturbed when hostilities concluded (Downs, 2015). Moreover, the Confederacy inherited the existing federal governmental presence in the South, including buildings and personnel, basically intact. The American revolutionaries, by contrast, comprised a tenuous alliance of colonial legislatures and ad hoc committees that struggled to govern their backcountry populations and take hold of administrative functions previously handled by royal governors. The difference between Union and Confederate taxing policies is therefore best understood as an outgrowth of long-term institutional developments that bequeathed to the northern free states robust taxing capacity absent from the southern slave states. Here we turn to Einhorn’s comparative study of northern and southern taxing traditions stretching back to the colonial period. Einhorn’s finding that taxing capacity in early America was closely related to democratic institutions—that more democracy meant more taxing  

power—might seem counterintuitive. The relationship is often thought to be the reverse. People dislike taxes, the thinking goes, so if they obtain a voice in government they will seek to reduce their burdens as much as possible. Was not the American Revolution, after all, a great tax revolt? Not exactly. The revolutionary slogan “no taxation without representation” did not oppose taxes per se but rather conditioned them on political voice. In point of fact, once Americans gained the ability to govern themselves they sometimes asked for more rather than less taxes, when they believed those taxes served a public purpose. As Lincoln famously put it, “the legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves—in their separate, and individual capacities” (Lincoln, 1953, 2:220-222, emphasis in original). Indeed, some Confederates played on the revolutionary slogan to criticize Confederate fiscal debility by objecting to “representation without taxation” (quoted in Todd, 1954, p. 138). There were major differences in the amount of democracy that antebellum Americans enjoyed. Gender- and race-based exclusions were national, but wherever slavery was dominant, democratic institutions suffered more. Slaveholders were powerful people schooled in what Thomas Jefferson called “the most unremitting despotism” (Jefferson, 1998, p. 168).9 By contrast, the northern colonies and later states tended to be more egalitarian and more democratic than their southern neighbors. They also tended to tax themselves more for things like roads and schools. The disparity between North and South is instantly evident, for example, by looking at the antebellum canal network, which was built largely with state funds (Larson, 2001; Taylor, 1951, p. 35). Comparative measures of public education and scientific funding display a similar sectional skew, even when soil type and other environmental conditions were indistinguishable (Majewski, 2016; Ron, 2020). This kind of pattern—linking more democratic governments with greater taxation and, sometimes, lower inequality—has been observed for the Americas generally and for Europe, modern and ancient (Sokoloff and  

Zolt, 2007; Tilly, 2009; Van Zanden and Prak, 2006; Tan 2017). As Findlay and O’Rourke put it, “states based on citizenship rather than coercion could actually levy more taxes, not fewer” (Findlay and O’Rourke 2007, p. 350). The northern free states thus had a substantially greater taxing capacity than their southern slave counterparts. This capacity can be regarded in two aspects: administration and politics. Administratively, northern states implemented more complex tax systems that addressed both revenue and equity issues. In particular, northern states had much greater ability to assess property values at market rates, to equalize values across locales lest tax officials try to under-assess their friends and neighbors, and to levy taxes in relatively fair proportion to taxpayers’ means and benefits. This ability, in turn, derived from the habits of a democratic society accustomed to “local decision making” and “ongoing, everyday political negotiation between taxpayers and elected local officials” (Einhorn, 2006, p. 29; 2008, p. 202). The significance of democratic practice for state capacity was that it generated legitimacy and compliance that allowed tax administrators to do their jobs. It also tended to generate more responsive and broadly conceived economic development policies that grew the taxable pie (Brownlee 2016, pp. 54-57). Democracy meant figurative and literal buy-in. Southern state governments eventually learned from their northern counterparts and began to close the taxation gap in the 1840s and 1850s (Thornton, 1982). They also innovated by introducing “uniformity clauses” requiring all forms of property to be assessed and taxed at the same rate (Einhorn, 2006, pp. 201-202). With the nonslaveholding white majority thus restrained from imposing discriminatory taxes on enslaved wealth, slaveholders favored new revenues to finance railroad construction and even public education (for whites). Yet on the eve of the Civil War southern states still lagged northern states in taxes per capita and per unit of GDP (Figure 4).  

3. TAXES AND MONEY IN THE UNION Union and Confederate fiscal regimes took shape when long-term institutional trajectories intersected with wartime exigencies. Both sides initially intended to rely on bond issues, as the US had done in earlier major wars (Edling, 2014). However, the scale of military needs quickly overwhelmed both governments’ ability to borrow. The Confederacy never surmounted this difficulty, whereas the Union eventually created new and very successful borrowing channels. According to one conservative measure, the Confederate States financed only 21,3% of their war effort via bond issues, while the Union’s corresponding figure was 64,5% (Godfrey, 1978, p. 14). In the short term, however, the Union, too, required other means. Both governments turned to emissions of paper treasury notes. The resulting policies shared some broad similarities. Both the Union “greenbacks” and the Confederate “graybacks,” as the notes came to be known, were exchangeable for interestbearing bonds of their respective issuing governments, a policy intended to encourage lending and public acceptance of the notes.10 Both currencies were also accompanied by promises to raise taxes in order to uphold their values. But only the Union was able to implement new taxes effectively (Brownlee, 2016, pp. 60-68; Edling, 2014, pp. 206-212; Bank et al., 2008, pp. 23-47).11 “In its financial mobilization for war,” writes the tax historian, W. Elliot Brownlee, “the Union had an advantage over the Confederacy because of the extended fiscal experimentation by Northern state governments” in the antebellum era (Brownlee, 2016, p. 65). In addition to raising tariff rates, Union officials began planning for heavy internal taxation as early as July 1861 and a month later imposed the nation’s first-ever income tax. They subsequently invested great effort in elaborating a system remarkable for its breadth and reach. The result, in July 1862, was a law “running hundreds of pages” that “taxed almost everything but the air northerners breathed” (Edling, 2014, p. 206; McPherson, 1988, p. 447). Additional rounds of legislation expanded the tax base and raised  

rates further. Yet “Republican leaders did not face significant resistance to the huge new taxes or need to rely on coercion for their collection,” Brownlee (2016, p. 60) observes, thanks to their “broad electoral popularity.” Max Edling (2014, p. 208) adds, in his recent study of early American war finance, that congressional debates over the first major internal revenue act are “noteworthy most of all for the willingness of the lawmakers to support the war.” The London Times opined that “one tenth of these taxes would bring any American community to the resistance point in a month,” but historians and contemporaries alike have repeatedly marveled at ordinary northerners’ eagerness to bear their share of the joint burden (cited in Ball, 1991, p. 221). “I have never before seen a country where the people were clamorous for taxation,” remarked one incredulous foreign observer in 1862 (Bank et al., 2008, p. 37).12 If this was a fiscal system that enjoyed democratic legitimacy, it was one that also enjoyed adroit political and administrative management. The House Ways and Means Committee took its time drafting legislation, but Congress publicly committed itself six months earlier to raising taxes as “a statement of intent meant to reassure public creditors” (Edling, 2014, p. 205). The July 1862 law raised the rates and progressivity of the income tax and added a first-ever federal inheritance tax to balance the regressivity of stepped-up customs and excises. Congress also selectively took lessons from abroad. It adopted the British administrative innovation of tax withholding (“stoppage at the source”) for collecting income taxes on corporate dividends and government employee salaries (Brownlee, 2016, p. 67). But “rather than impose high duties on a few items, like Britain did, the Ways and Means Committee opted for low duties on a wide range of manufactures” to spread the burden around (Edling, 2014, p. 206). Congress also stayed away from property taxes, leaving the states their traditional revenue base. In these ways, it addressed both the administrative and political requirements of an effective and sustainable tax regime. To be sure, there were problems. Treasury Secretary Salmon Chase initially took no direct action to collect income and revenue  

taxes (Studenski and Krooss, 1963, p. 141) and, later, evasion of liquor and income taxes proved significant (p. 151). Yet notwithstanding these trouble spots, the Union’s taxing system benefited from a high degree of legitimacy and compliance—especially when compared with the Confederacy, as we show in the next section. Thus, by most accounts, federal tax collection proceeded remarkably smoothly and turned out a revenue juggernaut. By the end of 1863, it was providing the government with “substantial income,” directly funding a third or more of spending. By 1865, internal taxes were dominating a federal revenue haul that, each quarter, exceeded and even doubled prewar collections for entire years (Edling, 2014, pp. 183, 195, 210-212; Brownlee, 2016, p. 68). From the outset, the connection between taxation and the maintenance of a federal fiat currency was evident to all. It was repeatedly stressed in policymakers’ private correspondence, on the floors of Congress, and in the press. “Now, then, put on a war tax of $200,000,000, issue $150,0000,000 demand notes,” wrote one correspondent to Elbridge Spaulding, the primary author of the greenback legislation. “The tax bill will create a general demand for the Treasury notes and keep them at or near par,” wrote another. The Treasury Secretary likewise pointed out that “a judicious system of adequate taxation” would “create a demand for the notes” (Spaulding, 1869, pp. 23-25, p. 46). When, later in the war, it became necessary to issue additional notes, the New York Times demanded “to be taxed to a degree which shall fairly correspond with the vast amount of promissory money afloat” (cited in Bank et al., 2008, p. 40). Congress responded by augmenting the internal revenue system yet again. These brief statements may seem vague about the mechanics of the fiat loop. But a look at the pre-war writing of one influential greenback advocate suggests what many others may have been thinking. In a comprehensive survey of money, credit, and banking published just two years before the war, the well-connected Philadelphia attorney and ironmaster, Stephen Colwell, concluded that what mattered for maintaining the value of paper money was ist  

acceptability, not specie convertibility (Colwell, 1859, p. 235, p. 244). Acceptability, in turn, depended on people’s confidence that the currency would reliably allow them to meet their obligations. Colwell therefore recommended that governments pay “the entire national expenditure” with legal-tender notes acceptable “in payment of all dues at their public treasuries.” The only limitation was to “issue only so much as will return in the regular course of the business.” This implied a method for calculating a safe issuance quantity: start with a fraction of expected tax receipts and gradually increase the amount over time. “By the experience gained,” Colwell believed, “the officers entrusted with this duty could manage such emission without danger of over-issue” (Colwell, 1859, p. 22). This reasoning illuminates the briefer statements by Colwell’s fellow greenback-supporters. When, for instance, the New York Republican Moses Grinnell wrote, “Go a direct tax for one hundred and fifty or two hundred millions, and then issue one hundred and fifty millions Treasury notes legal tender” (Spaulding, 1869, p. 23), he seems to have been invoking a logic similar to Colwell’s.13 The point here is not that such views were universal—there were plenty of greenback skeptics before, during, and after the notes were issued—but rather that the mechanism of their operation was well understood and straightforward to articulate. Spaulding presented the case fully when he spoke before the House in late January 1862 in favor of the first emissions. The new tax law was still several months away at this point, the actual revenue still further in the future, but Congress had already declared its intent and a subcommittee of Ways and Means was hard at work. Spaulding therefore asserted that his proposed treasury notes would be supported by “adequate taxation, to be imposed by new bills.” He then pressed the importance of following through. “This is what the people . . . want to know,” he insisted. “If they take these notes, they want to know positively whether you will enforce the claim of the Government upon the property of the country, to the full extent necessary to redeem the Treasury notes” (Spaulding, 1869, pp. 33-34). The greenbacks were thus issued on the strength  

of a general understanding that heavy taxes would follow. And they did. As Hugh Rockoff observes, “the Republicans were serious about taxes” (Rockoff, 2015, p. 26). That Congress could make a credible promise “to enforce the claim of the Government upon the property of the country” nicely illustrates the utility of our “constitutional approach.” At issue here was not whether taxes would be perfectly proportioned to absorb the whole quantity of greenbacks issued. Spaulding’s call for a commitment “to redeem the Treasury notes” did not mean this. Indeed, Dror Goldberg points out that “a government that issues too much paper money can get away with it” for some time, “because money has a grip on everyone’s daily activities” (Goldberg, 2014, p. 472). The essential question was whether the government enjoyed the legitimacy to make good on its promises to the extent necessary to retain that grip. 14 Effective fiscal and monetary capacity serves here as a proxy for political legitimacy and provides a measure of citizen confidence in the Union’s relatively democratic “governance project.” The “fiat loop” is not, therefore, a matter of mechanically controlling the quantity of money, or even expectations about the quantity of money, but of establishing broad public confidence that can generate the “cash premium” to maintain the value of the unit of account. This was precisely where the Confederacy failed. Its monetary grip on the southern public loosened, slipped and ultimately gave way entirely. 4. TAXES AND MONEY IN THE CONFEDERACY The Confederacy hoped to manage the war on the basis of loans and it put off serious taxation until it was too late. Confederate fiscal policy was a mass of incongruities, beginning with the absurdity of its plans to rely on taxing international trade in the face of a Union naval blockade. The Confederate Congress’s first move, bizarrely, was to order costs reduced by “at least fifty percent” at the federal customs houses it had seized (Todd, 1954, p. 121). This meant layoffs, potentially crippling the revenue service it intended to count on. The plan seems not to  

have been carried through, but it hardly mattered because the tightening blockade let few cargoes in. Although the Confederate Treasury Secretary, Christopher H. Memminger, predicted in mid-1861 that customs duties would raise $25 million within a year, returns for the entire war fell short of $3.5 million. The Confederacy next looked to export taxes, apparently still unable to comprehend the effects of the blockade. Memminger believed that bond issues secured by export taxes sustained their market value better than other loans, but it is hard to imagine how this could have been the case when export tax collections were utterly marginal, totaling less than $40,000 for the war (Todd, 1954, pp. 121-127; Ball, 1991, pp. 203- 10; for measures of blockade effectiveness, see Thornton and Ekelund, 2004, pp. 35-36). The Confederate Congress next passed a “war tax” in August 1861, levying a flat halfpercent rate on real and personal property. Valuing property was precisely what the southern states had little experience doing, particularly when it came to slavery. In the antebellum era, some states did move from the simpler poll-based slave taxes (a flat rate per capita) to more administratively demanding ad valorem taxes (based on assessed values). These moves always came in the face of immense planter resistance and the result was often not a true valuation but rather a simpler enumeration of tranches defined by age and sex, following common practice on the part of slave traders (Einhorn 2006; Thornton 1982; Rosenthal, 2018). Consequently, during the Civil War, varying assessments of slave values in the different states generated major delays in the overall property assessment. The existing scholarship does not specify the precise problems but it is possible that incompatible slave schedules made equalization across the states difficult or contentious (Todd, 1954, p. 133; Ball, 1991, p. 220, 224).15 At any rate, after the assessment was done, collections were left almost entirely to the states, most of which proceeded to collect no taxes and instead paid their quotas by borrowing graybacks financed with their own inconvertible paper issuances. Almost three-quarters of the $17 million raised by the end of 1862 was not really tax revenue at all (Todd 1954, p. 133-136; see Table 2).16  

According to Burdekin and Langdana (1993, p. 357) “not until 1864 did the War Tax account for even 10% of total revenue. In 1862, its first year of implementation, less than 5% of revenues were realized from this tax.” The graybacks received less support than they otherwise might have gotten and the southern monetary system was made further complicated and uncertain. Nearly two years of “disastrous inertia” followed, with no additional taxation as the currency and the government’s credit deteriorated (Ball, 1991, p. 227). Finally, in April 1863, the Confederate Congress passed a serious tax law that was nevertheless fundamentally inadequate on several counts. Although it included an income tax, duties on profits from trade in major commodities, numerous professional licensing fees, and a tax-in-kind on agriculture, the law omitted a “direct tax” on property, including enslaved property. 17 Hence, although earnings on slave-grown crops were in principle subject to the income tax, for the most part “slaveholders were enabled to evade contributing to a new nation established for their special benefit” (ibid., p. 234). Indeed, evasion seems to have been rampant because “numerous obstacles blocked the satisfactory operation of the tax machinery” (Todd 1954, p. 145). For instance, income assessment began with an estimate made by the tax payer themself which, if challenged by the assessor, would be adjudicated by a panel of referees that the tax payer helped to appoint (Mathews, 1863, p. 121-122). Such a procedure presumably favored slaveholders, who exercised tremendous power at the local level. 18 But the deeper problem with the tax law was that the money tax was simply insufficient to meet rising expenses and spiraling prices. The tax-in-kind worked better. “In the first 9 months of 1863 . . . [it] accounted for more than half of the average monthly tax revenues,” but it provoked sharp protest (Burdekin and Langdana, 1993, pp. 357-8). At ten percent of agricultural output after deductions sufficient to feed farmers’ families, it “looked large and discriminatory in comparison with the 2% currency tax on salaries over $1,500” (Todd, 1954, p. 142; also see Bank et al., 2008, p. 33; Hurt 2015,  

pp. 132-134, 160). And since a tax-in-kind did not enhance the graybacks’ cash premium, it made them no more desirable and inflation continued to spiral out of control. Unable to grasp the causes of inflation, some southerners lashed out at greedy merchants and manufacturers (McPherson, 1988, p. 441; Wilson, 2002, p. 60; Rockoff, 2015, p. 8). But other well-placed Confederates understood exactly what was happening and said so. The Richmond Enquirer pointed out repeatedly that a fiat currency without adequate fiscal measures would suffer the same fate as the Revolutionary continentals and for the same reason: lack of taxation to uphold their value. The editor of the South’s leading economic journal, J. D. B. DeBow, reiterated the warning, as did the powerful Georgia politician, Robert Toombs (cited in Phillips, 1913, pp. 622-27). No less a figure than John C. Calhoun had explained the mechanics in painstaking detail as early as the 1810s and again after the Panic of 1837, observing that the federal government’s “fiscal action pervades the whole community . . . and it must, of course, create a general demand for whatever it receives and disburses as money” (Calhoun 1959, vol. 14, p. 299; Todd, 1954, p. 138; Ball, 1991, pp. 37-39, 50-51, 222-23). The Confederacy’s fundamental problem, in the words of Memminger’s biographer, was simply an “aversion to internal taxation” (Capers, 1893, p. 341). According to McPherson, “the Confederate government possessed no machinery for levying internal taxes and its constituents had no tradition of paying them” (McPherson, 1988, p. 38). The most comprehensive history of the matter, Ball’s aptly titled, Financial Failure and Confederate Defeat, stresses both the administrative and political weaknesses implied by these judgments. Ball (1991, p. 32, 42) notes that “southern colonies shunned direct taxes as much as possible, even at the cost of a lamentable level of public services,” and he blames a lack of “effective democratic government” for the Confederacy’s sclerotic wartime politics. “To mobilize a staff of collectors and assessors capable of appraising and levying direct taxes,” he concludes, “required far more will and, to a lesser degree, more skill than the Confederacy possessed”  

(ibid., p. 226). Robert Toombs apparently agreed, writing to a colleague in June 1863 that “the Yankee Congress have certainly beat us badly in finance” (quoted in Phillips, 1913, pp. 619- 20). A full accounting for Confederate fiscal policy may never be possible because many of Congress’s key deliberations were conducted in secret session. This, in itself, signals its democracy deficit relative to the Union. In the North, Spaulding sent the very first draft of his fiat currency measure to the New York Tribune for public dissemination and comment (Spaulding, 1869, p.13). In response to this and daily reporting on congressional financial deliberations in the press, he and others members of the House Ways and Means Committee fielded a range of views expressed in both private correspondence and public print. Confederate policymakers held their cards much closer to the vest. They failed to “take the people into their confidence,” in Ball’s words, because they did not have much confidence in the people (Ball, 1991, p. 209). As Drew Faust and Stephanie McCurry have shown, the Confederate project was profoundly anti-democratic, including attempts to reintroduce property qualifications for the franchise (Faust, 1988, pp. 33-39; McCurry, 2010, pp. 11-37). Some southerners complained specifically about the undemocratic conduct of fiscal policy. A public meeting in North Carolina declared the tax-in-kind “unjust and tyrannical” because it was passed “in secret session . . . taking from the hard laborers of the Confederacy one-tenth of the people’s living, instead of taking back their own currency in tax” (quoted in Schwab, 1901, p. 295). Also revealing is the fact that whereas in the Confederacy it was the Treasury Secretary rather than Congress that pushed for taxes, in the Union it was the House, the most democratic element of the federal government, that advanced the conjoined money-and-tax agenda. In this case, at least, Einhorn’s positive correlation between democracy and taxation seems to hold. Confederate fiscal incapacity should not be mistaken for states’ rights fanaticism or a lack of statist ambition. In fact, antebellum southern state legislatures were much more likely  

to charter banks and railroads as state-run enterprises and, at least in some cases, to apply the profits to expanding governmental services with the goal of establishing tax-free government (Wallenstein, 1987; Murphy, 2017, pp. 115-16; Quintana, 2018; Hall, 2019). This kind of policy was only possible because southern state governments were dominated by slave-owning planters. As long as the state invested in businesses that served the plantation economy instead of competing with it, government ownership was an attractive option. The experience was put to good effect during the war in the Confederacy’s vast takeover of industry, which, among other things, allowed it to manage some remarkable feats of bootstrap industrialization (Morgan, 2005). Before the war, however, planters proved decisively uninterested in backing state investment of benefit to manufacturers, such as construction of transportation access to Virginia’s coal beds (Adams, 2004; Majewski, 2000). The inability to discipline the wartime agricultural sector, which continued to devote inordinate acreage to tobacco and cotton in the face of urban food shortages, underscores the Confederacy’s commitment to the planter class (e.g., Hurt, 2015, pp. 118-125; Schwab, 1901, pp. 278-279). 5. COMPARISONS Without a solid fiscal base, Confederate statism proved chaotic and, to a large extent, self-cannibalizing. This must be kept in mind when comparing the Confederacy and the Union on measures of state capacity. In one of the most influential accounts of Confederate statism, Richard Franklin Bensel argues that, “measured by statutory rates, coverage, and revenues collected the Confederate internal revenue system extracted more wealth from that erected by the Union” (Bensel, 1990, pp. 170-71). The former, he shows, collected $82 million plus $40 million worth of in-kind goods in the first year of operation of its major tax law (the 1863 Act), while the latter collected $39 million during its first year. Citing the Union’s earlier start and the graybacks’ depreciation, he ultimately concludes that the two sides were “approximately  

equivalent” in the matter of internal revenue (Bensel, 1990, p. 172). Adjusting the figures for inflation, however, shows that Bensel seriously underestimates the severity of Confederate difficulties. When the Confederate tax bill was passed in April 1863, the wholesale price index was already about 1,100 and by January 1864 it was at nearly 2,800 (as compared to a base of the first four months of 1861; Lerner, 1955, p. 24, 29). It continued to rise in the opening months of 1864, when most of the new taxes were collected (Todd, 1954, p. 145; Godfrey, 1978, p. 23; Ransom, 2001). It is reasonably conservative to suppose that the average price index during tax collections stood at about 2,500, which means that the $82 million that Bensel highlights was only worth about $3.3 million in real terms. By contrast, a conservative average for the Union wholesale price index in the first year of its internal tax system would be 150, meaning its $39 million equaled $26 million in real terms, a nearly eightfold advantage compared to the CSA. A more realistic price index of 130, per Mitchell, would raise the Union takings to $30 million (Mitchell, 1908, p. 279). Even adding the tax-in-kind to the Confederate total (at $40 million nominal = $1.7 million real), the ratio is 6:1 in favor of the Union and a full year earlier, when crucial battlefield operations and materiél purchases had to be financed. In addition, the tax-in-kind did nothing to support the currency and, in fact, made the situation worse by reducing salable goods (Lerner, 1954, p. 513). The overall situation is indicated by Figure 5, which shows Union and Confederate tax revenues over time, adjusted for inflation. Irregular Confederate reporting makes this kind of visualization helpful. The magnitude of Confederate fiscal ineptitude now comes into clear view. The first three quarters of 1863 particularly stand out, a period of key battlefield turning points when the Union’s revenue machine was fully in gear while its opponent collected essentially nothing. It thus appears that Confederate statism lacked the fundamental attribute of a modern state: the capacity to tax in a manner compatible with waging a total war.19  

The picture is ultimately similar when taxes and note issues are measured against government expenditures. The Confederate Treasury’s irregular reporting makes it again difficult to compare its position with the Union’s, but reporting periods line up at the end of 1862, providing a comparative budgetary snapshot at a key point in the war. As shown in Table 3, total expenditures for the years 1861 and 1862 were nominally similar, but in real terms Union spending was nearly twice that of the Confederacy. Union GDP was similarly something like 2.5 to 3.5 times larger. 20 These ratios roughly correspond with common ideas about the war’s tactical realties, in which attackers (usually the Union) are thought to have required a two- or three-to-one superiority in manpower to overcome defenders’ advantages (e.g., Freehling 2001, p. 14; Knudsen 2022, p. 142). Indeed, the Union enrolled approximately 2.2 million soldiers to the Confederacy’s 800-900,000 over the course of the war (Gallagher and Waugh 2015, p. 30), a ratio of 2.6:1.21 Altogether, then, it seems reasonable to suppose that by the close of 1862 each government had made roughly proportional demands on its respective economy. Each government had also financed about three quarters of its spending with note issues, although the Union made up the difference primarily with taxation, the Confederacy with borrowing. What might a rational observer have concluded at this point? The war situation was equivocal. In September of 1862, the Union blunted a largescale Confederate raid into its territory at the Battle of Antietam. Though far from a resounding Union victory, it was enough for Lincoln to issue the Preliminary Emancipation Proclamation, a policy that transformed a war of national reunification into a struggle over the existence of slavery. Yet the Union’s prospects looked doubtful by the end of the year, as its eastern army suffered a devastating defeat at the Battle of Fredericksburg and its western army, bogged down in the Mississippi mud, was forced to call off an assault on the Confederate fortress at Vicksburg. “These were dark days in Washington,” writes McPherson (1988, p. 574). The military disappointments  

combined with the politically controversial shift toward emancipation policy strengthened the position of so-called “Peace Democrats,” who favored a negotiated end to the war. Such a scenario would have seriously hampered Union finances, because an independent Confederacy would have pursued free trade, probably siphoning commercial traffic from New York to New Orleans and thereby cutting sharply into the Union’s customs revenues, a key source of gold. Moreover, the Union’s budget deficit (expenditures minus tax revenues only) had exploded during the year, rising from $25 million at end of 1861 to $423 million at the end of 1862, an increase of nearly 1,588 percent (see figure 6). In short, while the Union’s larger economy gave it greater war spending capacity, its greater needs as the attacker in a war that favored defense, its important budget deficit financed largely with fiat notes (see table 3), and its uncertain battlefield position might have given pause to financial observers. And yet, with uncertain and distant prospects for a return to convertibility, greenback prices held out quite well. The Warren-Pearson wholesale price index for January of 1863 shows that the greenback had lost 36,9% of the value of a prewar gold dollar as compared to January 1861. By contrast, Lerner’s general Confederate price index shows that the grayback had depreciated 654% by this point as compared to January 1861 (Lerner, 1955, p. 24). If we compare the Union’s and Confederacy’s gold prices, the picture is similar. The average price of gold in greenbacks increased by 41,5% as compared to January 1862, while the grayback note price of a gold dollar in Richmond increased by 136,4% as compared to January 1862 (Mitchell, 1908, p. 5; Burdekin and Weidenmier, 2001, p. 1629). These figures suggest that the Union’s commitments to dramatically raise internal tax collections were perceived to be credible, a circumstance plainly lacking in the Confederacy. This credibility gap, in turn, stemmed from a more general gap in democratic legitimacy. The picture may be clarified by reference to hyperinflationary dynamics in other contexts. In a survey of hyperinflationary episodes that followed the First World War, Velde  

(2016) highlights that the end of those episodes depended on the capacity of each state to balance governmental budgets via, in part, sufficient taxation or credible announcements of future revenue collections. If we transpose Velde’s analysis to the Civil War, we would expect the Union to experience similar levels of inflation to the Confederacy because, at the end of 1862, its budget deficit was slightly greater (figure 6 and table 3). Yet, at this point the Confederacy’s level of inflation was eighteen times higher (see figures 2 and 3). If, on the other hand, we transpose the Civil War analysis we conduct here to the case of interwar Europe, we would want to point out that each of the five countries discussed —Austria, Hungary, Germany, Poland and Russia—were characterized by revolutionary or near-revolutionary situations. Such circumstances are likely to interrupt state functions and thereby to weaker or break the fiat loop. Velde’s own recognition of the French revolutionary assignats and the American revolutionary continentals as comparable cases further attests that hyperinflation is as much a consequence of social breakdown as its cause. What may be measured by those governments’ budget deficits then turns on the prior breakdown of state legitimacy. The Confederacy’s situation was historically specific. Its secession was deeply conservative, a distinctly counterrevolutionary movement. It preserved the US Constitution almost intact, merely strengthening protections for slavery. The enslaved population certainly harbored revolutionary impulses, but could not act en masse except in the near vicinity of Union troops. The Confederacy was capable of being self-sufficient in food and resources and found adequate funds to purchase weapons abroad. The Confederate failure originated instead with a state apparatus whose administrative and political capacities were too archaic to the needs of a modern war. It could not forge the fiscal machinery to mobilize real resources on the necessary scale. In this regard, the significance of the lengthy delay in implementing the Confederate internal tax system cannot be overstated. It testifies to the limited legitimacy of the  

Confederacy’s governance project, which, by failing to undertake an obvious imperative, allowed inevitable wartime inflation to turn into hyperinflation, leading to a cascade of problems whose impact grew wider at each downward step. All of them stemmed from the circumstance that, having failed to calibrate note issues to tax increases in a reasonable degree, Confederate leaders had upended money’s ability to distribute social claims in a manner generally perceived as fair. This fatally weakened money’s “grip on everyone’s daily activities” (Goldberg, 2014, p. 472). Inflation stoked popular discontent that manifested most clearly in the many food riots of 1863, which were met by a combination of suppression and ineffective price controls (Hurt 2015; Cashin 2011; figure 4). In some places, hyperinflation resulted in a barter economy or the use of wheat or bullion as means of payment, implying a complete loss of value for the grayback (Schwab, 1901, pp. 163-64; Pecquet 1987; Hurt 2015, pp. 134, 138; Carpenter, 2020, pp. 170-175; Seward, 1863). Indeed, enemy currency, Union greenbacks, were preferred even in “leading centers of the Confederacy” (Schwab, 1901, p. 161). Hyperinflation also disrupted production so that when the tax system was finally implemented, there was less to tax. It disincentivized production further when the government resorted to impressing what it needed at below-market rates (Hurt, 2015, pp. 120-127, 161- 162; Schwab, 1901, pp. 203-205). “After suffering under impressment,” several scholars report, “farmers simply stopped planting new crops” (Bank et al., 2008, pp. 29-30). Confederate delay further undermined fiscal capacity by missing the opportunity to tax in areas that would be occupied by Union armies. In short, it is difficult to see how Confederate revenue policy can possibly be put on a par with the Union’s as a measure of state capacity. It is potentially misleading, in this context, to speak of “extracting” taxes, a locution that comes from the “bellicist” or “fiscal-military model” of state development.22 Bensel’s view is perhaps closest to Charles Tilly’s generalized version of the model, which regards state power as crucially dependent not only on raw fiscal capacity but on the level of economic  

development of the society from which it draws (Tilly, 1992). The problem with such a formulation is that it distinguishes too sharply between the state and society/economy, so that the former seems entirely outside the latter and therefore engaged in a perpetual effort to “extract” wealth. But if, as Desan argues, an economy operating on the basis of money does not simply emerge spontaneously from market exchanges, but is rather a form of governance implemented by state officials, then one would have to acknowledge that money and taxes are ways in which the state cultivates the economy rather than merely extracts from it—that, in fact, state and economy are significantly endogenous to one another and cannot be easily disentangled even for analytic purposes. 6. CONCLUSION For political leaders charged with managing a war—or any existential threat requiring near total social mobilization—the standards by which to judge financial policy are narrowed to the stark options of success or failure. The actual mix of fiscal and monetary policies require a careful “balancing act,” as Rockoff puts it, attuned to both political and economic implications. Institutional endowments will make a big difference in deciding how such a balancing act can be managed and what it can achieve. This is the lesson we draw from our comparison of Union and Confederate financial mobilizations during the US Civil War. Synthesizing the existing scholarship with the help of Desan’s and Einhorn’s insights, we show that differential taxing policies explain differential currency outcomes. Whereas the Union greenbacks experienced only moderate and manageable inflation, the Confederate graybacks suffered catastrophic hyperinflation. In 1864 the Confederate government was even obliged to partially repudiate its own paper money. We further show that taxing policies were determined by institutional capacities resulting from long-run historical developments. In particular, we highlight the way that democratic  

governance enhanced two essential facets of taxing capacity: political legitimacy and administrative competence. Our analysis suggests that historical state capacity must form an integral part of any credit theory of money. It is not at all obvious that a government will be able to effectively sustain a currency via the “fiat loop,” even if its officials understand the mechanism perfectly clearly. This may also imply that a successful fiat loop is contingent on people’s broader range of commitments to the state’s “governance project.” Although we have highlighted the importance of relatively democratic governance in the northern colonies of British North America and, later, the free states of the United States, it is likely that other arrangements can function effectively so long as they link the state with key classes of social actors. In other words, both money and taxes, which together establish a pervasive structure for ordering social claims and obligations, depend on a still broader set of governing arrangements and practices. The Confederacy’s commitment to the personal sovereignty of the slaveholder in the era of powerful national states put it on the horns of a dilemma (Tilly, 1992; Maier, 2014). Fighting a total war with an economically advanced nation-state able to recruit a very substantial portion of its own society’s resources, Confederate officials and southern planters balked from taking necessary measures to sustain the material basis of armed force. The result was economic disorder and defeat. BIBLIOGRAPHY 1860. “The Credit System.” The Banker’s Magazine and Statistical Register, vol. 9, no. 10, 753-764. Adams, S. P. 2004. Old Dominion, Industrial Commonwealth: Coal, Politics, and Economy in Antebellum America, Baltimore, Johns Hopkins University Press.  

Antipa, P. and Chamley, C. 2017. Monetary and Fiscal Policy in England During the French Wars (1793-1821), Working Paper Banque de France no. 627, Paris, Banque de France, https://doi.org/10.2139/ssrn.2983672. Atack, J. 2016. Historical Transportation of Navigable Rivers, Canals, and Railroads in the United States, Ann Arbor, MI, Inter-university Consortium for Political and Social Research. Ball, D. B. 1991. Financial Failure and Confederate Defeat, Urbana, University of Illinois Press. Bank, S. A., Stark, K. J. and Thorndike, J. J. 2008. War and Taxes, Washington, D.C, Urban Institute Press. Bensel, R. F. 1990. Yankee Leviathan: The Origins of Central State Authority in America, 1859-1877, Cambridge, Cambridge University Press. Bordo, M. D. and White, E. N. 1991. A Tale of Two Currencies: British and French Finance During the Napoleonic Wars, The Journal of Economic History, vol. 51, no. 2, 303- 316. Bordo, M. D. and White, E. N. 1993. British and French finances during the Napoleonic Wars, pp. 241-273 in Bordo, M. and Capie, F. (eds.), Monetary Regimes in Transition, Cambridge, Cambridge University Press Brewer, H. 2017. Slavery, Sovereignty, and “Inheritable Blood”: Reconsidering John Locke and the Origins of American Slavery, The American Historical Review, vol. 122, no. 4, 1038–78. Brownlee, W. E. 2016. Federal Taxation in America: A History, New York, Cambridge University Press. Burdekin, R. C. K. and Langdana, F. K. 1993. War Finance in the Southern Confederacy, 1861-1865, Explorations in Economic History, vol. 30, no. 3, 352-376.  

Burdekin, R. C. K. and Weidenmier, M. D. 2001. Inflation Is Always and Everywhere a Monetary Phenomenon: Richmond vs. Houston in 1864, The American Economic Review, vol. 91, no. 5, 1621–30. Calhoun, J. C. 1959. The Papers of John C. Calhoun, Meriwether, R. L., Hemphill, W. E., Wilson, C. N. and Cook, S. B. (eds.). Columbia: University of South Carolina Press. Calomiris, C. W. 1988A. Institutional Failure, Monetary Scarcity, and the Depreciation of the Continental, The Journal of Economic History, vol. 48, no. 1, 47–68. Calomiris, C. W. 1988B. Price and Exchange Rate Determination during the Greenback Suspension, Oxford Economic Papers, vol. 40, no. 4, 719–50. Calomiris, C. W. 1992. Greenback Resumption and Silver Risk: The Economics and Politics of Monetary Regime Change in the United States, 1862-1900, NBER Working Paper, No. 4166. Capers, H. D. 1893. The Life and Times of C.G. Memminger, Richmond, Everett Waddey Co. Carpenter, K. B. 2020. Globalizing the Rio Grande: European-Born Entrepreneurs, Settlement, and Mercantile Networks in the Rio Grande Borderlands, 1749-1881, Ph.D. Thesis, Southern Methodist University. Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R., and Wright, G. (eds). 2006. Historical Statistics of the United States, Earlier Times to the Present: Millennial Edition, New York, Cambridge University Press. Cashin, J. E. 2011. Hungry People in the Wartime South: Civilians, Armies, and the Food Supply, pp. 160-75 in Berry, S. W. (ed.), Weirding the War: Stories from the Civil War’s Ragged Edges, Athens, University of Georgia Press. Colwell, S. 1859. The Ways and Means of Payment: A Full Analysis of the Credit System, With Its Various Modes of Adjustment, Philadelphia, J. B. Lippincott.  

Curry, L. P. 1968. Blueprint for Modern America: Non-Military Legislation of the First Civil War Congress, Nashville, Vanderbilt University Press. David, P. A. and Solar, P. 1977. A Bicentenary Contribution to the History of the Cost of Living in America. Research in Economic History. vol. 2, no. 1, 1-80. Davis, G. K. and Pecquet, G. M. 1990. Interest Rates in the Civil War South. The Journal of Economic History, vol. 50, no. 1, 133–48. Desan, C. 2014. Making Money: Coin, Currency, and the Coming of Capitalism, Oxford, Oxford University Press. Desan, C. 2017. The Constitutional Approach to Money: Monetary Design and the Production of the Modern World, pp. 109-30 in Bandelj, N., Wherry, F. F., and Zelizer, V. A. R. (eds.), Money Talks: Explaining How Money Really Works, Princeton, Princeton University Press. Dewey, D. R. 1903. Financial History of the United States, London, Longmans, Green, and Co. Downs, G. P. 2015 After Appomattox: Military Occupation and the Ends of War, Cambridge, MA, Harvard University Press. Easterlin, R.1961. Regional Income Trends, 1840-1950, in Harris, S. (ed.) American Economic History, New York, McGraw-Hill. Edling, M. M. 2014. A Hercules in the Cradle: War, Money, and the American State, 1783- 1867, Chicago, The University of Chicago Press. Edwards, A. D. 2017. The American Revolution and Christine Desan’s New History of Money, Law & Social Inquiry, vol. 42, no. 1, 252–78. Einhorn, R. 2006. American Taxation, American Slavery, Chicago, University of Chicago Press. Einhorn, R. L. 2008. Slavery, Enterprise & Society 9, vol. 9, no. 3, 491–506.  

Faust, D. G. 1988. The Creation of Confederate Nationalism: Ideology and Identity in the Civil War South, Baton Rouge, Louisiana State University Press. Ferguson, E. J. 1961. The Power of the Purse: A History of American Public Finance, 1776- 1790, Chapel Hill, University of North Carolina Press. Findlay, R. and O’Rourke, K. H. 2007. Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton, Princeton University Press. Freehling, William W. 2001. The South Vs. the South: How Anti-Confederate Southerners Shaped the Course of the Civil War. Oxford: Oxford University Press. Friedman, M. 1952. Price, Income, and Monetary Changes in Three Wartime Periods, The American Economic Review, vol. 42, no. 2, 612–25. Friedman, M. and Schwartz, A. J. 1963. A Monetary History of the United States, 1867-1960, Princeton, Princeton University Press. Gallagher, Gary W., and Joan Waugh. 2015. The American War: A History of the Civil War Era. Flip Learning. Godfrey, J. M. 1978. Monetary Expansion in the Confederacy, New York, Arno Press. Goldberg, D. 2014. Paper Money, 1450-1850, pp. 471–90 in Coffman, D., Leonard, A., and O’Reilly, W. (eds.), The Atlantic World, London, Routledge. Gorski, P. S. 2003. The Disciplinary Revolution: Calvinism and the Rise of the State in Early Modern Europe, Chicago, University of Chicago Press. Graham, F. D. 1922. International Trade Under Depreciated Paper. The United States, 1862- 79, The Quarterly Journal of Economics, vol. 36, no. 2, 220–73. Grubb, F. 2006. The US Constitution and Monetary Powers: An Analysis of the 1787 Constitutional Convention and the Constitutional Transformation of the US Monetary System, Financial History Review, vol. 13, no. 1, 43–71.  

Hall, A. 2019. Slaves of the State: Infrastructure and Governance through Slavery in the Antebellum South, Journal of American History, vol. 106, no. 1, 19–46. Hanes, C. 2006. Wholesale price indexes, by commodity group: 1749–1890 [Warren and Pearson].” Table Cc113-124 in Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R., and Wright, G. (eds.), Historical Statistics of the United States, Earlier Times to the Present: Millennial Edition, New York, Cambridge University Press. http://dx.doi.org/10.1017/ISBN-9780511132971.Cc66-204 Hurt, R. D. 2015. Agriculture and the Confederacy: Policy, Productivity, and Power in the Civil War South, Chapel Hill, The University of North Carolina Press. Huston, J. L. 2015. The British Gentry, the Southern Planter, and the Northern Family Farmer: Agriculture and Sectional Antagonism in North America, Baton Rouge, Louisiana State University Press. Jefferson, T. 1998. Notes on the State of Virginia, Shuffelton, F (ed.), New York, Penguin Classics. Kindahl, J. K. 1961. Economic Factors in Specie Resumption the United States, 1865-79, Journal of Political Economy, vol. 69, no. 1, 30–48. Knudsen, Harold M. 2022. James Longstreet and the American Civil War: The Confederate General Who Fought the Next War. Savas Publishing. Larson, J. L. 2001. Internal Improvement: National Public Works and the Promise of Popular Government in the Early United States, Chapel Hill, University of North Carolina Press. Lerner, E. M. 1954. The Monetary and Fiscal Programs of the Confederate Government, 1861-65, Journal of Political Economy, vol. 62, no. 6, 506-522. Lerner, E. M. 1955. Money, Prices, and Wages in the Confederacy, 1861-65, Journal of Political Economy, vol. 63, no. 1, 20-40.  

Lerner, E. M. 1956. Inflation in the Confederacy, 1861-65, in Friedman, M. (ed.), Studies in the Quantity Theory of Money, Chicago, The University of Chicago Press. Lincoln, A. 1953. The Collected Works of Abraham Lincoln, Abraham Lincoln Association, vol. 2, http://quod.lib.umich.edu/l/lincoln. Lindert, P. H. and Sutch, R. 2006. Consumer price indexes, for all items: 1774–2003. Table Cc1-2 in Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R., and Wright, G. (eds.), Historical Statistics of the United States, Earlier Times to the Present: Millennial Edition, New York, Cambridge University Press. http://dx.doi.org/10.1017/ISBN-9780511132971.Cc1-65 Lindert, P. H. and Williamson, J. G. 2016. Unequal Gains: American Growth and Inequality Since 1700, Princeton, NJ, Princeton University Press. Maier, C. S. 2014. Leviathan 2.0: Inventing Modern Statehood, Cambridge, MA, Belknap Press. Majewski, J. D. 2000. A House Dividing: Economic Development in Pennsylvania and Virginia Before the Civil War, Cambridge, Cambridge University Press. Majewski, J. D. 2016. Why Did Northerners Oppose the Expansion of Slavery? Economic Development and Education in the Limestone South, pp. 277–98 in Beckert, S. and Rockman, S. (eds.), Slavery’s Capitalism: A New History of American Economic Development, Philadelphia, University of Pennsylvania Press. Margo, R. A. 2006. Rent indexes for dwelling units in five large cities: 1860–1880, Table Cc60 in Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R., and Wright, G. (eds.), Historical Statistics of the United States, Earlier Times to the Present: Millennial Edition, New York, Cambridge University Press.  

Matthews, J. M., ed. 1863. The Statutes at Large of the Confederate States of America, Passed at the Third Session of the First Congress; 1863. Electronic Edition. Richmond, VA: R.M. Smith. https://docsouth.unc.edu/imls/22conf/1863stat.html. McCandless, G. T. 1996. Money, Expectations, and the U.S. Civil War, The American Economic Review, vol. 86, no. 3, 661–671. McCurry, S. 2010. Confederate Reckoning: Power and Politics in the Civil War South, Cambridge, Harvard University Press. McPherson, J. M.1988. Battle Cry of Freedom: The Civil War Era, New York, Oxford University Press. Mitchell, W. C. 1903. A History of the Greenbacks, Chicago, The University of Chicago Press. Mitchell, W. C. 1908. Gold, Prices, and Wages Under the Greenback Standard, Berkeley, The University Press. Morgan, C. 2005. Planter’s Progress: Modernizing Confederate Georgia, Gainesville, University Press of Florida. Murphy, S. A. 2017. Other People’s Money: How Banking Worked in the Early American Republic, Baltimore, Johns Hopkins University Press. Newell, M. E. 1998. From Dependency to Independence: Economic Revolution in Colonial New England, Ithaca, Cornell University Press. Pecquet, G. M. 1987. Money in the Trans-Mississippi Confederacy and the Confederate Currency Reform Act of 1864, Explorations in Economic History, vol. 24, no. 2, 218- 243. Pecquet, G., Davis, G. and Kanago, B. 2004. The Emancipation Proclamation, Confederate Expectations, and the Price of Southern Bank Notes, Southern Economic Journal, vol. 70, no. 3, 616–630. doi: 10.2307/4135334.  

Perkins, E. J. 1997. American Public Finance and Financial Services, 1700-1815, Columbus, Ohio State University Press. Phillips, U. B. (ed). 1913. Annual Report of the American Historical Association for the Year 1911, Vol. II: The Correspondence of Robert Toombs, Alexander H. Stephens, and Howell Cobb, Washington, Government Printing Office. Quintana, R. A. 2018. Making a Slave State: Political Development in Early South Carolina, Chapel Hill, The University of North Carolina Press. Ransom, R. L. 2001. “Economics of the Civil War,” in EH.Net Encyclopedia, ed. Roger Whaples, 24/8/2001, https://eh.net/encyclopedia/the-economics-of-the-civil-war/. Ransom, R. L. 2006A. Confederate government revenues and expenditures: 1861– 1864. Table Eh194-215 in Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R. and Wright, R. (eds.), Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition, New York, Cambridge University Press. http://dx.doi.org/10.1017/ISBN-9780511132971.Eh194-22810.1017/ISBN9780511132971.Eh194-228 Ransom, R. L. 2006B. Prices and Wage Indexes for the Eastern Confederacy: 1861– 1865. Table Eh128-130 in Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R. and Wright, R. (eds.), Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition, New York, Cambridge University Press. Ransom, Roger L. 2006C , “Monthly index of Richmond wholesale commodity prices: 1861– 1865.” Table Eh131 in Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition, edited by Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright. New York: Cambridge University Press, 2006. http://dx.doi.org/10.1017/ISBN9780511132971.Eh111-193  

Rockoff, H. 2015. War and Inflation in the United States from the Revolution to the First Iraq War. NBER Working Paper, No. 21221. https://doi.org/10.3386/w21221. Roll, R. 1972. Interest Rates and Price Expectations During the Civil War, The Journal of Economic History, vol. 32, no. 2, 476–98. Ron, A. 2020. Grassroots Leviathan: Agricultural Reform and the Rural North in the Slaveholding Republic, Baltimore, Johns Hopkins University Press. Rosenthal, C. 2018. Accounting for Slavery: Masters and Management, Cambridge, Harvard University Press. Sawyer, S. W. 2016. A Fiscal Revolution: Statecraft in France’s Early Third Republic, The American Historical Review, vo. 121, no. 4, 1141-1166. Schumpeter, J. A. 1954. The Crisis of the Tax State, pp. 5-38 in Peacock, A. T., Stolper, W. F., Turvey, R., and Henderson, E. (eds.), International Economic Papers, No. 4, London, Macmillan and Company Limited. Schwab, J. C. 1901. The Confederate States of America, 1861-1865: A Financial and Industrial History of the South During the Civil War, New York, C. Scribner’s Sons. Seward, W. H. 1863. Mr. Seward to Mr. Pike, No. 118, Department of State, Washington, September 5, 1863. Available at: Department of State https://history.state.gov/historicaldocuments/frus1863p2/d237 [Accessed Aug. 5, 2021]. Sokoloff, K. L., and Zolt, E. M. 2007. Inequality and the Evolution of Institutions of Taxation: Evidence from the Economic History of the Americas, pp. 83–136 in Edwards, S., Esquivel, G., and Márquez, G. (eds.), The Decline of Latin American Economies: Growth, Institutions, and Crises, Chicago, University of Chicago Press. Spaulding, E. G. 1869. History of the Legal Tender Paper Money Issued During the Great Rebellion, Buffalo, Express Printing Company.  

Studenski, P. and Krooss, H. E. 1963. Financial History of the United States: Fiscal, Monetary, Banking, and Tariff, Including Financial Administration and State and Local Finance. 2nd. ed. New York, McGraw-Hill. Taylor, G. R. 1951. The Transportation Revolution, 1815-1860, New York, Rinehart. Tan, James. 2017. Power and Public Finance at Rome, 264-49 BCE. New York: Oxford University Press. Thornton, J. M. 1978. Politics and Power in a Slave Society: Alabama, 1800-1860, Baton Rouge, Louisiana State University Press. Thornton, J. M. 1982. Fiscal Policy and the Failure of Radical Reconstruction in the Lower South, pp. 349-94 in Kousser, J. M. and McPherson, J. (eds.), Region, Race, and Reconstruction: Essays in Honor of C. Vann Woodward, New York, Oxford University Press. Thornton, M and Ekelund, R. D., Jr. 2004. Tariffs, Blockades, and Inflation: The Economics of the Civil War, Wilmington, Del., SR Books. Tilly, C. 1992. Coercion, Capital, and European States, AD 990-1992, Cambridge, MA, Blackwell. Tilly, C. 2009. Extraction and Democracy, pp. 173–82 in Martin, I. W., Mehrotra, A. K., and Prasad, M. (eds.), The New Fiscal Sociology: Taxation in Comparative and Historical Perspective, Cambridge, Cambridge University Press. Todd, R. C. 1954. Confederate Finance, Athens, University of Georgia Press. Tymoigne, E. 2019. Law, Sovereignty and the Monetization of the European economies: A Review of Making Money and Money in the Western Legal Tradition, Journal of Post Keynesian Economics, vol. 43, no. 2, 317-340. United States Census Office. 1990. Statistics of the United States (including Mortality, Property, &c.,) in 1860: Compiled from the Original Returns and Being the Final  

Exhibit of the Eighth Census, Under the Direction of the Secretary of the Interior. New York: Norman Ross Publishing, 1990. Van Zanden, J. L. and Prak, M. 2006. Towards an Economic Interpretation of Citizenship: The Dutch Republic Between Medieval Communes and Modern Nation-States, European Review of Economic History, vol. 10, no. 2, 111–45. Velde, F. R. 2016. Hyperinflations of the Early Twentieth Century, pp. 653–87 in Fox, D. and Ernst, W. (eds.), Money in the Western Legal Tradition: Middle Ages to Bretton Woods, Oxford, Oxford University Press. Wallenstein, P. 1985. “More Unequally Taxed than Any People in the Civilized World”: The Origins of Georgia’s Ad Valorem Tax System, Georgia Historical Quarterly, vol. 69, no. 4, 459–87. Wallenstein, P. 1987. From Slave South to New South: Public Policy in Nineteenth-Century Georgia, Chapel Hill, University of North Carolina Press. Wallis, J. J. 2006A. Federal government expenditure, by major function: 1789–1970 . Table Ea636-643 in Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R. and Wright, G. (eds.), Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition, New York, Cambridge University Press. http://dx.doi.org/10.1017/ISBN-9780511132971.Ea584-67810.1017/ISBN9780511132971.Ea584-678 Wallis, J. J. 2006B. Federal government revenue, by source: 1789–1939 . Table Ea588-593 in Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R. and Wright, G. (eds.), Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition, New York, Cambridge University Press. http://dx.doi.org/10.1017/ISBN-9780511132971.Ea584-67810.1017/ISBN9780511132971.Ea584-678  

Wallis, J. J. 2006C. Federal government finances – revenue, expenditure, and debt: 1789– 1939 . Table Ea584-587 in Carter, S. B., Gartner, S. S., Haines, M. R., Olmstead, A. L., Sutch, R. and Wright, G. (eds.), Historical Statistics of the United States, Earliest Times to the Present: Millennial Edition, New York, Cambridge University Press. http://dx.doi.org/10.1017/ISBN-9780511132971.Ea584-67810.1017/ISBN9780511132971.Ea584-678 Warren, G. F., Pearson, F. A., and Stoker, H. M. 1932. Wholesale Prices for 213 Years, 1720 to 1932, Cornell University Agricultural Experiment Station Memoir 142, Ithaca, NY, Cornell University. Weidenmier, M. D. 2000. The Market for Confederate Cotton Bonds, Explorations in Economic History, vol. 37, no. 1, 76–97. doi: 10.1006/exeh.2000.0732. Weidenmier, M. D. 2002. Turning Points in the U. S. Civil War: Views from the Grayback Market, Southern Economic Journal, vol. 68, no. 4, 875–890. doi: 10.2307/1061497. Wilson, H. S. 2002. Confederate Industry: Manufacturers and Quartermasters in the Civil War, Jackson, University Press of Mississippi. Woolfolk, G. R. 1960. Taxes and Slavery in the Ante Bellum South, Journal of Southern History, vol. 26, no. 2, 180-200. Wray, L. R. 1998. Understanding Modern Money: The Key to Full Employment and Price Stability, Cheltenham, UK, Edward Elgar Publishing.