Question

How the financial system impacts the U.S economy during and after the civil war? please be specific.

Answer 1

On the eve of the Civil War, the American economy had been caught in transition. What had been an almost solely agricultural economy in 1800 was in the first steps of an industrial revolution that would make the United States one of the largest manufacturing powers in the world by 1900. But in the pre-war years, the beginnings of the industrial revolution were almost exclusively limited to the regions north of the Mason-Dixon line, leaving much of the South behind.

Even in the agricultural sector, in several important areas, Northern farmers out-produced their southern counterparts, as Southern agriculture remained labor-intensive while Northern agriculture became increasingly mechanized. By 1860, free states had almost twice the value of farm machinery per hectare and per farmer as the slave states did, resulting in increased productivity. As a result, in 1860, half the nation's grain, four-fifths of its wheat, and seven-eighths of its oats were produced by the Northern states.

While weak throughout the war, the Southern economy has grown significantly worse in its later years. The Proclamation of Emancipation simultaneously angered the South with its slave pledge of independence, and threatened the very life of its primary source of labour. The economy continued to suffer through 1864 as Confederate forces were defeated by Union armies in the eastern and western theatres. Congress also passed several major financial bills during the war which changed the American monetary system forever. The Legal Tender Act allowed the federal government to print and use paper money to pay its bills and fund the war, called "greenbacks."

The war years also forged a close relationship between government and business elite, a relationship that sometimes led to corruption and disaster as it did when markets crashed on September 24, 1869, Black Friday. This new relationship created a political backlash against Washington's perceived East and Industrial bias, particularly in the West and South. In other words, the end of the issue of slavery during the Civil War gave way to a long political conflict over the direction of American economic development that would mark the rest of the century with politics.