How a lack of financial infrastructure and policies to avoid taxation led to inflation and the collapse of the Confederate treasury. A bit detailed on individual bond or note issues or tax methods. [336.75]The American Conflict of 1861-65 has a large and devoted following of readers and enthusiasts. The number of books available on individual battles or the character of individual leaders published each year must account for a significant share of American nonfiction. There are far fewer books, however, that examine the Confederacy as an experiment in government under the principles that led those states to rebellion. (Two good examples are The Confederate Nation, 1861-1865 by Emory M Thomas and The Confederacy edited by Albert D Kirwin.) In these works, the financial problems of taxation and financing a war are rarely addressed; the effects of fiscal policies, such as inflation, barter taxation, and consumer goods shortages are described without linking them to any cause.
Todd's book focuses exclusively on the fiscal operations of the Confederate treasury: taxation, currency, debt, and tariffs. The details, including exact amounts raised by each bond issue or the amounts of currency emitted by the treasury, can obscure the larger themes if one does not read carefully. Todd allows the messages of Secretary of the Treasury Memminger to the Confederate Congress to carry the impact of each policy decision.
Taxation. The new government handicapped itself from the start. There was no mechanism or network of agents to collect direct taxes in 1861. This led the treasury to defer taxes as a means of finance and to begin financing the government with a loan instead. When taxes were finally imposed after a year into the war, it was necessary to replace the separate state systems that had each been created. The first taxes were collected as a quota imposed on the states to make up however they might. Since many of the later-imposed taxes were direct taxes on assets, a network of assessors was required to value property (including slaves), as well as a network of agents empowered to collect the taxes. A tax-in-kind was also introduced to collect food and resources for the army. When an income tax was introduced in a legislative bill, the Senate cut the rates in half. In the end, adequate taxes were only approved by the Congress in March 1865.
Coinage. Each governmental agency was required to pay its own way. Although Federal mints in Charlotte North Carolina, New Orleans Louisiana, and Dahlonega Georgia had been seized with their stocks of bullion, there was no continuing flow of precious metal that would allow the mints to continue to earn seigniorage that would keep the mints open and provide a more stable means of exchange for the country. Instead, the bullion was sold for immediate war materiel needs. Currency, including interest bearing notes, would serve as the medium of exchange. The treasury would continue to worry about the growing number of notes in circulation - and the risk of inflation - but could not bring about meaningful reductions in the stock of currency.
Debt. The Confederate government seemed to prefer debt as a means of finance. In the first years, even its circulating currency were interest bearing notes issued under successive acts of Congress. The intent of later loans often included a mechanism for reducing outstanding currency. By late 1863, this reached the point of compulsory loans as a means of removing currency from circulation. Almost no foreign loans were available after 1863 and the burden of financing the war fell on an rapidly shrinking geographic base. Offers of payment in cotton or specie (at the government's discretion) for loan repayments point to a collapsing financial system to be replaced with a crude barter.
War stresses a nation's economic system and draws heavily on its resources to destroy or waste them. Todd highlights policy choices and options that weakened the ability of the fledgling government to undertake a conflict with a better organized and fiscally integrated power. The outcome, if not decided in months, was too easy to foresee.
This book is recommended, but it may not appeal to a general audience.
