What America Can Learn From the Economic Failure of 1861

The American Civil War was as much an economic struggle as an ideological one. Lincoln often spoke about why slavery had to end in order for American society to actually reflect its founding principles of democracy and human liberty. However, emancipation was not the only reason to take up arms against the South. By 1861 a number of economic forces had crystallized into a seemingly unsustainable mix of rich Southern plantation owners who refused to pay taxes, and a burgeoning industrial economy in the North looking for a supply of workers and a new consumer market. As Tony Horowtiz writes in his 150 year reflection on the Civil War, historians now agree that “very few northerners went to war seeking or anticipating the destruction of slavery.”

In 1861 the Government Was Small and Bankrupt

The United States was a decentralized territory up until the Civil War. State and local authorities handled all their regional responsibilities, and the notion of a united collection of states was not on most people’s minds. In the years leading up to the Civil War, the federal government had no central reserve bank, operated on a measly budget, and had a standing army of 14,000 men. When a law was passed to levy State-wide taxes to generate some government revenue, the Southern refused to comply and seceded instead, a decision that forced Lincoln to take a stand.

What most people don’t realize is that white supremacy was so entrenched in both the North and South that true racial justice was always a myth. After slavery was abolished, the 4 million or so slaves were forced to live under slavery by another name: a lack of employment, Black Codes that controlled where a black person could do business, Jim Crow laws, and lynching for (sometimes) arbitrary reasons. Economic hardship and institutionalized racism have held the African-American population back ever since.

Why Did the South Secede?

A decentralized federation of states worked perfectly for Southern plantation owners. They could sit back and enjoy the profit derived from slave population, showing no signs of slowing down. The cotton market was booming in 1860 and slaves were being sold to the South in record numbers. Crops could be sold for pure profit to the Northern factories, so the need to find markets for trade was simply not a concern. An aristocratic class grew out of this economic imbalance; a class of whites that became greedy and resentful of Northern abolitionists and nation-building advocates encroaching on the gold mine that was slavery.

The First Failure of America

Abraham Lincoln was left with only two options. If he let the South separate, he would be forced to give up on the American dream and gains in potential tax revenue for the government. Given how broke the government was in the 1850s, the economic incentive to fighting was incredibly intense. On the flip side, justifying a civil war was never an easy task because it meant a huge loss of life.

In the end, Lincoln chose to wage war in the interest of emancipation and government revenue. He knew that the Southerners had far more resources at their disposal than the bankrupt government. If this wealthily class were left to its own devices, slavery would never end, and wealth inequality would persist across the country. It was in many ways the first failure of America because it showed how a powerful and greedy portion of our society could bring the whole economy to ruin.

And make no mistake about it: this was an economic struggle between the North and South. The Confederate South as a nation would have continued to drain the north of wealth. Northern farms could not compete with slave owning southern farms. The low-cost production of the south would continue to be a commercial success because of their lower prices. In short, slavery was an economic threat to the north and trade with Europe. Northerners, for their part, were concerned about a future under the national rule of slaveholding interests, and what it might mean for white labor. Given all these pressing economic issues, the anguish of black slaves was hardly the most pressing concern, no matter what revisionist Civil Rights historians tell you.

A Lesson for Today

Although the crisis was over 150 years ago, there’s a vital lesson to be learned for today; the realization that corporate greed and digital automation is wreaking havoc on our economy just like slavery did.

Corporations are like the greedy and resentful plantation owners who refused to pay taxes while making an enormous profit from slavery. In today’s terms, slavery has morphed into automation. These corporations see an opportunity to make a profit as more important than ensuring human decency. Why else would they be advocating for automation when they know full well it puts people out of work? They are isolated from the needs of the nation, and they don’t care.

The government, for their part, is more unstable than it was in 1861. At least back then the government had enough courage to face the Southern aristocrats and fight for human decency. In today’s economic climate, corporations get tax breaks while the national debt continues to rise.


It is about time we learned the important lessons from our past and do something to prevent the continued deprivation of our economic well-being and common decency. The battle against automation is here, and we need answers.

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