Lincoln's Political Economy, part Three of Three

Last week, I wrote on Abraham Lincoln and the National Economy, part 1: income taxes, the national bank system, and the first U.S. savings bonds.

There are some other features of international trade, in regard to the "nations vs. markets", where Lincoln exercised "restraint-of-trade" actions. These are what some libertarians and other detractors find against him today.

The first is that Lincoln advocated a strong tariff regime, which was discussed in Lincoln and International Economy, Part 2. The second is that he used national clout and diplomacy to restrain trade for the South. The third is that by curtailing political freedom, in regard to the dis-United states of America, he infringed upon individual rights and individual commercial choices about how and where to conduct business.

Shifts in International Trade During the Civil War

I have already mentioned that Britain was incensed by the Morrill Tariff. Add to that a naval blockade by the Union against maritime trade with the South. Lincoln did not want international war at the same time as he had civil war. Therefore, diplomacy with Britain was key.

In a message to Congress (sweating in Special Session on July 4, 1861, during the stand-off at Fort Sumter), Lincoln noted that:

 . . . this illegal organization, in the character of confederate States, was already invoking recognition, aid, and intervention from Foreign Powers.

Shelby Foote recounts how Jefferson Davis sent a delegation to both England and France, the Confederacy's best trading partners. He did not give his first nor his second delegation sufficient instructions or sufficient powers to cut deals on their own. Trying to get instruction from Davis via Atlantic ship messages, especially during blockade, limited their ability to see important people or revise their strategies.

As Great Britain was the primary world naval power, they were the best hope of the Confederacy to lift the Union blockade, so they went to London first.

But the South had two other major problems in their diplomacy: one, European mills had all the cotton they needed. They had been watching the U.S move toward conflict for a long time and had stockpiled supply. Second, Great Britain and France had already dealt with their own slavery question from the abolitionist point of view. By the time Manchester mills were hurting for supply, the shrugging 'neutrality' of British and French Foreign Offices had left the South with no political allies and no true diplomatic alliances. (I, pp. 135-137). And the laboring class in England did not approve of slavery, even when their factories were shutting down because of war-related shortages. (Letter, Lincoln to the Workingmen of Manchester, England, January 19, 1863).

Both Britain and France watched the war closely, waiting for an outcome and planning diplomatic measures as needed. By September of 1861, after the Battle of First Manassas, Britain was beginning to think they would have to recognize the CSA. They still wanted to wait and see. France, while more friendly to the Confederacy, had essentially the same attitude. (I, p. 666).

But the war dragged on, and so did blockade. The South's capacity to export continued to fall over time as labor went to war, or food became scarce. In the meantime, English and French manufacturers sought other world economies for cotton production: such as Egypt and India. Cotton was sold from Texas into Mexico, making its way to Europe. And a contraband trade in cotton with the Union began to occur, in exchange for currency and foodstuffs.

Lincoln's simple, consistent avowal that the Confederacy was an insurrection and not a state left other nations in diplomatic stalemate. Then Lincoln's active diplomacy was primarily a market-based diplomacy:

In the end, however, no European nation offered mediation nor extended recognition of the Confederacy. Among the reasons undermining active European intervention were several principal considerations. Economically, there were developments that shifted trade relations to emphasize the North's economic ties with Europe. To begin with, huge cotton exports in 1857-1860 had enabled English manufactures to stockpile inventories that carried them through much of the war. Additionally, new sources of cotton in Egypt and India replaced the southern supply after 1862. Furthermore, the Union became a major consumer of British iron, ships, armaments, and woolen uniforms and blankets, which absorbed the decline in the U.S. market for English cotton textiles. At the same time, crop failures in western Europe in 1861 and 1862 increased European dependence on American grain and flour, making King Corn as powerful as King Cotton.

The South financed its war on cotton futures on the foreign exchange at the same time it diminished its acreage for wartime needs (or had it destroyed during battles and occupation). They also added a (smaller) cotton tariff to finance the war. Eventually, according to Foote, they took over all legal cotton sales to Europe. Is that libertarian? No, it is desperate.

Lincoln financed his country on income tax, bond sales to U.S. citizens, and (less important, as it turned out) with tariffs.

Conclusion

Lincoln refused to consider individual liberty for businesses, states, and plantation owners that did not accord that same liberty to its workers, i.e. the slaves. There are examples of him just moving past the "popular sovereignty" campaigners to expose their fatal weakness. "Popular sovereignty" always masked a heinous lack of freedom for the slaves in the United States. Libertarian arguments founded on popular sovereignty, such as the freedom to run your plantation any darn way you choose, are just the same argument in a different century. Lincoln believed in the sanctity of labor, that it contributed to society, and as such, it must be paid labor.

Lincoln's speeches are peppered with references to agricultural and industrial tools, labor, and processes. He was a man with a wide acquaintance with the elements of industry.  In his Lecture on Discoveries (February 11, 1859), he exults in trade diplomacy, where American railroad engineers go to Russia to consult. He praises the patent system as "adding the fuel of interest to the fire of genius, in the discovery and production of new and useful things."

In his First Inaugural Address (March 4, 1861), Lincoln said that secession would not solve the slavery dispute because of the proximity of borders:

 . . . A husband and wife may be divorced, and go out of the presence, and beyond the reach of each other; but the different parts of our country cannot do this.  . .  Is it possible then to make that intercourse more advantageous, or more satisfactory, after separation than before? . . . Can aliens make treaties easier than friends can make laws? Can treaties be more faithfully enforced between aliens, than laws can among friends? Suppose you go to war, you cannot fight always, and when, after much loss on both sides, and no gain on either, you cease fighting; the identical old questions, as to terms of intercourse, are again upon you. 

We were perhaps past the notion of friendship at that point, but Lincoln's concerns about border security and continual conflict are valid. He also believed a nation together would have better efficiencies for trade in the long run. In his Annual Message to Congress (December 1, 1862), Lincoln began by talking about our nation's interior regions, and then expanded:

And yet this region has no sea-coast, touches no ocean anywhere. As part of one nation, its people now find, and may forever find, their way to Europe by New York, to South Americana and Africa by New Orleans, and to Asia by San Francisco. But separate our common country into two nations, as designed by the present rebellion, and every man of this great interior region is thereby cut off from some one or more of these outlets, not, perhaps, by a physical barrier, but by embarrassing and onerous trade regulations.

And this is true, wherever a dividing, or boundary line may be fixed.  . . . These outlets, east, west, and south, are indispensable to the well-being of the people inhabiting, and to inhabit, this vast interior region. 

By calling Lincoln in restraint of trade, his detractors ignore the restraint of trade involved in slavery. They posit that two national governments, with two different bureaucracies and extra borders, would have less trade restrictions, and less customs duties, less tariffs and less tax codes.

The truth is, the question of trade restraint needs most to be answered by the South. On the household level, they denied millions of slaves of the chance to participate in a free economy. On the desperation side, their government took over foreign commodity exchange in a way that the North never even contemplated (nor had to). Lincoln's tariff regime constituted no barrier to his trade diplomacy with Europe. And on the reduction of trade barriers question, which is what free markets is all about, the South erected a political border.  This border would have changed the face of commerce and security on our Continent.

Most of all, Lincoln had heard the first generation of all of these arguments against him in his lifetime. He rejected and prevailed over them all.

References:

Lincoln: Speeches and Writings, 1859-1865. Library of America. Available.

Civil War Home, using the Macmillan Information New Encyclopedia, linked above and here.

Shelby Foote, The Civil War: A Narrative, Volume I. Random House. Available.

The Miller Center, University of Virginia: Abraham Lincoln, part 5, linked above and here.

The Union Pacific Railroad, Lincoln and the Railroad, here. Is that restraint of trade?

William Wunder, The American System of National Republican and Whig Henry Clay, above and here.

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