(June 29, 2017) The following essay on “The Biggest Confederate Error” of the Civil War is basically the first chapter of my two year old book, Lee’s Lost Dispatch & Other Civil War Controversies. This online version lacks only the footnotes. The entire book is available in the preceding hyperlink and in the link embedded in the book cover image below.
The Confederacy’s Biggest Error
While imprisoned two years at Fort Monroe, Virginia, after the end of the Civil War, former Confederate President Jefferson Davis admitted that the Confederacy should have replaced King Cotton (embargo) Diplomacy for a nearly opposite policy. Failure to do so was perhaps the Confederacy’s biggest error.
For months Davis was held in virtual isolation except for the occasional company of a US Army physician. Lieutenant Colonel John Craven, MD, kept a record of their conversations, summarizing many in various writings, including the 1866 book Prison Life of Jefferson Davis. Although King Cotton Diplomacy sought to restrict cotton exports as a means of motivating diplomatic recognition for the Confederacy from European nations, Craven reports that Davis realized it would have been better to export as much cotton as possible at the start of the war so that the staple could be safely warehoused overseas and sold as needed for foreign exchange. Historian Burton Hendrick states, “With the metal [specie] obtained from [cotton sales] deposited in London and Paris banks, the Confederacy would construct a stronger financial foundation than that of the Federal Government. Mr. Davis would quickly become a richer President than Mr. Lincoln.”
Hendrick summarizes Craven’s notes and recollections with Davis on the matter:
“South Carolina placed Mr. Memminger in the Treasury,” Craven quotes [Davis] as saying, “and while [I respect] the man, the utter failure of Confederate finance was the failure of the cause. Had Mr. Memminger acted favorably on the proposition of depositing . . . cotton in Europe and holding it there for two years as a basis for [our] currency, [it] might have maintained itself at par until the . . . [end]; and that in itself would have insured victory.”
More than three million bales of cotton rested unused in the South at the time of secession; if these had been rushed to Europe before the blockade . . . [was effective], said . . . [Davis,] they would have ultimately brought in a billion dollars in gold. “Such a sum,” Craven quotes Davis as saying, “would have more than sufficed for all the needs of the Confederacy during the war.”
Although ultimately flawed, King Cotton Diplomacy appeared to be logically sound at the start of the war. Great Britain was the world’s leading economy, and cotton textile manufacturing was the country’s largest industry. Nearly a quarter of its people were economically dependent upon the sector. In 1860, nearly 90 percent of Britain’s cotton imports came from the United States, all of which was grown in the South. According to historian Frank Owsley, “all [British leaders] believed alike . . . that the cutting-off of cotton supply in the South would destroy England’s chief industry . . . and bring ruin and revolution on the land.” Faced with revolution at home, it was logical to conclude that few British and French leaders could resist recognizing the Confederacy in an effort to obtain more cotton. French leaders were particularly sensitive to such concerns since the country counted among its citizens some who were old enough to remember the Reign of Terror following the French Revolution.
However, the strategy failed for two reasons.
First, the European economies were buoyed by demands in America for armaments to fight the Civil War. That the South was dependent upon overseas sources for most of its weapons is widely appreciated. However, even the North relied upon imports to a considerable extent. For example, until autumn 1862, over half of the shoulder arms used by Union soldiers were European imports. Consequently, the decline of the cotton textile sector in Europe that was induced by the shortage of raw materials was more than favorably offset by growing demand for arms exports.
Second, about a year after the war started, the Confederacy realized it was necessary to sell cotton in order to purchase the supplies required to continue fighting. Thus, the European cotton shortage peaked early in 1863, steadily improving thereafter.
On March 4, 1861, the same day President Abraham Lincoln made his first inaugural address, President Davis held his first cabinet meeting. During the session, Confederate Attorney General Judah Benjamin stated that if war came, he was convinced it was going to be a long and bloody one. Therefore, he recommended that large quantities of cotton immediately be shipped to Europe, where the government could sell it for specie. Any unsold bales could be inventoried and sold as needed in the future to raise hard currency. Secretary of State Robert Toombs and Vice President Alexander Stephens supported the suggestion. Although Davis agreed that any resultant war was likely to be long and bloody, Treasury Secretary Christopher Memminger ridiculed Benjamin’s idea. It was contrary to prevailing King Cotton dogma. Moreover, he did not believe the central government had the constitutional authority to become a cotton trader.
According to Owsley, about four million cotton bales were available in the South in 1861, and at least half could have been exported because the federal blockade was practically nonexistent during the first year of the war. By comparison, the European textile mills required about 3.8 million bales of cotton feedstock annually, with Great Britain alone needing about 2.6 million bales. Thus, if the Confederacy were able to ship two million bales to Europe and sell an average of five hundred thousand bales yearly, that would have satiated less than 15 percent of the normal annual (1860) demand.
It is not likely that such a meager increase in the actual wartime supply could have prevented a significant rise in cotton prices. Thus, the Confederates should have realized a disproportionately large amount of proceeds from limited tonnage sales. As historically recorded, cotton prices during the war averaged over seventy cents per pound in the commercial markets. If Benjamin’s proposal had caused them to average a somewhat lower sixty cents per pound, Owsley’s estimate of two million 500-pound bales would be valued at about $600 million in specie. Since US greenbacks traded as low as forty cents per dollar of specie, the $600 million specie value of Confederate cotton would have been as much as $1.5 billion.
Interestingly, if Benjamin’s suggestion had been attempted, it’s likely that the politically powerful cotton growers would have welcomed it because Southern farmers needed credit as early as autumn 1861. They had massive inventories that King Cotton Diplomacy encouraged them to embargo out of patriotism. Although officially voluntary, the embargo was airtight. For example, during the prewar four-month period from September 1, 1860, to January 31, 1861, the top five Southern ports received 1.5 million cotton bales from the hinterlands. In the corresponding period a year later, they received less than ten thousand bales, a decline of over 99 percent. Ultimately, much of the cotton would be wastefully burned to keep it out of Union hands when the Yankee army increasingly occupied Confederate territory as the war progressed.