Trading with the Enemy Read online

  New York started with a natural advantage that it was the only port on the East Coast that was deep enough to handle the largest ships of the era at any tide. By 1818, the city offered scheduled service across the Atlantic to and from Liverpool with the launch of the Black Ball Line. The line's ships were commonly referred to as “packets” because they regularly delivered pouches of postal and diplomatic mail. Packet ships would carry imports from Great Britain to New York and thence down the Eastern Seaboard to Southern ports such as Charleston and Savannah, and ultimately to gulf ports such as New Orleans and Mobile. On the return trips, their holds would be full of cotton. Only four years after the formation of the Black Ball Line, cotton accounted for 40 percent of New York's exports. By 1825, the city's port status was enhanced with completion of the Erie Canal, which opened trade with the rapidly growing Great Lakes states.27

  Nonetheless, abolitionists gained traction in the North from 1835 to 1857. Even “Cotton Whigs”—Northern Whigs such as the Boston Brahmins with political and economic links to Southern planters—concluded that slavery should not be permitted to expand into additional states as western territories were admitted into the Union. However, they did not change viewpoints so far as to abandon support for the constitutional right of slavery to remain as a state's right among those states where it was already legal. One trigger was the 1854 Kansas-Nebraska Act, which adopted the doctrine of “popular sovereignty.” Specifically the act mandated that the slave or free status of future states from the Kansas and Nebraska territories would be determined by a popular vote of their citizens. Selected Cotton Whigs, such as Amos A. Lawrence, provided funding to help nonslaveholders settle in Kansas, and it was for him that the town of Lawrence was named.28 As a result, the territory became a center of encounters between pro-slavery and anti-slavery settlers. As such confrontations escalated into persistent violence, the situation was labeled “Bleeding Kansas.” The Kansas violence was symptomatic of the flammable differences between North and South that Senator William H. Seward of New York predicted would erupt in an “irrepressible conflict” of civil war involving the entire country.

  But the financial Panic of 1857 prompted Cotton Whigs to refocus on strengthening ties to the South, which remained relatively prosperous. Southerners threatened to boycott manufactured goods from the North and to instead rely on imports. Planters wanted a new deal from the Northern moneychangers, who they felt were extracting too much of the value of cotton for their services. Northerners became even more alarmed in March 1858, when Senator John Hammond of South Carolina delivered his “King Cotton” speech, which included the rhetorical question of what would happen if “no cotton was furnished [to the North] for three years?” In response, the New York Herald wrote, “the people must forget about Bleeding Kansas.” The Boston Post added that the dogma of an “irrepressible conflict” must be “vot(ed) down.”

  Cotton Whigs concluded that Republicans were a dangerous sectional party whose aims could only lead to disunion and disaster. Searching for a way to promote a national party that could appeal to both North and South, the Cotton Whigs first leaned toward the anti-Catholic and anti-Irish Know-Nothings' American Party. But it had little appeal in the South. Shortly before the 1860 presidential election, the Constitutional Union Party was formed in Boston. John Bell of Tennessee became its presidential candidate and former Cotton Whig Edward Everett of Massachusetts was the vice presidential nominee. The party professed to the simple political principles of the Constitution and the Union of states. It hoped to avoid disunion by taking no stand on slavery.29

  As Table 1 shows, Great Britain was by far the world's biggest cotton consumer, with the United States ranking a distant second. British textile companies exported fabric throughout the world, including the United States. They even reexported raw cotton.

  As a means of motivating Great Britain and France to intervene on behalf of the Confederacy, shortly after the war began in 1861, Southerners initiated an unofficial embargo of cotton exports and a drop in cotton plantings. The strategy became known as King Cotton Diplomacy. Since about one-fourth of the British population was economically dependent on the cotton textile industry, Britain's ability to abide the economic consequences of the war would depend on the length of the conflict and the country's available inventory of raw cotton and finished textile goods.

  Much of the decline in cotton production, from 4.5 million bales in 1861 to 300,000 bales in 1864, reflected King Cotton policies, in addition to disruptions resulting from invading Union armies. First, at the start of the war, Southerners hoped that intentional and deep reductions in planted cotton acreage would convince Great Britain and France that the embargo was more than temporary, thereby implying that the world could face long-term cotton starvation if the Civil War became protracted. Second, in place of cotton, Southerners resolved to grow more of their own food because the northwestern states would no longer be reliable sources of provender during wartime.30

  As Table 2 illustrates, cotton prices sharply increased during the war, initially because of the embargo and later as a result of a progressively more effective blockade. During summer 1864, the New York price rose to almost $1.90 a pound; the Liverpool price climbed as high as thirty-one pence (there were 240 pence in each pound sterling). Before and after the war, thirty-one pence equaled about sixty-three cents. However, as a result of the drain on the North's and South's gold reserves caused by massive war-induced imports, both Confederate currency and the US greenback dollar depreciated considerably in relation to sterling. For example, before the war, each pound sterling was worth $4.77 in US currency, whereas at the end of the war, it converted to about $7.90 in greenbacks.31

  When the war began, Britain had about 2.3 million bales warehoused from the Southern states, aside from a large amount of Asian cotton. Britain started the war with sizable finished-goods inventories as well. Partly because of a decline in demand from the Southern states, Britain's cotton textile export market initially shrank. In short, finished goods were overstocked for a year or so. Consequently, textile industry executives originally welcomed the higher prices prompted by the war because the inflation provided substantial inventory profits. “In place of hard times, they had a shower of riches.”32

  When the war began, the stage was set for a showdown between King Cotton and the untested ability of Europe's economies to diversify into other profitable industries. Unless the economic foundations of Great Britain and New England were to change radically within a couple of years, both regions were likely to experience economic hardship without cotton. As shall be discovered, the Northern textile industry would grab most of the Southern supply by trading with the enemy. Despite the risk that a “cotton famine” in Europe might prompt Britain and France to intervene on the side of the Confederacy, domestic textile makers prioritized their own needs. Although Northern cotton mill consumption dropped about 60 percent during the war, higher prices for finished goods enabled mill owners to prosper. Massachusetts textile mogul Amos A. Lawrence wrote at the height of the war that his business was “better than ever.” He was particularly gratified that there was “no dickering about prices and almost all sales were for cash.”33

  Two

  Official Policy

  OFFICIAL POLICY TOWARD INTERBELLIGERENT TRADE IN THE Confederacy and the United States evolved fitfully. Ultimately it became a matter of necessity for the Rebels, whereas it was a matter of policy for Lincoln's government.

  CONFEDERACY

  The Confederate Congress never outlawed trade with the United States but instead attempted to regulate it. Less than a month after the opening shots at Fort Sumter, a congressional committee investigated the merits of a prohibition of cotton exports to the North while limiting imports to munitions and food. No such proposition was ever enacted. Instead, in May and August 1861, Congress passed laws restricting specific exports such as cotton, tobacco, and sugar to Confederate seaports, or across the Mexican border. The stipulations had the effe
ct of prohibiting shipment of the enumerated items to the Northern states. Conversely, the laws were silent about imports, thereby permitting Southerners to purchase merchandise, including the necessities of war, from the United States.1

  Prior to secession, nearly all manufactured goods required in the South were either imported or purchased from Northern states. Only a small fraction arrived directly from Europe. Generally, overseas merchandise arrived first in New York and was thereafter shipped by railroad, inland waterways, or coastal steamers to the Southern states. Ships coming into the region from foreign ports typically arrived in ballast to pick up cotton. Less than two weeks after Sumter, Lincoln declared a blockade of Southern ports from Virginia to Texas.2

  Ironically, the Confederate cotton embargo was half-consistent with Lincoln's blockade policy. As a result, the chief blockade consequence to Southerners was a limitation on imports. Confederate analysts estimated a “cotton famine” would materialize in Europe by February or March 1862. But by spring 1862, Europe's cotton shortage was less intense than the Confederacy's need for imports and international monetary credits. Consequently, voluntary embargo compliance disintegrated because cotton was the only practical means of obtaining needed goods and establishing credit abroad.

  In order to prevent valuable Southern commodities from falling into Union hands, a bill enacted in April 1862 prohibited exports through any Confederate location occupied by federal soldiers, but there continued to be no restriction on imports. The following month, Congress passed a bill requiring the destruction of most crops, including cotton, when there was the slightest danger of it falling into enemy hands.3

  Confederate armies were primarily supplied through three organizations. First was the Commissary Department. Commissary General Lucius Northrop directed the department until being replaced in February 1865 by Isaac St. John. Their job was to supply provender. Second was the quartermaster general, who was responsible for obtaining clothing and similar items such as saddles. Abraham Myers occupied the post until succeeded by Alexander Lawton in August 1863. Finally, the Bureau of Ordnance supplied munitions and weapons and was supervised by Josiah Gorgas during the entire war. He entered the post as a major and ended a brigadier general.

  Four months after the opening guns at Fort Sumter, Commissary General Northrop realized there were not enough hogs in the Confederacy to meet military needs and the beef in Texas would be hard to transport to the principal armies. By January 1862, he concluded that interbelligerent trade would be necessary. “On commencing the organization in Montgomery it was known that supplies, especially of salt meats, could not be obtained to an adequate extent except in the enemy's country. Accordingly, appropriate steps were taken to reach them. The stores of bacon and pork thus acquired, at a cost to the Government of much less than one-half of the current rates, are still being issued.”4

  By October 1862, Secretary of War George Randolph endorsed intersectional trade as a necessity when a Memphis resident arrived in the Confederate capital of Richmond, Virginia, proposing to sell large amounts of provisions in exchange for cotton located behind Rebel lines. (Federal troops occupied Memphis in June 1862 and continued to hold it until the end of the war.) Randolph recommended the transaction to President Davis, arguing that the prohibition of cotton exports through enemy-occupied cities only applied to citizens and not the Confederate government.5

  Davis was cool to the idea. When he suggested that the transaction be delayed, Randolph resigned. His successor, James Seddon, soon adopted an attitude similar to Randolph's. He told military authorities that they need not arrest Northern traders who came through the lines unless they were suspected of spying. Since Northrop stated plainly that he could not adequately supply Confederate armies with required provender unless he was permitted to trade cotton across those lines, Davis subordinates gradually adopted a “don't ask, don't tell” strategy toward the president. Intersectional trade continued to grow.6 For example, in spring 1863, Seddon wrote to General Joseph Johnston in Tennessee, encouraging the general to “obtain within your own department or the well stocked counties of Kentucky [behind enemy lines] all possible supplies. I am informed that you could probably obtain considerable supplies from Kentucky if you felt authorized to trade cotton or sugar for meat.”7

  By the end of 1862, Commissary General Northrop advocated impressment, but Congress resisted. Therefore, by indirect hints here and there, he encouraged army commanders to unilaterally impress whatever supplies they needed from nearby civilians in order to motivate congressional action. Virtually all except Robert E. Lee's Army of Northern Virginia complied. Consequently, during winter and spring 1863, Lee could not concentrate his full army along the Rappahannock River defense line. Lieutenant General James Longstreet's corps was temporarily relocated to southeast Virginia and northeast North Carolina, where more supplies were available. As a result, when Union Major General Joseph Hooker crossed the Rappahannock to attack Lee, Longstreet's corps was too distant to help, and the Confederates were outnumbered two-to-one, although Lee and his other corps commander, Thomas “Stonewall” Jackson, still managed to beat Hooker at the battle of Chancellorsville. Despite the relocation of Longstreet's corps, the incremental supplies endemically located in its district were not enough to offset a chronic shortage. Consequently, during that period, both corps of Lee's army were partly supplied by trading across enemy lines.8

  By late March 1863, Congress passed an impressment law. The following month it passed a tax bill that included a provision for tithing-in-kind. Every farmer was to reserve a fixed amount of produce for family needs and then deliver one-tenth of the excess to the government in a marketable condition. The terms also applied to salted pork, although beeves were taxed as income.9

  Standing orders to burn cotton rather than let invading Union armies capture it were often enforced by torch-carrying Confederate cavalrymen. If there was no opportunity to sell crops and inventories, planters acquiesced, or even eagerly participated in the conflagrations. However, Northern traders quickly learned that if they could get behind Confederate lines ahead of advancing Union armies, they could induce planters to sell cotton rather than burn it. Such was the underlying dynamic for most of the intersectional trade during the war; Northern traders provided the primary incentive that deterred Southerners from destroying cotton.10 When the incentive was absent, Southerners deliberately burned an estimated 2.5 million bales during the war.11 The 1863 annual report for the Boston Board of Trade stated, “The Confederates have guarded [cotton] with unusual vigilance burning…all likely to fall into our hands, knowing that the ‘Cotton Famine’ [is the best way] of bringing about recognition of their confederacy.”12

  Confederate General Richard Taylor, who commanded various armies in some of the richest cotton lands, including Louisiana, Mississippi, and Alabama, confirmed how the monetary incentive combined with basic human needs could lead Rebel officers to ignore orders to burn cotton:

  Outpost officers would violate the law and trade. In vain they were removed; the temptation was too strong and their successors did the same. The influence upon the women was dreadful, and in many cases their appeals were heart rendering. Mothers with suffering children whose husbands were already in the War or already fallen would beseech me for permits to take cotton through the lines. It was useless to explain that it was against the law…. This did not give food and clothing to their children.13

  On February 6, 1864, Congress enacted a law granting the government more power to trade with the United States but restricting the terms of such trade for private citizens. Specifically, residents were prohibited from accepting greenbacks in any transaction, whereas the Confederate government was allowed to do so. Private citizens who sold cotton were required to accept gold, specie, or Confederate currency, or to barter. Consequently, the government began to account for a growing share of commerce with Northern traders.14 By the end of the year, Commissary General Northrop stated that while it was difficult to persuade, o
r force, Southerners to sell goods to the commissary, interbelligerent trade had been “successful beyond expectations” in obtaining provender from enemy-held territory. He cited an example of trading a pound of cotton for a pound of bacon.

  A secret act of February 18, 1865, enabled the secretary of the Treasury to selectively grant private exporters exemptions to such restrictions, with the result that between-the-lines trading became increasingly liberal in the final months of the war. Essentially, both the Confederate government and licensed exporters were authorized to sell goods for greenbacks if nothing better, such as gold, could be obtained from the buyers.15

  UNITED STATES

  Owing to conflicting goals within discrete industrial and political circles, interbelligerent trade policy in the North was convoluted, even sometimes contradicting blockade and military objectives. As historian Merton Coulter put it, “The problems that met the United States government in dealing with this question were almost insurmountable…. The government vacillated from an intention, announced in the beginning, of completely stopping trade…to an almost unrestricted intercourse near the end of the War.”16

  Such trade was undoubtedly harmful from a military viewpoint because it provided the Rebels with arms and other necessities. Together with Secretary of War Edwin Stanton, most military leaders favored outright prohibition. As historian Thomas O'Connor explained the viewpoint: