Circa1865

“Another real Victorian virtue, not to be discredited by many imaginary Victorian virtues, [was] a strict standard of commercial probity . . . when the notion of success was mixed up not only with cynicism but with a queer sort of piratical romance. [But today] the favorite modern ideal in morals and even in religion, especially the religion popularized in the papers for millions of modern businessmen, is the word “adventure.”

The most menacing monster in morals, for the businessmen of my old middle-class, was branded with the title of “adventurer.” In later times, I fancy, the world has defended some pretty indefensible adventurers by implying the glamour of adventure.

My own father and uncles were entirely of the period that believed in progress, and generally in new things, and all the more because they were finding it increasingly difficult to believe in old things; and in some cases in anything at all. But though as Liberals they believed in progress, as honest men they often testified to deterioration.

I remember my father telling me how much he had begun to be pestered by swarms of people wanting private commissions upon transactions, in which they were supposed to represent another interest.

He mentioned it not only with the deepest disgust, but more or less as if it were a novelty as well as a nuisance. He was himself in the habit of meeting these unpleasant people with a humorously simulated burst of heartiness and even hilarity; but it was the only sort of occasion on which his humour might be called grim and ferocious.

When the agent, bargaining for some third party, hinted that an acceptable trifle would smooth the negotiations, he would say with formidable geniality, “Oh, certainly! Certainly! So long as we are all friends and everything is open and above board! I am sure your principals and employers will be delighted to hear from me that I’m paying you a small –__”

He would then be interrupted with a sort of shriek of fear and the kind diplomatic gentleman would cover his tracks as best he could in terror. “And doesn’t that prove to you,” said my father with innocent rationalism, “the immorality of such a proposal?”  

(The Autobiography of G.K. Chesterton, Sheed & Ward, 1936, excerpt pp. 16-17)

It is estimated that the Civil War cost $8 billion, which, including destruction of property, derangement of the power of labor, pension system and other economic losses, is increased to $30 billion. To this total is added the human cost of 620,000 battlefield deaths – the war killed one out of every four Southern white males between 20 and 40 — and at least 50,000 civilians dead from indiscriminate Northern bombardment of cities, and starvation.

In the immediate postwar and its two million men in blue mustered out, the Grand Army of the Republic (GAR) became a rich political endorsement as Northern politicians lined up to offer higher pensions in return for votes.  

The Most Costly Price of the Civil War

“War always intrenches privilege in the councils of the nation. The power of the financier is increased. He is called in to rule. Otherwise the state would not go on. Such was our own experience as a result of the Civil War.

Prior to 1861 a democratic spirit prevailed in the nation. Economy was the note in government expenditures. The Civil War ushered on a new era. The need for revenue brought about a merger of the protected interests of Pennsylvania and New England and the banking interests of Wall Street with the Treasury Department, a merger which has continued ever since.

Corruption born of army contracts and war profits penetrated into Congress and the various departments of the government. The public domain of the West was squandered in land grants to the Pacific Railroads with no concern for posterity. The richest resources of the nation were given away. For years after the war, privilege was ascendant and democracy reached to lowest ebb in our history.

Taxes were collected not for the needs of the government, but to maintain a protectionist policy. Revenues were squandered and pork-barrel methods prevailed. Pensions were recklessly granted to prevent a treasury surplus, while appropriations for rivers and harbors, for public buildings, and other purposed became the recognized practice of congressional procedure.

For fifty years the reactionary influences which gained a foothold during the Civil War maintained their control of the government. This was the most costly price of the Civil War, far more costly than the indebtedness incurred or the economic waste involved.”

(Why War? Frederic C. Howe, Charles Scribner’s Sons, 1918, excerpt pp. 313-314)

Shortly after the Bolshevik revolution and consolidation of power in Russia came the Great Depression and the opportunity for a charismatic American politician to introduce his own version of a planned economy, fiat money and social programs funded by deficit financing.

American Welfare State  

“My father was a true liberal as it was defined prior to World War II. He was also a highly regarded and respected liberal, in the forefront of his profession of journalism. At that time, most of those in the newspaper field were staunch supporters of the Constitution as originally adopted; that is, they believed that the role of the federal government was quite limited. And they also believed in the free enterprise system. There were few leftists in their midst.

Since then the term “liberal” has undergone a radical change in meaning, and now means almost the reverse of what it meant when my father was practicing his profession before World War II. Under the present-day meaning of the word “liberal” my father would now be called a conservative. In addition to his strong views about the superior qualities of the free enterprise system and the need for a diminished role for the federal government, he was a firm believer in high standards of morality for the family, and for the communities in which the families lived and raised their children.

In his later years he was subject to heavy criticism, much of it slanderous, but I never heard anyone questioning his integrity. In his search for the truth as a journalist, he had great respect for all obtainable facts and information required for reaching judgmental decisions.

The passage in 1913 of the Constitutional Amendment to tax income greatly increased the power of the federal government to control and regulate the economy, but the exercise of this power was quite modest until the New Deal and World War II. This power, together with the gigantic demands of the war, resulted in an enormous involvement of the federal government in the total economy of the nation.

And with it came much more sympathy by the general public and the media for socialistic and planned governmental programs. Support for these programs also prospered in colleges, universities, and religious groups. The Welfare State was beginning to get a firm foothold on our shores.”

(Forgotten Lessons: Selected Essays of John T. Flynn, Gregory P. Pavlik, editor, Foundation for Economic Education, Inc., 1996, excerpt pp. v-vi)

Though the war had a chilling effect upon Cincinnatians trading southward, by 1863 it was a boomtown supplying the Northern military and “filling large orders for iron and steel products, uniforms and wagons. In a few years, the profits amassed into great fortunes.”

Lincoln’s administration maintained the patriotism of the West with lucrative military supply contracts. Cincinnati’s political system became corrupt, and its leaders notorious for controlling elections and manipulating judges and juries.

The Courthouse Riot of 1884 occurred after German worker Wilhelm Berner and mulatto accomplice Joe Palmer murdered their employer, William Kirk. Though the judge, after the trial and confessions, sentenced both to 20 years in prison, the bribed jury returned a verdict of simple manslaughter.

The “Boss” Cox mentioned below was George B. Cox, a saloonkeeper who ran Cincinnati’s Republican political machine, which Ohioan William Howard Taft called a “local despotism” for the benefit of big corporations.

Religious Bigotry, Ethnic Hatred and Lynch Mobs

“Between 1830 and 1840 the population grew by 85 percent, reaching 46,338 residents, and made Cincinnati the fastest-growing city in America, sixth in population and third in manufacturing. In the 1830s and 1840s, Cincinnati’s population was composed mainly of native-born Americans from the Eastern Middle Atlantic and Upper Southern States.

Travel writers described it as a Yankee city with a pleasant blend of Southern ease and charm. But a new ethnic element appeared in the Thirties, when people from the fragmented states of Germany discovered Cincinnati.

Many of them clustered north of the canal in an area that they called Over-the-Rhine, where they built churches, houses, tenements (street-level shops with residence above), and small commercial buildings.

The new Whig party, intellectual successors to the Federalists, advocated government funding of “internal improvements,” primarily canals, highways and railroads . . . (Southern and eastern-based Jacksonians opposed federal funding for sectional projects that would chiefly benefit Kentucky, Ohio and the “West.” By the 1850s, entrepreneurial railroads radiated out from five depots in downtown Cincinnati like spokes on a half-broken wheel.

From 1835, German-speaking people were coming to Cincinnati in large numbers. The first were predominantly Protestants and Freethinkers, but Roman Catholics soon outnumbered them. By 1840, one-third of Cincinnati’s 75,000 citizens were German-speaking, of which an estimated two-thirds to three-fourths were Roman Catholic. The Irish . . . were also arriving in considerable numbers after 1840 . . .

As their numbers grew, so did hostility from the native-born majority. The Nativist riots of the 1840s and the political activities of the Know-Nothing party in the 1850s were indicative of the continuing bigotry toward Catholics and immigrants. In the 1870s and 1880s . . . Native-born Americans often blamed poor pay and labor conditions on the surplus of recent immigrants and freedmen. Social and political tensions grew over issues of class, race, ethnicity and criminal justice.

The city had a record of street violence, but there was no precedent for the Cincinnati Courthouse Riot of 1884, one of the bloodiest riots in American history. What began as a meeting in Music Hall . . . to discuss corruption in the justice system (a bribed jury had found a confessed murderer guilty of manslaughter only) ended with a lynch mob engaging law enforcement officials in a three-day street battle.”

After the riot, Cincinnati turned to George “Boss” Cox to stabilize city government.”

(Architecture in Cincinnati: An Illustrated History of Designing and Building an American City, Sue Ann Painter, Ohio University Press, 2006, excerpts pp. 30; 35-36; 45; 94-97)

Clement Eaton wrote that the plantation society of the Old South emphasized the family far more than in the North, and family graveyards were a familiar sight south of Mason and Dixon’s line. The family altar was a part of its religious mores, devotion to kin and tradition was essential, and “people were evaluated not so much as individuals but as belonging to a family, a clan.”

Additionally, the old Southern culture was different from our own age in its greater devotion to the classics; Hugh Swinton Legare of Charleston believed that their study “would form in [students] a pure taste, kindle their imaginations “with the most beautiful and glowing passages of Greek and Roman poetry and eloquence” [and] store their minds with “the saying of sages,” and indelibly impress upon their hearts the achievements of the Greek and Roman heroes.

The quest for the Northern conception of progress, unrestrained social change and an embrace of industrial capitalism changed all this.

Worship of the Dynamo

“The United States . . . does not possess many of the conservative advantages enjoyed by most premodern cultures . . . [and is] made up of dozens of peoples and cultures. Some are compatible with the culture of the original, predominantly British settlers; others are not.

We have long since lost our reverence for tradition. If the United States has a national tradition, it is the habit of change and the worship of the dynamo. Our most poignant folk hero is John Henry, the defeated enemy of progress.

The ordinary restraints imposed by community and religion survive most powerfully in the distorted forms of intolerance and superstition – much like the bizarre remnants of ancient paganism that endured for several centuries beyond the official Christianization of the Roman Empire. All that seems to bind us together as a nation is a vague ideology of liberty, equality and progress.

Apart from a certain natural inertia, there are few restraints on social innovation. Far from being unique, the United States has been, much like Athens, the education of the modern world.

Herein lies the special quality and crisis of our civilization. Our original and creative minds seethe with new ideas. A few of them are productive, but in the nature of things, most are not. There is nothing wrong with originality, but what is missing from the modern scene are all the powerful restraints, the governors that control the speed of social change, the filters of experience and tradition that sort out the practical from the merely clever.

What we lack are the divine oracles that thunder against any trespass upon ancient rights and any invasion of the nature of things. We have our prophets, it is true, but most of them insist on being creative men of original genius.

The family and the church have not disappeared . . . But they survive in isolated and individualized forms, which cannot impose much restraint upon the community or the state. In the 1980s . . . American families cannot even be sure of their right to rear their children without government interference.

The churches have seen their actual power reduced even more than the family. Today . . . the tax-exempt status of churches is regarded as a privilege granted by an indulgent government. Church schools are regularly taken to court in efforts to make them conform to the model of public education.

What is unsettling is the idea that community bodies – like local churches – have no part to play in exercising social control, that power is exclusively a function of the government and perhaps, the mass media.”

(The Politics of Human Nature, Thomas Fleming, Transaction Publishers, 1988, excerpts pp. 8-9)

Fielding their very first presidential candidate in 1856, the new Republican party was responsible for breaking up the 1789 federation of States only four years later – it was indeed the party of disunion. With conservative Southerners gone from Congress in 1861, the Republicans began dismantling the Founders’ republic and ushered in America’s “Gilded Age” and pursuit of empire. This new America would be “despotic at home and aggressive abroad” as Robert E. Lee famously remarked to Lord Acton shortly after the war ended.

A Party of Disunion and Thievery

“In the Plundering Generation, Ludwell H. Johnson summarized the real reasons for Lincoln’s violent opposition to the South’s independence: “Manufacturers feared the loss of American markets to a flood of cheap British goods pouring through a free-trade Confederacy; Northern shippers feared the loss of their monopoly of the coasting trade and their share of the transatlantic carrying trade; merchants feared the loss of the profits they garnered as middlemen between the South and Europe; creditors feared the loss of Southern debts; the Old Northwest feared the loss or curtailment of the Mississippi trade; the Republicans feared the disintegration of their party should it let the South go and bring upon the North all the consequences just mentioned.”

Lincoln waged war on the South, however, to achieve more than preservation of the status quo. War was the means to establish the North’s hegemony over the political and economic life of the United States. War offered Lincoln, his party, and Northern special interests a continental empire to exploit. And they did so with ruthless abandon. In the North, Lincoln’s Congress imposed excise taxes on virtually all items; raised the protective tariff to the highest level in the country’s history (under the Morrill Act of 1861); issued paper currency (Legal Tender Act of 1862); awarded Northern railroad companies government loans and extensive land grants (Pacific Railway Act of 1862); unilaterally repealed Indian land claims; promoted settlement of western lands by Northerners (Homestead Act of 1862); effectively “nationalized” the country’s financial institutions (National Banking Acts of 1863 and 1864); and furnished Northern business with cheap labor (Contract Labor Law of 1864).

In the South, Congress authorized the theft of tens, if not hundreds of millions of dollars, worth of Southern property (Confiscation Acts of 1861 and 1862, Direct Tax Act of 1862, and Captured and Abandoned Property Act of 1863). The cotton, alone, that the North stole has been conservatively valued at $100 million.

This legalized robbery was in addition to the plundering by Lincoln’s Army. In December 1864, Sherman wrote: “I estimate the damage done to the State of Georgia . . . at $100,000,000; at least $20,000,000 which has inured to our advantage, and the remainder is simple waste and destruction.”

With Lincoln came the wholesale corruption of the political system. In 1864, Edward Bates, Lincoln’s attorney general, lamented that “the demoralizing effect of this civil war is plainly visible in every department of life. The abuse of official powers and thirst for dishonest gain are now so common as they cease to shock.”

(Lincoln and the Death of the Old Republic, Joseph E. Fallon, Chronicles, August 2002, excerpts pp. 44-45; www.chroniclesmagazine.org)

In the four prewar years 1856-1860, total federal expenditures were a mere $274 million, and financed by tariffs (disproportionately paid by the South), and the sale of public lands. The direct costs of the Northern war effort 1861-1865 is estimated at $2.3 billion; when indirect costs such as outright destruction and soldier pensions are included the estimate rises to $8 billion. “[The] Union’s expenditures on the war were equivalent to more than 70% of the North’s share of the 1859 gross domestic product. Lincoln’s war economy enabled Philip Amour to make $2 million selling pork to the Northern army; Clement Studebaker amassed a fortune providing wagons to Northern forces, and Andrew Carnegie grew rich as an iron merchant.

Lincoln’s Broad Economic Revolution

“First . . . the [Northern] citizenry remained passionately resistant to any form of federal income tax. A second option was to turn to borrowing. The great advantage of this choice was that it would pass some of the cost of the war on to future generations (in the form of interest and debt). A final choice was to print money and declare it legal tender – a policy not without cost. The printing of currency not backed by specie would raise prices, thus financing the war through inflation.

As soon as the war began, President Lincoln ordered Treasury Secretary Salmon P. Chase to begin taking steps to fund the war. Chase faced an economy that had barely recovered from the Panic of 1857 before being thrown into recession by the secession crisis. Chase initially turned to increase import fees, excise taxes and the sale of government land, but he soon shifted his attention to the sale of [war] bonds [hoping] to fund its war effort through a form of borrowing.

Congress [passed] the revolutionary Legal Tender Act [in] February 1862 [which] provided for the issuance of $150 million in non-interest bearing notes. Although not backed by gold or silver, these “greenbacks” were legal tender for all debts except import duties and interest on government loans. By issuing notes without the backing of specie, the government risked serious inflation.

In August 1861 Congress passed a 3 percent tax on incomes of more than eight hundred dollars, but it was a year before those funds were collects. The following July a new revenue measure expanded income taxes and added an assortment of other levies.

In late summer 1862 bond sales had dwindled [and] Secretary Chase turned to Philadelphia broker Jay Cooke to orchestrate a massive campaign to stimulate them. This strategy [of 2500 agents nationwide] anticipated the patriotic war bond drives of World Wars I and II. [Roughly] one in four Northern families [purchased them,] Yet it appears most war bonds ended up in the hands of banks and wealthy investors.

The final piece of Chase’s financial program did not fall into place until midway through the war. The National Banking Act of February 1863 (and legislation of June 1864) established a new system of banks. Finally, in March 1865, Congress passed a 10 percent tax on all notes issued by State banks [which was sufficient to] drive most State banks into the new banking system.

When all was said and done bond sales funded two-thirds of the North’s military expenses. Various forms of wartime taxation funded 21 percent of the war’s cost, and the remaining costs were financed through inflation. By printing greenbacks the federal government caused an increase in prices, which had a measurable impact on the Northern economy. At their peak, prices rose to 80 percent above antebellum levels.

The funding legislation passed by the war Congress raises a broader issue. How did wartime measures reshape the American economy?

One long-standing interpretation is that the war was a triumph of industrial capitalism. With for decades the intellectual heirs of Thomas Jefferson and Alexander Hamilton had battled over the constitutionality of federal measures to assist economic development.

With the [Southern] congressmen safely out of the way [in 1861] – so the interpretation goes – Republicans were free to pursue an agenda which features protective tariffs and strong banking legislation. The Civil War provide the perfect excuse for imposing a broad economic revolution.”

(The North Fights the Civil War: The Homefront, J. Matthew Gallman, Ivan R. Dee, 1993, excerpts pp. 96-99)

The war waged against the American South was more about destroying it’s political and economic power in the Union, so that Northern political and economic interests could prevail nationally. The resulting carnival of political vice and scandal is best summarized with: “The festering corruptions of the post-war period sprang up in every part of America and in almost every department of national life. Other loose and scandalous times . . . had been repellent enough; but the Grant era stands unique in the comprehensiveness of its rascality.”

Bernhard Thuersam, www.Circa1865.org

Postwar Corruption and Thievery in Washington

“The Civil War had severed the Southern checks on the exploitation of natural resources, had supplanted an old, experienced ruling class for a new, inexperienced one, had released the dynamic energies of the nation, and had ushered in the Era of Manipulation.

Under President Grant, pliant and politically naïve, the government had fallen into the hands of dishonest and incapable men . . . politics under the cloak of Radicalism more and more had become identified with manipulation for economic favor. Hordes of lobbyists had swarmed over the land, seeking railroad subsidies, mining concessions, and thousands of other government handouts.

The West was being plundered by railroad and mining corporations, the South by Carpetbaggers and Scalawags. The cities and the State legislatures, in North and South alike, were infested with rings, lobbyists, bribe-givers, and bribe-takers. Even the national Congress had become a tool of predatory business interests. Machine politics, firmly founded on patronage, economic privilege, the bloody shirt, and the soldier vote, prevailed everywhere.

The new ruling classes, flushed with prosperity, had lost their sense of responsibility, and corruption had kept pace with the upward swing of the business cycle. Political morality had sunk to its lowest level in American history.

In the closing days of the last Congress, [Grant’s self-styled House floor leader] Ben Butler and a few others had slipped through a measure increasing the salaries of the President, members of Congress, and other high officials. Tacked onto the unpopular measure was a retroactive feature which in effect gave each member a $500 bonus for his service the last two years.”

(John A. Kasson, Politics and Diplomacy from Lincoln to McKinley; Edward Younger, State Historical Society of Iowa, 1855, excerpts pp. 250-252)

Lincoln’s war administration and deficit financing ushered in the modern American state which remains in existence today. The various Bureaus, Departments and revolutionary measures created for the purpose of increasing federal power were all linked to his total war-effort, including the restructuring of currency and banking. Author Bruce D. Porter (War and the Rise of the State, Free Press, 2002) wrote that “Appomattox thus represented not just the defeat of the South, but the defeat of the whole Southern economic and political system, and the triumph of a state-fostered industrial and financial complex in the North.”

Bernhard Thuersam, www.Circa1865.org

The True Result of Appomattox

“[in Herman Melville’s postwar] poems he recognized the tremendous costs, especially through the loss of freedom and the end of the founders’ dream for America as a result of the North’s victory. He viewed the construction of the new iron dome on the Capitol in Washington, DC, which replaced the wooden one, as a symbol of America’s future.

Bruce Porter’s well-documented study [of the war] relates some of the economic costs of the Civil War:

In connection with the war the Lincoln administration attempted to intervene in areas of the national life that the federal government had never touched before . . . Prior to 1861, the national government had been a minor purchaser in the American economy. During the war, it became the largest single purchaser in the country, a catalyst of rapid growth in key industries such as iron, textiles, shoe manufacturing, and meat packing . . .

The Civil War spawned a revolution in taxation that permanently altered the structure of American federalism and the relationship of the central government to the national economy. Prior to the war, over 80 percent of federal revenue had come from customs duties, but despite several upward revisions of the tariffs during the war, those could provide only a fraction of what was needed to sustain the union armies.

On August 5, 1861, the first income tax in US history came into effect, followed by the Internal Revenue Act of 1862, which levied a whole series of new taxes: stamp taxes, excise taxes, luxury taxes, gross receipt taxes, and inheritance tax, and value-added taxes on manufactured goods. The latter Act created the Bureau of Internal Revenue, perhaps the single most effective vehicle of federal power ever created . . .

Neither taxes nor paper dollars, however, came close to covering the enormous costs of the war. Dire fiscal straits forced the federal government to borrow over 80 percent of its cost, or more than $2.6 billion. [The] Lincoln administration created a captive source of credit by granting a monopoly on issuance of the new national currency to banks that agreed to purchase large quantities of federal bonds . . . [and] agree to accept federal regulation and federal charters. Thus, almost overnight, a national banking system came into being.

[Author] Eric Foner writes that the fiscal measures represented in their “unprecedented expansion of federal power . . . what might be called the birth of the modern American state . . .”

(The Costs of War, America’s Pyrrhic Victories, John V. Denson, Transaction Publishers, 1999, excerpts pp. 28-29)

Of the many reasons that war occurred in 1861, trade and sovereignty were two of the most prominent. On the first, Northern editorial opinion changed dramatically after the new Confederate States government enacted a virtual free-trade 10% tariff which would have bankrupted Northern ports and industry; the second was the question of the federal agent of the sovereign States waging war upon its creators. In the years prior to the war, Manhattan banks were lending money at modest interest to planters expanding fields for cultivation — and New England mills eagerly accepted slave-produced cotton.  Since 1865, Northern capitalists and their allies in the three branches have had a free hand in federal monetary policy and trade.

Bernhard Thuersam, www.Circa1865.org

Trade and Sovereignty

“The heart of the trade debate is not income or prices but sovereignty. The free trade agreements entered into by the United States not only violate our Constitution – a small thing, perhaps, since our own government does that very thing every day – but they also erode sovereignty.

This is obvious from the global apparatus of rigged trade established by NAFTA and GATT, but of the World Trade Organization set up in the last round of GATT alarmed even some knee-jerk free-traders. The WTO is a secret organization whose meetings are closed to the press, and it has a right to settle trade disputes between the US and other nations and the power to enforce its decisions.

When it comes right down to it, the free-traders believe that men and women are not really French or American, not really Christians or devil-worshippers; they are only rational producers and consumers, rootless hedonists and utility-maximizers who could just as well be born from a test tube as from a mother’s womb. They acknowledge no social ties except that of the contract for mutual exploitation. Concepts like “loyalty” and “treason” are as alien to them as they were to Red capitalists like Armand Hammer.

The big-money boys of the capitalist West (in and out of government) have changed their rivals but not their attitudes. They will sell arms to both sides in an African civil war and poison gas to Saddam Hussein; and if a tin-pot dictator bankrupts his country buying fighter planes, computer systems and one-way railroads, the New York banks will be happy to give him a loan backed by the World Bank and the American taxpayer.

In the good old days, American conservatives had to do battle with an evil globalist ideology called communism. They had their difference but they agreed on what they were against.

Today, they are confronted by a different globalism, the ideology of free trade and open borders and world government. If our conservative Republicans refuse to stand up to this menace, then the only way they are going to get into the White House is by buying a ticket and taking the tour.”

(Selling the Golden Cord, Thomas Fleming, Chronicles, July 1998, excerpts pp. 12-13)