Bill
Thomas Ferguson, "The Civil War Party System", in Thomas Ferguson, *Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems* (University of Chicago Press, 1995, pp. 61-71).
PART 1
C. *The Civil War Party System*
For years the epic highlight of many survey sources in American history and politics has been a detailed analysis of the ever-widening gulf that grew between the North and South in the years before the Civil War. By now the stars of this drama are so well known they scarcely need any introduction: tariff-seeking manufacturers in the North; Northern farmers and laborers who feared competition from slavery and wanted access to free land either for themselves or their children or because they hoped Western settlement would pull up wages in the East; and Southern planters who sharply opposed tariffs and were increasingly convinced that slavery had to expand or die.[88]
In recent years, however, this classic formulation of the Progressive interpretation of history has come under sharp attack. The importance attached to the tariff, for example, has been sharply questioned. In the early 1960s, several New Economic Historians argued that the South could actually have benefited from rises in tariffs. While this result now looks even more flimsy than some of the early quantitative work on railroads and the economics of slavery, the best recent assessments of how much the South lost from tariffs make it difficult to believe that the sums were worth secession in 1861.[89]
In addition, several studies have shown that the cotton textile industry, one of the largest and best-organized manufacturing interest groups, and one which presumably would have benefited from the Civil War tariffs, staunchly opposed Abraham Lincoln in 1860 out of anxiety for its supply of cotton (Foner, 1941; O'Connor, 1968).
Depending on their exact form, parts of the land argument also are shaky. Cotton planters worried about running out of land could always have developed some of the fields they later planted within the South after the Civil War --- an area twice as great as in 1860. Older arguments that cotton destroyed the soil and thereby forced expansion are simply wrong: planters headed West to take advantage of much higher yields, not because their own lands were wrecked. Nor is it obvious that increasing cotton (or wheat) acreage would have helped farmers as a group in either the North or the South. As Lee and Passell have observed, assuming that demand did not change, prices of crops would drop, lowering an individual farmer's revenues from the same output (Lee and Passell, 1979, pp. 212-13).
Not surprisingly, therefore, recent treatments of the political economy of the Civil War increasingly resemble movies about the Titanic in which the iceberg melts away before it can come on camera. Several highly sophisticated analysts have simply thrown up their hands, while others have resorted to increasingly improbable devices, including suggestions that thousands of Southern planters were literally paranoid.[90]
>From the perspective of the investment theory of parties, however, the
giant forces that first polarized the nation and then broke it apart are
easily identified.
Consider first the situation of major Southern investors. While Lee, Passell, and other New Economic Historians have greatly advanced the argument by bringing out more clearly the main economic issues in the dispute over expansion of slavery into the territories, they slip past the historically decisive point. Within any likely range of price declines, it simply does not matter if opening up new cotton lands might have slightly reduced the world price for cotton, or lowered the productivity of cotton acreage in general. These are aggregate effects spread out among all cotton growers. As the investment theory of parties suggests, what usually matters most in historical change is the position of the major investors. And here the situation is clear.
As the earlier planter invasions of Alabama, Louisiana, Texas, and Missouri illustrated, major cotton growers were highly mobile. They (or their agents and sons) moved rapidly to take advantages of any rich growing areas that opened up. Walling off these slaveholders from the territories by prohibiting slavery there would have reduced the rate of return on their investments, almost certainly to a significant degree. That less mobile or smaller groups would benefit if the major investors sacrificed profits and stayed home is irrelevant. One might as well expect major oil companies not to pump oil for the sake of the independents, or affluent farmers not to apply machinery and fertilizer, to increase everyone else's returns.
It could be replied that the territories opening up in the 1850s scarcely compared to Texas and Louisiana, and so could hardly have seemed widely attractive. But many reasons exist for thinking this was not the case. On and off the Senate floor in the period just before the Civil War, planters repeatedly demanded the right normally accorded capital in America to seek the highest possible rate of return by going anywhere it pleased.[91] In addition, both their words and some actions suggest that leading Southerners were making or projecting investments in southern California (then a very shaky free state), New Mexico, and perhaps Nevada --- all areas whose status as slave or free remained unsettled in the 1850s.[92]
It is also doubtful if the more recent literature has been sufficiently sensitive to the impact the admission of increasing numbers of free states to the Union was making on the Southern position within the federal government. Many newer accounts pause only to nod at the traditional arguments about Southern fears of permanent minority status, especially in the Senate.
But this skepticism is unwarranted. One of the few real battles in the Era of Good Feeling came over the admission of Missouri into the Union --- and the solution to the problem, involving the carefully paired admission of Missouri as a slave state and Maine as a free state, underscored the importance accorded regional balance.
Similarly, the annexation of Texas was delayed for years while debates raged over its impact on sectional power. Considering the heat these early fights generated, it is difficult to see why anyone would now doubt that the new conquests of the 1840s would inevitably raise the issue to a new level of interest, or that as Southerners watched California, Oregon, and other states enter the Union as free states, they would become increasingly fearful. Especially after the Kansas-Nebraska controversy undermined the painfully hammered-out Compromise of 1850, it is easy to see why Southerners believed that the loss of Kansas not only meant abandoning all hope for additional slave states in the Southwest but also threatened the status of vulnerable slave states like Missouri.[93]
A succession of Caribbean adventures in the 1850s showed just how alarmed Southern elites were becoming, as well as how the issue of control of the government was now transforming expansion from a unifying theme in the 1840s to a cause of breakdown in the 1850s. Planters and businessmen from New Orleans, a major center of agitation during the Texas controversy, launched an abortive attack on Cuba in 1851. Several groups of investors, led by one William Walker, organized ventures aimed at other parts of Central America in the mid-1850s.[94]
To dismiss these cases as essentially actions of private businessmen misses all the vital points. Walker's actions were widely hailed in the South. Because they promised control of territory that could later be brought into the United States, these ventures found wide support not only there, but in parts of the Southern-dominated Buchanan administration. Finally, as it became obvious that Northern Whigs and perhaps the Democrats were not about to support an attack on Cuba that the British (major investors in many Northern enterprises and the dominant power in the world economy) opposed, the Southern champions of expansion who had once opposed John C. Calhoun's increasingly strident attacks on the North now had no reason not to join him.[95]
Any remaining doubts about why Southerners became increasingly, and rationally, anxious should be stilled when the situation of major Northern investors in the later stages of the Jacksonian Party System is clarified.
As the New Economic History analysis misspecified the problems affecting the South, so it has failed to focus sharply enough on the critical power blocs in the North. That opening more lands along the Northern frontier (which at that time included parts of Indiana, Ohio, Michigan, and Illinois, as well as Wisconsin, Iowa, and Minnesota)[96] might lead to lower world prices for wheat or, perhaps, corn scarcely mattered to the investors chiefly responsible for promoting growth in these regions. While such considerations might eventually trouble farmers (though not if they believed that demand for their product was elastic or they sought a place for their children), and workers (who probably would still have preferred farms to factories), as well as later historians and social scientists convinced that it was these groups that provided the backbone of the Free Soil parties, major investors were certainly not trying to get rich by buying 160-acre farms.
Their efforts, by contrast, were directed at securing capital gains, for which "development" was essential. Most important, and fatefully, however, they were investing in railroads. Now, had they been differently circumstanced, it is exceedingly doubtful that the Eastern merchants, financiers, industrialists, and lawyers (such as the Forbes family of Boston, or the legendary "Associates"" of the same city) who dominated major American railroads would have scrupled at carrying slave-produced cotton any more than their grandfathers had worried as their ships carried slaves between Africa and the United States.
In the world of the 1850s, however, cotton expansion could at best have helped a tiny minority of these major investors. Railroad growth and profits in states like Indiana, Ohio, Illinois, and Wisconsin depended on the expansion of family farms in corn, wheat, and related products (plus, of course, such infant or locally based industries as could survive). Even if the railroads hoped to postpone conflict, there was no chance the settlers they were feverishly recruiting (who certainly feared slave labor) would sit still.
The rapidly developing discussions about a transcontinental railroad lent additional urgency to the debate over national development. A sugarplum that danced in the visions of many major investment groups in both the North and the South in the 1850s, this venture absolutely required government assistance if it were to be feasible. And here was an unpleasant dilemma. Given the enormous expense, it was initially possible to build only one. No one had to be a New Economic Historian to see that the location of that one line would thereby become a major determinant of the whole course of national development, and thereby the balance of power between North and South. Not surprisingly, therefore, investors proposing to begin construction from various cites-Chicago, St. Louis, New Orleans-maneuvered all through the decade, and, no less unsurprisingly, essentially checkmated each other in the 1850s.[97]
The stupendous scale of railroads compared to all other enterprises of the period is difficult to imagine today. America's first true "big business" dwarfed every other institution in society in the 1850s. (One recent analysis has observed, for example, that as late as the early 1880s Carnegie Steel, a leading manufacturing corporation, was still capitalized at only $5 million, while at least 41 railroads had capital values of $ 15 million or more [Burch, 198 lb, p. 16] . )
As a consequence, the Western-oriented railroads would by themselves probably have sufficed to force the issue of North against South. Once the issue began to be joined, however, other investor interests could hardly afford to sit back passively.
Even textile manufacturers for example, whose attachment to "cotton" as opposed to "conscience" Whiggery is correctly observed by the studies cited earlier, probably could not afford to let the South expand at the pace Southerners wanted. If textile magnates like the Lawrences of Boston tried to prevent war at the last moment by organizing the Constitutional Union Party in the 1860 election, they still had to make certain that Southern expansion into Cuba or the West did not eventually render their tariff-protected manufacturing investments as worthless as their heavy contributions to William Henry Harrison (who died in office holding an interest-free loan from Abbot Lawrence before he could act on either the tariff or the Bank) (Burch, 1981a, p. 218, n. 26).
With partial exceptions among textile manufacturers, merchants, and financiers in New York, Cincinnati, and other commercial centers who were interested in trade with the South, leading figures in every sector of the Northern business community played some role in the abolitionist campaign of the 1850s, and indeed statistical studies have demonstrated that they were far overrepresented among that campaign's leaders.[98]
Illinois Central Railroad attorney (and U.S. Senator) Stephen Douglas, for example, destroyed the Compromise of 1850 by advancing a plan for the settlement of Kansas and Nebraska that was a cover for a transcontinental railroad (Potter, 1976, pp. 145-76). When "bleeding Kansas" began hemorrhaging, textile king Amos Lawrence (who clearly tried to restrain the group to nonviolent efforts) joined many merchants, lawyers, and industrialists to back the network of Kansas Aid Societies that sprang up to funnel men and supplies to Free Soilers. Contributing money, time, and his almost mythic name, Lawrence helped hammer out the plans for a land company that offered shares to literally thousands of clergy in the New England and the mid-Atlantic states and that eventually had large impact on public opinion (Harlow, 1935).
Finally, transcontinental railroad promoter Samuel Ruggles (a New York merchant and leader of the short-lived American Party), William B. Ogden (a major developer of Chicago and agent for many Eastern capitalists), and superlawyer William Seward (a leading abolitionist, and member of a law firm that is today Cravath, Swaine and Moore, which at that time represented Wells Fargo and many other leading Western interests) all helped build the demand for a Northern-based line that eventually achieved expression in the newly formed Republican Party (Russel, 1948, passim; Burch, 1981b, pp. 19-21; Boorstin 1969).
The Whig Party had largely been built around the twin issues of the Bank and the tariff. A series of booms in the late 1840s and early 1850s, however, undermined the constituency for both these issues and led to the disintegration of the party. Headlong internal commercial expansion and the spread of railroads both reduced pressures for tariffs-in part because they created interests oriented toward the moving (rather than the production) of goods, but also because many railroads wanted to import superior British rails for their own tracks. In addition, the rapid expansion of state and private banks further multiplied the natural enemies of a national bank, while privately developed schemes for guaranteeing bank soundness, such as Boston's Suffolk system for state-run bank examinations, partially satisfied backers of a "sound" money (Hammond, 1957, Chap. 17).
As the Whigs fragmented, the pieces of the old party looked around for new coalitions. For a few years in the early 1850s, when very high immigration rates created fertile ground for nationalist themes, various factions experimented with all sorts of appeals.
When the panic of 1857 arrived, bringing with it a wave of religious revivals, smashed unions, and, as always, thousands of starving unemployed left without relief by "their" political parties (Rezeck, 1942), the Jacksonian System was close to collapse. Prompted by Southerners within the party and by some New York businessmen fearful for their city's trade with the South, President James Buchanan vetoed homestead laws and steamship subsidies. He also lowered tariffs and halted all aid to railroads (Polakoff, 1981, pp. 170-90; Yarwood, 1967; Burch, 1981b, p. 23).
Under this dramatic stimulus a new historical bloc now began coming together. While almost none sought war, legions of Northern businessmen grew increasingly impatient with the developing national stalemate. In the early 1850s, railroad titan John Murray Forbes, the leader of the so-called Forbes group of (mostly Western-oriented) railroads, and his lieutenant James Joy, president of the Michigan Central Railroad (in which the Forbes group held a dominant position) had strongly promoted the short-lived Free Soil Party.[99] Subsequently, Joy, while working briefly for the Illinois Central (which was then controlled from New York) engaged Abraham Lincoln as an attorney. Lincoln continued to work intermittently for the Illinois line after Joy departed. He did not, however, become the favorite candidate of the railroad, which backed Stephen Douglas in the famous Senate race of 1858.[100]
What happened thereafter is complex and, despite all the attention the period has received from historians, not entirely clear in all particulars.
Still hoping to avoid war, many Northern businessmen dramatically increased pressure on the South by fanning abolitionist flames. Emulating earlier business support for the Kansas aid movement, Forbes and other top business figures contributed money to John Brown, the noted abolitionist.[101] The Forbes group, which operated a string of Western railroads that eventually grew into the famous Santa-Fe line, seems also to have supported Charles Sumner.[102]
As businessmen all over the country began uncoordinated, decentralized searches for a presidential candidate for the 1860 election, the panic of 1857 hit. Some railroads folded. Others, including several controlled by Forbes, and the Illinois Central itself, were hurt badly and barely escaped bankruptcy.
While many details remain obscure, it is clear that these developments enormously strengthened radical sentiments within the business community. Among the directors of the Illinois Central, for example, anti-Lincoln sentiment seems to have abated,[103] while elsewhere demand for more vigorous action mounted. By the time former Massachusetts Republican Governor Nathaniel Banks had become head of the Illinois Central, Forbes, Joy, and company were all backing Lincoln as the Republican nominee.[104] So were too many other railroad men to mention, including many with ties to the earliest stages of Lincoln's candidacy (Burch, 1981b, pp. 18-19). Joining them were a host of other major business figures, including Ogden, the leader of the Chicago business community (which stood to profit enormously from Northern transcontinental lines and the newly laid railroad connections to the East rather than South) and an associate of many powerful Eastern railroad interests;[105] Ohio Publisher Henry Cooke (who came bearing campaign contributions from his soon-to-become famous brother in the banking business, Jay); Cooke's friend, Cincinnati merchant and abolitionist leader Salmon Chase; and Western Union's Ezra Cornell.[106] Businessmen demanding both banking reform (which was widely blamed for the panic) and tariffs, notably Pennsylvania iron manufacturers led by Simon Cameron, all climbed aboard.[107]
As the Southern states seceded and the Civil War began, the legislative logjam gradually broke up. Tariffs soared, railroad grants proliferated, the Homestead Act sailed through, national banking legislation that chartered a whole new crop of pro-union financiers passed, and Jay Cooke and other financiers did a splendid business in government bonds.[108]
If the investment theory of political parties accounts well for the. timing and policies of the hegemonic bloc that dominated the Civil War L System, it also makes it very clear why that system s unity could not last and why a return to two-party competition was inevitable. Though space limitations make it impossible to offer more than the briefest outline, this process is so much less well understood than the dramatic events of the late 1850s that it merits brief notice. A close look at how commerce and finance functioned within the hegemonic bloc of the system provides the key to virtually all] later developments. Though the Union League clubs that quickly formed in most major cities in the North certainly enrolled a majority of major investors during the war, a substantial number of bankers and merchants remained opposed to the new Republican bloc. The core of this Democratic opposition consisted mostly of merchants and financiers with strong commercial ties to the South or overriding commitments to free trade (such as New York banker August Belmont). Also in this group were a handful of manufacturers who, because they dominated world markets for their products, favored free trade (such as Cyrus McCormick) and a few railroads (including the New York Central) with obvious interests in the return of Southern commerce.[109]