Defending Federal Greed

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Professor
Gerald Gunderson has recently reviewed Professor Thomas DiLorenzo's
book, The
Real Lincoln
and found it lacking. Professor Gunderson is
Shelby Cullom Davis Professor of American Business and Economic
Enterprise at Trinity College in Hartford Connecticut and is editor
of the Journal of Private Enterprise. He is the author of
several articles on economic growth and entrepreneurship and an
important article on the "The Origins of the American Civil
War."

Professor
Gunderson's main criticism is DiLorenzo's claim that the Civil War
was not fought over slavery, but in order to promote the Republican
Party's mercantilist platform. The Professor's book review seems
to rest entirely on two publications.

The
first is the 1974 book by Robert Fogel and Stanley Engerman, Time
on the Cross: The Economics of American Negro Slavery
, which
found that slavery was a vibrant institution of capitalism. The
book provides a justification for the American Civil War, a position
that became snuggly integrated into the historians' lore for twenty-five
years. That is until the recent clamor for reparations for slavery,
where black leaders are arguing that the war had nothing to do with
slavery. In any case, I have already written a great deal about
Fogel and Engerman's work. While economists and historians have
poked many holes in their book, and Fogel has had to retreat from
his initial positions, I have shown their work to be fundamentally
flawed and completely misleading.

The
second publication is Professor Gunderson's own article, "The
Origin of the American Civil War," which was published by the
prestigious Journal of Economic History, during the same
year as the Fogel and Engerman book, 1974. By estimating the value
of slaves and the cost of the war, the article very cleverly suggests
that the Southern states fought to defend slavery and the Northern
states fought to abolish slavery; the Civil War was basically fought
over the issue of slavery, with the Union fighting to end black
slavery and preserve union. There is of course a kernel of truth
to the story. The northern and southern States were divided in terms
of economic interests and politics and this generally coincided
with the slave status of the states. It is also true that white
southern slave owners were interested in defending slavery because
it allowed them to exploit income and wealth from the productivity
of slaves to themselves. Slavery then is loosely related to a necessary
condition of bringing about war, but it was in no way a sufficient
condition.

Gunderson's
ingenious story clearly describes slavery as the cause of the war,
but it is his well-placed caveats where the real story is told.
For example, the South’s secession need not have been a reaction
against abolitionism, but to "any program which implied some
reduction in the returns from slave ownership" (p. 917) such
as high tariffs which would have threatened their self-interest.
True the Republican Party was hostile to slavery, but there was
no immediate threat of abolition. DiLorenzo and I believe the real
threat was the economic impact of high tariffs and the Republican
economic program. As Gunderson notes:

The
reduction in the value of slaves within the Union given Lincoln's
election, measures the basic cause of the war.
This is the "coercion" to which the southerners had
frequently objected. It suggests that the Republicans were not
viewed as abolitionists; that is, it was not expected that the
slaves would be freed in the immediate future. It does represent
a sizeable loss in slave values within the Union, however. Lincoln's
election is foreseen as the beginning of an erosion in returns
from bondsmen which is reflected in an immediate $700 million
drop in their present value. (p. 933)

I
would not argue that Professor Gunderson's estimate of the value
of slaves cannot be used as a measure of self-interest, but would
question what he sees as the cause for the loss in value of slave
property. He does mention federal taxation (p. 941) as a possible
cause but dismisses it because slavery is a sufficient explanation
and therefore taxation is not a necessary reason. Gunderson's story
loses plausibility when he attempts to use the same basic evidence
on slave value and war costs to explain Northern motivation. He
finds that the antislavery motivation was twenty times as strong
as that of preserving union and that preserving the union was just
a superficial cover story to start the war. He therefore maintains
that while everything is explained by resort to rational self-interest,
the actual cause of the war was an ideological drive to help black
strangers in foreign states. Anyone familiar with either public
choice theory or with Northern attitudes towards blacks and slavery
will find this conclusion completely implausible.

Gunderson
does offer a "consistent, and not unreasonable explanation
as to why the relevant self-interested parties would opt for war"
(p. 934) and to be fair he does call for further study and verification,
but the real threat was the tariff and the effect of the tariff
is captured in the value of slaves. Low tariffs mean that slave-based
plantation agriculture would be profitable, but high tariffs would
reduce net income, profits, and the value of slaves.

The
size and strength of the abolitionist movement was modest. While
a large number of Americans did not approve of the idea of slavery,
few were interested in going to war over the issue. In terms of
economic interests, there were northern industrialists who approved
of both war and the freeing of slaves. Freed slaves would compete
against free labor and drive down wage rates and serve as a new
source of consumers for the products of northern factories.

In
opposition to the small group of extreme abolitionists and industrial
capitalists was the bulk of the population in the northern states.
These people did not necessarily approve of slavery, but neither
did they want freed slaves moving into their areas. This is why
many northern states passed laws prohibiting slave owners from freeing
their slaves and moving them to Free states. It is also the reason
that the Underground Railroad generally ended in Canada rather than
in the northern states. Both slave owners in the South and labor
in the Northern states supported the Fugitive Slave Act which required
that slaves who successfully escaped to Northern states be returned
to their owners.

As
Gunderson notes "the Lincoln administration insisted on upholding
its authority as the federal government in the South. The South
responded by firing on Fort Sumter." (p. 928) And Gunderson's
own evidence could be used to make the case that Lincoln started
the war (p. 935, n. 24 & pp. 937–8).

Professor
Gunderson concludes his review by claiming that there have been
many explanations for what caused the American Civil War "But
again, as so often in the past, the pattern appears to repeat, the
effort to reach a conclusion has outrun its basis in history."
Austrian economists would agree with him that history alone cannot
lead you to the proper conclusion without resort to theory, but
DiLorenzo's book is built solidly around Austrian theory and public
choice theory.

Perhaps
Professor Gunderson can take solace in the systematic evidence on
civil wars presented by Paul Collier and Anke Hoeffler which provides
a clear and compelling case for what causes civil wars in general.
They studied the entire history of modern civil wars and tried to
determine what factors were related to civil war such as income,
population, ethnic division, and the importance of resources and
exports. They found, not surprisingly, that low income and high
population increased the probability of civil war. More importantly
they found that countries that had a high share of primary exports
to GDP were more likely to experience a rebellion and that natural
resources increase the risk of war "We interpret this as being
due to the taxable base of the economy constituting an attraction
for rebels wishing to capture the state" but it could also
encourage secession (p. 571). These results of course fit the American
Civil War. The South had a large natural resource base in its farmland
(and slaves), which produced primary exports such as cotton and
tobacco. This was the attraction of the “rebels” from the North
who wished to exploit these resources via the tariff.

Their
evidence also works against the case that slavery and abolitionism
was the cause of the American Civil War. "Analogously, ethic
division is the most common political explanation for civil war.
We have found that these interpretations are incorrect." They
find that non-economic reasons for civil wars only matter in the
sense that ethnic and linguistic differences allow rebel leaders
to divide the population and help reduce the coordination costs
of rebellion (p. 571). In subsequent research the authors tested
the “grievance model” of rebellion against the “greed model” of
rebellion. "We find that most of the proxies for objective
grievance are insignificant and that the best-performing grievance
model has very low explanatory power. By contrast, the simple greed
model performs well. The extent of primary commodity exports is
the largest single influence on the risk of conflict.
Strikingly,
ethnic and religious fractionalization makes a society safer, as
predicted by the greed model, rather than more dangerous as predicted
by the grievance model” (p. 25). Grievance from past wars does contribute
to future wars but they explain that this is because it makes it
easier to raise troops and resources to fight.

Only
this last point seems not to fit the case of the American Civil
War, for it would suggest that Southerners would have a grievance
against Northerners and would be willing to raise troops for another
fight.

September
24, 2002

Dr.
Mark Thornton [send him mail],
author of The
Economics of Prohibition
,
is a senior fellow with the Ludwig
von Mises Institute
in Auburn, Alabama.

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