Liberty Matters

Reconstruction’s Failure

It goes almost without saying that Congressional Reconstruction did not secure full justice, security, or political equality for African-Americans. All the participants in this discussion are in agreement about that. Given our differing perspectives, we may disagree somewhat about the extent or significance of the genuine gains made by the freed men and women. But Reconstruction was not even able to sustain the goals of its most radical proponents at the time. I therefore would like to explore some sources of Reconstruction’s failure. The underlying source was, of course, continuing and pervasive racial prejudice. Yet we can go deeper to examine particular policies, some seemingly unrelated to Reconstruction but others closely associated with it, that contributed to its failure. One of these involves a reform that, if implemented, would have significantly helped the former slaves. The others involve measures that undercut, either directly or indirectly, the success of Reconstruction.
Forty Acres and a Mule
The Union’s treatment of abandoned and confiscated lands in the former Confederacy constitutes a major lost opportunity. As early as 1862, well before the Civil War ended, plantation owners were fleeing and abandoning their lands and slaves, most notably in the South Carolina Sea Islands. There the slaves, even before full Union military occupation, began farming self-surveyed plots, and the area then attracted refugee slaves from elsewhere. With the arrival of Sherman’s army in January 1865 and his issue of Special Field Order No. 15, 400,000 acres of abandoned coastal plantations were set aside for the exclusive settlement of ex-slaves. Two months later Congress established the Bureau of Refugees, Freedmen, and Abandoned Land (Freedmen’s Bureau) to assist with the transition from slavery to freedom. Congress also had already passed two Confiscation Acts in 1861 and 1862, forfeiting the property and slaves of those supporting the rebellion, thus putting additional acres into Federal hands.[1]
Once President Johnson began granting amnesty to former Confederates, however, many ex-slaveholders recovered their abandoned plantations. Eventually the Freedman’s Bureau was reduced to implementing a paternalistic policy of compelling former slaves to work, for wages and under supervised conditions to be sure, but on plantations owned by white Southerners or leased to Northerners. In the end, only a small number of freedmen hung on to their land through purchasing it. Although the Republican Party dominated Congress, the problem was that it was divided into three factions: a very few conservative Republicans who supported Johnson; moderate Republicans, the largest faction, who opposed Johnson but shied from fully equal rights for blacks: and the Radical Republicans, the most outspoken of whom was the Pennsylvania Congressman Thaddeus Stevens. “Forty acres and a mule“ for each adult freedman became his rallying cry. But not even all the Radicals favored wholesale redistribution of southern land. In 1866, Congress did pass a bill that applied the homestead principle to 44 million acres of federal lands in the South, with former slaves and pro-Union whites getting preferential access. Yet most of this land was of poor quality and at distant locations.[2]
Many Northerners remained opposed to breaking up slaveholder plantations, seeing it as a violation of private property. But Stevens was not advocating land redistribution as a leveling measure to bring about greater equality. He instead employed a natural-rights argument, insisting that the former slaves had rightful title to their masters’ plantations as just restitution for their coerced labor. Even the former slaves who desired land were not, as Eric Foner reveals, challenging “the notion of private property per se; rather, they viewed the accumulated property of the planters as having been illegitimately acquired.” Stevens believed that land reform was essential to transform the feudal South into a region of yeoman farmers and free laborers. While his scheme, if adopted, may not have prevented the restoration of white rule, it certainly would have made a difference on the margin. Even the limited experience with land ownership in the Sea Islands created a black community noted for its self-sufficiency, independence, and resilience well into the post-Reconstruction period.[3]
Counterproductive Policies at the State Level
Another set of policies contributing to Reconstruction’s failure were actually some of the vaunted accomplishments of the Republican state governments that came to power in the South. As mentioned in my previous essay, these governments initiated increased funding of internal improvements, primarily railroad construction. The resulting subsidies were among the largest of the new state expenditures, diverting resources away from more urgent needs. Poor farmers, already destitute from wartime losses, found themselves levied upon further by their own states to provide economic tribute to privileged businesses. The reckless extent of these appropriations, moreover, was the occasion of most of the actual political fraud below the Mason-Dixon line during the period.[4]
Reconstruction’s importation of the Yankee system of tax-supported compulsory schools also entailed increased expenditures. This innovation had not even become standard throughout the northern states until the last decade before the Civil War, promoted by the northern Whig party partly to mold social conformity and instill “proper” respect for authority among Catholic immigrants and other ethnic outsiders. Literacy among white Southerners already exceeded 80 percent even before Fort Sumter, slightly below that of Northerners but better than in Britain or any other European country outside of Sweden and Denmark. Admittedly this omits the slaves, whom it was illegal to educate. After emancipation the former slaves hungered for learning, and during Reconstruction many Northerners volunteered their services or donated money to provide education, usually through the auspices of the Freedmen's bureau.[5]
To help ensure that government schools were permanently fastened upon the South, Congress created a federal Department of Education in 1867, downgraded the next year to a bureau within the Interior Department. By 1872 every southern state had established a school system, and generally these were more centrally administered than in the North, where local districts played a larger role. As mentioned in my previous essay, the public schools created during Congressional Reconstruction were all racially segregated except briefly in New Orleans. Not only did these schools, with the return of white rule, create a mechanism for racial exploitation, in which the taxes of poor blacks helped pay for white education, but also their educational accomplishments were hardly impressive. Fifteen years after the war ended, the literacy rate among southern whites had shown no noticeable gain, and 70 percent of southern blacks still could not read.[6]
Many of the other new state-level functions that my previous essay covered were also costly. As a result, the war-ravaged South suffered under some of the heaviest state and local taxation in proportion to wealth in U.S. history. Tax rates in 1870 were three or four times what they had been in 1860, even though property values had declined significantly. Many whites who had not lost their land already were forced into bankruptcy. At one point, 15 percent of all taxable land in Mississippi was up for sale because of tax defaults. Coming on the heels of wartime confiscations, Radical Reconstruction foisted upon the biracial South the worst of two worlds: significant turbulence in white land titles with little compensating distribution to African-Americans.  Moreover, the fiscal burden of these measures helped galvanize resistance to Reconstruction and undermined the southern Republican Party’s promising alliance between poor whites and blacks. Thus it is no surprise that the demise of the Republican state governments ushered in programs of government economy, expenditure cuts, and partial repudiation of state debts.[7]
Federal Policies that Impinged on the Defeated South
A third set of policies contributing to Reconstruction’s failure was imposed by the national government. In order to finance the war toward its beginning, Congress had imposed a tax of $20 million on real estate, to be administered through the states. After the war, the tax was levied against the rebellious states, with a 50 percent penalty for their failure to collect it themselves. Special federal tax commissioners assessed the real property of Southerners, selling the land of those unable to pay and keeping all the proceeds—not just the amount due. Although this brought more land into federal hands that in theory could have been sold to the former slaves, and a bit of it actually was, the tax mainly ended up as a further economic burden contributing to the insecurity of land titles. At the same time a particularly onerous increase in the federal excise tax on cotton extracted another $68 million from the South before being repealed in 1868.[8]
The Civil War had already been economically devastating for the South. Prior to the war, output per person in the slave states was at least one-fourth below that in the free states—if you include slaves as part of the population.  (If you exclude the third of the population that was enslaved, estimates vary, with per capita income of the slave states being just slightly higher or slightly lower than that in the free states.) After the war, the South’s total commodity output did not return to its 1860 level until two decades later, and since population had also risen, output per person, including the former slaves, was still 20 percent below its prewar levels.[9] Yet despite the fact that Southerners had lost between $1 and $1.5 billion from property destroyed during the war, economic historians have long agreed that this loss alone cannot explain the persistence of the increased income gap between North and South.[10]
Economic historians have identified several other factors to explain the slow recovery of southern output, and one of those was emancipation itself. With the former slaves now free, they consumed more leisure, with their labor input declining by approximately one-third.[11] This gain in black leisure, however, also does not fully account for the prolonged decline in southern income.  Another major factor was some of the policies that Vernon Burton refers to in his essay as “national Reconstruction.” To begin with, northern Republicans took advantage of the war to overturn the prewar policy of relative free trade by jacking up tariff rates. Average duties rose from 20 to 46 percent, and the free list was cut in half. Because the southern economy continued to rely heavily on agricultural exports, which depended on imports, the burden of this catering to special interests fell most heavily on the sector of the southern economy where most African-Americans worked. The South did not recover its world market share of cotton exports until the 1880s.[12]
Some historians have also put the blame on the new arrangement that came to dominate cotton growing: sharecropping. Southern manufacturing recovered much more rapidly than agriculture, and the states of the deep South, where cotton cultivation predominated, remained the region’s poorest. Sharecropping also became common among white farmers who had lost their land. Economic historians have engaged in an extended debate over the relative efficiency of sharecropping, and at least some of the more extreme economic critiques of this arrangement have been discredited. It did have the advantage of pooling risk. Yet sharing the crop still appears inferior to either hiring wage labor or renting land outright. Under those systems, either the land owner or the renter retains the gains from increased output, whereas under sharecropping each party gets only a predetermined share (usually around one half), thereby reducing incentives to produce more or make investments that would increase productivity. The former slaves however were resolute in their efforts to avoid wage labor in the fields due to its similarity to the gang labor on plantations. This is one reason why large plantations almost never survived emancipation, even in the West Indies and South America.[13]
Nonetheless a well-developed financial system might have permitted poor farmers to buy or rent land. But Union financial legislation passed during and after the war was riddled with features that interdicted the flow of savings to agriculture. The National Currency Acts of 1863 and 1864 created a new network of national chartered banks, which were required to hold specified quantities of Treasury securities. In exchange they could issue bank notes as currency, while the pre-existing state banks were no longer able to do so because of a prohibitive federal tax on their notes. Moreover, national banks could not legally make real-estate loans at all, while the general prohibition on branch banking, both at the national and state level, made it more difficult to shift credit from areas where interest rates were low to where the demand was the greatest. High capital requirements for national bank charters and initial ceilings on the quantity of bank notes also discriminated against the South. After the ceilings were removed, the requirement that national bank notes be matched by investments in government debt still diverted savings away from other uses and made it less profitable to issue these notes where interest rates were highest.[14]
State chartered banks could still offer loans in the form of deposits, but modern readers often fail to appreciate how the widespread use of checking accounts today depends upon advanced technologies of credit verification. During the nineteenth century, the privilege of writing a check against a bank was confined to individuals of recognized wealth or unquestioned probity. The poor or undistinguished had to borrow currency, commodities, or nothing at all.  The National Banking System contributed to starving the agricultural South not only of credit but also of cash in small denominations. Only silver coins were suitable for small transactions, but wartime inflation had driven them into hoards, reducing their total circulation to one-fourth their prewar level. The lowest denomination permitted for national bank notes was $1 (equivalent to about $20 today, during a period when real income per person was about 5 percent of what it is today). Although the government’s paper money (Greenbacks) was printed in lower denominations, the Treasury contracted its total circulation during Reconstruction.[15]
This government-induced curtailment of the South’s monetary system occurred just at the moment when the South’s monetary needs had leapt upward. The slave plantation had been a mini-planned economy, within which food, clothing, and other resources were allocated through the planter’s central direction. Upon emancipation most former slaves depended on the market for the first time, now having to purchase their own necessities. Sharecropping, however, was basically a barter transaction—cotton exchanged for the use of land—and even farmers who rented land often paid not “cash rent” but “standing rent” in the form of crops. Croppers and renters also relied almost entirely upon credit from country stores for food, clothing, and agricultural supplies, with crops pledged as security. Markups for the store’s commodity credit were between 30 and 70 percent annually, whereas in cities only 50 to 100 miles away, interest rates were one-fifth of that. The South’s urban and manufacturing centers fared better because they had higher concentrations of wealth to begin with and because, despite the ban on private mints, individuals had access to various forms of substitute currency illegally issued by municipalities and private firms.[16]
In short, the National Banking System throttled both financial intermediation and monetary exchange in the South’s agricultural sector, which in large part had been reduced to inefficient barter transactions. This financial impact was evident, to a lesser extent, even in northern agriculture. More national bank notes circulated in postwar Connecticut than in Michigan, Wisconsin, Iowa, Minnesota, Kansas, Missouri, Kentucky, and Tennessee combined. Major differentials among regional interest rates that had not existed before the war emerged. The discount rate on commercial paper in the 1890s ranged from less than 4 percent in Boston to 10 percent in Denver. This helped fuel political crusades for inflationary policies, either through printing Greenbacks or coining silver.[17]
Overall the national government’s spending, even after the heavy wartime expenditures had ceased, was twice as high as a percent of GDP as it had been prior to the war. Some of this increase involved lavish subsidies to railroads, with its associated scandals, and other pork-barrel legislation, reflecting the government’s neo-mercantilist coalition with business. But by the mid-1870s the largest expenditure was interest alone on the postwar national debt, which commanded about 40 percent of government outlays. As the national debt declined, it was replaced in 1884 by veterans’ benefits as the federal government’s largest expenditure, constituting 29 percent of federal outlays. Since few in the defeated South received either of these two payments, their net fiscal impact was to extract revenue from the nation’s poorest region, with its large population of African-Americans, for transfer to the North.[18]
If these three forms of detrimental economic policies—the failure of land restitution, the heavy taxation of the state-level Reconstruction governments, and the national government’s exploitation of the South and misguided monetary changes—had been different, a beneficial change in all three together might still not have made Reconstruction a total success. The Redeemer governments might still have restored white rule, and Jim Crow laws might still have been imposed in the 1890s. But any salutary alteration of these policies certainly would have made the freed men and women better off economically. And that in turn may have given them greater political leverage. The fact that southern blacks, despite the hindering impact of these policies, nevertheless achieved the major economic gains emphasized at the end of my prior essay, is a testament to their endurance and resilience. It also suggests that the market tended to do much better by African-Americans than government at any level after the Civil War.
[1] Willie Lee Rose, Rehearsal for Reconstruction: The Port Royal Experiment (New York: Oxford University Press, 1976); George R. Bently, A History of the Freedman’s Bureau (Philadelphia: University Pennsylvania Press, 1955); William S. McFeely, Yankee Stepfather: General O. O. Howard and the Freedmen (New Haven: Yale University Press, 1968).
[2] Claude F. Oubre, Forty Acres and a Mule: The Freedman’s Bureau and Black Land Ownership (Baton Rouge: Louisiana State University Press, 1978).
[3] Eric Foner, Nothing but Freedom: Emancipation and Its Legacy (Baton Rouge: Louisiana State University Press, 1978), p. 56.
[4] Carter Goodrich, Government Promotion of American Canals and Railroads (New York: Columbia University Press, 1960), ch. 4; John F. Stover, The Railroads of the South, 1865-1900: A Study of Finance and Control (Chapel Hill: University of North Carolina Press, 1955); Mark Wahlgren Summers, Railroads, Reconstruction, and the Gospel of Prosperity: Aid Under the Radical Reconstruction, 1865-1877 (Princeton: Princeton University Press, 1984).
[5] James D. Anderson, The Education of Blacks in the South, 1860-1935 (Chapel Hill: University of North Carolina Press, 1988); Ronald E. Butchart, Northern Schools, Southern Blacks, and Reconstruction: Freedman’s Education, 1862-1875 (Westport, CT: Greenwood Press, 1980); Robert C. Morris, Reading, ‘Riting, and Reconstruction: The Education of the Freedmen (Chicago: University of Chicago Press, 1981); Albert Fishlow, “The American Common School Revival: Fact or Fancy?” in Industrialization in Two Systems, ed. by Henry Rosovksy (New York: John Wiley & Sons, 1966), and Fishlow, “Levels of Nineteenth-Century American Investment in Education,” Journal of Economic History, 26 (Dec 1977): 418-436.
[6] Donald R. Warren, To Enforce Education: The History of the Founding of the Office of Education (Detroit: Wayne State University Press, 1974); Charles William Dabney, Universal Education in the South, v. 1, From the Beginning to 1900 (Chapel Hill: University of North Carolina Press, 1980); William Preston Vaughn, Schools for All: The Blacks and Public Education in the South, 1865-1877 (Lexington: University Press of Kentucky, 1974); Robert A. Margo, Race and Schooling in the South, 1880-1950 (Chicago: University of Chicago Press, 1990).
[7] J. Mills Thornton, “Fiscal Policy and the Failure of Radical Reconstruction in the Lower South,” in Region, Race and Reconstruction: Essays in Honor of C. Vann Woodward, ed. by J. Morgan Kousser and James M. McPherson (New York: Oxford University Press, 1982).
[8] Harry Edwin Smith, The United States Federal Internal Tax History from 1861 to 1871 (Boston: Houghton, Mifflin, 1914).
[9] Richard A. Easterlin, “Interregional Differences in Per Capita Income, Population, and Total Income, 1840–1950,” in National Bureau of Economic Research, Trends in the American Economy in the Nineteenth Century, Studies in Income and Wealth Series, v. 24 (Princeton: Princeton University Press, 1960); Easterlin, “Regional Income Trends, 1840–1950,” in Seymour E. Harris, ed., American Economic History (New York: McGraw–Hill, 1961); Robert E. Gallman, “Gross National Product in the United States, 1834–1909,” in National Bureau of Economic Research, Output, Employment and Productivity in the United States After 1800, Studies in Income and Wealth Series, v. 30 (New York: Columbia University Press, 1966); Robert E. Gallman, “Commodity Output, 1839–1899,” in National Bureau of Economic Research, Trends in the American Economy in the Nineteenth Century; Stanley L. Engerman, “The Economic Impact of the Civil War,” Explorations in Entrepreneurial History, 2nd ser., 3 (Spring/Summer 1966), 176–99; Engerman, “Some Economic Factors in Southern Backwardness in the Nineteenth Century,” Essays in Regional Economics, ed. by in John F. Kain and John R. Meyer (Cambridge, MA: Harvard University Press, 1971); Jeffrey Rogers Hummel, Deadweight Loss and the American Civil War: The Political Economy of Slavery, Secession, and Emancipation (2012), ch. 7: SSRN:
[10] Claudia Dale Goldin and Frank D. Lewis, “The Economic Cost of the American Civil War: Estimates and Implications,” Journal of Economic History, 35 (Jun 1975), 299–322; James L Sellers, “The Economic Incidence of the Civil War in the South,” Mississippi Valley Historical Review, 14 (Sep 1927), 179–91; Donald F. Gordon and Gary M. Walton, “A Theory of Regenerative Growth and the Experience of Post–World War II West Germany,” in Explorations in the New Economic History: Essays in Honor of Douglass C. North, ed. by Roger L. Ransom, Richard Sutch, and Walton (New York: Academic Press, 1982).
[11] Roger L. Ransom and Richard Sutch, One Kind of Freedom: The Economic Consequences of Emancipation (Cambridge, UK: Cambridge University Press, 1977).
[12] Frank W. Taussig, The Tariff History of the United States. 8th edn. (New York: G. P. Putnam’s Sons, 1931); Herbert Ronald Ferleger, David A. Wells and the American Revenue System, 1865-1870 (New York: Edward Brothers, 1942).
[13] Ransom and Sutch, One Kind of Freedom; Joseph D. Reid, Jr., “Sharecropping as an Understandable Market Response: The Postbellum South,” Journal of Economic History, 33 (Mar 1973), 106–130; Stephen J. DeCanio, Agriculture in the Postbellum South: The Economics of Production and Supply (Cambridge, MA: MIT Press, 1974); Lee J. Alston and Robert Higgs, “Contractual Mix in Southern Agriculture Since the Civil War: Facts, Hypothesis and Tests,” Journal of Economic History, 42 (Jun 1982), 327–353.
[14] John A. James, Money and Capital Markets in Postbellum America (Princeton, NJ: Princeton University Press, 1978); Richard E. Sylla, “The United States 1863–1913,” in Banking and Economic Development: Some Lessons of History, ed. by Rondo Cameron (New York: Oxford University Press, 1972); Bruce W. Hetherington, “Bank Entry and the Low Issue of National Bank Notes: A Re–examination,” Journal of Economic History, 50 (Sep 1990), 669–675; Richard H. Timberlake, Jr., Monetary Policy in the United States: An Intellectual and Institutional History (Chicago: University of Chicago Press, 1993), p. 434.
[15] Davis R. Dewey, “Banking in the South,” from v. 6 of The South in the Building of the Nation . . . (Richmond: Southern Historical Publication Society, 1909); Richard H. Timberlake, Jr., The Origins of Central Banking in the United States (Cambridge, MA: Harvard University Press, 1978), ch. 9; Sui–ki Leung, “Money Scarcity and the Cause of the American Free Banking Movement,” unpublished paper (University of South Carolina, Department of Economics, December 1991).
[16] James T. Campen and Anne Mayhew, “The National Banking System and Southern Economic Growth: Evidence from One Southern City, 1870–1900,” Journal of Economic History, 48 (Mar 1988), 127–37; Neil Carothers, Fractional Money: A History of the Small Coins and Fractional Paper Currency of the United States (New York: John Wiley & Sons, 1930).
[17] Lance E. Davis, “The Investment Market, 1870–1914: The Evolution of a National Market,” Journal of Economic History, 25 (Sep 1965), 355–93; Richard Sylla, “Federal Policy, Banking Market Structure and Capital Mobilization in the United States, 1863–1913,” ibid., 29 (Dec 1969), 657–86; Howard Bodenhorn and Hugh Rockoff, “Regional Interest Rates in Antebellum America,” Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel, ed. by Claudia Goldin and Hugh Rockoff, (Chicago: University of Chicago Press, 1992); Hugh Rockoff, “Regional Interest Rates and Bank Failures,” Explorations in Economic History, 14 (Winter 1977), 90–5.
[18] Richard White, Railroaded: The Transcontinentals and the Making of Modern America (New York: W. W. Norton, 2011); Historical Statistics of the United States: Earliest Times to the Present, Millennial edn. (New York: Cambridge University Press (2006), Tables Ea636, Ea641, and Ea643.