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Militarily it looked like the Union had the advantage going into the war. They had a larger population which meant they could have a larger army. They had an industrial base which meant they could produce the supplies needed to fight the war. But the Confederates had many advantages, too. The best military leaders (Robert E. Lee, Thomas Jackson, and James Longstreet to name a few) fought for the South. The Confederate armies could fight a defensive war, which was much easier to do than invade and conquer an area. Because the Union would have to invade and conquer the Confederacy, most of the fighting would take place on southern soil. This is an advantage militarily for several reasons. The Confederates would be defending their homeland, giving them a stronger incentive to fight. Fighting on southern soil meant shorter supply lines for the South, and longer supply lines for the North. Finally, the Confederate army would be fighting among friendly people.
I would agree with the previous post, you want to be sure that you are paying close attention to the points your instructor emphasized as this is a very broad question and there are many different points that could be emphasized.
One point that wasn't mentioned in the previous post was the idea that the South had prior to the start of the war that they would be able to count on support from foreign sources, believing that the British had enough left-over animosity from the war of 1812 and the revolution to jump in on their side. Unfortunately for them, aid from the British was never fully realized and so the blockade by the north really did strangle the South.
I would suggest that if there is a textbook or a set of instructor notes that guides your assessment on such a topic, you should refer to these before anything else. In terms of what you will find here, I imagine that there will be different opinions offered. In my mind, I would say that one can easily compare and contrast both sides in terms of economic and military advantages at the outset of the Civil War. From a military standpoint, the North enjoyed more population. With an advantage in population, it was able to endure more losses and replenish the human cost quicker than the South. I think that this ended up playing a major role in the North's strategy which was to hope for a longer and more protracted war. The North also enjoyed greater industry and a stronger base of economics, which allowed them to be able to withstand early losses and, again, play for time. The South had a couple of challenges at the outset of the war. Seeing that they were the ones who seceded from the Union, the Southern government had to establish a foundation for a real government while fighting a real war simultaneously. This was too great of a challenge for President Davis or anyone through which to navigate. The South believed that they enjoyed a military advantage in that they understood their own territories better than Northern soldiers as well as the fact that they boasted supreme military minds that were seen as critical to a tactical victory. The belief was that this war was going to be a short one, as the South believed the North would be overwhelmed with their own tactical supremacy and the historical tradition of war fighting that had been embedded in the South as part of its culture. The reality was that both of these were mistaken premises. The North had the cache to extend out the war, something that the agricultural South sorely lacked. Adding to this the command of the Northern navy which blockaded all Southern ports and reduced the chance of foreign intervention and support, this ended up playing a large role in the decisive nature of the war, as a snake choking its prey over time.
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