Aftermath and Impacts of the Civil War

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How did the Civil War affect the economies of the North and of the South?

The Civil War benefited the Northern economy, but it left the Southern economy in absolutely terrible condition. The South, with its agricultural economy, lost its ability to exploit slave labor for greater profits, and also, most battles occurred in Southern territory, leaving huge spans of agricultural land destroyed. The North had a more industrialized economy and therefore benefited from the railroad boom and the manufacturing of wartime products.

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The Civil War (1861–1865) was, in many respects, the first modern war. Modern warfare is fueled by strong economies, but that of the agricultural South was found lacking. Although the South's military leadership was outstanding, its political and financial bosses were not nearly as competent as those of the North. Moreover, Abraham Lincoln was far abler than Jefferson Davis in marshaling economic resources for the demands of total war. The North emerged from the war stronger economically than ever before. The South was devastated.

The North enjoyed many economic advantages. First, it could conduct foreign trade during the conflict, and England relied heavily on the North's bountiful agricultural products. An efficient food-processing industry kept the North's armies fed. The number of factories in the North increased. The oil industry, which was based in Pennsylvania, flourished. Urban centers thrived—growing both in population and in wealth. Taxation, though heavy, helped pay for the costly war. The North also used tariffs to raise revenue. Finally, the North's transportation system, particularly its railroads, were much more advanced than those of the South.

The South tried to use its more limited economic resources to merely survive. And these resources were further diminished as the North seized the Mississippi River and vast swathes of Southern land. New Orleans, the financial center of the Confederacy, fell early in the war. Overconfident Southern leaders went into the war believing that "King Cotton" would win the war for them. But England got along without the South's staple crop. The South had poor railroads, and its taxation system was inefficient. One key problem for the South's economy was states' rights, and governors often acted to buttress their own states rather than aid the national economy.

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As the response above states, the aftermath of the Civil War left the North in relatively good condition economically and the South in shambles.  There were many reasons for this, some because of the respective economies pre-war, some because of where the war was fought, and some because the North won and the South lost. 

As pohnpei397 notes, the South lost its free labor, which of course had a devastating effect on the economy.  But furthermore, the Southern economy was almost exclusively agricultural, thus far more labor-intensive than an industrial economy, and it also lacked the sort of infrastructure that would have allowed it to diversify and move into a more industrial economy.  Additionally, the previous unpaid labor, slaves, were spectacularly uneducated, as a matter of law and/or custom, since literate and educated slaves would have presented problems to their masters.  This meant that even skilled paid labor that could have led to industrial diversification was not present in the region.

The North, on the other hand, had a largely industrial economy, with more "universal" education and a rapidly developing infrastructure that allowed it to move produced goods more cheaply and easily.  Thus the North entered the post-war years in better economic shape.

Since most of the Civil War was fought in the South, parts of it were ravaged, by occupying forces who did not make any particular effort to conserve resources, by burning, and by other forms of destruction.  After all, it was a war. So, in addition to losing its free labor, the South had to do a significant amount of rebuilding.

The North, of course, saw few battles, and even those did not result in nearly the amount of destruction the South had sustained, so it did not need to concern itself with much in the way of rebuilding.  All it had to do was use the existing factories, a relatively skilled labor force, and infrastructure to convert from creating wartime products to creating peacetime products. 

The South had issued its own currency when it broke off from the nation, and its currency was rendered worthless because it lost the war.  Translated into modern terms, this would have been a loss of billions of dollars, I think, and I would guess that the credit terms for borrowing from the North to rebuild would have been very steep, as a matter of risk and as a means of punishment. 

Since the North won, its currency prevailed, so it did not diminish in value and was the coin of the realm.  Thus, all the wealth held in the North, to the degree people had capital after a long and expensive war, maintained its value. 

Today, if one looks at the economies of the North and South, the consequences of the Civil War are still apparent.  Southern states have higher rates of poverty, poorer educational outcomes, higher infant mortality rates, and lower life expectancy rates, all of the statistics one would expect when when a region has experienced what the South experienced.

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The Civil War greatly improved the economy of the North but harmed the economy of the South.

The Civil War disrupted the Southern economy badly.  First of all, it freed the slaves, thus removing the bulk of the Southern work force and forcing the South to readjust its economy.  Second, it devastated much of the South's infrastructure.  Destruction of things like railroad tracks caused short-term damage to the South's economy.

Meanwhile, the Northern economy was helped by the war.  It experienced a railroad boom as railroads were built with federal government support.  This was the most important change in the Northern economy as it led to westward expansion and to a much better transportation grid for the North's economy.

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The American Civil War (1861–1865), caused enormous military and civilian casualties for both the the Union (North) and the Confederacy (South), with estimates as high as one million deaths brought about by combat, disease, and food shortages. The South, however, experienced greater economic losses than the North, both during the war and in its aftermath.

Prior to the Civil War, the northern states were mechanized and had already developed a great deal of industry and manufacturing: textile mills, leather processing, pig iron foundries, and firearms production. War created a demand for more of certain kinds of products and materials. Areas of agriculture in the Union states which did not rely on slave labor also did not suffer the economic devastation that the Civil War brought to the Confederacy.

The Union's act of capturing the Savannah Seaport and the major economic hub of Atlanta, Georgia, further paralyzed the economy of the South and reduced the Confederate ability to finance the war effort. Ultimately, with the Union victory and the abolition of slavery, the South lost the large unpaid work force which it depended on for cotton production. Thus, the economy of the region was deeply diminished.

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