King Cotton, the tariff, the war and the mills of Europe

Cotton was the one industry dominated by the South.

For years the South was tolerated in its increasing anti-Union attitudes to keep open the main source of cotton for the northern mills. The Confederate government planned to use cotton as an economic tool in the war, by denying the North a needed commodity.

Many Northern and European industries depended on cotton for their business. By selling more cotton to the European nations at the expense of that cotton normally provided the United States, the Confederacy could raise currency for both their treasury and their sovereignty, while at the same time put the North in an economic decline. The North threatened a blockade of Southern ports.

It was obvious to both the North and South that such a blockade would most hurt England. One fifth of the population of England depended on the manufacture of cotton goods for their livelihood. About 80% of that cotton came from the U. S. South. The Confederate States of America counted on the economic pressure a blockade would bring to England, and to a lesser extent, France.

The Confederates felt a Union blockade would actually work in their favor.

The lack of cotton to feed the economies of England and France would in turn cause those countries to pressure the United States to recognize the C.S.A..

"The cards are in our hands and we will intend to play them out to the bankruptcy of every cotton factory in Great Britain and France for acknowledgement of our independence", stated an article in the Charleston Mercury.

When somebody shuffled the cards and it turned out the South was not holding the best hand.

In 1860, there was a bumper crop of cotton. England bought a surplus. Soon there was a surplus of both raw materials and finished goods. There was a glut on the market and prices were depressed. The effect of the war, however, was to increase the value of the raw goods and the finished goods to many times their original value.

This created a market and a new term, the blockade runner. Cotton could be bought in the South for three cents a pound and sold for forty cents and upwards to a dollar a pound, at the peak of market conditions, in England. The profit on about a 1,000 bales of cotton was around $250,000. Captains of blockade runners could count on about $5,000 per trip. The British sent goods to the South via Steamers to Bermuda or Nassau. The blockade runners would offload their cotton and then load these goods, which later in the war were more valuable than was the cotton, and bring them to ports such as Wilmington, Charleston and Savannah.

Because of the war, when England had gone through the surplus cotton it bought in 1860, the market stayed high. About three fourths of a normal year's export got to the foreign market aboard blockade runners during the years 1861-1865.

The North, when it penetrated the South, made strenuous efforts to secure cotton and ship it to England to keep Britain from recognizing and supporting the South. Another factor that dethroned cotton from a king to a pawn in the Civil War was a serious wheat crop failure in Great Britain. Great Britain became dependent on the government of the United States for wheat grain to aid in the food crisis. After the food crisis passed, the trade was continued on a munitions for wheat basis that was mutually beneficial to both sides.

Nevertheless, there was in the British cabinet and French court an interest to support the Confederacy as a separate state. This was especially true in the early part of the war. During this period, the Confederate ships, Florida and Alabama, were built in England.

"The war between the North and the South is a tariff war" - Karl Marx.

British newspapers, whether favoring the North or South, said the same thing: The feds invaded the South to collect revenue.

Indeed, when Karl Marx said the following, he was merely stating what everyone who followed events closely knew: "The war between the North and the South is a tariff war. The war is further, not for any principle, does not touch the question of slavery, and in fact turns on the Northern lust for sovereignty."

The South had solid legal, moral, and economic reasons for secession which had nothing to do with slavery. One issue loomed larger than any other in that year as in the previous three decades: the Northern tariff.

It was imposed to benefit Northern industrial interests by subsidizing their production through public works. But it had the effect of forcing the South to pay more for manufactured goods and disproportionately taxing it to support the central government. It also injured the South’s trading relations with other parts of the world.

In effect, the South was being looted to pay for the North’s early version of industrial policy.

The battle over the tariff began in 1828, with the "tariff of abomination."

( Known as the "Tariff of Abomination," the Morrill tariff was the highest tariff in American history, adding a 47-percent markup to prices of imported goods. Since the primarily agricultural South needed more imported goods than the industrial North, the tariff hit Southerners hard while benefitting sales for Northern manufacturers. Most of the money generated by the tariff was spent on Northern projects and needs. )

Thirty years later, with the South paying 87 percent of federal tariff revenue while having their livelihoods threatened by protectionist legislation, it became impossible for the two regions to be governed under the same regime. The South as a region was being reduced to a slave status, with the federal government as its master.

But why 1860? Lincoln promised not to interfere with slavery, but he did pledge to "collect the duties and imposts". He was the leading advocate of the tariff and public works policy, which is why his election prompted the South to secede. In pro-Lincoln newspapers, the phrase "free trade" was invoked as the equivalent of industrial suicide. Why fire on Ft. Sumter? It was a customs house, and when the North attempted to strengthen it, the South knew that its purpose was to collect taxes, as newspapers and politicians said at the time.

To gain an understanding of the Southern mission, look no further than the Confederate Constitution. It is a duplicate of the original Constitution, with several improvements. It guarantees free trade, restricts legislative power in crucial ways, abolishes public works, and attempts to rein in the executive. No, it didn’t abolish slavery but neither did the original Constitution (in fact, the original protected property rights in slaves).

Before the war, Lincoln himself had pledged to leave slavery intact, to enforce the fugitive slaves laws, and to support an amendment that would forever guarantee slavery where it then existed. Neither did he lift a finger to repeal the anti-Negro laws that besotted all Northern states, Illinois in particular. Recall that the underground railroad ended, not in New York or Boston-since dropping off blacks in those states would have been restricted - but in Canada! The Confederate Constitution did, however, make possible the gradual elimination of slavery, a process that would have been made easier had the North not so severely restricted the movements of former slaves.

Northerners were seeking a moral pretext for an aggressive war, while Southern leaders were seeking a threat more concrete than the Northern tariff to justify a drive to political independence.

Consider this little tidbit from the pro-Lincoln New York Evening Post, March 2, 1861 edition:

"That either the revenue from duties must be collected in the ports of the rebel states, or the port must be closed to importations from abroad, is generally admitted. If neither of these things be done, our revenue laws are substantially repealed; the sources which supply our treasury will be dried up; we shall have no money to carry on the government; the nation will become bankrupt before the next crop of corn is ripe. There will be nothing to furnish means of subsistence to the army; nothing to keep our navy afloat; nothing to pay the salaries of public officers; the present order of things must come to a dead stop.

"What, then, is left for our government? Shall we let the seceding states repeal the revenue laws for the whole Union in this manner? Or will the government choose to consider all foreign commerce destined for those ports where we have no custom-houses and no collectors as contraband, and stop it, when offering to enter the collection districts from which our authorities have been expelled?"

One of the key events which made blockade running a viable business in the latter half of the war was the so-called Erlanger Loan (or "Cotton Loan"), an issue of bonds made by Emile Erlanger and Company of Paris. Because Confederate currency was worthless in Europe, Erlanger cotton bonds became the de facto currency used by the South when purchasing ships, supplies and other war materiel abroad. In a very real sense, the Erlanger Loan gave the Confederacy at least a modicum of financial solvency even as its generals suffered defeat after defeat.

The Erlanger Loan was issued in five European cities - London, Liverpool, Paris, Amsterdam and Frankfurt - on March 19, 1863 and raised £1,759,894 ($8,535,486). The bonds sold at 90% of face value, and were redeemable for Confederate government-owned cotton in the Confederacy itself. This last clause was a critical catalyst in stimulating blockade-running, because the holders of Erlanger bonds had to risk the Federal blockade to convert them into a tangible commodity.

Since the face value of the Erlanger bonds was fixed, the actual cash value of the bonds varied with the fortunes of the Confederacy itself – usually downward. Within two weeks of the original issue, the cash value of the bonds had sagged to 87% of face value, and Erlanger and Co. began secretly buying up bonds to sustain the price. Given the increasingly grim outlook for the Confederacy after mid-1863, however, the value of the bonds remained surprisingly high, due in part to some very bold campaigning on the part of Confederate agents in Europe. Remarkably, agents like James Mason encouraged rumors that the Erlanger bonds would be honored no matter how the war ended.

Thomas Dudley, the U.S. consul at Liverpool who reported on Denbigh’s conversion to a blockade runner, was appalled at both the brazenness of the Confederate agents there and the naivete of local merchants: "as strange as it may seem," Dudley reported to Secretary of State Seward, "these people here who are aiding the Rebels and [have] taken or purchased these bonds think if worse comes, and the Union is restored that the United States Government will assume the payment of their bonds."

Obviously this was not the case. The Union never had any intention of honoring any Confederate bond or currency, and acted quickly after the war to codify that policy into law.  One of the provisions of the 14th Amendment to the U.S. Constitution, ratified in 1868, was that "neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States. . . . All such debts, obligations and claims shall be held illegal and void." But although those left holding cotton bonds at the end of the war lost their investment, the Erlanger Loan enabled the Confederacy to raise millions of dollars’ credit in Europe, money that was used to build warships, purchase munitions and obtain supplies, all of which were brought into Southern ports by blockade runners like Denbigh.

Cotton passes through the blockade, supplies the war effort

A year before the war began, John Fraser and Co. proudly announced a line of sailing packets with monthly schedules between Charleston and Liverpool. The Charleston Daily Courier boasted that the company was having constructed an iron propeller ship, capable of stowing 3,500 or 4,000 bales of cotton, exclusively for trade between Liverpool and Charleston. The United States later claimed that four of the firm’s five members were South Carolinians who set up the Liverpool branch in anticipation of war and who had their fifth member, Charles Prioleau, naturalized as a British subject for the purpose of aiding the South. Prioleau became the manager of the Liverpool house.

Fraser, Trenholm & Co. decided to prove that the blockade was ineffective and therefore illegal, by sending a steamer from Liverpool to one of the Southern ports. In August, 1861, they purchased three steamers of 2000 tons each - Bermuda, Victoria, and Adelaide. Consul Wilding reported that Fraser, Trenholm, which he had frequently mentioned, was paying for an armsbroker named Grazebrook to collect in his warehouse a large order of rifles, packed to resemble earthenware.

Charles Francis Adams formally notified the British government on August 15 that Bermuda was ready for sea and added that, the merchants who claim to be the owners have no intention of dispatching her on any errand of mercy or peace. Edward Haigh of Liverpool, the cotton broker of Fraser, Trenholm, became the nominal owner, but in a few days, a bill of sale was made out to Allan Stuart Hanckel and George A. Trenholm of Charleston. Captain Eugene Tessier, formerly master of Emily St. Pierre and other John Fraser & Co. ships, took command. John Fraser & Co. sent from Charleston their experienced pilot, Captain Penn Peck. Bermuda came from Fraser, Trenholm & Co., consigned to John Fraser and Co.

A million dollar cargo was on board: eighteen rifled cannon, a thirty-two pounder, a forty-two pounder, two 168 pounder Lancaster guns, with carriages and equipment, including powder and shot, 6500 Enfield rifles, 200,000 cartridges, 60,000 pairs army shoes, 20,000 blankets, 180 barrels gunpowder, large amounts of morphine, quinine, and other medical stores. In September, acting Secretary of War, Benjamin, acknowledged that John Fraser &Co. had placed the Bermuda at the service of the government and after conferring with the Navy, the Army was using the whole tonnage.

Bermuda arrived safely at Savannah, Ga., September 18, 1861, and returned to Liverpool with a large cargo of cotton. Southerners in Liverpool rejoiced over the success. Fraser, Trenholm had been apprised of her arrival by telegram and letter by way of Quebec.

Consul F.H. Morse groaned that the Bermuda had entered Savannah with a full cargo of powder, etc., for the rebels. He was mortified and fretted over the fact that the Fraser, Trenholm’s Cheshire had left for Nassau.

Thanks to Ethel S.Nepveux, "George Alfred Trenholm and The Company That Went To War: 1861-1865". Anderson, S.C.: Electric City Printing Company, 1994

Guns and Powder for Shiloh thunder through Charleston

Kate was an important factor in the battles fought at Shiloh, Tenn., in April, 1862, having run the blockade at Charleston several times to bring in supplies. On the Saturday night preceding the battle. Kate arrived at Charleston with 1,000 barrels of gunpowder and arms and accouterments for 10,000 men. On Sunday morning, the Quartermaster engaged every available drag. and wagon to haul the cargo to the depot. The roar of the drays and wagons was incessant all day Sunday and that night. As fast as a train was loaded, it was started for Johnston's army. Kate arrived so frequently that the New York Times suggested. "Let us console ourselves like Mr. Disraeli, by allowing them to increase our respect for the energy of human nature."

About the blockade:

At the time the blockade of the southern states was declared, Virginia and North Carolina were included, even though they had not yet seceded.
                                                              
The use of the term "Blockade" is widely regarded as a Union blunder because it is a term used when one sovereign nation is at war with another. By declaring a blockade, therefore, the Union was, in effect,  recognizing southern independence.
                                                               
Shortly after the blockade was put in effect, some local southern politicians, planters and others actually enforced an embargo on cotton exports in an attempt to force British intervention to break the blockade. The effect was the opposite: the British began to look for alternate suppliers.
                                                              
The Union started the blockade with only 69 ships, but built 200 more and converted another 200 captured runners.
                                                               
The blockade runners provided 60% of the south's arms, 33% of its lead for bullets, 75% of the ingredients for gunpowder, and virtually all of its paper for cartridges. Most of the cloth and leather for uniforms also arrived by blockade runner. In all, the south imported 400,000 rifles.
                                                               
Of the estimated 1650 blockade runner ships, 1100 were captured and 355 destroyed.
                                                                
A total of over 350,000 bales of cotton were carried through the blockade.
                                                             
The most successful blockade runner was the Syren, with 33 trips through. The last runner to enter Charleston, she was captured at the dock by Union troops, sold to a private party after the war, and lost in a storm in 1870.
                                                                 
Nassau was not the only place to profit from the south's difficulty in exporting cotton. Prosperous cotton growing industries also sprang up in Egypt and India to make up for the shortfall.
                                                                
Over 30 blockade runner ships were lost off one 12 mile stretch of beach above Cape Fear, N.C.

About the blockade runner Denbigh:

Denbigh was not a warship, nor was she a Confederate vessel. Like most steam blockade runners, she was a registered British merchant ship - a civilian vessel. As such, she flew the Red Ensign, a flag that was perhaps more widely recognized around the globe than any other. Carried by every vessel of the British merchant marine, in the 19th century the so-called "Red Duster" could be found in virtually every port, harbor and anchorage in the world.

Denbigh's official Board of Trade number was 28,647. She appears to have been registered only once, on October 1, 1860. When she was sold to the European Trading Company and fitted out as a blockade runner, no change in ownership was recorded with the Board of Trade  -  a further effort to disguise her new occupation. Her original certificate of registry carries the following note, written by an anonymous clerk at the office of the Chief Registrar of Shipping in London, that officially closes Denbigh's record as a British merchantman:  "Captured by the United States and lost at Galveston  -  per Form 20 received 21 Feby 1867."

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