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Civil wars impose large costs on the domestic economy as they are destructive of human lives and infrastructure. They threaten a country's legitimacy, its institutions and the rule of law. They also make investments riskier as well as it governments shifting expenditures to the conduct of war from output enhancing activities. This essay will examine the impact of the civil war on the economies of the South and the North.
The American civil war took place in 1861-1865 and it was largely due to Northern control of the federal government. The North was forced to compromise several of its national economic policy objectives because of southern opposition and the strong senate position the South held (The Gale Group. 1999).
The civil war was mostly fought in the south and so the south was more devastated and its property destroyed more than that of the north. E.g. in south Carolina, there was 965,000hogs before the war but only about 150,000 remained after the war. The emancipation of the slaves also destroyed a large part of the south's capital and creating a need for a new labor system. Confederate bonds and currency were now worthless, depriving the south of a great fortune of wealth. Almost all the banks in the south were destroyed, and there was little capital available to finance reconstruction (The Gale Group. 1999).
The North was not affected much apart from the fight that took place in Gettysburg. The North developed a total war strategy and the Northerner's strategized the South's defeat destroying its economy, way of life and its manpower. The South only surrendered when it was reduced to shambles, the war left the South's agrarian economy devastated. The price of cotton was left depressed and this also contributed to the South's defeat. The once wealthy planters and merchants found themselves left in abject poverty (The Impact of Civil War)..
The economic impact of the civil war was felt more in the South than in the North because this is where the fighting took place. The south's infrastructure was destroyed, the currency was depressed, the banking institutions destroyed and its agrarian economy reduced to shambles. The North was not affected much and after the war the North recovered quickly and its industrial economy churned goods for the rest of the country. But in the South people could barely afford transportation as it was very expensive.
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