WEBVTT

NOTE The Rhett Butler Effect

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In the last class, we set the scene for this somewhat controversial thesis about why or how the Union defeated the Confederacy.

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Now, basically that outline there is that the Union pursued a military strategy of the Anaconda Plan, of surrounding and constricting the South.

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The South strategy, overall strategy, was one of King Cotton, where we have the goods that will allow us to survive, that will bring Europe in on our behalf.

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So our view is that the key to the war and the outcome of the war was the battle at sea, where one side did wear uniforms but did not shoot to kill, and that's the Union blockade fleet.

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On the other side, they didn't even wear uniforms, and they never fired their guns, or very rarely fired their guns, and that's the blockaders.

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This is where the real important battle is won or lost.

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Now, of course, with the Union blockade, they're capturing ships, they're capturing cargo, they're forcing the blockade runners to use smaller, faster, using engines rather than sails,

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and so they're forcing higher costs on these blockade runners.

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The prices of goods in the South increase, and not just for monetary reasons, but because of the blockade itself.

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And what we're going to see is that the blockade increases certain prices much faster, much higher than others.

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And as you see in the book, in chapter 2, there's a lot of evidence, there's a lot of concern about the fact that luxury goods seem to be imported from Europe and were readily available.

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The prices were high, but they were readily available, whereas necessities were going up faster and were more difficult to come by.

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So, and when we speak of luxuries and necessities, that's really bad language in terms of economics.

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In economics, there is no particular meaning to necessities.

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So we don't ever talk about, in economics classes, need, we always talk in terms of want.

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Needs are those things that people want a great deal, or must have in their own mind.

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So a word like need is a four-letter word in economics.

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In the South, much of everything had to be imported.

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Anything that was made out of metal, machinery, medicines, clothing,

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Everything that was manufactured, in other words, tended to be imported either from the

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north or from Europe.

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Things that were partially produced in the south but also imported that was another class

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of goods, that would include beef, certain grains that were both grown in the south but

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also had to be imported into the south to meet all of the demand.

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And there was domestically produced products, which were domestically produced in the South,

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but by and large all consumed in the South and not exported, and that would include things

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like pork or swine and corn.

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And then finally there are the export products, and primarily on this account you would certainly

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include cotton and tobacco, but there were a few other products that were luxury goods,

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excuse me, were export goods.

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Now the idea that in a wartime situation your imports consist heavily of goods that are

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are thought to be luxury goods, specialty foods, luxurious clothing, cognac, things

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of this nature, while you don't have enough food to feed the troops and the citizens seems

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irrational, it seems illogical, it certainly seems self-defeating.

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And so what we try to do, particularly in this chapter, is explain why this situation

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would exist.

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Why would you have this otherwise irrational phenomenon coming on board at this crucial

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time?

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Well first of all we notice that in the import manifests of the blockade runners, we do see

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We see a lot of luxury goods, but we also see things like sewing needles, and quinine, medicines, and basic things needed for the production of clothing, the maintenance of clothing.

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So, it wasn't all luxury goods that were coming through the blockade.

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The blockade certainly raises shipping costs.

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What is the cost of bringing goods into the country?

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That's really the key thing.

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You really see the shipping cost increasing at exorbitant rates.

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What does this do?

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It raises the price of imports.

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That's something that seems fairly obvious.

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Let's take a look at that in graphical form.

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Imports into the south, you take a demand on the part of southerners for a particular

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They're good, and let's say the supply is coming in from Europe.

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So you originally have a quantity coming in before the war and a price of this imported

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good, let's say it's clothing.

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What the blockade does is it makes it more difficult to supply this good.

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So we show an increase in the difficulty of supplying the good graphically by shifting

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the supply curve.

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And so we move from this market position to this market position.

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So that the price in the south increases and the quantity that's being brought in and purchased

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is going to decline and the price in Europe is actually going to fall.

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So a big chunk of the total revenue here is going to the blockaders.

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We didn't even really concern ourselves with shipping cost originally, but now with the

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blockade, the blockaders are picking up all this profit.

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I guess I should have not used red for profit, but you get the idea.

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Now on the other side of the world, let's see what's happening.

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into Europe and in this case we'll just use cotton, the most dominant product in the export

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Trade, and here we have the supply coming in from the south, southern states, and the

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equilibrium or market clearing price and quantity that would exist prior to the war.

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Okay, but imports leaving the South, going to Europe, also face the blockade. It's not a one-way blockade, it's a two-way blockade, and actually the blockaders are more interested in themselves in nabbing the cotton going out, rather than the coffee going in.

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But it does the same thing. It reduces the supply with this blockade and raises the price and reduces the quantity.

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So these are all commonsensical things from what we know about blockades and the difficulty and the cost.

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But look at here, the price in the south of cotton is expected to fall because of the blockade, because it's so much more difficult to get out, the local price of cotton is going to actually be depressed.

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It's the price in Europe that's going to be high.

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So again, the blockaders are going to take this whole area of profit.

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So the more strict this blockade is, the higher the cost of running that blockade,

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and this wedge develops where the South isn't getting very much for its cotton,

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yet they're paying through the nose for the products that it is importing.

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So this blockade has an overall impoverishing effect on the people of the South, the economy of the South.

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It's a very detrimental effect and so the more successful the blockade is, the worse it is going to be for the southern economy and of course the war effort.

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and on the flip side of that, it's going to make it easier for Union armies

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attacking because this Confederate armies aren't going to be as well provisioned

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and the people on the home front are going to have less food, clothing and shelter.

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They're going to be less able to maintain their transportation system and so on.

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So, this is a very, very central problem for the Confederates.

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Yes?

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I was wondering, in this month, are most identically the same as what the southern South American program would have done or did do?

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And is that not the same with the policy of the prices in Europe?

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Maybe if we put it on the target for a while, we can have a better understanding.

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in terms of cotton. It would have a different effect in terms of clothing

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possibly, but certainly would have the same effect in cotton. And the idea there

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would have been, okay, if we imposed an airtight embargo and essentially reduced

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the price down to nothing, nobody's selling, that's what an embargo is, the

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The price in Europe would have skyrocketed, and the idea is at that point, the Europeans

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would have broken down the blockade, and so the idea is, well, the Confederates, cotton

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doesn't deteriorate, so if we can hold on for one season, enforce the intervention, we'll

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get all our money back next year.

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It didn't work that way though, obviously.

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I've got the idea from reading the book that the copy from Egypt and India was more expensive.

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Yes.

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And I wondered why that was the case, why were they producing culture that was good?

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Well, I think the, I'm not sure about Egypt, but I think Indian, Indian cotton was, it wasn't, it just took a long ways, you know, transportation wise, you'd have to go a very long ways.

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Egypt is closer, but I think that the local economy couldn't expand output because of the constraints on the amount of arable land in Egypt.

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So, you know, it wasn't like you just plant more cotton in the United States. You've got plenty of land.

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In Egypt, if you planted cotton, that means you weren't planting food.

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and so there was a much higher opportunity cost in Egypt for growing cotton and so that I think those are the the reasons and the fact that the things that I mentioned last week about developing cotton agriculture took a while to develop over time it wasn't something you could just like today you go from cotton to soybeans with a flip of a coin literally with a flip of a coin so things were different but now I want

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I want to try to explain something that's very tricky in economics.

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It's about relative prices, about one good versus another, and use that approach to explain

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why luxuries were available, so-called luxuries, and why necessities were in such short supply.

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Any kind of necessity that was coming in from Europe tended to be in short supply.

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Well, this is sometimes called the Elchin-Allen effect in terms of looking at prices and it's

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just a little something that appeared in a college textbook a number of years ago.

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Based on a letter to the editor, not George's, this lady in the state of Washington where

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where they grow a lot of apples was writing to the editor of the paper to complain that

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all of the good apples were being shipped to other states and that we had to have either

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processed apples or apples that were less desirable, second-rate or medium-grade apples

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rather than the premium or first-rate first-grade apples.

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Al-Chanel explained this, why the good apples which were grown in Washington by most of

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them were exported and they did this by noting that shipping cost of apples from the state

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of Washington to let's say the city of Washington DC all the way across the country were the

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same whether you shipped a crate of premium quality apples or low quality apples and that

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Fixed cost reduced the relative price of premium to second rate apples in the city of Washington.

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And it's just a matter of simple arithmetic in some sense.

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Let's say one pound of premium apples cost $0.50, whereas one pound of the second rate

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Apples was 25 cents in the state of Washington.

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So you're basically getting, you can get two pounds of low grade for one pound of high grade.

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Transport cost.

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Well, let's say it costs another 50 cents to transport them from one end of the country to the other so that the selling price in Washington, D.C. is going to be $1 for the premium and 75 cents for the second grade cut of apples.

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So in Washington, in order to get one pound of the premium great apples, you give up the equivalent of two pounds of second class apples.

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Now, you can get twice as much for the same amount of money, whereas in the city of Washington,

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one pound of premium-grade apples is only worth one and a third pound of the second

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Grade. So, in the state of Washington, you're looking at the choice of one pound versus

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two pounds, and in the city of Washington, your choice is one pound and one one-third

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So, given those different prices, the people in Washington are more likely to go for the

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lower quality apple, and the people in Washington, the city of Washington D.C., are more likely

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to go for the high priced apple.

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This also pertains to potatoes.

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People far away from the potato growing regions, where the transportation costs are great,

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are more likely to get the premium grade potatoes, potatoes that are unbruised, potatoes that

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are uniform in size, whereas if you go to Idaho, I've only been there one time, but

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I noticed that both in the restaurant and in the stores I mean they were very fine potatoes

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but the ones in the store were all not the nice uniform ones that we get in our stores

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and in the restaurant that I was in I got a humongous potato but it was nothing that

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was ever going to be shipped I mean it was like two and a half pound potato.

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This is the same way. If you're going to ship a lobster, you're going to put a lobster in a tank, put it on an airplane and ship it from Maine to Auburn, you're not going to ship second-rate lobsters, you're going to ship the pre-milled ones.

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And it turns out that the best tasting lobsters are about one and a half pounds each. That's

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one at their prime age. So if they go down into the sea in Maine and New York and Boston

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or wherever and they pull up little teeny lobsters, they're not going to be that good.

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you can pull up huge lobsters. When I was in Massachusetts out on Cape Cod, went into

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a fish market and they had like a 25 pound lobster there. And I thought, wow, that would

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be so neat. I mean you can't imagine how much butter you'd need for something like that.

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But the guy said, oh no, there's no way in the world you'd want to eat this thing. We

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We just keep it around just to show tourists, but it's just something that you would never

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eat.

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You always want that sort of premium age, premium size lobster, and those are the ones

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that get shipped out because of the high transportation costs.

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More in terms of a blockade type situation occurs right here in the city of Auburn.

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Does anybody in here go to the Auburn football games?

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Couple takers.

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Well it's kind of a very unusual thing that occurs here in Auburn, six Saturdays of the

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year approximately.

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The people of Auburn and Auburn fans tend to be almost, at least generally, beer drinkers.

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If they're a drinker, they tend to be beer drinkers.

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Not a lot of, you know, high-end wine consumers, not a lot of martini drinkers, there's no

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martini bars, you know, that kind of thing, tends to be mostly beer drinkers around here.

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and if you come to the games, there will be people all around the whole area and generally if they're drinking alcohol products, they're drinking beer and then something very unusual happens, they have to cross through what amounts to a blockade or a prohibition because in order to get into that stadium you have to go through a checkpoint and if you try to cross that checkpoint

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with alcohol and it's discovered it can be confiscated, maybe kicked out of the

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stadium and things of that nature that's right Ozzie and I'll don't worry I'll

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invite you up to my skybox next year

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It's like watching it on a giant TV, but if we look down in the stands, we see that a lot of people are not obeying this prohibition against alcohol, they're actually consuming alcohol, and they're not consuming beer.

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So this 85,000 group, maybe a certain percentage of them are alcohol drinkers, and a certain percentage of them continue to drink inside the stadium, but they don't drink beer.

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You cannot get a keg past the checkpoint. As a matter of fact, it's pretty difficult to even get a 12 pack or even a 6 pack by the checkpoint, but the risk is very high.

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How about the night before you tape it under your seat, or you're going to slip?

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The types of things that are consumed in there, the tastes and preferences of the individuals

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are totally tilted because of the risk associated with bringing in alcohol products.

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People go for the smaller, more compact, more alcohol per ounce, you know, the bigger bang

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for your buck, essentially, and it's that prohibition line or that blockade line that

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changes the risk-reward scenario in favor of the product with more alcohol per ounce

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or per area of volume.

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The same thing holds true with illegal drugs.

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The prohibition against illegal drugs sets up kind of like a prohibition boundary around

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the United States to make it more difficult to get, say, marijuana from Columbia, South

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America into Columbia, South Carolina.

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And the risks of running that blockade are tremendous.

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You of course lose all your drugs, you lose your plane or your boat and you get thrown

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in jail for a number of years.

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And so the risk associated with running that kind of blockade is very significant and it

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makes up almost entirely the price of illegal drugs.

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So that drugs in, marijuana in Columbia, South Carolina, Columbia, South America, may be

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only fifty dollars a pound.

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But when it gets into the United States, it may be on the range of a thousand or two thousand

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or three or four thousand dollars a pound.

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So that transport cost makes up a huge percentage of it.

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So when people are looking to run drugs, they are always looking for the more potent version

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of the product, whatever it happens to be.

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So that's what they're buying because it's more potency, more compact, more value, economic

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Bank Value, and gives you greater concealability, smaller packages, smaller faster modes of

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transportation and ultimately more profits when the deal is done.

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So in all of these cases we see that these blockades or these prohibition boundaries

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that people have to pass through, whether it's the football stadium, whether it's

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the illegal drug catching network, or even more subtly in the case of just moving apples

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from one part of the country to another, change relative prices and they change the composition

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of imports and exports.

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And so we speak of luxuries and necessities, and the book has, quote, several observers

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from the period to this effect, that people were complaining, people were upset that these

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luxury goods were passing into their economy, soaking up their dollars, and yet there wasn't

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enough food to feed children in many cases.

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But what we're really looking at is goods that have high economic value relative to

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the bulk of the product.

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Those goods are going to be favorably affected by a blockade, whereas products that are really

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bulky and not without much value are going to be adversely affected by running the blockade

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into the South. We develop some examples and some evidence to this effect and I'm going

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to try to go through this example in a little detail. It's a hard concept to grasp in many

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respects. And it certainly was a hard one to find concrete statistical evidence for.

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As you see in the book, we had a lot of difficulty trying to bring out that

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Evidence. We set up this scenario where pre-war one pound of coffee is equal in

215
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price to two pounds of sugar. So coffee, they're both about the same size per

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Sugar was less expensive, it was coffee that had more value relative to its bulk, it really

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wasn't a luxury good, we quote one observer who noted that a jewelry store in Atlanta

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was using coffee beans instead of diamonds in women's jewelry because diamonds were kind of

219
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beside the point at this point but coffee really had such a special meaning that they would even

220
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use it in women's jewelry. Pre-war, a pound of coffee is equal to one dollar and two pounds of

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of Sugar is equal to one dollar. So this is also equal to one dollar. Then we add an extra

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An extra dollar of transportation cost.

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If we add an extra dollar of transportation cost, then one pound of coffee is going to

224
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be equal to two dollars.

225
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But its previous equivalent over here is now going to cost $3, a dollar for the sugar and

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an extra dollar for each pound of transportation so that the sugar is rising in cost relative

227
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to the coffee.

228
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And as we raise the transportation cost at another dollar, the coffee becomes three dollars,

229
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but the sugar is now going to be equal to five dollars.

230
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$1 for the sugar and $2 for each pound of transport cost. So again, the price of sugar

231
00:32:23.820 --> 00:32:34.760
is rising relative to the price of coffee. It's the same business. The blockade runners

232
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aren't really particular about what they're running. They're running to make a profit.

233
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And as we raise that transportation cost ever higher, sugar becomes relatively more and

234
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more expensive to coffee.

235
00:32:54.940 --> 00:33:01.020
And conversely, while coffee is going up in price, it's still getting relatively less

236
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expensive for consumers.

237
00:33:05.660 --> 00:33:13.300
So in your overall basket of choices, you're going to veer more and more towards coffee

238
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and less and less towards sugar.

239
00:33:20.260 --> 00:33:28.340
And this is the more or less the foundation behind the idea that goods with high value

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00:33:28.340 --> 00:33:35.120
relative to their bulk are going to fall in price relative to goods that are low value

241
00:33:35.120 --> 00:33:42.240
Relative to the bulk, the weight and the volume that they have on the ships, and so what we saw

242
00:33:44.000 --> 00:33:51.680
or what we can look back to see was that certain items were just way too heavy to be even considered

243
00:33:52.400 --> 00:33:59.440
to be imported into the South. The ships were getting smaller and so certain types of machinery,

244
00:33:59.440 --> 00:34:06.920
for example, it's just cost prohibitive to try to import those types of things into the

245
00:34:06.920 --> 00:34:07.920
South.

246
00:34:07.920 --> 00:34:14.440
And other things that were just very bulky relative to their value, grain products for

247
00:34:14.440 --> 00:34:21.920
example, is just way too expensive transportation wise to bring those in.

248
00:34:21.920 --> 00:34:29.280
And there's lots of anecdotal evidence about the types of products, and if you look through

249
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What you'll see is that the types of goods that were coming through, yes they were luxury goods, but interspersed with them were non-luxury goods that just happened to be high value relative to their bulk.

250
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In order to, not to prove this, but to better illustrate this and to better investigate this phenomenon, we did some empirical statistical work to try to back it up.

251
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And there's a surprising amount of good evidence that's available about what was happening in the South.

252
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A political scientist named Schwab, for example, developed a list of prices for 22 commodities in the South during the Civil War.

253
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And using that data, we were able to show what was happening to the price of luxury prices to necessities.

254
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And what we showed, simply put, was that the price of luxury goods during the war was actually declining.

255
00:35:52.280 --> 00:35:59.280
For much of the war, the prices of luxury goods was declining.

256
00:35:59.280 --> 00:36:21.280
at the same time that capture rates, so this is capture rates, and this is luxury prices, and this is time.

257
00:36:21.280 --> 00:36:36.320
And then at the end of the war, remember the capture rates declined fairly, fairly drastically

258
00:36:36.320 --> 00:36:39.800
and the price of luxury goods turned up.

259
00:36:39.800 --> 00:36:49.760
So the general feel for the data as best we could reconstruct them is that, and sometimes

260
00:36:49.760 --> 00:37:09.760
The theory really does hold up, as the blockade becomes stricter, the price of luxury goods falls, and it wasn't to the end where the capture rate really fell off,

261
00:37:09.760 --> 00:37:23.760
When the blockade becomes stricter, the price of luxury goods falls, and it wasn't to the end where the capture rate really fell off, that the price of luxury goods went up.

262
00:37:23.760 --> 00:37:38.760
Now there's a lot of things going on here. Southerners are getting poor, ports are being closed, the government is commandeering boats,

263
00:37:38.760 --> 00:38:05.760
and of course they're not working off of a price, off of a hardcore price system with profits and losses, they're just commandeering and stacking boats with war supplies, so there's a lot of things going on here that could upset this data and could have painted a different picture of what we actually see statistically.

264
00:38:05.760 --> 00:38:16.760
And we also, to further sort of illustrate and investigate this hypothesis to see, you know, is this the real reason?

265
00:38:16.760 --> 00:38:22.760
We looked at a set of luxury goods and a set of necessities.

266
00:38:22.760 --> 00:38:25.760
And again, these are poorly defined creatures.

267
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We used coffee and tea as the luxury goods, the ones with a high value per bulk.

268
00:38:31.760 --> 00:38:39.360
and then we used necessities sugar and molasses. Now sugar actually was

269
00:38:39.360 --> 00:38:47.120
considered a luxury good in the South during the Civil War. It was difficult to

270
00:38:47.120 --> 00:38:54.520
get once New Orleans had been captured. It was very difficult to get. Coffee was

271
00:38:54.520 --> 00:39:05.520
was very difficult to get. The Southerners used all sorts of substitutes for these products.

272
00:39:05.520 --> 00:39:19.200
They would take various nuts and twigs and flowers and grasses, burn them, and then put

273
00:39:19.200 --> 00:39:45.200
So they would put the end result in water, boiling water, to make a coffee substitute, or they would mix things like burnt chicory in with the coffee to make it last longer, and they would use, of course, tea products over and over again until they produced no results, and they would make tea substitutes as well.

274
00:39:45.200 --> 00:39:50.680
So there was, you know, actually all of these products were in tight supply, but if you

275
00:39:50.680 --> 00:39:57.760
look at coffee and tea in the import mix, they were much more luxury goods than sugar

276
00:39:57.760 --> 00:40:00.400
and molasses.

277
00:40:00.400 --> 00:40:04.960
And we have prices from various cities in the south.

278
00:40:04.960 --> 00:40:18.960
I think it was Richmond, Montgomery, and I've forgotten the other ones.

279
00:40:18.960 --> 00:40:23.640
We had four cities where the prices were in the newspaper basically and could be collected

280
00:40:23.640 --> 00:40:26.120
from the old newspapers.

281
00:40:26.120 --> 00:40:36.720
and to set up time series data of these prices, of the prices of coffee and tea and the prices

282
00:40:36.720 --> 00:40:44.440
of sugar and molasses in order to see how well the capture rate of boats coming into

283
00:40:44.440 --> 00:40:48.420
the south explain the changes in prices.

284
00:40:48.420 --> 00:40:56.000
And I'm not going to get into the statistical methods and that kind of stuff, but we got

285
00:40:56.000 --> 00:41:12.000
We've got some evidence that suggests support for the notion that the number or percentages of ships that were being captured really was the most dominant influence on tilting the prices of luxuries versus necessities.

286
00:41:12.000 --> 00:41:22.000
And the more ships they captured, the more likely the blockade runners would try to run luxury goods through rather than necessities.

287
00:41:22.000 --> 00:41:38.000
So basically we feel that we have the mystery solved with respect to why necessities were shunned during a war effort and why luxuries were relatively available.

288
00:41:38.000 --> 00:41:44.000
We call it the Rhett-Butler Effect, but it's really the blockades effect.

289
00:41:44.000 --> 00:41:56.000
How strong the blockade became made the problem on the home front, and this was really a problem of morale, of southern morale.

290
00:41:56.000 --> 00:42:13.000
That luxury goods would be easy to come by and necessities would be very difficult to come by and it's in many cases just simply not available to southerners in their economy.

291
00:42:13.000 --> 00:42:23.000
Okay, any questions about any of this stuff? This is Claire.

292
00:42:23.000 --> 00:42:38.000
I think if I were like running my house home, and these budgetary items would be cutting in, I would actually want more necessities, so I would spend more on the prices of necessities going up.

293
00:42:38.000 --> 00:42:52.400
Yes, I mean it is very complicated and it's an effect that does not affect

294
00:42:52.400 --> 00:43:00.840
everybody in the same direction. For example, if they put a 50 cent tax on

295
00:43:00.840 --> 00:43:08.640
on Gasoline, 50 cents per gallon, both on premium and regular.

296
00:43:08.640 --> 00:43:13.380
That might cause some people to switch from premium to regular, and it might cause other

297
00:43:13.380 --> 00:43:20.440
people to switch from regular to premium, but the overall effect is that it's going

298
00:43:20.440 --> 00:43:26.800
to encourage more people to buy more of the premium gas.

299
00:43:26.800 --> 00:43:32.100
There's going to be less gasoline purchased overall, but it's going to tilt it in the

300
00:43:32.100 --> 00:43:35.760
direction of that more potent gas.

301
00:43:35.760 --> 00:43:39.680
So you may get some college students who say, you know, I can't afford it anymore, so I'm

302
00:43:39.680 --> 00:43:40.680
going to go to the lower.

303
00:43:40.680 --> 00:43:47.440
And then you might get some more calculating business types and think, well, you know,

304
00:43:47.440 --> 00:43:49.920
I'm paying 50 cents no matter which one I get.

305
00:43:49.920 --> 00:43:59.920
So you get more bang for the buck, so to speak, with that higher octane gasoline.

306
00:43:59.920 --> 00:44:05.320
So we're not looking at that individuals because there are a lot of individuals who actually

307
00:44:05.320 --> 00:44:17.640
did do exactly what you suggest is that you spend all of your income on the necessities.

308
00:44:17.640 --> 00:44:30.760
Food, and nothing else. That would be basically it. Another thing this does, the more tight

309
00:44:30.760 --> 00:44:36.920
the blockade becomes, is it forces Southerners to do what? They have to start making their

310
00:44:36.920 --> 00:44:47.120
own stuff. They have to become more self-sufficient and less working from their comparative advantage.

311
00:44:47.120 --> 00:44:54.400
So the southern economy is transformed, a lot of it voluntarily, a lot of it southerners

312
00:44:54.400 --> 00:45:05.400
just moving their production from cotton to other crops, likewise people in the city,

313
00:45:05.400 --> 00:45:10.460
and then the government actually forces a lot of self-sufficiency instead of saying

314
00:45:10.460 --> 00:45:16.460
And we're going to get our pistols from Europe or our swords from Europe or our military

315
00:45:16.460 --> 00:45:19.860
buttons or our cannons from Europe.

316
00:45:19.860 --> 00:45:25.600
They decided in many cases to rely on domestic production so that Southerners would have

317
00:45:25.600 --> 00:45:31.220
to start from scratch in many cases to learn how to do things that they had never done

318
00:45:31.220 --> 00:45:39.420
before and that is, it's kind of nice to have your own munitions plants and that kind

319
00:45:39.420 --> 00:45:45.180
of Things, but it's also very, very expensive, because if you don't have the expertise, if

320
00:45:45.180 --> 00:45:50.660
you don't have the comparative advantage, if you don't have the right resource mix, it

321
00:45:50.660 --> 00:45:58.980
becomes very difficult, and there's industry after industry, like building warships.

322
00:45:58.980 --> 00:46:03.140
Initially they decided they'd buy from Europe, they ran into a lot of problems with that,

323
00:46:03.140 --> 00:46:09.280
so they turned to domestic production, both the Confederates and the state governments,

324
00:46:09.280 --> 00:46:14.720
When they started building warships, but they didn't have the machinery, they didn't have

325
00:46:14.720 --> 00:46:22.440
the technical knowledge or the expertise, they had difficulty in procuring the materials,

326
00:46:22.440 --> 00:46:27.960
the boat, the armaments, the metal plating, things of that nature.

327
00:46:27.960 --> 00:46:36.960
And so the ships were poorly constructed, took them a long time, most of them were actually

328
00:46:36.960 --> 00:46:50.560
The end result of these higher prices that are coming into the southern economy is a

329
00:46:50.560 --> 00:46:56.320
lot of movement towards self-sufficiency.

330
00:46:56.320 --> 00:47:01.800
That again is a very difficult blow to an economy.

331
00:47:01.800 --> 00:47:10.160
This is basically what Germany tried to do during World War I and World War II.

332
00:47:10.160 --> 00:47:18.140
Because of their strategic position, they were either or potentially surrounded by enemy

333
00:47:18.140 --> 00:47:24.240
combatants who weren't exactly going to allow them to trade with the rest of the world.

334
00:47:24.240 --> 00:47:32.840
And so Germany had to, they had to turn to the strategy of self-sufficiency and domestic

335
00:47:32.840 --> 00:47:33.840
production.

336
00:47:33.840 --> 00:47:39.280
In their case, you can make a much better case for Germany doing something like that

337
00:47:39.280 --> 00:47:45.440
because they had a much more, even at that time, a much more diverse economy with agriculture,

338
00:47:45.440 --> 00:47:53.640
manufacturing and so on, in a highly skilled and diverse labor and things of that nature.

339
00:47:53.640 --> 00:48:05.280
And yet it's still really, the critical blows in the German economy were those resource

340
00:48:05.280 --> 00:48:13.160
shortages, and towards the end of both wars, it really stuck out like a sore thumb where

341
00:48:13.160 --> 00:48:19.440
they couldn't do so much on the battlefield because they were lacking the necessary resources

342
00:48:19.440 --> 00:48:20.440
in their home front economy.

343
00:48:20.440 --> 00:48:21.440
Yes?

344
00:48:21.440 --> 00:48:45.440
During this period, what happened, say, with commerce in particular, between the North and Canada and the American, and say, Texas and Mexico, it seems that there was some opportunity there.

345
00:48:51.440 --> 00:49:00.200
changed quite a bit. For example, the Northwest, you know, Iowa and Minnesota,

346
00:49:00.200 --> 00:49:07.100
places like that, Indiana, Illinois, would trade, send their grain products to the

347
00:49:07.100 --> 00:49:15.680
South. That changed. The grain products subsequently went east, to the east and to

348
00:49:15.680 --> 00:49:24.720
to Europe, and a lot of American grain started flowing out over to Europe.

349
00:49:24.720 --> 00:49:35.280
There was, I guess, some more trade between the North and Canada, and the South did try

350
00:49:35.280 --> 00:49:41.820
to develop trade routes into Mexico that wasn't really that successful.

351
00:49:41.820 --> 00:49:48.380
The transportation cost of getting things over to Texas and then into Mexico, and then

352
00:49:48.380 --> 00:49:53.300
you're into Mexico and there's really no international shipping routes.

353
00:49:53.300 --> 00:49:59.700
So that really was a possibility, but there was no railroad, for example, all the way

354
00:49:59.700 --> 00:50:03.460
from Texas down into Mexico at the time.

355
00:50:03.460 --> 00:50:08.440
Texas did have some railroads, but it was to exploit local cotton production.

356
00:50:08.440 --> 00:50:12.800
So basically, you get to the end of the line and then all of a sudden you're walking, or

357
00:50:12.800 --> 00:50:19.480
you're in a cart drawing products.

358
00:50:19.480 --> 00:50:23.960
And so it was very difficult.

359
00:50:23.960 --> 00:50:33.040
The idea of shipping the Texas cotton out of the Confederacy through Mexico to Europe,

360
00:50:33.040 --> 00:50:43.680
They've looked at the cost of doing all that and it wasn't just an easy profit opportunity.

361
00:50:43.680 --> 00:50:53.040
And so transportation costs, we take so much for granted nowadays with electronic information

362
00:50:53.040 --> 00:50:58.780
and all sorts of modes of different transportation.

363
00:50:58.780 --> 00:51:04.660
Back then, things were much more difficult and actually, you know, things like the railroad

364
00:51:04.660 --> 00:51:12.380
was very, very important to the economy and to the war, but it was brand new and not as

365
00:51:12.380 --> 00:51:17.580
extensively available as it is today.

366
00:51:17.580 --> 00:51:23.740
So they tried that, but it didn't really work out for them.

367
00:51:23.740 --> 00:51:31.740
There was not much cotton exported through Mexico that they could tell.

368
00:51:31.740 --> 00:51:38.820
Another thing that is kind of interesting is that there was still a north-south trade.

369
00:51:38.820 --> 00:51:45.100
There was a little bit of running between the states, but there was actually an official

370
00:51:45.100 --> 00:51:54.500
between the north and south where the southern armies would trade cotton with the northern

371
00:51:54.500 --> 00:52:00.020
armies in return for usually beef or some sort of food product that they needed. They

372
00:52:00.020 --> 00:52:06.220
wouldn't trade obviously ammunition or uniforms, but they would trade those basic commodities.

373
00:52:06.220 --> 00:52:12.700
The north needed the cotton. Cotton was very expensive in the north. They needed cotton

374
00:52:12.700 --> 00:52:19.980
for the cotton mills in New England, and so there was political pressure on the Lincoln

375
00:52:19.980 --> 00:52:28.220
administration to cut deals, and the Confederates were happy to go along with it when they were

376
00:52:28.220 --> 00:52:33.060
in such dire need, particularly for the beef products for the troops.

377
00:52:33.060 --> 00:52:52.060
What about the exchange of offered or captured, offered or captured, I mean that seems to me a peculiar thing to have a periodic exchange, especially when these guys were pretty good at what they did.

378
00:52:52.060 --> 00:52:58.060
You know, Ozzie, it was an entirely different world at that time.

379
00:52:58.060 --> 00:53:06.060
If you were captured in a battle, chances are you would be paroled.

380
00:53:06.060 --> 00:53:12.060
And so they would take your gun and they would wipe out a piece of paper

381
00:53:12.060 --> 00:53:17.060
and it would say, you know, I agree not to fight for at least 10 months or something.

382
00:53:17.060 --> 00:53:24.020
and you'd sign that and people basically went along with that they were happy to

383
00:53:24.020 --> 00:53:31.860
be sent home and if you were recaptured I think they can shoot you on the spot so

384
00:53:31.860 --> 00:53:41.600
that was right and so that was quite common and also you know with the

385
00:53:41.600 --> 00:54:11.600
Blockade Runners. They would be released as well. No, no, the blockade runners could run over and over again. They didn't have to be paroled, because they weren't they weren't a military force. They were just not pirates, sailors. And in the blockade runners were very often getting the bidding for the boat that they had just lost. So those kind of things were much more fluid. Now towards the end of the war,

386
00:54:11.600 --> 00:54:18.360
The union stops paroling, they stop having these prisoner exchanges where one side would

387
00:54:18.360 --> 00:54:26.600
agree to turn over so many and the other side would match it and that stopped later in the

388
00:54:26.600 --> 00:54:35.040
war and this is when the prisoner populations in the north and south started to grow and

389
00:54:35.040 --> 00:54:41.000
where all of these nasty problems about people dying in these prisons, Andersonville the

390
00:54:41.000 --> 00:54:49.720
The most notable, but Elmira up in New York, you know, these were places, certainly the

391
00:54:49.720 --> 00:54:56.000
Confederacy didn't have, had no resources to take care of these troops.

392
00:54:56.000 --> 00:55:04.840
They had barely enough resources to, you know, keep them in one spot.

393
00:55:04.840 --> 00:55:15.060
and you know so that was another change in war tactics where the previous tendency was

394
00:55:15.060 --> 00:55:22.760
either kill your enemy or parole them or trade them or something or sell them as a slave

395
00:55:22.760 --> 00:55:28.520
but get them out of your hair, get them back to work somehow and then at that point, not

396
00:55:28.520 --> 00:55:32.760
saying that was the first point in world history where this is done but at that point after

397
00:55:32.760 --> 00:55:39.760
It was still the element of chivalry there, though. I mean, you know, the...

398
00:56:02.760 --> 00:56:09.760
I'm sorry about that, but I hope you all get a chance to see this special lecture and be back here next week at 2.30.

399
00:56:09.760 --> 00:56:18.760
We've got some interesting things to do because next week we're going to start to look at why the South shot itself in the foot.
