By the standards of the era, the cost of the American Civil War was huge. The Federal government faced a problem that no other US government had faced – how to finance the cost of a major war. Many on both sides believed that the war would be short. Few believed that it would last for four years or that it would involve so many men.


Unlike the South, the North had a diverse industrial base so it could supply its armies with most requirements. However, the money involved far outweighed any form of government spending prior to the conflict and those in power had to learn from their own mistakes.


The war in 1861 cost the Federal government $50 million on food alone for its troops and a further $50 million on supplies to quartermasters’ departments. However, both figures spiralled as the war progressed. By the time the war ended the Federal government had spent $370 million on food alone and a further $678 million on supplies. This amounted to over $1 billion for the war – a colossal sum for the time.


However, with such sums being spent, the war also saw the rise of the profiteer. It is estimated that 50% of what the Federal government spent ended in the pockets of the profiteers. Firms providing the Federal government with items inflated the price of their commodities. Few questions were asked, as the government needed war materials. However, what the government purchased was frequently poor in quality. Uniforms fell to pieces and could not withstand the conditions the soldiers lived in. Those who supplied food received their money but provided poor quality food. At the end, it was the soldier in the field who suffered. The paper ‘Harper’s Weekly’ made the point that during the Crimean War the British hanged a few suppliers for providing inadequate food for the troops and that the North should try doing the same.


Probably the best example of a firm that exploited the war was a firm that became an American legend – Colt. Samuel Colt was a brilliant businessman. He offered one-off Colt 45’s to famous generals on either side – despite his factory being in the North. He then sold the basic models en masse to either side but at a huge profit. A Colt pistol cost $15 dollars to manufacture from start to finish. Colt sold them for $25 each. Such was their reliability and popularity among the soldiers that the Federal government bought Colt’s pistols in huge numbers resulting in Colt making huge profits. Colt was also a very generous contributor to the campaign funds of senior politicians, who also endorsed his pistols at the highest level. Remington, who produced a highly competent pistol, did not ‘play the same game’. Therefore, despite the quality of his pistols, his firm only received a contract for 5000.


The supply problems of the South were huge. It did not have the economic base of the North and relied on cotton and tobacco for its pre-war wealth. Europe was a major market for both of these commodities and the Union’s naval blockade of its harbours proved to be very difficult for the South. Blockade-runners were common but many were caught. Those who did get through demanded to be paid in gold and the limited gold reserves of the Confederacy soon dwindled. When gold became almost impossible to get, the Confederacy paid in cotton. This was a valuable commodity but required the blockade-runner to do the same again (in reverse) to get his ship across the Atlantic. His other choice was to sell the cotton to the North, which was certainly a possibility, as the North needed as much cotton as it could get and it also meant that a journey across the Atlantic was less necessary.


The economic impact of the war quickly hit the South. By early 1863, the dollar used by the Confederate government had dropped in value by 80% since it was introduced. As the war progressed, the blockade became more firmly put in place. Therefore, its impact became greater.