funded free legal counsel for indigent defendants.”
101
With some
charitable assistance, the Reconstruction administrations laid the
basis for an educational system that was to comprise university col-
leges as well as high schools, open to the freed people and their
descendants. Th
e social programs of Reconstruction demanded
resources that were in chronically short supply. Raising taxes alien-
ated potential supporters. Th
e South experienced a credit famine, as
banks and storekeepers would advance supplies only for cotton cul-
tivation and did so in far more modest installments than they had
before the war, when slave property could be off ered as collateral.
Th
e empowerment of the freedmen was carried through in the
teeth of continuing resistance from white “rifl e clubs,” the Ku Klux
Klan, and kindred organizations. Th
e Reconstruction administra-
tions fared best—at least for a while—in states where there was
either a large black population (South Carolina and Louisiana) or a
solid phalanx of white Republicans (Texas and Arkansas).
102
Much
depended on the quality and energy of local political leadership.
What was needed was an alternative to Federal troops as guarantors
of the new order.
In the few areas where there were not only Union soldiers but
also black elected offi
cials and police, there were instances of freed-
men’s labor associations successfully taking over and running the
plantations. Th
is occurred on several of the rice plantations along
the rivers of coastal South Carolina. Th
e planters’ practice of pay-
ing wages in “checks” at high-priced stores that they controlled had
bred hostility to the wage system: “In Colleton County, by the early
1870s, several large plantations were operating under what a news-
paper called “a sort of ‘communism,’ ” with black laborers forming
societies, electing offi
cers, and purchasing estates collectively.
103
But
such enclaves of labor power were precarious, and in the later 1870s
black organization and ownership was to be targeted in South
Carolina as it was elsewhere.
Th
e Northern public had been disturbed by white terrorism
and so-called “race riots” (really ethnic cleansing), but it had little
101 Foner,
Reconstruction, p. 364.
102 Eric
Foner,
Reconstruction, pp. 439–40.
103 Eric
Foner,
Nothing But Freedom: Emancipation and its Legacy, Baton
Rouge 1983, p. 85.
introduction 67
patience for the heavy costs of an extended occupation of the South
and was demoralized by reports of carpetbagger corruption. Prior to
the 1872 election, a group of “reform” or Liberal Republicans, led by
Horace Greeley, mustered a challenge to Grant, but they argued for
less rather than more engagement in the South. Grant’s reelection
gave a little extra time, but neither the president nor the Republicans
gave decisive support to the Reconstruction administrations. To do
so would have been expensive and contrary to the growing view
that the time had come for a reconciliation with Southern elites.
Th
e size of Union forces in the South was continually being whit-
tled down, and white vigilantism was emboldened. Some attempts
were made in South Carolina to defend Reconstruction by rely-
ing on a local mixed militia, but eventually in the key states the
Republican governors had to rely on Federal troops.
104
THE RESTORED UNION AND A
THWARTED REVOLUTION
Th
e Civil War had landed Washington with a debt of $2.8 billion, and
the bankers had extracted exceedingly favorable terms.
105
Schuyler
Colfax, from Indiana, proposed that the huge war eff ort required
new taxes—a progressive income tax and a levy on the shareholders
of the banks and the new corporations. Colfax pointed out that the
farmer had to pay a tax on his property, so justice demanded that
there should be a tax on capital—especially that of shareholders—as
well as on employees and cultivators.
106
Th
e income tax was agreed
upon but the plan for a tax on capital was vetoed by Wall Street
104 Steven
Hahn,
A Nation Under Our Feet, pp. 302–13.
105 Th
e total cost of the war has been estimated at $6.5 billion by Claudia
Goldin and Frank Lewis, prompting Phillip Paludan’s comment, “Th
at amount
would have allowed the government to purchase and free all the 4,000,000
slaves (at 1860 prices) give each family 40 acres and a mule and still have pro-
vided $3.5 billion as reparations to former slaves for a century of lost wages.”
Paludan, “What Did the Winners Win?” in Writing the Civil War, McPherson
and Cooper, p. 181.
106 W.
Elliot
Brownlow,
Federal Taxation in America, Cambridge 1996,
p. 26. Colfax was at this time in the Radical camp. Also see Vorenberg, Final
Freedom, pp. 206–7.
68 an unfinished revolution
and the treasury secretary. Th
e income tax was set at 3 percent and
much war expenditure was paid for either by issuing war bonds or
by printing greenbacks. Some urged that the public debt be paid
off in the same way, although the value of the paper currency had
fallen by about a third. Th
e Republicans, having contracted the
debt, argued that paying it off with devalued paper would be a sorry
reward for the patriotism of those who had subscribed, whether
bankers or ordinary citizens. Th
eir decision to pay off that debt in
gold left the Treasury bare, unable to pay for Reconstruction in the
South or ensure steady growth in the North. Neither the Lincoln
administration nor its Republican successors seized the opportunity
to introduce a central bank or eff ectively to regulate the thousands
of private banks. Th
is was to be a source of future fi nancial instabil-
ity and meant that farmers and small or medium businesses did not
have access to reliable and reasonably-priced credit. In a book of
letters addressed to Colfax in 1865, Henry Carey, the noted critic
of free-trade economics, warned that a credit famine would ruin
all hopes for successful Reconstruction.
107
Yet nothing was done to
meet this problem, Southern producers were starved of credit and
by 1880 per capita income in the US South was only 50 percent of
the national average, and it would remain so for many decades after.
Th
e weakness of the Southern economy was a drag on national
performance, but the national economy also suff ered because of
the primitive banking regime. One rather understated criticism
of the postbellum US fi nancial system concludes: “Th
e main costs
to the US economy of not having a central bank were a less effi
-
cient payments system and a greater potential for instability.”
108
Th
e
North’s master fi nancier, Jay Cooke, who had marketed the Union’s
war bonds, was himself to be bankrupted by the crisis of 1873.
As it happened, by 1869 Schuyler Colfax was vice president
and, one might have hoped, ready to devise a way of taxing the
new breed of robber barons. Unfortunately, it was soon discov-
ered that he was implicated in the Credit Mobilier scandal. Th
e
Credit Mobilier had issued shares to large numbers of legislators,
107 Henry Carey, Letters to the Honorable Schuyler Colfax, Philadelphia
1865.
108 Richard Sylla, “Reversing Financial Reversals,” in Government and the
American Economy, Price Fishback et al., Chicago 2007, pp. 115–47, p. 133.
introduction 69
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