Dixie Victorious: An Alternate history of the Civil War

by Peter Tsouras

  “The people of the United States decided to preserve the Union. For the past two years and six months, since the attack on Fort Sumter, this nation has striven to end the present rebellion and bind together again the Union. Until a very short time ago, the sacrifices of our soldiers who have borne the battle, and of their wives, widows, and children, have promised such a restoration. Now, with the reverses our arms have suffered in the Seven Days, at Second Manassas, and at Frederick, a nation re-united seems further away than it was before.

  The offer of Great Britain and France to mediate between the United States and the Confederacy on the basis of an armistice, lifting the blockade, and negotiations with a view to separation of the Confederacy from the United States, followed by international recognition of the Confederacy as an independent sovereign state, if accepted on that basis, would end the work we are now in to restore the Union. The citizens of the United States, who elected me President by their votes, chose the other course. As their elected leader, I am determined that the Union shall be reunited, whether by force of arms or by peaceful means.”

  He paused, then tempered his earlier comments:

  “However, the United States is considering the offer of mediation and will not reject it. We will respond to Great Britain and France and seek to determine if, by their assistance, the Union may be saved.”

  Turning to the events in New York, he said,

  “The news of this offer of mediation stirred the passions of people and caused them to act in haste. I urge all of our citizens to remain calm and to have faith in the future. I have urged major interests to act, with the support of the United States Treasury, to restore order to the market and to financial affairs. The United States dollar is strong and will remain strong.”

  Lincoln closed his remarks by saying:

  “I will continue to serve the Union, and to do what is right, as God gives me the light to see the right. I ask all citizens for their prayers and their support at this difficult time.”40

  Before Lincoln’s remarks could be reported, the New York Stock Exchange had closed early, preventing the mounting market panic from doing even worse damage. Spurred by news of the market panic, runs had started on banks in New York, Philadelphia, Boston, and elsewhere. Banks closed their doors, and militia units were put onto the streets to aid police in maintaining order.

  The countdown to the November stage of the elections for the 38th Congress was moving inexorably forward. There were only five days left until Delaware voted and eight days until the largest block of states voted on November 4, including New Jersey and New York. There was no time to wait for the results of a diplomatic exchange with the prospective mediators. Ordinary people would have to vote based upon the facts then before them and their hopes and fears for the future.

  The 37th Congress had finished its second session on July 17, 1862. Its third session was not to begin until December 1, 1862.41 The 38th Congress was not to convene for its first session until more than a year later, on December 7, 1863.42 But the impact of a Republican loss of control over the House would be felt immediately.

  The Peace Democrats sensed a huge opportunity. Those who had suffered from the devastation of the Midwest’s grain trade had voted their economic interests and turned solidly against the war. Now, the core of Republican strength in the northeast was beset by sudden economic disruption and the threatening presence of the Army of Northern Virginia with one foot across their threshold, the Mason-Dixon Line.

  The Democrats had a plan:

  “[They] tried to turn the many defeats suffered by Northern armies into votes at election time. The list of decisive defeats for Union arms in the first two years of the war was written in blood, and there were few victories. The situation encouraged defeatism. Democratic politicians said the war was a failure and the President was incompetent. Lincoln ineptly juggled his commanders and repeatedly bet on the wrong horses… They believed that ‘managerial confusion’ reigned in Washington and that army appointments and removals were based more on politics than on ability.”43

  While turmoil in the markets, spiking interest rates, and the apparent threat to shipping interests and exporters arising from possible British and French intervention on the Confederate side struck business interests hard, the runs on many banks had the main impact on voters. Deposits were not insured and many banks issued their own paper money. Runs on banks thus threatened not just the banks and their owners, but everyone with deposits in those banks and everyone holding paper money issued by those banks. Thus, a failure of a large bank could dry up much of the liquidity in the bank’s service area, when the money it had issued became worthless. This chain of developments could convert a prosperous community into a cauldron of unemployment, closed factories, foreclosed mortgages, and stewing social unrest in a very short period of time.

  Greenbacks, the paper U.S. currency issued to help pay for the war, were falling steeply in value. From Friday 24th to Tuesday 28th, prices of goods in Greenbacks more than doubled in many places. This presaged runaway inflation. Only those who could pay in hard currencies, gold and silver, could obtain reasonable prices, and then only if they were established customers. And persons and companies with substantial hard currency holdings started deciding not to make new purchases unless they were truly unavoidable and to stop paying outstanding debts in specie.

  These developments were accumulating at a rapid pace and triggered what became a decisive Democrat initiative. U.S. Senator Garrett Davis, a Kentucky Democrat, proposed a series of “peace resolves,” the last of which provided:

  “Resolved: That the President of the United States be and he is hereby authorized to propose a cessation of arms and an amnesty to the authorities of the Confederate States of America, with a view to hold a convention of the people of all of the States to reconstruct the Union; and if that cannot be effected then the said convention agree upon the terms of separation of the States, without the further effusion of blood and of a lasting peace among them.”44

  This proposal was adopted by Democrat candidates across the country. It had the useful feature that it was closely parallel to the joint British and French mediation offer’s provisions, but it was not identical. It provided for an American solution to the war without drawing in foreign powers.

  Lincoln’s dedication to saving the Union caused him to make a major political error in response to these “peace resolves.” His reaction to reporters, which was printed in all of the Northern papers, was that he did not favor an armistice, “with the unending evils of permanent separation disguised by empty results of a temporary peace staring them in the face.” He favored “the continuance of the war until a permanent peace shall be established by suppressing the rebellion.” Lincoln, like most Republicans, believed that reunion by amnesty or compromise would be no more than “utter degradation and dishonor.”45

  But runs on the banks continued, and the Greenback continued to fall in value, despite strenuous intervention by Secretary of the Treasury Chase. U.S. gold reserves were pledged to support the Greenbacks, but it was immediately reported in the papers that far more Greenbacks were in circulation than the U.S. had specie to back them. The U.S. Treasury maneuvered to buy back bonds whose prices were plunging, pumping liquidity into the system in New York. But there was no public mechanism to come to the rescue of private banks which did not have substantial hard currency reserves, and a great many did not.

  Thus, as the week of the 27th continued to unfold, banks failed across the northeast and riots broke out. In Boston, Hartford, and Albany militia actually fired on rioters, killing many.

  When Delaware voted on Saturday, November 1, the voters elected William Temple, a Peace Democrat, to the 38th Congress. On November 4, the deluge struck. Kansas, with one seat, elected a Republican. Illinois elected ten Democrats and only four Republicans. Massachusetts, the bedrock of Unionism, Republicanism, and abolitionism, elected two Peace Democrats and eight Republicans. Michigan elected three Democrats an
d three Republicans. Minnesota, with two seats, elected two Republicans. Missouri elected five Democrats and four Union Party members, who would vote with the Republicans. The drumbeat of disaster continued in New Jersey, which went solidly Democratic, all five seats falling to the opposition. In New York, 20 seats went Democrat and only 11 stayed Republican. Finally, in Wisconsin, the state’s delegation split evenly, with three seats going Republican and three going Democrat.

  It took a while to count the votes. Some races were close, and outcomes were not known until a week later. But it was clear, even from the initial returns, that the Lincoln Administration’s war policies had been repudiated soundly at the ballot box. With other states yet to vote, the Democrats held 95 seats of the 184 known to be contested at that time.46 Even if they did not win a single additional seat in the later voting states, they had secured an absolute majority in the House.

  Lincoln called a Cabinet meeting for Friday, November 7.47 The election results were clear. Lincoln began the Cabinet meeting by reviewing the agenda. The United States had to respond to the offer of mediation. There was no prospect of immediate military action against Lee’s forces in Pennsylvania, but at least Lee appeared to be firmly settled into his new winter quarters. Volunteer enlistments had dried up, putting into question the ability to provide General Halleck with the agreed upon reinforcements. The economic crisis was grave and unresolved. The concatenation of the Peninsula, Second Manassas, Frederick, the Confederate advance to York, the British and French mediation offer, and the market panic and bank collapses had changed the public mood decisively against the President’s policy to restore the Union by force of arms, as demonstrated in the election results. The question was, what was to be done?

  Secretary of the Treasury Chase began to review the situation. With Treasury intervention and the assistance of major financial interests, the market panic had been stemmed. But many banks remained closed and it was not clear whether, or when, they would reopen. Business confidence had collapsed. This was the most grave of the situations facing the Union.

  Secretary of War Stanton stated that he was receiving reports that government contractors were demanding payment in specie for war materials. Army sutlers were still accepting payment in Greenbacks from the troops, but prices had tripled in the last week and were still rising. Goods and services critical to forces in the field were denied both soldiers and officers who could not afford the prices and had no independent means.

  Secretary of the Navy Welles stated that provisioning his ships had become a problem. While the Navy had long-term contracts for coal, some deliveries under these contracts had been withheld by contractors who were demanding payment in specie. The blockade could be maintained for perhaps another month based on coal supplies on hand and in transit, but if deliveries became uncertain, the blockade would start to unravel shortly thereafter. Winter weather increased coal demands for station keeping on the blockade lines, so the supply issue would shortly become critical.

  Welles added that, while he had received nothing official from Navy contractors, he believed that they, too, would shortly begin demanding payment in specie for shipbuilding materials and ship’s stores. While the Navy shipbuilding program could continue so long as workmen in the yards would accept Greenbacks as salary payments, shortages of labor and materials could quickly arise, particularly if inflation made workmen’s wages impossible to live on.

  Lincoln turned to Chase and asked him how the United States could continue to finance the war. Chase responded that the nation’s gold reserves were not large enough to meet all of the demands placed on them. Ordinarily, if confidence in the government were high, the Greenbacks that had won acceptance and served to finance both the war and a parallel industrial expansion would be good money. But confidence had collapsed, and the value of the Greenback could not be sustained with the amount of gold on hand. In fact, the ratio of Greenbacks in circulation to the U.S. gold reserve was about 120:1. Thus, if the gold reserve were pledged entirely to the support of the Greenback and the Greenbacks’ value were to fall to equal the value of the gold, then each Greenback would be worth less than a cent.

  Chase continued, explaining that the entire U.S. gold reserve could not be pledged to support the Greenback. Some was needed for coinage, some was needed to settle international debts, and some was required to pay government contracts that specified payment in specie.

  Chase then pointed out that the market panic and bank runs would most likely severely limit the ability of the government to sell war bonds in Europe for specie, trading paper for gold. News of the economic consequences of the mediation offer was likely to reach Europe early the following week, and even if European powers were not to engage in alliances with the Confederate states and enter the war as belligerents against the U.S., the collapse of business confidence would probably be enough in itself to stanch the flow of European credit which the U.S. had so far enjoyed during the war.

  Lincoln wanted to know what each Cabinet member thought about prospects for continuing the war on the basis of the policy of reuniting the country by suppressing the rebellion by force. Stanton, always the warrior, asserted that the war could still be won, and even if they only had a year until a Democrat-controlled House took office, victory was still militarily possible. The overall strategic plan for fighting the war, the Anaconda Plan, was still working, despite tactical reverses, and the full weight of Union power had yet to be applied against the Rebels. Welles agreed with this position, saying that the Navy was getting stronger, day-by-day, and the blockade was getting tighter. Union operations on the rivers and against the Confederate harbors were continuing to have success and there was no prospect that the Confederacy could build a navy that could make more than tactical contest against this progress.

  Chase then asked the two Secretaries their opinion on the larger question: Regardless of the prospects on the field of battle, could the military and naval effort be sustained in the face of the current financial crisis? Both Stanton and Welles reluctantly stated that they could not sustain operations without supplies and they could not obtain supplies without financing.

  Chase looked at Lincoln and said that he had consulted with the best financial minds in the country in search of solutions to the present crisis, and none of the suggestions would work so long as the underlying problems remained unresolved, namely the presence of a rebel army in Pennsylvania and the real potential of foreign military intervention. Those two unpleasant facts would prevent restoration of confidence and, without confidence, there would be no funds.

  Lincoln, as disheartened as the rest of the cabinet by this discussion, then turned to Seward. He asked the Secretary of State to draft a response to the British and French offer of mediation to ask them to elaborate on their proposal. He directed that it specifically explore the possibility of securing European assistance in restoring the Union. He stated that he would not give an affirmative reply to the European proposal as it stood, and that he was more likely to adopt some version of Senator Davis’s peace resolve, that would lead to a completely American solution, if such were to be the will of the people.

  He turned to Stanton and Welles and directed them to continue present campaigns at the slowest possible pace and not to initiate any new operations. He further directed that they review current plans and determine which efforts were simultaneously low priority and high cost, and make plans to terminate those efforts as soon as possible, with an emphasis on cost rather than military efficacy. He further directed that steps be taken to make good, out of current government supplies, the needs of troops and sailors in the field that were now beyond their means due to sutler and contractor price increases.

  Lincoln closed the meeting by stating that he would publicly announce that he was responding to the European offer of mediation and exploring its possibilities. He hoped that this would aid in stabilizing the financial crisis until some way to move forward could be worked out.48

  Lincoln’s announcement o
f his response to the British and French did help stabilize the financial situation. However, his announcement and public knowledge of the election results triggered a brutal public debate between the peace forces and the abolitionists. The abolitionists saw the war as a crusade to end the South’s “peculiar institution” once and for all and free the slaves. It was a moral mission, one for which they claimed divine blessing. Confronted with the reality that financial collapse plus the threat of foreign intervention was condemning their dream to failure, they sought enemies and found plenty of them in the Peace Democrats.

  The Radical Republicans’ rhetorical assaults on Peace Democrats were so laced with vitriol and so violent that, had the financial crisis not been so grave, it would have threatened a second division of the United States, this one largely between New England and the Midwest. But in the face of the bank runs and collapses, public support was not there. Everyone except the most fanatic abolitionists realized that their families, their homes, their farms, their jobs and their futures were now at stake.

  The saner abolitionists argued in their own councils that slavery was a fundamentally flawed institution, one that would fall of its own weight. They pointed out that the war had so far proved the Union superior in all aspects except generalship. They argued that the gap in capabilities between the United States and the Confederate States would only widen in the future, so long as the South remained agrarian economically and feudal politically. They predicted that Southern attempts to close the gap by industrializing would either fail by excluding the slave population, or, because of the education and training required to be a successful industrial worker, would create in the slave working class a force that could not be contained within their system. These arguments were grudgingly and bitterly accepted.