Three years after the firing on Fort Sumter, the Civil War still dragged on. In April 1864, the Union Army entered its fourth year of war, having made little recent progress. Its last major victory, five months previous, at Chattanooga, was defensive, holding territory it had earlier captured; the July 1863 victories at Vicksburg and Gettysburg were even further in the past. Ulysses S. Grant had one month previously been promoted to become the commanding general of the Union Army, but he had yet to mobilize his troops against the Confederates in the war’s eastern theater. Success appeared likely, eventually, but it had not yet arrived.
Meanwhile, newspapers were describing another aspect of the crisis: the “novel inflation of the currency.” As the New York Times reported just days after the Fort Sumter anniversary, “Almost every necessary of household consumption is … from 75 to 100 per cent higher than it was a year ago.” The crises the Lincoln administration faced compounded across four years of war; superadded to them all was inflation.
The man fighting the war with inflation—as Roger Lowenstein narrates in Ways and Means: Lincoln and His Cabinet and the Financing of the War—was Lincoln’s treasury secretary, Salmon Chase. The Civil War—its costs, its strain on demands, its disruptions of trade and supply chains—made the effort to combat inflation, for the treasury secretary with, as he said, a “fishy name,” much like swimming upstream. Indeed, Chase’s job was more complex than simply curbing inflation within the United States; he also worked to indirectly exacerbate it within the Confederacy. This made Chase’s battle one with inflation rather than just against it.
Chase’s actions, Lowenstein argues, were a key reason the Union won the war. In fact, Ways and Means makes clear that the treasury secretary’s campaign in the balance sheets was as significant as Grant’s more famous victories on the battlefield.
But Lowenstein’s argument goes further, looking beyond the Union’s success in the war: between 1861 and 1865, the Union—or, rather, the Nation, as it was increasingly known—accomplished far more than the defeat of the Confederacy. Lincoln and the wartime Congress abolished slavery, established national banks and a national currency, levied an income tax, added new departments to the federal government, and planned both a transcontinental railroad and the land-grant universities that still operate across the United States today. They achieved all this not in spite of wartime inflation, but, instead, as part of an agenda that combatted inflation.
A longtime financial journalist, Lowenstein may well have predicted the drastic inflation that coincided with his book’s publication. Ways and Means does not, however, claim a direct application to the present. Reading this history within the context of our current crises makes its lesson for the present clear.
The risks of inflation did not paralyze the Lincoln administration’s social agenda. Instead, the war with inflation was fought with the tools of that social agenda, with measures that would simultaneously combat inflation and advance the interests of a laboring class over those of an entrenched oligarchy.