rosy outlook from dismal science

How can the Northern economy be doing relatively well given the labor and wealth wasted on the war? High labor productivity applied to a big and well-endowed country that can take in large numbers of immigrants, who add to the nations wealth. Technology and the free labor system have increased productivity.

From The New-York Times January 7, 1864:

The Losses of War How they are to be Replaced.

Economists have always spoken of “efficiency” of labor as one great source of wealth that is, the application of forethought, invention and industry to production, so that the greatest possible result is obtained for the force applied. It is this peculiarity of American labor which is so rapidly now replacing the losses of this war, and which is each day opening new sources of wealth. To many minds both here and in Europe, the financial condition of this country, during this fearfully wasteful war, has been a mystery and an anomaly. How a nation could be throwing into the sea, as it were, several hundreds of millions every year, and not be plunging into bankruptcy and ruin, was something at first inexplicable to students of finance and economical science.

Expenses of living, it is true, owing to the tariff and the depreciation of the currency, have greatly risen, yet the great and wonderful fact remains that the principal source of our wealth still exists in immense surplus; in other words, the production from agriculture, even with a million of laborers unemployed and fed at the public expense, has been greater than ever before. We have fed the army, our own people, and, to a certain extent, the population of Europe, and still have so much surplus that flour, maize and beef are not so high as they have been often in former years.

Nothing will explain this astonishing fact but what has been called the “efficiency” of our labor; that is, the application of brain to labor under the most unusually favorable conditions. Here, almost for the first time in the history of the world, we have a rapidly advancing population, an increasing capital, boundless material advantages in our alluvial soil and water communications, and a constant application of improvements to agriculture. The conditions for production never existed to such a degree in any country. Already we discover that the teeming brain of the Anglo-American has filled the gap made by the withdrawal of a million of laborers by machines of agriculture, so that production in proportion to the demand, remains as large as ever. No doubt, too, the high rate of wages has called out a great deal of comparatively idle and unproductive labor, and turned it to the most profitable employment.

Along with this constant filling up of the losses of war, we begin to discover that other veins of wealth are opening, which will go far to remove from us some of the burdens of our national debt. The cotton lands of the South, as they are opened and protected by our armies, are becoming an EI Dorado to the fortunate Northerners who have cultivated them. We hear already of fortunes rapidly made by enterprising Yankees on the Mississippi and near New-Orleans, such as the history of Peru or California could hardly equal. These accounts may be exaggerated, but there can be no rational doubt that the cotton and sugar plantations, under freed labor and during the high prices of these staples, will pour in a flood of wealth upon the country.

It must be remembered that freed labor is more “efficient” than slave labor; that the emancipated slaves work more steadily under Northern employers than Southern; that Northern capital will inevitably flow into these districts, and that the price of cotton must be high during the long and gradual close of the war, which now seems probable. With such conditions, a small territory may reap profits which were once enjoyed by the whole South. Or, accepting OLNSTED’s theory, that the whole surplus wealth of the South was always the produce of a comparatively few plantations under slave labor, our people having possession of those very plantations, may obtain from the world a vastly greater profit than used to flow to us from the whole Southern export.

Similar facts are also beginning to present themselves in California and the neighboring districts. The mineral wealth which, is opening in the veins of the Rocky Mountains and their numerous spurs, is represented by trustworthy observers, as beyond all calculation. Immense fortunes are being made each day in some of the mining districts. Some of the largest mines have come into the possession of the most solid and careful associations, who employ talent and capital, without stint, to extort the boundless wealth which lies hid in them. It is safe to say that a vast increase of wealth will flow into the country during the next twenty years from this source alone. All these prosperous undertakings will besides, augment another great source of our wealth — immigration — so that in the years succeeding the waste and loss of this war, we may reckon on such an increase of production in the United States as has never been known in human history. Providence will heal the wounds of the nation, and justify by its material blessings a war which has been fought for principles.

happy campers? “during the long and gradual close of the war” (LOC: 6th N.Y. Artillery at Brandy Station, Va. April, 1864)