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Lincoln’s interest in innovative technology long preceded the Civil War. With other modernizing Whigs and Republicans, Lincoln shared a fascination with technology. His law partner wrote: “He would stop in the street and analyze a machine. . . . Clocks, omnibuses, language, paddle-wheels, and idioms never escaped his observation and analysis.”
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While serving in the US House of Representatives, Lincoln patented “A Device for Buoying Vessels over Shoals” (patent number 6,469, May 22, 1849), which consisted of bellows that inflated beneath a ship’s water line in order to help the ship rise in shallow water. He paid for a wooden model of the invention, which is now in the National Museum of American History of the Smithsonian Institution, but he never sold it. Lincoln envisioned other inventions. In 1859 he said in a speech in Milwaukee that he had given much thought to “a steam plough.”
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He hoped to make money as a public speaker by means of lectures such as his “Second Lecture on Discoveries and Inventions,” written in February 1859.

The most striking wartime technological innovation was the ironclad. Both sides raced to create armored warships powered by steam. Low in the water and covered by iron plates, ironclads looked like something out of a Jules Verne science-fiction story.

On March 8, 1862, the Confederate ironclad CSS
Virginia
, formerly the USS
Merrimack
, attacked the Union ships that blockaded the Virginia port of Hampton Roads, smashing two combatant ships and several transports. If the Confederacy could use ironclads to break the Union blockade, it might be able to sustain its cause by importing weapons and supplies from Britain or France.

On March 9, 1862, a Union ironclad, the USS
Monitor
, in the Battle of Hampton Roads fought the
Virginia
to a draw before falling tides forced the
Virginia
to withdraw. Following the battle, both sides commissioned more ironclads, but the Union had proved that its blockade could not be broken.

The age of the wooden warship was over.

THE PRICE OF WAR

To pay for the war, the US federal government instituted income, inheritance, and excise taxes, and ran up a deficit of $2.5 billion. To cope with this, the Lincoln administration and its congressional allies created the Bureau of Internal Revenue, later the Internal Revenue Service, within the Treasury Department, as part of legislation that Lincoln signed on July 1, 1862. The law also created the first US income tax, with a top rate of 10 percent on high incomes. After the first federal income tax was abolished in 1872, a federal income tax law was passed in 1894, only to be declared unconstitutional by the Supreme Court. In 1913, the Sixteenth Amendment, permitting federal taxation of incomes, was adopted. The income tax rate was initially no more than 7 percent on the highest incomes.

In August 1861, Secretary of State Salmon P. Chase, a former US senator and governor of Ohio, pressured northeastern bankers to provide a loan in return for Treasury bonds. When it became clear by 1862 that the war was going to be a long one, Congress authorized a combination of new bonds and “greenbacks” or dollars that were not backed by gold. The New York and New England banks bitterly disagreed with the Lincoln administration on whether bonds should be sold at or below par. The hostility of the northeastern financial community deepened after Chase and Congress decided to finance the war using fiat currency, or greenbacks that were not convertible into gold.

Chase turned to Jay Cooke, an Ohio-born Philadelphia banker who was a friend and political donor, along with his brother Henry, an aide to Chase at the Treasury who edited Ohio’s main Republican newspaper. At the beginning of the war, Cooke successfully sold millions in bonds that raised money for the defense of the state of Pennsylvania. As agent for the federal government, Cooke carried out a brilliant campaign to sell federal bonds directly to the public, raising enormous sums for the Union cause from small-town bankers and businessmen and others. Cooke mobilized a national sales force of more than two thousand dealers, some of whom followed the Union army and tried to sell bonds to defeated southerners, and used the telegraph to coordinate bond sales. He persuaded Chase to issue the bonds in small denominations so that a majority of Americans would be capable of purchasing them. While Cooke made a modest amount of money from his one-sixteenth of 1 percent commission, he used the increased prominence of his firm and its power in the bond market to make a fortune, which he invested after the war in railroads before the crash of 1873 bankrupted his company.

The human costs of the Civil War were devastating: 600,000 soldiers killed and an equivalent number wounded. Some 250,000 Confederates died of wounds from battle or disease. If the Union forces had suffered proportional losses, instead of losing 360,000 men, they would have lost more than a million. The equivalent in World War II, in which the United States lost around 300,000 soldiers, would have been more than six million.
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In addition to experiencing conquest and occupation, southerners experienced losses on a scale like that suffered by European nations in the world wars of the twentieth century. The defeated South spent $2 billion while the North ran up a debt of $3 billion. The abolition of slavery erased $2 billion of capital. Two-thirds of southern wealth vanished.

During the Civil War, the federal budget increased from $63 million in 1860 to $1.2 billion in 1865. After Lincoln’s death, Mary Lincoln told Herndon that her husband had planned to take the family to Europe following his retirement from the presidency: “After his return from Europe, he intended to cross the Rocky Mountains and go to California, where the soldiers were to be digging out gold to pay the national debt.”
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“AN OLD-LINE HENRY CLAY WHIG”: THE POLITICAL ECONOMY OF ABRAHAM LINCOLN

When southern members withdrew from Congress on the eve of the Civil War, their ability to block the plans of the new Republican majority came to an end. Although the Republicans included some former Jacksonian Democrats who opposed the extension of slavery, most Republicans were heirs of the Whig party of Henry Clay.

The Civil War was, among other things, a battle between Jeffersonian and Hamiltonian conceptions of political economy. Not every northern Unionist was a Hamiltonian; the prowar coalition united Hamiltonian Republicans with Jeffersonians in the North and Midwest inspired by Andrew Jackson’s success in facing down the threats of South Carolina in the Nullification Crisis. And the South included a few Hamiltonians, including the vice president of the Confederacy, Alexander Stephens, an old friend and colleague of Lincoln and, like Lincoln, a former member of the nationalist Whig Party. Even so, the war pitted a Jeffersonian agrarian society, dedicated to the defense of states’ rights, localism, and slavery, which troubled Jefferson but not the Confederate leaders, against a North that, while largely rural, was a rapidly industrializing society influenced by Hamilton’s and Clay’s vision of nationally sponsored technological and financial modernization.

The Hamiltonian tradition could not have found a better spokesman than Lincoln. Although his first political position—postmaster of New Salem, Illinois—was provided by the Jackson administration, Lincoln belonged to the Whig Party of Clay and Webster from the time it formed in the 1830s until divisions over the expansion of slavery destroyed it in the 1850s. In his first campaign manifesto, of 1832, the young Lincoln announced his dedication to Clay’s American System: “My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank . . . in favor of the internal improvements system and a high protective tariff.”
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Lincoln called Clay his “beau ideal of a statesman.” During Lincoln’s presidency, one member of Congress observed that he “belongs to the old Whig party and will never belong to any other.”
²⁴
“I have always been an old-line Henry Clay Whig,” Lincoln explained in 1861.
²⁵

Lincoln and his wife, Mary Todd Lincoln, were born in Henry Clay’s adopted Kentucky. Some of his Todd in-laws knew Clay and belonged to the Whig circles in Springfield in which Lincoln moved. A relative, Lyman Beecher Todd, claimed in 1901: “I have seen him [Lincoln] when twice he visited Lexington, Kentucky,—on last occasion when he was the guest of Mr. Clay at Ashland.”
²⁶

Two of Clay’s sons fought for the Union while one fought for the Confederacy in the Civil War. In 1862, when John Clay sent Lincoln one of his father’s snuffboxes together with best wishes from Clay’s widow, Lincoln wrote, “Thanks for this memento of your great and patriotic father. Thanks also for the assurance that, in these days of dereliction, you remain true to his principles. In the concurrent sentiment of your venerable mother, so long the partner of his bosom and his honors, and lingering now, where he
was
, but for the call to rejoin him where he
is
, I recognize his voice, speaking as it ever spoke, for the Union, the Constitution, and the freedom of mankind.”
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“A CENTRALIZATION OF POWER, SUCH AS HAMILTON MIGHT HAVE EULOGIZED”

Under the leadership of Lincoln, Clay’s American System of national banking, internal improvements, and tariff-based import-substitution industrialization was finally enacted on a grand scale. Even before the war ended and the period of Reconstruction finally began, the remaking of the United States by northerners was well underway.

The Republican Party was divided in its attitudes toward banking. Former Whigs like Lincoln supported a national banking system. But many western Republican farmers who had earlier been Jacksonian Democrats had a populist suspicion of northeastern financiers and British finance. Their suspicions seemed to be confirmed when New York bankers refused to extend loans to the US government during the early part of the Civil War, when asked to do so by Treasury Secretary Salmon P. Chase.

The eastern banks also opposed key reforms of the American financial system that Chase proposed. One was the Legal Tender Act of 1862, which allowed the secretary of the Treasury to issue paper money based on federal government debt—”greenbacks.”

When the Civil War began, the currency consisted exclusively of notes issued by banks chartered by the states and redeemable in gold or silver. The National Currency Acts of 1863 and 1864 created a new federal banking system. Under its provision, state banknotes were eliminated by a 10 percent tax on them, and a system of nationally chartered banks authorized to issue banknotes supplied by the Treasury was created. The Republicans did not create a third Bank of the United States, however. That occurred only in 1913 with the creation of the Federal Reserve. While the federal government drove state banknotes out of existence, many state-chartered banks chose not to seek federal charters. By prohibiting branch banking across state lines, the new national system itself reinforced state and local banks. Instead of withering away, state-chartered banks continued to exist alongside nationally chartered banks in a dual banking system.

The
New York Times
wrote on March 9, 1862: “The legal tender act and the national currency bill crystallized . . . a centralization of power, such as Hamilton might have eulogized as magnificent.” The Democratic state committee of Indiana agreed, complaining in 1862 that President Lincoln had struck “down at one dash all the labor of Gen. Jackson for the last four years of his administration.”
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INTERNAL IMPROVEMENTS

Internal improvements, or infrastructure projects, another part of Clay’s Hamiltonian American System, were also established on a grand scale under Lincoln and his successors. The failure of the state internal improvements program in Illinois did not reduce Lincoln’s commitment to the American System. During his first and only term in the US Congress, on June 20, 1848, Lincoln defended federal subsidies for internal improvements. Addressing the old claim by Jeffersonians that the constitution forbade federal aid to private enterprises, Lincoln argued: “The [question] of national power and state rights as a principle is no other than the principle of generality and locality. Whatever concerns the whole should be confided to the whole—to the general government; while whatever concerns only the state should be left exclusively to the state.”

Lincoln himself owed much of his prosperity as a lawyer to the railroads. The Illinois Central Railroad was Lincoln’s most important client. He also obtained work as a lawyer from other railroad companies with Illinois interests, including the Ohio & Mississippi Railroad, the Alton & Sangamon Railroad, and the Tonica & Petersburg Railroad.
²⁹

Lincoln’s most famous case was
Hurd v. Rock Island Bridge Company
(1857), which involved a clash of steam-age transportation technologies. In 1856, a steamboat struck a bridge across the Mississippi in Illinois that had been constructed by the Chicago, Rock Island and Pacific Railroad, called the Rock Island Railroad. Lincoln successfully defended the railroad in a case that helped to establish the right of railroads to cross rivers.

Remembered as “the rail-splitter,” Lincoln would more accurately be remembered as “the rail-roader.” He oversaw more land grants to railroads than any other president.

On September 20, 1850, one of Lincoln’s predecessors in the White House, President Millard Fillmore, signed the first Federal Land-Grant Act. Guided through Congress by senators Stephen A. Douglas of Illinois and William King of Alabama, the act granted land that could be sold to finance the Illinois Central and the Mobile & Ohio line in Alabama and Mississippi. Until then, the only aid by the federal government to railroads had been a reduction on imported iron and rails from 1830 to 1843 and route surveys carried out on behalf of private railroads by US Army engineers.

Before 1860, no bill providing federal aid for the construction of a railroad from the East to the Pacific had ever passed in Congress.
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In 1862, Congress passed legislation spending millions on a Pacific rail line to be built and operated by two companies, the Union Pacific and Central Pacific. Corrupt practices on the part of company officials, including allies of Lincoln, produced the Credit Mobilier scandal during the Grant administration, which will be discussed in the next chapter.
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In spite of scandals and waste, the American railroad network grew between 1860 and 1870 from twenty-nine thousand miles to forty-nine thousand miles.
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The United States had the highest proportion of railroad mileage to inhabitants in the world by 1868.
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