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Lincoln's Economic Legacy

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02/09/2001Thomas J. DiLorenzo

Americans have been led to believe that when they celebrate Abraham Lincoln’s birthday each year on February 12 they are celebrating freedom, the preservation of the union, and a reaffirmation of the principles of the Declaration of Independence. This belief is a testament to the notion that in war the victors get to write the history.

Lincoln will probably be forever known as the "Great Emancipator" because of the Emancipation Proclamation. But every Lincoln scholar knows something that few Americans are aware of: The Emancipation Proclamation freed no one, because it specifically exempted those areas of the southern states that were at the time under the control of the federal armies while allowing slavery to exist in the "loyal" border states of Maryland and Kentucky and in Washington, D.C. itself. 

"The principle [of the Proclamation] is not that a human being cannot justly own another," the London Spectator observed on October 11, 1862, "but that he cannot own him unless he is loyal to the United States" government. 

As Lincoln stated in a famous, August 22, 1862 letter to New York Tribune editor Horace Greeley, "My paramount object in this struggle is to save the Union, and is not either to save or destroy slavery. If I could save the Union without freeing any slave I would do it; and if I could save it by freeing some and leaving others alone I would also do that."

The Emancipation Proclamation was a propaganda strategy designed to deter England from supporting the Confederacy. It came as a complete surprise to most 

Northerners, who thought they were fighting and dying by the tens of thousands to preserve the union. As a result, there were draft riots in New York City; a desertion crisis was created in the U.S. army, with some 200,000 deserters, according to historian Gary Gallagher; and war bond sales plummeted. According to James McPherson, the "dean" of "Civil War" historians, Union soldiers "were willing to risk their lives for the Union, but not for black freedom . . . . They professed to feel betrayed."

Slavery was ended in 1866 with the Thirteenth Amendment, but at the cost of 620,000 lives; hundreds of thousands more that were crippled for life; and the near destruction of almost half the nation’s economy. By contrast, dozens of other countries (including Argentina, Colombia, Chile, all of Central America, Mexico, Bolivia, Uruguay, the French and Danish colonies, Ecuador, Peru, and Venezuela) ended slavery peacefully during the first 60 years of the nineteenth century. Why not the U.S.?

Lincoln may have "saved" the Union in a geographic sense, but his war destroyed the union defined as a voluntary association of states. Forcing a state to remain in the union at gunpoint renders that state a conquered province, not a genuine partner. This was the overwhelming sentiment of Northern opinion makers at the outset of the war. 

As Horace Greeley wrote on March 21, 1861: "The great principle embodied by Jefferson in the Declaration is that governments derive their just powers from the consent of the governed." If southerners wanted to secede, "they have a clear right to do so." "Nine out of ten of the people of the North," Greeley wrote, were opposed to forcing South Carolina to remain in the Union. 

As of 1857, writes Roy Basler, the editor of Lincoln’s Collected Works, Lincoln had rarely ever mentioned the issue of slavery, and even then, "when he spoke of respecting the Negro as a human being, his words lacked effectiveness." What did preoccupy Lincoln’s mind throughout his twenty-eight year political career prior to becoming president was the political agenda of the Whig Party and of the man whom he revered most in life, the Kentucky slaveowner Henry Clay, whom Lincoln eulogized in 1852 as "the great parent of Whig principles" and "the fount from which my own political views flowed." 

And those political views were clearly stated by Lincoln when he first ran for the Illinois legislature in 1832: "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." These three things -- protectionism, government subsidies to railroad and canal-building companies, and central banking -- were called the "American System" by Henry Clay. Economists have another word for them: "mercantilism." 

Murray Rothbard accurately defined mercantilism as "a system of statism which employed economic fallacy to build up a structure of imperial state power, as well as special subsidy and monopolistic privilege to individuals or groups favored by the state." This is what Lincoln devoted his entire political career to achieving. He was a master politician who once told a friend that his career ambition was to be "the DeWitt Clinton of Illinois." DeWitt Clinton was the notoriously corrupt governor of New York who is credited with inventing the spoils system. 

The so-called American System of mercantilism could only be implemented by a highly centralized government of the sort that the U.S. Constitution attempted to deter. That’s why it could only be put into place by force of arms, which it was. As soon as Lincoln maneuvered the South Carolinians into firing the first shot (at a customs house, Fort Sumter) tariff rates were immediately raised to an average of 47 percent and higher, and remained historically high for decades after the war. 

During the war Lincoln established a number of tyrannical precedents, including unconstitutionally conducting a war without the consent of Congress; suspending habeas corpus; conscripting railroads and censoring telegraph lines; imprisoning without trial some 30,000 northern citizens for merely voicing opposition to the war; deporting a member of Congress, Clement L. Vallandigham of Ohio, for opposing Lincoln’s income tax proposal at a Democratic Party political rally; shutting down hundreds of Northern newspapers and imprisoning their editors for questioning his war policies; ordering federal troops to intimidate voters into voting Republican; and intentionally waging war against civilians. 

The second plank of the American System of mercantilism, central banking, was achieved with the National Currency Acts of 1863 and 1864, and there was a virtual explosion of government subsidies to railroads and other businesses that bankrolled the Republican Party. The inevitable consequence was the notorious corruption of the Grant administrations. 

In 1861 Senator John Sherman, brother of General William Tecumseh Sherman and a major power in the Republican Party, announced that "Those who elected Mr. Lincoln expect him to secure to free labor its just right to the Territories of the United States; to protect . . . by wise revenue laws, the labor of our people; to secure the public lands to actual settlers . . . ; to develop the internal resources of the country by opening new means of communications between the Atlantic and Pacific."

Translating from the politician’s idiom into plain English, this meant that Lincoln’s main objective was always protectionism for Northern manufacturers; buying votes with cheap federal land sales; and the purchase of even more votes and campaign contributions through a massive spoils system created by government subsidies to the railroad industry. The corrupt political strategy of DeWitt Clinton writ large is Abraham Lincoln’s true economic legacy.


Contact Thomas J. DiLorenzo

Thomas DiLorenzo is a former professor of economics at Loyola University Maryland and a member of the senior faculty of the Mises Institute. He is the author of The Real Lincoln; How Capitalism Saved America; Lincoln Unmasked; Hamilton's Curse; Organized Crime: The Unvarnished Truth About Government; and The Problem with Socialism.

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