Debtor Diplomacy: Finance and American Foreign Relations in the Civil War Era 1837-1873

by Jay Sexton

The United States was a debtor nation in the mid-nineteenth century, with half of its national debt held overseas. Lacking the resources to develop the nation and to fund the wars necessary to expand and then preserve it, the United States looked across the Atlantic for investment capital. The need to obtain foreign capital greatly influenced American foreign policy, principally relations with Britain. The intersection of finance and diplomacy was particularly evident during the Civil War when both the North and South integrated attempts to procure loans from European banks into their larger international strategies. Furthermore, the financial needs of the United States (and the Confederacy) imparted significant political power to an elite group of London-based financiers who became intimately involved in American foreign relations during this period. This study explores and assesses how the United State's need for capital influenced its foreign relations in the tumultuous years
wedged between the two great financial crises of the nineteenth century, 1837 to 1873.

Drawing on the unused archives of London banks and the papers of statesmen on both sides of the Atlantic, this work illuminates our understanding of mid-nineteenth-century American foreign relations by highlighting how financial considerations influenced the formation of foreign policy and functioned as a peace factor in Anglo-American relations. This study also analyzes a crucial, but ignored, dimension of the Civil War - the efforts of both the North and the South to attract the support of European financiers. Though foreign contributions to each side failed to match the hopes of Union and Confederate leaders, the financial diplomacy of the Civil War shaped the larger foreign policy strategies of both sides and contributed to both the preservation of British neutrality and the ultimate defeat of the Confederacy.

Genres: History, American Civil War, Finance

300 pages, Hardcover

First published January 1, 2005

Reviews

[Frank Stein · Rating 4 out of 5]

There is nothing too shocking in this book, but it does provide a good overview of American finance and diplomacy in the mid-19th century.

The book retells some oft-told tales, usually about British-US relations, but gives them a slight financial spin. The author discusses, as previous historians have, how the Webster-Ashburton Treaty of 1842, which settled the northern Maine boundary, was negotiated by two individuals in the pay of the Barings bank. He relates how the Clayton-Bulwer Treaty of 1850 was designed, as President Zachary Taylor said, to give "protection to the capitalists who may undertake to construct any canal" through Nicaragua (it basically favored Cornelius Vanderbilt's company.) He notes that the 1853 Joint Claims Commission, to settle debts between citizens of both countries, was led by Joshua Bates, the London-based but American-born Barings partner. Finally, he notes how the 1872 Claims Commission, which was supposed to decide how Britain could pay off damages caused by Confederate ships built in England during the war, was instigated because US Treasury Secretary George Boutwell wanted to sell his refunding loan in London, and financiers there wouldn't touch US securities until the "Alabama" issues were resolved.

Over a third of the book, however, deals with the four years of the US Civil War, and admittedly there was a lot of financial diplomacy during that time. The chart of prices of "Seven thirties" and "Five Twenties" the two major Union bonds, provided a sort of litmus test of British feelings towards Union success through the years, even though President Lincoln and Treasury Secretary Samuel Chase could never get a major European bank to directly market them. At the same time, the Confederate Erlanger bonds, issued by a French company in 1863, demonstrate how confident Britain was of Confederate victory. Each side used their bonds both to raise funds and to enlist foreign political support. They also tried to sabotage financiers' views of the other side. Robert Walker, the former Treasury Secretary under President Polk, who Brits liked because of his free-trade tariff of 1846, went to London to cry down the Confederate bonds, and wrote a successful pamphlet about how Jefferson Davis had, supposedly, encourage Mississippi to repudiate its debt in the 1840s. (The repudiation of Arkansas, Mississippi and Florida was a permanent stain on the Southern reputation in Europe, both financially and politically). Confederates made their task harder, sending people like Robert Yancey and James Mason to negotiate with anti-slavery Britain, even though the former was for reopening the slave trade and the latter helped author the fugitive slave law.

For someone interested in either British-US relations, or in international finance in the 19th century, this book would be a good place to start, even if it doesn't break any truly original ground.

[Jim Gulley · Rating 3 out of 5]

Sexton argues that too little attention has been paid to European investment in US bonds to finance the Civil War and Reconstruction. The creditor-debtor relationship of GB and the US bonded the two nations together and gave them a common interest in avoiding war (a more important factor than trade). The book is a dense account of international finance and laden with bond minutiae, monetary policy, and diplomatic wrangling.