In the 1800s, the relationship between the American South and cotton was a strong and profitable one. Leading up to the Civil War, the cotton industry was the greatest contributor to the Southern economy. Because the world largely depended on the South for its supply of cotton, the country was able to borrow money around the world. The cotton industry grew steadily over a 60-year period to meet the needs of the British textile industry and was aided by the invention of the cotton gin. The state responsible for the most production of cotton was Mississippi. To meet the growing demand, cotton plantations increased the number of slaves used to harvest it; by 1860, the number of slaves had increased to 4 million. Cotton would help to fund the government and military that formed the Confederate States of America when the South seceded from the U.S. Additionally, the money from cotton sales provided the financial foundation for the Confederacy’s diplomatic strategy.

• Why Was Cotton King?
• How Slavery Helped Build a World Economy
• How the Cotton Gin Started the Civil War
• Industry and Economy During the Civil War

King Cotton Diplomacy

In the South, the phrase “cotton is king” referred to the overall importance and political power of cotton. Because the world, particularly England, depended on the South for much of its cotton, the Southern government believed that this could be used as a way to garner allies. The strategy to do this, which Confederate president Jefferson Davis supported, was called King Cotton Diplomacy.

At the time, Union forces had begun blocking Southern exports and imports in a move called the Anaconda Plan. This was in 1861, and although the effort was successful to a degree, it did not entirely prevent blockade-running. King Cotton Diplomacy was meant to put an end to the blockade and gain support and diplomatic intervention from Britain, which had declared itself neutral. The strategy used cotton as leverage by torching as much as 2.5 million bales of cotton and deliberately creating a shortage. If successful, this strategy would hurt foreign textile companies, which would then demand that Great Britain and other countries support the Confederacy.

But the Confederacy did not know that Britain had stockpiled cotton bales in fear of a war in the United States. While this surplus did not prevent a cotton famine, it did delay it by a year. But the resulting shortage did not force European nations to support the Confederacy as planned. The price of cotton increased globally, and British textile companies sought cotton from other producers around the world, such as India and Egypt.

• King Cotton and the Economy of the Old South
• The South’s Mighty Gamble With King Cotton
• Great Britain and King Cotton: The Lancashire Cotton Famine and the American Civil War
• The Crowning of King Cotton
• Impact on the British Cotton Trade

Weapons, Ammunition, and Ships

Although the King Cotton strategy was not effective in gaining England’s support, it was effective in helping the Confederacy in other ways. The South had made a tactical error with King Cotton Diplomacy, but the value of cotton did serve as a way of gaining weapons, ammunition, and even ships. This was highlighted in 1863 with the arrival of the Erlanger Loan, which was named after Emile Erlanger and Company, a French banking house. The arrangement used bonds backed by cotton to raise money for the Confederacy. As the cash value of the bonds fell, Confederates promised repayment even if the South lost. They could not honor this promise, however, and the Erlanger bond is known as one of the most famous junk bonds as a result.

Cotton was also used to barter for goods from manufacturers in Britain. This was good business for blockade-runners, who would sell armaments in exchange for cotton on the British islands of the Bahamas and Bermuda. Blockade-running was dangerous but lucrative, with runners making 300 to 500 percent profit per trip. Using cotton as a means of payment furnished the Confederate military with materials from the British including rifles used during the Siege of Vicksburg. Warship construction was also financed courtesy of cotton. The trade of cotton for armaments only slowed after the Union captured the southern ports.

• Blockade-Running in the Bahamas During the Civil War (PDF)
• British Involvement in the American Civil War
• How British Businesses Helped the Confederacy Fight the American Civil War
• Historians Reveal Secrets of U.K. Gun-Running That Lengthened the American Civil War by Two Years

The Lure of Cotton

The Union didn’t just need to prevent the South from using cotton as a source of currency; it was also in need of cotton for its own textile mills. The importance of this was not lost on the North, and as a result, the Union imposed federal regulations that made Treasury-issued permits necessary to purchase Confederate cotton. This created a corrupt system in which people were able to make a fortune off of cotton from the south, buying it cheaply and inflating the price for resale. Military officers often profited from the cotton trade by partnering or making deals with cotton sources. Confiscated Confederate cotton, which could not be distinguished from traded cotton, was also being sold for profit. Civilians and Union soldiers alike were lured by the promise of cotton wealth and were inspired to go South both during wartime and after the war ended.

Abandoned cotton plantations were a source of profit as well, though they required skilled labor to run. The Northern government, which was looking for an answer to the problem of an influx of escaped slaves, saw cotton as a partial solution. Refugees from the South could be sent to take paid jobs on cotton plantations that had been abandoned. This was yet another way for the North to profit from cotton. The idea, which was a type of containment policy, was devised by Union Army Adjutant-General Lorenzo Thomas in the Mississippi Valley in 1863. This policy saw former slaves either recruited or working under contract on these plantations for 10-hour shifts per day while receiving a wage of $10 a month. These guidelines were very strict and were devised to make the plantation lessees the most amount of money. Workers were unable to leave the plantation without permission and a pass, nor could they miss more than two hours without having their pay slashed by half for the day.

• Traders or Traitors: Northern Cotton Trading During the Civil War (PDF)
• Abraham Lincoln and Cotton
• Starving the South: How the North Won the Civil War
• Contraband Camps of Northern Virginia
• Trading With the Enemy
• The Generals and Admirals: Lorenzo Thomas

World’s Leading Cotton Exporter

At the end of the Civil War, the federal government was burdened with a significant amount of debt, and cotton exports were a key resource by which they could pay it off. Furthermore, the United States needed money in order to grow and strengthen its economy by investing in major projects like the railroad industry. For these and other reasons, the Reconstruction era that started in 1865 was marked by the push to restore the cotton industry. Republican capitalists in the North stood against taking cotton-producing lands from plantation owners in the former Confederate South, instead favoring a policy of helping them immediately restart the production of cotton on their lands.

The strategy ultimately proved successful. By 1870, the United States was successful in retaking its place as the global leader in cotton production. Exports in 1880 surpassed levels seen in 1860, and America remained the top exporter of cotton until 1937.

• A Map of U.S. Cotton Production in 1880
• Historical Timeline: Agricultural Trade and Development