AMERICAN CIVIL WAR STILL DIVIDES THE COUNTRY CULTURALLY AND
ECONOMICALLY
The United States remains culturally divided along the North-South civil war lines and,
as a result, trade across the old borders is lower than it should be. That is the central
finding of research by Gabriel Felbermayr and Jasmin Gröschl, to be presented at
the Royal Economic Society’s 2012 annual conference.
Looking at data on flows of goods and services among US states over the past 20
years, the study finds that the historical border between former Confederate states and
former Union states reduces modern-day trade by as much as 18%.
This is the same effect as having a sales tax as high as 8%. These results hold after
controlling for differences in income, education and whether the states produce more
agricultural or manufactured products.
The authors suggest that this low level of trade is caused by: ‘a still existing cultural
divide and distrust between the North and the South that was reinforced by the
Secession and the subsequent Civil War’.
150 years after Confederate troops attacked Fort Sumter in South Carolina, a US-wide
survey by the Pew Research Center in 2011 reported that 56% of Americans believe
that the Civil War is still relevant to politics and public life today.
Long before the civil war, the Southern and Northern economies differed. The South
was dominated by large plantations of cotton, tobacco, rice and sugar, whose
profitability relied on forced labour. It exported crops to Europe and imported
manufacturing goods from there. The North, dominated by smaller land-holdings, was
rapidly urbanising. Its infant manufacturing industries were protected by import tariffs
against European competition.
Today, the North-South economic divide is still visible. US state-level data suggest that,
on average, the South is still poorer, more rural and agricultural, less educated, more
religious and has different political views. The economic gap may have narrowed, but
political disagreement on the role of the federal government continues to beset the
country.
The authors conclude: ‘So, 150 years after the war, the nation is indeed still divided.’
More…
150 years after Confederate troops attacked Fort Sumter in South Carolina, a US-wide
survey by the Pew Research Center in 2011 reported that 56% of Americans believe
that the Civil War is still relevant to politics and public life today.
In addition, the poll shows that the nation is still divided along the lines of the former
alliances over whether the war was fought over moral issues – slavery – or over
economic policy.
This study asks: 150 years after the Secession, how integrated is the US economy
today? Is there a truly single market, or do border effects between the two former foes
hamper economic exchange still today?
Long before the war, the Southern and Northern economies differed. The South was
dominated by large plantations of cotton, tobacco, rice and sugar, whose profitability
relied on forced labour. It exported crops to Europe and imported manufacturing goods
from there. The North, dominated by smaller land-holdings, was rapidly urbanising. Its
infant manufacturing industries were protected by import tariffs against European
competition.
Today, the North-South divide is still visible. US state-level data suggest that, on
average, the South is still poorer, more rural and agricultural, less educated, more
religious and has different political views. The economic gap may have narrowed, but
political disagreement on the role of the federal government continues to beset the
country.
Carefully controlling for observable contemporaneous and historical differences
between North and South, the study finds that the long defunct border between the
North and the South is still relevant and still divisive for economic relations between US
states today. It particularly hampers transactions between states in highly differentiated
industries, which indicates the potential role for cultural factors and trust.
The former border, which essentially captures whether two states were on opposing
sides of the Civil War, still constitutes a discontinuity in the economic geography of the
United States.
This study estimates the trade-inhibiting force of the long defunct border between the
North and the South with the help of a gravity model. The researchers use US statelevel trade data on different waves of the Commodity Flow Survey (1993, 1997, 2002
and 2007).
The results show that the historical border reduces today’s trade between former
Confederate and Union states by 7-18% on average. This equals an ad valorem tariff
equivalent of 2-8%.
Several channels might relate to the persistent trade-inhibiting effect. While the border
is likely to be related to endowment differences between Northern and Southern states
in cropland, or in the size and structure of agricultural production, the emergence of the
border may relate to historical ethnic patterns, historical educational achievements of
the population, or institutional differences. Most importantly, it may result from the
incidence of slavery. Controlling for all these determinants, the study still finds lower
trade between Northern and Southern states.
Interestingly, the trade-impeding effect of the former border relates to the degree of
product differentiation. It is stronger in the food, manufacturing and chemicals sectors
than in mining, which is characterised by a completely standardised good, or
machinery, where the pattern of specialisation across the North and the South is very
strong.
This suggests that historical events have shaped cultural determinants of trade that still
matter today. Hence, the former border relates to a still existing cultural divide and
distrust between the North and the South that were reinforced by the Secession and the
subsequent Civil War. So, 150 years after the war, the nation is indeed still divided.
ENDS
Contact:
Jasmin Gröschl
Ifo Institute – Leibniz Institute for Economic Research at the University of Munich
International Trade
Poschingerstr. 5, 81679 Munich, Germany
+49 (0)89 9224 1317
+49 (0)176 20388374
Email: groeschl@ifo.de