A popular song once asked what war is good for good for making people rich. As government spending on the Civil War surpassed $2 million a day by 1863, there was plenty of loot to be had, . One answer: It is very especially for businessmen unburdened by ethics who were willing to supply substandard products to Union soldiers.
The word “shoddy”—originally used in Britain to describe worthless coal—was soon used in the United States as a definition for the cheap reprocessed wool that unscrupulous suppliers used to make army uniforms. Harper’s Weekly called it “a villainous compound, the refuse and sweepings of the shop, pounded, rolled, glued, and smoothed to the external form and gloss of cloth, but no more like the genuine article than the shadow is to the substance.” Uniforms made of shoddy quickly fell apart under the demands of everyday use.
“It followed that the merchants and manufacturers who supplied the government with such cloth became suddenly and fantastically rich in the course of their scramble for contracts alongside others of their kind, the purveyors of tainted beef and weevily grain, the sellers of cardboard haversacks and leaky tents,” wrote Shelby Foote in his three-volume history of the Civil War. That was bad for the soldiers but good for a whole new class of nouveau riche millionaires. In 1843 there were only 20 millionaires in the entire United States. By 1863, New York City alone had more than a hundred.
They lived lavishly, in “new brown-stone places on Fifth Avenue,” with “the new diamonds which dazzle unaccustomed eyes, the new silks and satins which rustle over loudly, as if to demand attention,” observed the New York World. “The world has seen its iron age, its silver age, its golden age, and its brazen age. This is the age of shoddy.”
There were other methods of taking advantage of the government’s free-spending ways. Young J. Pierpont Morgan became involved in a scheme to sell the United States its own rifles at a huge profit. Businessman Arthur Eastman initially offered to buy 5,000 obsolete carbines from the U.S. government for $3.50 each, although he didn’t have the cash handy. Later, when General John C. Frémont needed weapons, New York lawyer Simon Stevens offered to sell him the guns Eastman wanted to buy. He promised Eastman $12.50 each and subsequently made a deal to sell them to Frémont for $22.
There was only one catch: Stevens didn’t have the money either. So he approached Morgan, who loaned him $20,000 in exchange for 9 percent interest and a 25 percent commission on the deal. In the end the transaction wound up in the Supreme Court after the government balked at paying more than $110,000 to buy back its own guns, which it had originally agreed to sell to Eastman for a mere $17,500. In 1867 the court agreed with Stevens that a deal was a deal and ordered the government to pay him his full fee, plus interest.
J.P. Morgan also added to his already growing fortune by quietly buying up gold, then shipping a huge stock to England so that the resulting shortage in the United States would drive the price up. Such speculation was a fine way for those with knowledge and nerve to make piles of money.
“Along with ordinary happenings we fellows in Wall Street had the fortunes of war to speculate about and that always makes great doings on the stock exchange,” said speculator Daniel Drew. “It’s good fishing in troubled waters.”
Jay Gould was perhaps the best fisher of them all, pulling a fortune in commissions from the pool. Cold-hearted and clear-eyed, Gould was “one of the most sinister figures that ever flitted bat-like across the vision of the American people,” according to journalist Joseph Pulitzer. The speculator knew gold prices would fluctuate depending on the fortunes of the Union Army, rising after a defeat and falling after a victory. “During the war of the rebellion, Gould’s firm…made a great deal of money speculating in gold. Gould had private sources of information in the field, and he was able to turn almost every success or defeat of the Union army to profitable account,” wrote one biographer.
James Fisk was a good friend of Gould’s, and after the war they would team up with Drew against Cornelius Vanderbilt in the famous struggle for control of the Erie Railroad. During the war, Fisk dealt favors to Washington politicians from his suite at the Willard Hotel in exchange for lucrative contracts to supply blankets and other materiel to the Army. He also made a fortune purchasing Southern cotton for Northern firms behind enemy lines.
Financier Jay Cooke made a fortune by helping the government raise one. Desperate for money to fund the war, Secretary of the Treasury Salmon P. Chase began issuing government bonds for sale to the public. Cooke approached Chase with the idea that he would be the sole agent for selling those bonds, for a commission, of course. Chase balked at Cooke’s monopoly scheme, but Cooke sold bonds anyway, and did it so well that Chase finally capitulated.
Cooke then opened an office opposite the Treasury Building and embarked on a whirlwind advertising campaign. “By selling huge quantities of the bonds, at the rate of $2,000,000 a day, Cooke’s commissions at .5 percent rose to some $3,000,000 a year—though this did not include the very heavy expenses of promotions,” wrote Matthew Josephson in his book The Robber Barons. Cooke used this bonanza to make himself a powerful force in the nation’s financial establishment. “Rising from obscurity, like the proverbial comet, he had come to hold the national purse-strings, and soon the expression: ‘As rich as Jay Cooke,’ became a familiar folk-saying,” Josephson wrote.
There was also money to be made in places other than New York. Peter A. Widener of Philadelphia and Richard Armour of Milwaukee sold meat to the Union Army. As the war drew to a close, Armour knew that meat prices would fall, so he hurriedly arranged to sell his meat “short” and gained a $2 million windfall when prices plummeted from $40 a barrel to $18.
Not every businessman saw the war as an opportunity to plunder the government. For example, New York City department store magnate Alexander Turney Stewart sold blankets and uniforms to the Union at cost. People like Morgan, Gould and Cooke would have had a name for people like that. The name would have been “sucker.”
Originally published in the February 2006 issue of Civil War Times. To subscribe, click here.