Working Paper: NBER ID: w25392
Authors: James J. Feigenbaum; James Lee; Filippo Mezzanotti
Abstract: Using General William Sherman’s 1864–65 military march through Georgia, South Carolina, and North Carolina during the American Civil War, this paper studies the effect of capital destruction on medium and long-run local economic activity, and the role of financial markets in the recovery process. We match an 1865 US War Department map of Sherman’s march to county-level demographic, agricultural, and manufacturing data from the 1850-1920 US Censuses. We show that the capital destruction induced by the March led to a large contraction in agricultural investment, farming asset prices, and manufacturing activity. Elements of the decline in agriculture persisted through 1920. Using information on local banks and access to credit, we argue that the underdevelopment of financial markets played a role in weakening the recovery.
Keywords: capital destruction; economic growth; Sherman's march; financial markets; recovery process
JEL Codes: N21; N41; N51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital destruction (E22) | contraction in agricultural investment and activity (Q14) |
| capital destruction (E22) | decline in improved land (Q15) |
| capital destruction (E22) | decline in manufacturing activity (O14) |
| underdevelopment of financial markets (O16) | hampered recovery (E65) |
| prewar bank presence (N21) | recovery outcomes (I12) |