Smuggler Nation (30 page)

Grant especially singled out Jews to blame for black marketeering, and he even went so far as to attempt to expel all Jews from territory under his authority, until President Lincoln quickly blocked the order. Meanwhile, as historian Jonathan Sarna points out, “Grant’s own father, Jesse Grant, was engaged in a clandestine scheme to move Southern cotton northward. His partners were Jewish clothing manufacturers named Harman, Henry, and Simon Mack.”
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At the same time as Sherman and Grant were denouncing the cotton trade, other Union military leaders eagerly profited from it. Some military expeditions were actually covers for cotton expeditions. This included the early-1864 Grand Gulf expedition commanded by Brigadier General A. W. Elleter. The report of the officer in charge described the trip in blunt terms: “To sum up, we marched 250 miles, injured our transportation, exposed our lives, got but few recruits, and as far as ending the war is concerned, we did just nothing at all; but if anything, served to prolong it by assisting a lot of rebels and thieves to sell and get to market about 1,515 bales of private, C.S.A. [Confederate], and abandoned cotton, and a lot of speculators, whose loyalty I very much suspect, in making fortunes.”
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Cotton speculators sometimes joined army expeditions by purchasing journalistic passes, sold for $2,500 apiece.
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Some Union military leaders, such as Major General Benjamin F. Butler, commander of the Department of Virginia and North Carolina, were notorious for using their position for commercial gain. Butler somehow managed to increase his net worth from about $150,000 in 1862 to about $3 million six years later.
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As historian Ludwell Johnson documents, Butler was so entrenched in cotton dealing that his name was “almost a synonym for contraband trade, with all its undertones of corruption and treason. Wherever Butler was, whether New Orleans or Norfolk, business boomed, and much of it was in the hands of his friends and relatives.” Butler also happened to be a stockholder of the Middlesex mills and a resident of Lowell, Massachusetts, the center of the country’s textile industry.
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Butler and his cotton-trading brother William had close ties to President Lincoln, who maintained a strikingly lax attitude toward the cotton trade. Lincoln argued that every bale of cotton that came to the North was one less bale of cotton exported by the Confederacy to Europe at greater profit through the blockade. It kept northern mills running and maintained the loyalties of border states and occupied southern territory. Or at least that was how Lincoln rationalized it. He was well aware of the problems associated with “cotton fever.” “Few things are so troublesome to the Government as the fierceness with which the profits of trading in cotton are sought,” Lincoln wrote to a friend who had asked for help in securing a cotton deal in June 1863.
“The temptation is so great that nearly everybody wishes to be in it; and when in, the question of profit controls all, regardless of whether the cotton-seller is loyal or rebel, or whether he is paid in corn-meal or gunpowder.”
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Left unstated by Lincoln, but clear to anyone taking notice, was that cotton was also useful for patronage politics. Lincoln liberally handed out much-coveted permits to purchase cotton, many of them to close associates, friends, and family members.
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These permits could then be sold and resold to other merchants. As Senator Justin Morrill complained, through these executive permits “a very large trade has sprung up … so that … the exception came very near being the rule itself.”
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In July 1864 Congress revoked Lincoln’s power to personally allocate these special trade permits, hoping to rein in private traders. In September, however, Lincoln signed an executive order that significantly loosened restrictions on the cotton trade, with those most able to take commercial advantage typically also the most politically connected in Washington.
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As historian David Surdam points out, despite Lincoln being remembered as “Honest Abe,” the president had few qualms about facilitating the abuses, corruption, and profiteering associated with the wartime cotton trade.
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In one case, he even personally intervened to release a merchant imprisoned for cotton smuggling.
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Some members of Congress were appalled by the extent of the trade with the South. Senator Grimes charged that the Union either “carry on this war as a war, or let us else disband the army and let the treasury undertake to trade us through the war.” Senator Collamer facetiously advised that the government “withdraw all your Army, and enlist a large force of Yankee peddlers … to go down there and trade them all out; clean them out in trade.”
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A congressional investigative committee report, titled
Trade with Rebellious States
, concluded:

It is the judgment of your committee that the trade … has been of no real benefit to our government; but, on the other hand, has inflicted very great injury upon the public service. It has induced a spirit of speculation and plunder among the people, who have entered into a disgraceful scramble for wealth during a time of war, waged to save the life of the nation, and has fed the greed of gain which must wound the public morals. It has tended to the demoralization and
corruption of the army and navy by exhibition of the vast rewards which have accrued from this trade and from the temptation and bribery with which they have been constantly assailed. It is believed to have led to the prolongation of the war, and to have cost the country thousands of lives and millions upon millions of treasure.
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Some contraband supplies from the North also reached the South through the Union blockade rather than overland. For instance, meat from Boston or New York would be exported to Canada; then transported to Bermuda or Nassau, where it would be sold for several times the original price; and from there shipped on to southern ports through the Union blockade. Northern meat would also be shipped all the way to Liverpool, where it was reexported to southern ports via Bermuda or Nassau.
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Through these circuitous routes, the North was feeding the very Confederate army it was fighting.

New York and Boston smugglers also took advantage of the Mexico transit trade discussed earlier. “Trade now carried on with the insurgents,” General E. R. Canby noted, persisted “from New York and other Northern ports through the Mexican port of Matamoras [
sic
].” This included “[c]asks and crates of crockery freighted with rifle and musket barrels, bales of codfish with the small parts of the arms, kegs of codfish with the small parts of arms, kegs of powder in barrels of provisions.” These supplies were “constantly transferred to insurgents in Texas.”
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Before 1861, requests for customs clearances from New York to Matamoros averaged only around one per year, but from August 1861 to March 1864 there were 152 cargo ships cleared.
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Shippers used Mexican merchants as fronts, pretending to be doing business with Mexicans but actually doing business in Texas. As added insurance, customs agents were offered bribes to not ask too many questions.
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Cuba was also a favored neutral transit point for shipping northern gunpowder to the Confederacy early on, with Boston and Salem smugglers the leading offenders. The treasury secretary resorted to banning all gunpowder shipments from Massachusetts ports to Cuba, arguing that “the powder finds its way … into the hands of insurgents.”
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Boston smugglers also reportedly routed their cargoes through Canada to help disguise the final destination. “Large cargoes of Block-tin, drugs and powder are exported from Boston, for St. John’s, New Brunswick,
with the intent, it is believed, to forward them to the insurgent states by way of Havana,” a Treasury Department official informed Boston collector John Goodrich.
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To deter the shipment of northern supplies to the Confederacy through Havana and other neutral ports, port collectors in New York were instructed to impose a bond equivalent to the value of the cargo if there was suspicion that the cargo would be diverted to the Confederacy. The flaw in this seemingly sensible policy, however, was that it simply meant another opportunity for customs authorities to collect fees rather than inhibit clandestine trade. New York port officials charged shippers $25 to cancel a bond, which was sometimes paid even before the bond was issued. American consuls in neutral ports were supposed to provide another check on the transit trade, since it was their job to verify that the arriving goods were in fact intended for local use. But owing to either corruption or incompetence (or both), lax oversight was the norm. Trade from the port of New York to Cuba and the British West Indies doubled during the war years, a peculiarity that can be explained only by the transit trade to the Confederacy.
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New York customs agents were cashing in on the wartime trading in other ways as well. Take the case of Hiram Barney, appointed by Chase as customs collector for the Port of New York in 1861. Chase was in debt to Barney, owing him at least $45,000. It is unclear whether the loan was ever repaid, but Barney enriched himself through his position. His duties included serving as the Union’s “cotton agent,” receiving and selling cotton from occupied territory in the South—for which he received a 5 percent cut.
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These activities were legal, but congressional investigators unearthed many illegal commercial dealings in which Barney was complicit. Historians Carl Prince and Mollie Keller note that the position of customs collector for the port of New York was “long believed to be the most lucrative post in American government.”
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ALL SIDES EXPECTED THE
American Civil War to be short-lived. But it dragged on for four years, turning into a war of attrition. How and why did this happen? Wartime commerce, in the form of blockade running and trading with the enemy, is a crucial part of the answer. Much attention has been given in recent years to the importance of “conflict commodities” in fueling contemporary civil wars, such as so-called blood
diamonds in West Africa. Such profit-driven trade is characterized as a defining feature of these “new wars.”
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But as our own historical experience dramatically demonstrates, this is far from a new phenomenon. Cotton played an equivalent if not greater role in the American Civil War; indeed, we could label it “blood cotton.” And as we have seen, many commercial and political actors far removed from the battlefield had blood on their hands. Cotton is what gave the South the confidence to secede in the first place, and illicitly trading cotton for arms and other supplies is what helped the Confederacy sustain its war effort for such an extended period of time.

The Union victory brought peace, but it certainly did not bring an end to smuggling. Rather, as we’ll see in the next chapter, smugglers were very much a part of America’s extraordinary economic development and growth spurt in the late nineteenth century. War was good for illicit trade, but so was peace.

PART IV
THE GILDED AGE AND THE PROGRESSIVE ERA

10
Tariff Evaders and Enforcers

AMERICA AND ITS POSITION
in the world were radically transformed in the decades after the Civil War. No nation benefited more from the revolutions in transportation and communication, and no nation experienced such rapid economic growth and industrialization. These late-nineteenth-century changes also transformed the world of smuggling and America’s role in it. Booming trade and travel increased the opportunities to smuggle, high U.S. tariffs provided the incentive, and a burgeoning consumer culture yielded much of the demand. New York City, with some two-thirds of all imports entering through its port and being the place where three-quarters of all customs revenue was collected (the government’s main source of income before the national income tax), was the epicenter of tariff evasion and enforcement—and is thus the main focus of this chapter.
¹