Abstract

"Building American Finance with Public Debt"

Nicolas Barreyre, EHESS (nicolas.barreyre@ehess.fr)

This paper examines how the US state leveraged the unprecedented debt borrowed to wage the Civil War to reshape the financial sector of the United States and build its international networks. It assesses how the new financial heft of the Federal government gave it unprecedented influence in the postbellum economy, and explores how, through often technical decisions, Secretaries of the Treasury with their allies in Congress used debt management and financing not only to lessen the burden of public debt, but importantly to build a core financial sector for the US with the networks and capacity to reach directly into European money markets and to channel the massive investments that would then fuel the supercharged economic development of the country of the last decades of the nineteenth century.
This was a highly contested objective politically, bitterly fought, and all understood that it would shape the economy of the nation in more capitalistic ways and would lead to upward redistribution of wealth and concentration of economic power. Yet the debt management policies, intrinsically linked to the money question (and the gold standard) led the Federal government to invest in the financial infrastructure of the country, positioning it to tap international capital massively, while remaining at the core of it through quasi-central bank behavior of the Treasury. This research thus participates in the ongoing effort to reassess the crucial role of the US state in the economic takeoff and development of the United States in the nineteenth century.