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NATIONAL BUREAU OF ECONOMIC RESEARCH
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Capital Destruction and Economic Growth: The Effects of Sherman's March, 1850-1920

James J. Feigenbaum, James Lee, Filippo Mezzanotti

NBER Working Paper No. 25392
Issued in December 2018, Revised in July 2019
NBER Program(s):The Corporate Finance Program, The Program on the Development of the American Economy

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.

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Document Object Identifier (DOI): 10.3386/w25392

 
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