The Military-Industrial Complex’s Best Friend? Try Paper…

Legal tender act

In 1960, President Eisenhower railed against “the military-industrial complex” in a famous speech given just prior to his leaving the presidency. Many Americans since have reflected upon Ike’s words through a prism of the history that has transpired since the speech. But Eisenhower’s warning was rooted in the history that had transpired long before his speech. One of the most glaringly obvious examples of that latter historic context involves the bloodiest military conflict in American history: the Civil War.

During the first year of the war, then-Secretary of War Simon Cameron opened the floodgates to corporate profiteering off of the conflict. First, Cameron wrested the process of outfitting the Union Army away from the individual Union states and assigned it to the War Department. Then, Cameron eschewed the even-handed approach of competitive bidding for military contracts and largely neglected his office’s oversight responsibilities with the companies that secured contracts. In fact, Cameron and his department’s Assistant Secretary, Thomas Scott, directly benefitted from many of the contract relationships that they nurtured.

The consequences of this corrupt activity were severe — both on and off the battlefield. Many of the companies with military contracts cut huge corners on the quality of the goods and supplies that they delivered. Staples like uniforms and shoes — even horses — were grossly lacking in the level of quality necessary to effectively prosecute the war. And to add insult to injury, contract holders routinely marked up the per-unit prices for their wares up to six times their standard market cost.  As a result, the Union treasury withered away almost overnight.

War Secretary Cameron’s treasonous skein did not last long. In early 1862, President Lincoln tossed Cameron out of the War Department and exiled him on a diplomatic mission to Russia. But the damage had been done, most of all to the nation’s purse-strings. In the wake of that damage, an extreme remedy would be applied to assist the federal government in paying for winning the war that would assure its continued existence.

1862’s Legal Tender Act gave the United States government the power to print and circulate paper money that would hold value not backed by gold bullion. Faced with the egregious adversities of life during wartime, American citizens of the day had little choice but to accept Uncle Sam’s paper dollars as valid currency for their economic activities. Of course, everyone knows how the bigger story of the Civil War turned out: the Union’s paper dollars paid for the men and material necessary to win the war, and the Union’s paper dollars never went away.

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3 Comments

  1. And so it is! Great post, Jim. Gotta shake your head. When will people learn?

  2. Jim says:

    Unfortunately, we still wait for people to catch on! Not sure it will happen though! Thanks Laurie!

  3. Jose says:

    I get the sense the Cameron was not only responsible for the advent of our paper hammer, but for what eventually evolved into the $900 toilet seat as well :D

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