Capital destruction and economic growth: the effects of Sherman’s March, 1850–1920

Abstract

Using General Sherman’s March through Georgia, South Carolina, and North Carolina during the Civil War, we study the effect of capital destruction on medium- and long-run local economic activity, and the role of financial markets in recovery. We show that the march’s capital destruction led to a large contraction in agricultural investment, farming asset prices, and manufacturing activity compared to neighboring counties. Elements of the decline in agriculture persisted through 1920. Exploiting variation in local access to antebellum credit, we argue that the underdevelopment of financial markets played a role in weakening the recovery.