Ta-Nehisi Coates asks a series of excellent questions about the idea, touted by Ron Paul, that the Civil War could have been avoided through a program of compensated emancipation one of which I think I can answer:
Was a mass payment toward slave-holders even possible? We know that in 1860, slaves were worth $75 billion. Did the American government have access to those sorts of funds? If so, how would they have been garnered?
There’s a strong case that this could have been done, though some substantial irony in the fact that doing so would have required the violation of everything Ron Paul holds dear about economics. The main reason to think it would have been financially feasible is that the cost of prosecuting the Civil War was about $72 billion (in today’s dollars, which is what Coates is using to get the $75 billion figure) for the Union and about $24 bllion for the South.
So the United States had, strictly speaking, the economic resources necessary to pay the compensation. But as this excellent chart from UC Riverside Professor Robert Ransom’s piece on the economics of the Civil War illustrates, it wasn’t easy. By 1865, the Union had gotten pretty good at raising tax revenue through a combination of import duties, a kind of value-added tax on manufactures, and the nation’s first progressive income tax. Still, even in that year much more of the war was debt-financed than tax-financed. Even worse, “In 1862 Congress authorized the U.S. Treasury to issue currency notes that were not backed by gold. By the end of the war, the treasury had printed more than $250 million worth of these ‘Greenbacks’ and, together with the issue of gold-backed notes, the printing of money accounted for 18 percent of all government revenues.”
Now in practice, doing all this in circumstances other than the urgency of war would have been totally unthinkable. But that’s just one more nail in the coffin of the idea that compensated emancipation was on the table in some meaningful sense.
As regards Ron Paul, the more interesting point is this. Part of Paul’s totalizing worldview is that he hates war because war brings in its wake the financial apparatus of the modern state. Simultaneously, he hates the financial apparatus of the modern state in part because it’s a vehicle for the waging of destructive war. But in this case, while his posited alternative to war wouldn’t have required the mobilization of vast armies it certainly would have required enormous mobilization of money and with it something like the fiat money, large-scale borrowing on financial markets, and innovative new forms of tax collection that we associate with war finance.