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Neither the North nor the South had prepared for an extended war. Two years into the conflict, both faced common difficulties. Foremost was the lack of money and manpower. The war was expensive and both treasuries were depleted. While neither initially wanted to impose direct taxes to finance the war, they were forced by circumstances to turn to taxation though on a small-scale. The North seemed to have had more success in raising funds.
With the North’s population greater than that of the South, the new tax was able to finance 21% of the war expenses while it was only 1% for the South. Both also tried borrowing. The North being more committed to the idea and was able to obtain more than $2 billion worth of bonds in loan. Another solution that was considered and eventually enforced was the printing of paper money. The Confederacy started with $100 million while the Union printed $150 million worth of “greenbacks” so called because of its color.
The flooding of paper money expectedly led to inflation that resulted to food prices increasing to 80%. This led to hardships in the urban areas which were unable to produce their own food. Volunteers in the army for both sides dwindled off as disillusionment set in. The prestige of army life with its military parades and victories were gone as the harsh realities of deadly diseases, camp life boredom, loss of values, impersonal destruction and conditions of being “half-starved, half-frozen and half-drowned” were experienced. There were also desertions.
To entice would-be soldiers, sign-up bonuses of $800 to $1000 were given to outsiders. Soon, they resorted to the draft despite anticipated opposition and anger by the general populace. However, instead of forcing men to serve, they encouraged those who are already in the army to re-enlist and attract volunteers. The South needed more of these draftees since the North had about 180,000 able immigrants to choose from. The allowance for substitution and exemption, however, led to even further resentments as the conditions clearly favored the rich.