Victory or Repudiation? The Probability of the Southern Confederacy Winning
the Civil War
Marc Weidenmier & Kim Oosterlinck
NBER Working Paper, November 2007
Historians have long wondered whether the Southern Confederacy had a
realistic chance at winning the American Civil War. We provide some
quantitative evidence on this question by introducing a new methodology for
estimating the probability of winning a civil war or revolution based on
decisions in financial markets. Using a unique dataset of Confederate gold
bonds in Amsterdam, we apply this methodology to estimate the probability of
a Southern victory from the summer of 1863 until the end of the war. Our
results suggest that European investors gave the Confederacy approximately a
42 percent chance of victory prior to the battle of Gettysburg/Vicksburg.
News of the severity of the two rebel defeats led to a sell-off in
Confederate bonds. By the end of 1863, the probability of a Southern victory
fell to about 15 percent. Confederate victory prospects generally decreased
for the remainder of the war. The analysis also suggests that McClellan's
possible election as U.S. President on a peace party platform as well as
Confederate military victories in 1864 did little to reverse the market's
assessment that the South would probably lose the Civil War.
This use of financial markets data is far too rare in political science, and history.