Take the “long” view on Russian oil. History has a hint

Take the “long” view on Russian oil. History has a hint

Photo: ua.depositphotos.com / orlaimagen
29 July 2022

Many Europeans are now wondering what will happen when they can no longer buy Russian oil. No one can foretell the future, but history can sometimes give us some insight into how things could work out.

A similar situation occurred in the 1860s. The American South (like Russia today) as a mainly underdeveloped region with an abhorrent political system that produced a raw material, cotton, that the leading industries of the day needed—the textile mills of Lancashire, in England. When the American Civil War began, the North blockaded the South’s ports to keep cotton from being exported to England.

The blockade was largely successful, and the price of raw cotton in Lancashire rose to about six times its prewar level. Much less cotton was available, and hundreds of thousands of cotton mill workers lost their jobs.

But the hard times in Lancashire did not last long. Mill owners soon turned to other sources of cotton, especially India and Egypt. They had not used this other cotton previously because their machines could not process it. To respond to the blockade, they had to buy new equipment.

And the textile machinery companies in Lancashire had to invent the new equipment and make it. The result was an investment boom—and a quick return to prosperity in Lancashire.

So Lancashire turned out not to be “dependent on” Southern cotton after all.

What would have happened if England had wrongly believed that “weaning itself from” Southern cotton would be too painful and therefore broken the blockade?

We can’t know for sure, but economic historians who have studied thoroughly have made some educated guesses. Nobel Prize-winning economist Robert Fogel wrote that a very modest tax on cotton at pre-war volumes would have given the South a budget twice the size of the North’s, and so with Britain’s help it probably would have won and become an independent nation.

Fogel went on to predict that an independent, slave-holding South would have been a military colossus. It would have expanded into Latin America, possibly even linking up with Brazil (which did not emancipate slaves until 1888). Cotton would have lost its primacy, but this new country would have entered the twentieth century with vast reserves of oil (especially if it had conquered Mexico and Venezuela).

What would this alternative history have meant for Britain? Less than eighty years after the American Civil War (about the time that has elapsed from World War II to now), Germany was attacking Britain. The white supremacist South would have been Hitler’s natural ally, and a powerful one. The South and the Third Reich together would probably have won.

As Europe thinks about Russian oil today, it should take the long view.



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