Title: Victory or Repudiation? The Probability of the Southern Confederacy Winning the Civil War
Abstract: 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.