Working paper.Using General William Sherman’s 1864--65 military march through Georgia, South
Carolina, and North Carolina during the American Civil War, this paper studies the
effect of capital destruction on short- and long-run local economic activity, and the role
of financial markets in the recovery process. We match an 1865 US War Department
map of Sherman’s march to county-level demographic, agricultural, and manufacturing
data from the 1850–1920 US Censuses. We show that the capital destruction
induced by the March led to a large contraction in agricultural investment, farming asset
prices, and manufacturing activity. Elements of the decline in agriculture persisted
through 1920. Using information on local banks and access to credit, we argue that
the underdevelopment of financial markets played a role in weakening the recovery