The Funding behind the Alaska Purchase: An Exploration of Historical Financial Realities

The Alaska Purchase, a significant territorial acquisition that took place in 1867, is often shrouded in mystery regarding its funding. This article delves into the historical financial realities that underpinned this transaction, examining the context and the mechanisms used to transfer funds from the U.S. Treasury to the Russian Empire.

Historical Context: The Alaska Purchase of 1867

On March 30, 1867, the United States entered into a treaty with the Russian Empire to purchase Alaska for a sum of $7.2 million, equivalent to around $113 million today after adjusting for inflation. This event marked a pivotal point in U.S. territorial expansion and is often referred to as "Seward's Folly" by critics who questioned its strategic value.

The Role of the U.S. Treasury

The funds for the Alaska Purchase were not just a simple transfer from the U.S. Treasury. The transaction relied on a specific mechanism: the use of treausory warrants. A treasury warrant is a legal instrument that authorizes the disbursement of funds from the U.S. Treasury. These warrants would typically be created with the approval of the Secretary of the Treasury and countersigned by the Comptroller General. However, in the case of the Alaska Purchase, such warrants did not suffice.

There is a rather amusing and unverified story in which the U.S. gave Russia a check that allegedly bounced when presented for payment in gold. The tale goes that this gold was supposed to be used to fund the transaction, but it never arrived in Saint Petersburg. A common explanation is that the ship carrying the gold sank north of England, although this has been widely dismissed as a conspiracy theory rather than a proven historical fact.

Financial Context of the U.S. Federal Budget

At the time of the Alaska Purchase, the financial situation of the United States was quite stable. The federal budget for 1867 showed an intake of approximately $500 million and outgoings totaling $350 million, resulting in a surplus of about $150 million and a debt of around $3 billion (rounded). In these terms, the $7.2 million cost of the Alaska Purchase was minimal. The $7.2 million represented only 1.5% of federal income, 2% of expenditures, or approximately 5% of the surplus for that year.

When viewed from the perspective of the total debt and budget, the $7.2 million was essentially a drop in the bucket. It amounted to less than 0.25% of the total debt, making it a nominal expense in the grand scheme of U.S. finances.

Key Players and Political Context

The Alaska Purchase was driven by William Henry Seward, then the Secretary of State. Seward's vision of expanding American territory was bolstered by the closed-door meeting of U.S. Assistant Secretary Robert Sevier Chew with Russian Ambassador Edouard de Stoeckl. The meeting led to the signing of the Treaty of Cession, which was then ratified by the United States Senate.

Several factors influenced the timing and terms of the purchase. Russia was in a state of economic strain due to years of ongoing military conflicts. The U.S. was also facing significant domestic issues, including the conclusion of the Civil War and the discussions around the expansion of slavery, which posed significant political and social challenges. Despite these complexities, Seward and de Stoeckl managed to strike a deal that remains a subject of historical fascination.

Conclusion

The Alaska Purchase of 1867 was significantly influenced by the financial realities of the time. The funds required were facilitated through the use of treasury warrants, though many subsequent narratives have romanticized or exaggerated the circumstances of the payment. The transaction, while seemingly monumental in scale, was a relatively small expenditure in the context of the overall U.S. budget. The purchase, ultimately, was a strategic move that has since proven to be one of the most valuable acquisitions in U.S. history.

The story of the Alaska Purchase illustrates the complex interplay of political, economic, and social factors that shaped American territorial expansion during the late 19th century. Understanding these factors provides valuable insights into the broader context of American history.