Of all the problems raised by the North’s victory in the war, none proved more critical than the South’s transition from slavery to free labor. As federal armies invaded and occupied the Confederacy, hundreds of thousands of slaves became free workers. In addition, Union armies controlled vast territories in the South where legal title to land had become unclear. The Confiscation Acts passed during the war punished “traitors” by taking away their property. The question of what to do with federally occupied land and how to organize labor on it engaged ex-slaves, ex-slaveholders, Union military commanders, and federal government officials long before the war ended.

In the Mississippi valley, occupying federal troops announced a new labor code. It required landholders to give up whipping, to sign contracts with ex-slaves, and to pay wages. The code required black laborers to enter into contracts, work diligently, and remain subordinate and obedient. Military leaders clearly had no intention of promoting a social or economic revolution. The effort resulted in a hybrid system that one contemporary called “compulsory free labor,” something that satisfied no one.

Planters complained because the new system fell short of slavery. Blacks could not be “transformed by proclamation,” a Louisiana sugar planter declared. Without the right to whip, he argued, the new labor system did not have a chance. Either Union soldiers must “compel the negroes to work,” or the planters themselves must “be authorized and sustained in using force.”

African Americans found the new regime too reminiscent of slavery to be called free labor. Its chief deficiency, they believed, was the failure to provide them with land of their own. Freedmen believed they had a moral right to land because they and their ancestors had worked it without compensation for more than two centuries. “What’s the use of being free if you don’t own land enough to be buried in?” one man asked. Several wartime developments led freedmen to believe that the federal government planned to undergird black freedom with landownership.

In January 1865, General William Tecumseh Sherman set aside part of the coast south of Charleston for black settlement. By June 1865, some 40,000 freedmen sat on 400,000 acres of “Sherman land.” In addition, in March 1865, Congress passed a bill establishing the Bureau of Refugees, Freedmen, and Abandoned Lands. The Freedmen's Bureau, as it was called, distributed food and clothing to destitute Southerners and eased the transition of blacks from slaves to free persons. Congress also authorized the agency to divide abandoned and confiscated land into 40-acre plots, to rent them to freedmen, and eventually to sell them “with such title as the United States can convey.” By June 1865, the Bureau had situated nearly 10,000 black families on half a million acres abandoned by fleeing planters. Other ex-slaves eagerly anticipated farms of their own.

Despite the flurry of activity, wartime reconstruction failed to produce agreement about whether the president or Congress had the authority to devise policy or what proper policy should be.