Neither the North nor the South was ready for protracted hostilities. The U.S. Army was small and scattered, and state militias were untrained. Nor were the economies geared for war. The Southern economy was based on cotton and slave labor, and there were scarce facilities for making war equipment. The North was emerging from a financial panic and ensuing depression that had begun in 1857. Both sides hoped war would not come, but Northern leaders felt they had to fight to preserve the country they had inherited from their grandfathers who had forged it only eighty-odd years before.