The South is being squeezed by the North, but the war is nowhere near finished, or even, as things turned out, half over. The Union had the advantage in numbers of people, industries, railroad connections and the military/government complex already made and tested. The Confederates, forced to create and develop everything from Constitutions, capitals, governments, military complete with command structure and resources, on the fly or on the run while defending their boarders, had nonetheless had a number of early, major victories.
Though eleventh in chronological battles, the First Battle of Bull Run/Manassas, is considered the first major engagement between the Confederate and Union troops. Less than 20 miles from Washington DC and connected by good roads and rails, the Battle of Bull Run/Manassas, was a complete rout, with Union troops breaking and running, with some civilian observers, back to Washington DC in a near-panic. (It was a 10 hour carriage drive, so we’re not talking a complete gallop the entire way)
According to the common warfare of the time period, many on the Union side believed that the Confederates would follow and attempt to capture Washington DC the next day or two. DC residents scrambled to gather their personal effects, important government papers, artifacts, and abandon town before the Confederates 1812’d the place and “White House III” needed to be re-built–again. Certainly President Jefferson Davis of the Confederate States, there on the field of Manassas, urged his generals to do just that, capture DC, sue for peace, and put this war behind them.
But it never happened. The Confederates rested their troops, the Union regrouped, and the war dragged on. And the weaknesses of the South’s economy began to show.
The South’s economy was based on agriculture, specifically “King Cotton”. Prior to the invention and patenting of the cotton gin in 1793, cotton was a laborious crop, requiring so much work to raise, pick, process, and weave that the resulting cloth was a luxury good only the rich could easily afford. The South primarily grew tobacco, which was losing popularity. By the end of the 1780’s ,the large plantations and the slavery on which they depended, were slowly dying away. Then the cotton gin eliminates one of the most problematic and labor-intensive parts of cotton’s cycle from plant to fabric: removing the seeds. (Seriously, one pound of cotton needs 10 hours to de-seed by hand. The early 19th century gins can handle 50 pounds a day.)
Suddenly, cotton cloth is cheap and there’s a whole new market for cotton all over Europe and America. They couldn’t get enough of the stuff. The South churned out millions of bales a year to feed that appetite, increasing plantation size, numbers of slaves, and wealth. But that means they develop industry only in so far as it helps increase cotton production, and transportation thereof to sea ports. The North develops industry, including manufacture of steam engines, laying of railroads, mining metals, and growing grains and foods in fertile valleys that are too cold to support cotton. Many of these things take up land that could be used for cotton, so the South’s economy benefited the most from selling as much cotton as they can produce and purchasing anything they might need from the North and Europe.
But when push comes to shove, and suddenly you can’t ship your product out, you discover….cotton’s USELESS. You can’t eat it. You can’t use it. You can’t make it into weapons to defend yourself, you can’t build with it, you can’t do anything other than trade for stuff you can use. You can make cloth and tents and clothes with it…but the looms for these things were in the North and Europe. Cotton was shipped out in bales, not bolts. So long as the Union blockade remained and grews, millions of tons of cotton bales built up in warehouses and sea ports , but the economy of the Confederate States teetered on the brink of collapse. 
There are blockade runners, but they have to be built for speed to outrun the Union ships, so they can’t carry enough freight to balance the ships which are still being held hostage. The South HAS to break the blockade to survive. And despite having to sink her, the PIONEER proved to be one of the most promising ships that could blow up, sneak around, or break the phalanx of Union ships that kept Confederate frigates in, and European frigates out.
Now in Mobile Alabama, Hunley, McClintock and Watson need a new place to build their next boat, and they found it, and two new partners in the bargain: Park and Lyons Machine Shop, the business of Tom Parks and Tom Lyons.
This new boat was supposed to advance on the PIONEER in a few ways: she would have a longer hull with more room for men. Her knife-like bow come to a vertical blade rather than a point, which would allow her to cut through the water easily, while giving vertical stability. But most importantly, Hunley and his team hoped to revolutionize underwater navigation with a new engine propulsion system.
Even into the twentieth century, underwater propulsion had a central problem: combustion engines required air, and anything that’s watertight is also airtight. Within seconds to minutes, the engine sucks all the air out of the vessel and your lungs start to take issue with this idea. That’s why the diesel submarines of WWII were not diesel boats in the strictest sense, they were diesel electric. Submarines would run the engines on the surface with special induction valves allowing air in, the engines would run generators, the generators would charge batteries. Once charged, the engines could be shut down, the intakes closed, and the submarine, now running solely on electric batteries, could take to the depths. Until battery power ran out, the submarine could remain underwater. (Modern subs also function on this principle, but nuclear plants do not require air to function, so modern subs remain underwater as long as food stores and crews’ patience holds out.)
But that innovation was still thirty-five years or so in the future. Hunley and his team of four had a lot to work through, and no time to screw up.
The original engine idea was a electric-magnetic engine. Sadly, there are no specifications beyond this description, so no one knows how they were going to design or rig this thing in any configuration. The only thing we know is the engine, once fitted within the hull of the PIONEER II (now called AMERICAN DIVER), was not powerful enough to propel the submarine fast enough to overcome even the simplest current. With no documentation of the engine, or the tests used before the engine was removed and destroyed, we’ll never know how close we could have come to a unique engine propulsion system, or how much earlier the NAvy could have used submarines.
With the electric-magnetic engine abandoned, the group turned to a custom built small steam engine. Any engineer is going to see the problem with this idea–same as the combustion engine idea-fire needs air and air in a submarine is in short supply. The best historians can figure, this engine may have been designed to build up significant pressure, then, once the fire was doused, the crew could dive the boat, and function on the graduated release of the built up pressure. An interesting idea, but didn’t work well enough again. We’re back to a few strong men turning a crank.
It was now January, 1863.
The Great Ironclad MONITOR and MERRIMACK had already fought each other to a draw. The Battle of Bull Run/Manassas (no. 2) had happened with another Confederate victory, but things were slowly turning against the South.
AMERICAN DIVER however, was a bright spot. she handled, she turned, she seemed to be ideal to drag a contact mine behind her and take out the ships blocking Mobile’s harbor. This links to the best drawing I’ve seen about how her crew were positioned and worked within AMERICAN DIVER. (Couldn’t get permission to post in time, so the link is the next best thing)
By February 1863, the Confederates decided to try the DIVER against the blockade. The crank was physically hard on the men of the DIVER, and Mobile was over twenty miles from the mouth of the bay. So, the DIVER was towed from Mobile to Fort Morgan, located on a little spit of sand guarding the harbor’s entrance. Between Fort Morgan and Fort Gains, across the way, the DIVER and any of her targets would be in closest proximity until a target was close enough for a mission. Here’s where the story of the DIVER differs slightly, though the ending is the same.
In the first version, as DIVER was approaching Ft. Morgan, a storm, which had been building as DIVER and her tow reached their goal, swamped the DIVER. The tow ship was soon forced to cut the t0wline, lest DIVER take on water and draw her tow down with it. With her prospective crew on the towing ship and safe, DIVER went down alone.
In the second version, the DIVER made it to Fort Morgan, and out and back on her first mission, but the attack was unsuccessful. A second attack was planned, and it was at this juncture, heading out on her second mission, that the DIVER was lost in the storm. 
Whatever happened, the DIVER was gone, and with it, the time, money and resources the Confederates had put into her. None of those where easily replaceable, not any more.
But both the PIONEER and the DIVER had been so promising, Hunley and his team were determined to try again. With money and materials scarce, in order to build her, they were now going to have to sell shares of any future loot this next submarine, called “The FISH BOAT” or “PORPOISE” on paper, would someday capture.
Try, try, again.
 Archaeological evidence shows that the ancient Indians (as in, subcontinent of,) had a type of cotton gin as far back as 500 AD. There were also types of roller cotton gins in the Bahamas in the 19th century. In addition, there are claims that Eli Whitney was not, technically, the first inventor of the cotton gin–just the first one to try and patent it for mass-production. Whatever the truth (which is usually tangled), Whitney did not make much money on his gin…later he invented the rifle with inter-changeable component parts for easy assembly and repair. THERE’s where the money was!
 Ironically, in 1861, after the South started to secede, but before the North decided to blockade the ports (see note ) the South decided to economically force the North and Europe (actually, England, or if all else fails, France) to either sue for peace (North) or intercede and mediate for peace (Europe). They did this by voluntarily refusing to ship cotton out of the South, devastating the European and Northern cloth shipping, weaving, textile, and clothing markets. Or so they thought. The North wasn’t interested, and thanks to the South’s extreme sucess at growing cotton, they’d actually grown more than could be USED in the past year. (The English also had seen this war coming and had stocked up…just in case) So warehouses were bulging with cotton on both sides of the Atlantic. The 1861 crop was not, strictly speaking, needed. Moreover, England didn’t want to upset the North, putting trade for grain and corn and goods at risk, and they most certainly didn’t want the North invading Canada in retribution…again (War of 1812). There was some economic fallout, see “Lancashire Cotton Famine” in Whikipedia. But it wasn’t bad enough for the English to risk jumping in the middle of this mess. France didn’t want a divided America, they wanted a strong America who could balance the English in trade and military naval might in the Atlantic. So, they didn’t interfere and hoped for a Union success. And then Egypt and the Bahamas said, “If you’re looking for cotton…we’ve got plenty!” So this failed on a catastrophic level. (Let that be a lesson, unless you have ABSOLUTE 100% control of a good or service and there is NO substitute, more often than not, hoarding stuff only provides others the opportunity to fill the market you vacated!)
 Ironically, (there’s just too much irony!) by “blockading” the Confederate States, the Union States were tacitly acknowledging the Southern states HAD the right to secede and form an independent nation, and thus, this isn’t a rebellion, this was a war against a seperate nation that used to be part of their own. After all, you block someone else’s ports. You simply close your own to trade. By “blockading” the South rather than closing her, the North showed that despite rhetoric, they, on some level, believed it was true the South had the formed a second nation. (Another little known fact: NEW ENGLAND came within a hairs-breadth of seceeding from the union during the War of 1812, when Federal policies de facto prevented trade with France and England both–killing New England’s economy.)
 Clive Cussler, the novelist of the Dirk Pitt adventures (love ’em!) was part of the team which located and helped raise the HUNLEY in 2000. He’s now searching for the AMERICAN DIVER in Mobile Bay. I do hope he someday finds her, and the HUNLEY and DIVER can be exhibited together.