The Emancipation Proclamation had a significant impact on the Confederate economy and war effort. By declaring slaves in rebel states free, it threatened the very foundation of the South's labor-intensive agricultural economy. As Union armies advanced, many slaves fled to Union lines, depriving Confederate farms and industries of crucial labor. This exodus intensified labor shortages in the South, reducing agricultural productivity and hampering the Confederacy's ability to supply its armies and civilian population. The proclamation also discouraged European powers, particularly Britain and France, from intervening on behalf of the Confederacy, as supporting the South became synonymous with supporting slavery. This diplomatic isolation made it harder for the Confederacy to secure foreign loans and supplies. Additionally, the proclamation allowed the Union to recruit Black soldiers, bolstering its military strength while simultaneously weakening the Confederacy's workforce. The psychological impact was also significant; it demoralized many Southerners and strengthened the resolve of slaves to resist or escape. All these factors combined to undermine the Confederate war effort, contributing to economic instability and eventual military defeat.