I'll let General Sherman explain why the South lost the war. He was talking to a secessionist friend of his in 1860 and he predicted exactly what would happen if the South decided to secede from the Union:
"You people of the South don't know what you are doing. This country will be drenched in blood, and God only knows how it will end. It is all folly, madness, a crime against civilization! You people speak so lightly of war; you don't know what you're talking about. War is a terrible thing! You mistake, too, the people of the North. They are a peaceable people but an earnest people, and they will fight, too. They are not going to let this country be destroyed without a mighty effort to save it … Besides, where are your men and appliances of war to contend against them? The North can make a steam engine, locomotive, or railway car; hardly a yard of cloth or pair of shoes can you make. You are rushing into war with one of the most powerful, ingeniously mechanical, and determined people on Earth — right at your doors. You are bound to fail. Only in your spirit and determination are you prepared for war. In all else you are totally unprepared, with a bad cause to start with. At first you will make headway, but as your limited resources begin to fail, shut out from the markets of Europe as you will be, your cause will begin to wane. If your people will but stop and think, they must see in the end that you will surely fail."
The cause of the Confederates would have never succeeded. They lacked the industry, the resources, and the infrastructure to sustain themselves. It was only due to the genius of military commanders like Robert E. Lee and the ineptitude of men like George B. McClellan that the war went on as long as it did. Had Lee opted out of serving the Confederacy and/or McClellan had been replaced by somebody who could do their job, then the Civil War would have ended by 1862 or 1863. It would have ended before Lincoln could give the war a two-fold purpose of maintaining the union and the abolition of slaves, and slavery would have continued in the South for just a little while longer (until it was no longer economically viable to use slaves for labor when machines could do the work faster and more consistently). The Confederates never really had a prayer.