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Wall Street History
https://www.gofundme.com/s3h2w8
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08/04/2000
The Erie Canal, Part I
The Erie Canal.the great artificial waterway connecting Buffalo
on Lake Erie to Albany on the Hudson River. Without it, New
York would have evolved into just another city on the East Coast
of America, not the world''s financial capital. Wall Street, itself,
may have been Chestnut Street, or State Street.
The building of the canal is a story of vision and perseverance. In
the early 18th century, it was apparent that the transportation of
goods across the land was problematic. More to the point,
without a better transport system, westward expansion seemed
futile.
The idea for the canal actually goes back to the days of King
George I, who in 1724 turned it down. George Washington also
later saw the importance of connecting the Great Lakes to lands
east. He proposed a similar venture in 1783 that never came to
fruition.
Washington''s chief concern was that the loyalty of western
settlers was "hanging by a thread," as economic interests lay more
with New Orleans and Montreal than with the eastern seaboard.
As America''s population was expanding westward, beyond the
Appalachian Mountains, the costs associated with any kind of
cargo were prohibitive. The early road system was miserable and
the only way to move freight was by horse- or oxen-drawn
wagons. So the bulk of cargo traffic had to travel by river.
Historian John Steele Gordon notes that there were two primary
routes. "The first, via the Great Lakes, the St. Lawrence River,
and Montreal, required a portage around Niagara Falls. The
other, via the Mississippi River and New Orleans, passed through
Spanish territory."
Thomas Jefferson''s purchase of Louisiana removed the threat of a
foreign power shutting down the Mississippi to American
commerce and it helped alleviate what had been Washington''s
concern, that being "loyalty." But the original problems still
existed.
In researching the history of the Erie Canal, the lion''s share of the
credit goes to De Witt Clinton. But that is the easy way out.
Aside from those like Washington who had the vision to dream of
the project, there were actually a multitude of individuals who
deserve their own piece of history.
Back in 1788, two of the leading land speculators of the time,
Nathanial Gorham and Oliver Phelps, saw the need to connect
Lake Erie with the Hudson River, the latter flowing down into
New York City and the Atlantic.
Gorham and Phelps accumulated over 2.5 million acres in western
New York. In 1790, another speculator, Robert Morris,
purchased some of the Gorham / Phelps tract. Soon he had
amassed a stake of some 5 million acres.
Morris then sold a large portion of his holdings to a Dutch
consortium who, in turn, attempted to package the land to
European investors. But there was little interest.
In 1791, Governor George Clinton of New York called for a
canal linking Albany and Lake Erie. Clinton understood that
without increased commerce, New York City would lose out to
Philadelphia and Boston.
In 1792, the state incorporated two companies, the Western
Inland Lock Navigation Company and the Northern Inland Lock
Co., to actually construct the canal system. But, as with earlier
attempts, neither outfit was successful in finding investors and the
projects died.
Meanwhile, in 1790 a chap by the name of Henry Post met
De Witt Clinton, the secretary to his uncle, the governor of New
York. De Witt was 21, Post just 16, but they became fast friends.
Post clerked with a Wall Street trading firm, Prior & Co., and
was soon dubbed "Colonel Prudence" by De Witt because of his
laid back, cautious style of doing business, in contrast to the often
temperamental Clinton. Post became De Witt''s confidante.
Clinton was highly intelligent, graduating from Columbia at the
age of 17. By 1802 he was elected to the U.S. Senate, but he
only served a year, resigning to become mayor of New York. At
the time, the mayoralty, was a one-year appointive office. Clinton
held it for almost 12 years.
In 1812, De Witt ran for president against James Madison.
Madison, running for his second term, defeated Clinton handily,
59-41 percent (though it was somewhat closer in the electoral
college).
[De Witt''s uncle, George, had ended up serving as vice president in
Thomas Jefferson''s second administration.]
Also in 1812, Henry Post was working to form the Society for
Internal Improvements. It was to be a key ''think-tank'' in the
building of the Erie Canal.
But the War of 1812 put a temporary kibosh on any major
construction projects. When the war ended, the New York
congressional delegation lobbied Washington for federal support
but President Madison vetoed a proposal designed to grant New
York $1.5 million in seed money. [Total federal government
expenditures, back then, were about $22 million.]
With the encouragement of the ever loyal Henry Post, De Witt
Clinton ran for governor of New York and was elected in the
spring of 1817. He had grand plans, including possibly another run
at the presidency.
Clinton knew that he had to address the transportation issue. The
lion''s share of the survey work had been done by Post''s Society
for Internal Improvements; it was now a matter of convincing the
citizens of New York State and somehow raising the funds
necessary for the construction of a canal.
In De Witt''s eyes, New York had two distinct geographic traits.
First being the Hudson River, which by its size allowed ocean-
going vessels to travel far up into the heart of New York. The
second was a gap in the Appalachian Mountains near Albany,
where the Mohawk River flows into the Hudson. And the land
that ran from Albany to Lake Erie didn''t rise to a height greater
than 600 feet, meaning that a canal was feasible.
Governor Clinton came up with a price tag for the Erie Canal of
$7 million. Washington, once again, refused to help out.
The rural farmers of western New York, on the other hand, were
all for the project. Farming was rough and many of the settlers
were already contemplating new careers. The jobs and commerce
that would flow through with the canal project would be a
welcome sight.
But, just as in the politics of today''s New York, "downstate" or
city residents battled their upstate brethren. The city folk saw the
Erie Canal as a boondoggle that would bring no benefits to them.
Rather short-sighted, to say the least. The governor, however,
was able to convince the state legislature to borrow the $7 million
and on July 4, 1817, Clinton turned over the first shovel of dirt on
what would become the greatest engineering feat in America prior
to the Civil War.
Governor Clinton proclaimed, "The day will come in less than 10
years when we will see Erie water flowing into the Hudson."
It took less than that. Next week, Part II.
Sources:
"America: A Narrative History," Brown and Shi
"The Great Game," John Steele Gordon
"The Pursuit of Wealth," Robert Sobel
Journal of Financial History / Article by Fred Folsom
"The Growth of the American Republic, Vol. 1,"
Morison, Commager, Leuchtenberg
Brian Trumbore
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