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Wall Street History
https://www.gofundme.com/s3h2w8
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08/11/2000
The Erie Canal, Part II
So on July 4, 1817, construction began on the Erie Canal, the
artificial waterway that connected Buffalo on Lake Erie to
Albany on the Hudson River. It was the first such conveyance in
the U.S. and led to the spectacular growth of New York City, as
well as turning New York into the financial capital of the world.
The "Big Ditch," as it was affectionately called, stretched 363
miles, descending 555 feet from Lake Erie to the Hudson through
83 locks. It was 40'' wide.4'' deep.and entirely dug by hand.
And, if you are of Irish extraction, you can be proud that some
3,000 Irish immigrants worked on the canal; primarily because
attempts at farming in upstate New York had failed, thus the
project provided much-needed employment in the region.
On October 22, 1819, the first boat to travel on the canal went
from Rome to Utica. By 1821, some 220 of the 363 miles were
in operation, but construction of the hardest parts had not yet
begun (the area closest to the Hudson). Governor De Witt
Clinton nearly lost the governorship in 1821 as opposition from
''downstate'' residents nearly outweighed those who were smart
enough to know a good thing when they saw it.
And in 1825, true to Clinton''s word, the canal was completed,
well within the ten-year goal he had set back in 1817. Plus, it
came in on budget, $7 million.
On October 26, the governor set out from Buffalo in what would
be a two-week party. And then on November 7, Clinton
performed the "wedding of the waters" ceremony out near Sandy
Hook, NJ, as he mingled Lake Erie water into the Atlantic. New
York would henceforth become "the emporium of commerce, the
seat of manufactures, [and] the focus of great moneyed
operations."
In 1825, some 13,100 boats passed between Buffalo and Albany,
paying $500,000 in tolls which was more than enough to fund
the debt the state had incurred.
And, just as the Internet has helped to lower prices in some
processes today, the Erie Canal was a huge boon to the region''s
consumers. The canal was the most important freight route from
the East to the Mid West. Agricultural production from beyond
the Appalachians now passed through a far shorter route than had
been the norm. Historian John Steele Gordon notes that before
the canal was built, "a ton of flour in Buffalo, worth $40, could
be transported overland to New York City in 3 weeks at a cost of
$120. Using the canal it could be shipped in 8 days at a cost of
$6."
Gordon also notes that as a result of the canal, the growth of New
York City exploded. In 1820, New York had approximately
125,000 residents, while Philadelphia was at 110,000. By
1860, New York registered almost 1.1 million; Philadelphia, half
that number. And, in another example of the impact, back in
1800, 9% of the country''s foreign commerce had passed through
New York. By 1860 that figure was 62%.
[As a result of the Erie Canal, Philadelphia was shocked to
discover that the cheapest route for freight traffic to Pittsburgh
was by way of New York City, Albany, Buffalo, and wagon road
from Lake Erie. By 1840, Pennsylvania had 1,000 miles of
canals in operation. It was too late.]
Because the canal drew eastward much of the trade that once
went down to the Gulf, it had not only major economic
consequences, but also political ones as well. The Erie Canal
tied together East and West while isolating the South.
Canal mania gripped the northern half of the country as the Big
Ditch was being completed. In New York, branches of the Erie
Canal soon put most of the state within reach of it. And by 1828,
branches of the Delaware and Hudson canal linked New York
with the coalfields of northeastern Pennsylvania.
By 1837 some 3,000 miles of waterways were crisscrossing
America. Europeans were eager to invest in canal shares, which
were seen to be the perfect way to participate in the nation''s fast-
growing economy.
But the canal construction and investment boom was bound to
end badly. More than one state had borrowed heavily to finance
the projects, only to see them go bust. Bondholders had no
recourse. Some of the ventures were simply frauds. One
offering, the Chesapeake and Ohio Canal Company, designed to
be a southerly version of EC, was never completed after running
up costs of $22 million, over three times the Erie''s $7 million
price tag.
And there was a new threat on the horizon.the railroad. [Back
in 1825, the first commercial steam railway had begun operations
in England.] Coupled with the Panic of 1837 and the ensuing
depression, it spelled doom.
On the other hand, the Erie Canal can forever be credited with
solidifying New York''s preeminent position on the world scene.
Oliver Wendell Holmes (the author, not the Chief Justice), best
summed it up.
"Only with the planning and financing of the Erie Canal did Wall
Street threaten the older centers. When the Big Ditch proved
even more beneficial than expected, all of New York State and
the old Northwest opened to the port. As the city grew, so Wall
Street expanded its credit and banking operations. The brokers
waxed strong, as New York became the tip of the tongue that
laps up the cream of the continent."
[Sources: Same as Part I, 8/4]
Brian Trumbore
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