Canals Summary

  • Last updated on November 10, 2022

Canals opened the American frontier, creating new markets for eastern factories and providing access to the raw materials in the Midwest. They enabled businesses to become more efficient; however, several states suffered bankruptcies during the 1830’s because of investments in canals.

Small canals were first created in the United States during the late eighteenth century. One canal project, the Powtomack Company, was led by George Washington, who thought that canals offered the nation the best hope of linking its regions into a united country. However, the first major canal to influence American business was the Erie CanalErie Canal, completed in 1825. Governor DeWitt Clinton, DeWittClinton persuaded the New York legislature to invest $7 million in the construction of a 363-mile waterway to link Lake Erie in western New York to the Hudson River at Albany. The Hudson’s path through New York City would make that municipality the greatest port in the world. Lake Erie’s connection to the other Great Lakes opened up the frontier (including western Pennsylvania and what would become the states of Ohio, Indiana, Illinois, Michigan, Wisconsin, and Minnesota) to settlers. The completed canal was considered the engineering marvel of the nineteenth century. The benefits of the Erie Canal were immediate; settlers quickly moved west. Freight rates from Buffalo to New York, which had been $100 per ton by road, dropped to $10 per ton for shipments by canal. Whereas freight rates had previously often exceeded the value of the goods being shipped, the canal rates made it economical to ship more kinds of products. In only nine years, the tolls collected on the Erie Canal were sufficient to recoup the entire cost of construction.Canals

The locks at the Panama Canal in 1912, before the gates were placed.

(Library of Congress)

The lower freight rates that resulted from the opening of the Erie Canal made New York City the port of choice for both domestic and foreign shippers. Other New York cities benefited as well; almost every major city in the state falls along the trade route established by the Erie Canal. As a result of the economies demonstrated by the Erie Canal, there was a boom in canal construction in other locales, and a search for alternative forms of transportation that might offer similar economies.

Alternative Forms of Transportation

Some experts argue that even the invention of railroads can be attributed to the opening of the Erie Canal. For example, the Baltimore and Ohio RailroadBaltimore and Ohio (B&O) Railroad was formed in 1827, when merchants of Baltimore sought to preserve their city’s commercial advantage as a seaport link with the American interior. Baltimore had risen to the third largest city in the United States because of the construction of the Cumberland Road that bridged the Allegheny Mountains from Cumberland, Maryland, to the Ohio River Valley and on to the Mississippi Valley of the Midwest. However, even with the Cumberland Road, travel by wagon was arduous, slow, and costly. The opening of the Erie Canal in 1825 threatened to ruin Baltimore’s commercial role, as transport to the Ohio and Mississippi River Valleys shifted to waterborne shipment via canal, lake, and river through New York City.

Because Baltimore did not have direct river access to the west, merchants were willing to consider any ideas. Banker Philip E. Thomas had been corresponding with his brother, Evan, who was in England and was excited about “railed roads” there. The two believed that the cost of construction of a railroad, even over the mountains, would be less than the cost of building the Chesapeake and Ohio Canal (the nearest competitive alternative). The brothers also felt that the railed road offered a mechanical advantage in that horse-drawn wagons in a train could be pulled efficiently on the smooth rails. The merchants of Baltimore quickly warmed to the railed road idea.

Negative Aspects

Although the eastern canals were mostly successful, such was not the case in the Midwest. Canals offered a definite advantage in frontier areas. Compared with railroads, canals could be built using more local materials, allowing money to be expended locally instead of flowing to outside interests. In the case of railroads, the steam engines and the rails had to be imported. Several midwestern states approved laws, often called internal improvements acts, during the 1830’s to fund the building of canals. The bonds were to be paid off from revenues generated from canal tolls. Such revenues never materialized, and the bonds, many of which were held by British investors, were never paid off. As a result, these states either had to declare bankruptcy or, at minimum, found they could no longer issue bonds for any purpose. Due to financial mismanagement and the Panic of 1837, the internal improvements in the Midwest came to an end. The longest canal in the Midwest was the Wabash and Erie CanalWabash and Erie Canal, which was started in Fort Wayne, Indiana, in 1832. When completed twenty-one years later, the canal stretched from Toledo, Ohio, on Lake Erie to Evansville, Indiana, on the Ohio River. At 468 miles, it was the longest canal ever built in the United States. Its completion created a series of connective waterways from New York City to New Orleans.

Canals were the interstate transportation system of the first half of the nineteenth century, but following the U.S. Civil War, the railroad industry had grown to such an extent that canals became less profitable. In the twenty-first century, many of the old canals had become little more than tourist attractions.

Further Reading
  • Bernstein, Peter L. Wedding of the Waters: The Erie Canal and the Making of a Great Nation. New York: W. W. Norton, 2005. Engagingly written history of the Erie Canal that considers it in the broad context of nineteenth century American history and demonstrates its impact on national development.
  • Bourne, Russell. Floating West: The Erie and Other American Canals. New York: W. W. Norton, 1992. Series of histories about various American canals; includes bibliographic references.
  • Hecht, Roger W. The Erie Canal Reader, 1790-1950. Syracuse, N.Y.: Syracuse University Press, 2003. Collection of fiction, poetry, essays, and other works about the Erie Canal written over the course of its history.
  • Rubin, Julius. Canal or Railroad? Imitation and Innovation in the Response to the Erie Canal in Philadelphia, Baltimore, and Boston. Philadelphia: American Philosophical Society, 1961. Discusses community responses to the completion of the Erie Canal.
  • Scheiber, Harry N. Ohio Canal Era: A Case Study of Government and the Economy, 1820-1861. Athens: Ohio University Press, 1969. Although this book deals with the problems of the Ohio canals, the situations were similar in the other midwestern states.
  • Shaw, Ronald E. Canals for a Nation: The Canal Era in the United States, 1790-1860. Lexington: University Press of Kentucky, 1990. An excellent history of the canal era; includes bibliography and index.
  • Sheriff, Carol. The Artificial River: The Erie Canal and the Paradox of Progress, 1817-1862. New York: Hill & Wang, 1996. Uses archival research to document the varied responses of ordinary people who lived along the waterway.


Clay’s American System

Cumberland Road

Erie Canal


Mississippi and Missouri Rivers

Panama Canal


First stagecoach line


Water resources

Categories: History