The Inevitable Prosperity of Illinois

The precedent that internal improvements such as great canals were not part of the responsibilities of the national government had been established with the Erie Canal itself, a monumental project that took two decades to accomplish.

New York had gone to the Jefferson Administration looking for federal money to build a connection between the Hudson and the Great Lakes.

The debate was long and took years to sort out. For Jefferson and others, there was a philosophical issue, of whether such allocations from the treasury, and even such acts, lay within the power of the federal government as chartered in the Constitution (many in both parties were eager to figure out a way to say yes).

These considerations, however, were overridden, as they often were in that day, by regional issues of power. Despite the obvious national advantages of building the canal*. the other states objected to a federal outlay of money for the project on the grounds that not only was the project entirely within the territory of one state, it would, despite the national benefit, greatly elevate the position of that state with respects to the others. It did not take great foresight in that day to realize that by making the Hudson** into the water highway to the interior of the continent, New York City would be crowned among its rivals as the premier city of North America.

The result of this defeat on the national level was that the State of New York had to figure out a way to finance the project on its own, which it subsequently proceeded to do. Over the course of the next two decades the backers essentially cobbled together a string of allocations from the New York State Legislature as well as multiple rounds of subscriptions from private investors, in order to survey land, acquire rights, and eventually begin construction.

The result was one of the great triumphs of American history. The canal indeed helped propel New York and New York City into prominence and regional power. It had been paid for entirely by the State of New York, and by private funds. It seemed everyone had been proven right. The system had worked.

But that was New York, which was known even in the colonial era for its wealth (which in that day was not yet concentrated in the City, but was skewed more upstate among large landowners).

Out on the frontier, things were very different. There were hardly any wealthy landowners to fall back on for private subscriptions. Money as a whole was scarce. Even if such projects could find private subscriptions, who had the patience to wait as long as it took to build the Erie Canal?

All could see that canals in Illinois would open the Great Lakes to the Mississippi. The little burg of Chicago, at the mouth of one of the ancient portage rivers, would then lie along a continuous water route from New York to St. Louis and New Orleans. Commerce would flow through the continent like a circulatory system.  Everyone in the entire state would benefit economically. Civilization would inevitably flood into the frontier.

But how could the Illinois legislature finance it? Like other states, in order to solve this problem, they turned to the credit markets, both in the eastern U.S., and also across the Atlantic.


*Not just economic but strategic. See note below.
**instead of the St. Lawrence. By connecting the Hudson to the Great Lakes, the canal wold mean that New York would steal the natural advantage held by (British) Montreal, in guarding the most natural access point to the Great Lakes and thus to the interior of the continent. The strategic advantage of this for the United States would have been intimately understood by all in that day.  The American hold on the Ohio Country and beyond was still tenuous in that day, and the American area was occupied by the British in an ongoing basis until 1815. Had not Madison vetoed the appropriations bill for it in 1817, the project would have received federal backing.