The Economic Impacts of the Erie Canal

In 1825 the Erie Canal was completed. Stretching from Lake Erie in the west to the Hudson River in the east, the canal brought about major changes to society in the US and the economy of New York State. This chart shows an example of the economic impacts of the Erie Canal.

Prior to the Erie Canal, the only outlet for the Midwest to trade goods was down the Mississippi River to New Orleans. This journey was cumbersome for farmers and merchants, but it was the best available route aside from using roads on foot.

In 1817 Governor DeWitt Clinton of New York championed the canal and provided a funding source for it’s construction. The state of New York would provide the estimated $7 million infunding via bonds, then the canal tolls would pay the construction costs back. This came after the federal government denied sending federal funds. Congress actually approved the funds, though president James Madison vetoed it.

The Economic Impacts of the Erie Canal

The Economic Impacts of the Erie Canal chart

After 8 years of building the canal in 3 sections, the Erie Canal was finally completed in 1825. Its impact was immediately felt. Even with the tolls, the cost of transporting goods dropped from almost $100 per ton via road to $10 per ton via the canal. Not only did the cost drop, but the time it took to get goods to port cities for trade with Europe shortened by days. The Midwest finally had a more viable trading outlet.

The Erie Canal essentially transformed New York City into the premier economic hub that it is today. Prior to the canal other cities such as New Orleans, Philadelphia and even Baltimore were larger commercial ports. The canal gave NYC unfettered access to the vast resources of the US interior, and boomed as a result. The population of NYC quadrupled from 1820 to 1850.

The canal also served as a gateway to settling the Midwestern territories. The ease of travel allowed the huge influx of new immigrants to more easily access the lands further west.

Over the years, the success of the Erie Canal drew further investment into expanding and deepening it. It continued to be a major economic force until the late 19th century. The removal of tolls in 1882 further signaled the success after the reimbursement of construction costs.

Despite this, as technology improved, the infrastructure was also being laid for a superior form of transport: railroads. Railroad transport was even faster than the canal, and also could operate year round (the canal was closed for 5 months in the winter). Eventually, the Erie Canal became obsolete.

Despite this, the profound impact of the Erie Canal on the nation was undeniable.

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Source: New York State

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