FreightWaves Classics/Infrastructure: I&M Canal was successful until it wasn’t…

Background

The first canal built in the United States was constructed during 1792-1796. Built with private funds, it circumvented the South Hadley Falls on the Connecticut River in Massachusetts. Other small-scale private ventures followed this one. 

However, that changed in 1817 when construction of the state-funded Erie Canal began. It was a huge undertaking at that time; it was planned to connect Buffalo (which is located on Lake Erie) with the state capital of Albany (which is located on the Hudson River). The canal’s path was a distance of 350 miles, and it cut across the length of the state of New York. Because the Hudson flowed seaward to New York City and then into the Atlantic Ocean, the possibilities for agriculture and commerce were significant, but the canal’s estimated cost of $7 million (over $152 million today) was also quite significant. However, when the Erie Canal opened in 1825 it began collecting over $1 million in annual tolls.

Other canals follow the Erie

The rapid success of the Erie Canal generated the start of other publicly funded canal projects. In Ohio, the Ohio and Erie Canal, which began in the southern part of the state (in Portsmouth on the Ohio River) and ran northward to Cleveland on Lake Erie, opened to traffic in 1832. 

During the 1827-1834 period, Pennsylvania built a canal to connect Philadelphia on the Delaware River (and from there to the Atlantic Ocean) with Pittsburgh, which was built at the confluence of the Allegheny and Monongahela rivers, and formed the Ohio River to the west. Although primarily a canal, certain portions of the system used other transportation methods, including a portage railroad that was largely propelled by stationary engines running over a 37-mile section that crossed the Allegheny Mountains.

The plan for a canal in Illinois

Connecting the Great Lakes to the Mississippi River and then on to the Gulf of Mexico via a canal that joined the Chicago and Illinois rivers had first been proposed by the French explorer Louis Joliet as early as 1673, which was shortly after his passage through what would become the greater Chicago area. 

Illinois became a state in 1818; at that time its border had been extended northward by 60 miles from the foot of Lake Michigan (where the Northwest Ordinance earlier had prescribed it to be). The outcome of that addition was the site of Chicago, as well as a key footing on the Great Lakes.

After a proposal and lobbying by the Illinois delegation, in 1822 the U.S. Congress authorized the state to build a canal that would run from the mouth of the Chicago River to a specific point on the Illinois River. As part of the proposal, Illinois would receive the canal path itself as well as 90 feet of land extending outward from each side of the path. Timber and other resources could be harvested by the state on what had previously been federal land. However, the grant would be voided if the route had not been surveyed within three years or if the canal had not been completed within 12 years. 

Unsuccessful efforts in Illinois

Action by Congress led the Illinois General Assembly to approve legislation appointing five canal commissioners to lay out the canal’s route and estimate its costs. Civil engineers made the first survey of possible routes. Total construction costs were estimated to be $713,000 (Note that $1 in 1822 would be worth over $247 today). The legislature then enacted legislation that chartered a private corporation to undertake construction of the canal. However, the corporation was unable to raise the necessary capital for the project, and it surrendered its charter on January 12, 1826.

In 1827, Daniel P. Cook, the lone member of the U.S. House of Representatives from Illinois (and the namesake for Illinois’ Cook County), convinced Congress to make a better offer. Another act of Congress gave the state alternate sections of land extending five miles from each side of the proposed canal (a total of 284,000 acres of federal land). 

Once again the Illinois General Assembly passed an act that provided for a board of canal commissioners who were to lay out the route, select the alternate sections of federal land, and begin land sales to raise the funds required to finance the canal. Public land sales were conducted in Springfield in April and in Chicago in September 1830. However, during 1830-1832 only $18,799 was raised from canal land sales and $14,704 was paid out for canal commissioner expenses. 

Competition

In England, George Stephenson invented the first successful steam-powered locomotive. (To learn more about early English railways, read this article). He built efficient locomotives for the Stockton and Darlington Railway, which began operations in 1825 and for the Liverpool and Manchester line in 1829. These advances led to the beginning of railroads in the United States. The South Carolina Railroad first introduced American-built steam locomotives for regular service in January 1831. Within two years the railroad had extended its line 136 miles (from Charleston to Hamburg); for a short time it was the longest steam railroad in the world. By the early 1830s railroads extended from New York City, Boston and Baltimore.

The “railroad revolution” meant that canals were less important than they had been previously.

The Illinois and Michigan (I&M) Canal project was floundering. Moreover, there were proposals put forward for a railroad connecting Lake Michigan and the Illinois River rather than a canal.

More political wrangling leads to the project’s (slow) start

The U.S. Congress once again stepped in. On March 2, 1833 it passed a law that allowed Illinois to use the federal lands previously donated for canal purposes for either a canal or a railroad, and left the decision up to the Illinois state legislature. In 1835 the Illinois General Assembly voted to proceed with a state-controlled canal. It was to be financed by a $500,000 loan, which was backed by the security of the federal land donation and anticipated tolls. Three new canal commissioners were appointed; they sought to raise funds for the canal’s construction. However, eastern U.S. and European lenders were unwilling to subscribe to the loan unless Illinois pledged its full credit to back the loans. The General Assembly met in a special session and passed an act to this effect on January 9, 1836.

Groundbreaking for the canal took place near Chicago on July 4, 1836. However, more issues arose; during the first year of construction bad weather and a lack of both manpower and equipment slowed progress. The majority of activity was not on the canal itself, but “building access roads, acquiring equipment, recruiting laborers, and putting up crude structures to house the workforce.”

However, other state improvement projects also were being promoted. As the United States grew westward, improved transportation was considered the primary method to attract settlers and exploit natural resources. “If Illinois failed to implement improvements, many feared that the rest of the country would outpace it.” 

The 1835-36 Illinois General Assembly chartered 16 railroad companies; if completed they would link virtually all of the state’s major communities. However, by the end of 1836 the early railroad companies had been unable to raise enough money to undertake construction. 

That led the state legislature to pass “an act to establish and maintain a General system of Internal Improvement” on February 27, 1837. The legislation committed the state of Illinois to the oversight of construction and operation of 1,300 miles of railroads and the improvement of all of its larger rivers for navigation. 

The legislators who passed the bill counted on population growth to make this plan successful. “Bonds were to be issued on the state’s credit to pay for this massive public works project,” construction of which was to occur while the Illinois and Michigan Canal was being built.

Panic of 1837 slows the economy (and canal construction)

However, the Panic of 1837 (a major financial depression) severely impacted the values of stocks, commodities and land sales prices. The depression became a global event; banks failed, factories closed and unemployment surged. 

Nonetheless, canal construction continued into 1841, largely through creative financing such as special bond sales at discounted rates. However, the economic hard times finally caused Illinois to issue scrip to contractors. The scrip promised to pay face values of the scrip plus interest whenever funds became available. But by the end of 1841 almost all work on the canal and the railroads had stopped; it was evident that the state was unable to meet its financial obligations. In 1842 the Illinois state treasury collected only $98,546 in tax revenue, while the interest charges on its debt was nearly $800,000 – just for that year! Illinois was pushed to near-bankruptcy. 

Construction finally ends

The Illinois and Michigan Canal was finally completed in 1845 following another financial and administrative reorganization. The majority of the work on the canal was done by Irish immigrants; they lived and worked in transient work camps along the canal. 

The 96-mile construction project included 15 lift locks, five aqueducts, and four hydraulic power basins that were built along the canal’s length.

The canal opened to navigation when the freight boat General Fry traveled northwest from the town of Lockport to the then-small city of Chicago. Although the formal dedication ceremonies for the I&M Canal did not take place until six days later, the journey of the General Fry generated crowds and fanfare.  

People gathered along the canal to cheer the boat, which was “filled with passengers and decorated with flags.” Also carrying a full load of passengers, the tugboat A. Rossiter met the General Fry that evening to tow the freight boat through the section of the canal in Chicago. 

“As the boats passed through the city they were greeted with cheering, which was renewed at the different bridges, and points at which the citizens were collected,” reported the Chicago Daily Democrat newspaper. “Altogether there was considerable excitement in the city, and all appeared rejoiced at the realization of the long-promised event – the opening of the Illinois and Michigan Canal.” 

The canal’s impact

After finally being completed, the canal was pivotal to the growth and prosperity of the region it served during its first years. However, the most critical reason for the I&M Canal’s importance was that it connected Lake Michigan to the Mississippi River via the Illinois River, serving as the last link in an extensive water route that connected the Gulf of Mexico to the Eastern Seaboard. 

Moreover, the canal helped to transform Chicago from a small town to a major American city, a center of commerce and the key transportation hub of the Midwest. The presence of the canal attracted railroads and key industries to Chicago. The city’s population boomed; increasing from 20,000 in 1848 to 75,000 in 1854.

By providing a direct water link between the Great Lakes and the Mississippi River, the canal helped to shift the center of trade in the Midwest from St. Louis to Chicago.

Use of the canal from 1848-1900

Canal boats carried passengers as well as freight in the first few years after 1848. However, passenger traffic disappeared rapidly when the Chicago & Rock Island Railroad began competing in 1854. 

When the canal opened in April 1848 there were no railroads serving Chicago. However, by 1852 it had a connection to New York City, and by 1854 it was the railroad center of the Midwest. The new railroads were privately owned, and only some received government aid. With railroads a direct threat to the canal, it was a bitter twist when the Chicago & Rock Island Railroad obtained a right-of-way along the canal that it would be competing with. The railroad  was supposed to compensate the canal for the loss of tolls, but a legal quirk nullified that provision. The railroad was built between Chicago on Lake Michigan and Rock Island on the Mississippi River. It became fully operational in the summer of 1854; almost immediately passengers and small bulk goods shifted from the canal to the railroad, which was faster and more cost-effective. In addition, the railroad operated year-round, while the canal froze over during the winter.

Despite these setbacks, commodity traffic on the canal continued to grow. In particular, heavy bulk items such as grain (the largest commodity), coal, lumber and stone were shipped via the canal. Nearly 300 boats regularly plied the canal in 1864, and it reached its peak tonnage (over 1 million tons) in 1882. In addition, tolls and land sales along its length allowed the canal’s managers to pay off its debt in 1871. It was one of the few canals built during that period to do so. In addition, a cash balance of $95,742 was turned over to the state treasury.

In 1871 the I&M Canal was also the first inland canal to shift from mule-drawn towlines to steam-propelled boats. However, the canal and the railroad continuously changed their rates in order to undercut the other. For a time the canal was able to lower tolls while increasing revenue through increased tonnage. But navigation along the canal was increasingly difficult after the state stopped investing in its maintenance. In addition, the Illinois River (which connected the canal to the Mississippi River) was never an overly dependable route. The river was often too shallow for boats to navigate from La Salle to Grafton. Both the state and federal governments were reluctant to spend the funds necessary to dredge that portion of the river. 

Therefore, by the late 1890s commercial traffic on the canal had diminished significantly.

Chicago’s problems impact the canal

Near the end of the Civil War, the pollution of Chicago’s drinking water supply had reached the crisis level. The Chicago River was virtually stagnant; hard rains caused its contents to back into Lake Michigan (“where intake cribs had been built to siphon lake water for the city’s use”). Chicago’s population was just under 179,000 in 1865; their garbage and waste was dumped directly into the river, which became an open sewer. 

The “solution” was to deepen the cut of the Illinois and Michigan canal so the Chicago River would flow south to Lockport, where the canal intersected the Des Plaines River. Downstate residents’ drinking water came from the Des Plaines and the Upper Illinois rivers, and they complained mightily. However, the Illinois General Assembly gave the city authority to proceed when it passed a law in February 1865. The project was built in stages, primarily when the canal was closed in the winter. The construction was finished in 1871; Chicago had spent nearly $3 million on the project.

However, by the early 1880s Chicago residents’ health was threatened again due to its contaminated water supply. By 1880 the city’s population had increased to over 500,000. This huge influx of people was depositing much more waste into the Chicago River, which was polluting Lake Michigan. The canal was unable to handle the increased garbage and sewage. 

That led to the creation of the Chicago Sanitary District in 1889. It began construction on September 3, 1892 of the 28-mile Chicago Sanitary and Ship Canal that connected the Chicago and Des Plaines Rivers at Lockport. When completed in January 1900, it made the eastern portion of the Illinois & Michigan Canal obsolete; it was soon closed permanently to navigation. From then, canal traffic between Chicago and Joliet used the Sanitary and Ship Canal; although the I&M Canal maintained its land and water power lease concessions along the closed section of its line, it was unable to collect further tolls. 

World War I through the 1930s

World War I began in August 1914. By that time commercial traffic along the canal was negligible. However, the Joliet to LaSalle section of the canal was revived with federal funds for what was then considered defense and war-related purposes. But this was the last major financial funding provided to sustain the Illinois & Michigan Canal as a working entity. By the 1920s the canal extending from Bridgeport had become a dumping ground for garbage and waste.

The Illinois Waterway opened in June 1933. It connected the Chicago Sanitary and Ship Canal at Lockport and extended 60 miles to Starved Rock State Park near Utica. On June 22 a flotilla of Mississippi River barges from New Orleans arrived in Chicago. This was the death knell for use of the Illinois & Michigan Canal for commercial traffic, which had been insignificant in recent years. 

Beginning around 1900, use of the canal shifted primarily to recreation. Excursion boats of various sizes served a number of amusement parks near the canal, such as Rock Run outside Joliet.

In 1935, the Civilian Conservation Corps, which was a New Deal agency, worked with the National Park Service to restore some of the canal’s locks and began other projects intended for historic preservation and recreation. The outbreak of World War II ended these efforts. However, the efforts began again after the U.S. Congress designated the canal route the “Illinois and Michigan Canal National Heritage Corridor” in 1984.

President Ronald Reagan signed the legislation into law, which created the nation’s first heritage corridor. The designation “encouraged canal trails and nature preserves, and helped the downtowns along the canal by emphasizing economic development based upon history and historic preservation.”

Legacy

Financial issues meant that building the Illinois & Michigan Canal took much longer than originally planned. In addition, the advent of railroads (particularly direct competition from the Chicago & Rock Island Railroad) cut into the canal’s revenue base. Other issues outlined above meant that the canal never lived up to the initial plans for it. 

However, when it was finally completed in 1848 (more than 25 years after it was first authorized), it joined the Chicago River at Bridgeport near Chicago with the Illinois River at LaSalle, 96 miles away. 

The canal linked the Great Lakes to the Mississippi River (and consequently southern and eastern U.S. markets). To a degree this occurred, particularly in the canal’s early years when southern sugar was brought north to Chicago and then across the Great Lakes and through the Erie Canal to the eastern U.S. seaboard. On the reverse route, eastern manufactured goods reached Chicago and then many passed down the Illinois River into the Mississippi River and to southern markets. 

But the canal era in the United States was supplanted by the railroad era, which was subsequently supplanted by the era of trucking.

Source: freightwaves - FreightWaves Classics/Infrastructure: I&M Canal was successful until it wasn’t…
Editor: Scott Mall