The Erie Canal As A Model Of How To Build Big Projects Again

Jan 28, 2020

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DeWitt Clinton pours water from Lake Erie into the Atlantic Ocean after completion of the Erie Canal.
Philip Meeder (1826) / New York Public Library

In 1809, representatives from the state of New York traveled to the nation's capital to meet with President Thomas Jefferson. They wanted money for a 363-mile canal that would link Lake Erie with the Hudson River, thereby opening up New York City to a funnel of commerce from the developing American West. In an age before bulldozers and chainsaws, building an artificial waterway through untamed wilderness, mountains and rocky cliffs was audacious.

Jefferson had come to office promising federal spending on infrastructure, so canal supporters had a reason to believe he would pony up. He did not. He declared that the proposal for the Erie Canal was a "little short of madness."

But did that stop New York from building it? No! New York decided to go it solo. The state issued bonds and had private investors lend it money for the canal. And in only eight years — with zero financial support from the federal government — New York finished the canal with uproarious celebrations. In October 1825, Dewitt Clinton, the New York governor who had fought for the canal as naysayers called it "Clinton's ditch," boarded a boat at Lake Erie with two kegs of lake water. And 10 days later, he poured the water into the Atlantic Ocean after reaching New York City.

The Erie Canal was an immediate success. It unleashed a flood of resources from the West, dramatically increasing the variety of products and slashing consumer prices. New York manufacturers got increased access to markets in the expanding frontier, and New York became the central seaport for global commerce to reach America's heartland. Almost instantly, toll revenue from the canal was nearly five times more than the interest due from the state's bond debt. By 1837, only about a decade after completion, the entire debt was paid off. By the early 1850s, the canal carried over 60% of total U.S. trade.

So what about now?

Despite decades of bipartisan calls for more federal investment in infrastructure, federal spending on it has fallen in half over the last 35 years (from about 1% of GDP to 0.5%). It's why local leaders often blame the federal government for their infrastructure problems. But the Erie Canal is a testament to the fact that they don't necessarily need the federal government to pursue big projects.

State and local governments currently pay for more than three-quarters of all U.S. infrastructure spending. "While the federal government has effectively been stuck in neutral, we've seen states and localities pick up the slack by, in fact, going to the private markets, much like their predecessors did in New York state with the Erie Canal," says Adie Tomer, a fellow at the Brookings Institution's Metropolitan Policy Program. The municipal bond market alone, he says, is roughly $4 trillion, and much of that is for infrastructure.

But like federal spending, state and local spending has also declined over the last decade. That's despite an 11% increase in the amount spent on repairs. "For the most part, public infrastructure investment has shifted to upkeep, on what we've already built," Tomer says.

Tomer believes the shift to operation and maintenance — as opposed to transformative megaprojects like the Erie Canal — "is perfectly symbolic of the population and economic era the United States is in." Population and economic growth, for the most part, has stagnated.

The decline in shiny, new infrastructure projects is also the result of the types of technologies coming online. Many, such as electric and autonomous vehicles or digital platform systems that improve traffic, simply build on existing infrastructure.

"It's in our DNA in the United States — whether it's the Erie Canal or the transcontinental railroad or the interstate highway system — to want a megaproject," Tomer says. "The question today is what actually is a megaproject for this new era."

While there's broad agreement that we need more investment in infrastructure, there is not broad agreement on what kind. The left wants a Green New Deal that will liberate the United States from fossil fuels and mitigate the effects of climate change, and much of that would involve big changes in infrastructure, from massive investment in high-speed rail to a more efficient electrical grid.

Some megaprojects are in the works, including a new railway connecting Miami and Orlando, Fla. — but so far the sexiest ones have stalled. Take, for instance, the proposed bullet train between San Francisco and Los Angeles. It's a fiasco. It has received billions of dollars in both state and federal funding, yet — in more time than it took to build the entire Erie Canal — there has barely been any progress.

By the end of the 19th century, railroads replaced canals as the primary carrier of goods around the country. But historians agree that the canal helped New York grow to become the powerhouse it remains today. More broadly, it jump-started American industrialization and globalization. You can read the whole story in Wedding of the Waters: The Erie Canal and the Making of a Great Nation.

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