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The Erie Canal

Most historians have it wrong. It was the end of the Lowell Experiment, not the beginning, that marked the advent of full-scale industrial change in America: an age of coal, steam, and immigrant labor. While the factory system was evolving in the Northeast, the entire country experienced a market revolution that tied the expanding nation together with roads, canals, and railroads, and created modern capitalism.

This commercial revolution revolved around an axis that ran from New York to Chicago. Take a map and draw a line from New York up to Boston and then south to Baltimore. Put your hand on the map and move it across the country, all the way to the southern tip of Lake Michigan. Stop. You're in Chicago.

It's in this geographic corridor, and Mississippi Valley that serviced it, that the commercial revolution of the early 19th century was concentrated. In 1830, when they began to be make contact with one another, New York and Chicago were vastly different places. New York was a thriving commercial center of almost a quarter of a million people.

It had a spectacular gift from nature; a spacious, sheltered, deep-water port that was connected to the interior of the country by the Hudson River. And its aggressive merchants exploited this location to maximum advantage, making New York the country's leading export and import center, America's capital of commerce. New York was a city of the sea with an economic empire that was about to get far larger.

In 1825, the Erie Canal opened for business from Buffalo, on Lake Erie, to Albany, at the head of the Hudson River. This made New York the only port on the Atlantic coast linked by water to what was then the American West, a thinly settled area extending out to Chicago. The Erie Canal lowered shipping costs tremendously.

Now pioneering farmers in the West could ship their grain, lumber, and salted pork through frontier lake ports like Detroit, all the way to New York. And New York could trans-ship them almost anywhere in the world with its magnificent merchant fleet. The canal that helped make New York the country's busiest saltwater port would soon make Chicago the country's busiest freshwater port.

But in 1830, there was no town of Chicago. Chicago then was an isolated fur trading post on the far edge of American settlement, a dismal prairie swamp located on a small river that fed into Lake Michigan. The richest man in New York, Jacob Astor, had extended his fur trading empire out to Chicago, but the destinies of these two places would be more tightly connected in future years.

Nature had paved the way, eons ago, during the last Ice Age. When the glaciers that covered the northern part of the continent began to melt, they created a rushing river that swept south from the Great Lakes and cut a gap through the Appalachian Mountains-the Mohawk Pass. The Erie Canal, and later, railroads running between New York and Chicago, passed through this gap.

Because of the Mohawk Pass, there's no mountain barrier between New York and Chicago, as there is between other eastern ports and Chicago. This gave New York a huge advantage over its rival Eastern cities and united the economic destinies of New York and Chicago.

Chicago Evolves

The completion of the Erie Canal prompted the newly-formed state of Illinois to begin a canal project of its own. It would drive a canal from the Chicago River down to the Illinois River, which flows into the Mississippi. This canal would create an all-water highway from New York down to New Orleans, with Chicago situated at one of its key junctures. It was rumors of this canal that first brought New York speculators to Chicago to assess its economic potential.

What they saw didn't impress them. Because of the drainage problems, most of the place was underwater for a good part of the year. And most of the inhabitants were wild, hard-drinking French Canadians who had married into Indian tribes. The place had three raucous taverns but no church or schoolhouse.

The only thing Chicago had going for it was its location, but that was enough to interest New York money. Chicago's river gave it a protected harbor. And that river wound south and would, with the building the new canal, become an open door into the Tallgrass Prairie, the most splendidly endowed agricultural region in the world. With the canal, Chicago could become a jumping-off point for the settlement of a great part of the Louisiana Purchase.

The building of Chicago is a great American story. Chicago's early history is the history of the early American West, a place that was opened up, like the rest of the West, by cities, not by pioneering farmers, as the historian Frederick Jackson Turner argued. The settling of the frontier was one of the most ambitious city-building efforts in history. And no city in the West -- in the world, in fact -- grew faster than Chicago.

By the time of the Civil War, Chicago was the master metropolis of the mid-continent, a gateway city connecting new farms and towns of the West with the expanding industrial economy of the East. So what explains this place? How did it grow so spectacularly?

It wasn't all location. Nature had blessed Chicago, but cities are not ordained by geography. They're existential, products of human initiative.

The source of Chicago's early success was its visionary capitalists, money makers as well as city builders. Most of them were young men of modest means from New York and New England. Most were men like William Butler Ogden, the town's first mayor and master builder, and Gurdon Saltonstall Hubbard, who turned in his Indian buckskins for a frock coat and tie and became one of the town's richest men.

They were gamblers who risked everything they had on Chicago, investing in swampland in the hope the canal would turn a mudhole into a metropolis. Their economic prospects were tied to the town's economic prospects. Having invested heavily in Chicago real estate, every improvement they made, be it a road or a building, added to the town's wealth and their own.

It was the working out of Adam Smith's notion that self-interest promotes the public interest. In chasing wealth, they built a great city. Chicago was the creation of what John Maynard Keynes called those "beasts of capitalism:" risk-taking and innovation. And it embodied better than any other place the brutal and inventive vitality of the 19th century.

The Making of a City

You can underscore that word "brutal." When city lots went up for sale to help pay for the canal, speculators poured into the town, and this created pressure to remove the peaceful Potawatomi Indians. The Potawatomi claimed most of the land around Chicago, but this land had become too valuable, it was argued, to be left in the possession of "savages."

So the Indians were displaced, in a land swindle masquerading as a treaty negotiation. And with them went the French-Canadian forest traders, walking silently with wives and half-breed children to government reservations further west. This is how Chicago was turned, at the very moment of its birth, from a pre-capitalist, French and Indian trading post, to a capitalist, Anglo-American town.

The symbol of this cultural transformation was the Grid. When Chicago was designated as a future canal town, it was laid out by state surveyors in a grid, or checkerboard pattern. The grid turned land into real estate, a commodity to be bought and sold.

Land went to the highest bidder, and to remove land from the market for public use, such as parks or public squares, was considered a waste of a profit-generating resource. So early Chicago had no public squares and only one small park. When the city was built up, people were forced to go to cemeteries and use them as picnic grounds.

Chicago's founders envisioned a great future for their adopted town. There was only one problem. Chicago had no money. Enter William Butler Ogden: Problem solved.

Ogden, a New York state legislator, was sent to Chicago by New York capitalists who had bought land there on speculation. He hated the place at first, but saw its potential and set himself up as a conduit for New York money that began streaming into Chicago. Ogden and his business associates then set about building a town and connecting it to the rest of the country. They built plank roads to grain farms out in the prairie, established lake trade with the East via the Erie Canal, and tapped New York capital to complete the building of the Illinois and Michigan Canal.

And they built an urban infrastructure of banks and businesses, roads and bridges, packing plants and grain elevators, libraries and schools. These prairie capitalists were ceaseless innovators. In 1848, the year the canal was opened, Ogden was already investing money in a transportation technology that would replace the Canal. It was the railroad.

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