Chicago owes its existence to a government-proposed project that was accompanied by a federal subsidy, came in late and over budget, and was obsolete before it opened.
Some things never change.
Yet the Illinois and Michigan Canal, completed in 1848, has been described by historians as one of two public works projects that put Chicago on the map. The other was New York’s Erie Canal, which opened the Great Lakes to development in 1825.
The I-M probably had more influence on the city when it was nothing more than a line drawn on a map than it did as a working transportation artery.
Parklike fragments of the 96-mile I-M Canal still exist in such places as Lockport, though major sections between its terminals in Chicago’s Bridgeport neighborhood and Downstate LaSalle have been usurped by the Sanitary & Ship Canal.
That busy waterway replaced much of the I-M Canal as the link between the Great Lakes and the Mississippi River watershed, which stretches to Montana, Minnesota and Louisiana.
The mere promise of the canal–and with it the expectation that it would transform a marshland at the southern end of Lake Michigan into a major city–sparked Chicago’s first boom. By the time the canal opened in 1848, Chicago was a bustling city of 20,000.
As the first canal boat, the Gen. Fry, plodded into Chicago from Lockport on April 10, 1848, the competition was on the horizon. Several railroads were in various stages of planning; the first began running seven months later.
The idea that a canal could be dug along the route of the old Chicago canoe portage between the lakes and the Mighty Miss tributaries had been floating around for 150 years before someone did something about it. In those days, most trade moved by water.
So Congress in 1822 gave Illinois the right-of-way for the project and the state created the Illinois and Michigan Canal Co. with the authorization to sell $1 million in stock to finance construction. When few buyers indicated an interest, the state asked Washington for a helping hand.
The resulting compromise on Capitol Hill in 1827 increased the size of the land grant on the assumption that the state could sell the surplus property to raise money for construction. This was the prototype land-grant scheme resurrected to build many western railroads.
The land grant caused Illinois to create a public commission in 1829 to build the canal. The following year, it platted Chicago and LaSalle at either end of the route.
At the time, Chicago was more widely known as Ft. Dearborn and consisted of a backwater trading post with 40 to 50 residents. The actual fort had been closed by the government several years earlier.
It turned out that the canal commission couldn’t sell enough land even to fund the start of construction. So for the next five years, Illinois debated whether to build a $1.6 million canal or a $1 million railroad, and haggled with bankers in the East over financing. Originally, Illinois wanted to finance the project entirely with revenue bonds to be paid back from tolls, but the bankers demanded that the state back the bonds in case the canal traffic failed to live up to expectations.
Meanwhile, Chicago’s population had jumped to 3,265 and some of the lots sold by the canal commission for an average of $30 apiece in 1831 were fetching $3,615 five years later.
Construction began in Bridgeport July 4, 1836.
A bust followed in the Panic of 1837, almost bankrupting the state and causing construction on the canal to grind to a halt. The project was shut down in 1841, causing state officials to head East for more money. This time the financiers demanded, and got, control of the canal board.
However, by the time construction resumed in 1845, Chicago was again booming–a town of 12,000 inhabitants.
The population more than doubled over the next five years and more than tripled in the decade before the Civil War.
By then the I-M Canal, which didn’t carry much traffic in its first year of operation, was a busy artery. At its peak in 1882, the canal carried more than a million tons of grain.
It produced enough revenue to pay off its nearly $6.5 million in construction costs by 1871 and to show a profit until 1879.
Canal proponents were forced to admit its major attribute was in providing enough competition to hold down railroad shipping rates. The canal’s opening preceded by only seven months a railroad-building boom that by 1854 made Chicago the nation’s rail center and terminal for 10 railroads stretching for 3,000 miles in almost every direction.
Canal traffic peaked at just over 1 million tons in 1882, then began a long decline. Its Chicago-Joliet section was replaced in 1900 by the Sanitary & Ship Canal. By then, Chicago’s population was nearly 1.7 million.
