In the closing years of the eighteenth century and the first decade of the nineteenth the New York lands beyond the sources of the Mohawk had been taken up by a colonization characteristically western. New England farmers swarmed into the region, hard on the heels of the retreating Indians. Scarcely more than a decade before 1820 western New York presented typically frontier conditions. The settlers felled and burned the forest, built little towns, and erected mills, and now, with a surplus of agricultural products, they were suffering from the lack of a market and were demanding transportation facilities. Some of their lumber and flour found its way by the lakes and the St. Lawrence to Montreal, a portion went by rafts down the Allegheny to the waters of the Ohio, and some descended the upper tributaries of the Susquehanna and found an outlet in Baltimore or Philadelphia; but these routes were unreliable and expensive, and by one of them trade was diverted from the United States to Canada. There was a growing demand for canals that should give economic unity to New York and turn the tide of her interior commerce along the Mohawk and Lake Champlain into the waters of the Hudson and so to the harbor of New York City. The Erie and the Champlain canals were the outcome of this demand.

It is the glory of De Witt Clinton that he saw the economic revolution which the Erie Canal would work, and that he was able to present clearly and effectively the reasons which made the undertaking practicable and the financial plan which made it possible. He persuaded the legislature by the vision of a greater Hudson River, not only reaching to the western confines of the state, but even, by its connection with Lake Erie, stretching through two thousand miles of navigable lakes and rivers to the very heart of the interior of the United States. To him the Erie Canal was a political as well as an economic undertaking. "As a bond of union between the Atlantic and western states," he declared, "it may prevent the dismemberment of the American empire. As an organ of communication between the Hudson, the Mississippi, the St. Lawrence, the great lakes of the north and west, and their tributary rivers, it will create the greatest inland trade ever witnessed. The most fertile and extensive regions of America will avail themselves of its facilities for a market. All their surplus productions, whether of the soil, the forest, the mines, or the water, their fabrics of art and their supplies of foreign commodities, will concentrate in the city of New-York, for transportation abroad or consumption at home. Agriculture, manufactures, commerce, trade, navigation, and the arts, will receive a correspondent encouragement. That city will, in the course of time become the granary of the world, the emporium of commerce, the seat of manufactures, the focus of great moneyed operations, and the concentrating point of vast, disposable, and accumulating capitals, which will stimulate, enliven, extend, and reward the exertions of human labor and ingenuity, in all their processes and exhibitions. And before the revolution of a century, the whole island of Manhattan, covered with habitations and replenished with a dense population, will constitute one vast city." [Footnote: View of the Grand Canal (N. Y., 1825), 20.]

Sanguine as were Clinton's expectations, the event more than justified his confidence. By 1825 the great canal system, reaching by way of Lake Champlain to the St. Lawrence, and by way of the Mohawk and the lakes of central New York to Lake Erie, was opened for traffic throughout its whole length. The decrease in transportation charges brought prosperity and a tide of population into western New York; villages sprang up along the whole line of the canal; the water-power was utilized for manufactures; land values in the western part of the state doubled and in many cases quadrupled; farm produce more than doubled in value. Buffalo and Rochester became cities. [Footnote: J. Winden, Influence of the Erie Canal (MS. Thesis, University of Wisconsin); U. S. Census of 1900, Population, I., 430, 432; Callender, in Quarterly Journal of Economics, XVII., 22; Hulbert, Historic Highways, XIV., chap. v.] The raw products of the disappearing forests of western New York— lumber, staves, pot and pearl ashes, etc., and the growing surplus of agricultural products, began to flow in increasing volume down this greater Hudson River to New York City. The farther west was also turning its streams of commerce into this channel. The tolls of the canal system were over half a million dollars immediately upon its completion; for 1830 they were over a million dollars. [Footnote: McMaster, United States, V., 135; Canal Commissioners of N. Y., Report (January 17, 1833), App. A.] By 1833 the annual value of the products sent by way of the Erie and Champlain canals was estimated at thirteen million dollars. [Footnote: Pitkin, Statistical View (ed. of 1835), 577.] At the close of this decade the Ohio system of canals, inspired by the success of the Erie Canal, had rendered a large area of that state tributary to New York. The Great Lake navigation grew steadily, the Western Reserve increased its population, and the harbor of Cleveland became a center of trade.

The effect of all this upon New York City was revolutionary. Its population increased from 123,000 in 1820 to 202,000 in 1830. Its real and personal estate rose in value from about seventy million dollars in 1820 to about one hundred and twenty-five million dollars in 1830. [Footnote: U. S. Census of 1900, Population, I., 432; MacGregor, Commercial Statistics of America, 145.] The most significant result of the canal was the development of the commerce of New York City, which rose from a market town for the Hudson River to be the metropolis of the north. The value of the imports of New York state in 1821 was twenty-four million dollars; in 1825, the year of the completion of the canal, it was fifty million dollars. This was an exceptional year, however, and in 1830 the value of the imports was thirty-six million dollars. In 1821 New York had thirty- eight per cent. of the total value of imports into the United States; in 1825, over fifty per cent.; and this proportion she maintained during our period. In the exports of domestic origin, New York was surpassed in 1819 by Louisiana, and in 1820 by South Carolina, but thereafter the state took and held the lead. [Footnote: Compiled from Pitkin, Statistical View.] In 1823 the amount of flour sent from the western portion of New York by the Erie Canal equaled the whole amount which reached New Orleans from the Mississippi Valley in that year. [Footnote: Based on statistics in Report on Internal Commerce, 1887, p. 196; Canal Commissioners of N. Y., Annual Report (February 20, 1824), 33.] The state of New York had by a stroke achieved economic unity, and its metropolis at once became the leading city of the country.

Philadelphia lost power as New York City gained it. Though the counties tributary to Philadelphia constituted the old center of population and political power, the significant fact of growth in Pennsylvania was the increasing importance of Pittsburgh at the gateway to the Ohio Valley. In the Great Valley beyond the Blue Ridge lived the descendants of those early Germans and Scotch- Irishmen who early occupied the broad and level fields of this fertile zone, the granary of Pennsylvania. Beyond this rock-walled valley lay the mountains in the west and north of the state, their little valleys occupied by farmers, but already giving promise of the rich yield of iron and coal on which the future greatness of the state was to rest. The anthracite mines of the northeastern corner of the state, which have given to their later possessors such influence over the industries of the country, were just coming into use. The iron ores of the middle mountain counties found their way to the forges at Pittsburgh. Already the bituminous coals of the western counties were serving to generate steam-power for the mills upon the upper waters of the Ohio, but, as yet, the iron manufacturers of the state depended on the abundant forests for the production of coke for smelting.

The problem of transportation pressed hard upon Pennsylvania from the beginning. While Philadelphia was obliged to contest with Baltimore the possession of the eastern half of the state, she saw the productions of the western counties descending the Ohio and Mississippi to New Orleans. Even the trade in manufactured goods which she had formerly sent to the western rivers was now menaced from two quarters: the development of steam navigation on the Mississippi enabled New Orleans to compete for this trade; and the construction of the Erie Canal, with the projected system of tributary canals in Ohio, made it plain to Pennsylvania that New York was about to wrest from her the markets of the west. It had taken thirty days and cost five dollars a hundred pounds to transport goods from Philadelphia to Columbus, Ohio; the same articles could be brought in twenty days from New York, by the Erie Canal, at a cost of two dollars and a half a hundred. [Footnote: McMaster, United States, V., 136.] To Pennsylvania the control of the western market, always an important interest, had led in 1800 to the construction of a system of turnpikes to connect Philadelphia with Pittsburgh over the mountains, which developed a great wagon trade. But the days of this wagon trade were now numbered, for the National Road, joining the Ohio and the Potomac and passing south of Pittsburgh, diverted a large share of this overland trade to Baltimore. The superior safety, rapidity, and cheapness of canal communication showed Pennsylvania that she must adjust her transportation to the new conditions.

The way was prepared by the experience of corporations attempting to reach the coal-fields of northeastern Pennsylvania. In 1820 practically the whole output from the anthracite fields came from the Lehigh Valley and amounted to three hundred and sixty-five tons- -an equivalent of one for each day of the year. By the end of the decade the output of the anthracite fields was about one hundred and seventy-five thousand tons, and the retail price was reduced to six dollars and a half a ton. Navigation had been secured by the coal companies between the mines and Philadelphia by the Schuylkill; the Union Canal connected the Schuylkill and Susquehanna, and New York City was supplied by the Delaware Canal. [Footnote: McCulloch, Commercial Dictionary (ed. of 1852), I., 366; U.S. Census of 1880, IV.; Worthington, Finances of Pa.]

This activity in Pennsylvania in the improvement of navigation so far had been the work of corporations; but now, with the growth of population in the west and the completion of the Erie Canal, a popular demand arose for state construction of inland waterways. In 1825 the legislature passed an act under which an extensive system of canals was begun, to connect Philadelphia with Pittsburgh, the Allegheny River with Lake Erie, and Philadelphia with the central counties of New York at the head of the Susquehanna. [Footnote: See chap. xvii., below.] Obstacles speedily developed in the jealousies of the various sections of the state. The farmers of the Great Valley, whose interests lay in the development of a communication with Baltimore, were not enthusiastic; the southern counties of the state, along the line of the turnpikes, found their interests threatened; and the citizens of the northwestern counties were unwilling to postpone their demands for an outlet while the trunk- line was building. These jealousies furnish issues for the politics of the state during the rest of the decade. [Footnote: McCarthy, 'Antimasonic Party,' in Am. Hist. Assoc., Report 1902, I., 427.]

Nevertheless, Pennsylvania was growing rich through the development of her agriculture and her manufactures. The iron industry of the state was the largest in the Union. Although the industry was only in its infancy, Pittsburgh was already producing or receiving a large part of the pig-iron that was produced in Pennsylvania. The figures of the census of 1820 give to the middle states over forty per cent, of the product of pig-iron and castings and wrought iron in the United States, the value of the latter article for Pennsylvania being one million one hundred and fifty-six thousand dollars as against four hundred and seventy-two thousand dollars for New York. [Footnote: Secretary of Treasury, 'Report,' 1854-1855, p. 90.] The influence of this industry upon Pennsylvania politics became apparent in the discussions over the protective tariff during the decade.

Together, New York and Pennsylvania constituted a region dominated by interest in the production of grain and the manufacture of iron. Vast as was the commerce that entered the port of New York, the capital and shipping for the port were furnished in part by New England, and the real interest of the section was bound up with the developing resources of the interior of the nation.