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The movement of the state line notwithstanding, the canal’s course was still not set. That remained contingent on the decisions of Illinois officials, surveyors, and eastern financiers. In 1827, the state received a land grant from Congress of 284,000 acres, the sale of which would be used to finance construction.19 Two years later, the governor of Illinois appointed canal commissioners to oversee the project. The commissioners began laying out towns, including Chicago, along the proposed route. The Canal Commission hired surveyor James Thompson to make a plat of the town of Chicago. The Thompson Plat of 1830 established a grid of sixty-six-foot-wide streets, interspersed with lots dissected by sixteen-foot alleyways. The three branches of the Chicago River wound through the map, interrupting its otherwise perfect symmetry. By creating a series of relatively uniform segments, Thompson and the canal commissioners transformed Chicago’s land into a salable commodity for which there would soon be plenty of credit.20
The prospect of the canal, combined with the increasing availability of credit, drove investment in Chicago real estate. In 1832, President Andrew Jackson broke the power of the Second Bank of the United States, freeing western banks to offer credit for land purchases on liberal terms. Speculators with pockets full of easy credit bought and sold Chicago lots at a fever pitch, with buyers from as far away as Europe, New England, and New York snapping up property they had never even seen at continually rising prices. A Lake Street lot, for instance, cost three hundred dollars in 1832 and sold for sixty thousand dollars in 1836.21 These grand sums were mainly pocketed by land speculators who flipped lots, not the Canal Commission, which had sold most of its holdings before prices soared. Consequently, land sales did not generate enough capital to build the costly canal, and the state legislature began to consider if there was a cheaper, alternate route for the waterway.22
In the 1830s, members of the Illinois state legislature debated whether to fix the location of the canal on the basis of construction cost, politics, or topography. Viewed from ground level, the most obvious canal route seemed to follow the portage from the Chicago River to the Des Plaines. The surface of the upper Des Plaines was on a level with that of Lake Michigan, and the land in-between the two waterways rose to a maximum elevation of fourteen feet. Thus, the original plan was to make a thirty-mile “deep cut” in the earth from the Chicago River directly to the Des Plaines, letting gravity pull the water southwest. This plan, if enacted, would have reversed the flow of the Chicago River—a feat that engineers achieved in 1871. But during the 1830s, the deep-cut plan literally foundered on the rocks.
Viewed from beneath the earth’s surface, the proposed route had critical drawbacks. The soil consisted of dense clay called “hard pan,” and worse still, limestone bedrock lurked just below the earth’s surface at key points. The cost of blasting through the bedrock would be enormous: An 1833 estimate put the canal project cost at four million dollars, up significantly from estimates of seven hundred thousand dollars in 1823–1824. With cost projections soaring, some legislators suggested building a railroad or finding a less-rocky alternative canal route. The state, however, simply jettisoned the entire project until its 1835–1836 legislative session, when Hubbard—now a state representative—successfully argued that even if the original canal route was rocky and costly, both political and long-term economic logic argued for making Chicago the terminus of the canal.23
Figure 3. Maps of the mouth of the Chicago River in 1795, 1812, 1830, 1834 (clockwise from top left). These maps depict the Chicago River at four crucial points in the city’s early history. The map at the top left shows the six square-mile area of land ceded by American Indians to the United States government in the 1795 Treaty of Greenville. The next map depicts Fort Dearborn and the settlements clumped along the Chicago River in 1812. The third map illustrates how surveyor James Thompson laid out the streets and lots of Chicago in 1830. The final map illustrates where the U.S. Army dredged a channel through the sandbar at the mouth of the Chicago River in 1834. Charles A. Kent compiled these maps in 1915 for use in the Chicago Public Schools. This compilation of maps is housed in and was reproduced by the Chicago History Museum.
Since his first slog through Mud Lake in 1818, Hubbard had prospered trading furs and selling livestock to the soldiers garrisoned at Fort Dearborn. Having moved to Chicago permanently in 1834, Hubbard won election to represent the town in the state legislature. In the renewed debate over the canal, a faction of cost-conscious representatives argued for rerouting it through the Calumet River, which was located about a dozen miles south of the Chicago River, along the Illinois-Indiana border, and ran from Lake Calumet into Lake Michigan. The plan’s advocates explained that engineers could cut a channel from the Calumet River through the adjacent Saganashkee Slough, or “Sag,” to the Des Plaines.24 Advocates of the Calumet-Sag route promised that the route would circumvent much of the bedrock, thereby reducing construction costs. Hubbard countered this geological argument with a lesson in political geography. Taking out a map, Hubbard showed his colleagues in the chamber that the mouth of the Calumet River sat only a few hundred yards from the border of Indiana. Hubbard, according to one account, then noted that “it was expected that wherever the canal terminated, a great city would grow up” and asked “whether it was desirable that the coming city should be as much of it in the state of Indiana as in Illinois, when the entire expense of construction would devolve upon our state[?]” Hubbard’s argument prevailed, and on July 4, 1836, the state of Illinois began making the “deep cut” between the Des Plaines and the Chicago River.25
While political considerations dictated that the Illinois and Michigan Canal flow through Chicago, the imperatives of finance forced engineers to abandon the deep cut. Hubbard and his legislative colleagues’ insistence that the canal run through Chicago meant that engineers and laborers had to proceed with the arduous and frequently deadly work of cutting through the hard pan and bedrock along the route, which was carried out largely by Irish laborers. To finance the undertaking, the state of Illinois borrowed great sums. In 1835, the legislature granted Governor Joseph Duncan power to negotiate a five hundred thousand dollars loan for money to build the canal. In 1837, the legislature passed the Internal Improvement Act, authorizing the state to borrow four million dollars for canal construction and millions more to build an intricate railroad network across the state, known as the Illinois Central Railroad (a private corporation would later bear that name).26 Just when the state began to accrue enormous debts, the Panic of 1837 struck, stalling the economy and driving the cost of borrowing higher.27 By 1840, the cash-strapped state of Illinois halted work on the canal and railroads. By 1842, the state was in financial ruin with $10.6 million in public debt, annual interest payments of eight hundred thousand dollars, and a yearly income of just ninety-eight thousand dollars.28
Illinois was not alone. Inspired by New York’s Erie Canal, Ohio and Indiana had also launched ambitious internal improvement projects. In 1832, Ohio completed a canal between Lake Erie and the Ohio River, and its tremendous success galvanized political support for new public works projects. In 1837, the state legislature passed a Loan Law that virtually required the state to match private investment in internal improvements. Hoosiers, meanwhile, started building a “Mammoth System” of railroads, canals, and turnpikes. The Panic of 1837 was a devastating blow to all these Midwestern projects, and to state economies across the nation.
For years, western banks had been making unsound loans to land speculators in Chicago and throughout the nation. In 1836, President Jackson put an end to easy credit with his “specie circular,” an executive order that required western banks to redeem paper money in gold or silver. Deflation ensued. The cost of borrowing soared as many states became mired in expensive internal improvement projects. By 1841, Indiana had spent over eight million dollars on just 281 miles of its proposed 1,289 mile transportation system; it would need twelve million dollars more to complete the work. Already burdened with a total public debt of fifteen million dollars and annual interest payments of at least $615,000, the state of Indiana defaulted. Ohio fared a little better. In the decade after 1836, it spent thirteen million dollars on canals and aid to transportation companies. Meanwhile, the Loan Law alone forced the state to take on three million dollars of debt by 1842. The law, moreover, created numerous opportunities