Federal Financing
of Internal Improvements
in Antebellum America
Collection of the Museum of American Finance
By Michael A. Martorelli
Throughout this Republic’s first seven
decades, many people expressed strong
interest in making improvements to the
country’s transportation network. Civic
leaders believed an integrated system
of roads, turnpikes, canals and, eventually,
railroads would help strengthen
the nation’s political and economic ties.
Throughout the decades, however, those
men disagreed over the federal government’s
role in financing the costs of such
internal improvements. This analysis
shows that ambiguous guidance from the
Constitution was only one problem. Others
included an anti-government attitude,
state and sectional differences and sporadic
budgetary concerns.
The US Constitution permitted Congress
to regulate interstate commerce and establish
post roads, but it did not give that body
the permission to finance or build internal
improvements, such as roads and canals.
The nation’s early political leaders were
wary of exercising any unspecified power
and were quite conscious of the perceived
threat that an over-reaching central government
would pose to the states. None
of the first six Congresses and neither of
the first two Presidents wanted to commit
the federal government to funding internal
improvements. Instead, they counted
on the states and the moneyed gentry to
finance and build any appropriate additions
to the country’s transportation network.
Throughout the 1790s, state legislators
and private investors cooperated to establish
dozens of toll-free roads and fee-based
turnpikes. Private companies in several
states even managed to overcome significant
engineering challenges and build
relatively short canals to connect important
bodies of water.
By 1802, it became apparent that states
and private companies could not provide
the capital necessary to pursue large internal
improvements. Officials of the Chesapeake
and Delaware Canal Company were
forced to suspend work on that eponymous
pathway between two important waterways
when the company ran out of money. So
Engraved portrait of Secretary of the Treasury Albert
Gallatin. Gallatin’s April 1808 Report on the Subject of
Public Roads and Canals detailed a comprehensive
network of roads and waterways he believed the
government should build to connect towns, rivers
and lakes in every section of the country.
16 FINANCIAL HISTORY | Summer 2020 | www.MoAF.org