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Despite the fact that the Old Northwest (Ohio, Indiana, Illinois) was expanding, farmers in the region faced a major problem when it came to exporting their produce to markets on the east coast. Basically, lacking a water connection, they had to transport goods either overland, across the eastern mountain ranges, to either Philadelphia or New York (a path now partially feasible due to the opening of the National Road in 1817) or they had to ship their goods down the Ohio or Tennessee Rivers, to the Mississippi, through the port of New Orleans, to the east coast. Both of these routes were prohibitively expensive, and cut into farmers' profits, and thus the economic development of the region. The Erie Canal, by connecting Lake Erie to the Hudson River, made it possible for farmers to ship their produce more cheaply through the Great Lakes (which were already connected) straight to New York City.
This had several effects, the most important being that it stimulated more economic growth and settlement in the Northwest. It also encouraged the growth of cities in the region, which became major economic centers, Chicago, of course, being the most important example. It encouraged canal building, already a priority in Henry Clay's American System, in other locations, including from Pittsburgh to Philadelphia. It also cemented New York's position as the major economic and trade hub on the east coast- indeed, its biggest proponent was New York politician DeWitt Clinton. These changes, along with many other, were part of an massive period of economic growth and expansion that has become known as the Market Revolution. Canals would, of course, eventually become eclipsed by railroads, but they retained, and still retain their place as important components of the US commercial transportation infrastructure.
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