io G. S. CALLENDER 



projects were undertaken; the Baltimore & Ohio in 1828; the 

 Erie in New York and the Western in Massachusetts in the 

 early '30's; while Virginia, South Carolina, and Georgia pro- 

 jected lines to connect their seaports with the western waters. 

 The movement was taken up in the west in the early '20's, 

 when Ohio began a system of state canals almost as extensive 

 as those of New York and Pennsylvania, followed about ten 

 years later by Indiana, Illinois, and Michigan, with extensive 

 systems of both canals and railroads. Kentucky and Ten- 

 nessee devoted considerable attention to the building of turn- 

 pike roads, and Kentucky especially to the improvement of 

 the navigation of her rivers. 



Nor were the transportation enterprises the only ones to 

 receive the assistance of the states at this time. Almost from 

 the first introduction of banks into this country, it became a 

 common practice for the state governments to invest revenue 

 in bank stock. Many of the early bank charters reserved to 

 the states the right to subscribe for a portion of the authorized 

 capital, and this right was in most cases exercised. The 

 same policy was taken up in the western states about 1820. 

 In these states, however, the funds invested in bank stock 

 were not, as in the east, derived from revenue ; but the states 

 sold their bonds to secure the necessary funds. The first state 

 to do this on a considerable scale was Louisiana in 1824; and 

 between that date and 1840 the western and southwestern 

 states, including the territory of Florida, issued over $65,000,- 

 000 of bonds to provide banking capital to corporations. 



Thus during the first thirty or forty years of the century 

 the federal and state governments became actively interested 

 in a great number of the most important enterprises in the 

 country. At the very time when the federal government 

 was paying off its funded debt, in order that it might not be- 

 come a permanent feature of our policy and thus tempt the 

 government to extravagant expenditure, the states were 

 creating a funded debt of more than $200,000,000 — a larger 

 debt than the federal government had ever owed, and the 

 first large funded debt created by the government of any 

 country for purely industrial purposes. It is the purpose 

 of this paper to explain at length the conditions which gave 



