The canal that shaped American finance

**Robin Wigglesworth** (0:00)
This is a massive, massive construction and engineering project, unlike anything we've ever seen. It's like an Apollo program for the era. The canal is, what, 350 miles long, which is an order of magnitude bigger than any canal ever built in America before. And it can cut time travel from Albany to Buffalo from two weeks to just five days. It's actually like a teleporter in Star Trek or something for the era.

**Richard Sylla** (0:25)
Well, that's the important point, I think. The cost of shipping, let's say, a ton of wheat from where it was produced to the market in New York City was like one-tenth of what it had been previously. It's a dramatic reduction. And this is where the US begins to grow rapidly because the transport costs fell so dramatically.

**Gillian Tett** (0:56)
Today, on The Story of Money, the 19th century construction project that helped make New York the country's premier financial center. We're talking about the 363-mile-long Erie Canal, which links the Atlantic Ocean to America's interior.
And how its construction almost never happened.

**Robin Wigglesworth** (1:19)
But it did.
And Gillian, I'm particularly excited about this story because, well, our hero is kind of this weird, underappreciated corner of the bond market that really kind of only exists in America. And I'm talking about the municipal bond market, which are bonds sold by US states, local authorities, schools, even prisons. And as you know, I feel the US municipal bond market is a pretty magical thing that doesn't really get the attention it deserves.

**Gillian Tett** (1:50)
Yeah, yeah, yeah. I mean, we used to work together and you were constantly ranting about muni bonds and why they're so important.

**Robin Wigglesworth** (1:57)
Well, they are, they are, Gillian. Okay, so I had to be, I had to cover crypto all the time. Crypto, the entire industry is around $2 trillion, right? But the US muni market is more than twice as big. It's kind of the antithesis to crypto, which is incredibly sexy, fundamentally useless and pointless, whilst muni bonds are super important, hugely valuable, but nobody really cares about it. But it all started with the Erie Canal, which is why I'm so excited today.

**Gillian Tett** (2:25)
Yeah, I mean, I'm glad this is what gets you excited. Most ordinary mortals don't actually feel so passionate about the Erie Canal.

**Robin Wigglesworth** (2:31)
Yeah, and my tastes are peculiar, Gillian, I have to admit.

**Gillian Tett** (2:34)
Okay, so muni bonds are not sexy, but they're critical to how finance works today.
Not just for the issuers of governments, but also for the investors. And today we're going to start off by talking about the Erie Canal. And the founding fathers and the future presidents who were part of this story, who loved it, and some hated it too. And a New York City mayor who, just like today, made a lot of headlines and actually made sure it got built.

**Robin Wigglesworth** (3:03)
Plus, why? Even though the Erie Canal isn't used in the same way it was today, 200 years ago, its financial legacy is huge.

**Gillian Tett** (3:11)
So welcome to the story of money from the Financial Times with me, Gillian Tett, and me, resident Bob nerd, especially on Unifinance, Robin Wigglesworth.
So to help us tell the story of the Erie Canal and why it matters so much, we have got a financial history superstar with us today. He is the historian Richard Sylla, or Dick Sylla, Professor Emeritus of Economics at the New York University's Stern School of Business. Welcome, Dick.

**Richard Sylla** (3:53)
Glad to be here. I'm sort of excited about this opportunity.

**Gillian Tett** (3:57)
So technically you're Professor Sylla. I'm going to call you Dick if that's okay. But we're going to be talking a lot in this episode about a book that's one of Robin's favorite.
Take it away, Robin, why do you care so much about this book and why is Dick so relevant to it?

**Robin Wigglesworth** (4:10)
This book is called The Wedding of the Waters. It's written by another one of my favorite finance, financial historians, Peter Bernstein, who sadly passed away in 2009 But this book in particular is so fantastic because it really gets into the nitty gritty detail of how the canal was built and importantly for a finance geek like us, Gillian, it explained how it was paid for.
And Dick, you knew Peter Bernstein and worked with him as well, didn't you?

**Richard Sylla** (4:35)
Yes, he was a good friend and I actually admired him a lot. He was not an academic, but his publication record would have entitled him to be a, you know, probably a university professor at some good university.