The Ohio canal commissioners in 1825 reported in favor of state construction rather than grants to corporations, and gave the following reasons for their opinion:

Our jurisprudence, which borrows its principles and reasons from England, has vigorously adopted this doctrine of immortality of corporations, naturalized and established it as law in our free government, and stretched over its dogma the ægis of the constitution, so that now whatever is granted to a private corporation by the legislature is holden to be intangible and irrevocable.. Nothing can be more interesting to the whole community than the great navigable highways through the state from the lakes to the Ohio river on the routes proposed. It does not consist with the dignity, the interest, or the convenience of the state that a private company of citizens or foreigners (as may happen) should have the management and control of them. The evils of such management cannot be fully foreseen, and therefore cannot be fully provided against. Besides, such works should be considered with a view to the greatest possible accommodation to our citizens; as a public work, the public convenience is the paramount object; and a private company will look only to the best means for increasing their profits. The public convenience will be regarded only as it is subservient to their emolument. We think, therefore, that it would be extremely hazardous and unwise to intrust private companies with making these canals which can be made by the state.

Such opinions as these indicate the existence of a certain amount of opposition, not only to the corporate control of important works of transportation, but also to corporations themselves. The popular opposition to the United States bank in Jackson's time was, no doubt, to some extent due to this hostile feeling, although it should be noted that many of the states, which denounced that institution as a monster corporation, did not hesitate to create state banks of several millions capital, and to give them a complete monopoly of the banking business within their territory. These views were, however, far from representing the prevailing attitude of the people. They appear but rarely in the public discussions, are nowhere discussed in detail, and do not appear to have had much

influence in determining legislation. The readiness with which the legislatures of all the states created corporations for all sorts of purposes, whenever they were called for by individuals, in many cases granting the privilege of limited liability, shows that the opposition to corporations as such was insignificant.

The considerations which received the principal attention, and which chiefly determined the policy pursued, were of an entirely different nature. They related to the utility to the community of the various improvements contemplated, and to the inability of private enterprise to secure the capital to construct them. Long arguments were presented to show that the benefits to be derived by the community at large from such improvements were sufficient to justify their construction at public expense, even though private capital should not find it profitable to undertake them.

Such reasoning as this may be found in the public documents of most of the states which adopted the policy of internal improvement. Sometimes it appears in the discussions which preceded the construction of the works, and sometimes it is used to justify that policy after experience had shown that the tolls were not sufficient to pay the interest on the public debt created to carry it out. The Ohio canal commissioners at the outset of their enterprise, after expressing their opinion that the construction of the canals would be a prudent investment of capital, declared that a more important and interesting inquiry is what are the advantages which the people of this state may derive by the construction of navigable canals.

After the canals had been finished, they laid still greater stress upon the fact that, in estimating their value to the state, the revenue accruing from tolls was a matter of secondary importance. By taking the amount of tonnage received and exported from either end of the canal in 1832, and estimating the rise in the price of exports and the fall in the price of imports, they reached the conclusion that the aggregate saving to the people had amounted to $312,000; whereas the taxes raised to pay interest on the canal amounted to only $143,000.

The attitude of the people toward the policy of internal improvements was not due to any modern socialistic or populistic idea that the business of supplying transportation and banking facilities to the community was not a safe and legitimate one, to be left to the management of private enterprise. As a matter of fact, only a part of the states undertook the actual construction and control of such works. This was the policy of New York, Pennsylvania, Ohio, and the northwestern states, excepting in the case of one or two canals and railways and all the turnpikes; but Massachusetts, Maryland, and the southern states generally pursued the policy of shortening corporations to carry out the works, and assisting these corporations by subscriptions to their stock or by loans of state credit. After the crisis of the early forties, all the states pursued this policy of assisting corporations. It required the experience of later years with the evils of unrestricted private railway management, the rise of labor difficulties, and the appearance of monopolies and trusts in many industries, to teach the American public that private enterprise might sometimes require to be restricted and controlled rather than stimulated, in the interest of public welfare. Down to the civil war, except in case of the banking industry, the powers of the government were used to encourage and assist private enterprise, not to restrict it.

It remains to add a few words further concerning the connection of the states with banking enterprises. It has already been pointed out that nearly all the states invested public funds, derived either from revenue or from the sale of state bonds, in the stock of banking corporations. The motive which caused this widespread connection of the states with banks was not, however, the same in all sections of the country. In the older states, both north and south, it was not primarily, if at all, due to a desire to encourage the growth of banking. Banks needed no such encouragement in those states. On the contrary, they were regarded as very profitable enterprises, and the investment of capital in them as a distinct privilege. In New York, at least, the struggle of individuals to secure charters from the legislature gave rise to political corruption. Many of the early charters contained

provisions for the investment of educational funds in bank stock. The early Connecticut charters provided that "the bank shall at all times be open for subscriptions at the rate of $100 for each share from the school fund of this state, and from the funds of any college, ecclesiastical society, school, or corporation for charitable purposes within the state." Several New York charters contained similar clauses. The act which rechartered the bank of New York in 1813 authorized the comptroller of the state to subscribe $15,000 to the stock of the bank for the benefit of the common schools; and the treasurers of Hamilton, Union, and Columbia colleges were given the right to subscribe a similar amount for the benefit of these institutions. Banking privileges were frequently given to companies formed for the purpose of carrying out canals and railways, as in case of the Morris Canal company, the Central Railway and Banking company of Georgia, and the Southwestern Railroad bank of South Carolina. Clearly, the banking business was looked upon as in some way exceptionally advantageous to the investor; and the devotion of the surplus public revenue to the purchase of bank stock was simply a device for increasing the revenue of the state.

In the newer states, where capital was more scarce, other motives played a considerable part. The people were anxious to furnish a circulating medium, and also to provide banking accommodations to the commercial classes as well as loans to farmers. But in all, except the cotton states of the gulf region, the desire to secure for the benefit of the public the large profits to be earned in the banking business was an important, if not the most important, motive which led the states to invest in these industries. Thus, when Indiana and Illinois began their system of internal improvements, they both increased the capital of certain banks, and authorized the states to subscribe for the new capital. In Illinois the act which authorized this action was entitled "an act to increase the capital stock of certain banks, and to provide means to pay the interest on a loan authorized by an act entitled 'an act to establish and maintain a general system of internal improvements.' These states could borrow money at 5 or 6 per cent interest, and the banks earned from 7 to

9 per cent dividends. They found it profitable, therefore, to provide for the payment of a part of the interest on their internal improvement debts by selling bonds and investing the proceeds in bank stock. A similar motive influenced the action of Kentucky and Tennessee. The governor of Kentucky urged the legislature to subscribe for bank stock in order to provide funds for a system of public education; and the act which established the bank of Tennessee, in which the state invested $1,500,000, was entitled "an act to establish a state bank to raise a fund for internal improvements, and to aid in a system of education."

In the southwest the situation was different. The demand for capital here, and the difficulty of obtaining it, were, perhaps, greater than in any other part of the country. It is true there were no important works of internal improvements undertaken, except in Louisiana, where the state issued $1,200,000 worth of bonds to assist railroad companies. But the character of agriculture gave rise to a very great demand for capital. The plantation system carried on by slave labor is a highly capitalistic form of industry. Not only has labor to be employed on a large scale, but the planter has to purchase the labor outright, as well as to maintain it from year to year. This involves an enormous initial expense to the person who begins cotton or sugar culture with slave labor. As the planter's crop is marketed but once in the year, it is necessary for him to have large supplies of provisions on hand before these provisions can be paid for from the proceeds of his crop. The southern planter was therefore more like a man engaged in manufacturing or commercial business than like a northern farmer, and, like the manufacturer and merchant, required from time to time advances of capital to enable him to carry on his business. When it came to settling a new country with such a system of agriculture, the demand for capital became still greater. The hardy settler of the northwest could move into the wilderness with his family and gain a livelihood for them from the first, while he cleared his land and prepared it for cultivation; but the planter had to maintain his slaves while the land was being cleared and the first crop produced, which would require at