Financial Failure? The Real Returns to the Blackstone Canal

The Blackstone Canal opened in 1828, ran from Worcester, MA to Providence, RI, ceased operation in 1848, and is widely held to be a financial failure, returning $4.10 in dividends on an original investment of $100.00. Yet, the canal is attributed with stimulating the economic success of Worcester and the valley of the Blackstone River, once considered the hardest working river in the United States. This study seeks to reconcile these two opposing view of the value of the canal for three reasons: to identify the true value of investment in the canal to individual investors, to initiate the use of a case study approach in studying the returns to investment that could be applied to other situations where returns to investment are not fully reflected in company financial records, and finally to illustrate how people work within existing legal institutions, in this case water-rights laws to promote economic development and growth. My research thus far has identified investors whose investment returns were exceedingly high once all values of the canal to the individual are considered. This result stands in stark contrast to existing beliefs that the canal was a financial failure. The primary additional value of the canal to these investors was the waterpower that the altered water flow provided. Indirect evidence indicates that the canal may have actually been built for waterpower purposes. The transportation aspect of the canal allowed the investors to obtain the necessary state charters that allowed them to circumvent the existing water-rights laws and build a waterworks project of this magnitude.