Experience Stern | Faculty & Research

America’s story is written in concrete, steel, and ambition. Massive infrastructure projects have repeatedly reshaped the country and propelled it into the future. Four such projects stand out as having made America what it is today. This paper distills key lessons from the Erie Canal, the Transcontinental Railroad, the Panama Canal, and the Interstate Highway System. 

Successful execution of these projects depended on strong leadership accompanied by an ability to overcome opposition. Each introduced innovative financing and funding models along with advances in civil engineering. Historical precedents offer valuable insights into how contemporary infrastructure initiatives—both in the U.S. and abroad—can be structured for maximum economic and societal impact.

These projects served as catalysts for economic transformation by increasing connectivity and enabling new industries. The Erie Canal established New York City as the dominant port in America. The Transcontinental Railroad unified the nation’s markets and accelerated westward expansion. The Panama Canal revolutionized global trade routes. The Interstate Highway System led to the development of new metropolitan areas, fostered suburbanization, and led to the growth of national logistics networks. Each of these projects demonstrates the long-term benefits of strategic infrastructure investment.

The Erie Canal: A River Runs Through It

In the early 1800s, the American Midwest was cut off from the global economy. Meanwhile, the War of 1812 highlighted the importance of a means for rapid troop deployment to the east. Enter DeWitt Clinton, governor of New York and former mayor of New York City. Inspired by a proposal from engineer Christopher Colles, Clinton had a simple, audacious idea: carve a 363-mile canal through the wilderness, connecting the Great Lakes from Lake Erie to the Atlantic by way of the Hudson River. Skeptics called it “Clinton’s Ditch,” Thomas Jefferson dismissed it as “little short of madness,” and James Madison refused federal funding. Clinton was undeterred.

Constructed between 1817 and 1825, the Erie Canal—383-miles long with 83 locks—transformed New York harbor into America’s largest and secured New York City’s position as the nation’s commercial capital. Farmers in Ohio and Indiana suddenly had a cheap, direct route to ship grain to the Atlantic states and to Europe. Goods flowed in the opposite direction, opening the interior to settlement.

The Canal made use of design-build public-private partnerships with private sector developers contracted to build various portions of the route. It set a precedent for the use of municipal bonds in infrastructure financing, with the then-largest public sector issuance. The Canal was self-funding and tolls on passage completely covered debt service (tolls were eliminated in 1882). 

The Canal was deepened and widened over time to enable passage of larger barges. Ultimately, it was rendered obsolete with the advent of railroads in the late 1800s and the opening of the St. Lawrence Seaway in 1959. Today, the Canal is largely a source of toll-free tourism through upstate New York, with occasional heavy-barge traffic.

The Transcontinental Railroad: Building America, One Mile at a Time

The promise of California was an economic dream after gold was discovered in 1849. But getting there meant a months-long, perilous journey by stagecoach. Engineer Theodore Judah had a plan. Abraham Lincoln took this on. Lincoln saw the railroad as a necessity, not just for commerce but also for strengthening the Union during the Civil War. 

Two competing railroad companies were granted charters. The Union Pacific built west from Omaha, the Central Pacific built east from Sacramento. A subsequent section, built by the Western Pacific, took the Railroad all the way to the Pacific at Oakland.

Construction was brutal. Workers blasted through the Sierra Nevada, battled harsh winters in the Rockies, and contended with labor disputes and Native American resistance.

Begun in 1862, the Railroad was completed in 1869 with the ceremonial golden spike at Promontory Summit, Utah. America was forever changed. A journey that once took months now took a week along 1,912 miles of track. The Railroad spurred the development of towns, created new industries, and made coast-to-coast commerce possible.

Entirely constructed and financed by private sector interests, the Railroad was enabled by the Pacific Railroad Act of 1862 which authorized land grants to the railroad companies (in total, 129 million acres of federal land and 51 million acres of state land were granted, including a 200 foot right of way). The Railroad was an early example of value capture funding as the companies sold their land rights to developers along the route and redeployed proceeds in paying for the infrastructure.

The Panama Canal: America’s Bold Power Move

By the early 20th century, America was becoming a global power, but its navy and merchant ships were stuck sailing the lengthy and dangerous passage around the bottom of South America. President Theodore Roosevelt saw an opportunity in the failed French attempt to cut a path through Panama.

The French, fresh off their success with the Suez Canal, had attempted a sea-level waterway through the Isthmus of Panama. They sorely miscalculated the challenges of blasting through the rocky terrain. Construction complications were compounded by mosquito-borne yellow fever. All told, by the time they walked away from the project, the French had lost twenty thousand men and written off $287 million.

The Hay-Bunau-Varilla Treaty of 1903 with Panama, granted the U.S. the right to construct and control the Canal along with a 10-mile right of way (the Canal Zone). In return, the U.S. guaranteed Panama’s independence from Colombia and granted the country a one-time payment and annual annuity. 

The Canal construction project rested on a public health project – the eradication of yellow fever. American engineers implemented the out-of-the box solution of a canal raised above sea level by way massive lock systems at the Atlantic and Pacific ends and a course that runs through the Gatun Lake, then the largest manmade lake in the world, itself fed by the Chagres River and Panama’s heavy rainfall. 

Constructed between 1904 and 1914, the Panama Canal stands as one of the greatest engineering feats of its time: 1.5 billion tons of rock and dirt were excavated and 26 million tons of concrete were poured. It slashed maritime travel times and reshaped global trade. The Canal enabled the U.S. to project power and transformed global trade by significantly reducing maritime transit time from the major population centers on the U.S. east and west coasts from several months to about two weeks.

The Canal’s $375 million cost of construction was entirely financed by the U.S. federal government. Consider that the entire federal budget was about $600 million at the time. Funding of the Canal’s operations has been through toll revenues since inception. 

The entire Canal Zone was sovereign U.S. territory until its transfer to Panama on December 31,1999, pursuant to the Torrijos-Carter Treaty of 1977. A new parallel lock system was developed by Panama between 2007 and 2014, this was financed by development bank financing and funded by tolls.

Once re-elected, President Donald Trump repeatedly threatened to reclaim control of the Canal. In early 2025, BlackRock announced an agreement to purchase a portfolio of ports—including the Panama Canal ports—from Hong Kong-based CK Hutchison. At the time of writing, the outlook for that transaction was uncertain.

The Interstate Highway System: Paving the American Dream

No infrastructure project has had a more direct impact on American daily life than the Interstate Highway System. Inspired by President Dwight Eisenhower’s early experiences as a soldier in a difficult 1919 cross-country military convey and then with Germany’s Autobahn as the victorious Allied Supreme Commander in Europe in World War II, the Interstate was built to connect the country like never before. Eisenhower promoted the Interstate System as a safer mode of travel, a means of linking population centers, a spur to economic growth, and an improvement of defense readiness – its full name is the “National System of Interstate and Defense Highways.”

Its opponents were many. Urban communities along the proposed routing were against highways traversing their territory. Bypassed communities were subject to missed opportunities. State governments opposed ceding local rights to the federal government, favoring a series of intra-state highways instead. Fiscal conservatives opposed the system’s overall cost and impact on the national debt. Environmentalists were opposed due to ecological effects and unprecedented scale.

Yet, Eisenhower pushed forward. The result? A 47,000-mile network of roughly parallel north-south and east-west highways built to uniform standards. It remains the world’s largest controlled-access road system. 

The Interstate fundamentally changed America. It connected the entire country, fueled suburbanization, and enabled thousands of new communities and entire new industries – for example the long-haul trucking industry and national hotel and restaurant chains. Millions of jobs were created in construction and related industries and to support ongoing maintenance. 

Total construction cost of the Interstate System between 1956 and 1992 is estimated at $129 billion, shared approximately 90% to 10% between the federal and state governments. The Interstate is owned by the various states through which it runs. Construction was partly recouped by value-capture. The federal government acquired a two-mile wide right-of-way — using eminent domain where necessary — selling excess land to developers. 

Funding of the Interstate’s operation is complicated by a prohibition on tolls, except for portions of already-existing toll roads incorporated into the System. The federal and state governments share operation and maintenance expenses 25% to 75%. States cover their share by way of state gasoline taxes, vehicle registration fees, and general funds. The federal government’s share is funded by the Highway Trust Fund, itself funded by a federal gasoline tax. That tax has never been indexed to inflation and Congress has not authorized an increase since 1993. Federal general account transfers have been necessary to top-up the Highway Trust Fund. The gas tax itself is becoming increasingly challenged by the transition to electric vehicles, with a vehicle miles traveled tax being one of the solutions.

Comparison of Case Studies

We can see that there are several common features of each of these four projects, as summarized in the table below.

Lessons for Policymakers

These case studies underscore how the benefits from well-designed transformative infrastructure initiatives have benefits that last for centuries. 

Getting big things done needs strong champions to overcome political, engineering and financing challenges. Even projects that are of national significance can be paid for by the private sector if the correct financing and funding tools are utilized.

These lessons are highly relevant today as policymakers consider new infrastructure priorities, among them climate resilience; renewal of aging roads, bridges, and tunnels; remediation of transportation chokepoints; more efficient means of urban and interurban transit; AI and cybersecurity infrastructure; affordable housing; resilient water and waste management systems; and an energy system that is both resilient and draws on non-polluting sources of power.

As they look for ways to make cities, regions, and countries more efficient, policymakers, transit officials, entrepreneurs, and financiers can learn much from the success stories of the past.
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Ingo Walter is Professor Emeritus of Finance at NYU Stern. Clive Lipshitz is Managing Member, Tradewind Interstate Advisors.