“The South could have tied to the NW Terrs with canals”
I don’t think that there are any connecting rivers to follow and you have the Alleghenies to deal with.
The C&O, and George Washington’s earlier Patowmack Canal, went up the Potomac River to Cumberland, Maryland but only dreamt of connecting to the Ohio River at Pittsburgh. I don’t think that ever was practical.
While the Erie canal had obvious advantages, there were Southern possibilities.
Washington also championed the Kanawha canal project.
https://www.wvencyclopedia.org/articles/964
A turnpike wasn’t a disqualification (for Kanawha ot Potowmac) . And these were southerners in the NW Terrs who would use it.
http://www.envisionthejames.org/detail/james-river-and-kanawha-canal/evj6e320620cd3a8cf84/
“Then followed the War Between the States and the consequent destruction and deterioration of canal works. “And now the canal, after a fair and costly trial is to give away to the rail,” George Bagby wrote sometime after Appomattox, “and I in common with the great body of Virginians, am heartily glad of it. It has served its purpose well enough, perhaps, for its day and generation. The world has passed it by... The dream of the great canal to the Ohio... must be abandoned along with other dreams.”
In 1880 the canal system was sold to the Alleghany Railroad Company, and tracks were laid on the towpath, thus preventing canalboat traffic.”
Lot of historical trends going on. Basically though, the Southern slave-based capitalists made choices that were not future-oriented.