Canals are inland artificial waterways, some of which are deep and large enough to accomodate ocean-going vessels, and some suitable for smaller craft such as barges and narrowboats. Canals have a very long history, with the earliest example of one being dated to 4000 B.C. in Iraq. In the 6th century B.C. work began in China on a 1,000 mile long canal - the Grand Canal of China - which is still in use today. Many other early civilizations used canals for transportation and communication. These early canals were generally built between bodies of water that existed on the same level, and if any change of level was required the boats would be pushed manually up ramps. Obviously for the canal to develop into a major useful tool of transportation it was necessary for a more efficient way of dealing with the problem of topology.
In the Netherlands in about 1065, the flash lock or navigation weir was developed. This was a simple gate that allowed a boat to transcend a small shallow area by the application of a large volume of water to its rear. Henry I built the first canal in Britain in 1134, connecting the River Trent and River Witham. The first modern double-gated lock was apparently built in 1396 at Sluise, in Antwerp, now in Belgium. A double-gated lock consists of two gates, a downstream and upstream, both of which have sluices in them (some in deep parts have two sets of sluices). A boat enters the lock through the upstream gate, which is then closed. The sluices on the downstream gate are opened, equalising the water levels inside the lock and beyond the downstream gate. The downstream gate can then be opened and the boat can leave, at which point the lock is filled again by opening the sluices in the upstream gate. This means the upstream part of the waterway loses a volume of of water equal to the height differences each time a boat passes through, which can cause problems in heavily-used areas.
In the mercantile areas which are the present-day Netherlands and Belgium, canal-building took off in the sixteenth century. During the Dutch revolt the Spanish Netherlands (in the South of what is now the country) needed to get goods out into the sea past the independent United Provinces who controlled the (readily navigable) waterways in the North. In Britain some canal work carried on until the Industrial Revolution, but was not intensive. Then, during the Industrial Revolution, it really took off - prior to the invention of steam power and subsequently the railroad, canals were the primary means of transporting large quantities of goods. In the eighteenth century, when the revolution took off, British infrastructure wasn't particularly efficient - it mainly consisted of rivers and unsurfaced roads. The first canal of the modern era was commissioned by the 3rd Earl of Bridgewater in the 1760s. Engineer James Brindley completed it in 1761 and it was named the Bridgewater Canal.
Boats on these early canals were moved by means of a horse galloping on a specially-constructed "towpath" alongside it. At the time the infrastructure of Britain consisted mainly of rivers and poorly-constructed roads. Horses could only usually pull about a ton of merchandise on a road, but horses on the boats could pull up to 30 tons of material each. The Bridgewater Canal had been constructed to take coal into Manchester and was so efficient that it reduced the the cost of coal in the city by two-thirds within a year. Many other industrialists quickly saw the advantages of canals for transportation and the network expanded massively. Until the advent of the railroad the canal system had no competition and it soon expanded to a network of some 4000 miles in the rapidly industrialising North. The south didn't have such a need for a canal system, although there was a small one in the South West. Nor was there ever a canal connecting England and Scotland, although Scotland had its own self-contained system.
When the railroad was invented, the canal system faced a crisis. Railways were cheaper to operate and more efficient than small British canals. British canals had originally been constructed very narrowly and could not accomodate particularly large vessels, and so were unable to compete with the railways. Canal usage gradually waned and by the 1850s most goods were been transported by rail. On the Continent canals were built to be much wider and could accomodate ocean-going vessels of up to 2000 tonnes - so in France, the Netherlands and Germany canals are still a viable method of transportation until this day. In Britain, the smaller canal companies found themselves unable to cope with the challenges posed by railways and were forced to sell up and go out of business. Sometimes railway companies would buy the canals just to shut them down and eliminate competition, or sometimes the canal would be drained and used as railway right of way. Larger companies scraped by by exploiting niches that the railway companies hadn't latched onto, but the life of the boatman became increasingly hard - many now had to take their families with them on the boats. In the twentieth century the canals declined even further, and nowadays they are mainly used by tourists and holidaymakers. In the United States, the Erie Canal (the first canal in the U.S.) still operates for pleasure, as does the St. Lawrence Seaway, which also carries ocean-going vessels.
Larger canals able to accomodate ocean-going vessels occupy a more prominent place in our history books - who can forget the Suez crisis or the Panama Scandal in France? The first canal between the Nile delta and the Red Sea had been constructed in the 13th century B.C., but was allowed to decay once and for all after the 8th century A.D. In 1854 construction began on a new Suez Canal under the direction of fabled French engineer Vicomte Marie de Lesseps. The canal was to be owned by the La Compagnie Universelle du Canal Maritime de Suez (Universal Company of the Maritime Suez Canal) for ninety-nine years, at which point ownership would defer to the Egyptian government. The company was a private concern owned by French and Egyptian shareholders, but Egypt was forced to sell its shares due to debt in 1875. The British government purchased them and moved in troops in 1882. The canal has no locks because there is no difference in the lay of the land which merits them. Plans for a canal to cut through the Isthmus of Panama date back to the reign of Charles I of Spain, and the same Frenchman who built the Suez Canal tried to construct one in 1880. Millions of Frenchmen brought stock and many were ruined, precipitating a political crisis that inevitably focused on the Jews involved in the enterprise. The Canal was finally finished in 1914, but many people died in the process due to tropical disease and poor working conditions.