The Big Ditch: How America Took, Built, Ran, and Ultimately Gave Away the Panama Canal

SIX: Passed by the Ditch

s i x P A S S E D B Y T H E D I T C H La República de Panamá existe por y para el Canal. —Panamanian president Belisario Porras, 1924 BEFORE thE OpEning OF thE Panama Canal, it was widEly believed that a canal across the Panamanian isthmus would transform Panama into one of the great commercial centers of the world. Bolívar compared Panama to Corinth, which owed its success in the ancient world to its commanding position on the isthmus between the Ionian Sea and the Aegean Sea. Early twentieth-century Panamanian politicians often used the wealthy Hanseatic cities of medieval Europe which controlled the Baltic Sea trade as their point of comparison.1 Panama’s ambassador to Washington waxed enthusiastic about the canal in 1913, as he travelled the United States to drum up investment: “Our country has the Canal within its own territory, and therefore enjoys the greatest advantage. . . . The market for the products consumed by ships passing from one ocean to the other, or arriving at the Canal’s terminal ports, is a market that naturally belongs to Panama, and no other country can handle our competition.”2 So did the authors of the Blue Book of Panama, declaring in 1917 that “[t]he Republic of Panama should shortly become one of the business centers of the universe,” claiming that “the administration and upkeep [of the Panama Canal ] have brought large sums of money into the country.”3 A modern analyst might think of Singapore’s relationship to the Straits of Malacca. 190 | ChapTer six A better analogy to Panama’s situation in the early twentieth century might be Port Said, the Egyptian city founded by de Lesseps at the Mediterranean entrance to the Suez Canal, which developed into a squalid coaling station synonymous with vice.4 The Panama Canal’s direct benefits to Panama were small. A series of independent, piecemeal, but mutually supporting decisions made by American policy makers in Washington and in the Canal Zone combined to prevent Panama from enjoying the rents created by the Panama Canal. As an example, the canal administration deliberately avoided employing Panamanian workers, preferring instead to import low wage labor from elsewhere, mainly the Caribbean. Article 10 of the 1904 treaty prevented Panama from taxing any employee of the Panama Canal. The United States also explicitly prohibited Panamanian businesses from providing services to the canal, or to ships passing through the canal. Not every denial of benefits to Panama was caused by deliberate American policy. In some cases, paternalistic behavior by the United States simply failed to have the expected positive effects. For example, the United States explicitly exercised a protectorate over Panama, including the installation of an American fiscal agent in Panama City to maintain Panama’s finances. This imprimatur by the United States, however, did not translate into lowered borrowing costs for the Republic of Panama, nor did it result in Panamanian fiscal restraint. Panamanian officials found it too easy to circumvent American controls, and the United States refrained from imposing harsher sanctions or assuming greater direct control of Panama’s administration for fear of inflaming Panama’s chronic political unrest and destabilizing its government. The esTaBLishMenT of The CoMMissary The largest barrier to Panamanian participation in the economy of the Panama Canal was an organization known simply as the Commissary . The Isthmian Canal Commission established the Commissary in order to provide food and housing at reasonable prices passeD By The DiTCh | 191 to canal workers during the Panama Canal’s construction. The sudden arrival in 1904 of thousands of foreign workers caused shortages of food and retail goods, and Panamanian merchants took advantage of the situation to charge the often malnourished immigrant laborers exorbitant prices. Eggs and plantains sold at 10¢ each, the equivalent of an hour’s wages for most Silver Roll workers. A pound of meat cost 25¢, and a quart of milk cost 40¢.5 (To give more context, the roughly equivalent prices in 2009 dollars would be $29 for a dozen eggs, a quart of milk for $10, and a pound of meat for a mere $6—rural Panama having many ranches.6 ) Many canal workers chose to subsist on sugarcane. As a result, malnutrition greatly slowed their work effort.7 In response, in 1905 the United States government established a series of commissaries in the canal in order to feed and...