Book | 2010

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

by Noel Maurer and Carlos Yu

Abstract

On August 15, 1914, the Panama Canal was officially opened for business, thus changing the face of both world trade and military power and playing a pivotal role in the rise of the United States on the world stage. Today we view the creation of the Panama Canal as a story of U.S. triumphalism; but the true story is a bit murkier. The first study of the Panama Canal to make use of both conventional historical methods and the tools of quantitative analysis, The Big Ditch examines the impact of the Panama Canal on the Republic of Panama, the United States, and the world. Noel Maurer and Carlos Yu deftly chronicle the economic history of the Canal, from the very earliest proposals made by Spain in 1529, through an abortive French attempt in the 19th century, to the construction, opening, and operation of the Canal by the U.S., and finally the turning over of the Canal to Panama, which was promised by the Carter administration in 1977 and made effective December 31, 1999. The true story of the Canal upends the more conventional tale of U.S. triumphalism and its shepherding of one of the largest infrastructure works ever built. First, the Canal produced great economic dividends for the first quarter-century following its opening, despite massive cost overruns and delays. Second, the United States captured most of these economic benefits, partially because of its geographical situation and partially because it could leverage its military might to obtain a better agreement than would have otherwise been reached. Finally, the U.S. agreement to give ownership of the Canal back to Panama in the 1970s was not a gesture of magnanimity, but because the strategic and economic value of ownership had since disappeared. In a surprise to those who argued that it was impossible for a fledgling Latin American nation plagued by corruption to manage the Canal better than its powerful patron to the north, the story of the Canal since its handover has been that the Panamanians have ultimately proved better at running it. Under the distant governance of a large country not particularly vested in the Canal's operation, the Panama Canal was run as a public utility. The Panamanian government, in contrast, has run the Canal as a for-profit corporation, increasing safety and decreasing costs along the way. Maurer and Yu's nuanced analysis of the contribution of the United States to state-building, economic development, and democratization of Central America does more than just advance our understanding of the national and global consequences of the Panama Canal and the imperialist motives and influences of the United States. In an age where everyone is looking for new models to capture the benefits of private enterprise under conditions of state ownership, the tale told by The Big Ditch serves as a vital and object lesson for those who question the ability of governments to run companies effectively.

Keywords: For-Profit Firms; Development Economics; Political History; Infrastructure; State Ownership; Ship Transportation; Panama; United States;

Citation:

Maurer, Noel, and Carlos Yu. The Big Ditch: How America Took, Built, Ran, and Ultimately Gave Away the Panama Canal. Princeton University Press, 2010.