Unvarnished history of the Panama Canal

The story of the building of the Panama Canal at the turn of the last century is an exposé of the operations of the capitalist system and the enormous damage that is done to workers under it.

Matthew Parkers recent book Panama Fever (Hutchinson) is a piece of unvarnished history that makes the case for socialism more powerfully than any political tract could do. The construction of the canal and the ambitions, machinations and cold calculations that lay behind it make for grim reading. There were two elements in the building of the canal; the first, a failed French attempt under the leadership of De Lesseps (builder of the Suez Canal) and the second successful effort of the government of the United States. Over both construction stages, in the region of 28,000 workers lost their lives, mostly from diseases, which is a toll on a par with many wars.

As soon as fifty years after the discovery of the continents of North and South America, the advantage to World Trade of a man-made opening through the narrow isthmus of lower Central America was appreciated. Construction though had to wait until the appropriate technology had advanced and such a project began to appear feasible from the middle of the 19th century onwards. One of the main drivers was the rapid economic growth of the United States and its trade with the rest of the World, including both Europe and Asia. The canal which would be about 80 kilometres (50 miles) long would shorten the sea-going distance between New York and San Francisco from 22,500 km (14,000 miles) to 9,500 km (6,000 miles). In the 19th century Panama was a still a province of Columbia, ruled from Bogota. For the major powers of Britain, France, Spain (all three of which still had remnants of their colonies in the Western Hemisphere) and the United States, the future and control of the region provoked strong strategic rivalry. Panama itself had a sparse population and Columbia was weak and prone to recurring civil wars. Along with its own ambitions, each country was fearful of the significant commercial and military advantages that would accrue to the nation that would dominate the region.

While some understandings were present between the powers, the most explicit posture was that of the United States with its self-declared Monroe doctrine of 1823. This policy began as a defensive mechanism whereby the US stated that it would not accept any future European re-colonisation of any part of the Americas; though ultimately it was used to justify exactly such activities by the United States itself. More specifically, as the idea of a canal was mooted, it became US policy that, if the canal was to be built, it would not be allowed to be under the control of any foreign power. As early as 1848, the Americans forced Columbia to grant it the right to land troops on the isthmus if free transit across it (by road, rail or future canal) was prevented. This was the only foreign treaty signed by the US in the 19th century and for almost the first time the country declared it had strategic concerns outside its continental borders. American interest was whetted by its acquisition of vast Pacific territories from Mexico after the 1848 war, which made the isthmus a key strategic artery for the country. The California gold rush accentuated this trend and an American financed railway across Panama was completed in 1855. Simultaneously, the US Navy made itself routinely present in the neighbouring seas.

Financial swindle

The European powers, while mindful and wary of the obvious growing strength of the United States, were not ready to relinquish their presence in the western hemisphere. Confident from their success in building the Suez canal, a private French company headed by De Lesseps came to an agreement with the Columbian authorities and began work on a canal in Panama (more or less along the exact path of the current canal) in 1880. There was strong American suspicion that this was another attempt by France to gain leverage in Central America after the debacle of its involvement in Mexico in the 1860s, while the US was pre-occupied by its own Civil War. The US made its displeasure known with the result that this private French effort could not be officially backed by the government in Paris. Nonetheless, there was a patriotic flavour to the French enterprise with the project being seen as a means to improve Frances standing after the defeat by Prussia in the war of 1870.

There were two main tasks for the De Lesseps organisation: the raising of capital to finance the project and the sourcing of adequate numbers of workers for the huge construction effort that would be required. To lessen the dependence on what were regarded as Jewish-dominated monetary institutions, small investors were encouraged to come forward to give the project a more authentic Catholic French flavour. This could be regarded as an early type of Peoples Capitalism. From the outset, dubious methods were employed to raise finance and maintain investor confidence. Payments to newspaper editors and financial journalists for positive coverage, sweeteners to senior bank and stock exchange executives and payoffs to government deputies for a favourable attitude were prevalent and seen as necessary. This of course is still a practice that is widespread today by Western companies in undertakings such as the massive gas and oil pipeline projects in the former Soviet Union and in southern Asia.

The British Caribbean islands were identified as a promising source of labour, principally Jamaica owing to poor economic conditions on the island. Large numbers of workers were shipped from there to Panama. In fact initially so many Jamaicans left the island that plantation interests there lobbied to stop the outflow as it was driving up the price of labour. In Panama, the workers had to contend with extremely difficult and dangerous conditions; the diseases of malaria, yellow fever, pneumonia, dysentery, typhoid and tuberculosis were all present in addition to the hazards of physical exhaustion and frequent industrial accidents. The workers toiled outdoors in one of the wettest places on Earth with poor food and rudimentary accommodation. They were completely open to exploitation as there was no labour law in Panama except the freedom to work.

By the late 1880s the French effort had run into serious problems. They had grossly underestimated the scale of excavation involved and persisted with an unrealistic sea level plan for the canal. The project was plagued by mismanagement, extravagance and corruption amongst the contractors and senior officials with huge profits being taken by some engineering firms and financial middlemen. In addition, periodic civil unrest in the province of Panama and a weak police force hindered any meaningful advance. The high death rate amongst the workforce (approximately 20,000 died in the eight year period) caused demoralisation, led to a high turnover of workers and thus pushed up the wage rates. The scale of the deaths amongst the West Indians, combined with some high profile fatalities amongst the senior French administrators and their families, caused doubts about the canals prospects for success. Hence raising money in Paris for the scheme became more and more expensive. The project eventually collapsed in 1889 with most investors losing their savings. A bitter atmosphere of recriminations developed in France with professional anti-Semites, in the years just prior to the Dreyfus case, using the collapse to make allegations about the role of some Jewish financiers. The canal company was accused (and indeed was guilty) of misleading investors by false announcements of progress. An enquiry, driven by angry shareholders, was held to determine whether embezzlement and corruption had occurred. The fact that 20,000 people had lost their lives, as opposed to their savings, was not regarded as a cause for scandal.

Land grab

After the failure of the De Lesseps venture, a new French company was formed to try to keep the project going but little extra progress was recorded. The remaining investors realised that they could not hope to complete the work and the whole asset would have to be written off, unless they could find a purchaser for the, by now, quarter finished canal. They turned to the United States government as the only feasible body and employed intermediaries (what we would today call lobbyists) to petition the administration in Washington. They were helped by the advent of Teddy Roosevelt to the Presidency after the assassination of McKinley in September 1901. While regarded as a progressive Republican in domestic issues, Roosevelt was one of the new breed (and still historically one of the most important) of American imperialists who rose to power at the turn of the 20th century. At the outset, the new President decided that absolute American control over the canal zone would be necessary for success. This was opposed by the authorities in Bogota, who would only grant a lease arrangement that respected ultimate Colombian sovereignty. In a move that would be repeated many times in years to come, the US sponsored an independence movement amongst the top levels of society in Panama which was also supported by people with a financial interest in the canal. A successful coup against the small local Colombian garrison took place. This could have been subsequently suppressed by Bogota but crucial American intervention took the form of warning the Colombian government off. A pliant administration was formed in the newly independent country and in fact the US obtained decisive control over internal Panamanian politics for decades to come. One of the first acts of the new government was to cede the canal zone (a strip about fifteen miles wide) to the US government in perpetuity. The United States had total control over the zone and appointed a series of Governors and Special envoys to the region. While such a naked land grab was clearly unpopular with nationalists in Central and South America, it also provoked a backlash in America itself. Critics claimed the country was behaving more like an Empire than a Republic; defenders of the move replied that such operations were essential to the economic future of the United States and such arguments proved hard to refute in the Age of Imperialism.

From the start in 1904, the US effort was much more substantial than the French, backed as it was by the enormous resources of the American government. It was also free of the constraints to continually raise capital on the stock markets. The US army took effective control over the project, operating as a quasi-autonomous government and the military oversaw most aspects of workers lives in the canal zone. Undesirables could be immediately deported from the zone with the police given almost unlimited discretion as to who constituted an undesirable. Everything (health, housing, schooling, canteens, entertainment) was provided or organised by the state and at the time the project was viewed as having all the characteristics of paternalism and welfare socialism. So much so that a member of the then US Socialist Party working on the canal was asked by a visiting journalist whether this was the type of society he wanted to see in the future. He replied, government ownership dont mean anything to us working men unless we own the government. We dont here this is the sort of thing Bismarck dreamed of.


It was recognised that one of the main reasons for the failure of the French attempt was the crippling effect of disease on the white administrators and black workforce. Using prevailing medical advances and knowledge gained from conditions that faced US troops in the recent war in Cuba, the Americans were in a position to eradicate yellow fever and control malaria. This was accomplished by a massive sanitary campaign against the mosquito transmitters of both diseases. The huge resources put into this campaign were also seen to have wider strategic advantages in permitting safe settlement of the tropics by Caucasians. In actuality, pneumonia was a much bigger killer of black labourers but was almost unknown amongst the white work force. Malaria affected the success and efficiency of the project more significantly, both because this disease affected whites mainly and because, being generally not fatal, it resulted in expensive hospital treatment. Thus virtually nothing was done against pneumonia compared to the large programme to minimise malaria. This bears out the socialist view of the ultimate purpose of state-run health systems: they are financed precisely to the amount where the cost of dealing with the consequences of not having then would exceed the cost of having them. Hence hospitals were not constructed and maintained for workers benefit but as a judicious investment to ensure the profitability of the enterprise.

As with the French effort, the supply of an adequate labour force was seen as essential. The skilled workers and foremen would of course be white Americans but as regards manual labourers, white US workers were regarded as too expensive, too unionised and susceptible to tropical disease. Black Caribbean labourers were again seen as the most suitable being English speaking (thus able to understand instructions) and having some immunity to tropical diseases (to reduce hospital and sickness costs). More importantly they would be cheap in all senses of the word. The island of Barbados was this time identified as the best source. The island was overpopulated with descendants of sugar plantation slaves who were now landless labourers and there was a tradition of emigration. Over the course of the first decade of the 20th century, Barbadians in their thousands were shipped in cattle boats to Panama. Technically of course these were all voluntary migrant labourers though because of economic pressures, the real situation was little different to slavery. It highlights the socialist case that slavery can exist long after its formal abolition which is something those proponents of Apology for the Atlantic Slave Trade could do well to remember. In many cases, the Barbadians were victims of racism from the local Panamanian police and from their American supervisors.

While conditions for the black workers were materially better under the Americans (principally because of a major reduction in the death rate and appreciation of the cost benefits of maintaining a healthy workforce), compared to the French era, there was much more rigid colour stratification. The first decade of the 20th century marked the approaching apogee of the Jim Crow system in the southern US states. Intermingling of the races was seen as undesirable and was actively prevented; there were separate schools, canteens, bars, churches for blacks and whites. Not surprisingly living quarters and canteens, etc. were of a much lower standard for black workers. They endured conditions such as working in the rain 12 hours a day, 6 days a week. Black workers (unlike their white colleagues) did not have paid sick leave and could lose their jobs if they became ill. The West Indian workers were three times as likely as other workers to die from disease or accidents. Furthermore, to weaken worker solidarity and to prevent the occurrence of strikes (of which there were very few) the authorities had a scheme of periodically bringing in labourers from different European countries to lessen solidarity amongst the manual workers. Spain, Italy and Greece provided the majority of these extra men who were given double the wage rate of the black workers. This was a deliberate and successful Divide and Rule policy by the authorities.

Less important

The canal eventually opened under the Wilson Presidency in the summer of 1914 just as World War I started. It remains a busy trade route to this day. As it happens one of the main military reasons given for its construction, namely to permit US warships more rapid movement between the East and West coasts of the US was soon rendered redundant. The huge and permanent expansion in the US navy in the 20th century to police Americas global commitments made it necessary to have separate Atlantic and Pacific fleets and the development of aircraft carriers (too large to pass through the canal) as the crucial naval warship made the canal militarily less useful. Hence it was important but not vital to America in World War II and the Cold War. Increasing Panamanian resentment at the permanent ceding of a portion of their territory to the United States led to the signing of a revised treaty in 1977, in spite of vehement opposition by American conservatives. This set in motion the process of the return of ownership of the canal to Panama which was fully completed in 1999.

Would the canal have been built if socialism existed? In my personal opinion, yes, though clearly with a careful analysis of the costs and benefits to humanity. Instead of the needless and pointless diversion of time and resources into raising finance, political manoeuvring, wining and dining the people with influence, maintaining confidence etc, the focus under socialism would be on the engineering aspects of the project, its environmental impact and the health and safety of the people involved. The story of the Panama Canal serves as reminder of the totally avoidable waste that occurs under capitalism and the bizarre priorities of the money system. The fever for profit that gives the book its appropriate title was fundamentally the cause of the devastation wreaked upon the workers by exposure to the yellow fever and malaria fever on the Panama Canal.


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