The Big Ditch: How America Took, Built, Ran, and Ultimately Gave Away the Panama Canal. By Noel Maurer and Carlos Yu. Princeton. NJ: Princeton University Press, 2011. Pp. xiii, 420. $35.00, cloth.

Resumen

Noel Maurer and Carlos Yu provide a rich and remarkably entertaining historical account of the United States role in the history of Panama and the Panama Canal. The substantive contribution of the book lies, however, in its thorough interpretation and analysis. A combination of counterfactual analysis a la Fogel, multifaceted data, and clever narrative intertwine in the book. The authors offer compelling and systematic analyses of the intended and unintended costs and benefits of the Panama Canal as an infrastructure project and as an exercise of imperialism by the United States. The latter was able to leverage its coercive and economic power to make imperialism pay in Panama.They begin with a brief detour analyzing the pre-Panama Canal historical alternatives to the problem of interoceanic transport: the construction of a sixteenth-century road by the Spanish and of the mid-eighteenth century Panama Railroad under the auspices of New York investors. They thereby set the stage for the issues that replay themselves in the canal's history. First, specific geopolitical events (e.g., the Mexican-American War) and political actors played a key role in the ongoing negotiation of foreign intervention. Second, maintaining a labor force in a tropical, disease-ridden region was a challenge. Last, technological changes (the transcontinental rail system, larger vessels) and economic turns led to the appearance of alternative routes and modes of transportation.Chapters 3 and 4 focus on the painstaking processes of negotiating the terms of, and building, the canal. In Chapter 3, via a detailed narrative and comparison of the alternative proposals on the table before the final treaty was secured by the United States, the authors provide an original estimate of the quantitative effect of leveraging coercion into bargaining power: they estimate that “American coercive diplomacy under Theodore Roosevelt extracted as much as 1.6 times Panama's estimated annual GDP” (p. 92). Chapter 4 recounts the American effort to build the Panama Canal that began in 1904, cost twice its initial estimate, and was finished a decade late.Does imperialism pay? Maurer and Yu are at their best with their counterfactual analysis in Chapter 5. They provide estimates for the social savings and the regional and distributional effects to the world and the United States, and of the social rate of return during the canal's first fifteen years of full operation. A fall in transportation costs generated the larger share of social savings, the majority of which was captured by the United States through its intercoastal traffic. The social savings justify the canal's high cost, even accounting for defense costs. However, relative to other infrastructure projects, the Panama Canal was not transformative for the American or the global economy, but “merely very useful” (p. 315). Chapter 7 extends the analysis to the postwar period showing that the social savings generated dropped. Despite this loss, it would take many years and President Carter's political bravery to overcome the political obstacles that prevented negotiating the “ditching” of the canal.The flip side of the gains to the United States was the denial of benefits to Panama. Chapter 6 recounts how the Panamanian economy was effectively isolated from the business provided by the canal. Furthermore, the authors’ analysis shows no empire effect: “Panama's borrowing costs were systematically higher than the costs of capital in other American protectorates” (p. 206). If any, the benefits to Panama were unintended. The health measures undertaken by the United States when building the canal produced a major spillover of public health benefits for Panama: the authors’ estimate that the campaign reduced Panamanian mortality by approximately one-quarter. Almost a hundred years later, the canal itself benefitted Panamanians. They accomplished a revolution in the management of the canal that led to a profitable enterprise after 1990. Chapter 8 provides a well-documented narrative of the transition towards Panamanian control and the political struggles that began after the signing of the handover agreement in 1977. The set of events and good writing make for a “hard to put down” chapter.In 1989 Panama transitioned to an effective democracy. Maurer and Yu argue that the 1989 U.S. military intervention was not the ultimate cause but a catalyst: democracy succeeded because of Panamanian nationalism and President Noriega's miscalculations. One counterfactual that is not explored is whether the absence of U.S. presence and of the canal would have led to the mobilization of the Panamanian electorate and to the political personalities that were necessary conditions for the success of democracy in Panama. Given the high standard they set for the reader in earlier chapters, Chapter 8 could benefit from a more thorough counterfactual analysis.The authors do relatively little to explore why, in this case, imperialism paid, despite this being one of their main results and one contrary to a large literature on the wages of empire. There is only one brief comparison to the British case in the concluding chapter but no thorough comparison of policies or other factors across empires. They state that the returns “were so high because the zone of imperial control was so limited” (p. 321). And their analysis shows the important role of coercion. Yet why did other empires fail to use coercion so effectively? The reader is left with the impression that American imperialism in Panama was a very atypical venture: there was minimal involvement in governance outside the zone and an explicit exclusion of Panamanians. The book invites similar analyzes of the use of coercion and of infrastructure projects in other imperial contexts.This is a well-written and enjoyable book. It is rich in historical detail and also proposes “thin,” analytic-based arguments revealing the causal complexity of institutional development—an effective response of economic history to the “history only matters once” approach to the study of economic and political development.