Thursday, May 5, 2011

Noel Maurer & Carlos Yu's "The Big Ditch"

Noel Maurer is associate professor of business administration at Harvard Business School. His books include The Power and the Money, The Politics of Property Rights, and Mexico since 1980. Carlos Yu is an economic historian and private consultant based in New York City.

They applied the “Page 99 Test” to their 2010 book The Big Ditch: How America Took, Built, Ran, and Ultimately Gave Away the Panama Canal, and reported the following:
It’s hard to say if page 99 of The Big Ditch is representative of the book’s argument, but it certainly captures its flavor. Here it is, in its entirety:
Obviously, the United States did not set out to build the Panama Canal a decade late and double over budget. The Americans hoped that their $40 million purchase of the New Panama Canal Company’s assets in Panama would greatly speed construction. Sadly, that did not turn out to be the case. The French had excavated seventy-eight million cubic yards, but most of those excavations had been designed for a sea-level canal and proved useless for the American effort. (In fact, most of the French excavations sank below Lake Gatún when the Americans dammed the Chagres River.) The Panama Railroad proved to be in such bad condition that the Americans needed to rebuild it twice: once to handle the initial excavations, and then again when Lake Gatún drowned much of the original route. The New Company owned most of the city of Colón, but its buildings were so dilapidated and disease-ridden that the Americans built a practically all-new town, Cristóbal, across Limón Bay. About the only substantial savings that the Americans received from their purchase of the French assets were some old dredges that could be repaired or reconstructed for $500,000 less than it would have cost to purchase new equipment.


“There are three diseases in Panama ... yellow fever, malaria, and cold feet.”
John Stevens

The first few years of construction of the Panama Canal proved to be a management foul-up of the first order. The Isthmian Canal Commission tried to supervise construction from Washington. This would have been a bad idea with the communications technology of the first decade of the twenty-first century; it was an unmitigated disaster with the communications available in the first decade of the twentieth. Shipments arrived late, or piled up on docks with no means to unload them. By 1905 the New York Times was complaining that the Isthmian Canal Commission was on track to have spent $66 million by the end of the year, with “no dirt flying.”
(We cheated: page 99 ends at the word “was” in the last sentence.)

The Big Ditch is about the Panama Canal. More broadly, it’s about U.S. imperialism. In the case of page 99, the myth being punctured is that the tough and perspicacious Americans of 1900 built the largest single infrastructure project to date on-time and under-budget. In fact, not only was the construction a bit of a mess, but the Americans generally ran the Panama Canal quite badly. Accident rates, for example, skyrocketed in the 1950s and 60s. To give some idea of just how bad American management was, the first three big innovations introduced by the new Panamanian managers after the handover were lights, one-way transits, and firing drunken pilots.

More broadly, The Big Ditch advances two arguments. One is a substantive argument about economic imperialism. The United States developed strategies that enabled it to leverage its military dominance into a far better economic outcome than it otherwise could have achieved. It then returned the Panama Canal to Panama when the economic benefits from ownership of the canal (if not necessarily the benefits of the canal’s existence) sufficiently declined. Moreover, America’s indirect imperialism produced little in the way of institutional or economic development for Panama. (The Canal project had much more profound effects on Barbados.) The United States was instrumental in removing the blight of Manuel Noriega, but the democracy that emerged thereafter was hecho en Panamá, and had little do with the previous decades of U.S. intervention.

The other argument is a methodological statement about history and the social sciences. The social sciences are fundamentally about the study of social processes — the ways that human beings interact and the institutions that structure those interactions over time. Thus, social scientists do not really have a choice regarding the use of history — their interest in change over time gives them little choice but to make historical arguments. The real choice for economists and political scientists is whether the historical arguments they make are supported by systematically gathered and carefully analyzed evidence, or whether they are supported by “stylized facts.” We support the former, and The Big Ditch, we hope, provides at least a modest example.
Learn more about The Big Ditch at the Princeton University Press website.

--Marshal Zeringue