Classic Cons: The Panama Canal Bubble (Part 1)

Building the Panama Canal is one of the brightest “bubbles” of the XIX century bursting at the stock market. The word “Panama”, which became common noun, marked the beginning of the “wild” capitalism era.

According to the US mortgage pyramid quite recently it has collapsed the global financial market and continues up to now.

How It All Began

The first projects to construct a navigation canal on the Isthmus of Panama, which would significantly reduce the way for ships coming from the Atlantic to the Pacific Ocean, were made in the XVI century. But only four centuries later there appeared technical ability to implement such a daring plan.

Even in 1550, Antonio Galvao, the Portuguese navigator, offered to dig a canal through the 48-kilometer Darien isthmus. But Spain, which owned the territory, considered Galvao’s idea insane. The urgent need in the canal between the Pacific and Atlantic oceans didn’t appear until the middle of the XIX century. “Gold rush” began in California.

The Panama Canal on a Map of Central America 

Meanwhile, the East and West coasts of the US were divided by vast land spaces, which were very risky to cross at the time – the Wild West – the name stands for itself. In 1850, the United States and Britain signed Clayton-Bulwer treaty.

During twenty years the Americans and British were arguing about certain articles of the treaty, not wanting to concede. The French benefited from these disputes, using the anti-American sentiment of Colombian authorities, the Panama territory being under their supervision. In spring, 1879 the Paris Geographical Society launched an initiative to establish the Universal Inter-oceanic Canal Company and appointed Ferdinand de Lesseps as a manager.

Count Ferdinand-Marie de Lesseps

Count Ferdinand-Marie de Lesseps was born in a family of a major French diplomat. At the age of 19 the young aristocrat entered the diplomatic service. For several years he served as an assistant to the French ambassador in Portugal, his chief being his own uncle. Then there was work with his father in Tunisia. Over the next fifteen years Lesseps’s career evolved only upwards. As a rule, he moved from one capital to another being promoted.


Construction of the Suez Canal

His longest service was in Egypt. Here, a young French aristocrat managed to establish good relations with the local nobility. Due to this in 1854 Said-Pasha, the Viceroy of Egypt, gave Ferdinand de Lesseps exclusive concession for the construction of the Suez Canal. Having good relations in Paris, Count managed to get the support of the Emperor Napoleon III. The Suez Maritime Canal joint-stock company was founded.

The construction work began in 1859. And ten years later first ships went across the former waterless desert. After this triumph the question: “Who is Lesseps?” could be easily answered by either an American from Midwest, or a Prussian burgher, or a student from Kiev.

Lesseps became a member of several scientific academies. The largest universities in the world granted him degrees. The Count appeared in the high society wearing a Legion of Honor ribbon in a buttonhole of his dress coat.

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