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How Wall Street Created a Nation: J.P. Morgan, Teddy Roosevelt, and the Panama Canal

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The "nation" is of course Panama and this well-written and informative book explains the different roles played by members of an especially interesting group who include Joseph Pulitzer, William Nelson Cromwell, Theodore Roosevelt, J.P. Morgan, Phillipe Bunau-Varilla, Senator John Tyler Morgan, Senator Mark ("Dollar") Hanna, John Hay, and General Esteban Huertas. Espino traces a chronology of events which extends from 1501 when Christopher Columbus arrives in Panama until December 31, 1999, when the United States surrenders its control over the Panama Canal after ninety-six years. With all due respect to the profoundly important social, political, military, and financial implications of various decisions and consequences which Espino examines, I must say that the narrative often seemed to me to be one of a global or at least hemispheric soap opera. There are heroes and villains galore. Plots and sub-plots. Triumphs and failures. Betrayals. Countless opportunities either seized or forfeited.

The book's title correctly suggests Wall Street's central influence (both positive and negative) on efforts to finance, design, build, maintain, and control the Panama Canal. To say "Wall Street" is to refer to human beings with resources sufficient to their ambitions. Specifically, Morgan who was involved with a syndicate to purchase the French Canal Company and fund Panama's independence. Hence the importance of Cromwell who founded a pre-eminent Wall Street Law firm and succeeded in defeating the Nicaraguan canal forces in the U.S. Congress led by Senator Morgan. Hence the importance of Pulitzer who (through his newspaper, the New York World) accused President Roosevelt of aiding and abetting the Wall Street syndicate's advocacy of the Panamanian revolution.

American military forces were first stationed in Panama in 1857 and remained there to protect and defend the Isthmus until relinquishing authority on December 31, 1999, following a de-Americanization process initiated by President Carter. The "Zonians" will never forgive him for "depriving" them of their tropical paradise, just as so many British "colonials" never forgave Gandhi for leading India to independence. As for Panamanians, Epson reminds them (and the reader) of what Secretary Cass said (in 1855): "sovereignty has its duties as well as its rights." No country (including the United States) should ever be permitted "to close the gates of intercourse on the great highways of the world."

In his concluding remarks, Epson observes: "Today, the canal is no longer the vital waterway it once was. Panama, however, continues to be the coveted territory imbued with the special mission because of its critical position as the crossroad of the Americas. The challenges facing the canal are no longer only the security of the waterway, but a forty-year-old civil war in Columbia; drug trafficking; corruption; money laundering; authoritarian regimes; and poor social conditions throughout Latin America." In some respects, the soap opera continues. In other and more significant respects, a global pressure point remains.

Ovidio Diaz's book is highly recommended as a source of new insights into the Panama Canal Story.

The title is very exaggerated, but it helps sell books, and the most important thing for a book, love or hate it, is to be sold.

There is big emphasis on alleged corruption by some Panamanian Founding Fathers while in the same book he acknowledges that Panama had intended 57 times in the past to become independent. So, it is evident, that the ideas of our Independence and the Republic of Panama were not invented by Wall Street at all.

J.P. Morgan, Cromwell et al, just profited from the situation as good Wall Streeters. The Panamanian patriots, smart and practical, took advantage of their greed in order to accomplish something that otherwise would have been impossible, Panama being a small province of a much bigger , warring country and, worst of all, Colombia having a Treaty with the U.S. were the latter had the obligation to maintain the order.

Our Founding Fathers gambled their lives for sure. If the Colombian troops had managed to reach Panama City, they would have been executed.

Some Founding Fathers may not have been saints, but the evidence is really not that clear at all. Plenty of hearsay and accusations from people that had their own agendas and that told the story in their own, self serving way. Pulitzer's fight with Teddy Roosevelt being a major source of misinformation. So it seems necessary to dig up more documental facts.

It is also clear that Teddy Roosevelt and Hay were no saints either, but this does not diminish their good deeds or their place in history. Politics in those days, were like that !

In the end, we Panamanians have a great debt not only to the Founding Fathers, but yes, to Bunau Varilla and to Cromwell and to Roosevelt. If it hadn't been for ALL of them, we would still be, who knows, a forgotten backwoods province of Colombia !.

Congratulations to Ovidio Diaz Espino on his personal and important contribution to the history of Panama and the United States.

Roberto R. Roy
Member, Board of Directors
Panama Canal Authority 1998-2007

WAS PANAMA A MERE CREATION OF WALL STREET --O WAS ITS INDEPENDENCE THE EFFECT OF THREE POWERFUL FORCES?

by: Roberto N. Méndez (*)

Panamanian lawyer Ovidio Díaz-Espino's essay, "How Wall Street Created a Nation", whose Spanish version recently became available, informs us about a few, little-known but important, historical facts related to Panama's independence from Colombia, which happened on November 3, 1903. Un-fortunately, the essay's argument is simplistic, aside from the fact that it turns out to be contradictory and unoriginal.

The book's title, its Preface, its first chapter, and the author's own public statements, all align themselves with the "black legend" which surrounds Panama's independence.
According to it, Panama's independence from Colombia was conceived, promoted, financed and led by a group of New York bankers, headed by cunning lawyer William N. Cromwell, who acted in liaison with President Theodore Roosevelt.

Also according to the legend, Panama's founding fathers were little more than corrupt puppets, who merely followed Cromwell's instructions word for word, all in exchange for the classic handful of silver coins.

Such viewpoint is not only simplistic -it contradicts several historical sources and evidences, some of which, paradoxically, are mentioned by Díaz-Espino himself.

For one thing, it is well known that José A. Arango and other Panamanians started the conspiracy between June and July of 1903, at great personal risk. In other words, the separatist plot began spontaneously in Panama, and much before the Colombian Congress rejected the Herran-Hay Treaty, which occurred on August 12, 1903.

Only after the treaty was rejected did President Theodore Roosevelt began to lean in favour, not of Panama's independence, but of the odd thesis of American jurist John Basset Moore. According to Moore, the Mallarino-Bidlack Treaty of 1846 allowed to US to build a Canal through Panama, regardless of the wishes of the Colombian government.

Well-known historical documents testify to this fact. French investor Phil-lipe Bunau-Varilla provided one of them, in his book "From Panama to Verdun". Bunau-Varilla describes there how he met, in early October of 1903, with Roosevelt, and how he convinced the American President to abandon Moore's thesis, and to lend support to the separatist plot.

Surprisingly, Díaz-Espino mentions the meeting in his book, but he never realizes that it contradicts his essay's central thesis.
The essay's ending is no less of a surprise. On chapter 11, Díaz-Espino asserts that Panama's independence from Colombia was the joint result not of one, or two, but of three "powerful forces"; the first, Roosevelt's "ambi-tions" relative to the Canal; the second, Wall Street's "greed"; the third, Panamanians' "century-old aspiration to independence".

"Does not such a statement imply a contradiction vis a vis the essay's cen-tral argument?", Díaz-Espino was asked publicly in mid 2003, while visit-ing Panama on occasion of Panama's yearly Book Fair. As expected, the author was unable to offer a coherent answer.

In addition to that incongruence between central thesis and historical evi-dence, Díaz-Espino's essays suffers from a lack of originality, derived, ap-parently, from the author's unawareness about previous works on the sub-ject.
Indeed, Colombian journalist and historian Eduardo Lemaitre, whose work "Panama and its separation from Colombia", was published already in 1972, described the role that Cromwell and his group played in detail. And before Lemaitre, Colombian intellectual Oscar Teran, in his voluminous essay "From the Herran-Hay to the Hay-Bunau-Varilla treaty" (published in the thirties of last century) also divulged a large amount of information on the subject. What is more, Teran used the same sources that Díaz-Espino uses. It is therefore amazing that neither of these two previous and well-known works is even mentioned in Díaz-Espino's essay.

Yes, Ovidio Díaz-Espino's essay informs us of a few interesting and little known historical facts; unfortunately, his viewpoint is simplistic, contradic-tory, and lacking of originality. His purpose seems to be convincing us that Panama's independence was an episode characterized solely by the selfish-ness, corruption and cowardice of its participants. But in doing so Ovidio-Díaz contradicts himself, and seems to forget that all historical events are the result of interactions between positive and negative elements, which in one way or another contribute to the material and spiritual advancement of the people.

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(*) Roberto N Méndez (www.rnmendez.com) is a professor of economics at Panama's National University.

With greater-than-life characters such as J.P. Morgan, Teddy Roosevelt, William Nelson Cromwell, and Joseph Pulitzer, Ovidio Diaz recreates the exhuberance that turned America into the 20th century superpower. The book is a fast, easy to read narrative that has the touch of fiction. It is sometimes hard to believe that the events actually happened, but Mr. Diaz provides substantial evidence to back his assertions. I think this is a major contribution and should be read by anyone interested in regional foreign policy and the influence of Wall Street on American politics. My only criticism is that I wished Mr. Diaz had covered the 20th century in greater depth, since the events that he describes continue to impact the world today. We will have to wait for the sequel!

Ovidio Díaz Espino's "How Wall Street Created a Nation" is not a very reliable source if you are seriously researching "life in the tropics" -though Díaz claims in the foreword that he wanted to disclose the "mystery" behind the creation of the republic of Panamá. It cannot be denied that the author did quite a thorough research on the library of J.P. Morgan, but it appears as if this part of the story were the most important in the creation of a nation. And I believe that Díaz is dead wrong: people with strong links to a land create nations, not foreign money. The inclusion of Morgan's (his then employer) and ("Teddy") Roosevelt's names in the book's subtitle is an indication of who Díaz thought as his target audience. As for us, here in Panamá, who have made a little research - in situ - on the genesis of our country, we associate the creation of Panamá with persons like José Domingo Espinar (who was the first to separate the Panamanian province from Colombia), Justo Arosemena (who created the Federal State of Panamá) and rebel lawyer Pedro Prestán - who, in Díaz' book, appears as a pyromaniac mulatto, when Prestán was actually sentenced to death after two Americans and an Italian testified against him, when he was accused of burning the city of Colón, on the Caribbean coast of Panamá. This side of the story is largely omitted in the financial saga Díaz has concocted (sometimes performed by ugly Latino stereotypes and narration "a la Hollywood" - perhaps for selling movie rights?), which affects the book seriously. All the information Díaz found about how the Panamá Railroad Company's employees planned a sort of "coup d'état" in Panamá, in 1903, is valuable, but it needs the counterpart that he mentions here and there, when he admits that Panamanians tried to separate from Colombia more than 50 times. If this had not happened, surely a Chinese and a mule would not have been the only dead on November 3, 1903, the date of the separation. Many loyal patriots would have died for Colombia, but this was not the case. So the heroics of the Wall Street personnel and their colleagues in Washington and Paris only represent the economic machination that fueled an old aspiration. As it is, you may find it interesting, but please be aware that this is only part of history. It is not strange that Díaz ends his book citing a "Zonian" (Americans born and raised in the Canal Zone), reinforcing my impression of this book's submissive point of view.

A key document in this book is shown on page 185; it is a copy of a list of rich New Yorkers who had subscribed to the New Lesseps Company, when it was formed on October 24,1894 and sold their shares at a profit in 1903-1904, when the Company was sold to the US Government. But these shares represent only 4,662 out of a grand total of 650,000, which is less than 0.7%! The reader will decide if this is enough to justify the title of the book: Wall Street was there but for so little!
The whole book is like this, based on "personal" interpretion of facts by the author to serve his goal.
It is nevertheless spectacular for its title. A well thought marketing gimmick.

Previous reviewers have demonstrated the spectrum of opinion about the events portrayed in Díaz's narrative, based it seems on his own reading of the evidence. Whatever the historical significance of the Canal itself, one has to admit tha possibility that Panamás 1903 separation was not quite the most glorious uprising against tyranny at great risk to a mass of patriots ever witnessed in the pageant of human history. Similar revisionist tales of courageous resistance, in the face of tremendous personal risk, leading to the eventual overthrow of the Noriega régime, by the thin upperclass of Panamanians and the very large lower middle- and poverty-ridden lower classes, are often exaggerated. I think Díaz on balance got it about right: $40 million was a lot of money in those days, but neither Roosevelt nor the French nor the few Panamanians who got their pieces of the pie thought the price excessive or cared very much about the French "little people" investors who were treated like the investors in Enron, or about any trickle-down to the Panamanian poor. Nobody cares about them even now, and as for laissez-faire Wall Street policies, the less said the better at this juncture.

But what is maddening about Díaz's book are the typos, mistakes in basic English ("X stopped on the house of Y", but groups labor "in the balconies.") We read "let them on the secret" There are misplaced apostrophes ("the Chiriqui's province initial hestitation," "the troop's salary") misspelling of most French terms ("Interoceanic for Interocéanique", "enterprise" for "entreprise",) annoyingly inconsistent formations for money amounts ($40,000,000 alternates with $40 million but there are also double whammies such as the peculiar ("$40 million dollars" and ambiguous "$35,000 pesos"); and peculiar decisions about accent marks in French and Spanish both: "Credit" for "Crédit," "charge d'affairs" (without the e) for "chargé d'affaires," Colón, sí; Panama, no; Herrán and Agustín, sí; Maria, Chiriqui and Gutierrez, no; Meléndez, sí, Nuñez, Diaz, Bogota, Frances and Bovedas, no; and sometimes totally consistent but weird spellings: again and again we find, "Obaldiá," unpronounceable and just plain wrong! A tug-boat is called a "tug-of-war".

Díaz tells us the Canal Zone was "thirty miles long," when it was about 56 miles long (the length of the Canal); he calls the statute on contempt of Congress "a congressional law" (is there any other kind?); Lafayette Square should be Lafayette Square, and the Catedral square in Panama City becomes Cathedral "Park". A "caja fuerte" becomes a "safe box" in English, not a "safe", an expert shot is called an "expert shooter." Gen. Huertas married the "daughter of a local merchant who bore him a son," though I should think the General would have preferred his father in law take a less active role in the process. He tells us TR's $40 million in 1903 dollars, was a price far greater than the $15 million Jefferson paid the French for the Louisiana territory a hundred years earlier, together with the $7 million Lincold paid for Alaska, without accounting for a century's inflation of Jefferson' dollar and 50 years of Lincoln's. So it goes.

Perhaps later editions--I read the first--were corrected. An admirable book that could have used an editor, the publisher's fault, not that of the author, who is obviously fluent in at least two and probably three languages, but nobody can write a book in his second language without making a few mistakes. I presume even Jozef Conrad, a Pole who wrote in English, had a proofreader for "Heart of Darkness". A good book deserves a better presentation and for readers with an eye for precision, the many minor errors are distracting.

This book is not without error and at least one of them is significant because it involves a major player, Senator John Tyler Morgan.

In the verion I read, the author has Morgan as being from Louisiana. Tyler moved to Alabama from Tennessee as a very young child and was involved in that state's politics for more than 50 years, 30 of them as a Senator. Louisiana never sent anyone named Morgan to the Senate (and only one to the House).

The book reads well, but a sloppy error like that makes you want to backtrack a lot of other information.

Being a Colombian, the explanations by local historians of how Panama was lost seems to be plagued with errors and gaps that mask the need to protect the image of certain Colombian leaders who are still described in elementary school history books as "patriots". In the case of Panama a similar situation occurs. The local Panamanian explanations exude heroic figures, intense fighting, tremendous leadership and planning skills, etc which are grossly exaggerated but appeal to local consumption. That is why this book allows for a small peek into some real history of how foreign decisions were made to build the canal, and how the locals played the cards that were dealt to them.

After you read about the building of the Panama Canal this puts the political part into prospective.