Chapter XXXIV
The Canal Government

There were four forms of government in the Canal Zone during the ten years from April, 1904, to April, 1914.  Of these, three forms of government have been tried since American occupation in 1904.

When the Americans went to Panama, there was no separate government over what is now the Canal Zone.  The French had been sorely handicapped by the fact that they were nothing more than a corporation operating in the republic of Colombia, and amenable to the civil and military rule of that country.  They were under the direct rule of the province of Panama and the indirect rule of the Bogota government.  Whenever either of these governments wanted any favors from the French Company, their police and other powers over the canal strip were used in such a way as to enforce compliance with their demands.

When the United States undertook the work, the first requisite was full control of the territory.  The treaty, therefore, granted to the United States sovereign powers over a five-mile strip on either side of the center line of the canal, reaching from one side of the isthmus to the other, but excepting the cities of Panama and Colon.  Coupled with this exception, however, was a provision that the United States should always retain sanitary control of these cities, one the capital and the other the second port of the republic.  A further provision granted to the United States the right to preserve order in these cities whenever necessary.

The history of the construction period shows the wisdom of those who thus profited by the experience of the French with the Colombian government.  The Panamanians were friends of the work, and realized its importance, alike to the United States and Panama.  But in their zeal to promote their own immediate interests they were sometimes led to lose sight of more important concerns.

The first government which the United States set up on the isthmus was administered by a governor appointed by the President of the United States.  It was a civil government financed and operated by the United States and ruled by one of its officials.  The population paid no taxes and had no voice in the government.  The governor of the Canal Zone was a member of the Canal Commission, but he was independent of that body to a great extent in administering civil affairs.

As might have been expected, with the government of the Canal Zone largely independent of the commission, friction soon began to develop.  The engineers wanted all matters of civil government considered with prime reference to the welfare of the construction work, and when it appeared that this was not being done there was a protest.  The result was that not a great many months passed before there was a new form of government -- one in which the administrator was not a governor, but merely a member of the Canal Commission, heading the department of civil administration.

In this way the Canal Zone was ruled during most of the construction period.  The arrangement worked very well.  It is true that there was once a head of the department, who, after having been on the isthmus for many months, addressed a body of engineers, telling them that the day was soon to dawn when "the Atlantic and the Pacific would mingle their waters in Gatun Lake"; and it is also true that there was once a head of that department who inspired hostile attacks upon the man who had been commissioned to build the waterway.  But in spite of occasional incompetence the system of government devised for the Canal Zone was successful.

Under this civil government were placed the postal establishment, the court system, the police and fire departments, the customs service, the roads, the schools, the prisons, and other matters of lesser importance.  The United States built the water and sewerage systems of Panama and Colon under an agreement that it should be repaid in water rents covering a period of fifty years, and the cost of paving the streets of the two cities was to be repaid in ten years.  The Canal Zone government was the collector of these funds.  The head of the department of civil administration received $14,000 a year for his services.

When the time came to determine the character of a permanent government of the zone, it was proposed by some legislators that the strip should be thrown open to settlement, and that the little colony would possess the right of local self-government.  They supposed that the country could be made a prosperous farming community and they minimized the military necessities and strategic value of the canal.

Fortunately Congress turned a deaf ear to these proposals.  It realized that the commission plan had been a failure, and that the canal had been successfully built only by the concentration of virtually the whole power of government in the hands of one man.   Moreover, a populated Canal Zone would have required large expenditures for sanitation and health preservation.  A glance at the cost sheets of the canal reveals the fact that Uncle Sam spent nearly $17,000,000 for health purposes at Panama during the first ten years of American occupation.  This expenditure included, of course, the cost of hospitals and free medical attendance for the employees of the canal and a few other items, such as employment of chaplains and the disposal of the dead.

Congress not only decided against a commission form of government for the Panama Canal, but it went to the opposite extreme and provided a one-man government of the strongest type, subordinating the governor of the canal only to the President and the laws; and it gave the canal authorities the right to declare the zone practically one great military reservation.

The law for the permanent government of the canal ratified and confirmed all executive orders as valid and binding until Congress should determine otherwise.  This provision included the famous executive order concentrating the powers of the Canal Commission in the chairman and chief engineer.  After Mr. Wilson came into office, some of the members of the commission thought it an opportunity to change the organization on the canal and secure an equal voice in its affairs.  They were ready to carry their fight to the White House when their attention was called to this provision.  It is barely possible that there might have been a third chief engineer going the way of Wallace and Stevens but for that paragraph.

**End of Part 1**

The law provides that the President shall govern and operate the canal through a governor and such other persons as he may deem competent to assist that official.  Upon the recommendation of Colonel Goethals, the salary of the governor was fixed at $10,000 a year.  He had built the canal on a salary of $15,000 a year, while his predecessors had received $25,000 and $30,000 respectively.  Yet he modestly suggested that his salary was as large as he was entitled to ask for, and he discouraged a movement to have a salary of the governor fixed at $15,000 a year while he was the incumbent.

The governor of the Panama Canal is given jurisdiction and control over the civil government, with power to appoint magistrates, constables and notaries, to make rules touching the right of any person to remain on the Canal Zone, and to exercise other unusual functions.

The law significantly provides that when war exists or is imminent, the President shall designate an officer of the United States army to assume and exercise exclusive jurisdiction over the canal and the Canal Zone.  It was this provision that saved the canal from having its military character entirely subordinated to its commercial uses.   it had been almost decided to place the canal in control of a civilian under the Department of Commerce.  As the law stands, the canal is under the War Department; and, while the canal will be operated for commercial purposes in normal times, it will always be kept ready for the fateful day which every American hopes may never dawn, but for which the nation dares not be unprepared.

In carrying out the law providing for the permanent government of the Panama Canal, President Wilson, on January 24, 1914, nominated George W. Goethals as first governor of the canal.  He was confirmed February 4, and the new government went into operation April 1.

Colonel Goethals had urged that the change from the construction government to the operative government should be made in such a way as to cause the least possible friction.   He proposed that the change should be an evolution, and that the persons who had "made good" during the construction work should be preferred in filling positions under the new regime.  And he practiced, when he became governor, what he had preached when he was at the head of the commission.  He promptly assured the people on the Canal Zone that the new government was to be a development of the old, an adaptation of the existing organization to meet the new needs.

The new government, in its details, is based upon an executive order issued by President Wilson, January 27, 1914, and embodying the recommendations of the head of the commission.   The Governor is in supreme control, subject to the supervision of the Secretary of War.  A Department of Operation and Maintenance is provided for, which has charge of the completion of the canal, and its operation, including the operation of the terminal facilities.  The Purchasing Department is charged with the purchase of all supplies, which are turned over to the Supply Department.  The latter department, also has charge of the maintenance of commissaries, hotels and messes; it assigns quarters, maintains the buildings of the zone, and recruits and distributes the unskilled labor for the canal.  The Accounting Department, under the immediate supervision of the auditor, has charge of all accounting work.  A Health Department succeeds the Department of Sanitation.  It takes over the operation of the quarantine service, the sanitary control of the Canal Zone, the sanitary relations between the United States and the cities of Panama and Colon under the treaty, and the operation of the hospitals and charitable institutions.  The position of executive secretary is created, and he is given the administration of all those affairs which formerly were administered by the head of the Department of Civil Administration.  He has charge of the time-keeping system in force on the canal; of all matters relating to post offices, customs, taxes and excises, except the collection of moneys; of police, prisons, fire protection service, schools, libraries, clubs and the land office.  The files and records of the canal are under his supervision, as are, also, matters pending between the canal and the Panama government.  He has custody of the official seal of the canal.

Later executive orders established a Washington office, laid down the plan for the organization of the new judiciary, provided rules for the collection of tolls and the operation of the terminal facilities, etc.

When the work of reorganization began, it was carried out with the purpose of causing the least inconvenience to those who had to leave the isthmus on account of the gradual closing-down of the construction work.  Employees were permitted to accumulate eighty-four days leave to their credit, and silver employees were repatriated at the expense of the canal.  By the first of January, 1915, affairs had been placed on a permanent basis the new judiciary system was in operation; and Governor Goethals had begun to look forward to the day when he could pronounce the canal finished and in successful operation.

On March 4, 1915, the President responded to the desire of the American people by recognizing the right of Colonel Goethals and his principal  lieutenants to receive substantial promotion as a reward for their labors.  the President nominated Colonel Goethals to be a major-general; Brigadier-General Gorgas to be a major-general; Colonel Harry F. Hodges to be a brigadier-general; Lieutenant-Colonel William L. Sibert to be a brigadier-general; and Civil Engineer Harry H. Rousseau was raised to the rank of a rear-admiral of the Navy.  The Senate confirmed these nominations on the same day -- a signal honor.

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from: The History of the Panama Canal
by Ira E. Bennett, 1915

March 25, 1999

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