Saturday, March 31, 2007

A dip in the Panama Canal offers little relief

Books like Confessions of an Economic Hit Man and A Game as Old As Empire (both from Berrett-Koehler) offer a view of the actions and motives of our nation's companies and government that is at such odds with values and ideals that we profess that some part of me refuses to believe them. I don't know why I have a hard time swallowing these unpalatable versions of reality. I grew up with the Kennedy and King assassinations and Vietnam and Nixon. I shouldn't have any illusions and yet, I find myself looking for an out, looking for anyone I can trust who can "say it ain't so."

Anyway, that's why I was interested in reading "What Roosevelt Took," a fascinating working paper by Harvard Business School's Noel Maurer and Carlos Yu. (Read it here.) Maurer and Yu analyzed the economic benefits derived from building and operating the Panama Canal between 1903 and 1937. Who benefited most? The US, they say. And Panama? Panama was shortchanged on the purchase price and overtly excluded from participating in the construction of the Canal; it received almost no benefit whatsoever. In fact, the only significant benefit it received accrued from the campaign against disease, which was undertaken to preserve the health of the non-Panamanian canal workers, not the citizens.

Maurer and Yu's conclusion:

Panama’s experience with the Canal, therefore, holds warnings for modern underdeveloped countries that seek to rapidly develop through the construction of large infrastructure projects, be they pipelines (as in Central Asia and Africa) or “land bridges” (as in Central America). The spillovers from such projects may prove disappointing. Nor is it clear that greater international oversight is an efficient way to insure greater local benefits from such projects...Panama eventually developed the human and institutional capital needed to benefit from the presence of the Canal on its soil, but it was a slow process that took almost a century, and required multiple costly interventions by the United States. It is not clear how long it will take Bolivia, Chad, or Uzbekistan to do the same.
Which, by the way, sounds a lot like a polite way of saying exactly the same thing as the writers of the books mentioned above.

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