Failure That Leads to the Biggest Corruption of 19th Century

The Panama scandal was a corruption affair that broke out in the French Third Republic in 1892, linked to a French company's failed building attempt at constructing a Panama Canal. We can look into two significant parties of this scandal, namely shareholders and government authorities, separately to really grasp the importance of it and to gain a better understanding of its reflection on French society.

In 1881, the Panama Canal Company was founded to construct a new canal in Panama, whose president was Ferdinand de Lesseps also known for his succession of the Suez Canal. At first, the estimations were clear and reasonable. Those estimations of cost, duration, and other project requirements declared by Lesseps were accepted by shareholders and authorities. This admittance here was significant thanks to Lesseps’ good reputation from the previous project that had the interest of lots of investors of different sizes. However, soon after the preparations started, the company faced the bitter truth. 

The excavation rate was too little so the project was lagging. French people had to negotiate with Americans for a long time. Growing expenses, nearly twice the estimated, and delays mainly on the excavation process quickly became disturbances among shareholders. The disturbance turned into a catastrophe and stock prices dipped. As costs rose, the Company's agents resorted to bribing both the press and politicians in order to maintain public trust and secure legislation allowing further flotations. From the authorities' perspective, it is safe to say that, for a time, the full scope of the scandal was kept quiet as ministers who had accepted bribes postponed the judicial investigations demanded by outraged shareholders.

However, details of the corruption campaign began to leak out in 1892 via La Libre Parole. While in the Chamber of Deputies, Catholic and Boulangist deputy Jules Delahaye denounced parliamentary sleaze, claiming that more than 100 deputies, almost all of whom were Republicans, had been on the payroll. The government reluctantly established a committee of inquiry and allowed prosecutions to proceed. De Lesseps was convicted as a scapegoat, where all but one of the politicians were acquitted. 

The entire period, however, harmed the Republic's reputation. Some of the mud thrown at the regime by its opponents was bound to stick. Many of the compromised opportunist politicians realized their time in politics was up and retired. Nonetheless, the 1893 elections were not so disastrous as opportunist politicians had predicted. The political class' outrage over Panama had left the peasant electorate unmoved. Furthermore, whereas Panama harmed the Republic's image, foreign policy success boosted it. Hence, not all Panamists were defeated in the 1893 elections. The results were a complete victory for the moderate Republicans, who had an absolute majority. 

On the other hand, from the shareholder's perspective, the French public had lost faith in the project, especially as an ugly scandal descended upon the failed enterprise. The stockholders' only hope was to reorganize the company and keep the concession alive in order to sell the assets to someone else. When the De Lesseps Company's bondholders and other creditors threatened to sue, the French Parliament passed a Special Law in July 1893 requiring the appointment of a single bondholders' representative to work with the receiver in the reorganization of the Panama Canal venture. In October 1894, the receiver and the bondholders' representative collaborated to form the New Panama Canal Company.

To have an overall understanding of the Panama Scandal’s place amongst the French society; we can say that for the first four months, Panama remained at the center of France's political stage. As the evidence became public, each newspaper, politician, and the political group attempted to use it as a club against their opponents.

The Socialists saw it as proof of capitalism's inherent evils. The majority of them defended the republic, especially when they saw that the scandal was being used against the republicans by its enemies. Antisemitism sought to demonstrate the evilness of Jews. The right-wing press, including Univers, Croix, the Gazette de France, and so on attempted to tarnish the republic and republicans. And many on the Right had questioned why they should be expected to rely on a Republic that was so obviously corrupt. However, as the facts emerged, each paper was forced to defend its own receipts using the theory of advertising costs. So many politicians became involved that France discovered that virtue was not a monopoly held by any one party or group.

Rumors of a scandal had been especially prevalent since the Panama Company went bankrupt in 1889 and the financing and construction of the Panama Canal had captivated the French people's interest and concern for nearly fifteen years.

References and for further readings you can check:

Ameringer, C. (1970). Bunau-Varilla, Russia, and the Panama Canal. Journal Of Interamerican Studies And World Affairs, 12(3), pp.328-338. doi: 10.2307/175019

Byrnes, R. (1949). Antisemitism in France before the Dreyfus Affair. Jewish Social Studies, 11(1), pp.49-68.

James McMillan, "Consolidating the Republic: Politics 1880-1914," in J. McMillan (ed.), Modern France 1880-2002 (Oxford: Oxford University Press, 2003), pp.12-38.

For Photos: 1 / 2 / 3