The great Panama Canal Affair was only one of many financial scandals which seriously damaged the good fame of the French Republic founded upon the fall of the Empire, and consecrated by the collapse of the Commune of Paris. But this Panama scandal was by far the most important and most nefarious, alike in respect to the amount of money involved, the position and character of the people mixed up in it, and the wide ramifications of wholesale corruption throughout the political world that were in the end revealed.  
M. Ferdinand de Lesseps, the originator and organiser of the Suez Canal, was a man of quite exceptional ability, energy and force of character. He carried through his great project in the face of obstacles, political and financial, that would certainly have broken the heart and frustrated the purpose of a weaker personality. At no period did he show any disposition to keep the canal under harmful restrictions, and the Khedive Ismail Pasha, though a Turk of no scruples, who backed him throughout, also took a very wide view of the services which the canal would render to the world at large. It was to be neutral and open under the same conditions to the ships of all nations. Unfortunately, England, whose commerce has chiefly benefited by the canal, bitterly opposed its construction, going so far at one time as actually to prohibit the Khedive from carrying on the canal works in his own territory, thus occasioning considerable delay. As it happened, however, this delay itself was turned by de Lesseps to the advantage of the Canal Company, as he used the time to create new[107] engines for excavation which in the end expedited the completion of the waterway.
 
The result of this ignorant British opposition was that the finance of the great enterprise was chiefly provided in France, and, when the canal was first opened in 1869, it was considered, as in fact it was, a triumph of French sagacity and foresight over the obstructionist jealousy of England. This view was accompanied also by natural jubilation at the consequent increase of French influence in Egypt itself. Count Ferdinand de Lesseps, therefore, became a great French hero who, by his capacity, persistence and diplomacy, had not only gained glory for France and extended her power, but had also furnished his countrymen with an excellent investment for their savings, on which British commerce was paying the interest. His popularity in France was well earned and unbounded. The work of de Lesseps was, in fact, regarded as the one great and indisputable success of the French Empire. Anything which he took in hand thereafter was certain to prove of great value to the country and an assured benefit to those who followed his financial lead. He was also a lucky man. He and his set had won against heavy odds.
 
It is true the cost of the Suez Canal had been more than double his original estimate, even up to the time when it was first opened, and many millions sterling had been expended since; it was likewise the fact that his great idea had taken fully ten years to realise in the shape of a completed enterprise. But this was the larger tribute to his foresight and power of overcoming obstacles due either to natural causes or to the malignity of enemies. Thus Ferdinand de Lesseps, ten years after the Suez Canal had been made available for shipping between the Mediterranean and the Red Sea, held an unequalled position in the eyes of French engineers, French bankers and, what was more important, French investors.
 
Early in the year 1879 M. de Lesseps, following the course adopted by him in the case of the isthmus of Suez, called a Congress of the nations to consider the entire project of a[108] Panama Canal. There was nothing new in the matter. The line of the canal had been surveyed by a capable French engineer nearly forty years before. The Congress estimated the actual cost of the construction of the canal at about ￡25,000,000, or a little more than the highest sum thought sufficient by the English engineer of the Panama Railroad. But the mere figures are of little importance. That they were quite insufficient, as the business was managed, has since been abundantly proved. But at first there is no reason to believe that de Lesseps was other than quite straightforward. He had bought the concession for the canal from Mr. Buonaparte Wyse, who had acquired it from the United States of Colombia, through whose territory the canal as surveyed ran. That this concession itself had previously been found very difficult to finance in any shape was a matter of common knowledge; that also the canal, when constructed, might prove far less valuable in every way than was calculated for world commerce was the opinion of many skilled engineers. But then the same things had been said about Suez. So the French public rushed in to subscribe the money required for the French Company immediately formed by M. de Lesseps to exploit the concession.
 
The great name of de Lesseps covered the whole risk and rendered criticism quite useless. But the management of the excavation was wildly incapable and inconceivably extravagant. It was very soon discovered that the original estimates were absurdly at variance with the cost of the real work to be done. The entire enterprise, as undertaken in 1884, was entered upon possibly in good faith, but in a wholly irresponsible and ignorant manner. In spite of warnings as to the certainty of encountering exceptional obstacles, no steps were taken to provide against contingencies, to inform the shareholders as to the position, or to revise the plans in accordance with the facts. The canal was inspected by M. Rousseau at the end of 1885. This engineer gave a most unfavourable report in regard to the excavations and constructions already carried out at vast expense, and the enormous additional sum[109] needed to give any chance of completing the works. Instead of honestly facing this most unpromising situation and disclosing to the shareholders the real state of the case, or declaring that at least three times the amount would be required to bring the project to a satisfactory conclusion, and calling for this huge sum at once, the directors resorted to all the worst tactics of the unscrupulous promoter. This part of the matter went into the hands of M. Jacques Reinach and M. Cornelius Herz, names and persons afterwards covered with obloquy in connection with the whole affair. They set to work systematically, and were restrained by no inconvenient scruples. Strong political influence in both Chambers was needed in order to obtain the passing of the Panama Lottery Bill. Strong political influence was bought, though the Bill itself was not carried. From 1885-86 onwards this wholesale bribery was continued on an enormous scale.
 
The company was as careless of men’s lives as it was of shareholders’ money. Labourers from all parts of the world had been gathered together in what was then a deadly climate, without proper sanitation or reasonable medical attendance. Some time prior to the financial troubles it was known that such anarchy and horror prevailed on the Isthmus that intervention by the French Government, or even by an international commission, was called for. Nothing but the great reputation of de Lesseps could possibly have upheld such a state of things, or have obtained more and still more money to perpetuate the chaos. Even when the truth as to the frightful mortality of the men employed and the incredible waste, due to incompetence and corruption, must have been known to the President of the Company (M. de Lesseps himself) and his fellow-directors, when, likewise, they must have been convinced that the company was drifting into a hopeless position, they still appealed to their countrymen for more and more and more money to throw into the bottomless quagmire at Panama, and sink of French savings in Paris, to which the whole company had been reduced.
 
[110]
 
By the year 1888 no less than 1,400,000,000 francs had been expended in one way or another, while not one-third of the necessary work had been done. Of that ￡55,000,000 nominal amount not a few millions sterling found their way into the pockets of deputies, senators, and even Academicians, to say nothing of commissions and brokerages of more or less legitimate character.
 
Politicians in France are no worse than politicians in other countries. But the proportion of well-to-do men among them is less than elsewhere. There was consequently a margin of them always on the look-out for an opportunity of adding to their income, and this margin was much larger in the National Assembly before payment of members than it is to-day. For such men the Panama finance was a glorious opportunity. Nobody could suspect de Lesseps of being consciously a party to a fraud. To make a French venture like the Panama a great success, in spite of all difficulties, was a patriotic service. To receive good pay for doing good work was a happy combination of circumstances none the less gratifying that, the work being honestly done, remuneration followed or preceded in hard cash. The extent to which this form of corruption was carried and the high level in the political world to which streams from the Panama Pactolus were forced up is only partially known even now. But so wide was the flow and so deep the stream that, when the outcry against the Company began in earnest, statesmen whose personal honour had never been challenged were afflicted with such alarm, on the facts being laid before them, that they did their very utmost to suppress full investigation.
 
This, however, was not easy to accomplish. For there were no fewer than 800,000 French investors in the Panama Company. All of these were voters and all had friends. It became a question, therefore, whether it was more dangerous to the Republic and its statesmen—for personal as well as political considerations came in—to compel full publicity, or to hush the whole thing up as far as possible. Meanwhile, the public,[111] and important journals not suspected of Panamism, took the whole thing down from the Cabinet and the Bureaux into the street.
 
For the opponents of the Republic it was a fine opening. That enormous sums out of the ￡55,000,000 subscribed had been paid away to senators, deputies and Academicians, for services rendered, was certain. Who had got the money, and under what conditions? Imputations of the most sinister character were made all round. Paris rang with accusations of fraud. That more than a hundred deputies were concerned in Panama corruption is a matter of common knowledge. One who was in a position to know all the facts declared that more than a hundred who were mixed up in other nefarious transactions used Panama to divert attention from their own malfeasances. However that may be, public opinion, excited by the clamour and denunciations of eight hundred thousand shareholders and electors, clove to Panama. It became an instrument of political warfare as well as of personal delation. The obvious determination of Presidents Carnot and Loubet to prevent a clear statement from being issued and the Directors prosecuted only rendered the sufferers more determined to get at the facts and wreak vengeance on somebody.
 
There were two views as to Count de Lesseps—to give him his title, which had its value in the Affair—and his conduct in the Panama Canal Company. There were those who held that de Lesseps, beginning as an enthusiast, and believing himself perhaps to be inspired in everything he undertook, no sooner found that his carelessness, in disregarding real natural difficulties and in organising the excavations on the spot, must result in failure, unless he could obtain unlimited resources, and doubtful of ultimate success even then, began at once to display the worst side of his character. The successful adventurer became, by degrees, the desperate gambler with the savings of his countrymen. Instead of regarding himself as the trustee of the people who, on the strength of his reputation and character, had risked their money, he deliberately shut[112] his eyes to the real facts. He resorted to all the tricks of an unscrupulous charlatan, misrepresented the truth in every respect and had no thought for any other consideration than to get in more funds. For this purpose he paraded the country, making the utmost use of his personal and social advantages, and losing no opportunity for unworthy advertisement. All this time he knew perfectly well that his enterprise was doomed. Consequently, there was little to choose between de Lesseps and Reinach, Herz and the rest of them, except that he was perhaps the greatest criminal of all. Such was the view of the promoter-in-chief taken by lawyers and men of business who looked upon the whole matter as a venture standing by itself, to be judged by the ordinary rules of financial probity.
 
On the other side a capable and influential minority regarded de Lesseps as an enthusiast, a man of high character and noble conceptions, quite devoid of the power of strict analysis of any matter presented to him, and destitute of common sense. His financial methods and commercial obliquities were due to his overweening confidence in his own judgment and faith in his good fortune to pull him through against all probabilities. The one great success he had achieved rendered him a man not to be argued with or considered on the plane of ordinary mortals. He saw the object he was aiming at, felt convinced he would accomplish it, regarded all who differed from him as ignorant or malignant, and went straight ahead to get money, not for his own purposes but in order to carry out the second magnificent scheme to which he had committed himself. Corruption and malversation by others were no concern of his.
 
President Sadi-Carnot, a cold, silent, upright man, little given to allow his feelings to inflame him at any time, warmly took this view of de Lesseps’ character. M. Carnot had been brought into close contact with de Lesseps on another of his vast projects. The President, like many others, refused to look at the Panama matter from the point of view of fraud or imposture. Money was for de Lesseps always a means, never an end. When the whole matter was brought before him, and[113] one of the legal personages whose duty it was to investigate the whole of the facts came to a very harsh conclusion as to de Lesseps’ responsibility for the waste, corruption and malversation, M. Carnot said with some vivacity: “No, no; M. de Lesseps is not a man of bad faith. I should rather consider him punctilious. Only his natural vehemence carries him away; he is a bad reasoner, and has no power of calculation. Hence many regrettable acts on his part, done without any intention of injuring anybody. I knew him well, having seen him very close, when his imagination suggested to him the scheme for excavating an inland sea in Africa. A commission of engineers, of whom I was one, was appointed to hear him and study his proposal. We had no difficulty in showing that the whole thing was a pure chimera. He seemed very much astonished, and we saw that we had not convinced him. Take it from me as a certainty that he would have spent millions upon millions to create his sea, and that with the best of good faith in the world.”
 
This was probably the truth, so far as de Lesseps himself was personally concerned. Promoters, discoverers and inventors of genius are men of mighty faith in their respective enterprises. As a great anarchist once said of his own special nostrum for regenerating humanity at a blow: “All is moral that helps it, all is immoral that hinders it.” So with de Lesseps. All was moral that got in money to construct his canal: all was immoral that checked the flow of cash to the Isthmus. But an enthusiast of this temper, “without power of calculation,” is a very dangerous man, not only to the subscribers to his shares, but to the Republican politicians who confined their enthusiasm to the acquisition of hard cash for use not in Panama but in Paris.
 
In 1888 the Panama Canal Company collapsed, and the thing was put into liquidation. But that was not the end of it. All sorts of schemes were afoot for carrying on the works and completing the canal before the concession expired in 1893. Although, however, from the date of the breakdown onwards—[114] when it was stated that fully ￡70,000,000 would be needed in addition to the amount already expended or frittered away to carry out the canal—most virulent attacks were continually made upon prominent politicians and financiers, as well as upon the Directors of the Company, neither the political nor the legal consequences of the disaster were felt to the full extent until four years later. Judicial investigations, it is true, were going on. But it was an open secret that, in spite of the losses and complaints of the shareholders, and the strong desire of the public that the whole vast transaction should be exposed in every detail, the anxiety of men in high place was to calm down natural feeling in the matter. What made this attitude more suspicious was the fact that the Government had certainly not shown itself unfavourable to the scheme, but on the contrary had helped it, even when the gravest doubts had been thrown upon its practicability, at a cost vastly exceeding anything contemplated by the Company. In fact, an atmosphere of general distrust pervaded Paris and the whole of France. Yet Panama still had its friends, and it was believed that somehow or other the affair would be tided over.
 
But there was a good deal more to come. Things, in fact, now took that dramatic turn which seems the rule in France with affairs which directly or indirectly influence high politics and high finance. There were people who believed that the entire enterprise could be set on its legs, although parts of the recent excavations were deteriorating and some of them had been covered already with luxuriant tropical growths which one imaginative critic spoke of as “forests.” Either the Government, they thought, could be forced to take up the enterprise itself, or at any rate would think it best, in view of what had already been done, to support de Lesseps in a fresh scheme, should the concession be renewed. This, no doubt, was the opinion of M. Gauthier, who urged the Government in the Assembly to appoint a commission to prepare plans for the completion of the Canal. This, he declared, was the only means of safeguarding the interests of the shareholders and the[115] many hundreds of millions of francs sunk by poor French investors in this great enterprise.
 
Such a daring proposal necessarily raised the whole question of the responsibility for the serious engineering and financial fiasco. The Government was at once charged from several quarters, not as being answerable for past mistakes in supporting the Panama Company, but with present obliquity in screening and protecting delinquents who should long since have been brought to justice. One deputy vehemently declared that the only reason why no adequate action was taken was that “men possessed of great names and high positions” checked any attempt to handle the scandal boldly. Other deputies declaimed with equal warmth against throwing good money after bad. Meanwhile rumours floated round the Chamber as to the number of deputies who had put their services at the disposal of the Company for money received. Later, this accusation took definite shape as a formal accusation that fifty deputies had received among them the sum of ￡120,000. Senators and Academicians were in the same galley. Exaggeration was imputed, but the figures were proved afterwards to be less than the truth. Then everybody concerning whose position there could be the slightest doubt was accused of having “touched.”
 
Even MM. Rouvier and Floquet were taunted with having accepted large sums. The Chamber passed a resolution “calling for prompt and vigorous action against all who have incurred responsibilities in the Panama affair.” This might mean anything or nothing. It was pointed out, however, by a high authority that a judicial inquiry was proceeding all the time. But the public became impatient because nothing was done to stop the campaign of vilification on the one hand or to prosecute the Directors on the other; though de Lesseps was being denounced daily in the press as a fraudulent adventurer. Excitement ran very high. The shareholders and some of the deputies cried aloud for justice.
 
Matters being thus exceptionally perturbed, Baron Jacques[116] Reinach, the chief agent in the manipulation of political corruption, committed suicide by apoplexy. That was the gruesome explanation given in the press of this financier’s sudden death. His fellow Semite, Cornelius Herz, survived the tragedy. Just at this moment, when everybody thought that something must be done, the Panama Concession was extended for a year. The Panamists took heart again and believed all would blow over. So the ups and downs of public expectation went on.
 
Then, quite suddenly and without any general notification, all the Directors of the Pana............