The late 19th century was the golden age of canal building. The completion of the Suez Canal, for instance, brought Europe 5,000 miles closer to India’s ports and made Africa an island. It was this achievement that inspired a canal between the Atlantic and Pacific Oceans.
There were three key enabling factors for the Panama Canal. The first was political will on the part of the French and American publics. The second was steam-based mechanical power.
The third factor was information: before about 1880 there was insufficient geographic knowledge to determine whether it would be more straightforward to build a canal through Panama or Nicaragua. Both the width of the isthmus and the height of the mountains in between were unknown. In fact, for centuries people believed that the natural level of the Pacific was 20 feet higher than the Atlantic, because of the more severe tides on the Pacific side.
Whether to build in Nicaragua or Panama was also a political question. A canal through Nicaragua would have been longer than in Panama, but it would have been 500 miles closer to the U.S. It also would have favored ports on the Gulf coast such as Mobile, which is why it had the backing of John Tyler Morgan, a powerful senator from Alabama.
The initial canal building effort was conducted by a private French enterprise. Unfortunately for them, their initial fundraising by selling equity was too small, so they had to rely on several large rounds of debt funding. Eventually the interest payments were too great and they went out of business, with the remainder of the canal completed by the American government.
This is a story of innovation, entrepreneurship, and achievement on a grand scale.