The Canal Zone is a strip of territory ten miles wide, its irregular lines following the course of the canal, which is its axis. Over this zone the United States, under its treaty with Panama, exercises jurisdiction "as if it were sovereign." The American Government was unwilling to undertake the great and expensive work of constructing the canal without having this guaranty to protect it from possible harassment at the hands of the Panaman authorities.

One of the first tasks that confronted the United States authorities when they entered upon the work of building the canal was that of providing a civil government for this territory named by law the Canal Zone. Postal facilities had to be provided; a police system had to be established; customs offices were required; fire protection was necessary; a court system was needed; a school system was demanded; and, in short, a sort of territorial government had to be put in operation before the work of building the canal could go forward satisfactorily.

This government was established in 1904 under the direction of Major General George W. Davis, the first governor of the Canal Zone. From time to time it was extended and improved. More than half of this was appropriated out of the Treasury of the United States, and the remainder collected in the operations of the government. In addition to directing the government of the Zone, the head of the department of civil administration was the titular representative of the Canal Commission in all matters in which the commission and the Republic of Panama had a mutual interest. However, in practice, the Panaman Government looked directly to the chairman and chief engineer on all important matters.

One of the earliest and most important subjects requiring their cooperation was that of sanitation in the cities of Panama and Colon. The United States agreed to advance money for building sewer and water systems, and for street improvements, in the two principal cities of the Republic, on condition that the Republic of Panama and the two cities would reimburse the United States Treasury through the water rents. The street improvements were to be paid for in 10 years, and the sewer and water systems in 50 years; in the meantime the United States was to be allowed 2 per cent interest on the money advanced. This amortization of the Republic's debt for these improvements has been going steadily forward.

In laying out the government of the Canal Zone it was thought wise to adhere as closely to Spanish laws and customs as was expedient under the new conditions. In view of this consideration the methods of taxation on the Canal Zone were allowed to remain largely the same as under the old Spanish laws of Colombia. Likewise the Spanish system of judicial procedure was adhered to during the early years of the construction period. It was not, indeed, until 1908 that the right of trial by jury was established in the Canal Zone. At that time former Senator J. C. S. Blackburn, of Kentucky, was at the head of the department of civil administration, and he regarded it as repugnant to American ideas of justice to deny to Americans on the Isthmus the right to be tried for felonious offenses by juries of their peers. Upon his representations President Roosevelt issued an executive order extending the right of trial by jury to the Canal Zone, and that order was effective after 1908.

With the early opening of the canal it became advisable for Congress to determine the future policy of the United States toward the Canal Zone, and to lay out a system of government there which would meet the needs of the future. It was determined that the Canal Zone should be used for the operation of the canal, rather than for a habitation for such settlers as might choose to go there. Hence the provision was made that the President of the United States should have the right to determine how many settlements there should be on the Canal Zone and how many people should be permitted to live there.

It will be the policy of the United States to discourage general settlement and to maintain only such towns as are necessary for the operation of the big waterway, granting only revocable leases to any outsiders when it is deemed advisable to allow them to occupy land within the Zone. There will be only five settlements in the Zone, if present plans are carried out: One at Cristobal, one at Gatun, one at Pedro Miguel, one at Corozal, and the settlement at Ancon and Balboa at the Pacific terminus of the canal. The total number of people who will reside in these settlements will probably not exceed 10,000, a material reduction from the 62,000 living on the Zone in 1912. Those who are still there, but who will not be needed in the permanent organization, will be repatriated at the expense of the United States Government. In 1912 there were approximately 31,000 British subjects on the Zone, practically all of them negroes from the British West Indian islands and British Guiana. The great majority of these will be carried back to their homes, as will all of the 4,300 Spaniards who desire to return. There were nearly 12,000 Americans on the Zone at that time, and perhaps two-thirds of them will leave before 1915. There were nearly 8,000 Panamans on the Zone and most of them will go to the cities of Panama and Colon, or upon the Government lands owned by the Panama Republic outside of the Zone.

The work of clearing the Zone of its population was begun early in 1913. A joint land commission was appointed to adjudicate the claims of those Panamans who were living within the Zone on lands that were needed for the operation of the canal. This commission consisted, under the treaty existing between the two countries, of two Americans and two Panamans. In their work they first took up the claims of the poorer classes who had nothing but a thatched hut and a small patch of ground. The commission visited the various parts of the Zone and fixed the value of such holdings. The people were given free transportation over the Panama Railroad, and usually were allowed from $50 to $100 for their homes. They preferred to move in colonies, so the Republic of Panama laid out small towns away from the Canal Zone for them. These natives, usually almost full-blooded Indians, were treated as kindly and as considerately as conditions would allow. They were willing to "fold their tents" like the Arabs, and leave their homes behind as they went out to conquer new ones in the jungles where the needs of a gigantic waterway could not encroach upon them.

The claims for lands which have to be taken from individuals by the United States will aggregate a half million dollars. As the Panaman Government allows homesteading on Government lands at a cost of about a dollar an acre, and as there are tens of thousands of acres of better land outside of the Canal Zone than inside, the policy of the United States in freeing this strip from native population will not work any great injury to the people.

During the construction period the laws under which the people of the Zone lived were made in three different ways. Of course, Congress as the legislative assembly was always supreme. But under the laws passed by it, the President of the United States was empowered to issue executive orders covering points not touched by congressional legislation, and under his instructions the Secretary of War could promulgate certain orders. In addition to this, the Canal Commission had a right to serve as a sort of local legislature. During the year 1912 sixteen executive orders pertaining to the Canal Zone were signed by the President and the Secretary of War, while five ordinances were promulgated by the Isthmian Canal Commission during the same period.

The court system under the construction-period government consisted of district courts, circuit courts, and a supreme court. There were five district judges and three circuit judges; and the circuit judges sitting together constituted the supreme court, from whose decisions there was no appeal. Under the permanent law there will be a magistrate's court in each town, which will have exclusive, original jurisdiction in all civil cases involving not more than $300, and of all criminal cases where the punishment does not exceed a fine of a hundred dollars or 30 days in jail, or both. Its jurisdiction will include all violations of police regulations and ordinances, and all actions involving possession or title to personal property or the forcible entry and detainer of real estate. These magistrates and the constables under them will serve for terms of four years. There will be a district court which will sit at the two terminal towns with the usual court officers. The circuit court of appeals of the fifth circuit of the United States will be the court to which appeals from the district court will be carried.

The postal service of the Canal Zone is practically identical with that of the United States. The revenues collected from the sale of stamps and postal cards amounted to $87,550 in 1912. Nearly a quarter of a million money orders were issued during that year, representing a total of approximately $5,000,000. A postal savings bank system is also maintained, a counterpart of the one in the United States.

All mail matter sent from the Canal Zone bears Panaman stamps countermarked by the Canal Zone government. When the United States established the postal system at Panama, American postage was used. The Panamans were very much dissatisfied with such a procedure, however, since it deprived them of a large share of their postal revenue. Their postal rates to the United States were those of the universal postal union—5 cents per ounce or fraction thereof on all first-class mail matter. The rate from the Canal Zone Was only 2 cents. The result was that the citizens of Panama and Colon would not patronize their own post offices, but carried their mail across the line to the post offices at Ancon and Cristobal where they could mail their letters at the 2-cent rate. The Panaman Government protested against this, and it was agreed by the Americans that in the future all mail matter should carry Panaman postage stamps. These are furnished to the Canal Zone government at 40 per cent of their face value. In this way the share of the Republic of Panama in the postal receipts of 1912 amounted to nearly $33,000.

President Roosevelt selected one of his "rough riders," George R. Shanton, to establish the police force on the Zone. This police force was selected generally from men who had seen service in the United States Army and had made good records there. In 1912 the force consisted of 117 first-class white policemen, 116 colored policemen, 20 corporals, 8 sergeants, 7 lieutenants, and 2 inspectors, besides a chief of police and an assistant chief of police. During that year 7,055 arrests were made, 70 per cent of which resulted in convictions. Police stations were maintained at all settlements along the line. A penitentiary was located at Culebra where approximately 140 convicts were confined. The penitentiary had to be removed owing to slides at Culebra Cut, and the men were put to work on the roads of the Canal Zone. They were kept in well-guarded stockades at night.

When Judge Henry A. Gudger was made a member of the judicial system of the Canal Zone he believed that it would be the scene of unusual lawlessness; he thought it would be a dumping ground for lawless people from all parts of the world. He therefore believed in strong repressive measures, and his earlier sentences were made heavy with that end in view. He found later, however, that the opposite was true. Under the system of quartering the canal help there was comparatively little mixing of the races. The negroes lived to themselves, the Spaniards to themselves, and the Americans to themselves; therefore, racial friction was largely overcome. The lawless found the Canal Zone a desirable place to shun. Judge Gudger soon discovered that severe measures were unnecessary, and in recommending pardons frequently stated that he had imposed sentences heavier than necessary to carry out the repressive policies he had in mind.A well-organized, paid fire department was maintained from the beginning and it was supplemented by volunteer companies in many places. In a number of towns fire engines of the latest automobile type were installed. Out of 300 fire alarms in 1912, nearly 200 were for fires in Government property valued at one and three-quarters million dollars, while the total loss was only $5,000.

The school system of the Canal Zone was laid out along the same lines that characterized all other activities for the welfare of the people who were engaged in building the canal. It was founded by Charles E. Magoon when he was governor of the Zone, and in 1912 had 75 teachers and officials, with an enrollment of 2,105, of whom nearly 1,200 were white. The standard required of the teachers was maintained at a high point. Of the 48 white teachers employed in 1912, 13 held degrees from colleges and universities, 19 held diplomas from standard normal schools, and 12 others had enjoyed at least two years of normal teaching. The white children on the Zone were given free transportation to and from the schools. Those who had to go on the railroad to reach their schools were given free passes. Those who attended the schools in their own neighborhood were gathered up in wagons and transported to school.

The system of roads for the parts of the Canal Zone adjacent to the canal itself was built mainly by convict labor at comparatively little cost. They have been useful to the natives in getting their few products to market, and during the years to come will be available as military roads for use in the defense of the Zone. These roads are built according to the best American standards and are almost the only real roads in the entire Republic. The Panaman Government has extended one road from the Zone line to old Panama, and for a few miles into the interior, but aside from this national road activities have been few indeed.

The American road from Panama to the Zone boundary, leading toward old Panama, over the savannahs, is the pleasure highway of the Republic. It is practically the only road in the Republic where one drives for pleasure, and here every automobile in Panama City is pressed into service during the late afternoon and the evening. The elite of the capital city own summer homes along this road. These homes are by no means as elaborate as the summer homes along the Hudson, but the fact that they were seated amidst veritable gardens of flowers gives them an air of beauty and restfulness attractive even to the most blase traveler.

The water-supply system of the Canal Zone consists of a number of reservoirs on the watersheds of the Isthmus where no human habitations are allowed, and where trespassing is forbidden. The waters are examined for bacteria and other properties once each month, and a report thereon is made to the proper officials. Twice each month a physical examination of each reservoir, and the land from which it receives its water, is made by inspectors who report all conditions to the sanitary and other authorities. If there is any sign of contamination, steps to overcome the trouble are taken immediately.

Where the reservoirs fill up to the spillway the waste water is not allowed to go over the top, but is drawn out from the bottom in order that the under layers of water may be the ones wasted. Water drawn out for domestic purposes is taken from the top wherever possible. The water has a somewhat unpleasant taste to people newly arrived upon the Isthmus, and in some cases serves to disturb the digestive tract, but to the people who become accustomed to it the unpleasant flavor, due to the presence of decayed vegetation, is forgotten, and the workers on the Canal Zone frequently declare they miss the Panama water when they go back to the States.

The permanent Government of the Canal Zone will be, in the main, merely a miniature of the government during the construction period. The law providing for the operation of the canal makes this Government entirely subsidiary to the main purpose for which the canal was built. It provides that when war is in prospect the President may appoint a military officer to take charge of the Canal Zone, and to conduct its affairs as they might be conducted were the Zone nothing more than a military reservation. The Government will have its headquarters at the Pacific end of the canal where Balboa, the principal permanent town on the Isthmus, will be located. This little American city will be Government-built and Government-owned, and it will be the smallest of all the world's capitals.

Under the new Government all old laws, not specifically repealed, or contrary to the new ones, will be continued in force. All executive orders issued by the President, and all orders and ordinances promulgated by the Canal Commission, during the construction period, not inconsistent with the act creating a permanent form of government, are made laws of the Canal Zone to continue as such until specifically repealed by act of Congress.