British Egypt and PNM Theory Part II

In my previous post, I gave a quick background on PNM theory and the British occupation of Egypt from 1882 to 1956. I then posed the questions: Was British intervention successful? And if so, could it be a valuable template for future intervention as related to PNM theory. So let’s look at the British occupation of Egypt.

First, let’s concentrate on the British economic reform of Egypt which was one of the primary reasons for the occupation. Egypt was heavily in debt, and had even sold a controlling share of the Suez to the British only a few years beforehand. Since the Egyptian government was filled with “patronage,” known to the developed world as corruption, structural reform of the various ministries was rather difficult and the money raised by shares of the Suez only provided a short lease on life for the Egyptian government, a few years. The British and French, Egypt’s main creditors, instituted a “stewardship” sending representatives to Cairo to take control of various ministries, already partial-colonization so to say. As Egyptians protested against their loss of sovereignty, unhappiness grew and a revolt finally broke out. When violence was directed against the European population there, the final line had been crossed.Prime Minister Gladstone, archliberal that he was ordered an intervention, despite international outcry against it. The French as usual did not participate,cried foul and resorting to their usual tactic of doing nothing.

After a swift victory, with Egypt firmly in British hands, the British embarked on far reaching economic reforms, surprisingly similar to what the IMF would do if they worked in conjunction with the US or UK military. According to Niall Ferguson:

“Evelyn Baring, later Lord Cromer, ran Egypt’s finances much like a modern structural adjustment program. The results were fiscal triumph. When the British took over Egyptian finances, debt service was consuming two-thirds of all tax revenue. Indeed, crippling taxation and cuts in the army’s budget had been among the principal causes of Arabi’s nationalist coup. By 1885, however, a debt rescheduling agreement had been reached with the foreign bondholders that gave the Egyptian economy a two-year breathing space and a new internationally guaranteed loan of 9 million pounds. By 1892 the debt crisis was over, and in the subsequent two decades the ratio of debt revenue was halved, from 10:1 to 5:1.”

British fiscal reform and control of the country paved the way for more foreign lending thanks to the underlying British security guarantee. Nevertheless, those who benefited most from the occupation complained the loudest in public. Under British rule and thus sure not to default on its loans, Egypt could also borrow at half the previous interest rates it secured.

“New loans helped to finance substantial investments in the country’s infrastructure, notably the first Aswan Dam, built between 1902 and 1906, which stored summer floodwater and then released it, doubling or tripling the crops peasant farmers could produce. Between 1886 and 1953 the area under cultivation expanded by nearly half. The railway network grew in size by a factor of four Egypt’s trade expanded rapidly until the onset of the Great Depression and again during and after the Second World War. Egypt’s peasants benefited directly not only from better infrastructure but also from lower taxation and access to affordable credit. The proportion of the population attending schools also quadrupled. All this was achieved by a combination of “English heads and Egyptian hands,” as the British liked to say.”

Yet, Ferguson does note that not all the numbers were good. As far as it is possible to estimate, the per capita Egyptian GDP stagnated between 1913 and 1950. However, the same was true of British India. The reason for this in both cases was population growth. Likely as a result of the improved economy and more available food (due to increased cultivation), the population rose so much that it negated a great deal of the progress, yet the growth was certainly due to Britains reforms. On top of that, the economy was dangerously dependent on cotton which fluctuated on the world market. Publich health was also neglected by the British which led to an increase in the infant mortality rate. Overall, the country got richer, but not the average person.

In the third and final post, I’ll look compare the aims of British policy in Egypt, their outcomes under occupation and after and analyze it in terms of PNM theory (connectivity and the 5 flows) and attempt to draw lessons from it for the US occupation of Iraq.