The American Interest
The Middle East & Beyond
Published on January 4, 2013
The Khedive’s Revenge? A Lesson of Indebtedness and Sovereignty

When, on Tuesday morning, I finished reading David Brooks’s column in the New York Times, I scribbled two words at the bottom of the newsprint. First let’s hear how his typically excellent column, this one on the nature and scope of the debt we are amassing and are refusing to responsibly address, ended:

The country either doesn’t know or doesn’t care about the burdens we are placing on our children. No coalition of leaders has successfully confronted the voters, and made them heedful of the ruin they are bringing upon the nation.

And then let’s look in on the two words I cursively scribbled in blue ink from my fountain pen:

Khedive Ismail

When I wrote those two words I had no inkling whatsoever that I would see in today’s news the announcement that Al Jazeera had purchased Current, which the New York Times describes as “the low-rated cable channel that was founded by Al Gore . . . and his business partners seven years ago.” According to the paper, Al Jazeera—which really means the government of Qatar—paid something like $500 million for Current, about $100 million of which will supposedly end up in the former Vice President’s pocket.

The reason for the purchase, supposedly, is that Al Jazeera is trying to convince Americans that it is a legitimate news organization, as the New York Times put it, “not a parrot of Middle Eastern propaganda or something more sinister.” The problem is that Al Jazeera does have a selectively propagandistic bias, not in all of its English-language reporting, but in virtually anything that has to do with Arabs, Israelis, the Middle East and Islam. Over time that bias, subtly and effectively communicated, can make a difference in American opinion. My guess is that’s the real motive for the purchase.

Now let’s take a step back and connect some dots. Why did my mind flit from the end of David Brooks’s column on the debt to the Khedive Ismail to the unanticipated Al Jazeera purchase of Current? Because I’m crazy, some of you might propose. Well, you may be right, but not all forms of insanity are created equal. Here, in any event, is the method to my particular madness.

To understand how I connect these dots, I realize that it would be helpful if my readers knew who—yes, who, not what—the Khedive Ismail refers to. From my experience teaching undergraduates and graduate students alike about the Middle East, I am prepared to wager that not one in a million Americans recognizes this biographical phrase; so let me introduce you.

There once was a fellow named Mohammed Ali—no, not the boxer, but presumably the man after whom Cassius Clay renamed himself. He is known to historians as the Albanian adventurer who rose to power in Egypt and, after failed Ottoman attempts to remove him, set out in 1831 to conquer Syria and Crete from the Sublime Porte. What happened next is complicated enough to have filled several books, and we will not concern ourselves with that. All you need to know for present purposes is that Mohammed Ali established himself as ruler of Egypt, and the man who, following on and in some respects imitating Napoleon’s attack on Egypt in 1798, crushed the ruling centuries-old Mamluke order in that country. His son, Ibrahim Pasha, continued in his brief rule his father’s modernizing and reforming ways, turning carefully to the European powers for assistance in that regard. Ibrahim Pasha was followed both literally and in terms of policy direction by two other relatives until Ismail Pasha rose to head the dynasty in 1863. In 1867 Ismail was formally recognized by the Ottoman sultan as the khedive, a term that roughly means viceroy—in the Ottoman period designating an independent ruler whose status was nevertheless below that of caliph.

It was during Ismail’s reign as khedive that the main symbol of Egyptian-European cooperation—in this case mainly Egyptian-French cooperation—came into being: the Suez Canal, constructed in 1869. The British had opposed the canal, seeing it as a vehicle for French influence in and around Egypt. But then, in 1874, the Khedive found himself in considerable financial difficulty. He couldn’t decide whether to spend money on Egypt’s modernization or on himself, so he did both. Now, as a means to secure the rights to construct the canal, the Egyptians in the person of the Khedive himself had been allotted a large number of foundation shares in the Suez Canal Company. To alleviate his financial distress, the Khedive let it be known that he wished to sell his shares.

There then occurred one of the most storied dramas of 19th-century European colonial history. (It is so wonderful that someone ought to make a movie of it.) At the instigation of the new British Prime Minister Benjamin Disraeli, the British government quickly came forward as a buyer. It purchased the Khedive’s shares for the enormous sum of £4 million, the vast majority of which Disraeli borrowed on the fly from banks owned by various Rothschilds. In a trice, the British government found itself the majority shareholder in the Suez Canal Company, and there was not a thing the French could do about it. (The fact that a lot of the borrowed money came from the French wing of the Rothschilds suggests that le banquier and the French government of the day were not exactly getting along. That would have to be a major subplot in the movie.)

Unfortunately for the Khedive, the money he got from the British for his shares did not turn the trick for him financially. Such was his extravagance and the incompetence of his administration that he again found himself deeply in debt, chiefly to British and French bondholders, just a year later. Much as the United States did in the Caribbean a century or so ago, the British government determined to take action in order to secure repayment of its nationals who had lent money to Egypt. The French, meanwhile, encouraged by none other than Otto von Bismarck, whose motive was to distract the French from their contemplation of a war of revenge over Alsace-Lorraine, joined with the British to depose the recalcitrant Ismail in favor of his son Tawfiq.

What happened next would turn the movie into something of a wry comedy. The British and the French found it far more difficult to extract money from Egypt than they had anticipated. All that cash somehow defied auditing, let alone recovery, along the Nile. Here is how the remarkable Clara Erskine Clement described it in her revised and enlarged 1903 edition of Egypt:

Then began a series of investigations of the Finances of Egypt, conducted by Mr. Cave, Mr. Goschen, Mr. Romaine, and by a Commission of Inquiry. All these investigators were unable to come at the exact truth, for they were met at each and every point with deceit and falsehood, so that the results shown by their figures are probably but an approach to the whole truth of the rottenness of the Khedive’s government [pp. 454–5].

The French eventually gave up, leaving the British to continue the effort. By 1881 the task transferred unwillingly to the new Gladstone Administration, which, at first sincerely anxious to be rid of ancillary imperial commitments, found itself with no choice but to take over control of financial matters within Egypt. Tawfiq Pasha was in no position to object, and neither was the Sultan in Istanbul, over whom the British held a certain amount of useful influence. Control of financial affairs grew willy-nilly into essential control of the Egyptian economy and before long to de facto control of the whole country—sparking a failed proto-nationalist uprising in 1882. Indeed, before long British involvement spread to fighting a war in the Sudan (movies have been made about that: Chinese Gordon, the Mahdi and the rest).

And so it was that, despite the inner convictions of the Liberal cabinet, Britain was drawn ever further into Egyptian affairs. Having defeated Prime Minister Disraeli at the polls on the very issue of colonial expansion, Gladstone found himself driven to adopt the policy of imperialism, if not always the rhetoric, that he and his colleagues had themselves denounced. It was in reaction to Gladstone’s episodic if feckless idealist leadership that Macauley had written: “There is nothing so ridiculous as the British public in a periodic fit of morality.” But a Prime Minister captured by the fates to do what he never intended is sort of ridiculous in its own way, too. I can’t stop myself from remembering this episode whenever memories of the Obama Administration’s “surge” and nation-building fantasies in Afghanistan come upon me. Ah, but that is another story.

Our story, to get back to the point and to contemporary matters, is that Britain insinuated itself into Egypt because that government allowed its finances to deteriorate to the point that it made itself prey to foreign influence. I’m not suggesting that the U.S. debt will ever allow American sovereignty itself to be pocketed by its many foreign creditors. After all, the Japanese in their heyday financially bought a lot of American real estate back in the 1980s, even Rockefeller Center in New York City, and a whole lot of good it did them. But while it differs greatly in scale, the Qatari purchase of Current really does not differ in kind from the sort of dynamic that ensconced the British in Egypt. When George W. Bush was fine with Dubai managing some ports in the United States back in February 2006, it caused a political firestorm. I doubt that these days, under current conditions, the purchase of Current will raise so much as an eyebrow, despite its probably being a far less innocent affair.

Yes, and some American states are renting tolled highways to foreign governments. American for-profit hospitals are increasingly in-sourcing lower-cost nurses from abroad because they don’t want to or can’t afford domestic-trained labor. What else in the future will we ask foreign companies, with foreign governments looking on, to do for us that we can’t do for ourselves because we’re unable to toilet train our budgetary habits?

What are we dealing with here, the Khedive’s revenge?

  • Alan Luxenberg

    Great Title!

  • Martin Berman-Gorvine

    I think you may just have inspired my next science fiction novel, which may not be so fictional.

  • Tom Richards MAmoderate

    USA bailed-out Fabian bankers who foolishly pushed ever more debt; So give them a haircut, payng pittance on non-pension debts.

  • K2K

    I have been thinking of Khedive Ismail solely in relation to Egypt’s Morsi having Christine LaGarde of the IMF dictating austerity measures, NOT the USA’s mountains of debt.

    As for Qatar buying Current TV? I assume they will do everything to scare Americans from supporting any more fracking for natural gas, which is Qatar’s cash cow. And Qatar does not want any US competition.

    Until the sale of CRTTV to Qatar, I had no idea I even had that channel.

  • Pingback: The Khedive’s Revenge | The Cranky Professor

  • Walter Sobchak

    You wrote: “He … set out in 1831 to conquer Syria and Crete from the Sublime Porte.”

    It might have been more communicative to an audience not versed in Middle Eastern History if you had written: He … set out in 1831 to conquer Syria and Crete, which had been governed by the Ottomans.

    The Al Jazeera Gore transaction was not a transfer of assets. Current TV had none. It was a straight bribe to rally environmentalists opposition to the development of North American energy resources (e.g. fracking, keystone pipeline)

    Environmentalists, not only wrong, but corrupt.