Arabs (21 page)

 

The reform process proceeded at a different pace in Istanbul and the other Ottoman provinces. As the imperial center, with responsibility for provinces scattered across the Balkans, Anatolia, and the Arab world, Istanbul had to ensure the development of all its provincial capitals. The government undertook major urban projects in the Arab world, building new markets, government offices, and schools. In addition, it introduced gas lighting and trams and other trappings of modern life in many of the Empire’s leading cities.

The Ottomans also gave concessions to European firms to build major infrastructural projects. They modernized ports in Istanbul and Izmir, Turkey, and in Beirut. They set up steamship companies in the Black Sea and the Marmara Sea. A British firm received the concession in 1856 to build the first railway in Turkey, a 130-kilometer (81-mile) line from the port of Izmir to the agricultural hinterland of Aydin. A French company received the concession for a second line from Smyrna to Kasaba (93 kilometers, or 58 miles), built between 1863 and 1865. As these lines were extended, government revenues from the railways increased significantly, encouraging further investment in Anatolian railways. A number of industrial ventures were established in the Tanzimat era, and mines were founded to extract coal and minerals. However, profits from successful ventures were matched by losses in those that failed, and the returns on Ottoman investments in European technology never offset the costs of new technology.

 

Reckless government spending alarmed reformers across the Ottoman Empire and North Africa. The acquisition of European technology achieved the opposite of the intended result; instead of making these states strong and independent, the development process led to the impoverishment and weakening of Middle Eastern governments, increasing their vulnerability to European intervention. Writing about Tunisia, Khayr al-Din claimed, “It is clear that the excessive expenses which burden the kingdom beyond its capability are the result of arbitrary rule, and that economy, which is the course of the kingdom’s well-being, is attained by regulating all expenses within the bounds of the
tanzimat
.”
²⁴
For the development projects to bear fruit, Khayr al-Din argued, governments needed to stay within their means. The benefits of Tanzimat reforms were being undermined by arbitrary rule and excessive spending.

To reform-minded thinkers like Khayr al-Din, the solution to both reckless government spending and arbitrary rule lay in constitutional reforms and representative government. The echoes of al-Tahtawi’s analysis of the French constitution could be heard very clearly in the second half of the nineteenth century. Under constitutional rule, a country would prosper, the people’s knowledge would increase, their wealth would accumulate, and their hearts would be satisfied. At least that was the theory.

The Tunisian Constitution of 1861 fell well short of reformers’ hopes. The text of the constitution drew on the Ottoman reform decrees of 1839 and 1856 and placed few limits on the executive power of the bey, who retained the right to appoint and dismiss his ministers. However, it did call for the establishment of a representative assembly, the Grand Council, composed of sixty members nominated by the ruler. Khayr al-Din, appointed president of the Grand Council, was soon disillusioned by the assembly’s limited powers to curb the bey’s excesses. He recognized that Ahmad Bey and his prime minister had only convened the council to rubberstamp their decisions, and so in 1863 he tendered his resignation. The issue that provoked his resignation was the government’s decision to contract its first foreign loan, which Khayr al-Din predicted would drag his adoptive country “to its ruin.”
²⁵

The Egyptian constitutional movement took root in the 1860s as well. Following the lines of al-Tahtawi’s analysis, many reformers believed constitutional government to be the basis of European strength and prosperity and the missing link in Egypt’s own reforms. Yet, as in Tunisia, no change was possible without the consent of the ruler. It was the viceroy of Egypt, Ismail Pasha, who called for the creation of the first Consultative Council of Deputies in 1866. The council was composed of seventy-five members indirectly elected to three-year terms. Like the bey in Tunisia, the ruler of Egypt sought to implicate the landed notables in his controversial financial policies through the convening of the council, whose role was limited to a consultative capacity (deputies had no role in making the laws of Egypt). Though a creation of the ruler, the council became a forum for Egyptian elites to voice criticism of the policies of the ruler and his government, and it marked the beginning of broader participation in the affairs of state.
²⁶

The most significant constitutional movement in the Eastern Mediterranean emerged from Ottoman Turkey. Some of Turkey’s leading intellectuals met in Paris and London in the late 1860s, where they mixed with European liberals and framed a set of demands for constitutional government, the sovereignty of the people, and an elected parliament to represent the people. Known as the Society of Young Ottomans, they criticized the government for the poverty of Ottoman society and the financial condition of the state. Its members lamented the Ottoman Empire’s increasing dependence on the European powers as well as foreign intervention into Ottoman affairs, and they laid blame for Turkey’s problems squarely on the irresponsible
policies of the sultan and his government. The Young Ottomans published newspapers and lobbied foreign governments to gain support for their cause. Even so, they recognized that change could only come with the consent of the sultan. Namik Kemal, one of the great Turkish intellectuals of the nineteenth century, told his fellow Young Ottomans that “the Ottoman nation was loyal to its Ottoman rulers; with us nothing was done unless the [sultan] really wanted it.”
²⁷
The society dissolved in 1871 but returned to lobby its cause in Istanbul, where it found support among reformist government officials. The Young Ottomans’ efforts were rewarded in 1876 with the promulgation of the Ottoman Constitution and the convening of the first Ottoman Parliament.

If reformers in Tunisia, Egypt, and the Ottoman Empire had hoped to stave off economic collapse by instituting constitutional reforms, they were to be sadly disappointed. The early constitutional movements were too respectful of authority to impose constraints on their rulers. They seemed to hope that the bey in Tunis, the pasha in Cairo, or the sultan in Istanbul would accept constraints voluntarily and share power with representative assemblies as an act of enlightened benevolence. These were not realistic expectations. The bey, pasha, and sultan continued to rule as before, and there was no constraint to prevent them from spending their governments into insolvency.

The single greatest threat to the independence of the Middle East was not the armies of Europe but its banks. Ottoman reformers were terrified by the risks involved in accepting loans from Europe. In 1852, when Sultan Abdulmecid sought funds from France, one of his advisors took him aside and counseled strongly against the loan: “Your father [Mahmud II] had two wars with the Russians and lived through many campaigns. He had many pressures on him, yet he did not borrow money from abroad. Your sultanate has passed in peace. What will the people say if money is borrowed?” The advisor continued: “If this state borrows five piasters it will sink. For if once a loan is taken, there will be no end to it. [The state] will sink overwhelmed in debt.” Abdulmecid was convinced and canceled the loan, though he would return to European creditors within two years.
²⁸

In 1863 Khayr al-Din chose to resign as Tunisia’s president of the Grand Council rather than be party to the country’s first foreign loan. He later wrote bitterly of the policies that led to Tunisia’s bankruptcy in 1869. “After having exhausted all the resources of the Regency, [the prime minister] cast himself down the ruinous path of loans and in less than seven years . . . Tunisia, which had never owed anything to anyone, saw itself burdened with a debt of 240 million piasters [£6 million, $39 million] borrowed by the Government from Europe.”
²⁹
By Khayr al-Din’s estimate,
the annual revenues of the Tunisian state had remained constant, at about 20 million piasters, right through the reform era. The result was that for seven years, expenditures exceeded revenues by 170 percent per annum. The result was the surrender of Tunisia’s sovereignty to an international financial commission.

 

The Ottoman central government was next to declare bankruptcy, in 1875. In the course of twenty years, the Ottomans had contracted sixteen foreign loans totaling nearly £220 million ($1.21 billion). With each loan, the Ottoman economy fell deeper into European economic dominion. Between discounts to attract increasingly skeptical investors and the various commissions and fees charged to float loans on European markets, the Ottoman government only received £116 million ($638 million)—the greater part of which was spent to service the Ottoman debt (some £19 million, or $104.5 million, in repayment and over £66 million, or $363 million, in interest). This left only £41 million ($225.5 million) for the Ottomans to invest in their economic objectives out of a total debt of £220 million ($1.21 billion). As Abdulmecid’s advisor predicted, the Ottoman state sank, overwhelmed in debt.

Over the next six years, amid the tumult of another disastrous war with Russia (1877–1878) and territorial losses confirmed in the 1878 Treaty of Berlin concluding the war, the Ottomans finally came to an agreement with their European creditors in 1881 with the formation of the Ottoman Public Debt Administration (PDA). Headed by a seven-man council representing the main bondholder states (Britain, France, Germany, Austria-Hungary, Italy, the Netherlands, and the Ottoman Empire), the presidency of the PDA rotated between France and Britain. Whole sectors of the Ottoman economy were placed under the control of the PDA, with revenues from the salt monopoly, fish tax, silk tithes, stamp and spirit duties, as well as part of the annual tributes of several Ottoman provinces, dedicated to debt repayment. The lucrative tobacco trade also fell under the PDA, though a separate administration soon was created to oversee the monopoly over the purchase and sale of tobacco. The PDA gained tremendous power over the finances of the Ottoman Empire as a whole, which the European powers used not just to control the actions of the sultan’s government but to open the Ottoman economy to European companies for railways, mining, and public works.
³⁰

 

Although Egypt held the distinction of being the last of the Middle Eastern states to declare bankruptcy, in 1876, the government’s position would have been far stronger had it declared insolvency sooner rather than later. The parallels to the Ottoman case are striking. Between 1862 and 1873, Egypt contracted eight foreign loans, totaling £68.5 million ($376.75 million), which, after discounts, left only £47 million ($258.5 million), of which some £36 million ($198 million) were spent in payments on the principal and interest on the foreign loans. Thus, out of a debt
of £68.5 million ($376.75 million), the government of Egypt gained only about £11 million ($60.5 million) to invest in its economy.

Faced with increased difficulty in raising funds to cover his debts, Khedive Ismail began to sell off the assets of the Egyptian state. He borrowed an estimated £28 million ($154 million) domestically. In 1872 the Egyptian government passed a law granting landholders who paid six years of their land tax in advance a future discount of 50 percent on future land taxes in perpetuity. As this desperate measure failed to staunch the hemorrhage, the viceroy sold the government’s shares in the Suez Canal Company to the British government in 1875 for £4 million ($22 million)—recouping only one-quarter of the £16 million ($88 million) the canal is estimated to have cost the government of Egypt. Stripped of key assets, the treasury tried to postpone payment on the interest of the state’s debt in April 1876. This was tantamount to a declaration of bankruptcy, and the repo men of the international economy descended on Egypt like a plague.

Between 1876 and 1880 the finances of Egypt were assumed by European experts from Britain, France, Italy, Austria, and Russia whose primary concern was foreign bondholder interests. As in Istanbul, a formal commission was established. One unrealistic plan followed the next in quick succession, placing terrible burdens on Egyptian taxpayers. With each plan, the foreign economic advisors managed to insinuate themselves deeper into the financial administration of Egypt.

European control over Egypt was firmly established in 1878, when two European commissioners were “invited” to join the viceroy’s cabinet. British economist Charles Rivers Wilson was appointed minister of finance, and the Frenchman Ernest-Gabriel de Blignières was named minister of public works. Europe got to demonstrate its power over Egypt in 1879, when Khedive Ismail sought to dismiss Wilson and de Blignières in a cabinet reshuffle. The governments of Britain and France brought pressure to bear on the Ottoman sultan to dismiss “his” viceroy in Egypt. Overnight, the recalcitrant Ismail was overthrown and replaced by his more compliant son, Tawfiq.
³¹