The Empire Project: The Rise and Fall of the British World-System, 1830–1970 (23 page)

The result was a fiasco for which company and government blamed each other. With the Barings crash in 1890, no more capital could be gleaned in London, and the Company faced bankruptcy. It abandoned hope of a private empire by Lake Victoria: only a government take-over could supply the political infrastructure needed for its commercial and philanthropic aims. After a bitter Cabinet struggle, a publicity campaign in which Lugard and Stanley were prominent, and a face-saving mission of inquiry, Uganda was annexed in 1894 and ‘British East Africa’ (modern Kenya) in 1895. Like Goldie, the East Africa Company's backers had successfully exploited public anxiety (about the fate of Christian missionaries and their converts) to goad the government into a forward policy. Like Goldie, they were helped by its grudging recognition that an administrative take-over was the only answer to the runaway competition of traders, missionaries and soldiers whose well-publicised jostling might derail their diplomacy in Europe and the Mediterranean. Unlike Goldie, however, Mackinnon's group profited little from the government buy-out. They were paid off with half of their costs, mostly at Zanzibar's expense.
⁶²

In the classic case of the African Scramble, private imperialists with their commercial roots in London, Liverpool, Glasgow or India were usually at cross-purposes with the agents of official policy. In West and East Africa, the chartered companies were meant to limit imperial liability while protecting a commercial interest. In both cases, they proved more successful at increasing the liability than in guarding the interest. Both were as much political as commercial enterprises whose ‘virtual’ assets could only be realised if the transaction costs of external protection were transferred to the imperial government. It was the peculiarity of tropical Africa in the 1890s that the technical, administrative and financial cost of transfer was so low; the mobilisation of public interest sufficient; and the diplomatic argument so pressing: conditions which favoured a sudden, swift and complete partition. Only in Southern Africa was private imperialism strong enough to resist the imperial take-over, build a state – and start a war.
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The Middle East and East Asia

In the Middle East and China, commercial conditions were quite different. Here, where three old empires struggled to modernise, diplomatic rivalry was intensified by the prospect of their collapse and partition. In Turkey and China, profit from trade was outshone by the lure of investment in government loans secured on state revenues or the grant of concessions for railways or other enterprises. Merchants and investors were forced to depend upon the mediation of diplomats who had an entree to the inner bureaucratic world where such transactions were finalised. Nor, in the cockpit atmosphere of great power diplomacy, could they impose their commercial claims where these conflicted with the interests of strategy or prestige.

The Middle East was particularly risk-laden. By 1880, both the Ottoman Empire and Egypt (its autonomous tributary) were bankrupt and their politics in crisis. The Ottoman government had lost some of its most valuable provinces in the treaty of 1878. In 1881, after six years of default, a new loan regime was created to regulate its borrowing under international supervision and repay the bondholders. The ‘Ottoman Public Debt Administration’ and its foreign managers controlled a large part of Turkey's public revenues, and directed to all intents its public investment. But, despite their previous interest in Ottoman bonds, British investors played a much smaller role in financing Turkey's new-style public debt than their counterparts in France where more than half the total was held by 1913.
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The commercial promise of the Anatolian hinterland – the scene of numerous railway schemes in the 1890s – was meagre compared with that of the Americas or South Africa. Worst of all, British lenders faced fierce competition from French and German banks represented on the Debt Administration. Success required furious diplomatic lobbying since the allocation of loans and the concessions they brought with them were a barometer of great-power influence at the Ottoman court. While the Foreign Office was keen to encourage British investment as a diplomatic instrument, the need to reach an accommodation with France or Germany made it an unreliable champion of the City's interests at the best of times.
⁶⁵

Egypt was a special case. Before the bankruptcy of 1876, it was the most dynamic zone on the European periphery, attracting trade and investment by the speed with which its great programme of public works was extending the cotton production of the Nile delta. The Suez Canal, the engineering marvel of its day, symbolised the importance to the international economy of Egypt's openness to foreign interests and influences.
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The eagerness with which the landholding elite responded to new commercial opportunities contrasted favourably with much of Afro-Asia.
⁶⁷
But the long crisis that followed default, and reached a climax in the revolution of 1881, threatened this steady transformation of Egypt into a satellite economy of Europe. Whatever its constitutional programme, Arabi's following, the ’Urabiya, drew upon widespread popular resentment against European artisans, merchants and landowners.
⁶⁸
The outcry of this ‘semi-colonial’ community was amplified by the press and the local agents of the British government. It contributed, as we have seen, to London's belief that a xenophobic Islamist movement was about to roll up British interests: economic, political and strategic.

With the ‘temporary occupation’ of 1882 and its tacit prolongation by 1890 into the indefinite future, Egypt was drawn more firmly than any other part of the Middle East into Britain's commercial orbit. The British dared not annex, and they were forced to respect the clumsy international machinery of the
Caisse de la Dette
, Cairo's version of the Ottoman Public Debt Administration. But, as the real (if hidden) force in the Egyptian government after 1883, the British consul-general Evelyn Baring (Lord Cromer) shaped a financial regime that turned Egypt into a pocket India.
⁶⁹
Free trade, public works and an ironclad guarantee against default made it a happy hunting ground for banks and land companies financed in London. By 1897, 11 per cent of Egypt's cultivable land was owned by foreign nationals, with heavy concentration in the Delta provinces.
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But the existence of this quasi-colonial regime can only partly explain the £66 million of British capital invested by 1914.
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The exceptional growth of cotton output and the fertility of new lands reclaimed for cultivation made Egypt the richest and most productive economy in the Middle East.
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In Egypt, British commercial interests benefited from official London's determination to exclude rival powers from the Nile Valley after 1882 and from Britain's ability, at considerable diplomatic cost, to maintain a monopoly of influence in Cairo. Commerce and empire were in harmony. In China, the commercial and diplomatic interests interlocked quite differently. Here British merchants (like Swires or Jardine Matheson) dominated foreign trade by 1880. But progress in tapping the vast hinterland behind the treaty-ports had been slow. Exportable commodities were sparse. With a population larger than India's, China took only 8 per cent of Britain's cotton exports (in 1896) to India's 27 per cent. The result was an involution of the trading frontier back towards the treaty-ports as the large British firms diversified into services like banking, shipping and utilities.
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British visitors were inclined to blame a treaty-port culture of sloth and complacency. The intrepid Isabella Bird demanded more ‘capital, push, a preference for business over athletics, a working knowledge of the Chinese language and business methods and a determination to succeed’.
⁷⁴
But, marooned at the edge of a vast non-Western world, British traders needed more than the spirit of enterprise to transform their economic environment. Less ambitious men hoped for the reform of China's pre-modern currency and the abolition of internal tariffs, the
likin.
But the real challenge was to persuade the Chinese authorities to sanction a railway programme: the one sure instrument of commercial progress.

The 1890s brought a breakthrough, or so it seemed. China's shock defeat by Japan in 1895 brought a new urge to ‘self-strengthen’, and a new need for loans.
⁷⁵
The difficulty was that, as in the Ottoman Empire, the allocation of loans, and the concessions that went with them, was bound up with speculation about a future partition. A loan might become a mortgage on the property of a bankrupt. To negotiate a loan under these conditions required forceful diplomacy at Peking, as much as commercial intelligence in Shanghai or financial backing in London. To British commercial interests on the spot, it was obvious that any reasonable allocation should reflect their pre-eminence. ‘Our true heritage in Asia is all Southeastern Asia up to the Yangtse valley’, wrote the
Times
correspondent in Peking to J. O. P. Bland, who was to play a leading role in pressing for railway concessions.
⁷⁶
China was now ripe for modernisation under British guidance, urged the young Charles Addis, the rising star of the Hong Kong and Shanghai Bank.
⁷⁷

But, as we have seen, official London was reluctant to risk the diplomatic confrontations to which the aggressive pursuit of British commercial interests might lead. The Hong Kong Bank was encouraged to arrange separate spheres of concession-hunting with the Deutsche Bank. An agreement was reached with Russia in 1899 to refuse official support for British concession-seekers in Manchuria in return for Russian self-denial in the Yangtse. Peking was persuaded to grant a fistful of railway concessions in 1898 to match those granted to Russia and France.
⁷⁸
But a concession was one thing; transforming it into a finished railway quite another. That required constant diplomatic pressure on the Chinese authorities. With the outbreak of the South African War in October 1899, followed by the Boxer Rebellion in 1900, it became harder and harder to drive the concessions through the provincial bureaucracies whose cooperation was essential. To Bland, who aspired to be the Chinese Rhodes, the solution was obvious. ‘Either we must adopt the methods of our successful competitors or go under…[T]he Russians pay their Chinese friends well to block our roads.’ What was needed was ‘a Government institution like the Russian Bank which should engineer commercial and financial undertakings’, and a candid recognition ‘that the obtaining of a concession in China meant certain payments to the officials concerned’.
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But, as he constantly complained, there was no diplomatic will in London for this or for the negotiation of railway zones in which the concessionaires would have security against the interference of the provincial authorities.
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By 1903, not a mile of line had been laid.
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Nor, though they toyed with the idea at the height of the Boxer Rebellion, would the policy-makers contemplate declaring a Yangtse protectorate – a Chinese Egypt – for which a strong group of China merchants had campaigned,
⁸²
to safeguard the prime region of British trade behind Shanghai.

The British government's real decision was to ally itself with the strongest commercial force in China, the Hong Kong and Shanghai Bank. It was a marriage of true convenience. The Bank was an exchange bank, an investment bank and a bank of issue, as well as being Whitehall's financial agent in China.
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It transacted business throughout China and hoped for more. It had no interest in a policy of spheres, still less in a Yangtse protectorate.
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It was anxious for good relations with the Chinese government, not least because any loans it might float would have to be secured on its revenues and not on those of the provinces.
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It was also well placed to dominate the international banking consortia which official London favoured as the instrument of development without spheres. With the Bank on its side, Whitehall could fend off complaints from the City and claim plausibly to be defending Britain's commercial stake in China. The Bank in return gained official support against its rivals in London and its critics among the British community in China.

The results were mixed. The defeat of the Boxers, the Anglo-Japanese alliance of 1902 and the defeat of Russia in 1905 might have been expected to open the golden age of Anglo-Chinese railway-building. In fact, the City proved reluctant to invest in China. The Foreign Office and the Bank argued over who should be admitted to the loan consortium: after the
Entente cordiale
of 1904, French participation became a diplomatic necessity.
⁸⁶
In the face of Chinese resistance, there was little prospect by 1908 of enforcing the kind of concession in which foreign interests kept full control over the construction and operation of a railway, as well as its finance. To Bland, that had seemed vital.
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As Peking lost control of its provinces and the ‘rights recovery’ movement gathered pace among the provincial gentry, the grandiose schemes for the opening of China to the trade of the treaty-ports and Hong Kong were quietly shelved. British trade and investment was more rooted than ever within the safe haven of the treaty-ports and diversified there into industry and services. The Bank fell back upon its favoured policy of promoting the international loan consortia through which it hoped to maximise its influence. But, within five years, the Chinese revolution and the outbreak of the First World War changed the political and economic landscape beyond recognition.