History of the Suez Canal Company, 1858-2008: Between Controversy and Utility 9782600013314, 2600013318

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PUBLICATIONS D’HISTOIRE ÉCONOMIQUE ET SOCIALE INTERNATIONALE No 25

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HUBERT BONIN

History of the Suez Canal Company 1858-1960 Between Controversy and Utility

LIBRAIRIE DROZ S.A. 11, rue Massot GENÈVE 2010

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ISBN: 978-2-600-01331-4 ISSN: 1422-7630 Copyright 2010 by Librairie Droz S.A., 11, rue Massot, Genève. All rights reserved. No part of this book may be reproduced or translated in any form, by print, photoprint, microfilm, microfiche or any other means without written permission.

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GENERAL INTRODUCTION In 1987 we had published a comprehensive volume recounting and analyzing the history of the Suez Canal Company in the years 1850 to 1980. In that book, we had dealt in detail with the firm and its reconversion into the Compagnie financière de Suez, we had talked of Ferdinand de Lesseps and Jacques Georges-Picot, of the first nationalization in July 1956 and of the second in February 1982 – dedicating some 150odd pages to the history of the canal, its French managers and its international Board of directors. Here, we present a completely new book which focuses solely on the history of the Suez Canal Company, from the conception of the project in the 1850s and the issues regarding its reconversion between 1956 and 1960, to the birth of a new, purely financial and banking project. We have re-unearthed and gone back to our original documents (which have also been used by other published papers), referred to the data preserved in “crude” form in the files stored in the office of the former engineers of the firm – where we ourselves worked from 1984 to 1987, and re-visited the conversations we have had with the people who had been there in the years 1930s to the 1960s. We have in fact been able to go further still, thanks to the large number of university theses, articles by economists on the profitability of the canal, and books and papers dealing with the economic history of Egypt. The wealth of references which appear in the footnotes bears testimony to this abundance. The last couple of decades have seen some major changes taking place in people’s thoughts and perceptions regarding the canal, especially due to the strategic role played by its type of “concession” in the economic development of many countries and even entire regions. This has led to new approaches to its history which fit in better with the economic history of the world. At the same time, the history of trade between Europe and Asia, especially its maritime aspect, that of the sea routes, shipping companies, navigation techniques, and the history of oil, which directly concerns the canal because of the oil wells in Asia, have themselves seen some significant breakthroughs and gone through major revisions since the 1980s. The present work has also benefited much from the large number of recent studies on the impact of French and British imperialism (military or economic) on the history of the

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Near East and Egypt1, on the role played by the canal in the immediate aftermath of the Second World War and on the repercussions – economic as much as diplomatic – of its nationalization in 1956. Therefore, it would not be too much to say that we present today, in 2009, a totally new and novel approach – novel by the fact that it aims at a global perception, a history which includes all relevant aspects: maritime, technological, human, social, capitalist, financial, geopolitical and patrimonial. It also uses a deliberately dialectic approach, because every chapter raises contentious issues and promotes a free and open exchange of ideas. Obviously, the conclusions are very much ours – and just as open to critical discussion. We completed this book in the Autumn of 2008, that is to say, just in time for the 150th anniversary of the creation of the Universal Suez Ship Canal Company (15 December 1858-2008). Coincidentally, the Suez Canal Company also happens to have entered a decisively new phase with the merger, in July 2008, of the Suez public service company with its sister concern Gaz de France and the creation of the new corporation, GDF Suez. Though the French government holds 35 per cent of the stake, it is to be managed as an independent company and left to fend for itself in the competitive environment of the global energy and public services markets, especially as this firm itself owns a massive subsidiary, Suez Environnement.

1. A CONTENTIOUS HISTORY The history of the canal, of Ferdinand de Lesseps and of the Universal Suez Ship Canal Company has always been, and will continue to remain, controversial. It will continue to engender heated discussions between historians, simple onlookers or active agents of capitalism, and theoreticians of progress and developmental models. For decades, the name itself evoked a negative response – Suez was synonymous with all that the worst aspects of imperialism. The creation of the company had also been riddled with controversies and criticisms, with the term “spoliation” being used freely. The financial and technological pressures of the North on the South, of the powerful on the weak, had resulted in an extortionary contract, a long-term concession (1858 to 1968) which deprived Egypt of the massive revenues generated by this hugely successful waterway. The 1

Notably: Caroline Piquet, La Compagnie du canal de Suez, une concession française en Égypte, 1888-1956, Paris, Presses universitaires de Paris-Sorbonne, 2008. Samir Saul, La France et l’Égypte de 1882 à 1914. Intérêts économiques et implications politiques, Paris, Comité pour l’histoire économique et financière de la France, 1997.

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nationalisation of 1956 came as a sort of catharsis which washed out the stain of a skewed relationship between “unequal” partners. To be fair, the American historian David Landes has also added artful bankers and inept managers of Egyptian finances to the pre-nationalisation simmering brew, people who spent extravagantly, only to find themselves mired in hopeless debts. His book, not surprisingly titled Bankers and Pashas, appeared coincidentally just as Nasser was in the process of nationalizing the canal. The American also spoke of a Lesseps who took full advantage of a weak Khedive to extract an unfair contract to the detriment of Egypt – of how the French entrepreneur made the most of the ruler’s lack of foresight and his blindness regarding his own financial and territorial motives. To top it all, the Company conveniently invoked the ancient customs of the country to make repeated use of the State’s corvée system for its own purposes. The resulting concentration of a poorly housed, ill-fed and neglected labour led to the death of thousands (worst-case estimates). This left one more “blot” on the gathering “dark legend” of the enterprise – a blot which has remained in the eyes of Egyptian nationalists till as late as the 1950s, and surprisingly, even in the eyes of some recognized authors. In fact, even today, some bloggers seem to find pleasure in reviving these accusations. As for Lesseps, the original “hero” of the Company, he was portrayed as a kind of capitalist adventurer, the archetype of the American “robber barons” of the 1880s and 90s, of the “tycoons” and speculators of the 1920s and 1950-70s. He was seen as the original “wheelerdealer” in search of a “hi-flying deal” which would garner his shareholders ample and durable profits. Lesseps was seen as one of the big names of that era such as the Pereire, the Talabot, the Rothschild, the Goüin or the Hersent – who were all busy putting French engineering and money to lucrative use by setting up massive national and international investment projects. For long, Suez was not really an “anonymous” joint-stock company (“société anonyme” in French), because it was identified with the name of Lesseps. While the Company was his glory, it also was his shame. When Lesseps failed miserably in his bid to create a passage through the isthmus of Panama, leading to the “Panama scandal”, the repercussions had a major impact on the Suez Company. Other economic crises too affected the Company seriously, and led to some disastrous consequences on other firms such as the Banque de l’union générale (crash in 1882), Société générale (crisis in 1886) and Comptoir d’escompte de Paris (crash in 1889) – though it is true that in each case the Company made a rapid recovery, regaining its corporate relationships, its brand image and its good name on the Paris stock exchange. It would seem that the only thing missing was a Balzac, a Zola or a Trollope to turn Lesseps into the hero of some dark novel in which some small-time speculator goes on to manage some vast over-seas

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project. Still, he has remained in the public memory, perhaps a little hazy with time, but very real nevertheless, as a hero of both Suez and Panama – evoking mixed, if not troubled feelings…. When his statue was torn down in the autumn of 1956, it must have seemed as a kind of exorcism, a cutting of the reins of a foreign power which had for too long dominated Egypt’s shipping and maritime life. Still, even after that, the “men of Suez”, those ensconced at the “Rue d’Astorg”, the headquarters of the Company in Paris, would still have aroused a heady mixture of admiration, envy and resentment because they were part of this “comprador bourgeoisie”, this alliance between foreign investors, multi-national corporations, bankers, and military interests which involved the biggest French firms for decades. Entire dynasties made up of managers, directors, presidents and vice-presidents were formed over and beyond the “two hundred families”. Just as with those of Crédit lyonnais, of Société générale or, when it came to the overseas, Crédit foncier d’Algérie & de Tunisie2, the big names and figures of the Paris Establishment inscribed the name of Suez among those of the “grand capitalism”, both French and “à la française” at the same time, a power which was thought to influence the world of money, the press, politics and even culture (in the name of learning Egyptian history). Like Schneider or Wendel in the world of ironworks, like the big banks Crédit lyonnais, or Société générale in the world of money, Suez had made a “name” for itself which evoked respect and even “dread” in the ‘Balzacian’ or ‘Hugolian’ sense, that is to say, the fear of a greater power, something almost too big, untouchable even. This power was expressed by the projection of capitalist interests into the colonies, stimulated by the “imperial economic spirit”3 and carried forward by the lure of the massive profits which can be extracted from the development of virgin territories. Suez was also strongly associated with British imperialism: the British Crown acquired more than 44 per cent of the Company’s capital in 1875 and consequently deprived Egypt of a major portion of the canal’s revenue which otherwise could have certainly allowed it to finance a modernization of its governmental machinery and its economic and cultural infrastructure. But it was the threat of a watercrossing by the Arab revolt in the early 1880s that pushed England to place its heavy hand on Egypt. The canal thus became the casus belli, the 2

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Hubert Bonin, Un outre-mer bancaire méditerranéen. Le Crédit foncier d’Algérie & de Tunisie (1880-1997), Paris, Publications de la Société française d’histoire d’outre-mer, 2004. See Hubert Bonin, Jean-François Klein & Catherine Hodeir (eds.), L’esprit économique impérial (1830-1970). Groupes de pression & réseaux du patronat colonial en France & dans l’empire, Paris, Publications de la SFHOM, 2008.

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excuse needed by Great Britain to impose its protectorate (and Egypt to lose its independence for the next half-century) and to establish permanent military bases, as much to keep an iron hold on one of the key routes to India as to maintain its imperial sway over Egypt. On the other hand, the departure of British soldiers with the nationalisation of the canal in the first half of 1956 showed just how much they had contributed to the safety of the water-way. The strategic role played by the canal in the course of the two World Wars (with the Turks in the First and the repeated attacks by Rommel and his Afrika Korps – which came within a hundred kilometers of Alexandria – in the Second) proved once again the absolutely vital role played by the British Empire in the history of the Suez canal. This, by the way, did not stop large segments of the public from having a negative opinion of the British “protection” – among the Egyptian nationalists to begin with, and later, also among those in other Third World countries. It was mainly the financial aspect that gave Suez a bad name. For decades the Suez Canal Company had continued to make substantial, if not huge, profits. The canal had been a veritable “money-making machine”. For its shareholders it was their golden goose, providing regular, ever-increasing dividends at minimal annual interest. Though a part of the capital was reimbursed, shareholders continued to receive their whole dividends. Critics had a field day by invoking the image of a balance and, by placing these outflows on one side, showing that Egypt’s share in comparison was a pittance and that the sums spent every year in maintaining the canal, the workshops at Port-Saïd and the investments for its modernization (increasing the depth and width, reinforcing the embankments, etc.) were much inferior to the fortunes being sent to Europe. The Company had also accumulated solid financial reserves to meet contingencies and especially for reimbursing the capital when the concession would end in 1968. In short, this “paradise of money” had gradually turned into a “hell of unethicality”. In the 1930s and 1940s, and especially in the first half of the 1950s, critics stridently denounced the Company’s heavy-handedness, its prosperity, its policies of under-investing and its total neglect of Egyptian interests. Sometimes they expressed their ire by demonstrating in front of what had become, around Ismailia and the executives quarters in the city of Port-Saïd, some sort of colonial enclaves, in which the Europeans enjoyed a life of ease and luxury, far from sordid living conditions of the average Egyptian. In fact, such a negative perception of the Suez Canal Company has persisted till 1980-2000 and a number of French and international university professors subscribe to this view – which would seem to indicate that there is some truth in it after all. The event of 1956 and the resulting hustle by the Big Powers in the form of conferences and international missions and even by the Franco-

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British military expedition gave the critics added ammunition as it showed just how much the Company meant to the imperialists who were hell-bent on resisting any change, any movement towards national independence, be it economic or political. The affaire of 1956 was another instance of neo-colonialism at the heart of a world going through major geopolitical developments – as though there was a need to use force to protect a European imperialist tool at the heart of the Near East. Even Jacques Georges-Picot, one of the high executives of the Company, admitted a posteriori that his Board, his executives in Egypt and the majority of his directors at the Rue d’Astorg, were late to realize the power and significance of the changes sweeping across the global geopolitical landscape after the end of WWII. A victory here would have cemented the legitimacy of the Company’s presence in the isthmus and its technological, financial and managerial hold on the canal’s operations. Things would have gone back to what it was. All the concessions that it had so grudgingly granted in the course of the negotiations bear evidence to too narrow a vision. It is surprising that in spite of being so well informed, the directors failed to apprehend the nature and extent of the burgeoning nationalist sentiments in Egypt. They thought that the social unrest was simply the expression of unionism and labor protests while the British soldiers routinely suppressed the sporadic riots which broke out. Gradually, the accords which had been negotiated or were in the process of being ratified, began to lose their hold because the Egyptians, especially after the coup of 1952, began to feel that the Company was playing a double game by granting a few belated concessions without any real intention of actually changing the status quo. It was all just a way of “backtracking” by a retrograde Company which seemed to be more keen on preventing any reform process than moving forward towards newer ways of managing the day to day functioning of the firm. It is no wonder then that, as no new balance of power was forthcoming, the Egyptians found themselves with no other alternative except to take matters in their own hands. Thus, either because of its blindness or obstinacy, the Company missed the boat of History and found itself out of a job and home. This has been the opinion of numerous analysts since as early as the 1960s which has over time been taken for granted and now entered the public’s subconscious. In retrospect, the fact that once the Suez Canal Authority had acquired the experience and trained a sufficient number of executives and pilots, Egypt was largely successful in managing the canal proved that the argument saying that European managers were indispensable was fallacious4. The Egyptians have succeeded in building for 4

We refer to the dissertation of our doctorate student Ahmed Ouazzani, who presented it in the Fall 2008 at the Montesquieu-Bordeaux 4 University on the

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themselves an elite corpus of technicians and managers capable of running the new company and even of launching major new engineering programs for improving the water-way.

2. SUEZ, A SYMBOL OF MODERNITY? Faced by such convincing accusations, it seems that it might be difficult to even begin yet another analysis on a more positive note…. Still, the passage of time has somewhat soothed the resentment and redressed the bias a little – with the result that the name Suez has now a more positive ring to it. Obviously, the books published or supported by the Suez Canal Company in the years 1900 to 1950 are much too partial and talk only of its achievements, its contribution to merchant shipping and trade, and its investment in the isthmus of Suez (shipyards, townships, etc.) without a single word on its negative aspects. But now, at the turn of the 21st century, it should be possible to embark on a more comprehensive and less preconceived reevaluation of the history of the Suez Canal Company. One of the signs that things are changing is the creation of the Association du souvenir de Ferdinand de Lesseps et du canal de Suez (“Association in memory of Ferdinand de Lesseps and of the Suez Canal Company”) which, far from being some kind of “cult” of the past, or of a “hero”, has striven to put Lesseps’ chef-d’œuvre and the activities of the Company in Egypt in a more neutral light, by assembling facts, setting up archives, promoting iconographic documentation and even by financing academic (critical) studies. The final proof being that it has maintained close ties with the Suez Canal Authority in Egypt in a genuine attempt at a discerning and balanced view of History. This move towards a more “non negative” version of the history of the Suez canal forms part of the larger trend of re-writing the history of the ‘saint-simonian’ movement – of reevaluating the unilaterally “positivist” image which had prevailed for long and which had included Lesseps and his Company in a spotless movement of “progress” transplanted from Europe towards the less developed Mediterranean (and Egyptian) shores. The past two decades have seen a more balanced approach which has sought to look upon saint-simonianism as no doubt a West European force for the spread of “modernity”, but also as a current of thought plagued by contradictions and conceptual topics of The History of the Suez Canal Authority since 1956. The research travel which he completed in Egypt benefited from the support of the Association du souvenir de Ferdinand de Lesseps et du canal de Suez.

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limitations. Finally, Suez can be seen in its entirety – as a drive towards modernity, but within the framework of an economic model shaped by what may be called “the Mediterranean system” (from “Système de la Méditerranée”, the title of a small book b y Michel Chevalier which was published in 1832), a system which would henceforth make no claims to having any “universal” code of values or precepts. The canal had been one of the instruments which helped in the integration of the world’s economies5, in the construction of a new “world-economy”, to use Braudel’s term6. The notion of “modernity” has also led to a re-consideration of the Company’s investment policies. Several economists and historians (including ourselves) have gathered and reconstituted statistical data in order to evaluate the technological and economic development of the canal. Many historians of public works and engineering have scoured the archives of the first worksite of the 1860s and concluded that over and beyond the sheer number of cubic meters of earth and stone moved or dredged, the work done was indisputably “modern”. It showcased the engineering capabilities of Europe and France7, the ability to make full and astounding use of powerful and efficient steam engines (for dredging and railroad transportation) and especially, the establishment of a core group of highly skilled engineers8 in the 1950s and 1960s. This group of engineers and technicians made up its capital of experience and “technological culture”, allowing it to maintain the canal in top shape, initiate and implement improvements (electric lighting, etc.) and plan the major construction works in order to make the crossing safer, faster and easier even as ships were growing ever larger. True, these engineers had been caught completely off guard by the sudden surge of traffic at the turn of the 1950s (mainly because of the oil boom), but the programs which they developed then have proven capable of meeting the demand – to the extent that the projects which were being implemented at the time of the nationalisation were resumed unaltered by the Suez Canal Authority. Such a high standard of “technological culture” must give us pause and induces us to reconsider the sometime vehement wording of the contract of concession used to create the Suez Canal Company. With 5

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See Dennis Patrick McCarthy, International Economic Integration in Historical Perspective, London, Routledge, 2006. John H. Dunning, The Globalization of Business, London, Routledge, 1993. Fernand Braudel, La dynamique du capitalisme, Paris, Flammarion, 1975. See Dominique Barjot, La grande entreprise française de travaux publics (1883-1974), Paris, Économica, 2006. See André Thépot (ed.), L’ingénieur dans la société française, Paris, Les Éditions ouvrières, 1985.

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the coming of more amenable times, the legal, financial and the “economic model” of the concession were rehabilitated. Since the 1990s, they were seen as forming part a series of “grand projects” which were being launched the world over, either to modernize and expand public utilities in the developed countries or, in the case of the emerging nations, to install the basic infrastructure. The “delegation of public utilities”, the economics of the concession, the public economic rights, not to speak of the public-private partnerships justified the concession, even turning it “fashionable”. Still, though the treaty of concession was concluded within the framework of an “unequal balance of forces between the North and the South”, did the actual contents of the concession, its clauses and methods of implementation, really partake of the original vices, of that domineering relationship? The debate continues unabated and while the critics of the “privatisation of public utilities” and those who believed in public corporations (which, by the way, the Suez Canal Authority is) maintain their theoretical and ideological stand (completely legitimate and acceptable in a democracy), there is also a strong counter current which sees the concession as a clear step towards a new “modernity”. More and more, the management of sea ports, airports, roadways, railroads, power generation and water distribution systems are being given over to private corporations, be they public works and civil engineering groups (in France and Spain such as Vinci 9 and Eiffage, public service groups like the two French giants Suez Environnement and Veolia Environnement, which can combine energy, water10, waste, transportation, or the American Waste Management) or companies which specialize in the investments and supervision of concessions such as the Australian Macquarie. We can thus well imagine that a day may yet come soon when an Egypt with a more liberal economy may well privatize the ports of Alexandria or Port-Saïd without having to resort to some kind of Western neo-imperialism – just as the Dubaï Port Authority and its Singaporean counterpart are managing ports the world over. But to dream or “privatizing” the Suez Canal Authority would itself be seen as a provocation, considering the financial difficulties faced by the Eurotunnel Group which manages and operates the Channel Tunnel. In short, one must re-consider the concession of the Suez canal in function of a set of criteria which have changed much since the tension9

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See Dominique Barjot, La trace des bâtisseurs. Histoire du groupe Vinci, Rueil-Malmaison, Vinci, 2003. Hubert Bonin, « Le modèle français du capitalisme de l’eau dans la compétition européenne et mondiale depuis les années 1990 », in Catherine Baron (ed.), Société civile et marchandisation de l’eau. Expériences internationales, special issue, Sciences de la société, n° 64, February 2005, pp. 55-74.

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filled 1950s. What belonged to a bygone era, the private concession which had governments bow to dictates of the “Grand Capital”, has now entered the realms of “modernity” and thus requires a revision of the analyses. We can now take up the history of the concession of the Suez canal in a wider and more global context which included the railroad networks at about the same time as the Concession11, before those of the electricity grid12.

3. A PRIORITY GIVEN TO DISCUSSIONS The dichotomy between the two kinds of interpretations, one negativist and the other positivist, means that in order to avoid falling prey to blind bias, we must be extra cautious and vigilant with our re-examination of the history of the canal and of the Suez Company. The problem is all too evident: it is almost impossible to write such a book without in some way displeasing every reader who is in any way “involved” in the argument. Incidentally, this has been the fate of some of our other books also. These “histories” of some other enterprises were found to be too “positive” by the historical community, while the companies’ bosses thought them much too “critical”! We are thus well aware that we will have to live with our choices and our conclusions, both intermediate and final. Actually, we will give top priority to discussions: for every theme and every period we will weigh the economic, maritime, financial, geopolitical and managerial stakes involved. We will scrutinize the economic, sociological, cultural ideological, diplomatic and military environment. At every turn, we shall try and determine whether the Suez Company could recognize these factors, and if so, how it responded to them…. We shall also see whether there was any hesitation on its part in the face of mutations or whether it completely missed the boat sometimes. 11

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François Caron, Histoire des chemins de fer en France, volume 1, 1740-1883, Paris, Fayard, 1997 et 2005. François Caron, Histoire de l’exploitation d’un grand réseau. La Compagnie du chemin de fer du Nord, 1846-1937, Paris, Mouton, 1973. Patrick Karl O’Brien, Railways and the Economic Development of Western Europe, 1830-1914, New York, Saint-Martin Press, 1983. Dominique Barjot, Henri Morsel & Sophie Coeuré, Les compagnies électriques et leurs patrons. Stratégies, gestion, management, 1895-1945, Paris, Fondation Électricité de France, 2001. Catherine Vuillermot, Pierre-Marie Durand et l’Énergie industrielle. L’histoire d’un groupe électrique, 1906-1945, Paris, CNRS Éditions, 2001. William Hausman, Peter Hertner & Mira Wilkins, Global Electrification. Multinational Enterprise and International Finance in the History of Light and Power, 1878-2007, Cambridge, Cambridge University Press, 2008.

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In fact, there will have to be a constant, running discussion on the position of the Company in the Middle East, on its contribution to the development or, on the contrary, to the decline of imperialism. There will be many debates regarding its capacity to adapt to the changes in the Mediterranean and global economies13, the developments in global trade, the growth of shipping companies, the spurt in the transportation of material, foodstuff and petroleum products. We will also discuss the nature and level of maturity of the Company’s “geopolitical culture” – which would either allow it or prevent it from apprehending the structural mutations taking place in Egypt and the Near East from the viewpoint of the “global economy”: was it at all times an “enlightened company”, basing itself on the economic and cultural data collected by the learned people that it financed or hobnobbed with (as an active European power at the heart of Egypt)? This evidently will lead to the question of its openness, of its “cultural capital”: had it been able to evolve its set of values in step with the changing times and keep up with the ever increasing technological demands? Had it been able to live up to its initial billing as a beacon light of Progress and Modernity (saintsimonian) or had it, bit by bit “frozen” its cultural capital in the name of some glorious past, considering it as somehow “eternal”? Business history (and the institutional economic science)14 have confirmed that every large enterprise has a tendency to slide towards, what was called in the 1980s, “the corpocracy” – the formalisation of a way of thinking and mode of managing which has begun to “fossilize” because it has exhausted its capacity to reinvent itself, because it has lost its flexibility. This forces its managers to take stock and even to, if need be, shake up the company’s “corporate culture” in order to try and change its structure into that of a “learning company”15. Moreover, historians have also found that these changes are cyclic in nature, appearing repeatedly over the history of every corporation – at least in the case of those which have fought against their internal crisis…. Thus, we shall need to scan through the century to see whether the Suez Canal Company too has had to face such moments in its history – whether it 13

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See John McCusker (et alii, ed.), History of World Trade since 1450, Farmington Hills, Thomson-Gale, 2006 (two volumes). See Douglass North, Institutions, Institutional Changes, and Economic Performance, Cambridge, Cambridge University Press, 1990. See Bart Noteboom (ed.), Knowledge and Learning in the Firm, Abingdon, Edward Elgar, 2006. Mark Casson, “Entrepreneurship and business culture”, in Jonathan Brown & Mary B. Rose (eds.), Entrepreneurship, Networks and Modern Business, Manchester, 1993, pp. 34-50. Geert Hofstede, Cultures and Organisations. Software of the Mind, New York, second edition, MacGraw Hill, 1997. Mark Casson, Bernard Yeung, Anuradha Basu & Nigel Wadeson (eds.), The Oxford Handbook of Entrepreneurship, Oxford, Oxford University Press, 2006.

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has experienced the indescribable feeling that time had come to a standstill, as though it had finally attained to some degree of economic “perfection” or of the “optimum”.

4. BUSINESS HISTORY APPLIED TO THE SUEZ CASE STUDY In order to re-evaluate the history of the Suez Canal Company, we will use the methods and concepts of business history16 which have been developed and refined over the past quarter century by the community of economic historians (who have similarly reconstituted and reconsidered the history of some of the largest companies such as Siemens, British Petroleum, Unilever, Procter & Gamble17 among others – in which we too have played our humble part)18. Obviously, we will begin with the Company’s creation and its place in the whole movement which stemmed from the surging “spirit of enterprise à la française”19, which was, in this case, incarnated by 16

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See Geoffrey Jones & Jonathan Zeitlin (eds.), The Oxford Handbook of Business History. Oxford handbooks in business & management, Oxford, Oxford University Press, 2008. David O. Whitten & Bessie E. Whitten (eds.), Handbook of American Business History, New York, Greenwood Press, 1990. If pioneering books (Alain Baudant, Pont-à-Mousson (1918-1939) : stratégies industrielles d’une dynastie lorraine, Paris, Publications de la Sorbonne, 1980, Jean-Pierre Daviet, Un destin international : la Compagnie de Saint-Gobain de 1830 à 1939, Paris, Éditions des archives contemporaines, 1988. Jean-Pierre Daviet, Une multinationale à la française. Histoire de Saint-Gobain, 1665-1989, Paris, Fayard, 1989) revealed in France the new business history trend, achievements were reached with, for example: James Bamberg, British Petroleum and Global Oil, 1950-1975. The Challenge of Nationalism, Cambridge, Cambridge University Press, 2000. Wilfried Feldenkirchen, Siemens, 1918-1945, Historical perspectives on business enterprise series, Columbus, Ohio State University Press, 1999. A. Heerding & D. S. Jordan, The History of N.V. Philips’ Gloeilampenfabrieken II : A Company of Many Parts, Europese Bibliotheek, 2004. Charles Wilson, The History of Unilever. A Study in Economic Growth and Social Change, London, Cassell, 1954. Charles Wilson, The History of Unilever, volume 3, London, Cassell, 1970. Geoffrey Jones, Renewing Unilever: Transformation and Tradition, Oxford, Oxford University Press, 2005. Hubert Bonin, Yannick Lung & Steven Tolliday (eds.), Ford. The European History, 1903-2003. Paris, PLAGE, 2003. France also followed the path, with, for instance: Patrick Fridenson, Histoire des Usines Renault, 1898-1939, Paris, Seuil, 1972 (second edition, 1998). Jean-Louis Loubet, Automobiles Peugeot. Une réussite industrielle, 1945-1974, Paris, Économica, 1990; etc. Hubert Bonin, Histoire de la Société générale. I. 1864-1890. Naissance d’une banque, Geneva, Droz, octobre 2006. Hubert Bonin, CFAO (1887-2007). La réinvention permanente du commerce outre-mer, Paris, Publications de la SFHOM, 2008. See: Hubert Bonin, “A short history of entrepreneurship in France (from 1780 up today)”, in Youssef Cassis & Ioanna Pepelasi Minoglou (eds.), Country Studies in

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Lesseps. To the very circumstances of its foundation must be added elements pertaining to its cultural, economic, financial and Mediterranean environment which had conspired at its birth. The actual founding of the corporation will therefore act as the launching pad for freewheeling thoughts and discussions on its human capital (with its fund of beliefs, ideas, spirit of enterprise, etc.) and its technological and financial capital which finally led to the birth of the Universal Suez Ship Canal Company in December 1858. How to understand and truly apprehend the significance of what had occurred at that precise moment – how had Lesseps’ visionary leap in the world of shipping and global trade had turned him into a pathbreaker and a herald of a new age? Once Lesseps’ had left the scene and its pages, the rest of the book will look upon the Company’s managerial style and power structure in the context of an enterprise which was gradually turning into a “large corporation” with the statutes of a public company listed on the stock exchange. Who was the boss? The dualism between the managers of the canal who were stationed at its headquarters in Ismaïlia, at the heart of the isthmus of Suez, and the Company’s bosses sitting in its headquarters in the Rue d’Astorg, at the heart of Paris’ financial district, will have to be looked into in order to sift through the allocation of skills and the possible interchanges between these two poles. The constitution of and the changes in the decision-making echelons, with the financial and institutional managers on one side and the technical engineers on the other (including the celebrated “Ingénieur en chef”), should provide ample scope for studying the exact manner in which a multinational public utility company was administered. At the same time, the role of the board of directors will not escape our scrutiny because, on one hand, each of these leaders was in his own right a giant in the world of international trade and shipping, and on the other, because they had each worked mightily at the heart of French capitalism, with its values,

Entrepreneurship. A Historical Perspective, Oxford, Oxford University Press, 2006, pp. 65-97. Maurice Lévy-Leboyer, « Le patronat français a-t-il été malthusien ?», Le Mouvement social, n° 88, July-September 1974, pp. 3-49. Jacques Marseille, Créateurs et création d’entreprises de la révolution industrielle à nos jours, Paris, ADHE, 2000. Rondo Cameron, « L’esprit d’entreprise », in La France et le développement économique de l’Europe, 1800-1914, Paris, Seuil, 1971 (Princeton, 1961). Hélène Vérin, Entrepreneurs, entreprise. Histoire d’une idée, Paris, Presses universitaires de France, 1982. AFHE, Entreprises & entrepreneurs, XIXe-XIXe siècles, Paris, Presses de l’université de Paris-Sorbonne and AFHE, 1983. Patrick Verley, Entreprises et entrepreneurs du XVIIIe siècle au début du XXe siècle, Paris, Paris, Hachette, 1994. Emmanuel Chadeau, L’économie du risque : les entrepreneurs, 1850-1980, Paris, Olivier Orban, 1988. David Landes, The Unbound Prometheus. Technological Change et Industrial Development in Western Europe from 1750 to the Present, London, Cambridge University Press, 1967.

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its message of corporate and cultural paternalism and sponsorship20. Measuring Suez’s “weight” within the Establishment will take up the best part of several chapters dealing with its networks of influence and its “embeddedness”21 within the upper class, the business community and political circles. Its networks allowed Suez to enter the world of the “elites” – one could even say à la française – even though they included the top echelons of European shippers and high officials from Great Britain (due to the 44 per cent held by the British Crown). This should lead us to analyze the nature of the power relationships between the “stakeholders” in the life of the enterprise. The economic factor came first: what was the place given to the clients, the shipping companies? How did trade and the British firms exert their power? How were they able to negotiate changes in the tariff structure and in the fares themselves? How did they influence the planning of the maintenance, modernization and expansion programs of the canal? Were the relationships between the Company and its clients balanced? Satisfactory ? Happy ? The pressures exerted by the rising demand will be laid threadbare with the help of statistics on the growth in transit volumes. Behind the shippers were the legal experts, who also played an indirect part because the international economic law had been resorted to to define the Suez canal’s international status (the Convention of Constantinople played a key role in the 1880s). Last, but by no means least, how did the Company’s directors deal with the pressure exerted by the British Crown? A second lot of “stakeholders” was made up of the “Orientals” themselves: first, the Ottomans and then the Turks, because Egypt was more or less situated within Constantinople’s sphere of influence. But it is the Egyptians who make up the centerpiece of several chapters…. It was required that we look more carefully at their capacity to influence the decisions made by the Company, on its financial policies and obviously, on its investment policies in Egypt itself, especially in and around PortSaid and Ismailia. The issues regarding the relationship between Egypt and the Company will be a recurring theme throughout the book: at the time when the concession was negotiated, when Egypt sold its part of the capital, when nationalism began to rise and finally when it came to a head. Though British pressure and influence dominated much of

20

21

See Erik Aerts, Claude Beaud & Jean Stengers (eds.), Liberalism and Paternalism in the 19th Century, Leuven, Leuven University Press, 1990. Peter Hall & David Soskice, Varieties of Capitalism : The Institutional Foundations of Comparative Advantage, New York, Oxford University Press, 2001. Mark Granovetter & Richard Swedberg (eds.), The Sociology of Economic Life, Boulder, Westview Press, 1991, reedition, 2002.

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the time, the Egyptian government also had a say and often dealt directly and independently with the Company. At the same time, we must also see how the Company managed to give itself a veritable “Egyptian culture” and how it was able to assemble, mobilize and win over the loyalty of its labor force. We must look into how it succeeded in negotiating the contracts and the fluidity of its local staff outside the canal itself. In fact, it had been able to equip itself with some major engineering and industrial installations all along the isthmus and on the shores of the two seas – with workshops at PortSaid, control units along the waterway and a flotilla of specialized boats (mainly for pilotage and dredging). We shall also try and reconstitute how it built and nurtured its “technological culture” within its corporate culture, erecting an efficient hierarchy of engineers and technicians apt for the management of a major foreign public utility. Due to this concentration of manpower, the Company had need of a coherent human resources management policy in Egypt. We shall take up and elaborate on this policy’s salient points as and when they appeared. In fact, the Company succeeded in gathering such a fund of local experience and skill that it became a veritable “Egyptian enterprise”. This meant added responsibilities – social responsibilities of course, but also cultural and educational responsibilities as well. We shall therefore also discuss the manner in which it went about implementing its unique brand of “responsible capitalism”22. At the point where these forces met and balanced each other, the Company of Suez could plan and implement its policies for the maintenance, modernization and enlargement (increasing the width and depth) of the canal. We shall need to come back on several occasions to the material investments of the Company, on the schedules, their modalities and their consequences on the transit and world shipping. Therefore, several pages of this book will revisit the history of shipping, with figures detailing draughts and tonnage. The ever- growing roster of ships’ names is symbolic of the expansion of the canal’s clientele. Understandably, there will be several chapters dealing with financial questions. The constitution and evolution of the capital and long term resources (loans, putting in reserve recurrent funds), the growth in receipts (in keeping with the escalating traffic), etc. will be evaluated in terms of net profit, allocation of funds and the returns realized by

22

See Steve May, George Cheney & Juliet Roper, The Debate over Corporate Social Responsibility, Oxford, Oxford University Press, 2007. José Allouche, Corporate Social Responsibility, volume 2, Economic-Financial Responsibility and Stakeholders, Basingstoke, Palgrave-MacMillan, 2006. Judith Hennigfeld, Manfred Pohl & Nick Tolhurst, The ICCA Handbook on Corporate Social Responsibility, Chichester, England, J. Wiley & Sons, 2006.

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shareholders. Had the canal been a sound overseas investment? Had it lived up to the aspirations of its ‘saint-simonian’ creators? We shall closely follow its ups and downs over the first few years as no major public transport utility (nor any big factory for that matter) can churn at full steam from the word go or turn in profits right from the start23. We will then continue to keep watch as the firm begins to grow and prosper, borne on the rising winds of global ‘trade’ and shipping – all the way till the final denouement in the decade immediately after WWII. In the process, we shall evaluate the Company’s “fortune” just prior to its nationalisation, its financial reserves, the estimated value of the canal (necessary because of the termination of the concession), its portfolio of liquid investments as well as the creation and expansion of a portfolio of financial investments.

6. SUEZ IN HISTORY The final chapters will look at the canal from the viewpoint of World History, at a Company caught in one of those defining Moments in mankind’s history: the final bloom of imperialism midst the gathering storms of nationalism. How did it look upon these ideological and geopolitical complexes? Whom or what did it turn to for support in these trying times? And how did it react to this “jolt of History”, when time seemed to suddenly run out in 1956 with the spark of nationalism, the fire of the military expedition and the tinder of the expulsion of the Company’s managers from the isthmus? Actually, it was then that History, led by global diplomacy and international power relationships, seemed to have bypassed the Company. After the fall of Lesseps’ statue at Port-Saïd, the firm exited the world’s stage not with a bang, but with a whimper of a negotiation for some compensation. It is therefore not easy to evaluate Suez’s “worth” once the canal had been lost. The final two chapters deal with Suez’s corporate image and with the brand name Suez itself on the Paris stock market. But more importantly, they should provide a solid base for a good case study of the Company’s corporate strategy: how to bring about a complete reshuffling of its portfolio of strategic activities? How to reallocate the available resources in such a manner that they are neither too risky, nor too detrimental to its shareholders? And first of all, why at all continue with Suez? Soon after its merger with Gaz de France in Autumn of 2008, Suez commemorated its 150th anniversary by publishing a solid, well23

About railways, see François Caron, « Les compagnies face au marché financier » and « L’échec financier », in François Caron, Histoire des chemins de fer en France, volume 2, 1883-1937, Paris, Fayard, 2005, pp. 345-376 & pp. 709-748.

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written book on its history. Suez had lived through two nationalisations, through two major strategic re-deployments (first from the canal to finance and banking24, and then from money to public utility)25 and two major spatial re-deployments (from Egypt to France and from Paris to Europe26 and the world). Jacques Georges-Picot27 and his team, bigger and stronger now, have set themselves the task of reviving Lesseps’ spirit and mobilizing the moneys accumulated for the construction of a new enterprise. We have set ourselves the task of sketching the contours and issues of this very challenge.

24

25

26

27

Hubert Bonin, Suez. Du canal à la finance (1858-1987), Paris, Économica, 1987. Hubert Bonin, Indosuez. L’autre grande banque d’affaires (1975-1987), Paris, Économica, 1987. Hubert Bonin, « Suez, de la finance aux services collectifs : analyse du redéploiement stratégique des années 1990 », in Marché(s) & hiérarchie(s), Toulouse, Presses de l’Université des sciences sociales de Toulouse 1, 2000, pp. 389-403. Hubert Bonin, « Suez toward a European enterprise, 1982-2000 », in Harm Schröter (ed.), The European Enterprise. Historical Investigation into a Future Species, Berlin, Springer, 2008, pp. 169-182. See: Jacques Georges-Picot, Souvenirs d’une longue carrière. De la rue de Rivoli à la Compagnie de Suez (1920-1971), Paris, Comité pour l’histoire économique & financière de la France, 1993 (edited by Hubert Bonin and Nathalie Carré de Malberg).

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THE SUEZ CANAL AND THE GROWTH OF FRENCH CAPITALISM This part will tackle the issue of “Progress” because the meeting of a country (Egypt), a territory (the Suez isthmus), techniques and engineering, and one man (Lesseps) led to some kind of a “revolution” which eased considerably worldwide transportation and achieved a dream which had been entertained since ancient times. The issue of the mid-century was expansion, progress, growth, industrial revolution, railway revolution, shipping revolution. Several actors struggled to insert the Near East into the tide of western progress, in particular in Egypt or the Levant (present Lebanon). The Mediterranean area was raised as a challenged to set up an intense connexion of shipping lines where harbours competed into modernisation (Barcelona, Genoa, Marseille1, then the new Greek ones), all converging somehow to Alexandria or to Constantinople. The French Mediterranean façade fought to be interconnected to fresh industrialised regions, around Lyon and Saint-Étienne, Paris or the northern mining, textile and metal-working platforms: in Marseille, Sète (or Cette) and a few little ports (La Ciotat, La Seyne, etc.), bankers, traders and industrialists shaped islands of industrialisation, for instance for shipyards, steammachines, food-stuff. On a broader scope, France itself gathered momentum to resist British hegemony, and joined Belgium, Catalonia or the Ruhr to determine some margin of manoeuver against British industrial firms and traders. Last, Europe emerged as thoroughly evolving from an agrarian type of economy towards urbanisation,

1

Roland Caty, Éliane Richard & Pierre Échinard, Les patrons du Second Empire. Marseille, Paris-Le Mans, Picard-Cénomane, 1999. Xavier Daumalin & Olivier Raveux, “Marseille (1831-1865). Une révolution industrielle entre Europe du Nord et Méditerranée”, Annales HSS, January-February 2001, n° 1, pp. 153-176. Olivier Raveux, Marseille, ville des métaux et de la vapeur au XIXe siècle, Paris, CNRS Éditions, 1998. Gérard Chastagnaret & Philippe Mioche (eds.), Histoire industrielle de la Provence, Aix-Marseille, Publications de l’Université de Provence, 1998. Louis Pierrein, Industries traditionnelles du port de Marseille. Le cycle des sucres et des oléagineux, 1870-1958, Marseille, 1975.

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industrialisation, modern shipping and wholesale trading, alongside the first industrial revolution2. Entrepreneurship became the masterword3, and a new dynamics boosted capitalism4 and world trade5, where services6, and therefore transportation and transit facilities played a key role. The history of the creation of the Suez company expressed therefore a trend towards modernity and “progress”: it was a consequence of this tide, but it soon became a symbol of this revolution. The firm, the canal and Lesseps ended embodying “Progress”, far more than a mere railroad, inland canal, or tunnel. There was some kind of a “before Suez” and an “after Suez”. It expressed a trend of ideas (progress, expansion, Saint-Simonian corpus of theories and expectations), a trend of technical innovation, a trend of the structuration of engineering, and trend of entrepreneurship. Steam machines (for dredging), new techniques of public works (for harbour walls in Port-Saïd), metal-working (in the workshops of Port-Saïd), engineering (with the effects from physics and maths progress) were thus involved in the Suez construction site. It too belonged to the first industrial revolution, in the midst of its deployment, almost at the same date that the Crystal Palace opened for the London Exhibition of 1851, and before the Eiffel Tower (1889) closed the era of the first industrial revolution. Lesseps and his team succeeded in conceiving a “strategy” and in combining innovation, engineering and money to contribute to the history of big enterprise. The very date of the foundation of the Suez company was located within a blessed decade – even if economic and business historians are always afraid on insisting on “peculiar times” or “eras” because they are well aware that such “blessed eras” are in fact succeeding themselves, 2

3

4

5

6

David Landes, The Unbound Prometheus. Technological Change et Industrial Development in Western Europe from 1750 to the Present, London, Cambridge University Press, 1967. Rondo Cameron, “L’esprit d’entreprise”, in La France et le développement économique de l’Europe, 1800-1914, Paris, Seuil, 1971 (Princeton, 1961). See Hélène Vérin, Entrepreneurs, entreprise. Histoire d’une idée, Paris, Presses universitaires de France, 1982. AFHE, Entreprises & entrepreneurs, XIXe-XIXe siècles, Paris, Presses de l’université de Paris-Sorbonne and AFHE, 1983. Patrick Verley, Entreprises et entrepreneurs du XVIIIe siècle au début du XXe siècle, Paris, Paris, Hachette, 1994. Mark Casson, “Entrepreneurship and business culture”, in Jonathan Brown & Mary B. Rose (eds.), Entrepreneurship, Networks, and Modern Business, Manchester, Manchester University Press, 1993, pp. 34-50. Norbert Élias, La dynamique de l’Occident, 1976. Fernand Braudel, La dynamique du capitalisme, Paris, Flammarion, 1975. Patrick Verley, L’échelle du monde. Essai sur l’industrialisation de l’Occident, Paris, Gallimard, 1997. John McCusker (et alii, eds.), History of World Trade since 1450, Farmington Hills, Thomson-Gale, 2006 (two volumes). Ronald-Max Hartwell, “The service revolution: The growth of services in modern economy”, in Carlo Cipolla (ed.), The Industrial Revolution, 1700-1914, Glasgow, Hassocks, 1986.

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each one, endowed with its middle and long term consequences on the structure of global economy… The first half of the 19th century sheltered successive waves of “take-off”7; transportation had already been a leverage to growth, mainly in railways8, but also in shipping (with the clippers and the first steamers)9; and the “economy of networks” had jumped towards a more intensified map. And uncertainty prevailed among businessmen either from the 1860s in some industries or regions, or obviously during the Great Depression10 of the 1880s-1890s. We might therefore consider the 1850s as one of this “blessed era” of growth, despite recessions and crisis – and one occurred precisely in 1857 all over western Europe. Table 1. The 1850s as blessed decade? Rates of French growth 1820-1830 1830-1840 1840-1850 1850-1860 1860-1870 1870-1880 1880-1890 Gross interior production

1.6%

2.6

1.2

2.3

1.7

0.2

1.5

Industrial production

2.8%

3.1

1.2

3.2

2.2

1.7

1.6

4.3

4.6

4

4

6.1

2.4

1.9

French exports in volume

Figures picked up in J.-C. Asselain11, op. cit., pp. 142 and 144.

Numerous companies, be promised to a durable life, either in direct, or through the future of their equipment and facilities, or be 7

8

9

10

11

François Crouzet, The First Industrialists. The Problem of Origins, Cambridge, Cambridge University Press, 1985. Pierre Rosanvallon, Le moment Guizot, Paris, Gallimard, 1985. Jean Vial, L’industrialisation de la sidérurgie française, 1814-1864, Paris-La Haye, Mouton, 1967. Charles Morazé, Les bourgeois conquérants à la conquête du monde, 1842-1890, Paris, Armand Colin, 1957; reedition, Brussels, Complexe, 1985. François Caron, Histoire des chemins de fer en France, volume 1, 1740-1883, Paris, Fayard, 1997 et 2005. François Caron, Histoire de l’exploitation d’un grand réseau. La Compagnie du chemin de fer du Nord, 1846-1937, Paris, Mouton, 1973. Patrick Karl O’Brien, Railways and the Economic Development of Western Europe, 1830-1914, New York, Saint-Martin Press, 1983. David Armine Howarth, Stephen Horwarth & John Haskell Kemble, The Story of P & O: The Peninsular and Oriental Steam Navigation Company, London, Weidenfeld & Nicolson, 1986. Maurice Lévy-Leboyer & François Bourguignon, L’économie française au XIXe siècle. Analyse macro-économique, Économica, 1985. Yves Breton, Albert Broder & Michel Lutfalla (eds.), La longue stagnation en France. L’autre grande dépression, 1873-1897, Paris, Économica, 1997. J.-C. Asselain himself used: Jean-Claude Toutain, “Le produit intérieur brut de la France, 1789-1990”, Économies et sociétés, 1997, 11, pp.30-57. And: Maurice LévyLeboyer & François Bourguignon, L’économie française au XIXe siècle. Analyse macroéconomique, Paris, Économica, 1985, pp. 328-337.

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condemned to disappear earlier or later, were born during the 1850s. New modern capitalism benefitted from a few beacons. Banks took part to this bloom: if the Pereire brothers’ Crédit mobilier, which was born in 1852, collapsed in 1867, it served as a model for several “modern joint-stock” banks all over Europe; if Comptoir national d’escompte de Paris, one of the ancestor of BNP Paribas, had been created in 1848, it lost its State shareholder and became a thorough modern and private joint-stock bank in 1857 under the name of Comptoir d’escompte de Paris, immediatly rushing to establish itself in Asia, East of Suez12. And Crédit industriel & commercial (CIC) which was created in 1859 is still alive today. Compagnie générale des eaux, which was to open and managed water networks, was born in 1853 and has become today a world giant for water and public services management (under the name Veolia Environnement, with still a French affiliate Compagnie générale des eaux). The Second Empire regime imposed an authoritarian amalgamation of railway companies into six main firms, in 1852 – Compagnie du Midi, PLM (Paris-Lyon-Marseille, Compagnie du Nord, Compagnie de l’Est, Compagnie de l’Ouest, Paris-Orléans – which lasted till 1937 and the creation of State-owned SNCF, but their railtrack networks survived within this SNCF. We can thus consider that the decade of the 1850s was some privileged “moment” in French and European economic and business history13, with a yearly rate of growth reaching 3.75 per cent or even 3.94 per cent for French GNP; and Suez joined the trail, even leading it perhaps. But one more important clue was the acceleration of the insertion of French economy into world growth, through the “opening” of its trade. The creation of the Suez company and the will to open the Suez canal expressed such a move towards a more integrated worldwide economy, which could impulse French integration into international trade and shipping flows, as signs of a “proto-globalisation” process. Suez therefore was conceived as a leverage to integrate French economy into large Mediterranean, Middle Eastern and Australasian trade areas, as an impulse to the creation of a new “system” were firms would deliver goods more for exports abroad in comparison with local and national markets, thus paving the way for what economists of

12

13

Hubert Bonin, “Le Comptoir national d’escompte de Paris, une banque impériale (1848-1940)”, Revue française d’histoire d’outre-mer, tome 78, 1991, n° 293, pp. 477497. Even macro-economist historian J.-C. Asselain dared shaping these 1850s when he enhanced the resiliency and intensity of growth during the decade : Jean-Charles Asselain, “1850-1960 : l’illusion de la puissance”, in Florence Bourillon, Philippe Boutry, André Encrevé & Béatrice Touchelay (eds.), Des économies et des hommes. Mélanges offerts à Albert Broder, Paris, Bière, 2006, pp. 139-156.

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Table 2. Rate of opening of French economy: part of export within GNP 1819-1821

4.1

1829-1831

3.9

1839-1841

5.5

1849

6.5

1849-1851

7.4

1850

7.4

1851

7.8

1852

8.5

1853

8.3

1854

8.5

1855

8.5

1856

9.2

1857

9.8

1858

10.9

1859

11.3

1859-1861

10.9

1860

10.9

1867-1869

12.9

1879-1881

12.9

1889-1891

12.9

Source: J.-C. Asselain & Bertrand Blancheton, “Dynamique de l’ouverture internationale”, Économies et sociétés, AF n° 32, 1/2005.

industry were to be calling “economies of scale”, which were supposed to reduce costs of production, to increase productivity – even if this concept appeared one century later –, not even taking into account lower coast of supplying through networks of procurement overseas. The inauguration of the international exhibition in Paris in 1855 provided another sign of the renewal of the connections between France and the world economy, even if other ones would follow later on (in 1867, and more famous, in 1889 and 1900 !). The creation of the shipping line Messageries impériales in 1852 – to become Messageries maritimes14 afterwards – also symbolised the pushing strategy to expand 14

Marie-France Berneron-Couvenhes, Les Messageries maritimes. L’essor d’une grande compagnie de navigation française, 1851-1894, Paris, PUPS-Presses universitaires de Paris-Sorbonne, 2007.

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French commercial influence throughout the areas of the Mediterranean, Atlantic and Indian Seas, all the more because it bought out a few shipyards to set up in 1855 Société des Forges & chantiers de la Méditerranée, which became a key tool of the rejuvenation of French merchant fleet. And both naval firms took a huge profit from the opening of the Suez waterway indeed. These very years 1850s-1860s benefitted therefore from a global cast of mind set by the Napoleonic political, business and cultural circles, which promoted a global outlook about the commercial evolution of Europe, as they pushed to consider it more and more within a worldwide framework, through a conception of general trade imperialism – and even of “imperialism of free trade”: “The global ambtions of the Second Empire were one of its main features, and the regime’s overseas imperialism should be viewed as an aborted attempt to build a French ‘free trade empire’ on a global scale, rather than the first steps towards the creation of the more secular and protectionist empire of the Third Republic. [...] Chevalier believed that the intensification of exchanges of commodities and ideas – encouraged rather than liberated by the State – was one of the main sources of economic growth.”15 Lesseps was only part of this scheme, as a key actor and leverage to the growth of shipping, but also as a mere reflection of a mindset which was being more and more clarified, with durable effects on French entrepreneurial initiatives. What business historians have to avoid above all is to draw their “story” at the center of world history… Sure they have to reconstitute the entrepreneurial “saga” of the company considered, the role played by “heroes” like Lesseps. But they have above all as a primary mission to insert the story of each firm into the global history of business and economy, to “give sense” to it and help understand the circumstances of the birth of the company, the originality of that latter, and its contribution to growth. This first part will thus retrace how Lesseps and his team were led to take the initiative of founding the Suez company. Their Strengthes were imagination, entrepreneurship spirit, the legacy of previous projects, and corpus of ideologies in favour of Mediterranean and world expansion. Their Weaknesses were to be measured against the very hegemony of British economy on industry and on worldwide shipping and trade. The Opportunities were to be found among the connections between Lesseps and Egyptian leaders, the creation of larger banking and financial market in Europe, and the upsurge of portfolios of engineering skills. The Threats were brought by uncertainties of investors’ trust into financing such a project and the 15

See David Todd, “The second global empire: Michel Chevalier and the French ‘imperialism of free trade’“, in Pierre Singaravelou (et alii, eds.), The Internationalisation of the History of France, 1750-2000, Paris, to be published.

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legal arguments about the statutes of the concession of the canal. We could then assess the first stage of the history of the Suez company along side such a “SWOT matrix”, as business strategists use them today. But even rationalised approaches and case studies cannot overcome the immaterial aspects of economic and business history, that is when time of History seems to be accelerated by voluntarist investments and intense risk-taking: the 1850s decade might appear on that level as a springboard for French entrepreneurship16, in which the history of the Suez canal took place, thus explaining why this part of our book might appear altogether as a solid business history and as a saga story dedicated to the valuation of Ferdinand de Lesseps. Even as a “cold-minded” historian, even if this history has been inserted by numerous academics within the history of “imperialism” and of the European hegemony over Egypt, these chapters had to insist on the basic values of entrepreneurship, risk-taking, Lesseps’ character, vision and achievements, and finally on the convergence between one man or one team, a development of European finance, and a portfolio of engineering skills which altogether paved the way to the emergence of the Suez company as a leverage force to a European and thereafter worldwide “open economy”17.

16

17

See Hubert Bonin, “A short history of entrepreneurship in France (from 1780 up today)”, in Youssef Cassis & Ioanna Pepelasi Minoglou (dir.), Country Studies in Entrepreneurship. A Historical Perspective, Oxford, Oxford University Press, 2006, pp. 65-97. Emmanuel Chadeau, L’économie du risque : les entrepreneurs, 1850-1980, Paris, Olivier Orban, 1988. See Hubert Bonin, “Les vertus de l’économie ouverte?”, in Bertrand Blancheton & Hubert Bonin (eds.), La croissance en économie ouverte (XVIIIe-XXIe siècles). Hommages à Jean-Charles Asselain, Bruxelles, Peter Lang, 2009, pp. 13-42.

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FERDINAND DE LESSEPS FROM HERO TO ENTREPRENEUR The story of the Suez Canal Company was identified intimately to Ferdinand de Lesseps, its conceiver and creator, as has been the case for most of the “heroes” who contributed to the start of future and durable big corporations; he symbolized and still symbolised the emergence of a capitalistic and entrepreneurial adventure which transformed itself into a success story – up to 1956 for the Suez Canal Company and up to now for what was called afterwards the Suez Financial Company, the Suez Company (Compagnie de Suez) and last “Suez”. Sure, Lesseps was not offered the (eternal?) triumph with which the engineer and entrepreneur Eiffel benefited thanks to the Eiffel Tower… But he got his statue at the entrance of the Suez Canal in 1899 till its upheaval in 1956 by the Egyptian Nationalists. This very artistic fate explains that Lesseps1 could be perceived as the hero of some kind of a “myth” of entrepreneurship within the internal “legend” of the Suez Company (almost up to the mid-1980s): he does belong to the De Viris Illustribus gallery which welcomed the visitors to the Suez headquarters, rue d’Astorg in Paris, up to the 1990s. Like the Schneiders at the Creusot industrial offices or at the headquarters of Schneider & Co rue d’Anjou in Paris (from the 1830s to the 1960s), or like Francis Bouygues (from the 1950s) at the still prospering public works and construction firm Bouygues, he had acceded to the glory of the “founding fathers” of some parts of French capitalism – although he missed the access to a dedicated museum, conversely to Henry Ford I, lodged at the museum of the Ford family and firm near Detroit…

1

Few books are in fact available about Lesseps; see: Charles Robert Longfield Beatty, De Lesseps of Suez. The Man and His Times, New York, Harper, 1956. Charles Robert Longfield Beatty, Ferdinand De Lesseps, A Biographical Study, London, Eyre & Spottiswoode, 1956. Charles Robert Longfield Beatty (& Henri Thiès), Ferdinand de Lesseps. Biographie, Paris, Les Éditions mondiales-Del Duca, 1957. Georges EdgarBonnet, Ferdinand de Lesseps, le diplomate, le créateur de Suez, Paris, Plon, 1951. Ghislain de Diesbach, Ferdinand de Lesseps, Paris, Perrin, 1998.

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1. SUEZ AND THE GLORY OF FERDINAND DE LESSEPS The second half of the 20th century has been witness to such a deluge of technological innovations, and engineering marvels have begun sprouting up with such regularity that people today hardly give them a second glance. In France, construction fever reached its peak during the “Glorious Thirties”, which saw a spew of major national projects being initiated and completed: the Génissiat Dam (on the upper Rhône), which came to symbolize the “Reconstruction”, the installation of nuclear power plants, the commissioning of the TGV, and last but by no means least, the Channel Tunnel (about which the Suez Finance Company too had attempted the task in as early as the 1960s). “By its very excesses, and even more by its complete dependence on private funds, the enterprise (the Chunnel) reminds us of the Suez canal. Let us hope that it will end by embarrassing the naysayers and the prophets of doom whose minds have been darkened by shades of the Panama canal”2 : Even with negative undertones, the journalist’s comment only confirms the fact that our memories still reverberate with the sound of excavators and cement mixers. Since Suez, men have dug the Kiel canal and the Panama canal at the beginning of the 20th century, the Great American Lakes have been linked and the Saint-Laurent seaway was opened in 19551959. Closer home, the French have tamed the Rhône and Rhine, diverted the course of the Durance and dug the impressive Bas-RhôneLanguedoc canal. But for now, the reader must shake off all knowledge of these massive technological and engineering achievements and place himself squarely in the middle of the 19th century, a time when all these were but hydraulic dreams, a time without any of today’s machinery, but a time alive with the passion of pioneers: “For the first time we saw a man with the power to mobilize enormous financial resources change the very fabric of society with nothing more than the power of an idea.”3 These words by Drumont regarding Émile Pereire – the railways and bank builder – could be applied as well to Ferdinand de Lesseps. The Suez canal had had no precedent; it boggled the imagination; it sought to outdo the mighty Pharaohs themselves. These ancient monarchs had linked the Bitter and Timsah lakes to the Nile, but all that remains of their work today are some crumbling archeological traces. We now begin to understand the vision and audacity of Lesseps the man;

2 3

Yves Cintas, weekly L’Express, 10 January 1986. Édouard Drumont, at the death of Pereire in 1875, in Jean Autin, Les frères Pereire. Le bonheur d’entreprendre, Paris, Perrin, 1984, p. 333.

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celebrating thus “The Genius of Man”4, the poet likened it to the divine essence itself and compared it to Antiquity’s mightiest legends: We have seen him but lately, a gentleman who, In his attempt to make his dreams come true, Dared put his finger on God’s own design… It was grand, it was great and of daring sublime. Ferdy de Lesseps had the abysmal gall Of changing the plumbing in God’s great hall! Wrought by Him in iron and steel, He shook the old world, turned it head over heel. Sure of his mission, he fought man to man, Attacked or scorned, he gave them a damn. In the path of his duty Ignorance stood tall, Barring his way and plotting his fall – But Lesseps unmoved, with a smile on his face Forged straight ahead at a blistering pace. His life is a battle, a fight without quarter, He gets what he wants, he will not barter. The Turks tried his plans to quickly unravel, The sands his work to bury and en-gravel – He vanquished them all, nature and man […]. England unhappy that a Frenchie should get Such glory and fame for his country and name, Refused to believe and called it a shame. But the slurs only served to strengthen his will, And the blows only made him grow stronger still! Like a rock in the midst of storm and fire, Like a lotus in the midst of mud and mire, He conquered them all, when his canal was built, A passage to India, for the desert some silt! […] The Corral Sea could now frolic and play With the Sea of Pearls by night or day. The Canal is open, the world can only stand Speechless with wonder at a deed so grand. Tho’ work still remains on the canal and port, Who can begrudge or cast a retort? Let us stand and applaud Lesseps and his deed, It took ten years, a marvel indeed!

Moreover, in 1861, the French Academy launched a poetry contest to commemorate this stupendous achievement: “The first idea, progress, the future of this massive enterprise in bringing European civilization to the shores of Asia.”5 The result of this contest was an ode to Lesseps:

4 5

Caroline-Eugénie Puissan, Le Génie de l’homme, Paris, 1881. Speech by Villemain, permanent secretary of the Académie française, at its meeting on 23 August 1860.

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Here was a hero who would never retreat, Marching till the end, not missing a beat – His name very soon was destined to resound, ‘De Lesseps, de Lesseps’, with cheers all round. When the prince of the land sat pensive and bland, This Frenchman addressed him with hat in hand: ‘When heroes begin on their laurels to rest Forgotten soon is their glory and zest. Of your reign if you would sweet memories remain Then flex your sinews and work the brain. The people of today are all wont to say, The best kings are those who work all day! […] You have in your hands the wherewithal To outdo the pharaohs, the Romans enthrall Push back these sands which your lands devour And make of this desert a fragrant flower! By forging new paths, bridging distant shores, Bringing peoples together and opening new doors, You will reduce by half the width of the world […] To work! To work! O comrades from France, Let us stoop to conquer, make most of this chance. Your mighty fathers had come all this way… Be firm like them and like them hold sway. The pyramids themselves bear witness to your deeds And 4,000 years of history looks on’ 6.

This poetic immortality – Lesseps in the legend of the centuries – was solidly bound in leather for posterity when the poem was included by Flammarion in its popular anthology “Auteurs célébres”; the catalogue of this series announced in the 1880s the publishing of this ode Les origines du canal de Suez; and thus the poet rubbed shoulders with such luminaries as Sandeau, Gautier, Maupassant, Richepin and Malot, then popular novelists and poets. What Jules Verne could only have imagined as science fiction, Lesseps had accomplished as solid fact and he reached therefore some kinf of actual popularity whicc was rooted deeply in public opinion at times when popular books and press articles were key medias to acceed to fame and glory. The modern historian does not let himself be carried away in admiration and he would rather see Lesseps as more of an agent of economic and diplomatic forces7, as a skiff, carried by larger and deeper currents swiftly accelerating towards a Euro-Asian confluence, the chance incarnation of a historic necessity. Even without Lesseps the canal would 6

7

Henri de Bornier, who won over 68 candidate poets in 1861. From: H. Poydenot, The Suez Canal and French poetry, mimeographed brochure, 23 May 1953. See Jacques Thobie, “La dialectique forces profondes-décision dans l’histoire des relations internationales”, Relations internationales, n° 41, 1985, pp. 28-38.

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have been dug sooner or later; he was more like a cog in the wheel of Progress, propelled forward by the inexorable march of civilization. Others before him, from as early as the first half of the 19th century, had thought of digging such a canal, but it was only when the economy had attained a sufficient maturity that the enterprise became not only attainable, but almost inevitable. The advances made during the first industrial revolution gave Lesseps the technological, financial and intellectual tools without which he could not have conquered the desert. Historically, Lesseps was only a part of a group of forceful entrepreneurs who pushed France into a transformational epoch. The “great man” belonged to a team and an era, and the secret of his success must be unearthed from under the economic and psychological landscape of the times. As the poet himself admitted: For You to accomplish! The time is nigh, Nothing is beyond the Science of today, It holds fire, the winds and the tides in its sway! 8

The primacy of the nexus of economic forces over any individual ingenuity was proved by the miserable failure of Lesseps’ attempt to dig the Panama canal. “Intoxicated with success, heady with the lust for battle, he found no other meaning in life than to undertake tasks thought to be impossible. Wooed on every side as the inevitable and indispensable leader, how could he resist the call of something which he considered to be his duty, the expectations of the elite, the lure of the creative urge, the siren call of taking up, at the age of 75, the grandest enterprise of the age, perhaps of all time? Thus he undertook Panama.”9 Lesseps was defeated by the tropical diseases which decimated his engineers and labourers, by persistent landslides which perplexed his best geologists, by the sheer volume of earth which had to be moved to dig a canal without locks. To top it all, the Great Depression eroded the Parisian money market and prevented the Panama Company from raising the capital required to build a canal with locks. The end came in February 1889, the Company was liquidated and man was obliged to bow before forces beyond his control or ken. Yet, these “greater forces” which lay behind the giant strides taken in the years 1854-1869 (that is, from the concession granted by Egypt till the inauguration of the canal), “owed greatly at times to the personalities and individual merits of some key human protagonists in order to be expressed and translated into decisions, acts and deeds” and the “making of

8 9

Bornier’s poem, quoted above. George Edgar-Bonnet, Ferdinand de Lesseps. Après Suez, le pionnier de Panama, Paris, Plon, 1959, preface.

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history through the bias of ‘great men’”10. The impact of these economic forces could be delayed or precipitated by quirks of human nature and history. Though ultimately inevitable, their effects may be modified by the individual. Man and these “time-forces”, locked together, dance through time to the tune of history. Lesseps became therefore some kind of a hero in historical memories because, far larger than his very shoulders, his entrepreneurship and skills elevated him to the position of a symbol for economic forces which tended to rebuild the configuration of the world, through the reshaping of maritime transport. At first view, Lesseps seems no more than an ordinary Frenchman, a middling diplomat in a family of middling diplomats. He did not belong to any of the big, aristocratic dynasties or the “grande bourgeoisie” which then occupied the key posts in the French Foreign Office. He was a modest diplomat who rose to a consulship and finally was appointed ambassador to Madrid and Rome. But this lasted for two years only – he was recalled to Paris in 1849 when his conciliatory stand regarding the tussle between the Republicans of Mazzini, who held Rome, and the French militants who wanted to re-establish the Pontifical monarchy angered the French powers. His career in shambles, he retired to his manor house in the Berry11 region (in the center of France). In fact, at that point in time, it was his brother who seemed destined for greatness: in short course, he was made a director at the Foreign Office, a plenipotentiary minister and finally, a senator ! But strange are ways of Fate because the five years of forced retirement had Ferdinand de Lesseps dreaming and pondering over the prospects of an Egyptian canal. As he put it: “I have been accused of being a dreamer […]. But dreamers are not such a bad lot. A little imagination makes a fine leaven for this heavy dough of human affaires. It is good that man has the possibility of freeing his spirit through this window of the ‘unfeasible’ and the ‘titanic’. That, believing all to be possible, he would at least attempt the impossible. Experience will all too soon puncture his illusions with the nails of reality, but his labors will always retain something of the grand.”12 Was thus Lesseps only a dreamer “à la Jules Verne”? A. Lesseps started to consider the potentialities of Egypt Then, Lesseps grabbed a momentous opportunity: In 1826 he had begun his career as assistant consul in Alexandria, where he rose to become a vice-consul and finally consul. Between 1832 and 1835, he had 10

11 12

Jean-Claude Allain, “Le groupe dirigeant dans la conduite des relations internationales”, Relations internationales, n° 41, 1985, p. 79. Georges Edgar-Bonnet, Ferdinand de Lesseps, op. cit., 1951. Lesseps, reception at the Académie française, 25 April 1885, in G. Edgar-Bonnet, op. cit, 1959, pp. 101-102.

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aligned himself with Mohammed Saïd, the viceroy’s son; when Saïd succeeded Abbas to the vice-regency in 1854, and as consequence, became ruler of Egypt, a quasi-autonomous province of the Ottoman empire, Lesseps took the opportunity to re-open the project of a canal through the Suez isthmus; his meeting of 15 November 1854 resulted in the first “firman” issued by the new viceroy: the treaty of concession of 25 November 1854 which gave Lesseps the authority to begin work on the canal. Lesseps’ friendship with Saïd played a crucial role in keeping him afloat during the arduous months ahead. He made several trips with Saïd – as much in the name of friendship as to keep the viceroy’s faith intact in the project and to bolster his confidence in the face of his Turkish and English adversaries. In 1857 they made a trip to Sudan, after which Lesseps wrote: “The viceroy is again full of confidence and no one has as yet tried to shake his faith.”13 The economic history of the world is all too often not much more than a collection of the exploits and stories of individuals who have used their personal contacts or skills to push through the required legislations and then made haste to get them financed by willing entrepreneurs. For example, the Panama Canal Company owed its existence to Wyse, who obtained the rights given by the Colombian government. Nothing as yet indicated that Lesseps had in him the iron required in a project leader ! As it was, he could have easily contented himself by becoming the indispensable (and expensive) link between any future canal company and the viceroy, using his good standing to quietly line his pockets. Lesseps’ circle of influence in France was limited, and it was only through his brother that he could touch diplomatic levels of any eminence. His contacts with a network of dynamic entrepreneurs garnered for him the support of the Bonapartists who were on the lookout for ways to fill the imperial coffers. Even so, it was only in 1869 that he was made the “official candidate” of the Bonapartists for the legislative elections which saw him quickly humbled by his rival Gambetta. It is evident that Lesseps’ renown and his influence on the national economy were the consequence of his achievements at Suez rather than the cause of his monumental success. In fact, it was Lesseps’ unaided acumen which transformed his personal relationships in Egypt into a coherent project. The idea itself had been mooted as early as 1821 by French engineer Adolphe Linant de Bellefonds. Lesseps had discussed it with Bellefonds himself when he had been posted at Alexandria. He pondered over it during his “retirement” of four years (1849-1853). In October 1855, he assembled a group

13

F. de Lesseps, letter of 7 March 1857. In Lettres, Journal et Documents pour servir à l’histoire du canal de Suez, second series, Paris, 1875-1881, volume 1857-58, p. 29.

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of French and European experts to study the proposal. In November 1855 they made a trip to Egypt and submitted their report at the end of 1856. Lesseps’ pragmatism gave the whole endeavour an even chance of success. In the case of Panama, it was the fateful decision to do without any kind of locks which had undermined the entire project. “Lesseps’ desire to dig a veritable Bosporus, whose width would allow ships ample space to navigate, cross each other and turn around, slowly gave way, in the face of financial constraints, to the building of a canal which would be just wide enough to give larger ships a comfortable one-way passage.”14 B. The evolution towards a technical project The grandiose dream was whittled down to a practical plan, attainable by the available technology and finances – a simple canal, economic and efficient. Now convinced more than ever of the feasibility of such a project, Lesseps launched himself into a propaganda offensive. In a dualpronged strategy, on one hand, he toured extensively to mobilize public opinion (that is, of the business middle class) and on the other, donned his diplomatic robes in order to garner governmental approval. During his numerous trips to Great Britain (June 1855, April-May 1856, March 1857, June 1857, June 1858), he met parliamentarians and brought together ship-owners and merchants who were looking for way to expand their maritime empires. “The upper echelons of the business community and the main bankers of the City accorded me a warm welcome and gave me letters of introduction and recommendations addressed to the principal maritime merchants and ship-builders of the other important cities […]. The Chambers of Commerce, merchants, ship-owners and shipbuilders of these towns were also informed that […]. I would be visiting them shortly […]. My aim is to gather collective, signed declarations which would […] make it clear that a passage through the isthmus of Suez would be to England’s benefit […]. Thus [the enterprise] […] would have the support of all England, just as it has of entire Europe and America.”15 In April and May of 1857, Lesseps crisscrossed England, trailing meetings and brochures. Back on the continent, he continued to gather support and pleaded his case in front of politicians, businessmen, and journalists all over Europe: Vienna in November 1857 and June 1858, Odessa in August 1858, Trieste and Venice in August 1858 and Barcelona in October of the same year, as to shape an international project favouring the progress of Humanity. In addition to these personal meetings, he sent reams of letters far and wide, in an effort to keep the flame alive and 14 15

Paul Reymond, Histoire de la navigation dans le canal de Suez, Paris, 1956, Preface. Lesseps, in a letter to M. Saïd, 31 March 1857, Lettres…, 1875, pp. 40-41.

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stoking it with news of any heartening developments in Turkey, Egypt or London. In contrast to those who preferred to remain in the background and pull strings with unseen hands, Lesseps believed in leading boldly from the front. Endowed with a fertile pen, he maintained that writing too was action and possessed a grandeur and vigor all in itself : the flamboyant capitalism of the “bourgeois conquerors”! On the field, in Egypt, Lesseps was a veritable dynamo – inspiring men, hastening the solution to technical problems and in general, carrying the whole project forward almost single-handedly. It was a time when any delay in the work could mean a financial disaster. After the Suez Canal Company was established on 15 December 1858, Lesseps personally launched the first work at the Gulf of Peluse in April 1859. In the words of Edgar-Bonnet: “Lesseps was everywhere […] at the same time: at Paris and at London, at Constantinople and at Cairo, at Port-Saïd and at Ismailia. Constantly on the move, in two decades he crossed the length of the Mediterranean 99 times on dilapidated and decrepit vessels […]. Single-handedly pursuing and conducting all negotiations, he remained in constant and direct contact with his engineers and laborers. He was as much at home in the dirt and bedlam of construction sites as in the sophisticated and plush surroundings of ministerial meetings – driving home his ideas with the same intensity, whether talking to entrepreneurs or diplomats. He traversed the desert from one end of the proposed canal to the other, traveling by day on horseback, sleeping under the stars, sharing all the hardships with his subordinates – he oversaw every detail, supporting, encouraging, galvanizing.”16 The globe-trotting CEOs of today, with all their chauffeur-driven limousines, business jets, satellite video-conferencing, etc. seem dull and insipid in comparison. Lesseps only had his boat, his horse and his pen. He had no secretarial staff, no team of engineers, no specialists in financial engineering. Armed with not much more than his vitality and drive, he almost single-handedly transformed the geopolitical and economic landscape of the world. It was only in June 1894, just six months before his death at the age of 90, that he stepped down from the presidency of the Suez Canal Company, a full fourty years after the lease had been granted by Egypt. “No amount of admiration for the man would seem too much. It was he who built the canal, nay, he was the canal. As a path breaker, he stands comparison with Magellan and Vasco da Gama. And yet, he had no specializations, he was neither engineer, nor financier, nor administrator […] – he was simply the man who dreamt, who worked and who achieved. His biggest asset was his unshakeable faith. His passion, which at first kindled only a few around him, soon spread like wildfire and

16

Georges Edgar-Bonnet, Ferdinand de Lesseps, 1959.

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galvanized multitudes, enthused shareholders and convinced or cowed politicians.”17

2. EGYPT AS A FASCINATING CIVILISATION IN THE MIDST OF THE CENTURY “It is in the environs of the Mediterranean that humanity finds its norm. When people venture away from this exquisite lake, be it via the pillars of Hercules or the Bosporus, they begin to turn abnormal and extraordinary… but it is the Southern route, through Suez, that leads to the strangest lands.”18 Today, with the advent of television, we have become used to the fiery people, hard life and political drama of the Near East; the growth of the oil-rich Arab nations have familiarized the French economy to the business practices of these Red Sea nomads. But let us put aside for a while our present knowledge and try to imagine what this “terra incognita” must have seemed like to a Frenchman of the 19th century; let us try and relive the fascination felt by Rimbaud and thrill to the exotic adventures of Lawrence of Arabia. Despite age old commercial ties, the eastern coast of the Mediterranean still remained in those days a land of mystery and magic, but it also commenced to be perceived along with a scientific19 and economic approach, thus spurring studies and dreams about some linkage between “Oriental adventure” and profits. A. Orientalism drawing Europeans to the Middle East area The job of the historian, though, is to step back, and to try and reconstruct the mental makeup and psychological bent which led so many Europeans to fall so passionately in love with the Eastern shores of the Mediterranean. The Byronic love affaire with Greece was part of a widespread fascination with all of the East, with Egypt as its mystic talisman and mesmerizing center. Right from the beginning, Egypt had occupied a special place and exerted a magnetic charm on the European mind when it turned towards the East. In a Renaissance déjà vu, the Age of Enlightenment saw a renewal of public interest in antique civilizations, with Egyptology the rage. André Grétry composed the operaballet La Caravane du Caire (1783), Jean-Philippe Rameau played L’Égyptienne, and the fine arts teemed with oriental themes, elements

17 18 19

Jules Siegfried, Suez, Panama et les routes maritimes mondiales, Paris, 1948, p. 49. Ibidem, p. 17. Marie-Noëlle Bourguet, Bernard Lepetit, Daniel Nordman & Maroula Sinarelly (eds.), L’invention scientifique de la Méditerranée. Égypte, Morée, Algérie, Paris, EHESS, 1998.

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and allusions. Napoleon’s expedition fed the fever, and the French authorities (the Directoire, 1795-1799) bid the young general take with him committees of the sciences and the arts20. When Jean-François Champollion unlocked the floodgates of Egyptology, French scientists and artists poured over every fascinating detail of Egyptian culture and life; afterwards, between 1809 and 1825, Gaspard Monge, Claude-Louis Berthollet and Isidore Geoffroy Saint-Hillaire (et alii) published the Description de l’Égypte in nine volumes. “The impetus and boost given by Napoleon will ripple down the ages […]. Egypt occupies a special place in the hearts and minds of the French, greatly preferred over many others.”21 Alongside this scientific wave, Bonaparte asked Jacques-Marie Le Père to study the feasibility of a canal at Suez and to measure the sea levels on either side of the isthmus, and Le Père’s report appeared in the Description in 1808 but being inaccurate because asserting a 6m difference between the level of the Red Sea and the Mediterranean Sea. The allure of the East continued and grew into the next decades. Painting (Fromentin, etc.), drama, music (Massenet’s Thaïs was played in Paris in 1894, Saint-Saëns’ Souvenir d’Ismaïlia in 1895,…) and literature (Gautier’s Le roman de la momie appeared in 1858) teemed with the sights, sounds and romance of this exotic new world. The obelisk of Luxor was erected in Paris in 183622 and adventure-voyages multiplied, though not by half as much as the number of stories which found their way back to astound and awe Parisian parlors23. The Mediterranean became a beehive of economic, political and colonial activity. French textile exporters had already a brisk trade going with the East from as early as the 17th century24. By the second half of the 18th century, both

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22 23

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See Henry Laurens (et alii), L’expédition d’Égypte, 1798-1801, Paris, Armand Colin, 1969. Catalogue of the Franco-Egyptian exhibition held in Paris in 1949. Especially the chapter: “Egypt and France in the 19th century”. Ibidem. Also see C. Edmond, L’Égypte à l’Exposition universelle de 1867. For example, François-René de Chateaubriand, Itinéraires de Paris à Jérusalem et de Jérusalem à Paris en allant par la Grèce et en revenant par l’Égypte, Paris, 1811. Gérard de Nerval (who made a trip to Egypt in 1843), Scène de la vie orientale, Paris, 1853. Gustave Flaubert, Notes inédites. Voyage d’Égypte, 1849-51, Paris, 1912. Comte de Chambord (the claimant to the throne in 1870-1877), Journal de voyage en Orient, 1861 (presented by A. Chaffanjon), Paris, 1936. Ernest Renan, Deux carnets manuscrits du second voyage en Orient (1864-65), preserved in the National Library in Paris. Théophile Gautier (who went to Egypt in 1869), Le Roman de la momie, Paris, 1858. Paul Morand, La route des Indes, Paris, 1936. J.-M. Carré, Voyageurs et écrivains Français en Égypte, Cairo, 1932. J.-C. Berchet, Les voyageurs Français dans le Levant au XIXe siècle. Anthologie, Paris, 1986. See also: K. Baedeker, Égypte, Manuel du voyageur, Paris, 1903. P. Masson, Histoire du commerce français dans le Levant au XVIIIe siècle, Paris, 1911.

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France and England had begun to eye India and Egypt (Dupleix)25 and Bonaparte twice dreamed of French influence there26. Globally, thus, on one side, such attractiveness was more based on geopolitical and economic forces, each big and imperialist European country dreaming of renewing Alexander the Great’s leadership on the Middle East area or moreover using the isthmus of Suez as a leverage to penetrate and control the Indian Ocean and naval paths to the Far East. And, on the other side, such fashion for Orientalism expressed a Europeano-centrist mindset27, either to further insert Egyptian history and inventions into the roots of European history and culture, or to attribute to the enlightened European elites the mission to “re-civilize” backward Egypt by transferring to the area the European modern forces of progress, such a progress having been halted there by the evolution of the Ottoman Empire or else. Even philanthropic and good-conscious Saint-Simonian utopians conceived such schemes to “reawaken” Egypt through the injection of European “progress”. In that meaning, quite different from exotic and picturesque stimulus, Orientalism was some kind of project to “westernize Orient”, and the future project of a Suez canal took part to such trend. B. The upsurge of Muhammad Ali’s Egypt Meanwhile, Egypt was slowly regaining confidence in itself and to assert itself againt the tutelage of the Ottoman Empire and against the 25

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François Charles-Roux (vice-president of the Suez Canal Company) wrote : – Les origines de l’expédition française en Égypte, Paris, 1910. – Autour d’une route. L’Angleterre, l’Isthme de Suez et l’Égypte au XVIIIe siècle, 1922. – L’Angleterre et l’expédition française en Égypte, 1925. – Les Échelles de Syrie et de Palestine au XVIIIe siècle, 1928. – Bonaparte et la Tripolitaine, 1929. – Le projet français de conquête de l’Égypte sous Louis XIV, 1929. – Histoire de la nation égyptienne, volume 6 (under the direction of Guillaume Hanotaux), Paris, 1932. See Jean-Marcel Humbert & Bruno Ponsonnet, Napoléon et la mer. Un rêve d’empire, Paris, Seuil & Musée national de la marine, 2004. About questioning Orientalism in the name of “post-colonial” studies, see: Edward W. Said, Orientalism, New York, Random House, 1978; reedition: London, Penguin, 1991 (translation: L’Orient créé par l’Occident, Paris, Seuil, 1980, reedition: 2005). Edward Said, Culture and Imperialism, New York, Alfred Knopf, 1993 (translation: Culture et impérialisme, Paris, Fayard, 2000). Patrick Williams, Edward Said, Sage masters of modern social thought, London, Sage, 2001. Naseer Hasan Aruri & Muhammad A. Shuraydi, Revising Culture, Reinventing Peace: The Influence of Edward W. Said, New York, Olive Branch Press, 2001. Valerie Kennedy, Edward Said: A Critical Introduction, Cambridge, UK, Polity Press, 2000. Ibn Warraq, Defending the West: A Critique of Edward Said’s Orientalism, Amherst, N.Y., Prometheus Books, 2007.

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global backwardness of the area: it joined the efforts of conceiving some trends to modernise the economy, to introduce some clues of “modernity” in the State administration, and to push Egypt into some more opened flows of trade, which was the key issue of the Middle-East in the 19th century28. In the 1830s, the sultan’s delegate and viceroy, Mehemet Ali, or Muhammad Ali, struck a decisive blow for Egyptian autonomy within the Ottoman empire by inflicting a crushing defeat on the Sultan’s Turkish troops. Though the treaty of London (1840) moderated the effects of this victory, both Turkey and England were forced to acknowledge the birth of a new political entity. With the help of the intellectual prowess of the West, Egypt now swept into a period of resurgence29, and in the 1830s, France even set itself up behind Muhammad Ali30 while it began to spread its fingers into North Africa31 and Sudan32. This “proto-Meiji-style” refurbishing of old Egypt led Muhammad Ali into the modernisation of agriculture, with the development of cotton and water systems, into the first pieces of light industries (first for armaments, then for consumer goods, last for textile mills). C. French experts involved in the resurrection of Egypt Throughout this process, France took a leading role in giving back to Egypt its national identity. French archeologists helped unearth Egypt’s unparalleled heritage, luminaries such as Auguste-Édouard Mariette, Gaston Maspéro, etc. helped to establish the French Institute of Oriental Archeology of Cairo and the Egyptian Antiquities Service. The French government set up schools in Cairo, Port-Saïd, Alexandria and Heliopolis. A French law school sprang up at Cairo and the Egyptian Royal Societies of Geography and Economic Politics felt the Gallic influence. Christian religious orders and missions supplied teachers and founded hospitals and charities.

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See Roger Owen, The Middle East in the World Economy, 1800-1914, London, Methuen, 1981. Jacques Couland, “L’Égypte de Muhammad Ali : transition et développement”, in Catherine Coquery-Vidrovitch, Daniel Hémery & Jean Piel (eds.), Pour une histoire du développement. États, société, développement, Paris, L’Harmattan, 2007, pp. 127154. Afaf Lutfi Sayyid-Marsot, Egypt in the Reign of Muhammad Ali, Cambridge Middle East Library, Cambridge, UK, Cambridge University Press, 1984. François Charles-Roux, Thiers et Mehemet Ali, Paris, 1951. Caroline GaultierKurhan, Mehemet Ali et la France: 1805-1849. Histoire singulière du Napoléon de l’Orient, Paris, Maisonneuve & Larose, 2005. François Charles-Roux, France et Afrique du Nord avant 1830. Les précurseurs de la conquête, Paris, Collection du Centenaire de l’Algérie, 1932. Jean Ganiage, Les origines du protectorat français en Tunisie, 1861-1881, Paris, 1959. Marc Michel, La Mission Marchand, 1895-1899, Paris, 1972.

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Lesseps’ personal influence with Saïd was amply supported by the French infiltration and influence in the whole of Egypt. Throughout the century, the Egyptian civil service had employed a large number of Frenchmen. There was a French chief of staff of the Egyptian army, a French commandant of the cavalry school, a French chief of the civil and military health departments, a French chief of staff of the Egyptian Marines, a French chief of Naval Construction who built Alexandria’s redoubtable arsenal, and a French director of construction and fortification. In 1818, Linant de Bellefonds was made the Chief Engineer of all civil works in Upper Egypt and as such was responsible for all waterworks and irrigation. When he was later made Chief of all Public Works, he played a major role in the national water management program, the backbone of the future cotton industry. Construction sites sprang up all over Egypt. In 1818, work was completed on the Mahmoudieh canal, which linked Alexandria to the Nile with 80 km of navigable waterways and 60 km more for irrigation. It took 300,000 “fellahs” to dig and then some 115,000 more to dredge it clear of silt two decades later. Between 1843 and 1861, Linant de Bellefonds and Eugène Mougel began work on two dams at the mouth of the Nile delta to increase the water level there and thus feed six other canals, including the Ismailieh canal. In 1865, Mougel resigned his post as Chief Engineer of the Suez canal project and became the director of all Egyptian bridges and canals. The nationwide building spree went into overdrive – the cement had hardly time to set on two new dams on the Nile delta (1886-1890), that the two other ones were raised in 1891-1898; the Aswan dam was built in 1898-1902 and reinforced in 1907-1910; between 1899 and 1908, three other dams were constructed, and the Ibrahimieh canal dug. One could even pretend that the further Lesseps’ labours were all but lost in the midst of all this activity, forming only a part of Egypt’s modernisation and public works. In fact, Linant and Mougel had already submitted to the viceroy the blueprint of a first pilot project on the canal as early as March 1855, and their plan had called for a canal with locks33. The strategic importance of Suez as a short-cut to India had been recognized long before the advent of Lesseps. From as early as 1829 a steamboat service had been established between Suez and India. The

33

Jean-Étienne Goby, “Histoire des nivellements de l’Isthme de Suez”, Bulletin de la SEGHIS, volume IV, 1951-52. J.-É. Goby, “Ingénieurs et techniciens français en Égypte au XIXe siècle”, Revue des deux mondes, June 1959, pp. 691-705. J.-É. Goby, “Les conseillers technique de F. de Lesseps et de la Compagnie de Suez”, Revue des ingénieurs, April-May 1958. J.-É. Goby, “Un ingénieur autodidacte, précurseur du canal de Suez : Linant de Bellefonds”, Le canal, n° 18, June 1955. Jules CharlesRoux, L’Isthme et le canal de Suez, Paris, 1901.

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Englishman Waghorn had set up a courier service between London and Bombay which took fifty days by traveling via Alexandria, Cairo and Suez. By 1839, the English Peninsular & Oriental Company (established in 1837, entrusted with the British mail) had spread its tentacles all the way to Alexandria, and reached Indian shores in 1844: its route included navigating the Mahmoudieh canal and the Nile till it arrived at Cairo; then they went overland, through the desert, the passengers in two-wheeled horse- or mule-driven omnibuses and the rest of the baggage, merchandise, water, mail and coal (for crossing the Red Sea) packed on some 3,000 camels. In 1856, the railroad arrived at Cairo, and Suez was connected in December 1858. In the very year that the Suez Canal Company was founded, it seemed to be doomed by a more efficient alternative – the new, 353 km railroad – and Lesseps’ dream a colossal redundancy. Thus we see that the Suez canal project formed part of a collective mindset of which Lesseps was an incarnation. D. French capitalism lured by Egypt As it was, Lesseps formed part of the West’s growing awareness of and economic interest in business opportunities in the East. In 1863, a group of Anglo-French bankers (including the Pereire family) established Banque impériale ottomane in the Ottoman empire. In 1867, this commercial bank opened a branch in Alexandria34 which, by the end of the century, was acting as a sort of common subsidiary for major French banking houses. Egypt’s growing financial needs necessitated the influx of French, English, and German investments. Between 1862 and 1873, the Egyptian government raised FRF 1,3 billion in bonds and 600 million more as short term floating debt. It was open season for bankernegotiators such as Édouard Dervieu35, who also enjoyed a personal rapport with the khedive, and the man from Marseille, Jules Pastré. Both the English and French set up rival banks or branches, with France asserting is specialty in mortgage loan banking, mainly through the Crédit foncier égyptien, established in 1880 – and a future director of the Suez Canal Company was employed there later on, in the 1950s, Émile Minost. Despite British geopolitical influence in Egypt, French capitalism had established strong footholds in the country, in banking, industry

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Jacques Thobie, Intérêts et impérialisme français dans l’Empire ottoman, 1895-1914, Paris, Publications de la Sorbonne, 1977. David Landes, Bankers and Pashas. International Finance in Egypt in the 1860’s, Cambridge University Press, Cambridge (Mass.)-London, 1952. David Landes, Banquiers et pachas. Finance internationale et impérialisme économique en Égypte, Paris, Albin Michel, 1993.

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and services, and it had become a stable commercial partner, especially through cotton purchases, which explains the presence of active branches of Crédit lyonnais36 since 1875 and of Comptoir national d’escompte de Paris37 since 1905. As historian Samir Saul38 showed, France was a key leverage to Egyptian “modern” economic emergence – even if it was part an “imperialist” scheme or reality. By 1911, France held a whopping 53 per cent of Egypt’s foreign debt and a full 50 per cent of local business corporations in the form of stocks and bonds. The FRF 390 million in stocks and bonds held by France in the Suez Canal Company represented only some 13.7 per cent of the FRF 2,840 million invested by the French in Egypt. European money played a major role in building Egypt’s infrastructure and greasing the wheels of a rapid industrialization drive. The French sugar manufacturing company Say (which was quite integrated within the reach of the Suez Group a decade later) owned the Sucreries d’Égypte. Shortly after the work in the isthmus, the Belgian company Empain laid new railroads and designed the city of Heliopolis39. Lesseps was by no means the only one who thought in terms of a civilizing mission. He just happened to be there at a time when the Oriental pull on the sentiments and the cultural and political mindset of Europe in the first half of that century met with the economic trend of the second half. Lesseps’ originality lay in being one of the earliest conduits of these investments. Though the big milling and paper manufacturing company Darblay40 had launched, in partnership with Pastré, the Moulins français d’Égypte in Alexandria, in as early as 1859-60, the capital involved was not in the same league as the Suez project41.

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Bernard Desjardins, Michel Lescure, Roger Nougaret, Alain Plessis & André Straus (eds.), Le Crédit lyonnais, 1863-1986. Études historiques, Geneva, Droz, 2002. Hubert Bonin, “Le Comptoir national d’escompte de Paris, une banque impériale (1848-1940)”, Revue française d’histoire d’outre-mer, tome 78, n° 293, 1991, pp. 477497. Samir Saul, La France et l’Égypte de 1882 à 1914. Intérêts économiques et implications politiques, Paris, Comité pour l’histoire économique et financière de la France, 1997. Robert Ilbert, Heliopolis, 1905-1922. Genèse d’une ville, Marseille, CNRS, 1981. Alain Plessis, Régents et gouverneurs de la Banque de France sous le Second Empire, Geneva, Droz, 1985, pp. 134-135. Jean Ducruet, Les capitaux européens au Proche-Orient, Paris, 1964. Samir Saul, “La France et l’Égypte à l’aube du xxe siècle. Les difficultés d’une jonction”, in Robert Ilbert & Philippe Joutard (eds.), Le miroir égyptien, Marseille, Jeanne Laffitte, 1984, pp. 109-124. Maurice Beaumont, L’essor industriel et l’impérialisme colonial, 18781904, Paris, 1949. Samir Radwan, Capital Formation in Egyptian Industry and Agriculture, 1882-1914, London, 1974. Félix Paponot, L’Égypte. Son avenir agricole et financier. Notes et documents sur la richesse et la fécondité du sol, suivi d’une nouvelle étude sur les irrigations, Paris, 1884.

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E. Saint-Simonianism and Egypt : Lesseps in the wake of a strong influence An abortive first attempt at a Suez canal had been made as early as 1808 by Jean-Baptiste Lepère and the Egyptian Expedition; it failed because it came before its time: the ground had not yet been prepared and seeded by the ideas of the French thinker and social theorist comte de Saint-Simon42. When he died in 1825, his followers, who included industrialists, bankers, young and budding “intellectual” businessmen, and journalists43, propagated the need for further investments, economic expansion and extension of the industrial revolution as the answer to most of society’s problems44. Led by Prosper Enfantin, they chose Egypt as their field of action and set off in the hopes of building a new, industrial utopia (1833-1837), based on the development of the Orient as an area rich in the heritage of history, of fertile land (thanks to canals for irrigation – like those built later by the Suez Company), and of skills45, and on an intense cooperation between the Orient and Europe alongside some kind of a Euro-Mediterranean scheme. Their first priority was to bulldoze their idea of civilization into Egypt by the means of massive public works: “Imagine that, with civilization as its vanguard, Europe began to spread into Asia – with the Russians from the north, the English from the south, Turkey from the west and, god-willing, Americans from the east. Imagine that, for this double influence (American and European) to reach and rejuvenate Asia, we cut through Suez and Panama – this ancient continent would very soon turn into a ravishing spectacle !”. “It is for us to create one of these two new routes – a route between Egypt and Judea, a route which would open the way to India and

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Pierre Musso, Saint-Simon et le saint-simonisme, Paris, PUF, 1999. Nathalie Coilly & Philippe Régnier (eds.), Le siècle des saint-simoniens, du Nouveau christianisme au canal de Suez, Paris, Bibliothèque nationale de France, 2006. Bertrand Gille, “Les Saint-Simoniens et le crédit”, in B. Gille, La banque en France au e XIX siècle, Geneva, Droz, 1970. Sébastien Charléty, Histoire du Saint-simonisme, 1825-1864, Paris, 1931. Marcel Blanchard, “Aux origines de nos chemins de fer, Saint-Simoniens et banquiers”, Annales d’histoire économique et sociale, 1938. Henri d’Allemagne, Prosper Enfantin et les grandes entreprises du XIXe siècle, Paris, 1935. Philippe Régnier (ed.), L’Orient, pôle de la pensée saint-simonienne, Paris, Société des études saint-simoniennes-Bibliothèque de l’Arsenal, 1989. Magali Morsy (ed.), Les Saint-Simoniens et l’Orient. Vers la modernité, Aix-en-Provence, Edisud, 1990. Bernard Jouve, L’épopée saint-simonienne. Saint-Simon, Enfantin et leur disciple Alexis Petit. De Suez au pays de Georges Sand, Paris, Guénégaud, 2001. Arlette Millard, Félicien David et l’aventure saint-simonienne en Orient, Paris, Les Presses franciliennes, 2005. Philippe Régnier, Les Saint-Simoniens en Égypte (1833-1851), Le Caire, Amin F. Abdelnour, 1989. Edward Saïd, L’orientalisme. L’Orient créé par l’Occident, Paris, Seuil, 1980. On a broad scope, see: Henry Laurens, Orientales, Paris, CNRS Éditions, 2007; first edition, 2004.

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China. Later, we will also cut through the isthmus of Panama. We will then have one foot on the Nile, the other at Jerusalem, our right hand will stretch towards Mecca and our left will encompass Rome and touch Paris. Suez is the heart of our life and endeavours, there we shall accomplish something which will make the world sit up and take note.”46 The team included two mining engineers, Charles Lambert and Henri Fournel: “Our work […] on this land of Egypt, a land ancient in memory and young in hopes […], a land which the new world wants to exploit in order to launch itself into the future […], is to traverse the desert which separates the two seas, complete the studies begun during the Egyptian Campaign, ascertain the best means of linking Suez to the Mediterranean and thus to establish a contact between India and Europe.”47 The idea was to investigate the feasibility of such a canal, draw up blueprints and work schedules and to convince the European powers to pool their resources in accomplishing this Herculean task. But the enterprise fell through when Egypt refused to deal with this band of utopians who had morphed into a sect manifestly incapable of realizing its own grand projects48. Still, it was not all in vain, the exercise did throw up a whole brew of interesting and promising ideas. Throughout the 1840s-1870s indeed, French utopians, experts, and businessmen conceived schemes of economic development turned towards Eastern Mediterranea – before Algerian and Maroccan outlets drew their attention from the 1880s. And such schemes undoubtedly created some mood in favour of the Suez enterprise49, because they mixed interests to Egypt developments, commitment of technician progress and investments, and entrepreneurship50. Soon enough, the project was taken up by Michel Chevalier, a mining engineer who was deputed to Egypt in 1845-1848; a journalist and later, a professor of political economy at the Collège de France from 1840 to 1879, he brought to it the caution and maturity of a respected academic; he too was a fervent advocate for the development of the regions around the Mediterranean, owing to a connection between railway and maritime roads and harbours to found the basis of an

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Prosper Enfantin, letter to Barrault, 8 August 1833. From: Jules Charles-Roux, L’Isthme, op. cit., pp. 198-199. Fournel’s letter to Arlès-Dufour, 3 September 1933. From: Ibidem, pp. 424-425. Suzanne Voilquin, Souvenirs d’une fille du peuple, ou le saint-simonisme en Égypte, Paris, 1978. Lajard de Puyjalon, L’influence des Saint-Simoniens sur la réalisation du canal de Suez et les chemins de fer, Paris, 1926. Ghislaine Alleaume, “L’économie politique saint-simonienne et les élites techniques de l’Égypte moderne” », in Philippe Régnier (ed.), Études saint-simoniennes, Lyon, 2002, pp. 305-322.

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economic integration of a thorough “system” of exchanges51 : “Egypt and Syria need to be rejuvenated; communication, industries, schools, media need to be implanted […]; the isthmus of Suez cut through by rail or boat.”52 Chevalier’s Système de la Méditerranée might seem the most elaborated intellectual framework for such an expansion: railroads had to join Northern Europe to Marseille; Marseille had to be equipped with modern harbour facilities and promoted as a door to Orient; maritime lines had to dispatch French goods all over the Ottoman empire – then at its apex – and charge cotton, silk, sugar, and various commodities there; Lyon and Marseille could start prospecting afterwards the Indian Ocean and the Far-East. Even if such conceptions missed the formidable transatlantic economy which took shape throughout the century, such a scheme was relevant, taking into consideration the ideas of this time. At long last, businessmen in touch with the Saint-Simonians began to include the canal in their investment plans. With the active support of the Lyons and Marseille Chambers of commerce, Enfantin brought together François Arlès-Dufour53, a big businessman of Lyon, and the Talabot brothers, who had made started a railroad business, to form the Suez Canal Study Society (or société d’études) on 27 November 1846, starting from 11 January 1847. Paulin Talabot, a future instigator of the Société générale54 and PLM railways55, gathered together French, English and German interests. Technicians were dispatched in September 1847 51

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He published four articles in the journal Le Globe, on 20 and 31 January 1832, and 5 and 12 February 1932, then grouped in a little book: Michel Chevalier, Système de la Méditerranée, Paris, 1832. Des intérêts matériels, Paris, 1832; reprint, Paris, Mille et une nuits, 2006. See Jacques Walch, Michel Chevalier, économiste saint-simonien (18061879), Paris, Vrin, 1975. Letter from Michel Chevalier, imprisoned at Saint-Pélagie, to Pereire, 31 January 1833, from: Jean Autin, Les frères Pereire, Paris, Perrin, 1984, p. 46. See Guy Fargette, Émile and Isaac Pereire. L’esprit d’entreprise au XIXe siècle, Paris, L’Harmattan, 2001. Arlès-Dufour was a commission-agent in silks and he was within the nexus of intense relationships inteding to prop up “modern entreprise”: he was a member of the board of new banks Crédit industriel et commercial in 1859 and Crédit lyonnais in 1863. Jacques Canton-Débat, Un homme d’affaires lyonnais, Arlès-Dufour, 17971872, Lille, dissertation, 2000. Jacques Canton-Débat, Arlès-Dufour (1797-1872). Du Canal de Suez à l’École centrale de Lyon. Le parcours exceptionnel d’un soyeux lyonnais, Paris, L’Interdisciplinaire, 2007. Hubert Bonin, Histoire de la Société générale. I. 1864-1890. La naissance d’une banque, Genève, Droz, 2006. Alfred-Auguste Ernouf, Paulin Talabot, sa vie, son œuvre, 1799-1885, Paris, Plon & Nourrit, 1886. A. Duluc, “Paulin Talabot : un des grands Français du XIXe siècle”, Cahiers de l’ISEA, 1972. Bertrand Gille, “Paulin Talabot, recherche pour une biographie”, Revue d’histoire de la métallurgie et des mines, 1970. Jacques Lenoble, Les frères Talabot. Une grande famille d’entrepreneurs au XIXe siècle, Limoges, CCSTI, 1989. François Caron, Histoire des chemins de fer en France. Tome 1, 1840-1883, Paris, Fayard, 1997.

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to Egypt to retake measurements (water levels, etc.) and prepare detailed plans. A major headache was averted when they concluded in January 1848 that there was no difference in the levels between the Red Sea and the Mediterranean. Consequently, the costs would come down substantially – and the project was brought that much closer to fruition. But man can only propose… Talabot’s miscalculation lay in proposing a 400 km long canal between Alexandria, Cairo and Suez, a concurrent railroad and a price tag of FRF 300 million56. Meanwhile, the English played truant and committed themselves solely to the railroad. Ultimately, the successive financial, economic and political crises between the years 1845 to 1851 put a halt to the whole project. It is an interesting question: where would be Lesseps today in our memory had this initiative proceeded as planned? In any case, as fate would have it, Lesseps found himself inheriting these Saint-Simonian utopias, the drawings made by the Study Society and Talabot’s project. He found that much of his homework had already been done for him some twenty years before the actual “firman” was granted in 1854 ! In fact, Lesseps must have actively participated in Saint-Simonian discussions in the mid-1820s; he continued to have a close relationship with Arlès-Dufour all through the first half of the 1850s. It was symbiotic – bringing together Lesseps’ good relations with Saïd in Egypt itself (and the all-important concession) with the infrastructure put in place by the Study Society. Moreover, Lesseps too felt the need for someone like Arlès-Dufour57 when he found himself caught in the political web of Anglo-French relations. Nevertheless, this mutually beneficial relationship ran aground58 in 1855 when Lesseps rejected the Talabot plan as too expensive. The viceroy too objected to a section which went right through the heart of Egypt; he feared, not without reason, that could very easily serve as a military inroad and tempt one of the big Powers, just as had happened with Turkey with its Bosphorus and the Dardanelles Straits which had provoked diplomatic and even military challenges. At the same time, the Saint-Simonians also recognized the formidable challenge posed by Lesseps’ headstrong character and his diplomatic skills59, and their philosophy of common development over-

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Paulin Talabot, « Le canal des deux mers, d’Alexandrie à Suez : moyens d’exécution », Revue des deux mondes, 1er mai 1855. Lesseps’ letters to Arlès-Dufour, a big silk merchant of Lyons, 30 November 1854, 14 December 1854, 25 December 1854, from: Jules Charles-Roux, L’Isthme, volume 1, p. 232. Lesseps’ letter to Baron de Bruck, 4 May 1855, ibidem, p. 234. Arlès-Dufour’s letter to Negrelli, June 1855, ibidem, p. 239. Regarding Enfantin, see Maxime de Camp, “Souvenirs”, Revue des deux mondes, 15 May 1882, ibidem, p. 241.

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seas got far from entrepreneurial and financial objectives set up by Lesseps60. Meanwhile, the Talabot brothers had given up hopes of collecting the required finances for the Suez canal and had returned to their financial, railroad and iron and steel interests at home. The Pereire also seem to have lost interest in the project, and Lesseps found himself alone with his “firman”. Would the whole enterprise collapse for the lack of capital? CONCLUSION Our conclusion will be classically balanced: sure, Lesseps was perceived and was in some kind a “hero”, a considerable figure who did accelerate the process of economical history thanks to his responsibility in the Suez adventure; he had the chance to become the French expert who got the deepest roots in the Egyptian circles of influence. But he benefited from a capital of knowledge which had been built then for several decades, in particular owing to French engineers active to support the modernizing trend of Egypt started by Mehemet Ali in the 1840-1850s and kept alive by his successors. He was also brought by the wave of saint-simonian ideas and networks which called for a strong involvement of France in the development of the Mediterranean areas; and, last, he was somehow “determined” by economic forces which pushed forward European forces to accelerate the tempus to collect commodities from Near East countries and to prospect Eastern outlets for French and European goods. He became, like others, a nexus of these trends and influence; but himself alone was stubborn enough to insert them into entrepreneurship. Anyway, as a wink to such a glorious history, the French shipping company Messageries maritimes, which had become a key customer to the Suez canal (see chapter 3), had ordered to Forges & chantiers de la Gironde, a shipyard located in the Bordeaux area, a mixed liner (with 13,700 tons) which was launched in July 1951 into the Garonne under the name of Ferdinand de Lesseps, thus proving the might of the legacy among modern maritime businessmen.

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See. Georges Taboulet, “Aux origines du canal de Suez. Le conflit entre Ferdinand de Lesseps et les Saint-Simoniens”, Revue historique, July 1968, n° 487, pp. 89-114; and Revue historique, October-December 1968, n° 488, pp. 361-392.

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Caricature of Lesseps, splitting the banks of Asia and Africa

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Statue of Lesseps being built at Port-Saïd (1899)

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Statue of Lesseps before being set up in 1899

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Dessin humoristique évoquant l’ampleur historique du percement du canal

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A dredger active on the worksite

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THE SUEZ CANAL AND FRENCH ENTREPRENEURSHIP The success of Lesseps and the implementation of his utopian or Saint-Simonian dream were not the mere result of some super-hero’s voluntarily mind and of the recruitment of a massive workforce handworking; they benefited from the actual progress of engineering and technology in public works and in mechanics because French firms had developed specialties which were the fruit of innovative entrepreneurship. From the first digging in the ground on 25 March 1859, at what was emerging as Port-Saïd, to the opening of the canal in 1869, a decade of works was opened to enhance the development of new technologies – despite the massive use of humane workforce; but mastering such a very use of this workforce and altogether the functioning of huge machinery were also proofs of the rapid evolution of engineering and the organisation of big projects. The building of the Suez canal1 became a land mark for the whole engineering and technical progress of the first industrial revolution and part of that “Prometheus unbound” underlined by David Landes2.

1. SUEZ AND THE ECONOMIC TREND : A GENERAL MOVE TOWARDS PROGRESS As for any event, the creation of the Company did not take place in a vacuum and the time of its inauguration was not an accidental event. After the crises and the economic downturn in the years 1845-1851, the 1850s saw a spurt in the nation’s economic growth and the launch of a second stage of the first industrial revolution which continued into the 1880s. The

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2

See S.C. Burchell & André Chassigneux, Le canal de Suez (Building the Suez Canal), Paris, RST, 1967. David S. Landes, L’Europe technicienne. Révolution technique et libre essor en Europe occidentale de 1750 à nos jours, Paris, Gallimard, 1975 (The Prometheus Unbound, Cambridge University Press, 1969).

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national income was up, investments were increasing: in 1850-1855, coal extraction at Pas-de-Calais turned profitable, the Bessemer steel revolution began in 1856 and really took off when, in the second half of the 1850s, charcoal was definitely replaced by coke3 ; the large railroad networks began to be laid from 1852 and Talabot’s PLM was established in 1857 to join Paris to Marseille4. The World Exhibition of 1867 bore witness to this growth and the Suez Canal Company had its own pavilion there. Meanwhile, burgeoning overseas trade also added to the allure of a passage through Suez. In the 1860s, France was the second largest trader in Europe, accounting for 19.2 per cent of all goods moved, behind the United Kingdom (24.8 per cent) but still ahead of Germany (18.4 per cent). This commercial boom was also the cause for the construction of the Joliette port at Marseille (1853), the setting up of merchant shipping lines (such as the Compagnie générale transatlantique in 1860) and the building of naval dockyards (Penhoët in 1862 near Nantes). After gaining a foothold in Saigon in 1859, France strengthened its influence over the rest of Cambodia in 1863 and pushed into Laos in 1866-1868. No wonder that Suez had begun to capture the imagination of the French ! In fact, one of the new ‘’modern” joint-stock banks, Comptoir d’escompte de Paris, had opened branches in the Far East from as early as 1860-62. There was a commercial and a geographical move to push French interests and skills towards the Near East, the Indian Ocean and the Far East, and the Suez canal project joined this “global project”. The 1850s also saw a rekindling of the French spirit of enterprise. The Pereire brothers set up the headquarters of their Crédit mobilier5 (1852) right next to the Suez Company offices at Place de Vendôme. Several major department stores were opened such as the Bon Marché in 1852 and Louvre in 1855. After a bout of recession which laid the economy low during 1856-1857, the mood picked up again. Businessmen resumed their dreams and projects, for example, the “Réunion financière” in 1857, which prepared the way for Société générale in 1864. After setting up Compagnie des chemins de fer du Midi in 1852, the 3

4

5

Rondo Cameron, “A new view of European industrialization”, The Economic History Review, February 1985. Alain Plessis, De la fête impériale au Mur des Fédérés, Paris, Seuil, 1973. Jean Vial, L’industrialisation de la sidérurgie française, 1814-1864, Paris/LaHaye, Mouton, 1967. Claude Fohlen, L’industrie textile au temps du Second Empire, Paris, 1956. Louis Girard, La politique des travaux publiés, op. cit., François Caron, Histoire de l’exploitation d’un grand réseau: la Compagnie du Nord, 1846-1937, Paris, 1973. François Caron, Histoire des chemins de fer en France, tome I, 1740-1883, Paris, Fayard, 1997. Bertrand Gille, “La fondation du Crédit mobilier et les idées financières des frères Pereire”, from: B. Gille (ed.), La banque en France au XIXe siècle, Geneva, Droz, 1970. Jean Autin, Les Frères Pereire, op. cit.

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Pereire brothers readied their “Grand Central” railway which would cut right through the Massif Central. Finally, the government got into the act and signed an agreement with the railway pioneers in 1858. One could pretend that the decade of the 1850s marked some apex in French entrepreneurship6, despite short recessions, perhaps because of the political stabilisation of 1851-52 and of general prosperity on a European level. 2. THE PROLIFERATION OF FRENCH ENGINEERS What saved Lesseps was the power and depth of French technical expertise and engineering know-how. Geology had progressed rapidly due to the mining industry7 and the “canal revolution”, which, between 1822 and 1848, had tripled the length of the national network, greatly enhanced the technological knowledge in the field. The laying of the first railway lines between 1827 and 1848 allowed the gathering of a whole battalion of mining engineers (also called “civil engineers”) who were fired with the zeal for progress, a zeal which was soon to be tested severely: “We must take it that […] everything will have to be made – roads, canals, transportation equipment”? wrote Pereire regarding Algeria, before Napoleon III in 1852: “We have enormous uncultivated tracts of land which need to be cleared, roads to be laid, ports dug, rivers to be made navigable, our rail network completed.”8 French companies were active all over Europe: Gouin-Batignolles built ports, sewage and wastewater systems and railway bridges; in 1856-58, the Pereire brothers had some 50,000 labourers working at their Russian firm, Société des chemins de fer russes, whilst the French engineer Bazaine supervised the digging of the Russian Ladoga-Neva9 6

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9

Jean-Charles Asselain, “1850-1860: l’illusion de la puissance”, in Florence Bourillon, Philippe Boutry, André Encrevé & Béatrice Touchelay, Des économies et des hommes. Mélanges offerts à Albert Broder, Paris, Institut Jean-Baptiste Say & Éditions Bière, 2007, pp. 139-156. François Bourguignon & Maurice Lévy-Leboyer, L’économie française au XIXe siècle, Paris, Économica, 1985. André Thépot, “Les ingénieurs des Mines dans les sciences et techniques sous la Restauration”, Bulletin du Centre d’histoire de la France contemporaine, Université de Paris, 10-Nanterre, no. 6, 1985. Pereire, lettre of 25 August 1833, regarding Algeria, from: Jean Autin, Les frères Pereire, Paris, Perrin, 1983. Rondo Cameron, La France et le développement économique de l’Europe, 1800-1914, Paris, Seuil, 1971. André Thépot, L’ingénieur dans la société française, actes du colloque du Creusot d’octobre 1980, Cahiers du Mouvement social, Paris, 1985. Louis Girard, La politique des travaux publics sous le Second Empire, Paris, 1952. 125 ans de progrès technique vue à travers la Société des ingénieurs civils de France (18481973), Rouen, 1973.

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canal. Larger-than-life projects were all the rage: in 1855, Thomé de Gamond proposed building a tunnel under the English Channel – an idea which had been studied from as early as 1838; he estimated that it would take nine years and 170 million francs; in 1858 he came up with his own version of an inter-oceanic canal through Nicaragua, but he lacked Lesseps’ iron; the idea of a tunnel under the English channel was revived in 1868-1870 and then again in 1873-1884 with even some preliminary work begun. Ultimately, Lesseps ended up with the idea of the Panama canal some time in 1877-1879 and in typical Lesseps fashion, a Company was established and work begun in 1881; this new project had some fifteen directors in common with Suez which soon resulted in very close human and technological relationships; and the Americans recognized the quality of the work done when they bought over the concession from the French in 1904: “What we see today all along the course of the canal bears evidence to the feverish energy with which all the machines had been put to use.”10 Lesseps had made a major mistake by rejecting the plan for a canal with locks; the costs went up astronomically, with some FRF 1,271 million spent for moving 55 million cubic meters of soil (two-thirds of the total dug for the Suez canal); and still the Americans had to remove 259 million more to complete the enterprise; thus, the problem there was financial and intellectual – not the lack of technological prowess. Through such a rapid survey over public works of these times, we can pretend that the Suez canal was progressing apace amidst major civil engineering undertakings, the building of tunnels – the Gothard tunnel was dug somewhat later between 1872 and 1880 –, laying roads and railway tracks, digging canals big and small: it was a beacon of a revolution in technics, part of the first industrial revolution, which mobilised innovations in favour of public works. “Suez exemplified the success of French public works firms outside the country [...] and the international prestige of French engineers was dedicated for a while to the Suez enterprise”11. Last, the expansion of French engineering entrepreneurship, technology, and capability gthered momentum from the 1850s-1860s, in the whole Middle East, either in Egypt or in the whole Ottoman empire: there, French companies or syndicates got several contracts to deliver equipments (especially for harbours or railways), in the wake of French (and also British) financial and banking arm, Ottoman Imperial Bank

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11

Report submitted to the Secretary of State for War, 6 February 1906, from: G. Edgar-Bonnet, F. de Lesseps, op. cit., p. 211. Dominique Barjot, La grande entreprise française de travaux publics (1883-1974), Paris, Économica, 2006, pp. 105 and 103.

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(or Banque impériale ottomane)12. The Suez concession was therefore a beacon for a broad financial, technical, and entrepreneurial deployment of French business along Mediterranean coasts – thus achieving Michel Chevalier’s Système de la Méditerranée indeed.

3. THE SUEZ CANAL AND FRENCH ENGINEERS Practically the entire project was organized, directed, and financed by French engineers and entrepreneurs13 ; manifestly, “the Suez canal is French genius at work”14 ! English engineers such as Robert Stephenson condemned the project: “We will soon see that this project cannot but fail and ruin its financiers”15. On the other hand, “you know how closely linked we are to the corps of engineers coming out of the École polytechnique. In whatever specialty, whether highways or mines, marine, geographic or military engineering, in all fields we have come across […] bright young minds open to grand projects […]. We are in the process of gathering an elite which will guarantee […] the best in skill, zeal and quality of execution”16. 12

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Jacques Thobie, Intérêts et impérialisme français in l’Empire ottoman (1895-1914), Paris, ublications de la Sorbonne-Imprimerie nationale, 1977. Jacques Thobie, L’administration générale des phares de l’empire ottoman et la société Collas & Michel (18601960), Paris, L’Harmattan, 2004. Jacques Thobie, La France, l’Europe et l’Est méditerranéen depuis deux siècles. Économie, Finance, diplomatie, Istanbul, Les Éditions Isis, 2007. Christopher Clay, “State borrowing and the Imperial Ottoman Bank in the bankruptcy era (1863-1877)”, in Philip Cottrell, Iain Fraser & Monika Pohle-Fraser (eds.), East Meets West-Banking, Commerce and Investment in the Ottoman Empire, Aldershot, Ashgate, 2008, pp. 109-122. André Autheman, “A general survey of the history of the Imperial Ottoman Bank”, in Philip Cottrell, Iain Fraser & Monika Pohle-Fraser (eds.), East Meets West-Banking, Commerce and Investment in the Ottoman Empire, Aldershot, Ashgate, 2008, pp. 97-108. Jacques Thobie, “French investments in public and private funds in the Ottoman empire on the eve of the Great War”, in Philip Cottrell, Iain Fraser & Monika Pohle-Fraser (eds.), East Meets West-Banking, Commerce and Investment in the Ottoman Empire, Aldershot, Ashgate, 2008, pp. 123-142. John Marlowe, World Ditch : The Making of the Suez Canal, New York-London, The Cresset Press, 1964. Nathalie Montel, Le chantier du canal de Suez, 1859-1869. Techniques et techniciens des travaux publics au milieu du XIXe siècle, Paris, dissertation at the ÉHESS, 1995, two volumes. Speech by the director of the Panama canal works, 1915. J.-B. Dummont, Le canal de Suez, series “Les grands travaux du siècle”, Paris, 1889. Étienne Micard (VoisinBey’s grandson), Le canal de Suez et le génie français, Paris, Société mutuelle d’édition, 1922. Lesseps, 2 June 1858, from: Ferdinand de Lesseps, Lettres, journal et documents pour servir à l’histoire de canal de Suez, volume 1857-58, Paris, 1875-1881, p. 224. H. Fournel’s letter to Arlès-Dufour, 2 September 1833, from: Jules Charles-Roux, L’Isthme, op. cit., p. 424.

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But Lesseps had to reach a subtle balance between mobilising a team of engineers and technicians, and gaining and preserving his control over the project, in order to keep it at hand. He was cunny enough to use the capital of knowledge and experience already accumulated by the engineers who had been active in Egypt for some years: Linant and Mougel had prepared the preliminary plan in 1855. In October of that year, Lesseps formed an International Technical Committee which, after extensive studies from Paris and through a trip in Egypt by five delegates, delivered a promissory report on 2 Januray 1856 – tactically a very few days before the concession act on 5 January – and its final report in December 1856, where it concurred with Linant and Mougel on the feasibility of the project – except that it rejected the principle of locks which they had proposed; finally in 1858-59, a Higher Council of Works, set up on November 1858 with seven members, among which two representatives of the Suez Company, gave the plan some finishing touches and tried to reduce the global cost, and tried to supervise the start of undertakings, up to its final meetings in May 1860. Lesseps then asked the viceroy’s engineers to make further studies; when the Committee made a field trip in March and April of 1859, it brought along hydrographic and land surveyors. By the time actual work began on 25 April 1859, Lesseps had gathered around him a team of highly capable engineers. A first team comprised Mougel, the first engineer-in-chief and chief officer for undertakings from April 1857 to November 1861, and Bernard de Montant, chief engineer up to 20 November 1861. After their dismissal, a second team was set up, led by François-Philippe Voisin (1860-1870): the deputy to Mougel between January and November 1861, he was promoted chief engineer for undertakings at once and officially in January 1862 up to 1869 – after hist return to France, he followed an engineer’s career, being promoted General Inspector of Ponts-et-Chaussées in French administration in 1884, before coming back to the Suez Company as a member of the Board in 1893 and as its vice-president from 1913 to 1918. Voisin could count a team of assistants such as on Montant, Félix Laroche, Joseph Sciama, and Jean-François Viller who were all engineers from the Ponts & Chaussées engineering Paris school. The entrepreneurs of undertakings too had impeccable credentials. The Dussaud brothers had had interests in the works at the ports of Marseille, Cherbourg, and Alger; beginning in 1862, they also constructed for the viceroy a port with multiple docks at Suez ; later, they obtained from the Suez Company the contract for building jetties at Port-Saïd. A second entrepreneur, Alphonse Couvreux, had established a big name for himself in railroads; in the 1870s, along with Hersent, he played a significant part in the Danube works, the marine canal at Gand and the port at Anvers; it was he who managed machines

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to cross into the El Guisr rocky pass in 1863; Couvreux was the very inventor of a new type of digging excavator, comprising a chain equipped with buckets, and driven on a railway alongside the canal being dug. Paul Borel had been a bridge engineer for twelve years before getting into railroads (1854-1861); Alexandre Lavalley (1821-1892)17 had the same job in Gouin-Batignolles between 1846 and 1861; in 1861, these two Polytechnicians came together to form the firm Borel-Lavalley, which dug 150 km of the canal18. Lesseps’ success owed much to these engineers and entrepreneurs who he had handpicked by himself to constitute a high level team able to face such a large project. The works gathered for example about 187 engineers or high technicians, 104 of whom were employed by the Suez Company19 : 60 by Borel-Lavalley, and 23 by Alexandre Hardon – himself a self-made-man without diploma... Among these engineers, 22 were from Paris Polytechnics School, 26 from Paris Central Engineers School (École centrale), 26 from the various French Arts & Crafts Schools (Arts & Métiers), and 47 from the Paris Ponts & Chaussées School, which constituted a considerable concentration of brain, dedicated to the canal project. The Company organised a centralised system, which followed the model of the still rare big firms of that time, alongside vertical and specialised hierarchies of power and skills: in Paris, a desk supervised the undertakings and their links with the cash inflows, with Jules Hanet-Cléry, chief engineer in France (from 1863). As soon as water reached Ismaïlia in January 1862, Voisin moved from Damiette to the new city, located in the mid-isthmus, on the Timsah lake, the centre of power in Egypt in April 1862. There, quite a matrix managerial form was adopted, with several departments, alongside functions (general accounting, equipment20, catering, etc.) or locations: Port-Saïd (with Félix Laroche, in charge with the port and three sections of the canal), El Guisr (with the Italian engineer Eduardo Gioia, in charge with two sections of the canal, but for a 50 km length), Ismaïlia (with Berthault,

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Nathalie Montel, “Alexandre Lavalley. Profession: ingénieur civil”, Histoire, Économie, Société, n° 2, 1995, pp. 215-228. Alexandre Lavalley, Note sur sa vie et ses travaux, 1821-1892, Société des Ingénieurs civils. Jean-Édouard Goby, “Les conseillers…”, op. cit. Jean-Édouard Goby, “Voisin Bey (1821-1918)”, Bulletin de l’Association du Souvenir de F. de Lesseps, n° 3, April 1982. La construction du canal de Suez, 1859-1869, a Suez Canal Company booklet (undated). Voisin-Bey, Le canal de Suez, in six volumes of text and 3 volumes of plates, Paris, 1902-1906. Nathalie Montel, op. cit., p. 159. Cf. L. Montel, Percement de l’isthme de Suez. Description des travaux et des ouvrages d’art définitifs. Machines et appareils, Paris, 1872.

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in charge with three sections), and Suez (with Eugène Larousse, for three sections). 4. FROM UTOPIA TO A CANAL THROUGH SUEZ ISTHMUS : THE UNDERTAKINGS Though for us the Suez canal has become an ordinary fact of our daily lives, in the early 19th century it had all the romance and adventure of a utopian dream. It was a time when, fired by the spirit of adventure and lured by the siren call of the far horizon, men set out to conquer and seed new worlds21 – such as the pioneers of Australia, the American gold rush, the Oregon trail, etc. While many of these did succeed22, there were so many others which floundered and were lost. Would Lesseps’ canal be actually built, or was it another ‘bridge too far’? A. Setting up a base camp Nowadays, we are quite familiar with the idea of setting up of a whole township around a major project, whether building a giant factory, prospecting for oil or constructing a barrage: it allows the technicians and workers to live and work undistracted and in complete freedom, whether their job is located in the middle of the burning Arabian desert or the frigid Canadian North. The builders of the Suez canal had to come up with the idea and carry it through all on their own; they had to construct a landing port, set up supply and food chains, build houses, etc. “The costs of the initial establishment was one of the major investments […] especially in the desert where everything had to be brought […]. We had to build or buy a veritable mountain of necessities […]. We had to establish, on the Mediterranean coast, an entire township of 4,000 inhabitants with every sort of workshop and machinery imaginable […]. We brought the Nile to the desert; we had to ensure a continuous supply of all our needs; ultimately, we could sustain, feed and give all the required tools and instruments to a whole army of over 40,000 workers.”23 An armada of camels was used to link the port at Alexandria to the work sites. In 1858-1860 a simple landing jetty was built of wood and metal at Port-Saïd; but storms soon ravaged the budding township and destroyed the ships in the roads24. Everything had to be rebuilt, houses, 21 22

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Jules Verne, Les naufragés du Jonathan, written in 1891, published in 1909. James Michener, Colorado Saga, Paris, 1975 (in the United States, Centennial, New York, 1974). Lesseps’ letter to Layard, Secretary of State at the Foreign Office, June 1861. From: Jules Charles-Roux, L’Isthme, op. cit., volume 1, p. 329. See Voisin-Bey, Le canal…, p. 172.

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workshops, hangars, water distillation plants, sanitation…. Entire dismantled cottages were brought from France, stones and lime from a quarry near Alexandria and bricks from Damiette to build this new “Arab town”. Finally, at the end of 1862, Port-Saïd was ready to go. At the work sites, houses were built for the European managers and technicians and “gourbis” for the fellahs. A whole town at TimsahIsmailia sprang up in April 1862, at the centre of the isthmus; the ground was leveled, roads laid, buildings constructed. And similar bases were established at Kantara, El Guisr, Toussoum, etc. For the first few years (1859 to 1865), the Company itself managed and ran the supply shops for its workers; towards the mid-1860s it began a process of disinvestment and transferred them to some 1,500 private traders of whom 800 were Europeans. Everything had to be procured: in 1862 the Company imported 35,000 pickaxes from France and bought hundreds of tons of biscuits. Every month the Egyptian government supplied 100,000 baskets (called “couffes”) to transport sand. Some 1,820 Europeans (including a number of Greeks and Italians) and 4,000 Arabs had to be maintained and given work. Almost as soon as the townships were settled, death came visiting – typhus and smallpox turned endemic. Brought back by pilgrims returning from the Hajj, an epidemic of cholera swept through the isthmus in May 1865: Three hundred of the 4,000 inhabitants of Ismailia were struck down; 210 Europeans and an unknown number of Arabs perished. The local labourers fled to their villages or to Port-Saïd25, leaving the worksites in total disarray. These events contributed mainly to the perennial reputation of the building site to have been some kind of a “Cayenne in the desert”, evoking the famous French penal colony in Guyana… The survival of the workers depended indeed on a constant supply of fresh water. In 1857-1858, Linant and Mougel had drawn up a detailed plan for a fresh water canal. The Company took up the work and distributed it over several worksites. While some two thousand camels brought water, 10 to 30,000 fellahs were set digging with shovels and baskets. In February 1862 water from the Nile reached lake Timsah and helped establish the Ismaïlia township. A fresh water canal went up to Suez, another linked Port-Saïd. B. The dependance on human workforce, between forced labour and recruitments of employees The whole enterprise depended heavily on the availability of a massive workforce. Though the Company recruited 8,000 labourers 25

Ibidem, pp. 379-383.

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between 1859 and 1861, it found it difficult to keep them; their inexperience, lack of skill, the variable nature of the terrain to be dug, the insufficiency of the daily wages, the living conditions, all conspired to cause wholesale defections. In 1861 alone the number of labourers varied between 4,900 in June-July and October to 10,000 in September, 11,000 in November and 15,000 in December. Finally, after the viceroy’s visit, a system of forced labour26 (“corvée” in French) was established in January 1862: every village was to furnish a contingent of labourers, paid by the Company, in a quarterly rotation; a representative of the viceroy and later, a governor of the isthmus, saw to it that the numbers were sufficient and that it remained stable. Shifts of some 12,000 to 22,000 labourers were assembled between 1862 and 1864. But all forces labourers were being paid, conversely to the “black legend” of the Suez Company, which thus cannot be for example likened with the excesses of forced labour in French colonies27, even if the wages were very low, if the duration of the daily shifts varied alongside the needs of the undertakings, and if the tasks were hard, especially when digging the El Guisr pass. And such forced labour had been a tradition in Egypt for public works. Muhammad Ali had used it to dig the canal linking the Nile to Alexandria, the Mahmudia canal, completed in 1820 thanks from 7,000 to 28,000 fellahs, and to clear irrigation canals. It had also been employed to build the railway linking Alexandria to Cairo in 1851-1855 (with about 20 to 30,000 fellahs). And the Egyptian or Nilean “civilisation” was even still deeply considering favourably slaveship till the midst of the century (even later on) because of intense traffic of slaves between Subsaharian Africa to the Middle East through the Suez isthmus, as it had been studied by Olivier Pétré-Grenouilleau28. The key issue was in fact not the low-consideration of human value in this area, but the actual treatment of forced labourers by the Company on its excavation sites, and no historian is able to prove that it resorted to violent deportations, harsh repression of undiscipline, or military constraints, as it was later the case in the Belgian Congo being conquered and exploited with atrocities and massacres by king Leopold II in the last decades of the 19th century or on the Congo-Océan construction sites in the 1920s. The

26 27

28

See Nathalie Montel, op. cit., pp. 120-131. For example, since the 1840s, forced labour was used in French Algeria to open and build country roads or village lanes; and forced labour became commonly used in some parts of French Subsaharian Africa, for instance for the Congo-Océan railroad or the Niger scheme. Olivier Pétré-Grenouilleau, Les traites négrières. Essai d’histoire globale, NRF, series Bibliothèque des histoires, Paris, Gallimard, 2004,

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abolition of forced labour in September 1864 was not due, as the antiimperialist detractors of the Company would have it, to an inordinately high rate of attrition; in 1956 they even estimated the toll at 120,000 dead29, and such a figure stayed durably in some “black legend” of the Suez Company throughout common opinion. Though diseases, accidents, and difficult living conditions meant that some hundreds died over ten years, the actual figures are far removed from the thousands who perished in building the railroad and the canal at Panama or in the laying of the Congo-Océan railway. There was no “labour camps” under some kind of military rules, because the Company wished to rely on a stable and able workforce, not on weakened and enslavened reluctant people. But the evolution of the political environment (see chapter X) led to the suppression of forced labour, despite the wills of the Company, which recalled that the forced fellah’s was two and a half less that costly than the free labourer... About 15,000 forced labourers (from fishing villages) thus dug in 1860 the four to five meters broad trench coming southwards from Port-Saïd to the lakes as an outline of the future canal on 30 km. To this local workforce, we must add 1,500 Europeans and 3,500 indigenous people working at the different workshops of the Company to get some idea of the magnitude of the labour required – which explains that the workforce reached on some months about 20,000 men all told. Even after the development of large scale mechanization, the firm still required thousands of fellahs between 1864 and 1869. In March 1862, it had completed the outline of the main canal by digging a narrow channel which linked Port-Saïd and Ferdane. Before any heavy machinery could be used, the terrain had to be prepared by hand, especially when it came to rocky terrain. The passage through El Guisr required backbreaking labour by 21 to 23,000 fellahs over a 13 km stretch in 1862-63. At Chalouf, between the Great Bitter Lake and Suez, human muscle power had to dig through 37 km as the terrain proved impossible to dredge; 6,000 labourers used wheelbarrows on inclined planks set in place by 2,000 others; some sixty miners from Piedmont were hired to blast through the rock. In such archaic, if not antique conditions, it was muscle power alone which kept the enterprise on track. The Company had to fight contagious diseases, wholesale layoffs and the unforgiving desert. It had to recruit people from as far off as Syria and deal on a daily basis with the logistical nightmare of maintaining a constant and adequate supply of fresh water, food, medicine, housing, and sanitation. Fortunately for

29

Mohamed Younes, Managerial Lesson from the Suez Canal, brochure of the Suez Canal Authority, Ismailia, 1964.

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Lesseps, there were no insurmountable difficulties which cropped up. The cholera epidemic was quickly brought under control; the fellahs did not revolt and were kept at their posts by Egyptian authorities. Nature too seemed to finally help out, because the rocky ledges came to an end and storms did not sink too many ships. This dependence on natural and human forces does give the impression of fragility. Despite Lesseps’ energy, the determination of the fellahs and the ingenuity of the engineers, the costs and duration of the entire project could have spiraled out of control had it not been for the machines.

5. MODERN TECHNOLOGY AND THE SUEZ CANAL The development of the project was based on the fruits from the first industrial revolution, which exerted a pervasive influence on public works techniques and on engineering devices. French entrepreneurship and inventiveness in this area were key levers to the implementation of the canal through the isthmus and to the respect of key deadlines. But some failures and limits were first met: lagging supplying flows, overcosts, delays in starting works, struggles between the engineers’ supervising team and the entrepreneurs, led to troubles in 1859-1861. Lesseps left too much leeway to a dishonest or incompetent entrepreneur, Alphonse Hardon, who had won the first contract on 12 February 1859 and 29 February 1860, in the sake for accelerating the process. He had to face his engineers themselves: in October-November 1861, Montant resigned and Mougel was dismissed, thus leading to Voisin’s power. The contract of the first general entrepreneur was cancelled on 1st January 1863 because of too much disorder30: equipment did not reach the works, working was suspended too often, etc. And the engineers, for a while, had to assume by themselves the development of works throughout 1862; but they impose a new organisation of catering, flows of inputs, supervising works alongside thirteen sections, with engineers in charge precisely for part of the undertakings. Finally, the Company reached the relevant process, through balanced contracts with new entrepreneurs: Dussaud, Couvreux, Borel & Lavalley. A. The construction of Port-Saïd This all-important access port to the canal outgrew being just a “wharf” due solely to the mechanized construction site set up by the

30

Nathalie Montel, op. cit., pp. 70-80.

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Dussaud company31 – which was a pioneering firm in this technology and was already known in Egypt because the governement had contracted with their firm in April 1862 to dig the wet dock of the Suez port. It built the two canal’s protection jetties (3,300 m and 2,000 m) in just over three years (from August 1865 to January 1869) by pouring 250,000 cubic meters of 25,000 cement blocks mixing sand and lime. Steam engines were used both for making the blocks as well as transporting them. The lighthouse was built with concrete using the latest French engineer’s Coignet technology. But a Scottish entrepreneur, William Aïton, was put in charge of digging the waterway and the docks; he faced such technical obstacles that the Company cancelled his contract and acted directly, before trusting Borel-Lavalley in April 1864 to complete the project. B. The triumph of the steam engine : The firms Couvreux and Lavalley The dredging of the canal was where modern civil engineering really came into its own. When asked to dig the first channel at El Guisr, Couvreux tailor-designed a 45-ton bucket excavator32; the design proved so successful that it even spread to Europe for major construction projects there. Meanwhile, seven of such machines were kept busy in the isthmus from 1863 to 1868, and even thirtheen altogether in 1868; they were supported by an entire 32 km rail network with 400 wagons and a dozen steam locomotives. Couvreux dug and pierced the El Guisr threshold, which was the highest technical difficulty of the project The Company had begun to use steam powered dredgers and cranes right from 1862-1863. It leased some twenty large dredgers to BorelLavalley along with a fat dredging contract in 1863 for three allotments: the Serapeus, the Amer lakes and the Suez section. The importance and urgency of digging service channels now became evident: it was who made it possible for the dredgers to work and relocate themselves. Borel-Lavalley gathered together a massive mechanized workforce to extract the 56,7 million cubic meters33 – that is 76,6 per cent of the 31

32

33

About Port Saïd, see Nathalie Montel, op. cit., pp. 532-553. About Dussaud, also see Dominique Barjot, La grande entreprise française, op. cit., pp. 84. And also see “Élie Dussaud”, in Roland Caty, Éliane Richard & Pierre Échinard, Les patrons du Second Empire. Marseille, Paris-Le Mans, Picard-Cénomane, 1999, pp. 130-133. “Elzéard Dussaud”, ibidem, pp. 134-135. About these modern excavators, see Dominique Barjot, La grande entreprise française de travaux publics (1883-1974), Paris, Économica, 2006, pp. 82-84. Dominique Barjot, “Innovation et travaux publics (1840-1939)”, Histoire, Économie, Société, n° 3, third term 1989, pp. 403-414. About Borel-Lavalley, see Nathalie Montel, op. cit., pp. 554-565.

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whole amount of excavatings (74 millions cubic meters), far ahead of Hardon (13,48 per cent), Couvreux (6,20 per cent) and the Company by itself (3,52 percent). In 1865-1866, it used 32 dredgers and five excavators; in 1867-1868, the number of dredgers34 was increased to 42; and in 1868-1869, a whopping sixty dredgers were running full steam ahead. To these were added lifting equipment, steam ships and barges, towTable 3. Equipment and workforce active on the Suez canal works35 Dredgers

Excavators

Hand-workers

1866 May

22

7

3,927

June

28

9

3,774

July

29

12

4,860

August

29

13

6,030

September

30

12

6,530

October

28

13

6,420

November

21

7

6,123

December

30

6

7,300

1867 January

40

6

7,774

February

40

3

7,074

March

41

3

7,153

April

41

6

6,368

May

41

9

6,678

June

48

8

7,260

July

45

8

7,630

August

44

September

43

October

32

8,004

November

39

8,340

December

41

9,250

34

35

9,412 12

7,920

About the dredgers, see Nathalie Montel, op. cit., pp. 571-585. Also see: Nathalie Montel, “L’organisation du travail sur les chantiers de terrassement. Le cas du percement du canal de Suez”, Culture technique, n° 26, 1992, pp. 134-155. National Archives 153AQ/1610B, quoted by Nathalie Montel, op. cit., p. 587.

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barges, steam-powered cranes, wagons and some two-hundreds other sundry boats. A total of almost 10,000 horsepower was available, with their reins in the hands of some 4,000 workers. All in all, in September 1867, for example, 43 dredgers and twelve excavators were active on the works, helped by about 8,000 hand-workers. The speed and success with which the digging proceeded was a reflection of French industrialisation. Lesseps’ dream was based on the solid foundations laid by French entrepreneurs who were very familiar with modern excavation technology and on French or “expat” engineers who could build and maintain the machines. Also, there a strong symbiosis sprang up between the fellahs and their machines. C. The first industrial revolution and the Suez canal Such a gathering of steam-powered machines36 could not have been possible without the prior maturation of the European mechanical industry. While some machines were ordered from Scotland and Belgium, the bulk was supplied by French factories. The dredgers, the cranes and tow-barges came from the big naval and railroad companies such as the Forges & chantiers de la Méditerranée37 and Goüin-Batignolles38 and the excavators and smaller dredgers from the industrial belt around Lyon, which had undergone a “mechanical revolution” in the second half of the 19th century (1850-1890)39. In 1862, the Suez Company set up assembly plants at Port-Saïd. Managed by Borel-Lavalley between 1865 and 1869, these workshops were used to assemble the machines which were shipped in parts from Europe and also for their repair and maintenance; the toll of attrition on these machines was so high that many had to be cannibalized and

36 37

38

39

For details, see Voisin-Bey, op. cit. See Olivier Raveux, Marseille, ville des métaux et de la vapeur au XIXe siècle, Paris, CNRS, 1998. Gérard Chastagnaret & Philippe Mioche (eds.), Histoire industrielle de la Provence, Aix-en-Provence, Publications de l’Université de Provence, 1998. Xavier Daumalin & Marcel Courdurié, Vapeur et révolution industrielle à Marseille (1831-1857), Marseille, Publishings of the Marseille-Provence Chamber of Trade & Industry, tome XII, 1997. Rang Ri Park-Barjot, “La Société de construction des Batignolles: des origines à la Première Guerre mondiale, 1864-1914”, Histoire, économie, Société, n° 3, third term 2000, pp. 361-386. For more on the growth of the French mechanical industry, see: Maurice Daumas, “Les mécaniciens autodidactes français et l’acquisition des techniques britanniques”, from: Maurice Daumas, L’acquisition des techniques par les pays non initiateurs, Paris, 1973. And, for more on the engineers of Lyon, who built a number of the machines used in the isthmus: Pierre Cayez, Crises et croissance de l’industrie lyonnaise, 18501900, Paris, CNRS, 1980. About orders for equipment, cf. also Nathalie Montel, op. cit., pp. 300-304.

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used as spare parts. Forging workshops with drop hammers, foundries with two cupolas, a copper foundry, a mechanical sawmill and several woodworking and carpentry workshops manned by some 700 to 850 technicians and workers (half of whom were Europeans) played a supporting role, while “flying” forges followed the work from site to site. Even outside metallurgy, the industrial revolution favoured the success of the undertakings: French firm Pavin de Lafarge, a specialist in cement, sent 80,000 tons of lime from France to produce the blocks used for the Port-Saïd jetties and the canal: lime was then mixed with plaster elaborated with gypsum dug in small mines along side the Ballal lakes. And coal had to be sent to the Suez works for the machines: 25,000 tons were imported in 1865 and 150,000 tons in 1868, mainly from the United Kingdom mines and ports, only a few tons coming from French mines (in Hérault and Gard départements).

6. THE COMPLETION OF THE CANAL UNDERTAKINGS The steps towards the achievement of the canal relied on the several entrepreneurs, which had to respect their contract, and on the supervisors, who controlled each section of the project. Dussaud succceded so well in delivering the Port-Saïd jetties and docks that the Egyptian government attributed their firm a second state contract, to establish two ports, at Ibrahim and Thefwik, between 1867 and 1874. A waterway serving as an outline of the canal and used to bring dredgers southwards was openend on 18 November 1862 from Port-Saïd to the Timsah lake, only 15 m broad – 56 m for the future canal – and 2 m deep – 8 m for the canal. The El Guisr pass was conquered in January 1868; but seawater filled the Timsah lake on 15 August 1867, and the Amer lakes between 18 March 1869 and 24 October 1869. Despite a quick official opening as soon as 1869, the very last diggings were completed on 15 April 1871: ultimate excavations had to be achieved and the Serapeus rocks had to be destroyed; the delay treached only two months against the deadline fixed to Borel-Lavalley by the contract, and it owned therefore a supplementing sum of FRF 1,8 million.

7. THE SUEZ CANAL ENTERED HISTORY: NOVEMBER 1869 The khedive Ismaïl (1863-1879) wished to crown the re-development of Egyptian modernity with grandiose celebrations: he could thus

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Table 4. Undertakings on the Suez isthmus from North to South Port-Saïd

Dussaud established both jetties and the dock (from October 1863)

A waterway as a trench bringing sea Opened on 18 November 1862 water from Port-Saïd to Timsah lake (thanks to forced labour) Water canal up to Ismaïlia

Opened on 2 February 1862

Then to Suez

Opened on December 1863 (and to sailing on August 1865)

El Guisr threshold and pass

Couvreux digging into it with it excavators, from October 1863 up to 31 January 1868

Several sections of the canal, south Hardon started excavating from on and north of El Guisr pass (Serapeus, February 1860, but reneged on his Amer lakes, Suez section) pledge. Then Borel-Lavalley excavating sand with its dredgers, from 1867 to 1871 Suez port

Dussaud built the wet dock, from April 1862

Ibrahim port and Thewfik port

Dussaud built them in 1867-1874

emulate his predecessor and Egyptian hero Muhammad Ali. The inauguration of the canal40 became what is called today a “global event”, with a party attended by worldwide VIPs. First of all, French empress Eugénie travelled to Egypt on the imperial yacht L’Aigle and was welcomed in a new palace in Cairo; Austro-Hungarian emperor FranzJoseph joined the fray, with the royal prince of Prussia FriedrichWilhelm, and prince and princess of the Netherlands; but queen Victoria was only represented by her ambassador there, Lord Elliot, as was the Russian tsar Alexander II by general and ambassador Ignatief. But about a thousand important people from the humanities, arts, culture flocked to Alexandria and Cairo, thanks to special liners. The inauguration events started on 16 November 1869 with religious consecrations; the next day 17 November at 8 AM, L’Aigle (with Eugénie and Lesseps on board) entered the waterway and was followed by the other ships; they were welcomed in Ismaïlia by the Khedive and Egyptian high dignitaries and foreign guests, among whom academics – and a hundred of guests had been guided among by the director of the founder of the Cairo Museum of Antiquities, Auguste Mariette. On 18 November, a magnificent party took place in Ismaïlia, with for instance a “fantasia” 40

G. Nicole & Édouard Riou, Inauguration du canal de Suez. Voyage des souverains, text and aquarels by Riou, Paris, 1870.

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and several receptions, with 1,200 tents and hundreds of buffets; on night, a huge ball gathered 5,000 guests in the khedive’s new palace, before two suppers and a fireworks. On 19 November at noon, the convoy of ships resumed following L’Aigle and reached the Amer lakes on the evening. On 20 November 1869, the convoys completed the inaugural trip when it joined Suez at 11.30 AM and Lesseps sent a telegraphic message to Paris to announce that the first ship had crossed the isthmus and had dropped anchor in the Red Sea. Pride could not but have been deeply felt by Lesseps, the leverage to entrepreneursip, the khedive, go-between to Egyptian modernity, the engineers and public works businessmen, and all people of the mid-19th century dreaming of “Progress”, and of a worldwide expansion of the world through new transportation networks, either railways or waterways and large merchant shipping fleets. But two facts have to be underlined. One one hand, as early as 1865, the Saint-Napoleon celebrations on 15 August of that year had included commemorating the first transit of a convoy between the Mediterranean and the Red Sea, which had taken place two days previously; six small steamboats had helped some coal barges navigate the entire length of the canal; and a towing service was already in place in 1865-1869. On the other hand, contrarily to general opinion about the Suez saga, the opera Aïda was not performed on the occasion of the inauguration in 1869; though it is true that the khedive commissioned Verdi in 1870, Aïda was performed in Cairo only in December 1871 and in Paris in 1880; the Cairo opera house opened in November 1869 with Rigoletto.

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CONCLUSION OF THE FIRST PART FERDINAND DE LESSEPS AND TECHNICAL HISTORY O hero who, with our hymns and prayers swelling your sails, Have launched your skiff towards destined glory […] Come! Allow us to place on your head A crown of fresh laurel 41.

We do not take away a whit from Lesseps’ achievement by analyzing the causes of his success. He inherited oriental, Egyptian modes and Saint-Simonian utopias. He personified the Will to a Universal Economic Progress which had swept across a resurgent Europe in the second quarter of the 19th century. He symbolized France’s growing power, borne abroad (especially into Egypt) by the ingenuity of its civil engineers and mechanics. He was carried aloft on the wave of capitalism which transformed the Near East into an imperialist playground. Lesseps’ success bears testimony to the economic maturity of the European as well as Egyptian economies and civilizations. And yet, it was he who set light to the whole enterprise by his will, his dynamism, his diplomatic skills, his deft touch on his Egyptian contacts. Though history contains and encompasses Lesseps, he was surely one of its more powerful mover and shaker42. Anyway the constraints of the workings through the isthmus required thousands of anonymous heroes of this Suez story, gathered by the Egyptian authorities (but paid byt the Company) to dig the first ways through sand. And moreover Lesseps’s “genius” consisted in his ability to open doors to high-level and inventive engineers who collected in Egypt the up-to date steam equipments to intensify digging and to overpass the lack of workforce. The Suez isthmus became some “exhibition” of industrial and mechanical progress, sustained by the workshops or plants set up in Port-Saïd for the maintenance of the machines and engines. It was the first step of the industrial revolution in such areas because railways did not reach yet the Ottoman empire and large ports (like Piraeus) were not still equipped; with the Constantinople harbour, where French technics also predominated, the Suez isthmus and Port-Saïd areas became some kind of shop-windows of French technical capital. Whatsoever the endless arguments about the “bad sides” of the completion of the project (forced labour, hard life for workers and even 41 42

Giuseppe Verdi, “The slave chorus”, act 2, scene 1, Aïda. See Ghislain de Diesbach, Ferdinand de Lesseps, Paris, 1998.

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mortal diseases; uneven financial relations with Egypt, etc.), the canal had been established, which traced a waterway across the desert43, opened a new page for maritime history44, and moulded a new frame of world-wide trade, in particular for the starring “route des Indes”45, easing the relationship with overseas empires, mainly for Great Britain, The Netherlands, and France. Technical progress opened doors to economic progress through the development of trade and production, thanks to the connections between Europe and Asia, and conquering bourgeois’46 entrepreneurial spirit could be spilled over the world with a new dynamics, after the railways revolution had prospered in Europe and was gathering momentum in North America through the transcontinental lines.

43

44

45 46

Z. Karabell, Parting the Desert. The Creation of the Suez Canal, New York, Alfred Knopf, 2003. See E.R.B. Duff, Cent ans du canal de Suez, 1869-1969, Paris, Éditions maritimes & d’outre-mer, 1971. G.H. Blake & W.D. Swearinger, The Suez Canal : A Commemorative Bibliography, University of Durham, 1975. D.A. Farnie, East and West of Suez. The Suez Canal on History, 1854-1956, Oxford, Clarendon Press, 1969. See Paul Morand, La route des Indes, first edition in 1937. Charles Morazé, Les bourgeois conquérants à la conquête du monde, 1842-1890, Paris, Armand Colin, 1957; reedition, Brussels, Complexe, 1985.

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Picture from Riou. The inauguration of the canal

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Piercing of the fresh water canal

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Works at the canal

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Building of a dredger at Port-Saïd

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Large radius dredger

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Another large radius dredger, as a landmark of French technology

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Dredger at work

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Large cutting at El Guisr, at the highest point of the Suez isthmus (20m high), in 1866-1867 (Ermé Désiré)

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PART 2

THE GROWTH OF CUSTOMERSHIP AT THE SUEZ COMPANY Apart from Lesseps’ Saint-Simonian idealism, his ideas regarding “universal peace”, bringing diverse peoples together and civilizing the East, we must also look into the practical side, the canal’s utility aspect: was it at all necessary ? If so, did it have a sufficiently large client base? Were the English experts justified in condemning firstly the enterprise as a waste of money ? The traffic figures should give us some idea of the canal’s economic viability. Moreover, if the Company did gain economically by a surge of maritime traffic through the canal, did it not cause bottlenecks at the same time? Did the Company provide adequate facilities for a safe navigation and a smooth passage? In short, were the customers satisfied? And how did the structures, directions, flows of transit evolve thanks to the opening and the development of the canal?

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CHAPTER 3

THE SUEZ CANAL FINDING OUT CUSTOMERS FROM 1869 TO 1914 Lesseps’ utopia consisted with the creation of new maritime and commercial flows between Europe and the Mediterranean area on one side, and the Indian Ocean and Asia on the other side. Saint-Simonians dream to accelerate economic and social history; but Lesseps and themselves had to face empirical realities, those of historical trends which required time to evolve. The rebuilding of transport habits for instance were far longer than expected. Everywhere in economic history industrial or logistical big equipments have always met difficulties in implementing processes and in reaching scheduled figures of production or transit: the Suez Company had to admit that even Lesseps could not push on the rhythms of transport history and that customers had to change their technical and commercial uses before rushing to cross the Suez isthmus – all the more because in parallel was at stake a revolution in ship-handling, with the transition between sailing to steam-boats, between clippers to steamers1, which required huge investments to renew the merchant fleets and to spread cola warehouses.

1

As being analysed in Christina Baird, Liverpool China Traders, Bern, Peter Lang, 2007, who devoted some pages to this evolution from clippers to steamers among the Liverpool shipping partly because of the development of the transit through the Suez canal. Also see: David Williams, “Trading links: Patterns of information and communication: The steamship and the modernization of East-West commerce”, in Philip Cottrell, Iain Fraser & Monika Pohle-Fraser (eds.), East Meets West-Banking, Commerce, and Investment in the Ottoman Empire, Aldershot, Ashgate, 2008, pp. 2539. C. K. Harley, “Shift from sailing ships to steamships, 1850-1890: A study in technological change and its diffusion”, in Deirdre [Donald] Nansen McCloskey & S.L. Engerman (eds.), Essays on a Mature Economy. Britain after 1840. Papers and proceedings of the MSSB conference on the new economic history of Britain, 1840-1930, Princeton University Press, and London, Methuen, 1971; reedited, Donald Nansen McCloskey (ed.), London, Routledge, 2006.

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1. ISSUES AROUND THE INAUGURATION OF THE CANAL (1869) The Suez canal had been officially opened on 17 November 1869. Despite such event, an important fact had to blur the prospects of rapid and intense development of transit through the new waterway. Because of technical difficulties, delays in transit had to be taken into account, which could hurt the financial prospects of a company which had selffinanced – though issuing of bonds – a large part of the Suez project and had therefore to assume the repayment of its liabilities. The very fate of a joint-stock company was thus questioned by the lack of cash flows, whereas new investments were require to achieve some ways of the canal and to adapt it to day to day transit. It was by no means complete : its depth varied between 7 and 8 meters, while at Serapeum it stagnated between 5 and 5.5 because the dredgers could not dig through the sandstone. There was much work to be done over the next five years (1870 to 1875) : to attain a uniform depth of 8 meters all through, shape the bends, streamline the “profile” and dredge the basins at Port-Saïd.

2. LAGGING NAVIGATION TECHNIQUES Besides theses issues, the rhythm of maritime technics had to be considered by the Company, which provided a waterway seeming to be inadapted to the shape of the commercial fleets predominating at the turn of the 1870s. The Company risked to be deadlocked pending the investments necessary to accelerate the timing of the revolution in shipping. A. Lesseps’ technical gamble In as early as 1857, Lesseps had visited the naval dockyards at Liverpool to see for himself the latest trends and shipbuilding methods. His entire project depended on steam power taking over from wind power. Sailboats would not be able to navigate the canal without being towed – which would make the journey as expensive as an overland, railroad transit. In 1852, the French line Messageries maritimes launched its first steamboat in the Red Sea and the year 1857 saw the launch of the allmetal steamer the Great Eastern. Lesseps gambled heavily on steam: “Steam has definitely replaced sails in warships […]. A similar transformation […] is bound to take place in the merchant navy, though obviously more slowly […]. Naval officers are unanimous in their opinion that such a

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transformation would take place even before the canal would be completed. The process is going on with every passing day.”2 Lesseps’ optimism was not shared by many merchantmen and sailors: “I am afraid that the canal may not prove to be very useful.” “They maintain that as soon as the isthmus is opened, the Red Sea, with its calm winds would greatly favor steam power […]. But though the Red Sea is ideally suited for steamships, they are still much too expensive to build and most would prefer sailing around the Cape which, though time-consuming, remains a much cheaper alternative.”3 “Mr. Lesseps is counting on the use of dual-powered vessels […]. But, such a vessel would have to make six to seven knots on steam power alone to be able to ply against a head wind […]. A cruising speed of six or seven knots would require a powerful steam engine and a large capacity for storing coal. It would also require extra stokers and mechanics. Navigating the canal under such conditions would be prohibitively expensive, especially for transporting low value merchandise […]. No doubt steam can be used to transport expensive merchandise, precious metals, passengers, etc., but the railway line between Alexandria and Suez which is close to being commissioned should prove more than adequate for these purposes.”4 The canal’s success seemed to depend entirely on an external, technological advance – something which Lesseps could do nothing about, except of course, by building an entire flotilla of steamships ! Was it then not a huge gamble to attempt a canal without any client pressure, without there existing even the ships capable of navigating it? It was the heyday of sailboats with large “clippers” majestically ruling the high seas. B. An agonizingly slow process of modernization Though British shipbuilders were a farsighted lot and gave their full support to Lesseps and his canal, the fact was that, as of January 1855, out of the entire English merchant fleet of 36,348 ships grossing some 5,116 million tons, only 1,480 boats (with 298,126 tons, that is 6 per cent) were steam driven – a figure not significantly different than for the French themselves, who were at 5 per cent. Lesseps seems to have been misled because the steam revolution was taking its own sweet time in coming. In May 1870, only some four thousand steamboats were afloat

2

3

4

The International Commission of 1956, from Paul Reymond, Histoire de la navigation dans le canal de Suez, Cairo, 1956. The captain and the second in command of the ship used on the Red Sea by André Siegfried’s father, from: André Siegfried, Suez, Panama et les routes maritimes mondiales, Paris, Armand Colin, 1948, pp. 86-87 (also published in New York, Harcourt, Brads, 1940). Le Havre’s Chamber of Commerce, from: P. Reymond, Histoire…, p. 19.

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in the whole world. Even the propeller, invented in 1822, was only slowly replacing the paddle wheel. Steamers had to stock up huge amounts of coal because they could not be refueled at all ports. The Franco-German war of 1870-1871 further delayed modernisation. Ship owners too ran shy of this new, untested route. The British Peninsular & Oriental company had steamships plying the canal, but till 1874, they continued to deliver “English Mail” between Alexandria and Suez ; even up till 1888 it was only for the “rapid mail”, while the “couriers” stayed away altogether. C. Was the canal dangerous? In fact, some 32 per cent of the transiting boats failed to cross the canal in 1870. In a year the figure went down to 19 per cent and settled at around 10 per cent in the 1880s. The pilots were still unfamiliar with the peculiarities of navigating this canal, its hydraulic phenomena5 and the different techniques required to navigate ships carrying different types of cargo. With single propellers and relatively small rudders, ships turned skittish and were very difficult to maneuver in the cross-currents and bends of the canal. On board, things were not helped by the delay in executing orders, as the helm was controlled by two to four sailors at any given time. The “pilot culture” set in only gradually, formed mostly by former sailors. In 1888, there were some 26 Greeks, 25 Italians and 15 French. By the turn of the 20th century, the total number of pilots had risen to a hundred, and in 1930 it touched 120, with some 40 English, 20 Greeks and Italians, and 35 French.

3. A CANAL WITHOUT SHIPS? “Dead calm here. The canal is a failure” was telegraphed6 sometime towards the end of 1869 ! Nine transits were made in December 1869, sixteen in January 1870, twenty in February, and a total of 223 in the first half of 1870. It took a long time for the canal to catch on. Apart from military and postal ships, merchantmen seemed to be steering well clear… Though it would seem at first glance that the traffic doubled between 1870 and 1872, it was only because the initial number was so small – it went up by only half more over the next five years (1872-1877). The tonnage did double though in that time span, equivalent to an annual 5 6

See Captain Paul Parfond, Pilotes de Suez, Paris, 1957. Worms’ agent in Port-Saïd, from: Georges Albertini, Cent ans boulevard Haussmann. Histoire de la maison Worms, Paris, 1948 & 1978, p. 44.

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Table 5. The first years of transit through the Suez canal Number of ships

Total net tonnage

1870

486

436,609

1871

765

1872

1,082

1,160,744

1873

1,173

1,367,768

1874

1,264

1,631,650

1875

1,494

2,009,984

1876

1,457

2,096,772

1877

1,663

2,355,448

1878

1,593

2,269,678

1879

1,477

2,263,332

1880

2,026

3,057,422

increase of 17 per cent from 1872 to 1877. While the canal did attract some clients, the actual tonnage passing through remained meager: less than two million tons per year between 1872 and 1877. The canal was very sensitive to the world’s economic situation. The recession of 1877-1879 caused a 22 per cent drop in the number of transits and a 4 per cent drop in the tonnage. It was only in 1880 that the barrier of 2,000 ships was crossed, with 2,026 transits. Then, an economic “boom” doubled the number of transits (from 1,477 in 1879 to 3,307 in 1883) and the tonnage (2,266 million tons in 1878-1879 to 5,042 million in 1880-1885 and almost six million in 1883-1884). The number of daily customers rose from three to eight between 1880 and 1889. Was the end of the tunnel at last in sight? And then came all over the modern economies the “great depression” of 1882-1896, trailing recessions and aftershocks in its wake. British naval construction declined by two-thirds between 1883 and 1886. French shipping companies suffered big losses and withdrew their investments in steamers. The decline in cargo and freight charges and idling ships favored the use of the old sea route around the Cape of Good Hope. Between 1885 and 1886, the tonnage passing through the Suez canal fell by 9 per cent and stagnated at 5.8 million tons in 1886-1887. The recovery of 1888-1891 (7.2 million tons annually) was cut short in 1892 by a slide of 11 per cent and a second period of stagnation from 1892 to 1897 at some 8 million tons. More was to come in the years 1896-1897: famine and the plague in India, drought in Australia. A full eight years in the period 1885-1897

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passed dull and lifeless. The canal did not seem to enthuse anyone: was it really of any use to anyone?

4. THE SUEZ CANAL COMES OF AGE Finally, in the last decade of the century, the tide seemed to turn in favour of the canal, and a plebiscite of ship-owners decided to give it a fair trial. Success was immediate, and fully confirmed Worms’ optimism: “You seem to despair of the canal’s future. I do not know from where you get such ideas. You will see that before long, this part of Egypt will hum with activity, it will become the most popular passage to India with steamers passing through every single day.”7 The canal had moved to the centre of worlwide economy and had become a linchpin of maritime circuits and of world shipping8. A. The advantages of the Suez canal (at the turn of the 20th century) The single biggest gain was the time saved. At the beginning of the 20th century, the 11,686 km journey from London to Calcutta going round the Cape of Good Hope took between 32 to 69 days, while the 8,019 km trip via Suez required, depending on the type of ship, anywhere between 22 and 47 days9. The gains for a journey to Bombay, Calcutta, Hong Kong and Melbourne were respectively of around 42-43 per cent, 31-32 per cent, 25-27 per cent, and 4-6 per cent. The journey from Marseille to Saigon took 7,168 km instead of the earlier 11,989 km and 20 to 42 days instead of 33 to 71. The gains for Tamatave, Saigon and Noumea calculated in terms of kilometers or days saved were of about 36 per cent, 40 per cent and 16 per cent respectively. As for the “couriers”, they could now completely avoid having to transfer onto the railroad which had been laid in 1858. In 1872, the dual powered (steam and sail) Mongolia of the Peninsular & Oriental company, one of the fastest liners of its time, made the trip from Brindisi to Suez in six and a half days: No wonder Phileas Phogg chose it for part of his epic journey ! The world had indeed become a smaller place: the canal played a significant part in Verne’s Around the World in Eighty Days, which he wrote in 1873. 7 8

9

Hippolyte Worms to his agent at Port-Saïd, 8 December 1969, Ibidem. See Max Fletcher, “The Suez canal and world shipping, 1869-1914”, The Journal of Economic History, XVIII, 4, 1958, pp. 556-573. Also see D.A. Farnie, East and West of Suez. The Suez Canal in History, 1854-1956, Oxford, Clarendon Press, 1969. Catalogue of the Franco-British exhibition of London. Notes, charts and notice boards, Paris, 1908.

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The Panama canal opened in 1904 and facilitated access to China and Australia, especially for the Americans. But Suez was the canal as far as the Europeans were concerned. Till the 1940s, all other forms of transportation, the Trans-Siberian, the railroads of the Near East and even airplanes hardly made a dent in the passenger traffic passing via Suez. B. The modernisation of the fleet : The triumph of steamers Naval construction went into overdrive. In 1862, the Pereire brothers established the French shipping Compagnie générale transatlantique with a dockyard at Penhoët-Saint Nazaire. The future of the canal depended on this industrialisation, the related developments in the fields of metallurgy and engineering and the resulting improvements in ship construction (shape, size and hull). Around 1885-1890 the tonnage of steamships around the world began to overtake that of sailboats: though French steamers took a little longer to outweigh their older cousins, by the mid-1890s the worldwide trend was firmly established here too10. Steam engines were being constantly improved in terms of power (force and pressure), size (smaller) and running economy (fuel consumption, maintenance costs). Engines of triple and then of quadruple expansion replaced “compound” engines. At the turn of the century, steam turbines (Parsons, Rateau) began to supplant piston drives. Soon fuel oil began to substitute coal: the first ship running on oil went through the canal in 1908. The next big advance was the advent of the diesel engine which, replacing the boiler and steam, powered its first canal crossing in 1912. The interwar years further consolidated its infiltration in world shipping: from 2 per cent of the tonnage in 1919-1921 to 20 per cent in 1930, and 25 per cent over the next few years. A similar transformation was taking place with fuel oil11. The quasi-total elimination of sailboats at the turn of the century meant that now practically all the world’s shipping fleets were potential customers of the Suez Canal Company, and, in effect, steamer tonnage went up from 8.2 million tons in 1885 to 45.8 million in 1915. C. Coal warehouses at Suez All these ships had to take on bunker coal: “It is a grave and important factor that the refueling of steamers has to take place so far from the 10

11

See Basil Greenhill (ed.), The Advent of Steam : The Merchant Steamship before 1900, London, Conway; Annapolis, Naval Institute Press, 1993. Robert Gardiner, The Golden Age of Shipping : The Classic Merchant Ship, 1900-1960, Annapolis, Naval Institute Press, 1994. Ronald Hope, A New History of British Shipping, London, John Murray, 1990. Guillaume de Saint-Victor, Le canal de Suez, Paris, Sirey, 1934, figures from p. 84.

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production sites of these fuels […]. Fuel depots had to be created at several ports.”12 The success of the canal also meant a windfall for the oil industry and coal traders. The Company threw in its lot with the new steamers and left the Cape route for the sailboats which, though more numerous for the moment, were now running on borrowed time. “One could very well ask why steamers had not already supplanted sailboats even on the long route round the Cape of Good Hope. It was because they could not be refueled anywhere along the route and therefore had to carry their entire stock of fuel. This took away precious cargo space and rendered the whole voyage uneconomical. In contrast, the new route (via Egypt) had refueling depots at every stage: Gibraltar, Messina, Malta, Port-Saïd, Ismailia, Suez, Aden, etc.”13 Phileas Phogg’s Mongolia made a four-hour stop at Suez to take on the coal required for the 1,310 miles journey to Aden, where they took on more fuel to get to Bombay, their next port of call. In 1880, 238 steamers laden with English oil passed through the canal on their way to replenish Far-Eastern ports. In 1865, Hypolite Worms, a coal trader since 1848, began to supply coal to the companies digging the canal. From as early as 1863, he had been supplying coal to Messageries impériales’ depots in Alexandria, Aden, Ceylon and Calcutta. Messageries impériales (then Messageries maritimes) had established a route going to Cochinchine (an erstwhile French possession, to become part of Indochine then of South Vietnam) which included a rail transfer over the Alexandria-Suez line which also used oil supplied by Worms. In 1867, this pioneer, with full confidence in this new route to India, opened branches at Port-Saïd and Suez : he supplied coal and oil to both Peninsular & Oriental and Messageries maritimes and it was his fuel14 which drove the first steamers on their inaugural passages through the canal in 1869. He sold between half and three-fourths of the coal bought by ships transiting the canal. In 1892, he sold some 500,000 tons to over 1,500 ships. Port-Saïd grew to be his largest depot in the world, using up between 900,000 and 1,200,000 tons of coal between 1890 and 1910.

4. WHAT PURPOSE DID THE CANAL SERVE? THE FLOW OF MERCHANDISE The Suez canal was the outcome of the West’s fascination with the East, its romance and idealism…. But there was also very much a desire 12 13

14

Jules Verne, Le tour du monde en 80 jours. Journal de l’Union des deux Mers, 1869, p. 437, from: P. Reymond, Histoire, op. cit., p. 7. See Georges Albertini, Cent ans, op. cit., 1978, pp. 15-16.

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to turn a profit, to open this “terra incognita” to commerce and colonization. Lesseps’ success was based on this expansion of the European world and his Company was instrumental in helping these “bourgeois conquerors”15 to build their commercial empire. From 1879-1880 the firm began to keep track of the number of migrants who, in addition to military personnel, pilgrims and other civilian tourists passed through the canal on their way to Oceania. The 337 immigrants in 1879 became 13,500 in 1880 – while the number of deportees almost doubled from 480 to 800. At the turn of the century, new trade circuits revealed the mouth-watering prospects of an encounter between an industrialised Europe and lands brimming over with potential riches. The firm’s prosperity went hand in hand with “the economic development of all the regions which came within the canal’s sphere of influence”16. Overseas imperial territories were more and more inserted within the sphere of economic and maritime influence of west-European countries – as we shall develop it in chapter 10. The income of the canal depended on the ebb and flow of commercial navigation (the “cargo boats”, “tramp steamers”) which, in its turn, was at the mercy of the unpredictable winds of the world’s economy and local production rates. The canal also earned substantially from the growth in the number of regular services and scheduled calls established by shipping lines. In 1900, steamer and “postal” services accounted for a quarter of total tonnage; in 1920-1930, that figure rose to one third of the total. The “Bulletin décadaire” published by the Company is riddled with references to these “victories”, made possible by the creation of such services. At the same time, the colonisation and exploitation of the Indian subcontinent induced so much traffic that in the 1890s; it made up more than half of all transits via the canal. Indian wheat was one of the biggest cargo, but the instability of the Indian climate caused unpredictable fluctuations in trade and shipping, despite the addition of products such as Indian manganese – the first shipments passed through in 1907. The 1890s marked a turning point: the exploitation of the Far East and Oceania (“Australasia”) widened the Suez’s customer base and helped to stabilize and regularize traffic. While the tonnage of Indian goods went up two and a half times, Indian trade lost its dominating position at the turn of the century: between 1890-1900 and 1901-1912, the share of East Indian trade (Calcutta) went down from 28.3 to 22 per cent and West Indian trade (Bombay) from 22.8 to 20.1 per cent. On the other hand, a five-fold increase in the traffic bound for East Africa and

15 16

Charles Morazé, Les bourgeois conquérants, Brussels, Complexe, 1985. Annual Report of the Suez Canal Company, 7 June 1900.

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its coastal islands, only served to raise its share from 3.3 to 3.5 per cent. The Pacific archipelago stagnated (12.8 to 12.4 per cent) despite regular oil supply services by Shell Transport to Sumatra and Borneo; first, the Rothschild frères affiliate which produced oil in Russia (in the Baku fields), BNITO (Caspian & Black Sea Oil Company), concluded an agreement with London firm Samuel & C° to export lamp oil kerozene to the Far East: “This business was to be firmly established in a fiercely competitive market by transporting the kerozene in bulk, using specially built tankers designed to meet the stringent safety requirements of the Suez canal [...], and the fist cargo arrived in Singapore in August 1891.”17 This paved the way to fast growing transit of oil products in both directions, all the more after Royal Dutch Shell had been constituted (grouping for instance BNITO, Samuel, Shell Transport, Royal Dutch), and after oil had been discovered in Persia18 and delivered to Europe through the Suez canal by the Imperial Oil Company, which ordered its first specialised tanker in 1916 under the name British Emperor. Even Oceania’s 184 per cent increase was followed the 194 per cent growth in overall traffic; moreover, its part of the tonnage leveled off at 9.9 and then at 9.1 per cent. By 1885, the number of commercial ships bound for Australia had increased by an order of magnitude, from 27 to 228 and their tonnage from 46,000 to 534,000 (from 2 to 8 per cent of the total). Most of this traffic was agriculture based: wool, tallow, skins, meat, milk products, fruits, etc., and the first frozen sheep carcasses from Australia passed through Suez in 1884, which confirmed the constitution of a globalised market for commodities and foodstuff, to which the Suez canal contributed on its side. It was China, Indochina and Japan who grabbed the largest portions, increasing their share from 18.8 to 23 per cent (from 1890-1900 to 19011912) with a four-and-a-half fold increase in the tonnage. The Boxers’ expedition brought China into the equation as one of the Company’s “serious” customers: “The opening of the interior provinces of this immense country to commerce, so long delayed, was a major step forward. The Celestial Empire leased out some coastal lands, allowed the laying of railroads, digging mines, building new ports and dredging major waterways to help facilitate international shipping.”19 The Suez canal was the main

17

18

19

Joost Jonker & Jan Luiten van Zanden, “Searching for oil in Roubaix”, The Rothschild Archives. Review of the year April 2006 to March 2007, pp.21-25 (here quotation from p. 20). See: Joost Jonker & Jan Luiten van Zanden, A History of Royal Dutch Shell. Volume 1: From Challenger to Joint Industry Leader, 1890-1939, Oxford, Oxford University Press; Amsterdam, Boom Publishers, 2007. See R.W. Ferrier, The History of the British Petroleum Company. Volume 1: The Developing Years, 1901-1932, Cambridge, Cambridge University Press, 1982. Annual Report of the Suez Canal Company, 6 June 1899.

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artery of this new imperialism and the first shipment of Manchurian soya passed through in 1910. But a more classical product crossed the canal, because Chinese tea became a key commodity towards Great Britain, thanks to tea clippers; they had more and more to give up ground to steamers using the canal, which helped the costs of freight to dwindle during the last quarter of the century20. Far Eastern trade flows gathered momentum from the 1890s with favourable impact on the canal transit21. The canal was also used southwards, for transporting European equipment to the East: in 1880, 57 east-bound ships passed through Suez, laden with rails and other railroad equipment destined for Karachi. Seven of them carried submarine telephone cables. Exports to India and the Far East grew rapidly between 1909 and 1914, delivering “wrought metal, machinery, railway equipment”; they were “symptoms full of promise for the future of the canal, as it was yet another proof of the economic development of the regions on the other side of Suez”22. Table 6. Transit through the Suez canal in 1913 (in thousands tons)23 Southwards traffic Metals and machines

Coal

2,300

1,192

Railway Petroleum equipment 598

518

Salt

Cement

Fertilisers

Various products

449

439

60

5,772

Textiles

Mineral oils

Various products

1,741

291

4,228

Northwards traffic Cereals 3,979

Oleaginous Metal ores commodities 2,656

1,560

5. THE GROWTH OF TRANSIT : THE POST-MORTEM VICTORY OF LESSEPS The evolution of the transit through the isthmus reflected the irresistible revolution of the world maritime traffic, which favoured more 20

21 22 23

Chiung-Jou Lin, “Le commerce du thé entre la Chine et l’Occident : l’évolution du transport maritime au cours du XIXe siècle et son impact sur l’économie chinoise”, in Silvia Marzagalli & Hubert Bonin (eds.), Négoce, ports et océans, XVIe-XXe siècles, Pessac, Presses universitaires de Bordeaux, pp. 321-334. Paul Butel, Histoire du thé, Paris, Desjonquères, 1989. See Francis Hyde, Far Eastern Trade, 1860-1914, London, A. & C. Black, 1973. Annual Report of the Suez Canal Company, 8 June 1914. Figures from the Suez Company.

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Table 7. Yearly transit through the Suez isthmus and the canal Number of Average Number of ships tonnage of passengers crossing the ships crossing the the isthmus isthmus

Taxed tonnage (tons)

Northbound tonnage

Southbound tonnage

1870

486

26,758

436,609

1880

2,026

101,551

3,057,422

1890

3,389

2,877

161,353

6,890,094

3,430,000

3,460,000

1900

3,441

3,981

282,511

9,738,152

4,979,000

4,759,000

1910

4,533

5,086

234,320

16,581,898

7,155,000

9,427,000

1913

5,085

5,455

282,235

20,033,884

9,416,000

10,618,000

1914

4,802

391,772

19,409,495

and more the Suez canal instead of the Cape of Good Hope and which itself grew alongside the integration of Asian productions and markets within the worlwide economy. The number of ships more than doubled between the 1880s and the 1910s, but, because their average dimension increased in the meanwhile, the tonnage which they transported through the canal exploded five to seven-fold in the same period. A. Countries and ship-owners : the precious clients in the 19th century Because of its economic power, Great Britain was by far the canal’s most valued customer in the 19th century: accounting for almost threefourths of all shipping, it left French, Dutch and German ships wallowing in its wake. With 40 per cent of the world’s ocean-going liners flying the Union Jack in 1913, Great Britain dominated the clientele24 with 75.5 per cent of all transits in 1870-1879, 78.2 per cent in 1880-1889, and 71.2 per cent in 1890-1899, as its thalassocracy reflected the might of its industry and trade25. The Peninsular and Oriental Steam Navigation Company, founded in 1840 and in charge with the Royal mail concession towards India in 1907-1939 (with a stop in Marseille, “port of call”)26, the British India Steamship Navigation Company (created in the 1860s, which merged with P&O in 1914) and the Blue Funnel Line (set 24 25

26

Personally calculated using the numbers given by the Company. See David Howarth, British Sea Power. How Britain Became Sovereign of the Seas, London, Carroll & Graf Publishers, 2003. Ralph Davis, The Rise of the English Shipping Industry, London, McMillan, 1962. David Armine Howarth, Stephen Horwarth & John Haskell Kemble, The Story of P & O: The Peninsular and Oriental Steam Navigation Company, London, Weiden-

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up in 1865 in association with the Asian trade company Swire) were key links between Europe and Asia (India, Hong Kong, etc.) and thus a leverage of transit through the Suez isthmus. The Suez canal had therefore transformed into a seaway of the British Empire27. After a modest start (1.2 per cent in 1870-1879, 3 per cent in 18801889), Germany surged to the second spot in the 1890s, with 8.6 per cent in 1890-1899. With the establishment of German colonies in East Africa and Asia (China, Pacific region), German business houses multiplied. Norddeutscher Lloyd of Bremen built twenty ships in 1899, nine of which were destined to pass through Suez28. A German shipping magnate, Philipp Heineken, who also happened to be president of Norddeutscher Lloyd, sat on the Suez Company’s board from 1899 to 1915. The closing years of the century saw the advent of the Japanese: the only two canal-crossing ships in 1895 turned into 34 in 1897. On the other side of the scale were the small fry: the Netherlands with 4.3 per cent in 1870-1879, 3.8 per cent in 1880-1889 and 4.1 per cent in 1890-1899; Italy with 2.8 per cent, 2.7 per cent and 1.9 per cent; and Austro-Hungary with 3 per cent per cent, 2.1 per cent and 1.9 per cent respectively. The nationality of client ship-owners closely reflected this distribution. Among the first 37 firms which used the canal in 1901, 22 were British, five German, three French and one each for the Netherlands, Japan, Austria, Russia, Italy and Spain. The first eleven largest client companies were: Peninsular & Oriental (1st), Norddeutscher Lloyd (2nd), Ocean SN (3rd), Hansa (4th), Messageries Maritimes (5th), Hamburg-AmerikaLinie (6th), Clan Line (Cayzer, Irvine) (7th), Lloyd Autrichien (8th), Samuel (Shell Line) (9th), Harrison (10th), and British India Steamship (11th). B. Was France a good client of the Suez Company? In 1858, Marseille hosted a grand banquet in honor of Lesseps. It was “celebrating an event which was primarily to its own advantage, as the project would revolutionize the commerce passing through its ports”29. The first, regular, French shipping line going to Asia via Suez was established

27

28 29

feld & Nicolson, 1986. Freda Harcourt, “The P&O Company: Flagships of imperialism’”, in Sarah Palmer & Glyndwr Williams (eds.), Charted and Uncharted Waters, London, National Maritime Museum & University of London-Queens College, 1981, pp. 6-28. Freda Harcourt, Flagships of Imperialism. The P&O Company and the Politics of Empire from its Origins to 1867, Manchester, Manchester University Press, 2006. Arthur John Sergent, Seaways of the Empire. Notes on the Geography of Transport, London, A.C. Black, 1918 and 1930. Jules Charles-Roux, L’Isthme, op. cit., volume 2, pp. 329-331. Courier from Marseille, 28 October 1858, report of the grand banquet of 27 October, from: F. de Lesseps, Lettres, op. cit., volume 1857-1858, p. 370.

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Table 8. Pavilion of the ships crossing the Suez isthmus30 in 1901 Nationality

Number of ships

Total net tonnage

2,075

6,252,819

Germany

511

1,762,624

France

281

756,782

The Netherlands

230

508,578

Hungary-Austria

138

408,518

Russia

129

363,685

Japan

57

237,338

Italy

87

176,401

Spain

35

112,721

Norway

47

76,096

Denmark

20

56,746

Ottoman Empire

40

47,220

United States

25

45,027

3,699

10,823,840

Great Britain

Total

by Fraissinet of Marseille. The relationship between the French port and Suez was further strengthened when Jules Charles-Roux was made vice-president of the Company. Marseille retained its advantage over the other French ports, grabbing 20 per cent of all French traffic in 1880 and 23 per cent in 1913. As with the people of Marseille, the Company too enthusiastically promoted colonisation. Right from the beginning, Lesseps had called forth to the “the young men of today, instead of vegetating or pursuing carriers which led to nothing good” and asked them to go “fertilize the new islands of France”31. From the start the Suez canal profited by the French colonisation because Cochinchina (a large part South Vietnam around the Mekong delta) joined French influence in the 1860s, a few while before the opening of the canal, and Saigon became thus a key destination for maritime lines as soon as it was opened in 1861; then France conquered Tonkin (present-day north Vietnam) and Annam (central Vietnam) in 1885, later on Madagascar in 1895-1905 and it established a large naval base at Djibouti in 1888. “Apart from temporarily

30 31

Suez Company’s annual report, 10 June 1902. F. de Lesseps, Lettres, op. cit., volume 1859-1865, p. 393.

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increasing our income, the ongoing French expedition to Madagascar will also benefit us in the long term as it will open up vast new lands to civilization and sustained economic development.”32 Such geopolitical and colonial moves created two basic traffics, one for business but a permanent and important one for the transport of military equipment, supplies, and troops. With the dynamism shown by Marseille and the expansion of the French overseas “empire”, the Canal Company could very well have had a robust business going with the French. Ably supported by the goods-handling, consignment and transit agencies set by the wholesale houseWorms, French shippers set up multiple cross-Suez routes33. One went towards Cochinchine and the Far East; another went to Mauritius and the Reunion Islands, and in 1886 a third went to Madagascar. One out of every fifteen ships passing through the canal in 1900 was French. Messageries maritimes (created in 1851)34 reorganized its schedules in 1895-1896 and launched “cargo-boat” services between Marseille, Indochina and Shanghai35. In 1901, Chargeurs réunis (created in 1872)36 also became one of the Company’s clients by opening a line to Indochina; from 1901 it competed with Messageries maritimes for a monthly line to Indochina (from Dunkerque, Le Havre, and Bordeaux) to Colombo, Singapore, and, in Indochina, to Tourane-Danang and Haiphong; for a while (1907-1912), this line extended its scope to China and Japan (Kobe) and even San Francisco, with 9,000 tons ships, but without profitability. Moreover Chargeurs réunis shipped nickel from New Caledonia and copper from the Boleo mines in California, because of its links with the merchant bank Mirabaud37, which had interests in both mining combines. In the interwar period Chargeurs réunis progressed decisively as a customer of the Suez canal: five new mixed

32 33

34

35

36

37

The Company’s annual report, 5 September 1895. Irène Bénilan, Le journal de la Compagnie navale Worms, 1882-1982, Paris, Worms, 1982. Marie-France Berneron-Couvenhes, Les Messageries maritimes. L’essor d’une grande compagnie de navigation française, 1851-1894, Paris, PUPS-Presses universitaires de Paris-Sorbonne, 2007. See Marie-France Berneron-Couvenhes, “The internationalisation of Messageries maritimes steamship company from 1851 to 1914: The defense of the French flag overseas”, in Hubert Bonin (et alii, eds.), Transnational Companies, 19th-20th Centuries, Paris, PLAGE, 2002. Jean Beugé & René-Pierre Cogan, Histoire maritime des Chargeurs réunis et de leurs filiales, Paris, Barré & Dayez, 1984. The links between Chargeurs réunis and Mirabaud are precised in Isabelle Chancelier, Messieurs Mirabaud et Cie. D’Aigues-Vives à Paris, via Genève et Milan, Paris, Éditions familiales, 2001, pp. 84-85. Paul Mirabaud stayed as president of Chargeurs réunis from 1895 to 1908, then was succeeded by his brother Albert Mirabaud.

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ships (about 11,700 tons – with cargoes, 140 passengers, and room for 700 soldiers) were delivered in 1923-1924, which carried out six links with the Far East (instead of five), four from Marseille to Saigon, then Hong Kong and Shanghai and a few other ports; two from Marseille to Haiphong (the port of Hanoi) But the hegemony of Messageries maritimes could not be challenged: in 1922-1931, for example, it accounted for 62 per cent of all French tonnage passing via Suez, while Chargeurs réunis and Compagnie havraise péninsulaire (controlled by Worms from 1929 onwards) amounted to no more than 11.7 per cent and 10 per cent respectively38. Jules Charles-Roux was not any too happy that the French fleet made up only 4 to 5 per cent of world shipping (1890-1939). As president of the Congrès de la marine marchande in 1901, he published Notre marine marchande in which he spoke in no uncertain terms regarding France’s poor performance as compared to Germany39. French ships accounted for only 8.8 per cent of the tonnage going through Suez in 1870-1879, 7.2 per cent in 1880-1889, 6 per cent in 1890-1899 and 19011910 – stuck in third place behind the British and the Germans. In the interwar period, the Netherlands overtook France and so did Italy in 1935-1938. In the 1930s, French shipping amounted to only 5 to 7 per cent of the tonnage, with Messageries maritimes coming in at tenth place among the canal’s clients and Chargeurs réunis at 27th. It is no wonder then that French shipping enterprises did not have the influence or clout enjoyed by their British counterparts within the management of the Suez Canal Company. This French Suez Canal Company could not afford to depend on its French clients: it had to rely massively on its British and German customers.

CONCLUSION Conversely with the golden legend which accompanied Lesseps’s life and achievements in France – paving the way to the foundation of the Panama Company –, the commercial fate of the canal was not yet guaranteed in the 1870s-1880s. The Company had to patient until the revolution in shipping techniques and in trading flows created actual traffics through the waterway, when steamers (and then fuel-driven ships) and shipping companies wove networks of lines between Europe and Asia and Australasia. Quite a quarter of a century was thus needed to transform the Saint-Simonian utopian project into an economic success.

38 39

Calculation based on: G. de Saint-Victor, Le canal, op. cit., p. 183. Jules Charles-Roux, L’Isthme, op. cit., volume 2, p. 333.

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Picture of the canal at the Chalouf passage

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Transitting ship

106

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Ships station at El Kantara

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The Peluse ship, from Messageries maritimes, in 1906

108

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The hegemony of British ship-owners : Breakdown of shipping companies along the net taxed tonnage in 1901 (document from the Compagnie du canal)

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CHAPTER 4

THE GROWTH OF TRANSIT THROUGH THE CANAL (FROM THE 1880s TO 1940) Figures allow to determine the part played by the Suez canal within the world economy and to reconstitute its dependancy on its conjunctural rhythms. The transit grew alongside the evolution of the commercial flows between continents and the emergence or reinforcement of countries or colonised territories which got a larger share of the markets for commodities and raw materials – whilst the economy of mineral oil took shape East of Suez and started to foster traffic through the isthmus.

1. THE EVOLUTION OF THE TRAFFIC THROUGH THE SUEZ CANAL The apparent two-decade-long stagnation in the number of ships (between 3 and 4,000 in 1882 to 1901) is misleading as it hides a doubling of the tonnage due to the increase in the size of the vessels. Then, towards the end of the 1890s, there was an explosion in the traffic itself due to the happy coincidence of a surging economy and the advent of the second industrial revolution: a new stage was reached by the history of the Suez canal. A. The rhythm of the growth in the traffic passing via the Suez canal This period of growth lasted from 1895 to 1930 and almost doubled the number of ships passing through the canal (from 3,400-3,500 in 1895-1900 to 6,000 in 1928-1929): the eight daily customers of 1880-1889 became eleven in 1900-1919 and then fourteen in 1920-1929. The canal’s success was built on the growth achieved in these first three decades of the 20th century. But it was not all smooth sailing: after the initial surge and an annual growth of 8.75 per cent over the first seven years, there were setbacks in 1904-1905 (-2 per cent) and 1907-1908 (-7 per cent). The

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Table 9. Transit through the Suez canal in 1800-1914 Number of ships

Total net tonnage

1880

2,026

3,057,422

1881

2,727

4,136,780

1882

3,198

5,074,809

1883

3,307

5,775,862

1884

3,284

5,871,501

1885

3,624

6,335,753

1886

3,100

5,767,656

1887

3,137

5,903,024

1888

3,440

6,640,834

1889

3,425

6,783,187

1890

3,389

6,890,094

1891

4,207

8,698,777

1892

3,559

7,712,029

1893

3,341

7,659,060

1894

3,352

8,039,175

1895

3,434

8,448,383

1896

3,409

8,560,284

1897

2,896

7,899,374

1898

3,503

9,238,603

1899

3,607

9,895,680

1900

3,441

9,738,152

1901

3,699

10,823,840

1902

3,708

11,248,413

1903

3,761

11,907,288

1904

4,237

13,401,835

1905

4,116

13,134,105

1906

3,975

13,445,504

1907

4,267

14,728,434

1908

3,795

13,633,283

1909

4,239

15,407,527

1910

4,533

16,581,898

1911

4,969

18,324,794

1912

5,373

20,275,120

1913

5,085

20,033,884

1914

4,802

19,409,495

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problems of the Indian weather added to the worldwide recession. Four profitable years in the pre-war period (1909-1912, registering a growth of + 7.5 per cent annually) preceded the recession of 1913-1914. The average annual tonnage doubled between 1892-1897 and 1909-1912, from 8 to 17.5 million tons. The Great War of 1914-1918 put an end to the good times: the traffic fell from about 20 million in 1912-1914 to a low of 9 million in 1917, and the annual average slid by 20 per cent between 1909-1912 and 19131918 (from 17.6 to 14.1 million tons). The recovery was long – it took a full four years for the East-bound commerce to pick up, to restructure the war economies in 1920-21 and overcome the global recession, and to fill the gap left by German shipping which was all but eliminated by the war and the subsequent loss of Germany’s colonies in Africa. It was only in 1922 that the canal limped back to normalcy and re-touched the 20 million-ton mark. A new wave of progress swept through the world’s economy between 1922 and 1925: the average annual tonnage in these years (23.8 million) was a full 35 per cent more than the figure attained in 1909-1912 and a whopping 69 per cent higher than in the years 1913-1918. A transient economic recession in the West saw a slight decline of 3 per cent in 1926-1927 before a massive surge in 1927-1929. An average of 31.4 million tons passed through the canal in these last couple of years of the third decade – triple the amount achieved at the start of the canal’s longdrawn-out growth in 1898-1904. Retrospectively, one can recognize that Lesseps had finally triumphed : his statue, erected on the jetty at Port-Saïd in 1899, standed contemplating, with some satisfaction, the success of his canal. A success made possible by the technological re-conversion of the world’s shipping fleets, the push of the second industrial revolution, an upswing in the world’s economy and the (re)-discovery of commerce with the East. Lesseps’ wager seemed to have been hopelessly lost in the initial slump ; it was only at the turn of the 20th century that it finally paid off. B. The canal and the depression of the 1930s The canal’s “golden age” came to an end when the “crisis of 1929” began to make itself felt in March-April of that year. The meltdown of the US economy in 1929-1930 was followed by the European crash in 1931-1932 and world commerce went into a tailspin, losing a third of its volume in the first half of the 1930s. A large number of ships were decommissioned. The decline in cargo and a threat of a war in the Mediterranean in 1936 diverted much of the remaining traffic to the Cape route. The pipelines joining Iraq’s oilfields to the Mediterranean

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opened in 1935, and Suez stagnated despite the increase in Italian shipping caused by the war in Ethiopia in 1935. Between 1929 and 1932, the tonnage went down from 33.5 million to 28.3 million tons, a drop of 15 per cent: it then hovered around 31-32 million in 1933-1936. A 16 per cent growth in 1932-1935 was followed by a drop of 1.3 per cent in 1936 and a rebound of 13 per cent in the following year to attain an all time high (9 per cent more than the levels achieved in 1929) before ending the roller-coaster ride with a slide of 19 per cent in 1937-1939. The stagnation of the world’s economy and especially, the gathering war clouds quickly smothered all promising upsurges. But though the Company did not completely escape the depression of the 1930s, it was more a question of lost profits (due to a stagnating traffic and the reduction of tariffs) than any major setback. On the other hand, the Second World War decimated the traffic, which fell by 80 per cent between 1937 and 1942. The tonnage in 1940 went down to the levels of 1915-1916 or 1904-1911 and 1942 saw it return to the levels attained in 1891-1892. It was only in 1947 that the Company saw the numbers return to those attained in 1937 – a full ten years had been lost. 2. THE ECONOMIC CURRENTS OF THE 20th CENTURY The flows of transit were somewhat reshaped in the interwar because of the evolution of productions overseas and because of the growth of some territories, which benefitted from new outlets in western Europe and purchased equipment to European companies; before oil became a key maritime cargo. A. The geography of foreign partners After WWI, there was a major reshuffling and restructuring in the interchanges and relationships which fed the traffic through the canal1. Countries close to Suez rose in prominence while its more distant clients began to fade in relative importance. In 1937, ships bound for India and the Far East comprised no more than 61.2 per cent of the total tonnage, as compared to 79.7 per cent in 1913. India, Burma and Ceylon declined from 45.4 to 25.4 per cent, China, Japan and the Philippines from 22.1 per cent to 20.4 per cent. Oceania accounted for no more than 6.5 per cent instead of the previous 9.9 while the American Pacific coast

1

Calculations based on the Company’s statistics, with reservations regarding their precision, as said by Paul Reymond, Histoire, op. cit., pp 187-188.

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Table 10. Transit through the Suez isthmus in 1914-1940 Number of ships crossing the isthmus

Taxed tonnage transported through the isthmus

Passengers on ships crossing the isthmus

1914

4,802

19,409,495

391,772

1915

3,708

15,266,155

210,530

1916

3,110

12,325,347

283,030

1917

2,353

9,368,918

142,313

1918

2,522

9,251,601

105,914

1919

3,986

16,013,802

527,502

1920

4,009

17,574,657

500,147

1921

3,975

18,118,899

295,199

1922

4,345

20,743,245

275,031

1923

4,621

22,730,162

246,331

1924

5,122

25,109,882

263,869

1925

5,337

26,761,935

269,522

1926

4,980

26,060,377

286,432

1927

5,545

28,962,048

340,318

1928

6,084

31,905,902

317,718

1929

6,274

33,466,014

325,855

1930

5,761

31,668,759

305,202

1931

5,366

30,027,966

270,657

1932

5,032

28,340,290

261,774

1933

5,423

30,676,672

253,940

1934

5,663

31,750,802

262,122

1935

5,992

32,810,968

625,465

1936

5,877

32,378,883

781,929

1937

6,635

36,491,332

697,800

1938

6,171

34,418,187

479,802

1939

5,277

29,573,394

410,523

1940

2,589

13,535,712

167,805

1941

1,804

8,262,841

14,124

1942

1,646

7,027,763

590

1943

2,262

11,273,802

173,269

1944

3,320

18,124,952

418,832

Figures from the Suez Canal Company.

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went down from 2.6 to 1.2 per cent. On the other hand, East Africa and its Islands grew from 5.1 to 6.9 per cent, the Red Sea ports and the Gulf of Aden jumped from 1.3 to 7.6 per cent and especially, the Persian Gulf saw a phenomenal rise from 1.4 to 16.6 per cent2. Sometime between 1932 and 1938, India lost its top spot. Meager harvests, increased internal consumption, the devaluation of the Indian currency, and political and social tensions had all a part to play in its commercial decline over this interwar period. At the same time, the growth of the Far East was due mostly to the awakening of Siberia and China. In fact, Russia’s “internal” commerce used the Suez canal as it allowed ships to ply between the Black Sea and Vladivostok and bring in material, petroleum products and foodstuff. The Chinese helped the canal grow in the 1890s but then faded away during the wars of the 1930s. Australia did not figure too prominently in the canal’s accounts because of a very competitive alternate route via the Cape of Good Hope, which boasted very convenient refueling stops. Indochina emerged as a major exporter in the interwar years, as did East Africa. In the case of the latter, the economic development was a sustained and steady progress, visible even from behind the sudden increase of Italian military traffic with Ethiopia after 1935. It is evident that the tonnage passing through the canal accurately reflected the underlying economic situation, its ups as well as its downs3. The data is a little skewed by the unexpected and rapid development of the Persian Gulf and the advent of the oil economy in the 1930s…. B. The European and Mediterranean consumer empire Much of the canal’s traffic flowed from the south towards the north, amounting to two-thirds of all transits in 1910-1930 and 1935-1937; Europe nourished itself on foreign produce. Moreover, the purchasing power of “developing” countries fell drastically during times of economic depression (unless, as in some cases, their development was financed by some rich nations) and reduced the north-south traffic of European manufactured goods. This explains the striking increase in the relative percentage of south-north traffic in 1931-1934 and 19381939 (almost three-fourths of the total). The exploitation of the natural resources of foreign lands reached its culmination in 1926-1930 with records set for soya, manganese and rubber. Cereals (27.5 per cent in 1913, 15.6 per cent in 1938) and oilseeds (18.4 per cent and 18.6 per cent) dominated the trade while

2 3

André Siegfried, Suez, op. cit., table on p. 102. Based on the Company’s statistics.

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minerals and metals went from 10.8 to 7.6 per cent, and textiles dropped from 12 to 6.5 per cent. The one outstanding story belonged to petroleum products, which shot up from 2 per cent in 1913 to 24.8 per cent in 1938. During those epochal years, the canal almost turned into Europe’s grocery store: India continued to sell its wheat (from zero to 500,000 tons, depending on the harvest) and rice (anywhere from 550,000 to 950,000 tons). Australia meanwhile had supplanted India in terms of wheat exports and its bounty, all of which passed via Suez, was enough to feed all of Great Britain for three weeks in 1924-1925. Indochina and Burma also began to figure prominently as rice exporters; in the 1930s, Indochina began exporting maize either to Europe or to Sub-Saharian African and Morocco. Java, Mauritius, the Philippines, La Réunion island and Australia (from 1923) began exporting sugar cane to the tune of 200,000 to one million tons at a time when the European beet fields had been decimated by WWI. India still held to its top spot as king of oilseeds (cotton, colza, flax, castor). Soon, India, China and Africa also added groundnuts to their growing range of exports. In 1929, seventenths of the world’s coprah exports passed through Suez – Indonesian coconuts feeding European oil presses and soap factories. The 1920s saw a surge in the traffic of Indian cattle cake and Manchurian soya, with the latter grossing 1,800,000 tons in 1929 alone. Despite the competition posed by the Cape route in the 1930s, the Suez canal retained its status as a vital artery feeding European industries with a large number of much needed raw materials. Indian jute was the principal textile product which passed through Suez on its way to Great Britain in the form of fiber and then increasingly, as woven cloth. Indian cotton declined due to first, the industrialisation of Asia which consumed it on spot, and second, the economic crisis which set in just before the War. The other organic products making their way up north were sisal from Indonesia and Africa, hemp from the Philippines and Australian wool. Most metal exports declined, though Indian manganese (for iron and steel) retained its importance (between 300,000 and 1,200,000 tons) as did Australian lead and zinc and Indonesian bauxite. C. The emergence of oil transit (from the 1890s) The coming of oil and petroleum products was a godsend to a canal which had been sorely affected by the economic downturn. In fact, oil had been shipped through the Canal in as early as 1892: “The Murex, the first tanker to carry oil in bulk through the Suez Canal, was launched in 1892 with a capacity of 5,010 deadweight tons. Owned by Marcus Samuel (founder of Shell Transport & Trading), it was an average-sized vessel of its

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Table 11. Key traffic through the Suez isthmus (tons)4 Southwards Metal Railway Coal and products equipcoke and ment machines or machines parts

Salt

Paper Cement Mineral pulp and oil paper

Fertilizers

Sugar

Various products

1921

1,127

554

1,122

341

115

214

211

129

21

2,742

1929

2,986

865

771

481

431

774

350

845

317

4,701

1938

1,954

255

208

349

390

561

283

655

150

2,890

Northwards Cereals [Among Raw oil Ore [Among Oleagi- Textile which and minerals which nous products rice derivated and manga- products (wool, products metals nese (coprah, cotton, ground- jute) nuts, soya, etc.)

Tea

1921

2,957 1,092 1,313

887

338

1929

2,154 1,137 3,714 2,189 1,200 4,688 2,024

416

1938

3,216 1,756] 5,220 1,387 565] 3,907 1,372

355

847

631 1,413

time.”5 Despite this innovation, the majority of oil tankers still carried their load of mineral oil in barrels, and it was only in 1907 that oil tankers as we know them today made their way regularly via Suez. “In 1915, the [BP] Company ordered its first seven tankers, of which two were in the 5,000-tons class, and five were 10,000 tonners. By the 1920s the Company and Shell had adopted the 10,000 tonner as their standard size tanker, which was not superseded until the introduction of a new class of 12,000 tonners in the 1930s [...]. One of the advantages of these vessels was their versality. Unlike later generations of tankers they were general purpose ships, which could be used to haul crude oil from the Middle East via the Suez canal to the Company’s European refineries or, more commonly, to ship refined products from Abadan to Western Europe, also through the Suez canal.”6 4 5

6

Booklet Le canal de Suez (statistiques), Paris, Suez Company, 1950. Stephen Horwarth, Sea Shell : The Story of Shell’s British Tanker Fleet, 1897-1997, London, 1997, p. 16. James Bamberg, History of the British Petroleum Company. Volume III. British Petroleum and Global Oil, 1950-1975. The Challenge of Nationalism, Cambridge, Cambridge University Press, 2000, p. 290.

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The discovery of oil in Borneo and Sumatra boosted the south-north traffic. And even though the refinery at Suez treated oil coming from Curaçao and the Shell Line sold Caucasian oil to the Far East, the north to south traffic hit rock bottom. The Canal Company adapted its infrastructure to suit the emerging oil economy which favored ships running on fuel oil or driven by engines. Worms began supplying “liquid fuel” to the ships passing through and became Shell’s (itself established in 1897) general agent in Egypt; it set up reservoirs at Port-Saïd and Suez in 1899; and, in 1909, the Standard Oil Company7 also set up shop at PortSaïd. The discovery of oil fields in the Middle East completely changed the canal’s economic environment. British interests in the area grew rapidly, mainly in Persia where the Anglo-Persian Company8 was established in 1909 and produced its first million tons in 1919; its subsidiary, British Tanker, turned into a major client of the canal for oil and allied products at Abadan9. The traffic of petroleum products jumped from 800,000 tons in 1920 to four million tons in 1930 and touched five million in 1934. At first, Persia trumped its rivals Bahrain and the Probe islands, but the laying of Irakian Petroleum’s oil pipeline linking the new oil discoveries at Mossul to the Mediterranean ports of Tripoli and Haifa in 1935 toppled its hegemony. Ultimately, the volume of the demand marginalized this rivalry and further increased the traffic. Over the course of the interwar years, the Suez canal emerged as a vital hub of the world’s oil trade, and the “tanker” became a commonplace client of transit, even if often it was not yet specialized vessel but still a multipurpose cargo10. D. The Suez canal and European exports Colonisation and the establishment of “empires” meant the opening up of new markets and export opportunities for European products. These “northern countries” supplied agricultural goods (chemical fertilizers, with 0.5 per cent of the north-south traffic in 1913, 8.1 per cent in 1938), domestic goods (salt: from 4 to 4.5 per cent; refined sugar: from 1.7 to 1.9 per cent; clothwear: 1.6 per cent in 1938), industrial material (cement: from 3.9 to 7.2 per cent; paper and paper pulp: 5 per cent in 7

8

9

10

C. Damougeot-Perron, La Standard Oil Company, 1870-1925, Paris, Jean Budray, 1925. James Bamberg, The History of the British Petroleum Company, volume II: The AngloIranian years, 1828-1954, Cambridge, Cambridge University Press, 1994. See R. W. Ferrier, The History of the British Petroleum Company, volume I: The Developing Years, 1901-1932, Cambridge, Cambridge University Press, 1982. See Raymond Solly, Tanker: The History and Development of Crude Oil Tankers, London, Chatham, 2007.

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1938). Coal lost out heavily (from 10.5 to 2.7 per cent) as ships did not use bunker coal anymore and Asian and Oceanian producers had become very competitive. Nor was it that this decline was made up for by any increase of oil exports by Russia or Romania – in fact, they themselves regressed from 4.5 to 3.6 per cent. Mostly though, the developed countries of Europe exported industrial equipment and goods. Machines, metallurgical products and railroad material made up more than 25 per cent of the north-south traffic in 1913 and 28 per cent in 1938. The Suez canal contributed significantly to the globalisation of the European economy. On one hand, it opened itself to raw materials and produce imported from all over the world, and on the other, it enlarged its markets by helping in the “development” of these new, exotic lands. Unfortunately, it is well neigh impossible to arrive at any precise quantitative assessment of the canal’s contribution to the reduction of the cost, in terms of both time and money, brought about by this geographic rearrangement.

3. TWENTIETH CENTURY CLIENTS OF THE SUEZ COMPANY The Orient remained a vital outlet for the British, with half of their gross income being derived from commerce with Asia, Australia and the Far East11. British shipping lines blanketed their competitors – 28 of the 55 largest clients of the canal in 1929 were of English origin12: “In the canal, busy with trade, the Red Ensign of the British merchant fleet was ubiquitous, and the waterway was crowded with the funnels and house flags of eastern-trading British companies such as P&O13, Orient, the City Line, Clan, Blue Funnel, Glen, the Ben Line and, of course, the oil tankers of Anglo-Saxon (Shell’s shipping subsidiary) and the British Tanker Company (the BP Company’s shipping subsidiary).”14 Over the first few decades of the 20th century, British dominance began to wane: From a high of 67.3 per cent in 1901-1910, it slid to 61.7 per cent in 1920 and hovered around 55 per cent in 1930-1933. In 1935, for the first time, it accounted for less 11

12

13

14

Imperial shipping committee on British shipping in the Orient, 1939, from: A. Siegfried, Suez…, p. 97. Net taxed tonnage. Fifty-five clients transported more than 100,000 tons via the canal. See David Armine Howarth, Stephen Horwarth & John Haskell Kemble, The Story of P & O: The Peninsular and Oriental Steam Navigation Company, London, Weidenfeld & Nicolson, 1986. James Bamberg, History of the British Petroleum Company, volume III, op. cit., p. 291.

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than half the tonnage passing through the canal (48 per cent); in 1936, it hit a low of 46.5 per cent, then rose a little in 1938 (50 per cent) and 1939 (51.4 per cent). First, the growth of some Indian industries as substitutes to imports from Britain (and its Lancashire textile, for example), second, the decline of trade and shipping in the Far East because of the unofficial then clear-cut conflict between Japan and China15 in the 1930s imposed some ceilings to UK shipping between Europe and Asia, thus putting brakes on the transit through the Suez canal. The Italian share, which stood at 1.4 per cent in 1901-1910, 3.5 per cent in 1920 and between 4.4 and 6.6 per cent in 1930-1934, went up dramatically with the outbreak of the Ethiopian war to 18.5 per cent of the tonnage in 1935, and 20.2 per cent in 1936. The next few years saw it gradually decline, with 16.1 per cent in 1937, 13.4 per cent in 1938, and 14.4 per cent in 1939. The Italian charge was led by the Lloyd Triestino shipping company, which helped ferry some 300,000 Italian soldiers through Suez in 1937. Meanwhile, Germany (15.6 per cent in 1901-1910, 11 per cent in 1930-31, 9 per cent in 1932-1938) and the Netherlands (buoyed by its colonies in Indonesia and its new tanker fleet; 4.7 per cent in 1901-1910, 8.1 per cent in 1920, about 10 per cent in 1930-1931, between 7 and 9 per cent in 1932-1938) maintained their strong commercial presence. Other players too began to appear on the stage. Mainly due to the timely inclusion of a new tanker fleet, Norway rode out the Depression in relatively better shape and made significant progress, with 0.6 per cent in 1901-1910, 1 per cent in 1920, 2.5 to 3 per cent in 1930-1932, between 4 and 5 per cent in 1933-1939. But we can also presume that part of this traffic was achieved for the account of British (or else) economy because several Norwegian ships practiced cross-trading abroad, for instance in the name of Liverpool trading houses. On its side, thanks to its growing exports (mainly textile), Japan did very well with 1.6 per cent in 1901-1910, 9.1 per cent in 1920, between 3 and 5 per cent in 1930-1937. The remaining tonnage was more or less equally shared out between the Greeks – because modern Greek shipowners took off in the interwar16 –, the Swedish, the Danish and the Americans, with close to 2 per cent in the 1930s.

15

16

Chih-Lung Lin, “British shipping in the Orient, 1933-1939: Reasons for its failure to compete”, International Journal of Maritime History, XX, n°1, June 2008, pp. 153172. See Gelina Harlaftis, A History of Greek-Owned Shipping. The Making of an International Tramp Fleet, 1830 to the Present, London, Routledge, 1996 (in Greek: Athens, Nefélê, 2001).

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Table 12. Pavilion of ships crossing the Suez canal in the interwar period (percentages) Great Britain

Italy

Germany Netherlands

France

Norway

Greece

Japan

1914

66.5

1.9

10.9

7.2

4.1

0.5

0.7

1.8

1921

62.9

5.2

9,9

11.2

5.4

1.4

0.3

5.8

1929

57.1

4.6

10.3

10.6

6.5

2.1

0.6

2.9

1938

50.4

13.4

9.1

8.8

5.1

4.3

2.3

2.0

CONCLUSION No revolution at all shattered the story of the transit through the Suez isthmus in ther interwar. But its diversification in goods and shippings’s countries reflected the lesser weight of Great Britain in the world economy, and moreover the development of imperial countries (India, Indonesia, Indochina) and mainly of emerging economies (Japan, Australia, etc.). The part played by Japan expressed its upsurge; that of Germany showed its recovery for exports of equipments goods and purchases of commodities, etc. The transit through the canal was determined by the reshaping and the rhythm of the world economy, without any originality; but what seems determinant might be that the Suez canal had become a commonplace waterway for shipping, thus fostering revenues to the Company, but also requiring fresh investments for the maintainance of the canal and its or its improvement.

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Map of the Southern entrance to the Suez canal in 1877

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Picture by Riou. The Port Suez roadstead

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Port-Saïd. Northern entrance to the canal

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Average taxed tonnage on a long term period

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Average gross tonnage on a long term period

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Daily amount of ships using the canal (on a long term period)

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Building of the Transit service at Port-Thewfik

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The agency of French shipping company Messageries maritimes at Port-Saïd

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Publicité pour les Messageries maritimes, l’un des plus gros clients français de la Compagnie du canal de Suez

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Excavations achieved for the building, the maintenance and the improvement of the Suez canal (five-years periods)

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CHAPTER 5

A COMPANY AT THE SERVICE OF CLIENTS Upgrading and maintenance work (till 1940) The Company faced a steady growth of traffic and, as we shall see later on, a huge change in the dimension of the ships crossing the Suez isthmus: the Suez canal could have become old-fashioned, should the Company be late in reacting to such quantitative challenges. Bad opinions had been professed about its strategy, which could have favoured financial profits instead of developing expenses for investment: this chapter will thus gauge the will and ability of the Company to provide to its customers – the shiphandlers – a canal adapted to the evolution of their fleets and to the need for reducing the sailing delays.

1. THE INITIAL CRISIS Conversely with Lesseps’s dreams, the canal did not satisfy its users for a while: construction work continued for quarters after the official inauguration; pilots and their crew were still learning the ropes and were not yet fully conversant with the subtleties of navigating this canal, which explains that accidents multiplied and their total amount reached almost 3,000 between 1870 and 1884. Parallel transits were impossible, while multiple simultaneous crossings of the canal could only be accomplished by berthing one or more ships at “stations” built for the purpose. Even then, an average of four crossings meant that every ship had to dock twice for an hour and a half each time – a long and risky procedure. Transit times began to lengthen till, in 1882, it took a record 54 hours. The increase in the traffic and the number of crossings often meant that ships had to spend a second night lying idle, as no ship movement was allowed at night. Moreover, the canal was not deep enough and ships had to offload some cargo at Port-Saïd to meet the draught requirements.

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It seemed to be the end of Lesseps’ idea of “economy all round”, and the British government must have begun to regret its agreement with the Company (February 1876) by which it had committed itself to paying a million francs every year for the next thirty years for the improvement of the canal. Despite the growing traffic, the Company was finally obliged to admit that the canal was too narrow to accommodate the ten or so daily crossings. Shipowners pointed out that their ships had been built with the depth of the larger ports in mind, ports such as Marseille, which allowed ships drawing more than 8,5 m as draught and that such ships had been plying the world’s oceans from as early as the 1890s.

2. CONSTANT EFFORTS AT IMPROVING THE CANAL (1883-1939) Such obstacles to the growth of traffic and to the fluidity and security of the transit led to a reconsideration of the investment process: the Company had to admit that the expenses achieved in the 1860s and at the beginning of the 1870s were not sufficient, that the history of works had not reach its term with such initial achievements, and that it was necessary to engineer a new wave of investments to reach the expectations of customers. A few British shipowners went so far in 1882-1883 that they demanded to short-circuit the Suez Company and to draw a second canal through the Egypt under the control of British interests ! Whereas the 44 per cent holding in the Company’s equity had not been conceived from the start by the British government as a leverage to grant influence over the firm, the conjunction of such a financial participation and of the complaints of British shipping led to question the very legitimacy of the policy defined by the Suez managers: they had to broaden their scope, to avoid being satisfied with their historical undertakings, and leaving their entrepreneurial spirit to wane, in favour of a refreshed step of investments to develop the waterway1. Harsh press campaigns took place in London in 1882-1883 (even in The Times2). Lesseps himself decided to tour a few merchant cities in 9-20 November 1883 to pick up the complaints of the Chambers of commerce and of the shipping; and his son Charles held six sessions of negotiations with shipowners in London in the premises of Peninsular & Oriental , which 1

2

See Samir Saul, La France et l’Égypte de 1882 à 1914. Intérêts économiques et implications politiques, Paris, Publications du Comité pour l’histoire économique et financière de la France, 1997, pp. 241-245. The Times, 11 October 1882, 29 June 1883, 21 July 1883, 26 July 1883 and throughout July 1883.

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led to the agreement on 30 November 1883, called the “London program” – which was afterwards ratified by the Company’s General Assembly on 12 March 1884, even if some shareholders protested against resuming investments at times when the debt was still high and dividends lacking stuff : the majority was reached only slightly by 843 against 761. A. The second program of works, from 1884-1885 to 1890 An international consulting committee took a full eight months (from 16 June 1884 to 11 February 1885) to review the entire project of the waterway and its achievements, and to define the most important and urgently needed improvements in order to meet client requirements. To start with, it squashed the idea of a second canal which had been mooted by anti-French circles as a solution to the problem of midcanal crossings: the costs of maintaining double the length of embankments would have been prohibitive; moreover, any actual improvement in the navigation would have to wait till the inauguration of this second canal. The commission decided upon two simple objectives: widening and deepening of the canal. In May 1885, the Company accepted a compromise between those clients who wanted to reduce transit time by increasing the width to 82 meters (which would allow ships to cross without stopping), and those, fewer in number, who wanted the depth to be increased to ten meters for their bigger ships. Some two hundred million francs were set aside for the works, with the first hundred million to be spent over the first seven years; this led to the “second program” of works, after the first one, dedicated to the initial excavations in the 1860-1870s. It was decided that the firm was to increase the depth in three phases, first, to 8,5 and then to 9 meters. It was also to increase the number of the wider sections (65 meters, with 75-80 meters at the bends) in order to avoid ships running aground and building more crossing stations. The Company acquired the necessary lands from the government of Egypt via the agreement of 1886. B. Relentless works (1890-1914) The second program of 1884-1885 was suspended in 1890 as the transit times had come down due to other improvements, often independent of any Company initiatives. Incremental progress allowed to alleviate investment in large undertakings: night-time navigation was introduced as improvements in electric lighting allowed floodlights to be set up on ships and on beacons and buoys; and the buoying of the canal was completed by December 1886 and the system went operational in 1887; ship movement was no longer restricted to daylight

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hours. In 1893, telephones replaced the telegraphic communication between surveillance offices which supervised ship movement. The number of pilots increased, as did their experience. The addition of a second rudder and technological improvements further facilitated navigation of the canal. The works program lost its urgency, especially as the global Depression (in the 1880s-1890s) caused a reduction in the number of transits made by merchant vessels. Investments too were reigned in: the hundred million francs which were to be spent over seven years were spread over sixteen years, between 1885 and 1901. In 1890, the depth had been increased to 8,5 meters, which allowed a draught of 7,8 meters; and, by 1898, the width reached 37 meters insteed 22 m. The Company now embarked upon less spectacular, but regular improvements; while many of them had been envisaged in the program of 1884, new ones were also added. Further dredging allowed a draught of 8 meters in 1901 and the enlargement of “stations” reduced crossing times. The embankments were strengthened with plantations and wooden supports, later they were clad in stone. The debates caused by the surge in traffic at the beginning of the century resulted in a renewed support for the Company’s “economic” strategy. The idea of a second canal was again rejected – the timeconsuming practice of berthing a ship for crossings was to continue. Consequently, as ships continued to grow in size, the canal had to be constantly enlarged to accommodate their draught. The work programs undertaken over the next several years (the third program of 1901, which stretched over 1903 and into 1906; the fourth program of 1908, the fifth program of 1912 which was completed only in the 1920s) were all a series successive, overlapping improvements which took place without any clear chronological boundaries. The effective width of the canal, especially at the bends, the number and size of “stations” and the depth (10 meters in 1907, 11 then 12 meters over 1908-1914) were all improved. The permissible draught attained 8,5 m in 1908 and 8,84 m (29 feet) in 1914; in 1870, the canal was a 22 meter-wide gash in the desert; in 1898 it was broadened to 37 m, and by 1914 it cut a swath 45 meters wide and 10 meters deep. C. The interwar years: A period of relative calm With the completion of the program of 1912 in 1924, the navigation had improved to such an extent that there was no longer any urgency for implementing the other, scheduled developments. The sixth program of 1921 included increasing the overall width (from 45 to 60 meters by connecting the stations), the width at the bends (to 80 meters) and the depth; but the reduction of the transit because of a short and deep recession slowed the process: “According to the present view, the

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implementation of the program of 1921 is no longer urgent.”3 Anyway, the effors were resumed, and little by little, investments were completed and progress was tangible: first, the maximum permissible draught went up from 8,84 meters in 1914 to 10,36 meters (36 feet) in 1936; second, the target of 60 meters in width, set in 1912, was attained between the Amer lakes and Suez in 1925, and, by 1934, the entire length of the canal had been widened to 60 meters (with 80 meters at the bends) – almost triple the width in Lesseps’ time. A lull in the traffic and the completion of the sixth program in 1934 meant that no major investments were needed in the near term. If we add the constraints imposed by WWII, we can see why the Company was satisfied by simply maintaining the canal over the next ten years or so. D. The extent of the works: A tangible progress The figures are convincing enough: between 1884 and 1939, almost 153 million cubic meters were moved by dredging and embanking by either the Company directly or by sub-contractors like Grands Travaux de Marseille, which dug the basins at Port-Saïd at the turn of the 20th century. On average, between five to six million cubic meters per year were moved from the canal between 1927 and 1929 – the apex – whereas some three to four million cubic meter had been moved yearly between 1900 and 1925, and two million per year between 1870 and 1900. Globally, some 90 million cubic meters had been moved by 1914, and another 50 million were dug off between 1914 and 1934: this was equivalent to two additional canals being excavated, as Lesseps’ original project had required the clearing of some 74 million cubic meters. And this was not all: two to four dredges of the Company were waging a constant battle against the encroaching sands. The total volume removed between 1870 and 1939, either for “improvements” or for “maintenance” (“curing”) of the canal, touched 300 million cubic meters – more than four times the amount extracted for the initial canal4. These works went practically unnoticed due to their relative ease as compared to the Herculean task achieved in the 1860s. At that time, the work had to be initiated with pickaxes, shovels and explosives to cut the first channels through sand and rock before dredges could be brought in to help with the excavation; but, once the canal had been dug, the work done by dredges was relatively easy and passed without fanfare. Undetectable undertakings were going on: a permanent dredging program to de-silt the canal was instituted; to clear the sea alluvion, a substantial 3 4

The Company’s Annual Report, 8 June 1925. See Christian Funck-Brentano (ed.), Compagnie universelle du canal de Suez, Paris, 1947 – the book was commissionned by the Company.

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Table 13. Chronology of the works completed at the Suez canal between 1885 and 1940 Programs

Depth

Draught

1870

22 meters

1885-1900

Second program

1901-1907 (upgraded in 1903 and again in 1906)

Third program

1907 1908-1924

8.5 meters in 7.8 meters width 1890, then 8 meters enlarged then 9 meters in 1901 from 22 to 37 meters in 1898; some sections of 65 meters, with 75 to 80 meters at the bends; stone pitching; installation of crossing stations in 1898 Increase in the number of crossing stations 10

Fourth program

11

8.5

1912

Installation of new, larger stations in 1912

1914

1912

Width

12

8.84 (29 feet)

Crossing stations linked up; 45 meters (with 10 meters of depth)

Fifth program

part of the dredging took place in the channel of Port-Saïd, where three marine dredges were continually engaged in removing marine effluence. The development programs too lacked originality: the Company opened “stations” (resolution of 1898) which facilitated the mid-canal

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Programs

Depth

Draught

Width

19211934/1936

Launch of the sixth program

The stations with the new dimensions link up: progressive unification in width; Crossing at two large stations at the 22 and 40 km mark

1924

Completion of the fifth program

60 meters between the lakes of Amer and Suez, in 1925

1936

10.36 (34 feet)

60 meters achieved in 1934; bends measuring 80 meters

crossing of ships; in 1904 it increased their number; then it widened the canal to the width of these stations (program of 1908); it then opened new stations (1912) before widening the canal further (1921). It is understandable that such work would not capture anyone’s imagination; nevertheless, “the Company invested in improvement and maintenance works”5. 3. WAS IT AN EFFICIENT COMPANY? AN ASSESSMENT Did the Company live up to its mission, did it satisfy its customers? Had it invested enough to meet the growing demands of world shipping? Or had the Saint-Simonian spirit which had roused and moved Lesseps run dry and lost itself in the arid desert? We have to scrutinize a list of questions which could had been raisxed by shipowners and shiphandlers about what is walled to day in firms the “process of 5

Interview with J. Georges-Picot, 22 June 1984. About the works program, see Paul Reymond, Histoire de la navigation dans le canal de Suez, Le Caire, Institut français d’archéologie orientale, 1956. Hubert Bonin, “The Compagnie du canal de Suez and transit shipping, 1900-1956”, International Journal of Maritime History, XVII, n°2, December 2005, pp. 87-112.

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quality”: did the Suez Company meet the expectations of its customers? Or was it only preoccupied by financial concerns? A. Was the canal made safer? Major accidents did take place: in 1905, a ship ran into the Chatham, which caught fire; the Chatham had to be blown out of the water as it was carrying dynamite. In 1902, an oil tanker caught fire and remain ablaze for 15 days before sinking. A coaler sank in 1905 as did a dredge in 1908. But gradually the incidence of such major accidents diminished: from 6,1 per cent of the number of ship passing through in 1886 to 1,9 per cent in 1899. By 1895, the time lost due to such accidents had been reduced from ten to less than an hour. The canal was now no more than a slightly more dangerous waterway, and nighttime navigation was introduced in 1887. B. Did the transit times improve? The growing skill of pilots, better navigability, more powerful ships and the improvement in crossing “stations”, all contributed to the reduction in transit times: 48 hours in 1870, 43 hours in 1885, 30 and three-fourths in 1888 (a massive improvement due to the introduction of nighttime navigation), 24 hours in 1890, 19 hours in 1895, 18 and a half in 1900 and finally 18 hours in 1905 – a reduction of more than twothirds over three decades ! Half-a-dozen hours were shaved off between 1905 and 1939 (transit in thirteen hours), amounting to a gain by more than a quarter. Apart from the stops for crossings, the journey between Port-Saïd and Suez took about fifteen hours at the beginning of the 20th century and between eleven and twelve hours in the interwar years. Table 14. Transit times, in hours and minutes (sailing time and stops included) 1870

48.05

1880

38.46

1890

24.06

1900

18.32

1910

16.54

1913

16.19

1920

16.28

1925

15.20

1930

14.34

1935

13.20

1939

12.58

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C. Larger ships through the canal One of the main objectives of the constant efforts at improving the canal was to increase the permissible draught. While three-fourths of the ships passing via Suez at the beginning of the century were of the same size as those of 1870, larger ships (cattle transporters, ocean liners, warships) began to make an appearance. The canal could only accommodate them by taking exceptional precautions, with crossings confined to the lakes. This meant further long delays. Though ships drawing more than 8 meters constituted a small minority (in 1908, the 213 such ships represented 5.6 per cent of the total clientele and the 374 in 1912 only 7 per cent) the Company was obliged to entertain them. In fact, by so doing, it pushed forward the growth and improvement of the canal itself. In the 1880s, shippers launched steamships of more than four thousand tons deadweight: 67 passed through the canal in 1881, 318 in 1885. In 1913, they represented a full 44 per cent of the entire traffic. Soon, five thousand tonners appeared, with three crossing over in 1881 and 31 in 1885. The six thousand-ton figure was achieved in 1886 and eight thousand in 1900. In 1896, the Norddeutscher Lloyd dispatched the Barbarossa, a steamer of 10,785 tons, to Australia. Some 48 thousand tons passed through the canal in 1908 and 66 thousand in 1912. Fourteen to sixteen-thousand-ton ships arrived in 1910 (the Empress of Russia, weighing in at 16,949 tons, was launched in 1912) and 18-20,000 tonners in 1920. The Empress of Britain, with its 42,762 tons, ruled the seas from 1931 to 1939 – a tenfold increase over the maximum tonnage achieved in 1870. The average gross tonnage of client-ships tripled between 18701879 to 1910-1919 and quadrupled between 1870-1879 (1,900 tons) and 1930-1939 (7,700 tons). The Company successfully met the technological challenges posed by this obesity epidemic sweeping through the world’s fleets. Once the Table 15. Tonnage of steamships passing through the canal 4,000

44 % of the total

5,000

1913 1880s

6,000

The first in:

1886

Appearance of the 14,000 to 16,000 in the 1910s 16,949

Empress of Russia

1912

Appearance of the 18,000 to 20,000 in the 1920s 42,745 gross registered tonnage

Empress of Britain

1931 (then twice a year)

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Table 16. Average gross tonnage of all vessels passing through the canal 3,500

1890-1899

4,500

1900-1909

5,300

1910-1919

6,900

1920-1929

7,700

1930-1939

Table 17. Gross tonnage of ships crossing the Suez canal in the interwar period 1890

2,877

1900

3,981

1910

5,086

1913

5,455

1920

6,047

1921

6,278

1922

6,585

1923

6,780

1924

6,765

1925

6,916

1926

7,256

1927

7,237

1928

7,249

1929

7,376

1930

7,628

1931

7,779

1932

7,835

1933

7,840

1934

7,779

1935

7,659

1936

7,706

1937

7,648

1938

7,747

1939

7,812

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initial difficulties had been solved, it kept itself well abreast of all shipping developments which took place between 1890 and 1930. Actually, it would have been touch-and-go had not the depression of the 1930s cast its pall over international trade and allowed it some breathing space. Already in the 1920s, ship-builders had begun to churn out bigger and bigger ships and ports had to ready their quays and tide gates to receive ships drawing more than 35 feet (10,67 meters) of water – a draught which had been set as a maximum by the International Congress of Navigation at London in 1923; in fact, by the end of the 1920s, even 40 feet had become common. The Company scrambled to meet these challenges and launched a number of studies in 1928-1931; they had to consider not only the canal’s capacity, but also hydraulic phenomena and the faster wearing out of the embankments by the passage of larger and faster ships. There is nothing to suggest that the Company would have been caught short if the traffic and the size of ships had surged in the years 1930-1940. The moratorium on investments was caused by the economic crisis and not by any Malthusian ideas. 4. THE IMPORTANCE OF THE COMPANY’S ENGINEERS The Company was able to thrive, because of the “stock of grey matter” or “brain” it had stowed away at Ismaïlia, the headquarters of its technological operational administration. The mere sixty Parisian employees could only control – and finance – the teams of technicians which facilitated the navigation of the canal. The Company’s success depended on its engineers, inheritors of not only the works but also the wisdom of those who had accomplished the grand Egyptian projects of the 19th century, and the builders of the Canal. The “Chief Engineer” (Ingénieur en chef ), aided by assistant engineers, directed and managed the works, material and stores. There were successively eight chief engineers between 1870 and 1941, including Cyrille Lemasson (from 1873 to 1894), Édouard Quellenec (from 1894 to 1901), Louis Perrier (from 1902 to 1918), Max Bahon (1918 to 1920 – a future CEO of the Company in 1927-1935), Paul Solente (from 1920 to 1936), and Jean Homery (from 1937 to 1941). Solente (1872-1940), for example, had been a student at the Paris École des Mines and had been recruited in 1907 at the Central Services in Ismaïlia and had become sous-chef de section at the maintainance division, when he was called in Paris to set up the Studies Service in 1912, to complement the Egyptian headquarters and to establish a better and more direct link with the claims of the European shipping. Then, he replaced Bahon as Ingénieur en chef from July 1920 till his own

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retireemnt in December 1936, but he was kept at the Company as a consulting engineer till his death. His successor Homery (born in 1879) had been a student at École polytchnique and École d’artillerie de Fontainebleau and had joined the French Army, when he was recruited by the Company in January 1904, as a training designer of waterways, before assuming the charge of the dredgings of the Port-Saïd roads in 1908. He was then continuously promoted within the Technical Services (January 1914 : sous-chef de section, January 1922 : chef de section adjoint, January 1924 : chef de section – in charge of supervising a few kilometers of the canal –, January 1929 : ingénieur en chef adjoint in Ismaïlia), before reaching the top as Chief Engineer between January 1937 and his retirement in May 1941, as a symbol of the technical corporate culture of the firm and of the “body”of engineers which constituted on key axis of the development and of the success of the Company6. Apart from the Department of Workshops and the General Stores, a Technical Section looked after the actual works; subdivided into three geographic sectors (Port-Saïd, Ismailia and Port-Thewfik), this Technical Section was further organized into four sub-sections: works, material, supply and architecture. All four of these had to be organized, coordinated and given time-bound schedules as the Company handled its own “engineering” and sometimes sub-contracted a part to other firms who worked under the instructions of its engineers in Ismailia. Engineers entered the Company as “draughtsmen”, rose to become “foremen” and then “chief foremen”. The title “Engineer” was reserved for the Engineer-in-chief who was often a Polytechnician (a graduate of the École Polytechnique, like Quellenec and Perrier, who also happened to be graduates of the École des Ponts-&-Chaussées – whilst Solente was a Polytechnician and an engineer from École des mines de Paris), and to his deputy. This Chief Engineer was aided by his “section heads” and “subsection heads”, often graduates of the École centrale de Paris. During the 1910s, there were some 25 “engineers”, ten of who were graduates of the École centrale de Paris, another ten were “Gadzarts” (from the École d’Arts et Métiers7), two Polytechnicians and one from the École des Ponts&-Chaussées. But overall counting of actual engineers or high-ranking technicians reached a total of almost seventy in 1938 – and the overall amount was estimated to about five hundreds for the whole century of existence of the firm8.

6 7

8

We used the Personnel records kept at the Company’s archives. See C.R. Day, “The making of mechanical engineers in France. The École des arts et métiers, 1803-1914”, French Historical Studies, Spring 1978, pp. 439-460. By Suez engineer J.-É. Goby (private records).

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Within the Transit Service set up in 1888 by Jean-Baptiste Tillier and headed successively by twelve executives till 1956, the management in charge of transits recruited marine engineers, former students of the French “École navale” or officers of the merchant navy to organize and follow the traffic itself while the upper management looked to the administration, personnel and accounts. The successive heads of Transit were thus all “officier de marine”, able to establish good understanding of the requirements from transitting ship, all the more since they staid for a long while at the helm: Tillier (1888-1906), Émile Coullat (19061917), Paul Schmitt (1918-1926), Pierre Blanc (1927-1937), and Georges Douin (1938-1944). This latter (born in 1884) had studied at the French École navale and had joined the French Navy, where he took part to several missions and even fightings in the Far East and the Adriatic Sea during WWI. Such an experience explains that he had been recruited in 1919 by the Transit Service, where he was promoted as Agent principal du transit in Port-Saïd, then as the head of the Transit Service in Ismaïlia from January 1938 till 1944. Over time, the Company had assembled a group of high class people, lured by the prestige of being part of an informal “corps” of engineers who, though smaller in size than those of the railways or the public works, was as proud of its deeds and capacities. These “brains” had been attracted by the allure of having direct responsibility over the works, of their technical nature and by the fame they had already achieved. Such a reputation led the Company to win prizes for “material and processes in civil engineering in public works” and for “geographic charts and apparatus” at the Paris World Exposition of 1889; it also participated in the Paris Exhibition of 1900 and the Franco-British Exhibition held at London in 1908, with small information rooms.

5. PILOTS AND MARITIME TECHNICIANS AS KEY INSTRUMENTS OF EFFICIENCY AND SECURITY Another key cohort of contributors to the development of transit through the isthmus comprised the pilots. They belonged to the Transit Service, but were of course not confined to the Ismaïlia offices: they assumed the guidance of ships on two steps: a first group acted on the Port-Saïd/Ismaïlia section, the second one on the Ismaïlia/Suez section, with a change in Ismaïlia. The growth of the traffic required the recruitment of larger groups of pilots, and the group reached the figure of 111 in 1937, among which 40 British and 38 French people, along with the tradition of technicality and nationality which had taken shaped from the start.

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Table 18. Evolution of maritime employees dedicated to the actual operations of transit Pilots

Other maritime employees

1908

102

6

1914

109

6

1922

100

10

1929

119

22

1939

114

22

1946

130

28

Beyond these pilots, the Transit Service also comprised several technicians and sub-pilots who contributed to the day to day facilities brought to customership. Port officers supervised the whole operations; “commis vérificateurs” (controllers) or “mesureurs” (measurers) came on board to gauge the volume of cargo to transit the canal and thus adjust tansit fees. The large flotilla of the firm gathered another kind of “pilots”, less “noble” than those in charge with the transit, but useful to the global efficiency of the operations: captains in charge of big tuggers, for instance, or people manoeuvering the small boats (“pétrolettes”, etc.) used in the ports or throughout the canal for case by case interventions.

CONCLUSION As for any firm, the Suez Company balanced constantly between saving money to please its financiers (for reserves) and its stockholders (for dividends) one one side, and investments on the other side: it had to reach the subtle and optimal point when the expectations of shipowners and the requirements of ship pilots were satisfied without overestimating the evolution of the transit. It had thus to stick to the growth of customersship and of the dimension of ships, in order to avoid investing too much into an oversized canal, and altogether to anticipate the trends of the traffic, in order to deliver services adapted to the users of the canal. The arts of managing a concession consisting in flows (traffic, water, etc.) was thus taking shape, there in Ismaïlia, Egypt, as well as in Panama, or at the large French firms specialised in water concessions, Compagnie générale des eaux and Société lyonnaise des eaux, or by private or public authorities supervising the equipment of important harbours. Sure, one might conclude that the history of the Suez canal from the 1880 up to the 1930s lacked adventure and drama, conversely with the previous Lesseps’ years, because a somewhat “dull” management was

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dedicated to year after year improvements throughout the canals and at Port-Saïd; but the volumes of the excavations piled up by these discreet programs of undertakings overspassed those of the Lesseps years: the equivalent of another canal had been dug off, in fact, and anonymous heroes were then consacrated, the engineers, technicians, pilots, and maritime employees who managed these programs and the machines used for them and assumed the operations of transit.

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CONCLUSION OF THE SECOND PART THE SUEZ COMPANY AND THE WORLD ECONOMY The Company showed itself to be quite sensitive to the fluctuations of the world’s economy, though it did manage to adapt itself to its constantly changing tides. It clearly felt the effects of the global depressions of 1880-1890 and the 1930s and the short-term international and Indian recessions. It kept pace with the rapid growth brought about by the second industrial revolution. It suffered due to the delay in the mechanisation of the world’s fleets and then gained when steamers finally arrived and began to increase their tonnage. The exploitation of “new lands”, with Europe enriching itself with their natural resources while selling its goods, the increasing trade (oil especially) and the emergence of new producers like Australia were all factors which greatly influenced the Company’s finances. At the same time, the Company was quick to adapt itself and draw profit from every opportunity that presented itself. It was quick to recognize the importance of oil, first as fuel and then as cargo. It kept in close touch with its customers in order to keep abreast of the latest developments and avoid any chance of losing its fickle clientele. It recruited competent engineers, promoted coal driven equipment in the isthmus and encouraged the conversion of world shipping. Its directors campaigned in favour of colonization and overseas commercial expansion. They wanted France to follow in the footsteps of Great Britain, which was already the canal’s most important client. The Company tried its best to transform its environment, to further the changes already taking place which would result in more trade, more traffic through the canal and thereby more profits in its pocket. It had finally won its double wager: to build a utopian canal and to adapt it to seventy years worth of technological advances. But did it turn a profit?

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Dredger active on a maintenance works

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Ship through the El Guisr curve in 1938

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General plan of the maritime Suez canal in 1930 (document from Compagnie de Suez)

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PART 3

A GLOBAL COMPANY? A NEUTRAL CANAL? After it was nationalised in 1956, the Company abandoned any pretense at neutrality and submitted itself to Egyptian authority. “The use of this sea route […] is henceforth subject to the whims of a single government […]. The high principles which inspired Lesseps are no longer valid: the free usage of the canal, the full and equal transit rights enjoyed by all users, all ships and all nations are no longer guaranteed.”1 Lesseps and his successors wanted to establish a “global company” and to insulate it against external political or military pressures, creating a haven of peace in the midst of international turmoil. But did they succeed? Or did their vision remain just that, an unrealized dream?

1

Georges Edgar-Bonnet, Ferdinand de Lesseps. Après Suez, le pionnier de Panama, Paris, 1959, p. 47

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CHAPTER 6

THE CANAL AND INTERNATIONAL DIPLOMACY The initial crisis (from the 1850s to the 1880s) For obvious reasons, Great Britain wanted complete control over all routes to the jewel in its crown, India. Its intentions had been made clear right from the beginning when it had so vociferously opposed Lesseps’ project. From the start, the Suez canal became a key international and geopolitical issue1.

1. THE FEAR OF FRENCH INFLUENCE IN EGYPT The Anglo-French rivalry in Egypt dated back to Napoleon’s Egyptian campaign at the end of the 18th century and was resumed when France supported Mehmet Ali’s bid for autonomy in the years 1830 to 1840. The English were afraid that the construction of a canal through Suez by a French company would signal France’s re-emergence in the region and that it would allow France to eat into its share of the “spoils” flowing in from the Ottoman empire: “The Sultan could well object to the acquisition of large tracts of land by a foreign company. It is highly conceivable that the establishment of such an important enterprise in Egypt could pose a number of dangers to the Ottoman empire, especially as it ran through the very heart of the empire and sought to establish a compact corps of foreigners with special privileges who would not be subject to the country’s jurisdiction.”2

1

2

See Charles Halberg, The Suez Canal : Its History and Diplomatic Importance, New York, Columbia University Press; London, PS King & Son, 1931. Reedition: New York, Octagon Books, 1974. Lord Woodehouse at Turkey, from: Jules Charles-Roux, L’Isthme, op. cit., volume 1, p. 320.

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England’s biggest fear was that France would use this Company to flout the “principle of equality”: “It must be insisted that all guarantees be given […] to all the European powers which have an interest in this part of the world that this projected line of communication would in no way harm their interests and that they would not be denied any advantage given to any other power, especially in times of war.”3 “I think that the project […] is an attempt to create a second Bosporus and to put it in the hands of the French […]. By the means of this canal, the French could send a fleet into the Eastern seas in a matter of five weeks, while we would need at least ten. In the event of war, […] [they] could […] cut all communication between England and India.”4 “The construction of this canal, though begun as a purely commercial enterprise, could be easily converted […] into an asset of great strategic importance.” “Such a company cannot be viewed in the same light […] as any other private enterprise, and, in the course of events, the actions of such a company could very well become the actions of the French government.”5 The conclusion was clear: “It is not in our interests that there be a sea route between the Mediterranean and the Indian Ocean in the hands of any power other than our own.”6

2. ENGLISH PRESSURE ON TURKEY AGAINST LESSEPS’ PROJECT The English were adamant about blocking this canal project: they delayed the authorization which had to be given by the sultan, who was the legal master of Egypt, but who, till the advent of WWI, was master only in name. One could easily have imagined of a different sort of pressure, in which the British government would have pushed through its own project of a canal financed by English capitalists and entrepreneurs; that would have boosted its power and influence in the region while giving it the aura of technological prowess and progress. But their official stand was to deny even the possibility of digging such a canal. Lesseps was obliged to waste precious time7 at Constantinople, fighting for the interests of his company against fluctuating decision makers who were afraid of British diplomatic reprisals, 3 4 5 6

7

Count Ellenborough, May 1861, ibidem, p. 323. Ibidem. Lord Carnavon, in the House of Lords, 6 May 1861, ibidem, pp. 317 and 318. Palmerston, in the House of Commons, 2 June 1858, from: F. de Lesseps, Lettres, op. cit., volume 1857-58, p. 234. See: Lesseps’ letter of 20 January 1858 to Griffith, the English deputy (p. 182), of 17 April 1858 (p. 195), of 25 December 1857 to Count de Lesseps (p. 148), of 28 July 1858 (p. 307), in: F. de Lesseps, Lettres, op. cit., volume 1857-58.

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reprisals which could tear the Ottoman empire apart as they had done in Greece in the 1820s. They even sent their fleet to Alexandria in 1859 in an attempt to cow the khedive into suspending the ongoing works on the canal. Lesseps had to take such pressures on the Ottoman goernment into account because, at these times, the influence of French interets in Constantinople had not yet reached the level which was to be obtained through the Imperial Ottoman Bank later on8.

3. WAS THE COMPANY REALLY A COMMERCIAL ENTERPRISE? Lesseps, who was supported in this by the influential English deputy Gladstone9, took great pains to paint the proposed canal as a simple, straightforward project. He pleaded that it should be an enterprise not unlike other such civil engineering projects which had been launched all over Europe and the Middle East in the wake of this new wave of industrialization, and quite similar in nature to the Cairo-Suez railway line laid by the British themselves: “The case of the Suez canal enterprise is the same as for all the other concessions for railroads or telegraphy sought within the Ottoman Empire by numerous private, non-French ventures.”10 He also declared himself ready to do without Turkish authorization, which had not been found necessary for laying the railway line. At the same time, he also used a more efficacious and subtler diplomatic approach. His proximity to the French imperial circle (especially the Prince Napoleon) and the fact that his own brother, Charles de Lesseps, was a director at the ministry of Foreign Affairs, guaranteed the full support of his ambassador. But Lesseps preferred to keep these official connections more as a last resort than as active tools. He deliberately kept his company (largely) free of any government intervention and scuttled the English accusations of a collusion with the French political and military “imperialism”. The Company was clearly to be an independent entity and strongly objected to any hint at any sort of subservience to the French government. It liked to call itself “global” or, in a more modest mood, as simply an intermediary, a conduit between

8

9

10

Jacques Thobie, Intérêts et impérialisme français in l’Empire ottoman (1895-1914), Paris, Publications de la Sorbonne-Imprimerie nationale, 1977. Walid Arbid, Salgur Kançal, Jean-David Mizrahi & Samir Saul (eds.), Méditerranée, Moyen-Orient: deux siècles de relations internationales. Recherches en hommage à Jacques Thobie, Paris, L’Harmattan, 2003. See the speech given in the House of Commons on 14 August 1858, in: Jules Charles-Roux, L’Isthme, op. cit., volume 1, p. 272. Lesseps, letter to Griffith, cited above.

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Egypt and French money and technological savvy. The Company was firmly not a diplomatic-cum-financial “diptych”11, at the service of France’s overseas ambitions. Ultimately, Lesseps won Egypt’s trust, mitigated British objections and received Turkish ratification.

4. THE BRITISH CROWN AS THE COMPANY’S MAIN SHAREHOLDER (1875) But was this image of a purely commercial venture really true? The RealPolitik had to be considered indeed because the international balance of powers and geopolitics had to be respected, even by such a pushing investor as Lesseps. Lamartine and Flaubert had caught the crux of the matter when they said: “Egypt is Suez, Suez is India, and India is England […]. You will never be able to take Egypt or keep it. England and a hundred million British subjects in India will not let you, nor will they allow a passage through Suez, which would cut the commercial world asunder.” “The transit via Suez is a convenient way to see, one fine morning, a host in red descend upon Cairo […]. But we would not be the only cause.”12 Controlling the route to India was an absolute necessity for the United Kingdom and it had already staked out its claim by establishing several naval bases, including the one at Aden in as early as 1839. The Sepoy mutiny in India had necessitated for example the passage of British troops via the Suez isthmus in 1857. The canal proved thefore to be an important tool at the service of British colonial domination. In May 1878, 26 British ships from India passed through Suez, transporting 8,400 troops for the occupation of Cyprus. The manning of British overseas military bases saw 58,300 soldiers pass via the canal in 1878 alone. The waterway was also the key to British trade with the East. No wonder then that Great Britain had no option but to intervene in the affairs of the Company. On its side, the Company could do little to resist such a mighty power and could no longer maintain its image of “neutrality”. 11

12

Regarding the notion of diptych and triptych, see: Jacques Thobie, “Le triptyque finances-industrie-diplomatie”, Relations internationales, 1974. Jacques Thobie, La France impériale, 1880-1914, Paris, Megrelis, 1983. Jean Bouvier & René Girault, L’impérialisme français d’avant 1914, Paris, Mouton, 1976. Henri Brunschwig, Mythes et réalités de l’impérialisme colonial français, 1871-1914, Paris, Armand-Colin, 1960 [French Colonialism, 1871-1914, London, 1966]. Pierre Léon & Gilbert Garrier, Histoire économique et sociale du monde. La domination du capitalisme, 1840-1914, Paris, 1978. Lamartine, regarding France’s support of Mehemet Ali against a British backed Turkey, from: Jules Charles-Roux, L’Isthme, op. cit., volume 1, p. 179. Flaubert, Correspondance, 1st volume, ibidem, p. 187.

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A. The dire financial situation of Egypt Egypt’s financial difficulties after the Ottoman empire went bankrupt forced the khedive to borrow large sums on a short term basis to replenish a treasury which had foreign debts amounting to FRF 2,3 billion. “On becoming khedive, Ismaïl at once began a vast program of public expenditure, treating the Egyptian Treasury as if it was his private property [...]. His extravagance increased and, as it did, financiers descended on Egypt to arrange even larger loans at more ruinous rates of interest. With the help of this borrowed money he remodelled the customs, the post office, and the educational system, stimulated trade, maintained a theatre and an operahouse and built more, palaces. His entertainment was lavish and extravagant [...]. By the time he was dismissed by the sultan in 1879, Ismail had managed to increase the Egyptian national debt from £7 million, when he became khedive, to almost £100 million, a factor of 14.”13 “He had incurred vast debts in his efforts to raise money for the canal’s completion and his other projects by borrowing, at exorbitant rates of interest, from European banking houses suchn as Oppenheim Alberti & C° and the AngloEgyptian Bank. Other entreprising financiers, such as M. Édouard Dervieu of Paris, joined his brother André in Cairo to take advantage of the khedive’s need for money and willingness to borrow. By 1875, the Egyptian Treasury had paid £16,075,119 for the construction of the canal and had borrowed £35,437,474 at rates of interest between 12.36 per cent p.a. (1873 State loan) and 26.9 per cent p.a. (Railway loan of 1866). As security the khedive had pledged virtually everything eligible for such purposes in Egypt. By 1875, the only income left to him was his share in the Suez Canal Company.”14 Like other hard-pressed countries, he cashed in on his securities, the most tempting of which were his stock of Suez Canal Company shares. After he had already “sold” the coupon income15, it was now the capital which was up for grabs. These shares could easily have appeared on the Paris stock market, used by French banks as loan guarantees or bought by a group of French financiers. But the British would not tolerate any meddling by the French government in the Company’s capital – it had caught the spoor of an easy prey. The French influence on the canal could now be moderated by a large British stake. “Though it was a 13

14

15

Lord Rothschild, “You have it, Madam”. The Purchase, in 1875, of Suez Canal Shares by Disraeli and Baron Lionel de Rothschild, booklet, London, Rothschild & Sons Archives, 1980, pp. 8-9. Ibidem, pp. 11-12. See David Landes, Bankers and Pashas: International Finance and Economic Imperialism in Egypt, Harvard University Press, 1959 & 1979. David Landes, Banquiers et pachas. Finance internationale et impérialisme économique en Égypte, Paris, Albin Michel, 1993. See further in the book, chapter 11.

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question of millions of pounds, these shares would give their owner a huge, if not preponderant, influence over the canal’s management. In these critical times, it would be of vital importance to Your Majesty’s power and authority.” “I would say that the purchase of these Suez Canal Company shares is an absolute must if England is to have a firmer grip on its Eastern Empire.”16 The return to power of Disraeli in February 1874 marked a turning point in British policy about the fate of the Suez canal: his predecessor and rival, Gladstone, had shown no real interest at all in the ownership, the finance, and the fate of the canal. Disraeli trusted the Rothschild of London to negotiate a stake by British interests in the Suez Company, directly, through contacts on Paris market itself, rapidly rejected by French bankers, then through a direct offer to the khedive to purchase his shares in the Company. Lionel Rothschild mobilised the skills of his merchant house to move the networks of relationship which could be relevant, but vainly. Suddenly, the Turkish bankrupt in October 1875 changed the mood of the financiers: Egypt could no more borrow to finance its huge budget deficit, although Ismaïl needed between three to four million pounds to make end meets in November 1875; he desperately needed cash to face the dire consequences of a long-term budget deficit which had been financed through borrowing overseas mainly in Germany and France. B. Balking French interests The French bank Crédit foncier proposed the khedive to buy its shares for FRF 50 million (or £2 million) “and indeed acquired an option to do so, but the French Foreign minister, the duc de Decazes, chose not to proceed without [British minister of Foreign Affairs] Derby’s blessing, and this was flatly denied.” 17 We have to precise that, at these times, France power was harshly contested between Republicans, Liberals and Monarchists, and that the government and its Parliament majority were somewhat lacking with a determinant authority; and perhaps the Conservatives then governing the country hoped secretly to woo the British side in favour of the re-establishment of monarchy against a drift towards leftist Republicans. Moreover the French banking community – especially Société générale18 and the Anglo-Egyptian Bank, which had 16

17

18

Disraeli, the English Prime Minister, to his Queen, 18 November 1875, and speech at the House of Commons on 8 February 1876, from: Georges Edgar-Bonnet, Lesseps, op. cit., pp. 30 and 34. Niall Ferguson, The World’s Banker. The History of the House of Rothschild, London, Weidenfeld & Nicolson, 1998, p. 821. Hubert Bonin, Histoire de la Société générale. I. 1864-1890. Naissance d’une banque, Geneva, Droz, 2006.

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strong French connections –, then balked at getting involved into more Egyptian financial operations, just at times when the Ottoman crisis was pending and that the Paris political and financial situation was blurred by uncertainty19. Without reacting quickly and massively (in cash and through diplomacy), France had to yield to the breakthrough of British interests into the Suez canal: French capitalists had hesitated investing more money in a company whose future and profits remained uncertain; and the French government too did nothing to encourage French businessmen to form a pool and buy these shares. Actually, by allowing the English to buy them, the French government was trying to placate 10, Downing Street in an effort to rebuild its diplomatic clout20 after the debacle of 1871. The French government was keen on seeing the intervention of the British State as a way of placating worries about the fate of the Egyptian authorities, which could finally help stabilising the area and ease the tensions surroundings the life of the Suez canal itself. C. Disraeli and Rothschild as pushing actors Anyway, “the khedive therefore had little option but to sell to Britain, and on November 23 offered to relinquish his shares for £4 million [...]. Derby and the Chancellor were against accepting the offer, arguing that the canal should be controlled by an international commission ; but, when the matter was discussed in the five Cabinet meetings held between November 18 and 24, Disraeli eventually prevailed. Four million pounds was a huge sum in 1875: the cost of the purchase was equivalent to 8.3 per cent of the entire UK budget net of debt charges.”21 Because “the Parliament was not sitting and it was unclear whether the government coud raise the money from the Bank of England without its authority”, Disraeli asked Rothschild to advance the amount, in return for a commission of 2,5 per ent and an interest charge of 5 per cent – then to be paid by the khedive in fact... The contract could thus be signed with Ismaïl on 25 November 1875, and the installments were completed between 1st December to 1st January, before the Parliament authorized the emission of Treasury bills. It allowed the State to reimburse Rothschild as soon as in the

19

20

21

Jean Bouvier, “Aux origines de la IIIe République. Les réflexes sociaux des milieux d’affaires”, Revue historique, October-December 1953, pp. 271-301. Republished in Jean Bouvier, Histoire économique et histoire sociale, Geneva, Droz, 1968, pp. 59-89. See: Jean Bouvier, “Les intérêts financiers et la question d’Égypte, 1875-1876”, Revue historique, 1960, pp. 75-104, reprinted in: Jean Bouvier, Histoire économique et sociale, Geneva, 1968. Jean Bouvier, Le Crédit lyonnais, 1864-1882, La naissance d’une banque, Paris, 1961 and 1968. Niall Ferguson, op. cit., p. 821.

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course of March22 – whilst harsh arguments took place in the City about the charge to be paid to N.M. Rothschild & Sons (about 15 per cent on a yearly term) and about such a direct financing of the State by a family bank... In November 1875, the British government had thus bought the shares for four million pounds (or FRF 100 million): “You have it, Madam”, told Lord Rothschild (Lionel de Rothschild) to the Queen23. “Although the purchase was hailed, both in England and in many other countries, as a major political and diplomatic coup, the sale of the shares, the rapidity with which the money was raised, and Disraeli’s reasons for making the acquisition were questioned at the time, even by members of the Cabinet who had been persuaded to agree to the purchase even on the first occasion, the 17th November, that the Cabinet discussed the matter, without any detailed knowledge of the situation. The conduct of Baron Lionel, which had advanced the money at, it is said, at a day’s notice and charged a commission of 2 per cent and interest of 5 per cent per year for a few months, was also criticised, these charges being conveniently annualised by his critics to make them higher than they actually were.”24

5. THE GROWTH OF BRITISH INFLUENCE ON THE SUEZ COMPAGNY AND CANAL Whatsoever the arguments, one could pretend that the blunder committed by Palmerston’s initial absence in 1858 had at last been mended: a more balanced position between French and British interests in Egypt was then reached25.

22

23 24 25

For details, see Ibidem, pp. 822-829. Also see Charles Lesage, L’achat des actions de Suez, Paris, Plon, 1906. For more detailed points, see: Correspondence Respecting the Purchase by Her Majesty’s Government of the Suez Canal Shares belonging to the Egyptian Government, Presented to both Houses of Parliament by Command of Her Majesty, London, printed by Harrison & Sons, 1876. Robert Blake, Disraeli, London, Eyre & Spottiswoode, 1966. Lucien Wolfe, “The story of the Khedive’s shares”, The Times, 26 December 1905, p. 7. See Lord Rothschild, “You have it, Madam”, op. cit. Ibidem, pp. 13-14. See John Marlowe, Anglo-Egyptian Relations, 1800-1956, second edition, London, Frank Cass, 1965.

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A. The British insinuated themselves into the Suez Company (18751879) Despite concerns among a few members of informed elites26, the purchase of the Suez shares did not immediately bring any real power to the English as one of the rules of the Company limited every shareholder to a maximum of ten votes in its general assemblies. Unfortunately, such an equalizing legality also opened the doors to unwanted psychological factors. Without the active support of the French government, Lesseps was a pygmy in front of the British might and a way had to be found to accommodate English expectations regarding the Company and its management, be they political or commercial. An agreement was signed in February 1876 by which three representatives of the British Crown would sit on the Company’s Board. The firm became the symbol of an “entente cordiale” which transformed Egypt into a Franco-British “condominium” in 1875-1879, with its own Public Debt Fund (1876), European ministers in the government and a board of enquiry on Egyptian finances headed by Lesseps himself (1878). It even went so far as to have these two powers join hands in deposing the khedive Ismaïl and replacing him with his son Thewfik in 1879. Till 1904, the English, supported by the French, controlled the Egyptian finances in order to recover their debt. They eroded the khedive’s autonomy while insinuating their own direct influence. The khedive was no longer the Company’s sole non-French partner in the isthmus. B. The British settled in the canal zone (1882) This English intrusion aroused an Egyptian backlash – Europeans were massacred, and arabi, a staunch nationalist, was nominated as Minister. But this only served to give England an excuse for a military intervention. In Paris, very few people actually reacted against such risk of a British expression of might in the Near East. Prime Minister Gambetta published an official note on 7 January which enhanced French concerns over Egypt; the naval authorities, and especially viceamiral Alfred Conrad, the head of Orient naval forces in the East Mediterranea, drew the attention of the government on the negative effects of such of an unbalance of maritime influence in the area27.

26

27

See, far later: Charles Lesage, L’invasion anglaise en Égypte: l’achat des actions de Suez, Paris, Plon, 1906. Charles Lesage, “L’achat des actions de Suez”, Revue de Paris, 15 November 1905, pp. 325-369. See: Philippe Masson, La marine française de 1871 à 1914, in Histoire militaire de la France, tome 3, Paris, Presses universitaires de France, 1994. Theodore Ropp, The Development of a Modern Navy: French Naval Policy, 1871-1914, Annapolis, Naval Institute press, 1937; reedition:1987.

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Lesseps attempted to promote negotiations and compromise. Fearing the hostility of their European counterparts against a military intervention, France and Britain proposed a European collective action in Egypt, but Germany was reluctant and the other countries (Russia, Austria-Hungary) hesitating, and finally a mere call for order in Egypt was sent to the Ottoman sultan. In Paris, at that time, once more, there had been first, in January, some void of power between two governments (Gambetta, then Freycinet), and second, Prime Minister Freycinet had to take into account its Republican center-left majority in the Parliament, which was yet not much convinced of the interest of military interventions either in the Mediterranean area (Tunisia, Egypt) or in the future Indochina, which resulted in hesitations and even of the successive dismissal of a few Prime Ministers28. Freycinet succeeded in concluding an agreement with the British government to set up a common expedition in Egypt; he asked the Parliament some budget in that intent, but it refused it on 29 July, and the government had even to leave… Such a deadlock in Paris gave leeway to England for action in Egypt. British troops landed in August 1882 and occupied the isthmus, before they conquered Cairo on 15 September. While English ships paid “transit” fees, they were there to stay – in order to repulse any attack by the insurgents and to serve as base for the eventual conquest of the country. From 1882 onwards, England proclaimed itself as the canal’s protector, and in the name of autonomy, laid its hands on this strategic route to India and on the gateway to Egypt itself, while Lesseps and France were left dreaming about a “temporary protection” of the canal29. England sent Lord Cromer as its first High Commissioner (1883 to 1907) and began the political, financial and commercial domination of yet another colony. It skimmed off two-thirds of Egyptian exports and supplied a third of its imports in 1885, while the numbers stood at 8 per cent and 11 per cent respectively for France. C. A Company submitted to British supremacy Lesseps tried to instigate a revolt against this violation of neutrality by ordering the pilots to stand down, but British soldiers forced the locals into compliance and Lesseps’ stand-off lasted only two days. The

28

29

Key political leader Charles de Freycinet related such hesitations in: Charles-Louis de Freycinet, Souvenirs, volume 2, 1878-1883, chapter 7, Paris, Delagrave, 1913 (available on internet). Charles-Louis de Freycinet, La Question d’Égypte, Paris, Calmann Lévy, 1905. See Jules Charles-Roux, L’Isthme, op. cit., volume 2, while Georges Edgar-Bonnet, Lesseps, op. cit., criticized Lesseps’ choice.

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English government, irked by Lesseps’ inflexibility, and British shipowners, dissatisfied with the state of the canal, challenged the Company’s monopoly. As a majority shareholder and as the biggest client of the firm, England made its demands clear: a greater presence on its Board, a greater control of the Company or the construction of a second canal. Diplomatically isolated (France was preoccupied with its Tunisian affaires and refused to intervene in Egyptian politics) and hemmed in on all sides by unfavourable circumstances, the Company had to accede. Charles de Lesseps was obliged to concede the upgradation program of 1884, a reduction in transit tariffs and to admit seven more English ship-owners and traders to the Company’s Board. And England now occupied 10 of the 32 seats on the Board – which will be studied later on. The bridgehead established first in the equity of the Suez Company, then on the very zone of the canal itself, before setting a durable political and military Protectorate on Egypt, explains the hegemony of British interests on the geopolitical environment of the Company, which supplemented their might within the circles of worldwide shipowning and thus within the committee gathering the customers to discuss about the transit tarrifs, and last the power of the City on several financial operations involving Egypt and even the Suez Company. Big issuings of Egyptian bonds were achieved in London under the guidance of NM Rothschild merchant bank30, in 1879 (£8,5 million, at 5 per cent, pledged by a mortgage on Egyptian public estate – but its actual value for brokerage reached only 73 per cent, which proved the low estimates of Egyptian creditworthiness at this time) –, then in 1887 (£9 million, at 3 per cent, pledged by a few Europeans countries), in 1888, and in 1890. And this predominant situation justified the opening of a London office by the Suez Company in 1883, as a foothold there to meet representatives from maritime and financial interests.

CONCLUSION The Suez Company could not escape geopolitics: as the Suez isthmus became more and more involved in the “Indian road” linking Great Britain to its empire, eastward, and because the economic interests of British firms31 grew rapidly East of Suez, the control of the Suez 30

31

See Caroline Shaw, “Egyptian finances in the nineteenth century: A Rothschild perspective”, The Rothschild Archives. Review of the year April 2005 to March 2006, pp.34-38. See Lance Edwin Davis, Robert A. Huttenback & Susan Gray Davis, Mammon and the Pursuit of Empire. The Political Economy of British Imperialism, 1860-1912,

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canal became some kind of a challenge. Even if British authorities were divided about it, finally, Disraeli paved the way to financial, diplomatic, and military stake in Egypt. The khedives could no longer live a Mammonic life financed at credit by financiers from continental Europe; the “principle of reality” imposed to take geopolitics into consideration, which led to ponder about the role of Egypt within the worldwide networks of British influence. Sure, the bankruptcy of 1875 was the casus belli providing the opportunity to seize solid positions within the equity and the Board of the Suez Company. But we cannot imagine that, in the midst of imperialist moves and struggles, the Suez canal could have staid completely as a pure “capitalistic” and entrepreneurial entity: it became a target for imperial and imperialist policies – in fact only preceding the future Panama canal on the level of political control, because the United States later on were to control both the capital and the territory of Panama.

Cambridge, Cambridge University Press, 1986. Peter J. Cain & Anthony Gerald Hopkins, British Imperialism : Innovation and Expansion, 1688-1914, London & New York, Longman, 1993. Graham Goodlad, British Foreign and Imperial Policy, 1865-1919, London, Routledge, 1999. William Hynes, The Economics of Empire: Britain, Africa and the New Imperialism, 1870-1895, London, Longmans, 1979.

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Caricature : Disraeli enticing the British State into purchasing part of the equity of the Suez Company

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CHAPTER 7

THE COMPANY’S APPARENT NEUTRALITY Despite the influence of Great Britain – through the Crown itself as a shareholder and therefore as a stakeholder, the process of half-colonisation of the Egyptian protectorate, or the role of British ship-handlers in the life of the Suez Company –, the Suez canal was not to become a piece of British imperialist purpose, following the diplomatic hazards or moods. Lesseps’ dream was to equip the worldwide economy with a waterway accessible permanently to every ship, whatsoever the geopolitical environment; and his objective was therefore to guarantee the neutrality of the canal. Such a legal position could take its inspiration in the statute of the Danube river or of the straits of Dardanelles and Bosphorus to reinforce such a neutral way of life. But the balance of power overpassed such legal declarations for good: wars, international tensions, or British power were to impose sometimes their effects on the Company, despite its will to manage the canal alongside an independent process in the name of a “pure” capitalism concerned only by efficiency and profit. The two world wars could not but involve the canal and even the Company into direct military and diplomatic events.

1. THE FOUNDING PRINCIPLES As it happens all too often, geopolitical forces proved themselves too strong, Lesseps’ ideals of universality and neutrality were trampled underfoot, and the Company’s wonted equality vis-à-vis its clients was dealt a body blow by the English domination. Actually, Lesseps should have seen this coming long ago, in as early as the 1850s, when he was witness to the legal battles waged between London and Constantinople. In fact, he showed himself to be still naïve years later when he failed to recognize the American shadow looming over the Panama canal and courted disaster by sticking to his high “principles”. Having said that, it must also be noted that the avowal of such principles was also a necessity for the survival of a precariously perched company which had to

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convince its international clientele of the practicability of such an enterprise, whatever be the political issues. As it always happens in human affairs, ideals and self-interests were inextricably linked. In spite of the khedive’s firman of 1856 (ratified by Constantinople in 1866) by which he guaranteed the canal’s neutrality, the Company needed something more concrete than his sinking credibility or Lesseps’ words to back up its claims. It sought to establish its bona fides with an official “charter”. The European “summits” (Vienna in 1815, Paris in 1856, Berlin in 1885) had redrawn the map of the world: could they not dedicate the canal to the entire world? It was not enough that the Company’s concession be granted by only Egypt or the Ottoman empire; it had to be ratified by an assembly of all the major “powers”, there being as yet no “League of Nations” or a UNO. But much work was required. The English had rejected any talk of “neutralizing” the canal in 1856, in 1869, and again in 1873; in 1877 they also rejected applying the Agreement of Straits (Bosphorus and Dardanelles) of 1841 which forbade the transit of warships because they thought that the route to India had to remain open for His Majesty’s soldiers. For the United Kingdom, the control over Mediterranea or over the trade axis towards Asia was at stake, as was challenged the access towards the straits and the Black Sea for Russia or a few other countries. “Big Powers” questioned endlessly the balance of power which served as a mainframe for thalassocracy throughout the history of the Mediterranean Sea, and they had to imagine some tricky agreement to balance the might of British interests in the Near East and in the Suez isthmus on one side, and the necessity to respect some community of international rulers on the other side1. This explains that reaching the “neutrality” of the Suez canal was then and has been perceived henceforth as an impossible target or as an elusive strategy2.

2. THE AGREEMENT OF 1888 The British occupation of the Company’s installations in 1882 tarnished the firm’s brand image. Was not the canal British now? The English needed to disguise their occupation and provide proofs to the contrary while ensuring that they did not “loose face”. It was suggested that the canal could be placed under the protection of an international force. In 1882-1883, France mooted the idea of a committee on the lines 1

2

See Félix Ponteil, La Méditerranée et les puissances depuis l’ouverture jusqu’à la nationalisation du canal de Suez, Paris, Payot, 1964. Loïc Marion, « L’introuvable neutralisation du canal de Suez », Stratégique, 1990-3, n°47.

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of the “European Committee of the Danube”3 which would monitor and control the traffic through the canal. The English were loath to give up their military presence, fearing that they might not be able to resume their control in case of war, or to even share their present hold with the French or the Germans whose colonization drive had already become a cause for alarm. From the 1870s several scholars had thought of inserting the Suez canal within an international code or law about rights of circulation and controlling international waterways. The Institut de droit international (Institute for International Law) had been set up in Belgium (Gand) in 1873 and argued about some international authority and code of rules to manage key worldwide issues in the name of positivist action4 to avoid international clashes and even wars – in the wake of the 1870 conflict between France and German States. The main topics were forms of an international arbitrage and also the statutes of the navigation through the Suez canal and the genuine control of the neutrality of transit through the isthmus, organised by the 1856 agreement and its ratification in 1866 by the Ottoman State. To guarantee a free transit was the purpose of arguments, either about war times or through peace times. Such arguments fostered the practical discussions which led finally, on 29 October 1888, to the key the Agreement of Constantinople, which established the canal’s neutrality: it was to remain open to all the world’s fleets, even in times of war. The canal itself, its ports, and the waters within a three-mile radius were to be kept free of all conflicts or blockades. The international community was then satisfied; the waterway seemed definetly to escape the risk of Egyptian intrusion on its functioning and rules of circulation – even if the text did not actually tackle the issue of the statutes of the Suez Company by itself, of its very nationality, a point which Egyptian nationalist experts should remind several decades later: the international statutes of the canal did not transform the statutes of the society5. Turkey and Egypt were to protect the isthmus; but their inability to face any real army and the absence of an “international police force” left the door wide open for the British. The treaty stipulated that “the principle of equality regarding the free usage of the canal […], no [nation] will seek to gain territorial or commercial advantages, or to acquire any privileges in international relations regarding 3

4

5

See Hanna Bokor-Szegö, « La convention de Belgrade et le régime du Danube », Annuaire français de droit international, 1962. J. Blocizewski, Le régime international du Danube, La Haye, Recueil des cours de l’Académie de droit international, 1926-I. See Albéric Rolin, Les origines de l’Institut de droit international, Gand, IDI, 1923. Martti Koskenniemi, The Gentle Civilizer of Nations, The Rise and Fall of International Law, 1870-1960, Cambridge, Cambridge University Press, 2002. See references in chapter 16.

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the canal.”6 But the presence of English troops in Egypt, right next to the canal, rendered this “principle of equality” into nothing more than a hollow phrase7. True, the diplomats living in Egypt would “demand the suppression of any publication or the dispersion of all gatherings on either side of the canal which would endanger the freedom or security of all transits”8. Even if it were argued that the British military presence in Egypt was more to do with England’s ambitions on the Middle East, it nevertheless did exert an evident influence on the canal’s “freedom”. The Agreement would seem to have been more of an exercise in diplomacy than anything else: all the nations were indeed equal, but under the benevolent gaze of the undisputed Mistress of the Seas and of all Egypt. During the Russo-Turkish war of 1877, Great Britain had made it very clear to the Russians that any bombardment of the canal would constitute an act of war, and Saint Petersburg quietly shelved that plan. On the other hand, the English themselves had their reservations regarding the application of the Agreement in toto. They claimed that the political tensions in Egypt justified the suspension of some of its clauses and as these nationalist troubles and Britain’s military occupation remained in place for several decades more, the Agreement seemed more and more like a pledge than an actual fact. Then, the AngloFrench accords of 1904 went a step further and “legitimized” the suspension of these offending articles, removing the remaining obstacles in the path of English sovereignty in the isthmus and its supervision of the canal’s “neutrality”.

3. A NEUTRALITY IN FACT? Interestingly, this neutrality was respected and maintained by the British. Warships crowded Port-Saïd and accounted for 4.7 per cent of the tonnage in 1896. In 1895, the French went to Madagascar and the Italians to Abyssinia; and they returned in 1896. The Spanish fleet, at war with the United States, passed through in 1898, en route to the Philippines. The European expeditions bound for China (to crunch the Boxers revolt) went through in 1899-1900. In November 1904, the mighty Russian fleet crossed the isthmus on its way to its disastrous defeat at the hands of the little-known Japanese at Tsushima Bay (1905).

6 7

8

Article 12 of the Agreement. Yves Van Der Mensbrugghe, Les garanties de la liberté de navigation dans le canal de Suez, Paris, Librairie générale de droit et de jurisprudence, 1964. Article 8.

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It must be noted though, that all these conflicts hardly concerned the British. Even the Italians, who had sanctions imposed against them by the League of Nations for attacking Abyssinia, were allowed to pass their troops freely through the canal in 1935 – thus explaining the upsurge of their transit figures; the free passage of their ships also allowed them to reinforce and strengthen their position in Ethiopia in 1939-1940. They were taking full advantage of English hopes that this would dissuade them from taking Germany’s side in case England went to war with Germany. The Anglo-Italian accord of 1938 guaranteed the mutual respect of the Agreement of 1888, and Britain could now hope that in case of war, Italy would not attempt a military coup on the canal. A. British troops godfathering the Suez isthmus The neutrality and the free openness of the Suez canal was proclaimed by such numerous multilateral or bilateral compacts9. Anyway, despite the legal protection of agreements and pledges from nations, the British authorities had rather establish actual guarantees against unexpected bad action from incidental enemies or attacks. British troops were present in Egypt from the establishment of a de facto protectorate and from the de jure protectorate set up in 1914 – after Constantinople chose to rally the German side at war. Later on, when the Italian offensive in Ethiopia convinced nationalist Egypt to negotiate closer links with its tutor10, it wished to transform this one into its “guardian”, which explains the agreement concluded in August 1936. Its very effects for the Suez canal was that British troops were authorized to be stationed in the isthmus to guarantee the protection of the waterway: about 10,000 soldiers and 400 special pilots could thus be active in the isthmus, mixing their life with that of the Suez Company’s managers, engineers, employees, and pilots. The “principle of reality” prevailed therefore against the mere protection of agreements and legal pledges: the openness of the Suez canal to British fleets had to be preserved, even by force, to insure the supplying of Great Britain with Asian and Oceanian goods and to ease the access to the Indian empire. Therefore, the Suez zone and canal genuinely joined the broad scheme of British imperialism in the Middle East, itself part of western

9

10

See for example Alfred Schiarati, De la condition juridique du canal de Suez avant et après la Grande Guerre, thesis, Lyon University, 1930. Raoul Genet, Droit maritime pour le temps de guerre, Paris, 1937-1938. Gilbert Gidel, Le droit international public de la mer, Paris, Sirey, 1931-1934. See E. Monroe, Les enjeux politiques en Méditerranée, Paris, Armand Colin, 1939 (translated from English), p. 36.

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hegemony11 on this area, all the more because economic interests reached rapidly a new scope after oil became a key issue there. Whatever the diplomatic, political, legal or financial statutes of the canal or of the Company might be, anyway, the issue of preserving British naval interests on both sides of the Suez isthmus would have led to some kind of direct or indirect control over the waterway; any counterfactual history could not live without conceiving such an involvement because the canal was to be inserted somewhat within the British naval strategy East of Suez12. B. The Company and the canal in the First World War In 1925-1928, a monument to the “defense of the canal” was erected at Ismaïlia13; but against whom did it have to be protected? Right from the start of the war in August 1914, Egypt had asked the English to protect the canal; one key target was the fate of the Ottoman empire, now Turkey, and the “Lawrence myth” only recalled us that the Near East was at stake, and thus also the Suez canal. Fearing sabotage by the means of scuttling ships and thus blocking the canal, the English forbade the passage of German or Austrian civilian ships and drove out those which were already inside. The Company had to accept these measures as necessary. All the ships in the canal benefited from the application of the Agreement of 1888 – they were free to leave. But the loopholes were apparent when, no sooner were they outside the 3-mile “neutral” zone, a boarding party from a prowling British cruiser would force them to Alexandria. Turkey’s decision to enter the war on the side of the Germans in November 1914 finally gave the British the excuse to resort to force. The pro-Turkey Egyptian viceroy was deposed in December 1914; Egypt was separated from the Ottoman empire and became, in December 1918, a British “protectorate”: a de facto state of affairs had now become “de jure”. The canal was of vital importance to the British – in October 1914, a first convoy of 38 ships had brought some 25,000 soldiers to Europe. This explains that, fearing an attack by the Turks, England transformed the isthmus into a military base: English and French troops, fortifications, seaplanes and warships kept a sharp vigil on the canal. The British headquarters in the Near East were located in Ismaïlia in the buildings of the Company, which had to transfer its 11

12

13

David Kenneth Fieldhouse, Western Imperialism in the Middle East, 1914-1958, Oxford, Oxford University Press, 2008. See Greg Kennedy (ed.), British Naval Strategy East of Suez, 1900-2000. Influences and Actions, London, Routledge, Cass Series: Naval Policy and History, 2004. Designed by the architect Roux-Spitz.

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executives and employees westwards in the country. And in fact the Suez zone became for a while somewhat of a battleground and a target of war14 : an attack by 16,000 Turkish soldiers was repulsed in February 1915; minesweepers cleared the canal of mines; in July 1915, German and Turkish planes attacked the installations of the Company. Not so far, Kantara was transformed into a huge military base, used by Allenby and Kitchener to launch their offensive on Palestine15 in 1917, which caused intense transit through the canal; even a mobile bridge was opened on the canal at El Kantara in November 1917 The Company – which had to impose its German director since 1899, Philipp Heineken, the president of Norddeutscher Lloyd, to leave the Board in June 1915 – was dragged helpless in the maelstrom of events. It had to adapt the conditions of transit and life to such a harsh war-time environment. Despite an increase in the tariffs, the war wrecked its finances. Submarines and the risk of being torpedoed in the Mediterranean diverted the traffic to the Cape route. Spurred by its French roots and the relationship of power in Egypt, the Company did not suffer lightly these attempts on its neutrality. It sided actively with the English, its workshops at Port-Saïd repaired allied ships and it gave them full use of its materials. Neither the English, nor the canal, nor the Company really lived up to this “principle of neutrality” during these turbulent years (1914-1918).

4. THE COMPANY AND THE CANAL IN THE SECOND WORLD WAR Two decades later, it became obvious that the Suez canal could not escape the destiny of battling countries as the Middle East was involved in WWII: German troops fighted westwards from Italian Libya; French Syria and Lebanon leaned to Germany because they depended on the pro-German Vichyst state; the recently discovered and exploited petroleum of Irak was a challenge, etc. – while British forces little by little established their control on the Indian Ocean along the Eastern coast of Africa and in Ethiopia. The environment of day to day life of the Suez canal became thus intense, and it could not avoid being involved in the events of WWII.

14

15

Georges Douin, Un épisode de la guerre mondiale, l’attaque du canal de Suez, le 3 février 1915, Paris, Delagrave, 1922. Jean-Édouard Goby, “Le canal de Suez pendant la Première Guerre mondiale”, Bulletin de l’Association du Souvenir de Ferdinand de Lesseps, n°5, April 1984, pp. 1944. Paul Reymond, Histoire de la navigation dans le canal de Suez, Cairo, 1956.

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A. The Suez Company threatened The buildup to the second major war of the century began to erode traffic several years before the actual declaration of hostilities. Growing international tensions during 1936-1939 forced ship-owners to use the longer but safer route via the Cape of Good Hope, which also demanded lower insurance premiums16. Even more alarming were the claims made by Italy regarding the French possessions along the east coast of the Mediterranean and the Red Sea (Tunisia, Djibouti); Rome went so far as to demand the surrender of the Suez Canal Company itself. In fact, this was one of the concessions that Great Britain is supposed to have advised its European partners to make in order to pacify the Axis powers: the British ambassador in Paris “Phipps asks whether we should authorize England to open doors about Tunis, Djibouti, Suez”17 for discussions about barters intended to lure Mussolini towards the Anglo-French side, which French Prime Minister Daladier rejected on 24 July 1938, because he did not believe that Italy would be appeased by such concessions. B. The zone of the Suez canal at war In 1937-1939, the English began to reinforce its troops protecting the canal (and from there the whole activities in Eastern Mediterranea18): by the beginning of 1939, some 20,000 Egyptian soldiers and another 12,000 British troops were stationed in Egypt while the Italians had amassed 100,000 of their own across the border in Libya. As the treaty of 1936 was applied, British government regained the military control of Egypt as soon as war was declared19 – and Egypt closed its diplomatic relations with Germany on 3 September 1939 and with Italy on 12 June 1940 –, which revealed somewhat as a relevant decision because the canal was rapidly threatened by direct risks of war. The Company itself prepared for war by constructing bomb-resistant shelters and readying the equipment needed to help ships in distress. Such moves were put at proof when the Suez waterway became a direct target of warriors. Italian troops invaded Egypt from Libya in September 1940; then, because of their collapse, German troops joined 16 17

18

19

Henri Poydenot, Le canal de Suez, Paris, 1955. François Bédarida, “La ‘gouvernante anglaise’ ”, in René Rémond & Jeanne Bourdin (eds.), Édouard Daladier chef de gouvernement, Paris, Presses de la Fondation nationale des sciences politiques, 1977, p. 235. L. Morsy, “Britain wartime policy in Egypt, 1940-1942”, Middle East Studies, n° 25, 1989, pp. 64-94. See Jean-Pierre Derriennic, Le Moyen-Orient au XXe siècle, Paris, Armand Colin, 2nd edition 1983, p. 103.

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Libya in March-April 1941, opening a local conflict for several terms, until the Summer of 1942. The isthmus of Suez took on a major strategic importance and furious battles were fought against first the Italians, and then against Rommel and his Afrika Korps, who came within 80 km of Alexandria in July 1942 (El Alamein battle). The canal itself suffered from the war when it was attacked with bombs and mines continuously from August 1940 to November 1941. Ships were hit in February 1941, and all traffic came to a standstill for two and a half months. The Company’s business went flat, and the monthly traffic declined from 477 ships in August 1939 to a minimum of 57 in August 1940. It stagnated from 1941 to 1942 and picked up only in the summer of 1943. On a broader scale of war, Ismaïlia itself became the headquarters of the British Mediterranean fleet. The entire isthmus was turned into a huge military base, the canal into a war port, and the workshops of Port-Fouad into arms factories which worked 90 per cent of the time for the English. In the summer of 1943, the British troops present in the isthmus were involved in the preparation for the invasion of Sicily20. C. The Company involved on the Allied side By now, the United Kingdom was manifestly in control over all of Egypt. The canal was completely under British supervision, with British warships keeping a watchful eye on all “neutral” vessels passing through. Either because they recognized how the land lay, or by the sheer force of their convictions, the Suez Company’s entire personnel gave their full and enthusiastic support to the British. The firm actively helped the Allied cause by giving putting at its service all its people, materials and workshops. Employees volunteered as militia to spy on the Italians, or enrolled themselves in the Egyptian regiments of the Free French. The firm’s senior agent at Cairo, Louis de Benoist, assumed the presidency of the Français libres (Gaullist Free French) in Egypt on 1st June 1941; the Company itself became a rallying point for Gaullists, while most other French organizations in Egypt remained mainly pro-Vichy21. As the Germans had occupied Paris, the British government should have to count the Suez Company among the firms “being active in countries controlled by enemies”, and thus to seize its assets. But the London Bureau of the Suez Company, headed by Louis Thémoin, assumed the responsibility for the financial and technical management

20

21

Louis Lucas, “Le canal de Suez et la Guerre”, Revue maritime, n°251, February 1968. Paul Reymond, Histoire, op. cit. See: Louis Lucas, “Le canal et la Guerre”, op. cit., confirmed by Jacques GeorgesPicot’s written testimony and Charles Ribeyre’s interview of 31 January 1986.

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of the canal, which avoided such a divestiture; and, in conformity with an agreement of 1940, the Company transferred a part of its funds and its complete share portfolio in Algiers (to the Banque d’Algérie) in 1940 and another part of its availabilities in New York to an account opened as soon as 1939 at Morgan Bank. And later, in 1942, it delegated all the powers of the Board – that is the “institutional responsibility” of the firm – to its British directors. It thus saved its assets from being confiscated by the British authorities along strict rules of war. In Egypt itself, it respected a rule forbidding any links with Nazified Europe, even French Vichyst authorities of Zone libre, and stuck to the process of having only relations with the London office and with British directors in London, which were supposed to take over the control of the Company for wartime22. Such a move of power to London pleased British authorities, which required that Great Britain controlled thoroughly the Suez activities, and which were concerned by the risk of Egyptian demanding the location of the managing power in Alexandria, with the two Egyptian directors and the Agent supérieur. Because Louis de Benoist joined decisively the side of the Allied forces and even became in Cairo the delegate of France libre in Egypt, there was no ambiguity from the Suez managing headquarters in London and Ismaïlia in their rupture with Vichyst France, and thus no room for manoeuver for Egyptian authorities to deprive them of their actual power. D. A powerless Company in Paris In the meanwhile, the transfer of assets and revenues outside Paris and metropolitain France (to Banque d’Algérie in 1940 and even in New York to an account opened as soon as 1939 at JP Morgan bank) deprived the Company of the risk to be involved actively in some kind of the policy of “Collaboration” with German Occupants of France: their control of the Company’s corporate office in Paris amounted to nothing more than sitting in an “empty shell”. One sign of such idleness is the fact that Georges-Picot left the firm for a while because he could no more assume his charge to supervise the Egyptian activities; he had been mobilised an on officier in Egypt, in London and in North America; then he had worked somewhat at Suez, and joined a middle-rank job in the economic administration as a civil servant from May to August 1941, then an (unpaid) member of the cabinet of the Minister for Supplies till April 1942, and then came back to supervise the relationship between Rue d’Astorg, Algeria (to transfer financial assets to Banque d’Algérie) and Egypt, till the thorough cut of France off its overseas links, the day to day treasury, and the prospects of the canal on the long term. 22

See Caroline Piquet, Ph.D., op. cit., pp. 162-168.

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The Company was also thus saved from having to “collaborate” with Germany, for example by having to supply funds or selling its shares at extorted prices. The only job left for the “Kommissar” appointed by the Occupiers, Falkenhausen, was to get the authorization required for paying the pensions and giving financial assistance to families of the Company’s employees who were in Egypt23. It is true that the board of directors continued to meet, but without any real decision-making powers: it was nothing more than empty talk, an exercise in futility. No doubt there were some black sheep: as a witness, businessman Charles Rist mentions a few directors who obviously showed their pro-German or anti-Gaullist thoughts, like Mathieu de Lesseps, a “reactionary”, who was impatient about the imminent German victory over the “Bolsheviks”, Jehan de Rohan, and president de Vogüé; and he called them in his Souvenirs: “sick people”24. But the Company as a whole could not be lead into any kind of “Collaboration” by the individual stands taken by some of its directors. The arrest and detention of Georges Edgar-Bonnet, Suez managing director, and Michel Homolle from November 1944 to February 1945 had nothing to do directly with the firm, because it was their role on Air France’s Board that had got them blacklisted – even they represented the Company as an institutional investor, the former as a vice-president of Suez, the latter as a general secretary of Suez – and happily for himself Georges-Picot had had to leave the third seat attributed to Suez which it occupied because a 1940 law stipulated that only two directors could represent a single corporation on the Board of another one. In spite of the pro-Vichy stand taken by some eminent members of its Board25, the Company had clearly thrown in its lot with England and Egypt against Germany and Italy.

23

24

25

Annual Report of the Suez Company 18 December 1945. Jacques Georges-Picot’s testimony. Jacques Georges-Picot’s interview of 22 June 1984. Jacques GeorgesPicot, “Le Marquis de Vogüé, président de la Compagnie du canal de Suez de 1927 à 1948”, Bulletin de l’Association du souvenir de Ferdinand de Lesseps et du canal de Suez, n°5, April 1984, pp. 5-16. Charles Rist, Une saison gâtée, Journal de la Guerre et de l’Occupation, 1939-1945 (edited by Jean-Noël Jeanneney), Paris, 1983. Rist maintains that the other members of the board were mostly pro-Gaullists. It is to be noted that several members of the Vogüé family actively participated in the French Resistance in the Berry and Champagne regions. Louis de Vogüé’s (the president) son, Bertrand, was condemned to death by the Germans in August 1944 at Reims. Let us also note that François Charles-Roux, a future president of Suez who was appointed as General Secretary at the Foreign Ministry in May 1940, resigned his post in November 1940. The higher echelons of French society too was divided, like the rest of France.

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Wrecked ship blocking the canal at km 83.6 after having hurt

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CONCLUSION The arguments about the neutrality of the Suez canal led to harsh negotiations and finally to balanced agreements, which involved every stakeholder into “lip service” declarations, pledging for the respect of the openness and integrity of the waterway. But such stances could not resist actual events, world wars, all the more because battlegrounds were set just a few hundred kilometers to the canal itself ; and even attempts to conquer it or to hinder the transit occurred. Thus the Suez canal had to be committed to follow the destiny of the British empire and authorities; British troops settled in the isthmus in 1914 – and now onwards up to 1954; workshops were delivering services to the British Navy or suppliers; enemy fleets did not cross the isthmus, etc. And during WWII, the Company itself succeeded, intently for some of its managers, or thanks to a favourable course of events and attitudes, in avoiding being blurred by pro-Vichyst or even pro-German positions, all the more because the Suez canal was in law and in fact managed from the London Bureau and from Ismaïlia, that is on the British side, which could not have been different indeed. Should other choices had occurred, one might imagine than British authorities would have seized the assets of the Company and assumed in direct its management. Anyway, when the war progressed towards its completion, they thought of the fate of the canal and even some officials imagined its attribution to some kind of an Anglo-Egyptian institution, thus depriving France from its asset, as a way to sanction its Collaboration policy (even in North Africa and Levant, until the Fall 1942). But the alliance between the Allied side and the France libre could not but rub off such ideas, and a British expert expressed what should be the tide of history and a well-off understanding of French aspirations of restoring its might. To strip France of its canal would “be giving future generation of Frenchmen a grievance. Without the Suez Company the future grandeur of France would not be restored. Marianne without her front teeth might develop the inferiority complex of injured vanity”26.

26

Report from a meeting at the Foreign Office on 3 February 1943, Archives of the Foreign Office 371/3555, quoted by Caroline Piquet, Ph.D., op. cit, p. 172.

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CONCLUSION OF THE THIRD PART FROM IDEALISM TO PRAGMATISM Lesseps had proclaimed the Company’s universality and neutrality. But, at his death, the British held a controlling share of its capital and a third of its board-members were English. Naturally, they stamped their own brand of management in Egypt while keeping a sharp eye on the entire isthmus. Chained to a such a partner, the Suez Company had to make several compromises and was forced to admit that it did not have sole control of the canal – that over and beyond its Board, there loomed London’s mighty presence. Egypt had conceded to it the physical, commercial and technical rights, Great Britain allowed it to manage its affairs during times of peace. But as soon as war was declared, the myths of neutrality and independence were well and truly shattered. In fact, as soon as the Suez canal had become the gateway to the British empire in the Indian Ocean, in the Far East and Australasia, to the British economic interests (plantations, oil, Chinese concessions, etc.), and a leverage to British thalassocracy, it could not escape its metamorphosis into a strong issue of British worldwide power. Had the Egyptian development kept momentum and followed the path towards a solide State organisation inherited from Mahmoud Ali, perhaps the Egyptian State itself could have assumed the task of gatekeeper; but its weakening in the 1860s-1900s and the threat posed by nationalist layers of population (in the 1880s) seem retrospectively to have led the British Crown to intervene directly and to impose its protectorate over the country, in the wake of what is called the process of “second colonisation” in the name of maritime interests. The canal was thus a linchpin for economic and military imperialism, against the will of its Saint-Simonian initiators and of its founders around Lesseps.

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PART 4

A MIGHTY COMPANY From a pioneering undertaking which intended to promote entrepreneurship, commercial progress, worldwide prosperity, thanks to the opening of a waterway linking several seas and continents, the Suez Company transformed itself into a symbol of French business “Establishment”. To locate precisely the timing of such a metamorphosis remains difficult; but we could think that the departure of the Lesseps family and loyal supporters from the Board and the circle of decision, and the development of British influence – either in direct through the presence of the representants of the British Crown, or through the role of the delegates of shipping – contributed to such an evolution. One has also to think of the tide of money which started to flow from the Suez canal (in fact from London, where the transit fares were mostly paid by shipowners) when the waterway became a success story, that is a key element of sea-trade, when Asia was fare more inserted within Europe’s commercial, imperialist and even imperial grip. Such a cash machine had to be managed with firmness and discernment: on one hand, money had to be redistributed to shareholders and various stakeholders (bond holders, mainly), and guarantees of seriousness and transparency had to be brought, which explains the call for figures of the Establishment to consolidate the corporate image of the Company: might and majesty had to go altogether. In the meanwhile, such a wealth led the Company to join implicitly – because we found no “theorizing” text or “chart” thereabout – the little world of French (and European) big business, which had to prove and entertain its very “legitimacy” within the framework of “social-liberal capitalism”, still deprived of the State intermediation. The Suez Company had thus to balance might and legitimacy, to assert its philosophy of welfare capitalism, either in France (with the call for grands bourgeois representative of this mindset) or in Egypt. There abroad, welfare capitalism or more plainly “good capitalism” (or gentleman capitalism) took shape: the issue was corporate image against a mere perception of imperialism. The over-might of the Suez Company there – because it belonged to a rare layer of big modern

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business in Egypt, along with a few firms, in food processing, trading or banking, and because it was perceived as a European (and a 44-percentBritish-owned) tentacle supplementing the British administration and army – imposed a subtle step between an attitude of technical and financial superiority and a position of commitment to the development of Egyptian economy, services, and workforce – if not finances. Such an array of issues, around the stale of “might”, could not but stir arguments between contemporaries of the interwar period – when the Company reached its first apex in the 1920s – and between historians: Was it only a leverage to imperialism? Did it assume its mission of “welfare capitalism”? and, over all, what about money, revenues, profits, dividends, financial might? Did such a weathy position lead to an influential position across the Egyptian society or on the Paris market place?

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CHAPTER 8

THE SUEZ COMPANY AND MONEY (1858-1870s) By how much will the world’s riches increase? Let small minds answer these little queries! Towards nobler aims we shall turn our eyes… To bring peoples together and make them wise, Let us, as Christians all come together: To enrich may be good, to enlighten, better! 1

The historian does not quite agree with the poet and would much rather talk objectively of people’s economic situations. Unfortunately, all the books which have appeared on the canal have neglected the money aspect: they simply mentioned the initial cost of the project and the issuing of shares in 1858. Then, on the eve of its nationalisation, they precised the total cost of construction, maintenance and improvements, so as to give some idea of the extent of this daylight “robbery”. It is an understandable tradition that makes companies keep their finances to themselves – what with the government’s tax department, employee claims, and shareholders’ greed – and lets others speculate about “hidden money”2. Unfortunately, that also means that the historian in search of truth will have to dig deep to unearth facts such as: Did the Suez Canal Company make money ? If so, what did it do with it? Our book about the history of the Suez Company provided the first study of the financial aspects of its evolution, before professor Samir Saul, lecturer Caroline Piquet and a few articles dug deeply into the subject through a cunny approach. This present synthesis is still opened to arguments about values and calculations, but the genuine debate will always rely on the perception of the profitability of the waterway and of the dispatching of cash and profits between the stakeholders (Egypt, the British Crown, shipping, investors, shareholders, the expenses for

1 2

H. de Bornier, L’Isthme de Suez, poem of 1861. Expression culled from: Jean-Noël Jeanneney, L’argent caché, Milieux d’affaires et pouvoirs politiques dans la France du XXe siècle, Paris, Seuil, 1981.

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the maintenance and the modernisation of the canal, the welfare of the workforce, etc.).

1. FINANCING THE CONSTRUCTION OF THE CANAL Since the last third of the 20th century, project financing has become a commonplace practice, with its banking and finance habits and techniques, and because of the “revolution” of dams, tunnels or rapid trains, huge construction sites punctuated the headlines – from the New Deal building derby (with the cover of the first issue of Life magazine on 23 November 1936 dedicated to the building of the Fort Peck dam in Montana) to Communist achievements in the USSR or China, and to the sagas of transportation networks or hydroelectrical huge scales of dams on rivers. Even if designers, architects and photographers still succeed in mobilizing public opinion around brilliant undertakings (bridges, for instance), the solidity of project financing could rely for decades on the development of financial markets to provide subscribers to bonds issues, though a process of democratizing investment, either directly, or through the intermediation of institutional investors from assets management divisions in the name of managers of mutual funds or insurance reserves. What Lesseps completed was in fact one of the first attempts of such democratisation of finance holdings, when he offered to French and even (but without success) European savers to take part to such a huge project financing enterprise. A. The initial gamble The construction of the canal “was an enterprise which […], from the commercial point of view, was like many of these scams which are so often dangled in front of gullible capitalists. I believe that it is physically impracticable, as the costs would be much too large for there to be any meaningful returns”. “It is one of those projects meant for duping people.” “This company is one the most remarkable attempts at fraud which has been put into practice.” “I am convinced that it is impossible for this project to pay back the cost of its construction.”3 “Fiction is not dead in the land of Alexandre Dumas and Mr. de Lesseps […]! As a business venture, the Suez canal is laughable. It is a sort of chattel loan in the desert. We will not insult our

3

Palmerston (British Prime Minister), speeches of 7 July, 17 July, 23 August 1858, from: Ferdinand de Lesseps, Lettres…, volume 1857-58, p. 92. Speech of 2 June 1858, Ibidem, p. 232. Speech of August 1857, from: Jules Charles-Roux, L’Isthme…, volume 1, p. 271.

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readers by suggesting that they could ever believe that Suez’s stocks and shares have any value whatsoever.”4 “There will be no end to the amount of money that would have to be spent for maintaining [the canal]. In fact, it would be digging holes in sand, in a country where the land itself has no solidity and where the entire landscape can be rearranged by a single wind storm…. Water is indispensable for life […]. The cost of transporting fresh water would be prohibitive. A single stormy night could easily choke the entire project with sand.”5 “I cannot believe how the French government could let itself be compromised in such a manner by getting involved in a bankrupt company’s project, or that it would try and save a commercial venture which is nothing more than a crude trap.”6 Construction and maintenance required huge sums of money. The capital gained from shareholders and investors hung precariously in the balance – if the Company failed to build the canal (as it happened with the Panama Canal Company 25 years later), or the canal proved too expensive to maintain, it would mean a financial disaster of epic proportions. On the other hand, the income from the canal would at best result in some insignificant dividends or interest – either way a bad investment ! Lesseps’ problems were not only technological, but also financial: how to turn a substantial profit? Nevertheless, he sounded full of confidence when the first pickaxe fell in 1859: “The thorough investigation that we have just completed gives us the assurance that this enterprise, which is beginning today, will not only be a great leap forward, but will also add enormously to the value of the capital which has made it possible.”7 B. The canal and the first steps of financing The issue of financing the canal, if ever a source of admiration (about the “pharaonic” dimension of the project), has been solved from decades, even if new studies still tackle the topics8. But the difficulties of the very starting years have often been forgotten: like every “big public works project”, the Suez waterway project was at first a disappointing achievement because more obstacles were met than expected and because profitability flows did not follow initial schemes.

4 5 6 7

8

Daily News, from: J. Charles-Roux, L’Isthme…, volume 1, p. 309. Times, Ibidem, p. 309. Earl Ellenborough, Ibidem. F. de Lesseps, 25 April 1859, the day the canal works were begun, from: Voisin-Bey, Le canal…, p. 27. See Christian Prat dit Hauret, “Les comptes du canal de Suez : analyse d’un investissement pharaonique (1859-1869)”, in Jean-Guy Degos & Stéphane Trébucq (eds.), L’entreprise, le chiffre et le droit, Bordeaux, Bordeaux 4 University, 2005, pp. 287-303.

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a. The cost of the canal The official figure given for the construction of the canal is 433 million francs. The works required 300 million with the embankments and dredging taking up 219 million of which 164 were paid to BorelLavalley and 13 to Couvreux, the firms involved in the building undertakings. A major portion went into setting up the administrative structure and the living sites for the Egyptian labourers. The total also included the 5 per cent interest paid to shareholders over the duration of the works, which amounted to some 67 million francs. It must be admitted that Lesseps proved himself rather prudent and in no way can it be said of him that he was extravagant. Suez cost far less than did Panama, which sank the equivalent of some 1,400 million francs between 1881 and 1921. While a number of commercial and railroad companies had launched themselves from as early as 1852-1857, Lesseps held back, jumping into the fray only when he was convinced that the forces – diplomatic, technological, financial – were all converging towards a propitious outcome: “There is no hurry […]. I take great care before using any part of the capital, making sure that it is in no way compromised […]. Being well aware, right from the beginning, of all the underhand means which are used by the English cabinet to scuttle any project which may threaten its policies […], I did not want to expose my finances […] to chance fluctuations or to any harm that could result from nefarious political schemes hatched by unscrupulous governments.”9 b. The money market mobilised for the Suez equity Bankers had by now become used to “project financing”, that is, the financing of major construction projects, of “ready-to-run” factories, prospecting for oil, etc. During the period 1830-1850, they began to assemble the amounts required for launching railway companies, big banks and various other large-capital ventures. In those days, bankers, businessmen and financiers would come together in a round table discussion and form a “syndicate” which would try and raise the sum by using their network of relations or by digging into their own pockets. The financial market for much securisation had not yet matured and “banking networks” were as yet unknown in the second half of the 1860s. Lesseps rejected the proposals made by the big bankers such as Fould and Rothschild10 because he refused to pay the commissions they demanded. “These bankers want to rule over me, but I refuse to submit to 9 10

F. de Lesseps, Lettres…, volume 1857-58, page 32. F. de Lesseps, from: R. Courau, Ferdinand de Lesseps. De l’apothéose de Suez au scandale de Panama, Paris, 1932.

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them. I will manage my affairs on my own and will approach the public directly.”11 The Company opened an office in Paris and began building its own network of bankers and traders in the provinces (such as the local banking firm Varin-Bernier in Bar-le-Duc) as well as abroad. The first 200 million were collected by allowing for the shares to be paid in instalments: shareholders “freed” their 500-franc shares in seven instalments over 1858-1866. Lesseps succeeded in his efforts. Some 21,000 subscribers rallied to his call, of which only 48 went for more than 200 shares (over 100,000 francs). While some FRF 104 million were collected from the French, the project did not seem to have any takers abroad, with only four million received from foreign investors. It was the Egyptian government which saved the project by infusing 89 million francs, adding to its initial share the portions reserved for European countries. This qualified French success was due to the revolution which had swept through the French money market over the last ten years. Since 1848, the government had begun a process of “democratizing public credit” in order to increase the subscriber base for its bonds. The Second Empire began a campaign for the “universal franchise of capital”12, and in 1854, some ten thousand individuals came forward with an amount of 468 millions of State bonds to finance the Crimean war. Between 1852 and 1865, the government managed to raise FRF 3.5 billion. By issuing shares and bonds at very low rates, railroad companies raised some five billion francs in that same period. Rothschild’s Compagnie du Nord railway firm was established in 1845 with a capital of FRF 200 million, the same as Suez. By 1880, the railways boasted almost 700,000 subscribers. An upswing in the economy and a renewed confidence in the government kicked off another surge. In 1852, the Pereire-owned Crédit mobilier collected some FRF 160 million (in capital and deposits) while the Banque de France enjoyed a capital of FRF 182.5 million in 1857. Banks collected a third of Suez’s capital, with Comptoir d’escompte de Paris chipping in with 80 million in 1869, Société générale 60 million13 and Banque de Paris et des Pays-Bas FRF 62.5 million in 1872.

11

12

13

F. de Lesseps, after his talk with the banker Adolphe Fould, according to the Souvenirs de Denormandie, the Suez Canal Company’s legal advisor. From: J. Charles-Roux, L’Isthme…, volume 2, p. 285. See Pierre-Cyrille Hautcoeur (ed.), Le marché financier au XIXe siècle, Volume 1. Récit, Paris, Presses de la Sorbonne, 2007. Georges Galais-Hamondo (ed.), Le marché financier français au XIXe siècle. Volume 2. Aspects quantitatifs des acteurs et des instruments à la Bourse de Paris, Paris, Publications de la Sorbonne, 2007. Alain Plessis, La Banque de France et ses 200 actionnaires sous la Second Empire, Geneva, Droz, 1982. Cf. Hubert Bonin, Histoire de la Société générale. I. 1864-1890. Naissance d’une banque, Geneva, Droz, 2006. Bertrand Gille, “Les saint-simoniens et le crédit”; “La

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French money fertilized and seeded the development of several “new lands of growth”: by 1850, some two billion francs had already been invested abroad; another FRF 7.8 billion were reached in 1857-1866 and a whopping FRF 15 billion in 1870. These investments brought in 600 million francs annually from 1866-1867 onwards. The sheer size of these sums indicates that Lesseps’ project formed only a part of the general upswing in the financial market and the all-round growth of French wealth and prosperity. This helps to put the Company’s capital into perspective – the hundred million raised in France over nine years does not seem all that extraordinary anymore: the Company was swept forward by the economic surge14. In 1868, 100 million francs were added by the issue of bond loans to the 200 million already collected in 1858-1866. Another FRF 20 million came from the returns on the money which had been deposited in banks before being used; and 122 million were infused in cash by the Egyptian government between 1864 and 1869 to help the project taking shape. Ultimately, half of the FRF 433 million spent on the canal (including the FRF 67 million paid to the shareholders as interest) came from the Egyptian government, while only half came from the pockets of French investors. The myth of an enterprise solely financed by the private sector was shattered. Though neither the French nor British government was involved, State presence was ensured by the host country’s major contribution to the Company’s financial success. But what of the veiled and not-soveiled diplomatic threats made by England and the Ottoman empire? The loud proclamations of the potential risks in investing in such a utopian dream? Did these not worry investors and prompt bankers to charge higher interest rates? If so, then was not Lesseps extremely fortunate in the timing of his project – coming as it did right in the midst of a surging economy and widespread financial prosperity ?

2. THE FINANCIAL CRISIS : A PREMATURE END OF THE ROAD FOR THE COMPANY? Alas, the Saint-Simonian and Lessepsian entrepreneurial dreams met disappointment because they had to face a situation of distrust from investors and the Paris market place, which were confronted to the

14

fondation du Crédit mobilier et les idées financières des frères Pereire”; “La formation de la Société générale”; “Les premières années de la Société générale (18641870)”, in La banque et le crédit en France au XIXe siècle, Geneva, Droz, 1961. See: Alain Plessis, De la fête impériale….

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Table 19. Initial financing of the Suez canal (millions francs) Equity raised

200 Among which: French subscribers (about 21,000)

104

Foreign subscribers

4

varia

3

Equity subscribed by the Egyptian government

89

Revenues for the assets lodged in banks

20

Bonds issued in 1868

100

Cash provided by the Egyptian government in 1864-1869

122

Total

442

Total expenses for the building of the canal

433

Among which the interest charges paid to the subscribers of bonds Part financed by the Egyptian State itself (89 + 122 million)

67 211

meager returns on investment caused by the weak commercial situation of the Suez waterway: shipping transit did not meet expectations, and profitability was at stake. Could the value of the Suez share regain momentum against such bad odds? A. The Company in dire straits At the beginning, the Company failed to enthuse the French: its shares dropped to half, then plunged to one fourth their par value in 1875. The doubling of expenses, which had been initially forecast in the 1850s at 200 million, sent financial shivers down people’s spines. By 1866 Lesseps had exhausted his capital of 237 million francs (collected between 1858 and 1866-1867), while some 197 million more were spent15 in 1867-1868 and 1869. A Journal des travaux publics (Journal of public works) appeared in 1865 and raged against what it termed “the errors and inadequacy of the management”16. Things came to a head with the coming of the economic crisis at the end of the imperial era and the capitalists’ refusal to make any further investments (what was called “the strike by the billion” or from the capital). Lesseps failed to issue a bond loan of a hundred million francs in 1867 as only a third of the sum

15 16

Voisin-Bey, Le canal…, volume 6, p. 161. E. Dentu, La vérité sur le canal de Suez, Paris, 1865.

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had been underwritten. He had to get a bill passed which would allow him to issue a more tempting “lottery loan” and raise the required hundred million. In June-July of 1870, Lesseps tried to convince the British government to underwrite a loan issued in the United Kingdom, but the Franco-German war intervened. The attempt failed to make any headway when it was tried again in April 1871. In France, a bond issue of FRF 20 million fetched no more than five million in July 1871. Meanwhile, due to the war and shipowners’ hesitations, income from the canal had narrowed down to a trickle – as has been already studied. With an income of only FRF 23 million in 1870-1871, the Company suffered an operating deficit of FRF 12 million. It managed to break-even only in 1872; but much work remained to be done on the canal, debts had to be paid back, dividends and interests honored. By 1872, the Company’s coffers were empty. No dividend had been declared since the inauguration and even the minimal 5 per cent interest (which was no longer assured for the shares issued in 1870-1873) had not been paid. Lesseps failed to meet three bond maturity dates while having to raise transit fees in 1872. There was talk of a repurchase by the United Kingdom; the Parisian press and the khedive were for it and in 1871, a group of English entrepreneurs had the gall of proposing it to Lesseps himself. Luckily, the British government remained cold towards the idea of a British or international repurchase. Meanwhile, the shareholders were in revolt and some of them came together to bring out a rival journal to the Company’s official publication: from 1872 to 1875, the Canal des deux mers thus stridently denounced Lesseps and his management. In the shareholders’ general assembly of March 1872, two rival candidates won the majority of the votes. All through the beginning of the 1870s, the idea of liquidating the Company was mooted repeatedly. Would it really come to pass? Would the “Suez Scandal” breach its embankments and wash away all the French money pumped in? B. The Company saved by financial agreements (1871-1874) The Company’s earnings tripled from 1870 to 1874 (9 to 27 million francs) and doubled from 1870-1880 to 1881-1890 (FRF 293 to 645 million per decade). Lesseps at last managed to get some money, Lebaudy, a sugar baron and a major shareholder in the Company advanced seven million francs in 1871. In 1873 and 1874, two interests instalments were finally paid. Somewhat reassured, the creditors accepted a compromise. Shareholders went for bonds which “consolidated” their interest arrears, and the 34 million-franc debt was transformed into debentures in 1874 which they either reimbursed from 1882 to 1921, or disposed off on the stock market. Lesseps thus managed

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to avoid having to use up all the income in paying off this debt. Finally in 1874, the general assemblies began to feel a little relieved and things settled down. Still, the Company’s profitability was in no way assured. The initial success of the project was due to the ripeness of the money market and the optimism pervading the economy, not to speak of the vital role played by Egypt by bringing in fully half of the required capital. The problems were evident from day one: the canal cost more than doubled what had been estimated, the income was barely a trickle and shareholders were getting impatient. For more than fifteen years (1858 to 1874) the Company seemed a lost cause and the canal a drain for bad investments. The FRF 433 million spent in 1858-1869 did not bring any profit. Shareholders received 5 per cent as interest, but talk of liquidation even put the capital in jeopardy. Did Lesseps misjudge the financial aspect? The Company had no financial structure to speak of as it depended solely on the direct issue of shares and bonds, without the support of banks. But the project did not fail the way Panama did because Lesseps’ technological gambles were spot on: the canal was dug with care, and steamers were beginning to supplant sailboats. Income soared as trade took off on the back of the economic boom of the 1870s. Investors too did not abandon the Company as the financial market was on its final high before the crashes of 1882 and 1889. Was then the Company’s ultimate success a fluke, or does luck really favor the brave and was it Lesseps’ audacity which really carried the day ? CONCLUSION SUEZ BETWEEN DREAM, ENTREPRENEURSHIP, AND FINANCIAL RISKS At first glance, the Suez undertakings did not meet expectations: commercial and financial returns were disappointing. But we must remind that the Suez waterway had been dreamed of for almost half a century – since the first schemes of the Napoleonic expeditions, the engineers recruited by emerging Egypt, and Saint-Simonian utopians – and that the building itself demanded a decade of efforts from workforce and machines. The first decade of history of the canal could not escape to the fate of every big building project, as it has been confirmed throughout economic and business history. Despite the promises of the engineers, always following their trends of rationalising reality and putting facts within well-managed facts, and despite entreaties from investors so much easily carried adrift by engineers’ brilliant timetables, every big project (a large processing plant, service facilities, tunnel, bridge or else) had and will have to be behind schedule, either for its

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completion itself – because of technical obstacles, here at Suez because of rocks emerging from the sand south of Port-Saïd, or of human issues, here because the replacement of the forced labour by waged workforce –, or for the take off of returns – here the lagging growth of transit and fares. André Citroën was used to declare that men had only three ways to be ruined: gambling, womanizing, and engineers… Without following such touting phrase, a business historian has anyway to take into account joined by the Suez Company: its entrepreneurs broke with the path of dependancy which impeded Europe to join Asia through the Suez isthmus by sailing, but they had to submit to the commonplace path joined by every big project, depending on day to day unexpected obstacles. The chance of the Company was that trust still predominated in its favour on the Paris market place: Lesseps had not yet been deprived of his entrepreneurial legitimacy by the Panama demise. And the economic climate was predominantly good (despite a European slump in 1873-1874 and some political and financial uncertainties in France itself) till the crash of 1882, which allowed the individual and institutional investors to keep faith into the future of the Company – all the more because the British Crown joined the circle of stakeholders in 1875.

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A FINANCIAL HISTORY OF THE SUEZ COMPANY FROM THE 1880s TO THE 1930s While the Company managed to avoid liquidation during the first half of the 1870s before reaching a first dividend for the year 1875, it took fully twenty years for it to arrive at some sort of financial security. Though share and bond holders were now relieved that their money was safe, did they finally make a profit? And how profits were distributed between stakeholders?

1. UNDERSTANDING THE ACCOUNTS Evaluating the Company’s accounts is a delicate affaire. The annual reports are often vague in their study of the balance sheet. Fiscal and accounting legalities replace any attempt at taking stock of the cost of investments, their yield or profits1; and the categories fixed in the official reports do not necessarily correspond to the reality of a profit & loss table because the amounts paid to creditors and shareholders are spread over expenses (the service of the debt, but also the fixed regular interest paid to shareholders as yearly instalments – about 10,8 million francs in the 1880s-1910s) and dispatching of net profits, whilst the amounts of the amortization of the value of the canal, the value of the canal itself, and the deposits on the reserves account belonged more or less to arbitrary figures by the Company. A historian’s perspectives on the accounts of such a firm are necessarily approximates, dealing more 1

“Estimating profit and its reconstitution […] is always a difficult, arbitrary and unsatisfying endeavor. But does that mean we must give up the quest? That would not be acceptable”, Jean Bouvier, in: Jean Bouvier (et alii), Le mouvement du profit en France au e XIX siècle, La Haye, 1965, p. 14. Jean Bouvier, « Les profits des grande banques françaises des années 1850 jusqu’à la Première Guerre mondiale », in Jean Bouvier, Histoire économique et sociale, Geneva, 1968. J. Denuc, « Dividendes, valeurs boursières et taux de capitalisation des valeurs mobilières de 1857 à 1932 », Bulletin de la Statistique générale de France, July-September 1934.

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with orders of magnitude and tendencies rather than any strict “audit” of the books. Still, that should not take anything away from the veracity of the conclusions. The first difficulty arises with the relative worth of the diverse currencies in question. The Company was paid in various currencies, which meant that right from the 19th century, it had to deal in foreign exchange transactions which further complicated its accounts. During the interwar years, favorable exchange rates turned in large profits which distorted the Company’s actual profitability. Transit receipts amounted to some 186 million francs in 1924 which, though up by 10 per cent, were nothing compared to the benefits of the exchange rate, which came to 315 million. The appreciation of the British sterling pound in 1926 again meant a windfall as they made up 20 per cent of total receipts ! In 1928 the Company recognized that “henceforth the face value of our profits will reflect the correct situation of your enterprise, without being distorted by the fluctuating value of the franc”2. On the other hand, the Company’s net worth went down by 6 per cent with the devaluation of the pound in 1931. As isolating each and every one of these factors is beyond the scope of this study, we shall content ourselves to a general evaluation of the firm’s finances. It is difficult to get a precise idea of the true value of the franc in terms of real purchasing power (for the investors, for buying material, etc.) because inflation, the depreciation of the franc in 1914-1926 and four devaluations between 1928 and 1940 ate away at the French currency. In 1924, the Company declared: “For the first time since 1914, the gross income (of the dividend), if converted into gold francs, is equivalent to what it was in 1914.”3 Francs of different valuations were lumped together in the Company’s accounts till 1928, at which point they were all converted into the devalued franc Poincaré. Some FRF 101 million were then added by the operation re-evaluation which accompanied the move, and placed in reserve. Because of such uncertainty about the future of European currencies and the franc, the firm, which had given an assurance that it would honor all its debts in current francs, was submitted in 1925 to a decision by an Egyptian court which directed it to do so in gold francs (of 1914-value, therefore) and in 1931 to another one which demanded it to do the same when paying the 5 per cent interest on shares. Up till 1927, the transit receipts were entered in the gold value of the franc while almost all other items appeared in current francs. One has to therefore study the overall receipts which also mention the profits from the exchange rates in order to know the actual

2 3

The Company’s Annual Report, 4 June 1928. Annual Report, 8 June 1925.

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value in current francs which then we would have to convert into constant 1913-francs to be able to follow the true economic picture over the interwar period. Though some precision is lost at every step, it would still give us a truer picture of the Company’s finances. The fluctuating sums which appear under the item labeled “reserves” also render any evaluation of the Company’s liquid assets a very approximate affaire. Even the structure of the accounts changed sometimes. In 1900, some material was shifted from the “original installation” account head to “movable and immovable property”, while “depreciations” added yet another complication. We have no intention here to go into the details of the Company’s accounting practices, limiting our study to the essentials: how much did the Company spend? How much did it earn? 2. TOTAL EXPENSES FOR THE CANAL EXCAVATIONS AND MAINTAINANCE The Company had to finance its work programs. But these programs themselves were not clear cut: some were left incomplete (like the program of 1884), others exceeded their time limits and overlapped into those coming after – it is practically impossible to estimate the precise cost of each and every work program. The Company estimated the total cost of the canal at 692 million francs in 1913, and in 1934, the year when further investments were stopped, at 951 million in gold francs. Over the 433 million paid for the construction, some 518 million more were spent on upgrading. This “capital” was spread over “movable and immovable property”: material, buildings, workshops. In 1939, “material and tools” amounted to 128 million gold francs and “buildings” 80 million. This total of 210 million gold francs in investments and operating property should be added to the costs of construction and upgrading works, giving a grand total of around 1 161 million gold francs in “capital” expenses. Another method of estimating the expenses would be to add the 433 million of construction to the 242 million spent in works between 1870 and 1914 and the 124 million (in 1913-francs) spent from 1914 to 1939 to arrive at a grand total of 799 million (1,009 million if we include the operating property).

3. THE INCOME FROM THE CANAL TRANSIT AND FINANCIAL RESERVES The development of the transit through the isthmus supplied a larger and larger flow of fares and cash : the issue was to find out a

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relevant strategy of dispatching the availabilities among the short term needs (to meet shareholders and bondholders’ expectations), middle term requisites (for the maintenance of the canal to guarantee a continuous process of transit growth), and long term demands (facing new programs of modernisation of the waterway, preparing the end of the concession by repaying part of the equity, and even piling up financial reserves for a still unprecised future). The business historian is not sure at all that “strategy” was at stake, that the managers and the Board did argue about strategic purposes ; they reacted empirically to suggestions from engineers and technicians, to pressures from shipping, to habits among the Paris market place about the relationship with shareholders, etc. A. The revenues from the canal transit The Company’s income came from the transit charges paid by customers and investment earnings stemming from its liquid assets. In fact, the Company had a hefty financial “cushion” in the form of a petty cash fund, bank deposits and short or long term fixed deposits, kept for paying for the works, declaring dividends or placed permanently in safety stocks. This neat little “kitty” amounted to 11 per cent of the Company’s assets (canal plus the various other assets) in 1913, 28 per cent in 1930 and a massive 42 per cent in 1925. In 1939, this hoard amounted to 335 million gold francs – fully a third of the canal’s value. The Company was already in part at least a financing firm…. But it is practically impossible to study in any great detail the Company’s management of its liquid assets and its effects on the overall finances. Its investments were simple enough: government bonds, stocks and shares in railroad, oil and banking companies. Finally, some money also came in from sundry services rendered and the “common estates” (lands and activities exploited in partnership with the Egyptian government) such as sale of water, land rental, works, etc. B. The completion and repayment of the loans After having received 100 million francs in 1868 to complete the canal, the Company raised another 46 million in 1871-1874 via bonds in order to consolidate its debts vis-à-vis its share and bond holders. It used “sliding” loans for its upgrading works by getting the required authorization from its stockholders to issue a limited number of shares per year in order to raise the required amount as and when it was needed – a neat ploy to reduce interest charges. Three loans were thus realized between 1879 and 1882 (27 million), between 1887 and 1902 (100 million) and between 1909 and 1914 (30.5 million francs). Further 199.5 million francs were raised in 1915-1918. The Company funded its activities by taking

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recourse to the financial market which coughed up 44.5 per cent of the canal’s cost, amounting to 36 per cent of the total capital expenditure. C. The question of self-financing The Company had always maintained some reserves to cover its current expenses. Gradually, it increased these reserves in order to be less dependent on the financial market. After 1866, it had no longer any need to approach its shareholders and by 1918, loans were a thing of the past. New investments (purchasing material, constructing workshops or accommodations, maintenance of the canal) could now be easily incorporated into the operating costs of the canal. The self-financing of upgrading works was also progressing apace, with the Company mixing loans and drawing upon the “available resources” from its treasury4 which was brimming over, thanks to the good times it had seen at the turn of the century. Though WWI cut into this buffer stock, the resurgence of the economy in the 1920s allowed the Company to self-finance the “program of 1921” and put an end to loans. It could now lead a more comfortable life as all its investment costs could be met by its operating profits5. Self-financing increased to the tune of 214 million francs6. If we accept the Company’s own estimate of 951 million francs, we can deduce that the canal’s finances revolved around four major items: the initial capital (21 per cent), the loans (44.5 per cent), self-financing (22.5 per cent) and the income from the resale of a portion of the lands to the Egyptian government (12 per cent). If we add the investments into “operating property” (material, buildings), then self-financing would increase to 424 million, the same percentage as loans (36.5 per cent of the grand total of 1,161 million) and much bigger than the Egyptian payments (10 per cent) and the capital (17 per cent). Whatever the reality, one fact stands out: the Company must have made a lot of money to be able to finance itself and pay off the debts.

4. THE PROFITABLITY OF THE COMPANY The Company’s main source of income was the transit fees paid by its users: “The Suez Canal Company had this great advantage in that its 4 5 6

Annual Report, 17 June 1906. See the Annual Reports of 3 June 1925 and 3 June 1929. And not 328 million francs as claimed by C. Funck-Brentano (La Compagnie universelle du canal de Suez, Paris, 1947) who has forgotten to include the Egyptian government’s compensation of 1864 and 1869 (114 million).

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traffic could increase without incurring any corresponding increase in operational costs. Such was not the case with the railways for example, whose expenses increased in parallel with the traffic and who were obliged to use a significant portion of this greater income to cover the added expenses. For several years now, despite a considerable growth in traffic, the Company’s expenses have remain more or less stationary.”7 Although the upgrading costs were double those of the original construction, they were spread over a six-time longer time-span and used dredges which could now circulate freely in a pre-dug canal…. A. Growing profits between 1858 and 1914 Our first aim is to see whether the canal proved itself to be a sound financial investment regarding the capital expenditure. Our conclusions have the benefit of simplicity while coupled inevitably with the disadvantage of being approximations. Our estimate of the total amount spent on the canal between 1858 and 1914 is 675 million gold francs (433 million for the construction and 242 for the upgrading)8. On the other hand, the average annual receipts tripled between 1870-1880 (27 million) and 1881-1890 (65 million), and then doubled again from 1881-1890 to 1901-1910, when they touched 115 million. The canal made the same amount in the first fourteen years of the new century (1901-1914) that it had made in the last thirty years of the previous one (1870-1900). The cost of the canal amounted to a fifth of the total income (3,454 million) and a paltry 29 per cent of the distributed profits (2,346 million francs). Calculated in current francs, the assessment of the profitability of the Company by Professor Samir Saul confirms that satisfying profits were reached in the 1880s-1890s, but that the bonanza appeared in the first decade of the 20th century, when commercial growth developed the transit through the Suez isthmus: it was a first Belle Époque for for the Suez Company. The average annual profits distributed quadrupled between 18751880 (12 million) and 1891-1900 (45 million), and again doubled between 1891-1900 and 1911-1914 (81 million). Though the first dividend took a long time to come, shareholders were amply rewarded for their patience, pocketing 68 per cent of current receipts. We could conclude that the canal brought in about three and a half times the 675 million spent on it, generating a total of 2,347 million francs over 57 years9. 7

8 9

Jules Charles-Roux, L’Isthme…, op. cit., volume 2. See also the Annual Report of 6 June 1899. Addition of the sums given in the Company’s Annual Reports. A gain of 348, that is, + 248 per cent in 56 years.

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Table 20. The evolution of ratios of profitability of the Suez Company in the 1880s-1910s

1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914

Net profit against equity capital (equity and reserves)

Gross profit against permanent funds (equity, reserves, loans – amounts still pending)

15.54 17.45 17.14 16.64 13.78 14.57 17.64 18.07 18.53 24.42 20.25 20.04 19.88 20.43 20.76 19.01 22.45 23.51 22.33 26.23 26.49 26.32 29.68 28.12 25.52 27.21 23.87 28.04 30.19 30.21 29.27 27.51 26.75

16.67 17.80 17.07 16.71 14.52 14.18 15.37 15.18 15.34 18.18 16.24 16.18 16.19 16.70 16.95 15.77 18.52 19.50 19.07 21.07 21.52 21.32 23.59 22.97 21.69 22.94 21.03 23.53 25.16 25.51 25.64 23.51 22.30

Table drawn from: Samir Saul, La France et l’Égypte de 1882 à 1914. Intérêts économiques et implications politiques, Paris, Publications du Comité pour l’histoire économique et financière de la France, 1997, p. 294.

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Table 21. The evolution of the main accounts of the Suez Company in the 1880s-1910s (in millions current francs)

1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914

Total amount of receipts (transit, water supplying, financial revenues, etc.)

Gross profits (after expenses)

Net profits: gross profits less yearly expenses, the service to bondholders, and the payment of fixed statutory interests proportional to capital, paid to shareholders (about 11,800 to 11,900 million each year)*

63,410 68,523 65,408 65,050 59,023 60,510 67,705 69,765 70,461 86,867 77,810 73,844 73,951 80,703 82,223 75,607 87,906 94,318 93,451 103,122 109,850 106,876 119,176 117,308 111,989 120,119 111,491 123,478 133,704 128,038 139,923 129,926 125,121

57,054 61,658 59,169 58,299 52,396 54,018 60,751 61,685 62,557 78,573 69,654 65,724 69,139 71,464 72,706 67,385 79653 85,680 84,422 93,765 97,156 96,761 109,314 107,741 101,021 108,129 98,881 111,473 121,144 124,195 125,411 114,384 111,333

31,674 35,864 35,072 34,029 28,358 29,988 36,271 37,213 38,133 50,592 41,729 40,616 40,367 41,969 43,174 39,316 47,326 52,529 50,927 60,989 62,730 63,612 75,794 74,034 67,618 74,182 64,581 77,705 87,242 90,197 89,431 83,863 92,300

* Almost all this amount was distributed to shareholders and members of the Board.

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B. The profitability of the canal from 1915 to 1939 The figures in the interwar period suffer from the effects of inflation, depreciation and the devaluations of the franc. We have tried to establish some sort of continuity by “deflating” the post-war data by the price index10. The resulting numbers are expressed in “constant 1913 francs”, which differ only slightly in value from gold francs. Our conversion was done on the figures arrived at by the Company after its own conversions of its foreign currency receipts into francs. The results may seem somewhat artificial, but the important thing is to recognize the need for such an arrangement, and that it in no way affects the veracity of our conclusions. In these 25 interwar years, the canal brought in about 3,696 million 1913-francs, a little more than what had been collected in the entire previous half century. In fact, the Company made more money during the years of the economic downturn (2,196 million 1913-francs in 19301939) than in the “good” times (1,500 million 1913-francs in 1915-1929) preceding it. It would seem that the Company was hardly affected by the economic environment, especially when we consider that its average annual income doubled in the midst of the depression (100 to 220 million 1913-francs). Still, the Company did not show itself any too generous vis-à-vis its shareholders. During the years 1915-1929, the proportion of the income distributed remained the same 68 per cent as in the pre-war period. Subsequently, it fell to 63 per cent per cent during 1930-1939, giving an average of 65 per cent for the period 1915 to 1939 – practically no difference. The sum distributed touched 2,407 million 1913-francs and, like for the income, these 25 years saw it rise by as much as it had in the previous fifty years. The amount during the depression (1,376 million 1913-francs) was a quarter more than during the times of economic growth (1,032 million 1913-francs). C. A promising venture? The basic figures vary so much that it is difficult to estimate, with any precision, the overall profitability of the canal. The official figure given by the Company as the cost of the canal plus the works is 951 million francs. We could add to it the cost of material and buildings to arrive at a grand total of 1,161 million.

10

Values for the interwar period were calculated by averaging the most current gross and retail prices prevailing in France in relation to the index of 100 in 1913. This would give us the values in constant 1913-francs, close to the gold-francs of 1913, but not quite identical.

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From even before 1914, the profits distributed (2,347 million) swamped these diverse expenses. In fact, by 1890, investors had already recovered the base cost of the canal (FRF 675 million, with 433 million for the main channel and 242 million more for the upgrading)11. Professor Samir Saul12 reached slighty different figures, as he told of 1885 as the date of repayment of expenses; but his conclusions converged with ours: if are added the payment to shareholders as dividends, the repayment and service of bonds, and constant interests paid to shareholders, the Company distributed between 1882 and 1914 almost five fold what it had received beforehand from bondholders and shareholders, that is FRF 2,650 millions (among which 1,937 million to French stakeholders) versus 557 millions (among which 461 millions paid by French staheholders). From a point of view, it would thus seem that the entire operational income during the years 1890 to 1914 could be considered as a net, distributable profit. But shareholders had to wait thirty years before they could really enjoy the windfall of the next quarter century. Actually, the global cost of the canal in terms of capital plus operational expenses (FRF 1,161 or 1,009 million) was recovered only in 1900, and it was only then that all the expenses incurred over the period 1858 to 1939 were fully amortized. Thus, from a different perspective, it was only with the dawn of the new century (1900 to 1939) that every single franc could be considered as a net distributable profit. The gross and net profits were thoroughly confused for four decades, with profits making up more than two-thirds of the gross income. Admittedly this analysis has it faults and neglects to consider the annual or decade-wise chronology of the flow of money. Still, it suffices to answer our main question regarding the profitability of the canal: yes, it was a good investment. A full two-thirds of the almost 4 billion francs in income (1,134 million in 1901-1910, 533 million in 1911-1914, 2,347 million in 1915-1939) went into the pockets of investors as net profit. The canal had turned out to be an efficient profit making machine indeed.

5. A SATISFIED SHAREHOLDER? Naturally, shareholders did not get to hog the entire amount. The official allocation gave them 71 per cent of the profits, the Egyptian government received 15 per cent (in theory), the founders 10 per cent, administrators 2 per cent and employees 2 per cent. In fact, except for 11

12

Annual payment (minimal statutory interest, dividends) + interest paid on the 35 million in coupons + the 35 million. Samir Saul, La France et l’Égypte, op. cit., pp. 282-285.

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these last, the international group of investors turned a hefty profit. The directors and founders could also be considered as shareholders, which in many cases, they often were, pocketing their part of the 71 per cent along with their reserved share. As for Egypt’s share of the pie, it quickly disappeared into European hands. The Company pampered its shareholders. With commendable foresight it kept aside a substantial reserve in order to maintain dividend payouts even in the more difficult years, such as during WWI and the first few years of the 1930s. As a result, shareholders’ income hardly fluctuated over this turbulent period. But were the returns substantial? Were shareholders justified in investing in the Suez Canal Company ? Our evaluations are somewhat stretched and artificial as we have taken for granted that shares bought in 1858 were kept in perpetuity, with the inheritors counting their profits over the long term…. Also, the calculations are necessarily skewed by monetary adjustments – the figures from the interwar period had to be reduced to the 1913 values. Moreover, over the years, several shareholders redeemed their shares – the Company returned the money and the shares turned into “actions de jouissance” / shares without voting rights which were not entitled to the minimum interest of 5 per cent, the risk premium, but received their share of the dividend which surpassed this percentage. But, these actions de jouissance [repaid but still owned shares] represented only 23.7 per cent of the total 800,000 shares in 1939. Therefore, while we have no means of determining the percentage of such shares in every year, our conclusions remain valid as the total amount in 1939 (47 million francs) is negligible beside the other amounts. A. The stock price before WWI Shareholders with an eye fixed only on the stock market value of their holdings received a rude shock when the price of a share dropped 41 per cent from 1862 to 1871 (208 francs on the average). But then it rose 103 per cent over the next four years, touching 422 francs in 1874, the last year in which its value remained below par (500 francs). From 1875 onwards (674 francs), shares of the Suez Canal Company never dipped into the red ever again. After stagnating between 674 and 752 during 1875-1879, the value crossed the 1,000-francs threshold in 1880 (1,076 francs per share). In 1882, the shares were worth 2,537 francs, twelve times what was quoted in 1871, and three and a half times their value in 1875. The crash on the Paris market place and the economic slump caused a 22 per cent drop in 1882-1884; and the price stagnated at 2,162 francs between 1883 and 1890. And then a steep climb occurred: the 3,000-francs mark was crossed in 1895, that of 4,000 francs in 1904, and that of 5,000 francs in 1910, before the peak of 6,107 francs was

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attained in 1912. The increase of the transit fuelled large fares while the technical profile of the canal satisfied its users, avoiding thus to bear the weight of costly fresh investments. Table 22. The evolution of value of the share on the Paris Stock Exchange in the 19th century (current francs) 1862 1863 1864 1865 1866 1867 1868 1869 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900

477 501 470 440 371 326 368 475 273 208 355 435 422 674 702 678 752 724 1,076 1,976 2,537 2,372 1,968 2,035 2,094 2,011 2,168 2,296 2,348 2,661 2,713 2,674 2,862 3,249 3,347 3,234 3,583 3,621 3,508

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The start of the 20th century opened doors to a new tide of prosperity and retunrs, because the end of the Great Slump of the 1880s-1890s occurred in the second half of the 1890s and, despite localised recessions, the world economy progressed and drew the growth of transit through the canal in its wake. It was the Belle Époque for shipping and cash flows, which crowned the pathbreaking project of Ferdinand de Lesseps and of is engineers – while the Panama canal took shape on another continent. Table 23. The evolution of value of the share on the Paris Stock Exchange at the Belle Époque (current francs) 1901

3,714

1902

3,924

1903

3,905

1904

4,210

1905

4,461

1906

4,471

1907

4,552

1908

4,446

1909

4,748

1910

5,331

1911

5,546

1912

6,107

1913

5,415

1914

4,867

A 300 per cent rise was achieved in just two decades – a period which saw only a modest increase in the cost of living. No wonder that shares of the Suez Canal Company were the darling of investors, and we can readily sympathize with the hero of the novel, Le noeud de vipères who, at the prospect of a divorce towards the end of the century, blurted out: “And especially… in case of a separation, I would have to return the Suez [shares] which had come as part of your dowry. I have got used to considering them as mine. The idea of having to part with them was horrible.”13 Or, in the words of his daughter: “The Suez [shares] of father Fondaudège… they must have gone up since 1884….” “The Suez? But they have been sold… 13

François Mauriac, Le noeud de vipères, 1933, pocket edition, p. 97. The plot was situated in 1896.

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[…].” “What? Are you mad? The Suez sold? […]. He had him sell his Suez?”14 To sell such shares appeared then as some kind of crime of lese-majesty, as if selling pieces of family jewellery because they were identified to long term investments which every family savior had to preserve for the tranmission of his/her inheritance or for the valuation of his/her assets within a social-liberal economy where the Welfare State did not exist yet to provide protection against the hazards of life. B. The stock price during the interwar period The Great War did not leave the stock market untouched. The recession of 1912-1914 and the raging battles gnawed 25 per cent off the 1912 value. The end of the war saw the shares resume their upward flight, doubling in value between 1918 and 1923. The small stumble in 1924 (- 9 per cent) was easily forgotten in the tripling between 1924 and 1929, and still they went up and up… till the price reached an astronomical 23,605 francs – before a 38 per cent drop in 1930-1931. But, these figures are largely misleading as they are all based on the par value. Expressed in terms of 1913-francs, the value of a Suez share fluctuated between 1,950 and 2,200 1913-francs in 1918-1924, which was about the same as its price in the 1880s: Inflation had eaten away much of the capital gains. How did the shareholder react to being brought down to earth by the frankness of a Company which was well aware of this phenomenon? A possible answer to un-expressed concerns could have been, in 1924, the split of the original 500 francs-shares into two of 250 francs each, in a bid to broaden the shareholder base (which also compels us to double the subsequent market rates in order to estimate the development of an original investment). Was this a sign that the firm feared shareholder dissatisfaction and was attempting to enlarge its base? There is no documentary evidence to support this. The effects of this splitting coincided with an improvement in the financial market caused by an economic surge and the stabilization of the currency. Share prices began to go up in 1924-1926 and regained their 1904-1909 value. At its peak, the record of 1912 (6,107 1913-francs) was crossed several times, with interwar records in 1929 (4,070x2) and still in 1936 (4,390x2). But the value dwindled during the slump of the Stock Exchange and afterwards during the ultimate years of inflation, either because of the depressive mood on the Stock Exchange and among investors, or because of the uncertainties faced by the returns from transit. One estimate reckons that the capitalisation of the Suez Company reached 7 per cent in June 1920 and 27 per cent in 1937 of the whole market value of a sample of 900 firms – the equivalent of the whole 145 colonial firms 14

Ibidem, p. 171.

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Table 24. The evolution of value of the share on the Paris Stock Exchange in the interwar period 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 *

Current francs 4,867 4,179.5 4,338 4,444 4,987 5,779 6,951 5,982 6,395 8,637 7,857

Francs of 1913 4,867 3,483 3,253 2,778 2,415 2,281 1,967 1,951 2,311 2,644 2,105

The face value of the share was reduced from 500 francs to 250 francs since October 1924.

1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944

10,426 14,015 14,250 20,225 23,605 18,264 14,692 14,522 18,475 19,160 18,354 20,485 25,286 22,026 15,406 15,050 18,330 24,517 44,944 61,200

2,607 2,661 2,506 3,699 4,070 3,113 2,504 2,829 3,745 4,048 4,235 4,390 4,310 3,088 2,160 1,792 1,858 2,066 3,050 3,399

quoted in Paris (9 per cent in 1920 and 10 per cent in 1939), as a clue of its pervasive role among investors15.

15

Muriel Konczyk-Petit & Antoine Parent, “Heart of darkness, 1919-1939: Did French colonial investment pay ?”, working paper, 2009.

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Table 25. Dividend paid to each Suez share by the Company to its shareholders (in francs) 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914

30.29 28.90 28.05 44.75 65.77 76.86 83.14 81.95 80.64 70.69 73.44 84.47 85.89 86.75 105.50 82.36 90.37 90.00 92.50 92.50 90.00 92.50 108.00 108.00 125.00 125.00 130.00 141.00 141.00 141.00 141.00 141.00 150.00 158.00 165.00 165.00 165.00 120.00

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C. The income from shares Till 1914, shareholders who were more interested in the income from their shares rather than in capital gains had no cause for complaint. The interests paid and dividends16 declared between 1859 and 1914 added up to 4,600 francs. For an initial investment of 500 francs, the shareholder pocketed 82 francs every year, that is, 16.4 per cent per year for 56 years – not bad at all. But we must also joint the income in relation to the market value of the shares. Though shareholders received nothing in 1871-1873, handsome returns of 4 per cent per cent in 1875-1880 meant that an average of 2.4 per cent in interest was paid out over 1870-1880. From 1881 to 1890 they gained 3.6 per cent, then 3.1 per cent per cent between 1891 and 1900 and 3.2 per cent in 1901-1910, giving an average of 3.1 per cent over 1870 to 1914. These numbers are somewhat misleading as the market value of the Company’s shares shot up at the beginning of the century and squeezed pay-outs. Nevertheless, no other company gave better yields and the Suez Company shares were the most highly prized of all. They not only grew in value, but also ensured a substantial annual income. A holding of just ten shares brought in 820 francs a year, more than the entire annual salary of a qualified worker at the turn of the century. It is no wonder then that the Suez’s shares were so highly rated and jealously guarded: The actual transaction amounts of these shares remained small as the sales fell far short of the constant demand. Shareholders’ income remained practically constant all through the inter-war period, averaging 107 1913-francs per year in 1915-1930 and 167 francs in 1931-1939. Even the Great Depression left it untouched. Over 25 years, this 129-franc annual income on a 500 franc investment represented 25.8 per cent of the capital, while the capital itself grew to form a neat pile of 3,221 francs. The ratio of the income to the market value of the shares17 touched 5 per cent in 1922-1923 and averaged 3.3 per cent between 1918 and 1930. WWI could do nothing to spoil the party for a Company nicknamed “growing income”18. D. Shareholders’ profits on the long term Over 81 years, a share bought at par came to be valued at 7,621 francs. We have not taken into account the shares transferred in the stock market, which would entail redoing the whole analysis and recal16

17

18

This amount is the sum of : Interest of 1858-1870 + dividends of 1875-1914 + consolidated obligations on unpaid interests 1870-1874.100 Transferable shares in France, the stock market deflated by the average gross and retail price indices. É. Micard, Le canal de Suez et le génie français, Paris, 1930, is the only book which talks on the profit aspect, p. 260.

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Table 26. Estimate of the Company’s and its shareholders’ revenues in the interwar period (in constant francs of 1913) Total revenue

Distributed as dividend

1915-1929

1,500

1,032

1930-1939

2,920

1,376

1915-1939

4,420

2,407

culating the profit-loss scenario for every generation. The shareholder who persevered through the initial tribulations was amply rewarded for his patience. “We hope that our shareholders do not forget the incomparable security afforded by this company, a sense of safety which continues to attract even more capital in shares and which all but guarantee handsome returns.”19 For the shareholders too the canal proved to be a resounding success ! 6. WERE THE CUSTOMERS FINANCIALLY SATISFIED? All in all, the main issue for the Lesseps and the Saint-Simonian entrepreneurial spirit which led the pioneers of the 1850s-1870s was to provide the economic world with a decisive tool to “progress” through a waterway able to shorten the shipping lines and accelerate finally the rhythm of growth thanks to a significant reduction of the costs of transport: shipping custumers were to become the main beneficiaries of the Suez canal. Such an issue leads to some argument about the balance reached between the allocation of the returns of the canal between self-financing for maintainance and investments, interests and dividends paid to financial stakeholders, and the cut on tarriffs which could profit to shipping. A. The pressure exerted by English ship-owners In order to surmount both the diplomatic and financial obstacles to his project, Lesseps had sought and obtained the support of European traders and ship-owners. A commission made up of representatives from several Chambers of Commerce had paid a visit to the canal in 1865. The canal’s success was based largely on the understanding arrived at with ship-owners, which was thought of as a partnership between the entrepreneur-owners of the canal and its customers. The income of the firm depended on an actual, physical contact with ships which had to be measured at the point of entry in order to determine the tariff, which 19

Annual Report, 4 June 1890.

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was based on the volume of the ship. On their part, ship-owners too stood to gain by the canal and contributed to the survival of the Company when it was floundering in deficits. In 1872, the Company raised the tariff, which was henceforth to be calculated from the gross tonnage instead of the net tonnage. But shippers rose in revolt and in 1873, the Ottoman empire set up an international commission of tonnage. The Commission rejected the Company’s proposal and sent troops and a battle fleet in 1874 to underline its stand. Even Lesseps had to bow before the might of these ship-owners who were so adept at stoking Turkish ambitions over Egypt and the Company. Nevertheless, the Company’s financial situation compelled shipowners to accept a “surcharge” which was gradually reduced over ten years, as and when the growing traffic allowed its reduction and final abolition20. Meanwhile, they were not at all happy that the extra income from this surcharge and growing traffic was not used to improve the canal’s navigability which they found to be dangerous and unsuitable for the increasing number and size of their ships. Finally, they found a patron in the British government, and the Company had to accept the demands of the “Association of steamship owners engaged in trade with the Orient”, the various Chambers of commerce and the union of ship-owners. Though British authorities refused to intervene directly, a first, provisional accord was signed in 1876 under British supervision. It was soon followed by a formal agreement in 1883. Though the British were not directly involved, they urged the Company to come to some sort of agreement with its customers. Charles de Lesseps said later that the English themselves had thought of launching a project21 to dig a rival canal in 1883. As already told in Chapter 5 about the modernisation of the canal, after extensive negotiations with ship-owners, the Company had signed the “program of London” in November 1883, and seven ship-owners and traders, including the owners of the Peninsular & Oriental and the British India, were to sit on the Board to defend the merchant community’s interests. The Company abolished the surcharge, piloting fees and charges for rescuing ships which had run aground. It set up an automatic link between a rise in the dividend and a reduction in transit fees and embarked upon the program of 1884 which aimed at reducing transit times. Between 1884-1885 and 1913-1916, the Company reduced its fees by 38.5 per cent over eight stages (by 52 per cent if we compare the rates in 1874-1877 to those of 1913-1916). Pleased and encouraged by this massive reduction in their transit costs, ship-owners pushed 20

21

Regarding these “tonnage wars”, see: Jules Charles-Roux, L’Isthme, op. cit., volume 2, pp. 6 to 28. See the Annual Report of 5 June 1899.

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Table 27. Fares on the transit through the Suez canal (in francs) 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1916 1917 1920 1921 1923 1924 1925 1928 1929 1930 1931 1934

12,50 12,50 12,50 12,50 11,50 11,50 10,50 10,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 9,50 8,50 8,50 8,50 7,75 7,75 7,75 7,75 7,75 7,25 6,75 6,25 6,25 6,75 7,25 7,75 8,50 8,25 8,50 7,75 7,50 7,25 7,50 6,90 6,65 6,50 5,75

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forward the modernization of their fleets. This, and the resulting growth in traffic, made up for the reduced margins. Sure, shipowners constantly checked the evolution of their fares and that of dividends to shareholders, and they even protested in 1902-1905 against the delay in cutting into tariff fees22, which had been stabilised in 1893-1902 and had been reduced from a meager 5.6 per cent from 9 francs to 8.50 francs in 1903, and these protests led to a further 8.2 per cent cut in 1906 to 7.75 francs. In the interwar period, the decrease or the stabilisation of the transit fees is obvious, all the more if we take into account inflation (for the 1920s): the actual value of the fares declined in favour of shipping, but the Company bet on the growth of traffic to balance such a cut into its returns. But, on the long term, the target of shipping had been somewhat reached: the transit fares declined steadily, which reflected the completion of investments of maintenance and modernisation on one hand, and the growth of the traffic on the other hand, this latter being more decisive because it opened doors to increasing returns and cash to be devoted to reserves, to the repayment of the bond debt and to the payment of larger dividends. B. Shareholders versus ship-owners The project of the Company’s repartitioning of its profits in favour of ship-owners, following the London program of November 1883, had shareholders up in arms: the opposition swept 47 per cent of the votes in the general assembly of March 1884. A “Defense Committee” was established which published damning brochures and made life difficult for the Board during the tumultuous assemblies of 1888 and 1890: “There was a single prevailing sentiment: that the Board was mocking shareholders’ rights’ [...]. The directors are duty-bound to extract from the company all that it can, and legitimately should, produce.” Shareholders denounced “these reductions [of tariffs] which denied [them] a significant part of what rightfully belonged to them” and what they called “a body blow to the principle of property rights”23. “Is it fair that shareholders should be deprived while shipowners made merry? Does it make sense to retain on our Board ship-owners whose interests are diametrically opposed to our own?”24 The opposing party had even the good sense to choose as its mouth-piece Charles de Lesseps, a former deputy and a government advisor, but in no way related to Ferdinand de Lesseps. The general assemblies of 1892 and 1893

22

23 24

See Samir Saul, La France et l’Égypte de 1882 à 1914. Intérêts économiques et implications politiques, Paris, Publications du Comité pour l’histoire économique et financière de la France, 1997, pp. 258-261. Ibidem, 25 May 1888. Ibidem, 5 June 1899.

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were also agitated, especially against the entry to the Board of the former ambassador of France to London, William Waddington, because he was thought to have played a part in making the Company succumb to British pressure in 1883: “He represents the policy of self-deletion.”25 But the opposition got only 18 per cent of the votes. The “magnificent income”26 calmed shareholders’ ire. By the beginning of the 1890s, the Company had done well enough to pay back the entire cost of the canal. It had entered its golden era of large profits and fat dividends. Actually, shareholders were mistaken in their protests. If we calculate the profits lost due solely to the reduction in tariffs from their original levels of 1870-1874, we arrive at some 392 million francs from 1870 to 1914. That represents only 11.4 per cent of the total income and resulted in only a 16.7 per cent reduction in distributed profits. This “misappropriation” had not been the outright “robbery” it was made out to be, as vehement shareholders pretended. C. A victory for shareholders? The Great War necessitated a succession of tariff hikes totaling + 36 per cent between 1913-1916 and 1918-1920. The Company retained these high rates well into the 1920s to help finance the upgrading program of 1921 and as a buffer against currency fluctuations. It was only in 1931 that prices were reduced to their pre-war levels. After all is said, did shareholders get a bigger slice of the profit pie? If we take into account the transit fees levied in 1914, the answer is yes. On the other hand, the Company did not raise its fees to their 19th century levels and nor did it levy a surcharge as it had in 1874. Compared to the figures of 1870, shippers benefited from an overall reduction of 427 million gold-francs between 1915 and 1927 and another 446.5 million 1913-francs27 between 1928 and 1934. If we care to add these non-identical though approximately equivalent currencies, the total comes to 873.5 million. Shareholders gave up 36 per cent in shared profits and the equivalent of 24 per cent in total income to the Company’s customers. Behind the appearances – the grudgingly slow 25 26 27

Annual Report, 6 June 1893. Ibidem, 31 May, 1892. We have added to each year’s receipt the percentage of the reduction of the transit tariff in relation to the price of 1869-1870, which comes to ten francs. This gives a figure of 456 million francs from which we should deduct the amount of the surcharge drawn between 1874 and 1883 (FRF 64.2 million) to arrive at FRF 392 million. It was impossible for us to calculate similarly for the years 1934 to 1940 as the frequent currency fluctuations (between Egypt and Great Britain and between Egypt and France) would turn them meaningless. But that should not take anything away from what the numbers reveal about the preceding decades.

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reduction of tariffs after WWI – was the users’ maintenance of the solid financial gains made in the 19th century. In the long term, it was the customers who emerged victorious – a fact which must have dissuaded them from making any large demands in the 1920s. They protested only when the Great Depression stifled trade, and the devaluation of the sterling pound in 1931 meant that tariffs which were paid in gold-franc equivalents were now that much dearer. Their recriminations (especially by the Liverpool shippers in 1931), and a hard campaign by the British press28 in 1933 forced the Company to re-evaluate its tariff structure in order to keep its clientele. Three successive reductions were made in 1930, 1931 and 1934. A diminution by 17 per cent between 1929-1930 and 1934-1935 resulted in only an 8 per cent decrease from the rates fixed in 1913-1916. During the interwar years, shareholders had quietly pocketed a large part of the canal’s profits while ship-owners were too busy counting their new-found wealth.

7. PAMPERED EMPLOYEES Shareholders were not the only beneficiaries of the Company’s financial success. While it escaped paying taxes to either France (it being Egyptian) or Egypt (it being a foreign company), the French government did manage to get its hands on a part of the loot by imposing taxes on shareholders’ income. But there is no way we can even begin to estimate the amounts involved. Should we then conclude that the Company only served to fill the pockets of its capitalist shareholders? And if so, should that not induce a sense of shock at such a scandalous profitability ? The firm itself never hid its profits. In contrast to the normal practice followed by French businessmen before 1945, the Suez Canal Company openly declared its successes and legitimized its profits. They were the deserved reward for the initial risks run by its founders and shareholders and the repeated investments made for the maintenance, equipment and modernization of the canal. In the final analysis, the Company’s bounty was also shared with three other entities: its customers, Egypt – and we shall tackle this issue in the last chapter of this part, chapter 11 –, and the employees of the Company. Right from the beginning, this latter formed part of that advanced fringe of a growing capitalism which advocated “philanthropy”, not only by creating profitable enterprises, but also by encouraging employees to invest and take part in the company and its prosperity. 28

See the Annual Report of 1st June 1931, and: Jacques Georges-Picot, “Le marquis de Vogüé, Président de la Compagnie de Suez de 1927 à 1948”, Bulletin de l’Association du Souvenir de Ferdinand de Lesseps, n°5, April 1984.

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Lesseps helped build enduring social institutions and developed what may be called the Suez philosophy; in the words of the vice-president: “I know that the principles we follow are quite opposed to those of the new socialist school which would like to give to the employee certain indefeasible rights and to free him completely and for ever from the clutches and supervision of the employer. I know that the attempt towards establishing cordial relations and mutual trust between the employees and the employer has become ‘old hat’ […]. The followers of that school must admit that we have created a series of charitable organizations, more or less intelligent and meritorious, but they still flatly refuse to acknowledge that we have established a social institution. This is not the place to squabble over these questions and to ask whether the inevitable hostility and distrust which accompany capital and work would be more harmful to the employee than to the employer. But I think that the Suez Canal Company’s social and humanitarian program has been sufficiently well conceived and executed for it to be exposed in its entirety. The results are there for all to see.”29 The hospital and ambulances kept at the worksites for the benefit of the labourers played their part in the eventual success of the entire project: the Company set up a hospital in 1887 which boasted two doctors and five nurses at the turn of the century and a sanatorium at Ismaïlia. Right from the beginning, accommodations were built for the employees. Due to a massive building drive in the 1920s, 1,115 houses were ready by 1931. The Company subsidized schools, sports associations, discount stores and clubs. Like the “paternalistic” employers of Alsace, Le Creusot and from the North (of France), who took pains to improve their employees’ overall quality of life (which the government had not yet begun to do), the Company too took care of its personnel both at work and at leisure. In addition to the collective infrastructure built for its employees, the Company also took upon itself the task of improving and preserving their income. In a rare example of sharing the capital and work, employees received 2 per cent of the net profit. This amount, paid for their retirement and later, fed a “reserve fund”. The balance was distributed among the employees in proportion to salary and seniority. Retirement plans were generous: employees could quit after thirty years of work with 60 per cent of their salary. Those who had worked for twenty years in Egypt could retire at 60 with a “golden handshake” in proportion to the number of years in service (2 per cent of the salary for every year). The Company also financed the retirement plans of the labourers and pilots (between a third and a half of the last salary drawn, after 25 years of service or after the age of 55). “Family counselors” helped families cope with illness or inability to work by the means of financial aid packets drawn from “operational 29

Jules Charles-Roux, L’Isthme, op. cit., volume 2, p. 256.

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expenses”. A loan bank was established in 1920, at first for short term loans, and from 1923 onwards, for mortgage loans. The firm provided free medical care and granted paid sick leaves. For the Company’s “agents”, provisions were also made for paid holidays, free transport, housing allowance, family obligations, marriage and for jump starting budding careers. At the same time, the labourers themselves had come together to form some sort of mutual insurance which would help finance their holidays.

CONCLUSION SUBTLE BALANCES BETWEEN STAKEHOLDERS Debates will never cease about the financial evolution of the firm managing the concession of the Suez canal. The shipping community ever expected lower fares, and the link established by the agreement of London in 1883 between the the growth of dividends and the decrease of transit fees might seem retrospectively disappointing, because the huge amount of cash transferred to shareholders (even those who had already got the repayment of the capital) was considerably far larger than the total amount of rebates gained by shipowners on the long term. The clinching argument of the Company was the necessity to put aside reserves to reimburse the equity capital and the bonds when the concession would reach its term, and, on the other side, to dedicate money to investments to the maintenance and more and more to the modernisation of the waterway. But we have seen that both accounts did not consume in fact the high returns from transit, which fuelled thick net-net profits – that is after having dispatched parts of the genuine net profits to reserves and to the payment of bonds service – almost wholefully distributed to shareholders. The British Crown was split among its dual positions: it was a shareholder (44 per cent) and thus was quite satisfied of the income fostered by the canal, which could finance some part of its (military) expenses in Egypt, for example – and such a contribution ought to be estimated. But is ought to have more asserted its function of representant of British economy and shipping, which it effectively did only in the mid-1880s, without exerting pressure on the Board and the firm to go further in the reduction of transit fares. A key issue in business history is the “price of risk”, that is what is the acceptable or relevant reward brought to pathbreaking entrepreneurs. Sure, the high level of risk undertaken by investors from the 1850s1880s ought to be rewarded, first to overcome the uncertainties, frustrations and disappointment of the 1870s-1880s, to appease the concerns raised by the sluggish economy during the western slump of the 1880s –

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even till the mid-1990s. The 1880s first allowed the Company to reach a turning point in 1890 because it had earned the equivalent of the sums used to build the canal; and then the 1890-1910s years provided an ample reward to risk-takers. The issue remains therefore the bonanza of the interwar period, which seems to lack legitimacy because the amount of profits and of dividends could appear as out of proportion with the stabilisation of the situation: increase of transit, upsurge of oil tankers, first apex of Asian-European connections because of plantations, colonisation and mining, etc. But the managers could easily answer with the argument of the modernisation programs: they assumed their task of investing and maintained the entrepreneurial spirit of the firm… Table 28. Some financial items of the Suez Company in 1929 and 1938 (in millions of current francs) 1929

1938

Transit receipts

1,044

1,660

Total receipts

1,190

1,784

Operating expenses for the transit

76

142

Operating expenses for the maintenance of the canal

81

158

Total

157

300

Loans

83

168

Provision for upgradation work

80

0

Amortization of material and buildings

25

50

Put in reserve

25

15

Paid to Egypt

0

53

781

969

15

18

75%

58%

Payments to owners of “civil shares” representative of advances to the Company; founder’s shares; to the Board directors and to shareholders Benefits distributed to employees Percentage of transit receipts allocated to other (non personnel) benefits Three asset items in 1938 Investments, cash and deposited in banks

1,906

Reserves

468

Net profit

915

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SUEZ’ INFLUENTIAL POSITION IN FRANCE Beyond the core of activity of a firm and its financial success, what has to be taken into account in business life (and business history) is the “position” conquered by the Company on the market and political place. Its “immaterial capital” comprises a portfolio of relationship indeed, an ability to be more or less influential among the business community, to take part to institutions representative of the business circles, and even to play some role within lobbies, as a member of the so-called “Republic of businessmen”1. Such a capital of image and of influence, such an art of networking2, is always difficult to catch; but the name of Suez was by itself a key to consideration and prestige; and we have to assess now whether Suez had to be counted among the VIP of the Paris place. 1. THE BIRTH OF AN INSTITUTION The Company’s financial success turned it into a renowned and respected institution, the symbol of a triumphant capitalism. It proclaimed its new-found confidence to the whole world when it opened its corporate office on the Rue d’Astorg in 1913, in a district which was fast filling up with the corporate headquarters of many other prestigious firms such as its neighbour, Saint-Gobain. The sumptuous office, which epitomized sober wealth, was crowned by a “gallery of busts” – displaying statues and portraits of the Company’s “heroes” and models of its ships – and a magnificent boardroom. “I was impressed not only by the rich, padded atmosphere, the thick, wallto-wall carpeting and heavy curtains, but also by the dignified comportment

1 2

See Jean Garrigues, La République des hommes d’affaires, Paris, Aubier, 1997. See Pamela Walker Laird & Thomas McGraw (eds.), Pull. Networking and Success since Benjamin Franklin, Cambridge (Mass.)-London, Harvard University Press, 2006.

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of the junior staff. In those days, all the red and green carpets contained the scarab motif, the canal’s emblem. At the entrance, the concierge was always in redingote. Inside, the ushers were liveried à la française with gold buttons. I quickly came to understand that most were from a few select families, families which had long been in the service of either Lesseps’ or the prince d’Arenberg’s own households.”3 The Company had become a monument to French money, the symbol of a glorious chapter in its history. “Immediately, I was struck by a few characteristics of the d’Astorg office. It was, first of all, the power of tradition […]: what had always been done at the Company took on the aspect of dogma, something well nigh impossible to transgress.”4 The firm was a vast family and the “guardians of the temple” formed a sort of elite “caste”, a select “knighthood”. The managers often co-opted employees: “For the recruiting of personnel, we consider family recommendations first. Consequently, we have many who are inter-related, in Egypt as much as in France.”5

2. THE DECISION-MAKING POWERS The Company was represented by the president of its board of directors, and the prestige of such a chairmanship grew with the affirmation of the wealth of the firm.

A. The Lesseps dynasty as part of Suez history and legacy Lesseps himself, chairman from 1858 to 1894, was a “president cum managing director” who wielded all authority in France and, in spite of the fact that the Company’s team of engineers enjoyed great autonomy in Egypt, supervised building, construction and maintenance works on his frequent visits there. But over time and with the onset of age, Lesseps had to relinquish his “absolute monarchy”, especially when problems multiplied with the Panama Canal Company which he was also managing in parallel. When Lesseps retired in 1894, his son Charles de Lesseps might not succeed him because, embroiled in the Panama affaire, he had already resigned from the Company’s Board in 1892. The family though retained much of its high standing in the Company and continued to share in its financial success: Victor died in 1897, his son Charles II sat on the Company’s Board till 1924 and was succeeded by

3 4 5

Jacques Georges-Picot, Testimony. Ibidem. Ibidem.

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two of Charles I’s sons, Charles-Victor, from 1924 to 1937, followed by Mathieu, from 1938 to 1943. B. Paris grands bourgeois as chairmen Meanwhile, the role of the chairman too underwent major modifications. His executive powers were curtailed and he began to function much like a constitutional monarch, at the head of a group of eminent personalities from the world of business and supported by able assistants. In constant touch with the governments of Great Britain, France, Egypt and the Ottoman empire, this “diplomat” represented a federal, almost multinational (French, Egyptian, even English) “private State”. The president was also the rallying point for thousands of shareholders. This mass capitalism depended on the protection afforded by heavyweights from the business and political worlds who stood as guarantee for the all money risked in this “anonymous” enterprise6. A first example was Jules Guichard. Grandson of a deputy of the Directoire (1795) and the Consulat (1799) who had risen to become a high-ranking government official in the Finance Department, and son of a big landowner who was elected deputy in 1848 and in 1871-1884, Guichard had been one of the pioneers of the Company. He had actively encouraged colonisation and the construction of the canal. His experience as a “farmer” made him the natural choice for directing the “Ouadi basin”, the developmental hub of the entire isthmus, between 1861 and 1866. When this project was abandoned7, he concentrated on his personal career: director of companies (including the Suez Canal Company from 1874 to 1896) and senator and local representative in the Yonne département. Made vice-president of Suez in 1887 as the landed bourgeoisie’s hedge against Lesseps’ gamble, he rose to the presidency (1894-1896) only when the Lesseps family withdrew from active participation8. His successor, prince Auguste d’Arenberg (1824-1924) raised the Company into the rarefied air of Parisian high society. He was himself

6

7 8

Let us not forget how this type of “anonymous company” (that of joint-stock firms) was denounced in the 1930s by part of public opinion, how its “trust” was accused of meddling with the free play of market forces; its directors were held to be “irresponsible” because they themselves had not invested their money in the company, thus explaining their benign neglect attitude in front of the booming years and then of the crisis. This led to the amendment in the firms’ statutes by the Vichy government, alongside the “FührersPrinzip”, and the creation of the P-DG function (président-directeur général) mixing the functions of chairman and of CEO. See chapter 5. Jean-Étienne Goby, “Jules Guichard (1827-1896)”, Bulletin de l’Association du Souvenir de Ferdinand de Lesseps, n°4, April 1983, pp. 5-32.

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from a family of ancient nobility which had been re-ennobled when his father was elevated to the peerage under the Restoration. He was the ultimate symbol of the aristocracy’s reign on the Parisian world, as a key member of its larger segment which rallied to the République in the 1890s, also perhaps because he was a member of enlightened freemasony. From his estates at Berry, he rose to become deputy at the Chambre des députés in 1877-1881 and in 1889-1902. Vice-president of the Jockey Club, president of the horse racing society and of the Philanthropic Society of Paris (1885-1916), he also sat on the board of numerous prestigious corporations (such as Mines d’Anzin or railway ParisOrléans) and was a member of the Académie des Beaux-Arts9. He brought class and distinction to the Suez Canal Company when he assumed its presidency in 1896 to 1913. But moreover he belonged to the circles favouring imperial expansion, as a co-foundator of Comité de l’Afrique française in 1890 – to assert French interests in subsaharian Africa against Great Britain and Germany – and presided over it till 1912, with Melchior de Vogüé as a vice-president, and more decisevely of the informal “colonial party” which federated members of Parliament committed to colonial developments and interests10. The bureau of this Groupe colonial had comprised Jules Charles-Roux in 1893-1898, then Arenberg in 1898-1092. And Arenberg, who had travelled to Egypt in 1863, had come back enthusiastic towards Lesseps’ achievements abroad. After him, the Company turned to Charles Jonnart11, a notable of the Republic, a former high civil servant in Algeria, a member of the Chambre des députés (in 1889-1901), a Public Works minister, and mainly a General Governor of Algeria (in November 1900-May 1901, then in May 1903-March 1911). His aura among the circles of business devoted to overseas activities and among the “parti colonial”, the lobby gathering members of Parliament linked to them, had been reinforced first by his marriage to the daughter of Édouard Aynard, a key banker and liberal

9

10

11

Georges Devin, Le prince Auguste d’Arenberg, booklet, Paris, 1924. Jacques de Vogüé, “Le prince Auguste d’Arenberg, président de la Compagnie du canal de Suez”, Bulletin de l’Association du Souvenir de Ferdinand de Lesseps, n°6, April 1985, pp. 5-14. Julie d’Andurain, “Réseaux politiques et milieux d’affaires : le cas d’Eugène Étienne et d’Auguste d’Arenberg”, in Hubert Bonin, Catherine Hodeir & Jean-François Klein (eds.), L’esprit économique impérial (1830-1970). Groupes de pression & réseaux du patronat colonial en France & dans l’empire, Paris, Publications de la SFHOM, 2008. See Jean Vavasseur-Desperrier, “Charles Jonnart et le ‘parti colonial’ : économie et politique”, in Hubert Bonin, Catherine Hodeir & Jean-François Klein (dir.), L’esprit économique impérial (1830-1970). Groupes de pression & réseaux du patronat colonial en France & dans l’empire, Paris, Publications de la SFHOM, 2008. Jean Vavasseur-Desperrier, République et liberté. Charles Jonnart, une conscience républicaine, Villeneuve d’Ascq, Septentrion, 1996.

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politician from Lyon, who had been a leading figure of politics and business in Lyon and Paris to convince the authorities to develop action overseas and colonial empire and business. Jonnart even was elected to succeed to Arenberg at the chairmanship of Comité de l’Afrique française in 1912. It was only a first step because, a few months later, in May 1913, the vicepresident from 1907 became chairman of Suez, despite the (secret) hopes of Jules Charles-Roux, from Marseille, then his rival for the job. Jonnart became a member of numerous institutions expressing the overseas purposes of a few communities, like the Comité de l’Orient (1908, to promote the expansion in the Levant and the Far East), the patronage committee of Société de l’histoire des colonies françaises (1912), of Comité de l’Asie française (1917), and of Société de géographie de Paris (1921). After Jonnart’s tenure (1913 to 1927), the Company once again returned to the aristocracy and chose marquis Louis de Vogüé (18681948), as its next president (from 1927 to 1948). He was close to Arenberg as his neighbour in the countryside – both estates being in the Cher département, at the centre of France – and because he became his sonin-law, having married Louise Marie Charlotte d’Arenberg (1872-1958). The general secretary of the French Red Cross, he supported Émile Cheysson’s Société d’économie sociale, which advocated for a philanthropic capitalism as practiced by the Company. With extensive estates in the Cher département (in the Berry area), he was president of the Farmers’ Association of France (Société centrale des agriculteurs de France, 1919-1948) and sat on the board of the Banque de France (as a Régent), of the International Labour Office (headquartered at Geneva), of Banque des règlements internationaux (Bank for International Settlements, at Basel), and was a member of the National Economic Council12. Having become a truly prestigious institution, the Suez Canal Company chose for itself the finest of presidents, balancing influence in business and politics, embeddedness within enlightened circles of the business community, and within the lobbies of “the largest France”, that is that of colonial empire and overseas expansion. C. The emergence of managers at the centre of power After Lesseps’ departure, presidential authority waned. The following chairmen were more and more like constitutional monarchs, eminent figureheads surrounded by a Council of worthies and experts. “Up till M. de Vogüé, the presidents had been chosen from the French aristocracy. They were simply presidents, with no say in the administration or 12

Jacques Georges-Picot, “Le Marquis de Vogüé, président de la Compagnie du canal de Suez de 1927 à 1948”, Bulletin de l’Association du souvenir de Ferdinand de Lesseps et du canal de Suez, n°5, April 1984, pp. 5-16.

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management. Their role was purely representative, to represent the board of directors. They met the managing director twice a week.”13 The president’s functions were mostly an exercise in public relations, representing the Company in France and Europe and maintaining a dialogue with the canal’s customers and shareholders. His annual six-week sojourn in Egypt helped enthuse the Company’s employees there and cement its good relations with the Egyptian and English authorities. The president was the grand-master of “communications” both internal and external. His and the Company’s prestige depended on a highly qualified team of managers and executives. In Egypt, engineers looked to the proper functioning of the canal. In Paris, the management looked after the business affairs of the firm. With “remarkable discretion, the Marquis de Vogüé let the management handle all questions regarding routine administration”14. “The president did not manage, he was ignorant of the day-to-day questions regarding personnel and finance.” “Mr. de Vogüé chose the executives, presided over the Board and intervened only in the larger issues.”15 The corporate headquarters at Paris were established by Guichard who thought it necessary to widen the Company’s footprint there. The post of executive director (“directeur”) was created in 1894 for Count Rouville, an accountant who had been with the Company since 1863. The high Treasury Official, Edgar Bonnet, organized the management of the firm in his capacity as head of general accounting in 1896-1900 and as general secretary in 1900; after attaining to its Board in 1920, he was made the Company’s managing director between 1920 and 1927, then being elevated as a vice-president in 1927-1942. He was aided by a deputy executive director (Max Bahon, directeur adjoint in 1920-1927) and his son own George Edgar-Bonnet who became the general secretary. In 1927, Bahon succeeded Bonnet as CEO, while G. Edgar-Bonnet assumed the post of directeur adjoint while he was himself replaced by Michel Homolle as general secretary. The hiring of Jacques Georges-Picot was a significant step towards establishing this (lightweight) “technostructure” in the Company. While big financiers entered the power corridors of the firm in order to savor their retirement on its Board, a brilliant high official of the Treasury accepted to become its chargé de mission in 1937. To the Company’s prestige was also added a dash of strategy – a process which had been brought to fruition by G. Edgar-Bonnet. “He well understood the need to break with the Company’s traditions in which he had always lived and which, up till then, had recruited its Parisian managers almost exclusively

13 14 15

J. Georges-Picot, interview of 22 June 1984. J. Georges-Picot, “Le Marquis de Vogüé… ”, quoted article, page 11. J. Georges-Picot, interview of 22 June 1984.

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by resorting to internal relations or automatic advancement than any hiring of ‘outsiders’, except for technical posts in Egypt.”16

3. EMINENT PERSONALITIES SITTING ON THE COMPANY’S BOARD The choice of the 22 other members was dictated by the need to meet several exigencies, as is clearly revealed by our study of the Company’s dealings over the period 1900-1940. Lesseps clearly had his firm’s credibility in mind when he went shopping for his first board in 1858. Of the 35 members he chose, eleven were noblemen, five politicians (including three deputies), seven big “proprietors”, eleven diplomats or European businessmen and five managers, engineers and businessmen from France. It was more of an “advertising” team for the project than the required panel of financial managers. In 1871, the Board was reduced to 21 members; in 1884, it again grew to more than thirty members as it had to make place for three representatives of the British government, which was now a major shareholder17, and seven English traders and ship-owners. A. Suez part of big business ? The Company also roped in a number of big businessmen, either because they provided some sort of moral support, or because they themselves were looking for a way of capping distinguished careers. Its Board read more like a Who’s Who of the financial elite, including several eminent businessmen who had no connection whatsoever with the workings of the canal. These included presidents, vice-presidents and directors of some of the most prestigious enterprises in France such as the railway companies, or big industrial firms Saint-Gobain and Mines d’Anzin, on whose Board sat two of Suez’s big names: Arenberg and Jean Casimir-Perier18. The Company’s finances were in the able hands of the president and vice-president of Banque de l’union parisienne, Charles Sergent (1928-1938) and Frédéric François-Marsal (a director in 16 17 18

J. Georges-Picot, Testimony, 1984. See chapter 4. See: Jean-Pierre Daviet, Un destin international : la Compagnie de Saint-Gobain de 1830 à 1939, Paris, Éditions des archives contemporaines, 1988, about the composition of this prestigious company’s Board which mixed descendants of the Empireera nobility with that of the Ancient Régime, company technicians and representatives of the major shareholding families (Swiss). Louis Bergeron, Les capitalistes en France, 1789-1914, Paris, 1978. Guy Palmade, Capitalisme et capitalistes français au e XIX siècle, Paris, 1961. Pierre Birnbaum, La classe dirigeante française, Paris, 1978.

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1927-1933) respectively and the president of the Crédit foncier égyptien, Émile Miriel (a director in 1928-1932). The railway utilities recognized Suez as their alter ego in terms of seniority and technological excellence and contributed handsomely to Suez’s Board in the form of the presidents of the Paris-Orléans (Alphonse de Courcel, a director in 1899-1920; Charles Vergé, a director in 1894-1929), and of the Paris-Lyon-Marseille (PLM): Stéphane Dervillé, a director in 1906-1926. A high figure of French capitalism in the interwar period, engineer Gabriel Cordier, was a director in 19261934: he presided over railway company PLM since 1925; but he was before all a key manager in the electricity industry, as chairman of Énergie électrique du littoral méditerranéen, a key utility in south-eastern France, and of Alais-Froges-Camargue, the ancestor of Pechiney and the French leader in electrometallurgy (aluminium, etc.), whilst being a director of Grands Travaux de Marseille (a public work firm) and a Régent of Banque de France; being a director at Suez altogether put this latter on the level of big business in industry and utilities and almost of Banque de France. Then there was also the steel baron, Humbert de Wendel, president of Comité des Forges and of Metz’s Chamber of Commerce (1934-1955); Eugène Motte (1918-1933), a prominent figure in the textile, banking and chemical industries; Auguste Isaac (a director in 1910-1938), president of Lyons’ Chamber of Commerce (and a director of railway firm Compagnie d’Orléans), and Jules Cambefort (a director in 1896-1906), a leading banker of Lyon19. B. Suez and geopolitics Ambassadors too played their part in recognizing Suez as a quasiindependent, international state, with Louis-Aimé de Fleuriau (a director in 1865-1871), Paul Cambon (1918-1924) – who could complement at Suez its habits of good entente between Paris and London, as he had been a French ambassador to Great Britain20 –, Jules Cambon (a director in 1925-1935), Camille Barrère (a director in 1923-1939), Victor de

19

20

See H. Bonin, « Auguste Isaac et la place bancaire lyonnaise », in Hervé Joly (ed.), Patronat, bourgeoisie, catholicisme et libéralisme, autour du Journal d’Auguste Isaac, Cahiers Pierre Léon, n°5, Lyon, Université Lumière-Lyon 2, LARHRA-CNRS, 2004, pp. 109-130. “Paul Cambon [...] [dit] son plaisir d’entrer dans une compagnie qui avait pratiqué l’accord franco-anglais bien avant l’alliance, à un moment où les sentiments réciproques étaient loin d’être cordiaux. Quant à lui, il avait été pour l’entente entre les nations, entente aujourd’hui cimentée sur les champs de bataille et qui devait survivre aux conditions présentes”, from Étienne de Nalèche’s diary, 4 March 1918, quoted by Odile Gaultier-Voituriez, book to be published.

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Lacroix (a director in 1939-1948). Then there were the politicians (Charles Jonnart, Frédéric François-Marsal; Louis Barthou, a director in 1924-1934; Gaston Doumergue, a director in 1932-1938); the military (vice-admiral Edgard Humann; admiral Georges Durand-Viel, former Chief of the Naval Staff, from 1938 onwards; general Maxime Weygand, 1935-1940); the senior public servants: Ernest Roume, a former Governor General of the French Occidental Africa (or AOF) and Indochina, 1917; Charles Laurent, former director in the Ministry of Finance and president of the court of the Exchequer, a director in 1919-1939; Clément Moret, former Governor of the Banque de France, a director in 1937-1943. Georges Devin, a director in 1906-1938, represented the world of law and regulation, because he was a former president of the lawyers’ association to Conseil d’État and to Cour de Cassation – both among the highest institutions of the French law system. The eminent economist Charles Rist, a director in 1933-1955, was also the proprietor of Revue d’économie politique, a deputy governor of Banque de France and a director of leading investment bank Banque de Paris & des Pays Bas and of its affiliate Banque impériale ottomane. These and others like them justified their director’s fees by the unmatched talent pool which they helped form in the upper echelons of the Suez Canal Company. C. Suez and bourgeoisies To sit at Suez’s Board was to belong to the upper crust of grandees, to play a patriotic part in France’s growing international influence and to be paid handsomely in return – the directors shared 2 per cent of all profits (for example, 11 million in 1939). No wonder that Parisian high society clamored to be let in: baron Alphonse de Courcel (a director in 1899-1919), viscount de Bresson (a director in 1895-1905), viscount Jehan de Rohan, president of the Automobile Club de France, one of the most distingued elites club in Paris (a director in 1938-1958), count Étienne de Nalèche, who owned the Journal des débats (a director in 1918-1945), prince d’Arenberg, marquis Louis de Vogüé (a director in 1919-1948), and viscount Eugène Melchior de Vogüé, a member of the Académie française (a director in 1899-1910), etc. Some executives of the firm were also let into the Board as a final recompense for exceptional services rendered and as a way of projecting the Company’s technological reputation. Thus, Voisin-Bey (a director in 1893-1918) was not the only engineer to have sat on the Company’s Board as he was also joined by Rousseau and Quellenec. The managing director succeeded in his mission: Edgar Bonnet (a director in 1919-1942, vice-president in 1925), Max Bahon (a director in 19351956); but the presidency stayed beyond his grasp: he did not have the

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indispensable requirement of a “position” in this company of eminent “notables” or high end of society. The Board balanced therefore patrons of influence on the Paris market place, specialists in law, economy or engineering, members of High Society, and acted as a melting pot for various layers of bourgeoisies, those of talents and those of heritage. It contributed obviously to the “creditworthiness” and the reputation of the Company in Paris, because for long its had been perceived more than an adventurous and exotic enterprise overseas and had thus to be differentiated from the Panama blurred destiny or from some other risky undertakings in mining, shipping or tropical plantation; the “glorious names” of its directors could rub off the Lesseps’ pregnance on the first decades of the firm in favour of a perception of stability. On a second stage, the Board assumed more and more the mission to guarantee that the huge amounts of cash earned by the Company thanks to transit would be well used, alongside a relevant share between re-investments in the modernisation of the canal – itself promising future returns from a still more crossed waterway – and distribution to shareholders. A third function touched only an uppercrust of the Board: from the turn of the 20th century Suez became another “club” for the business society, where information could be got about the evolution of the Paris market place, the professional life of businessmen or VIP, but it provided the members of this informal club with news about international affaires, which constituted the advantage edge of the Suez Board. The diary of count Étienne de Nalèche21, the head of the Journal des débats, read by well-thinking French bourgeois, reveals thus how much the Board played a role of connecting people and picking up news and more often hints about the evolution if international affairs, because directors could meet there British VIP and reach to informations involving Paris, London, the Middle East, shipping, and the global health of the economy and international trade exchanges. Nalèche was a director between 1918 and January 1945, and relates in his diary news about the financial market – because Suez managed its portfolio and its proprietary trading –, about shipping, about the British mood, about a few French firms, etc. “Men of influence” could then act on a better way because they had enriched their knowledge of business and politics circles during the meetings of the Suez Board, as a supplement to other (and more decisive) means of information.

21

We thanks our colleague Odile Gaultier-Voituriez to have supplied us with the abstracts of this diary where Nalèche wrote about Suez.

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4. THE COMPANY BETWEEN A PRESTIGIOUS BOARD AND A MODEST INFLUENCE The Board reflected the aura of splendor radiated by the Company: “My impression about the Board is very good. All these directors are well-off people of good company, and the circle is truly pleasant.”22 But did it prove that it was able to exert a decisive influence within the Paris business community and further within the political city ? A. A meager influence? And as with all things high and sublime, Suez seems retrospectively to have lived and functioned in “splendid isolation”. While it admitted eminent personalities, it was beneath its dignity to join any employers’ organization. “We belong to no professional employers’ organisation, nor to the CGPF”, the association federating the whole French business since 1919. The presence of retired ambassadors “does not indicate any special links with the Foreign Office” just as the attendance of businessmen did not signify any real contact with other French firms. “I am struck by the Company’s splendid isolation in the midst of Paris […]. I have no contacts whatsoever with any of the French public administrations, not even with the Department of the Merchant Navy, or with any other company in Paris, for that matter.”23 The Company had no need to form either a political or financial pressure group, or to try and spread its tentacles into the administrative apparatus to defend or promote its interests. Its Board was more of an exchange of “nobility” – of the firm and of its notables – than a barter of “services”. Right from 1864, the Company’s carefully cultivated distance from the French government was a clear indication of a firm which was more concerned with its relations with the English. Also, the Suez Canal Company never stooped to the level of having to finance journals or political parties: there is not even an odor of any sort of “Suez scandal” in any of the archives24.

22

23

24

“Mon impression de l’assemblée est très bonne. Tous ces administrateurs sont gens fort distingués et de très bonne compagnie, et le milieu est vraiment agréable.” Diary of Nalèche, 4 February 1918, quoted by Odile Gaultier-Voituriez, book to be published. Jacques Georges-Picot, regarding his entry into the upper management of the Company in 1937. Interviewed on 22 June 1984 and Testimony manuscript. See J. Bouvier, Les deux scandales, op. cit.

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B. Suez and overseas business : A community of interest? The relationship between the Company and business circles patronizing the expansion of French firms and economic power overseas became more and more impressive. Suez reached the community of interest which took part to a huge move towards French influence abroad – even if did not join the protectionist or narrow-minded side of French business because it belonged firmly to the promotors of an “opened economy”, as it was active on an international level, and even could be retrospectively been perceived as a “globalised” (or “protoglobalised”) firm. The first requirement for the Suez managers was to win and entertain customers’ trust, and, consequently, representatives of ship-owners were invited on the Board, such as André Lebon25 – the president of Messageries maritimes sat on the Company’s Board from 1906 to 1938 –, Georges Philippar (1939-1958), also of Messageries maritimes – of which he was general manager –, and Paul Mirabaud (1905-1909), the family banker from Mirabaud (one merchant house of the Haute Banque), which was strongly committed to the development of overseas mining (Phosphates de Gafsa, Mokta, Penarroya)26 and was a key partner of investment bank Banque de l’union parisienne27, but one can presume that he had joined the Board as the chairman of the ship-owning firm Chargeurs réunis, one among important customers of the canal. These three members of the Board were well recognised part of the Establishment which godfathered and supervised French maritime expansion, along with harbour business and politicians or high civil servants devoted to the reinforcement of the “French pavilion” against British and German ones. Lebon was for example an ancient minister and had become a VIP among business dedicated to overseas expansion, as a president of Crédit foncier d’Algérie & de Tunisie, a big bank active in North Africa and in East Mediterranea28. Their direct association to the company expressed this common struggle in favour of French influence on an international (and maritime) level. 25

26

27

28

Joël Dubos, André Lebon. Un homme d’affaires en République (1858-1938), Rennes, Presses universitaires de Rennes, 2003. Isabelle Chancelier, Messieurs Mirabaud & Cie. D’Aigues-Vives à Paris, via Genève et Milan, Paris, Éditions familiales, 2001. H. Bonin, La Banque de l’union parisienne. Histoire de la deuxième banque d’affaires française (1874/1904-1974), Paris, PLAGE, 2001. H. Bonin, Un outre-mer bancaire méditerranéen. Le Crédit foncier d’Algérie & de Tunisie (1880-1997), Paris, Publications de la Société française d’histoire d’outre-mer, 2004. H. Bonin, “Une banque française maître d’oeuvre d’un outre-mer levantin : le Crédit foncier d’Algérie & de Tunisie, du Maghreb à la Méditerranée orientale (1919-1970)”, Outre-Mers. Revue d’histoire, first term 2004, tome 91, n°342-343, pp. 239-272.

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As symbols of such a trend, the president in 1896-1913, Arenberg, also presided (from 1890 to 1912) over the Committee of French Africa which had been established in 1890 to help, by propaganda and money, the French penetration of the continent; in 1897, Arenberg was also made president of the International Colonial Institute. Jules CharlesRoux epitomized this trend: made a director in 1889 and the Company’s vice-president from 1897 to 1918, he brought together in his person political influence – as a député (member of Parliament) of Marseille in 1889-1898 –, economic savvy – as the owner of a soap firm in Marseille –, as a figure of capitalism active overseas – as a president of Compagnie générale transatlantique from 1904 onwards and a member of the board of Land Bank of Egypt and of Fraissinet shipping firm – and of capitalism in general – with a dozen of seats in various boards, among which: Comptoir national d’escompte de Paris, itself much active in Egypt, Chantiers & ateliers de Provence, Chantiers & ateliers de SaintNazaire (both ship-building firms), Raffineries de sucre de Saint-Louis (importing sugar from overseas), Société marseillaise de crédit (the big bank in Marseille), and railway company Paris-Lyon-Marseille (PLM). He also developed intellectual acumen, because he was the author of a number of books on France’s growing influence abroad and on the history and geography of the Mediterranean world in general and the Suez canal in particular29. His strong place among circles of French overseas interests comprised his chairmanship of Société de géographie coloniale de Marseille, and a few others institutions (Comité de Madagascar, Comité de l’Asie française, Comité de l’Afrique française, etc.), all dedicated to the reinforcement of the French presence all over the maritime, imperial and commercial world. As a parliamentarian in 1889 to 1898, Charles-Roux became the vice-president of the “colonial group” at the French Chamber of Deputies, a lobbying group which pleaded for the reinforcement of the economic influence over the empire30. Moreover, and later on, in 1903, he had been elected as the chairman of the Union 29

30

Roland Caty, “Jules Charles-Roux (1841-1918). Industriel et homme d’affaires”, in Roland Caty, Éliane Richard & Pierre Échinard, Les patrons du Second Empire. Marseille, Paris-Le Mans, Picard-Cénomane, 1999, pp. 113-115. Christopher Andrew & Alexander Kanya-Forstner, “The French ‘colonial party’. Its composition, aims and influences, 1885-1914”, The Historical Journal, 1971, XIV (1), pp. 99-128. Christopher Andrew & Alexander Kanya-Forstner, “The French ‘colonial party’. Its composition, aims and influences, 1885-1914”, The Historical Journal, 1971, XIV (1), pp. 99-128. Charles-Robert Ageron, France coloniale ou parti colonial ?, Paris, Armand Colin, 1970. Christopher Andrew & Alexander KanyaForstner, “The Groupe colonial in the French Chamber of deputies, 1892-1932”, The Historical Journal, volume 17, n°4, 1974, p. 837. Julie d’Andurain, “Réseaux politiques et milieux d’affaires : le cas d’Eugène Étienne et d’Auguste d’Arenberg”, In Hubert Bonin, Catherine Hodeir & Jean-François Klein (eds.), L’esprit économique impérial, Paris, Publications de la SFHOM, 2007.

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coloniale française, a key institution which federated all the committees promoting the interests of overseas regions (Africa, Orient, Asie, etc.), and had become an important lever force to provide information and exert public relation in favour of imperial France, in particular through its journal La Quinzaine coloniale31. Less important in the French Establishment was also director Charles Laroche, who chaired Companie marocaine, a holding firm of the Schneider group, which supervised several affiliates in Morocco (retail trading, etc.), and was a director at Hersent, a public works firm active overseas. Through Charles-Roux, Lebon, and Philippar – because Messageries maritimes used Marseille as its key harbour towards countries and seas beyond the Suez canal –, the Suez Company was anchored in the very Marseille business and community of overseas interests – and also for a while Émile Darier, a soap industrialist of Marseille, who was close to Lesseps personally and joined the Board32. Suez enriched its own identity through such an involvement towards the growth of Marseille, considered as a door to Eastern overseas countries (porte de l’Orient33), and through the indirect promotion of Marseille bourgeoisies and entrepreneurship34 and of Marseille as some kind of a metropolis of Eastern Mediterranean areas. The Suez canal had become part of the basic background of Marseille activities – especially for those linked with overseas colonies of Madagascar35, La Réunion, La Nouvelle-Calédonie, and of Indochina, and with China – and even part of its “imaginary”36: 31

32

33 34

35

36

Henri Brunschwig, Mythes et réalités de l’impérialisme colonial français, 1871-1914, Paris, Armand Colin, 1960. Marc Lagana, Le parti colonial français, Québec, Presses universitaires du Québec, 1990. Roland Caty, “Émile Darier (1827-1906). Industriel (huiles et savon)”, in Roland Caty, Éliane Richard & Pierre Échinard, Les patrons du Second Empire. Marseille, Paris-Le Mans, Picard-Cénomane, 1999, pp. 121-123. Jean Boissieu, Quand Marseille tenait les clés de l’Orient, 1871-1939, Paris, Fayard, 1982. See Pierre-Paul Zalio, Grandes familles de Marseille au XXe siècle. Enquête sur l’identité économique d’un territoire portuaire, Paris, Belin, 1999. And also Roland Caty, Éliane Richard & Pierre Échinard, Les patrons du Second Empire. Marseille, Paris-Le Mans, Picard-Cénomane, 1999. Roland Caty & Éliane Richard, Armateurs marseillais au e XIX siècle, Marseille, Chambre de commerce & d’industrie Marseille-Provence, tome I, collection Histoire du commerce & de l’industrie, 1986. Marcel Courdurié & Jean-Louis Miège (eds.), Marseille colonial face à la crise de 1929, Marseille, Chambre de commerce & d’industrie Marseille-Provence, tome VI, collection Histoire du commerce & de l’industrie, 1991. Olivier Lambert, Marseille entre tradition et modernité. Les espérances déçues (1919-1939), Marseille, Publications de la Chambre de commerce & d’industrie, 2000. Olivier Lambert, Marseille et Madagascar. Entrepreneurs et activités portuaires, stratégies économiques et mentalités coloniales (1840-1976), Marseille, Publications de la Chambre de commerce & d’industrie, 2000. Marcel Roncayolo, L’imaginaire de Marseille. Port, ville, pôle, Marseille, Publications de la Chambre de commerce & d’industrie, 1990.

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Suez belonged to the day to day way of life of Marseille harbour and industries, which explained the part played by Charles-Roux less within the direction or the management process, but more as a key institutional communicator, well publicizing the activities, the functions, and the worldwide role of the Suez canal and company. Suez was part of this informal axis which was theorised by Chevalier (and his saint-simonian Système de la Méditerranée – see chapter 1) and drawn by pioneering entrepreneurs like the Talabot brothers, ArlèsDufour and several Paris, Lyon and Marseille businessmen and investors in the 1850s-1880s, before such an axis became the spinal column of commerce, transport, and money flows between Paris and Marseille, and overseas, toward East Mediterranea (and Suez), the Indian Ocean, and the Far East, and such VIP on the Board embodied this legacy and these business circuits – even if the saint-simonian hopes to transform the center-east of France into a key lever to French growth thanks to the Suez canal had to take into account the irresistible might of north-western French and European regions. Such a vocation was given concrete expression when the Suez Company took part to the creation of the Comité de l’Égypte in 1895: along with its brother committees (Comité de l’Afrique française, Comité du Maroc, Comité de l’Asie française), it contributed to organize a movement in favour of a strategy of strengthening French influence in Egypt and containing British might there: scholars, high (often retired) civil servants and businessmen joined such committees to share experience, promote initiatives and connect networks. Suez managers and directors were thus involved in the “ideology of empire” which was more and more shared all over Europe by larger circles of elites37. They were informed directly though the British directors about the tensions between France and Great Britain concerning the future of the Levant and of Syria, all the more because Jonnart himself was a key member of the Comité de l’Asie française where the argument between both countries were seriously considered: in the 1910s-1920s, global influence along the eastern coasts of Mediterranean Sea was at stake, and French interests there had to be supported. 37

For the previous era, see Anthony Padgen, Lords of all the World. Ideologies of Empire in Spain, Britain and France, 1500-c.1800, New Haven, 1995. Afterwards, see: Hubert Bonin, Jean-François Klein & Catherine Hodeir (eds.), L’esprit économique impérial (1830-1970). Groupes de pression & réseaux du patronat colonial en France & dans l’empire, op. cit. Winfried Baumgart, Imperialism : The Idea and Reality of British and French Colonial Expansion, 1880-1914, Oxford, Oxford University Press, 1982. Peter Burroughs & A. J. Stockwell (eds.), Managing the Business of Empire. Essays in Honour of David Fieldhouse, Londres, Routledge, 1998. Douglas Kenneth Fieldhouse, Western Imperialism in the Middle East, 1914-1957, Oxford, Oxford University Press, 2008.

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But the very influence of the Suez Company on the Paris political and business place cannot be genuinely assessed. Sure, Jules Guichard was a senator (from Yonne, in 1895-1896), Charles Jonnart, a deputy and senator, and a general governor of Algeria (in 1918), Jules CharlesRoux, a deputy in 1899-1918, Arenberg, also a deputy in 1891-1902. But their very influence in the Chamber of Deputies or in the Senate was low indeed, and they never belonged to the key political leverage groups. They anyway brought their knowledge of overseas business to their colleagues; their could act as prescribers of ideas or initiatives, in their field, and thus their position at Suez (as chairman or vice-chairman) altogether broadened their dimension within the Paris “clubs of influence” and circles, and helped Suez to consolidate its corporate image of discreetly influential and well-introduced firm about overseas and shipping challenges. C. Suez as a British shipping club Because it had been set up as a waterway facilities manager for the “universal” community of shipping, the Company had to welcome its representants to its Board. Beyond French delegates of ship-liners, the Board encompassed the whole European maritime community and could have looked as a club of shipping; but because the British fleet then dominated the shipping world, it provided numerous directors, which reinforced the British influence on the Board – beside the very representatives of the British State as the main shareholded of the firm, of whom we shall not develop a list. The agreement between the Lesseps father and son and the British shipping community reached on 30 November 1883 had stipulated that it was to be represented directly on the Board, besides the delegates of the British State as a shareholder, in order to emit the voice of key customers within an influential institution of the firm. The General Assembly had accepted such admission on 29 May 1884: seven new directors from British origin had thus joined the Board on the session of 2 September 1884, and (with the three directors selected by the British State) they constituted the London Bureau, some kind of a consultative committee to discuss about the evolution of the transit, the canal and the fares. A vice-president permanently represented the London shipping community: When he died, John Stokes, who had been designated by the British State to negotiate with Lesseps the issues raised by the interests of Great Britain in the Suez equity and in the Suez canal, was for example replaced as a vice-president by Thomas Sutherland (a director from 1884 and vice-president in 1903-1922), who was the chairman of Peninsular & Oriental (P&O), a member of Parliament (deputy), and who presided over the consultative committee of the Company in

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Table 29. Directors issued from the European shipping community June 1884-1922

Thomas Sutherland

June 1899june 1912 June 1901June 1905

Geo Plate

June 1902June 1927

Frederick Green

Founder of the Orient Steam Navigation Company and manager of the Orient-Pacific Line

June 1904

James Lyle Mackay

Director of the Great Britain British India SN Company, past president of the British Chamber of Shipping, a member of the Indian Council

June 1905June 1918

John W. Hughes

Manager of T. Great Britain & J. Harrison, from Liverpool

June 1910

Oswald Sanderton Director and manager Great Britain of Wilson Line

June 1912Summer 1914

Philipp Heineken

J.-B. Westray

Chairman Great Britain of Peninsular & Oriental Chairman of NordGermany deutsche Lloyd Chairman of General Great Britain Steam Navigation Company; secretary of the conference fixing prices for the Indian freight Great Britain

CEO of Germany Norddeutscher Lloyd

June 1919-1957 T. Harrison Hughes

John Hughes’s son and manager of T. & J. Harrison, from Liverpool

Great Britain

June 1920June 1923

Owen Philipps

President of Royal Mail Steam Packet Company

Great Britain

June 1920

Edmund Wyldlbore-Smith

President of the Inter- Great Britain national Commission for Supplies during WW1 and director of several corporations

June 1922June 1933

Lord Inchcape

Manager of one key international trading house in Asia, lord Inchcape (Kenneth Mckay)

Great Britain

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Table 29 (suite) June 1922June 1929

Aubrey Brockleband

President of a shipping company

Great Britain

June 1923

Robert Horne

Past president of the Board of Trade and Finance minister; vice-president of a company

Great Britain

June 1927-1945

John Cadman

Chairman of the Anglo-Persian Oil Company (with its affiliate British Tanker Company)

Great Britain

June 1927

Alan Anderson

Partner of Anderson, Green, the contract manager of the Orient Line

Great Britain

June 1930

Royder

Chairman of the Cunard (with Anchor Line; Brockleband; Commonwealth & Dominion Line)

Great Britain

June 1933-1943

August Cayzes

President of Clan Line

Great Britain

June 1939-1957

Arthur Harold Bibby

President of Bibby Line

Great Britain

London. His successor as vice-president was Lord Inchcape, a key indirect customer of the Company as a loading corporation because he was the manager of one key international trading house in Asia (called a “hong”, because it was active in Hong Kong), Inchcape (1933), himself followed by the shipping manager Harrison Hughes from 1933. One key customer joined the Board in June 1927, John Cadman, who, as the chairman of the Anglo-Persian Oil Company (with its affiliate British Tanker Company), was then the second client of the Suez Company behind P&O. 5. SUEZ COMPANY AS A CAPITALIST GROUP? The portfolio of knowledge set up during the building of the Suez canal, the wealth gained through the revenues of the transit, and the might owed to the position of the Board could have led to the assertion of Suez as an influential part of French capitalism, along with the metal

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firms, the collieries, and some of the textile combines. Its very influence is difficult to catch anyway, but we have to try and seize its leverages. A. Suez and Panama, sister companies Of course, the Suez Company and the Lesseps clan exerted a strong influence on the Paris finance place when the project of the Panama canal was established. From the start, the Suez team developed a transfer of knowkedge from Suez to Panama: its engineering experience, its network of relationship among public works firms, its ability to raise bonds and then to manage flows of cash to finance the buildings, were all key elements of the first stage of the Panama Company’s life, when it appears as a successfull enterprise, promised to a brilliant future. The reluctance of big banks to get involved durably in the process of issuing the bonds reminded Lesseps of his Suez adventure: once more, he seemed as some entrepreneurial hero who had to jump over the hurdles of timid partners. Without diving there into the history of the Panama canal, we shall only precise that the first Board of Panama welcomed in 1879-1880 several members of the Suez Board: four members of the Lesseps family: Ferdinand, his brother Jules (but he died as soon as 1887), two sons of Ferdinand, Victor (a diplomat) and Charles-Aimé (a member of the management of Suez in Paris and very influential in the emergence of the Panama Company); Eugène Dauprat was at Suez and Panama and his daughter had married a member of the Panama board, baron Henri Cottu; count Gontaut-Biron had a seat on both board and his son Ferdinand married a daughter of Ferdinand de Lesseps. “Marius Fontane, the secretary of Panama, worked at the headquarters of the Suez [...] [and] played a considerable part in the sister firm.”38 JeanBaptiste Emmanuel Daubrée, count Paul de Mondésir, Théodore Motet, count Paul de Circourt, Mourette, Adolphe Péghoux and Ernest Prévost also had a seat on both Boards. “The Suez Company wished to supervise its homologue, to flank it with reliable people, to manage it along with a quite similar way [and] the Suez Company prevailed in the board thanks ot its very stature.”39 We could imagine therefore that such a partnership could have crossed decades and emerge as an informal group of concession and facilities management; but Lesseps’ errors and the huge differences between the sand and flat Suez isthmus and the mountainous and tropical Panama isthmus led to a failure of the Panama Lesseps project, which hindered the sistership to resist to the 38

39

Jean-Yves Mollier, Le scandale de Panama, Paris, Fayard, 1991, p. 90. All these elements have been picked up from Molliers’ book. Jean-Yves Mollier, Ibidem, p. 91.

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crisis and the collapse of the Panama Company40 in February 1889. Several consequences had to be drawn from the events: first, the Suez Company, which happily had endured no direct or indirect financial losses in the Panama affair, had to be deprived of the influence and role of the Lesseps clan; second, it could no more exert some kind of patronage over a daughter or sister firm; third, it had to focus back on the Suez canal and count on its own forces to assert its position on the Paris place. B. Suez as an institutional investor? If the metamorphosis of the services firm into a finance company had to wait until the turn of the 1960s and if the Company stuck to its function of managing the Suez canal, this very activity fostered not only revenues but also “technical reserves”. These amounts were intended to face future investment programs, retirement fees to employees, and the repayment of the capital at the end of the concession in 1968. They also constituted some mattress for security. An astonishing look at figures reveals that Suez was one of the richest companies in France just before WWII41, thanks to its huge portfolio of treasury, financial availabilities, which transformed it into a specialist of what is called now “assets management”, because the other firms, mainly utilities and industrial groups, were holdings supervising participations in their affiliates and partners, whereas only the investment banks did manage a financial portfolio, but also among their faithful partners, not specially along “modern” assets management processes. Whatever their purpose and even if they kept a low profile conversely with the following period in the 1950s, these funds first emerged as some lever for accompanying partners or activities linked with the overseas expansion, and second provided opportunities to act as an “institutional investor” which practised “assets management” through the purchase of equity here and there on the stock market. But in these times, before WWII, only a few stakes were acquired. Because Compagnie des mines d’Anzin figured among the leading collieries – and its oldest, from the 1750s –, its “nobility” could have explained that Suez became its share-holder, besides its profitability; Edgard Bonnet was even elected as (non executive) vice-president. But the key investment of Suez was in airways. There was there a consistent field because Suez could thus favour the expansion of 40 41

Jean Bouvier, Les deux scandales de Panama, Paris, Julliard, 1964. Jean Denuc, “Structure des entreprises”, Revue d’économie politique, January-February 1939, n°1, special issue De la France d’avant-guerre à la France d’aujourd’hui, p. 239.

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Table 30. Suez as an assets management firm? The weight of assets of few firms in 1936 (above FRF 190 million) Nominal value of capital

Value of the portfolio of participations of the firm (FRF million)

Suez

200

861.952

Saint-Gobain (glass and chemicals)

300

788

Compagnie française des pétroles (oil)

600

581

Paribas

300

543

Compagnie générale d’électricité (utility)

174

501

Société lyonnaise des eaux & de l’éclairage (utility)

260

473

Énergie électrique du littoral méditerranéen (utility)

395

359

Énergie industrielle (utility)

194

308

Michelin (tyres)

150

297

Pechiney-Alais, Froges, Camargue (electro-metallurgy and –chemicals)

258

263

Compagnie des mines d’Anzin (colliery)

22.5

223

Union européenne industrielle & financière (Schneider metallurgy group)

140

220

Compagnie Standard franco-américaine (oil)

165

216

Banque de l’union parisienne

200

215

169.5

215

Société des mines de Lens (colliery)

225

214

L’Hydroénergie (utility)

100

211

Société des aciéries de Longwy (steel)

156

206

Penarroya (mining)

309

193

Tréfileries & laminoirs du Havre (metal manufacturing)

Source: Jean Denuc, “Structure des entreprises”, Revue d’économie politique, JanuaryFebruary 1939, n°1, special issue De la France d’avant-guerre à la France d’aujourd’hui, pp. 268-270.

pioneering networks joining Europe and the Middle East, which could ease the way its own managers could reach Egypt. The Company acted there not only as a sleeping partner managing passively its financial assets; it asserted itself as strategic stake-holder of a new airway small firm. At this time, the air relation between Europe and the Middle East

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depended heavily on the Britih firm Imperial Airways (with Persia or Egypt), hip-hopping from Italy to some islands then the final airports. French interests had set up Compagnie des messageries transaériennes – in fact godfathered by Messageries maritimes – which had to join Marseille to the Levant (Lebanon and Syria), then governed by France under a mandate from the Society of Nations. In 1928-1929, along with shipowner Messageries maritimes, two railway firms active also in tourism and hotel business, Compagnie du Nord and PLM (both having representatives on Suez Board) and a few banking and finance institutions active in Indochina (Banque de l’Indochine and Société financière et coloniale) or in Paris (Banque de l’union parisienne, Banque de Paris & des Pays-Bas, Banque nationale de crédit, Société générale, Crédit lyonnais), it supported the reinforcement of the company, which became Air-Orient42 in 1930. It was only a first step before a further general amalgamation of a few airway companies (Air Union, Société générale des transports aériens, CIDNA-Compagnie internationale de navigation aérienne, Air Orient), into a new and solid firm, Air France, in 1933, itself taking over collapsing L’Aérospostale. The process was achieved under the guidance of the French State (with a third of the equity), which was concerned with the defence of a “French pavilion” against Imperial Airways or Lufthansa at a time when the half-dozen of small French airways companies endured harsh times. Suez became a share-holder of the new Air France firm as it acquired 62,000 shares of the new firm at FRF 405 each, that is a big amount of FRF 25,1 million, which opened doors for its two representatives on the Board (Homolle and Edgar-Bonnet, then also in 1937-1940, Georges-Picot), before providing it with its own prestige and clientèle. Air Orient and its successor Air France had no purpose to compete directly with Imperial Airways and to join Europe and Egypt – only in June 1946 did Air France sent a DC4 to Cairo, owing to a new direct line Paris-Cairo – and it merely reached Beyrouth, Damas, and Indochina; but such lines helped cementing French influence and interests in eastern Mediterranea (like the Suez canal) and beyond the canal, which responded to the demands of the “imperial system”. In the air like on seas, the Suez Canal Company proved its involvement into overseas expansion. Through this investment, it reinforcemed its position within the circle of “imperial business” and its major role in favour of the “imperial spirit”43 which culminated in the 1930s.

42

43

Cf. Air Orient, special issues of Icare, n°86, 1978, and n°90, 1979; and Air France et son histoire, 1933-1983, Icare, n°106, 1983. See Hubert Bonin, Catherine Hodeir & Jean-François Klein (eds.), L’esprit économique impérial (1830-1970). op. cit.

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CONCLUSION The Suez Board shows how large was the circle of connections and influence of the Company, among the good-willing high bourgeoisie of Paris (but often deeply rooted in rural property), inspired by welfare capitalism and the issue of Progress (led by elites in the name of their social and economic responsibilities, within a social-liberal mindset short-circuiting any temptation by the State to get involved in the process). The Lesseps heritage had thus been entertained for long. But the growth of its business led the firm to extend its connections to representatives of French business and influence abroad (with diplomats, generals, heads of big companies), and before all to delegates of the shipping French and British world. British presence was active, and this constituted a specific culture against the huge majority of French firms, because the Suez managers and directors were always “open-minded” to world-wide or at least European and Mediterranean issues. Anyway, pondering a firm’s influence is always a delicate exercise – even if we practised it already about Société générale, Compagnie française de l’Afrique occidentale, or Crédit foncier d’Algérie & de Tunisie, in a few other books. The voice of Suez could reach layers of French elites and deciders, because the Board represented worldwide big business; but the company lacked a direct grip over the Paris market place, being not committed in French politics, internecine struggles about tax reform or else, or it never tried to control any journal, conversely with steelmakers (François de Wendel) or else. Its directors were called on Board because they were influential by themselves or thanks to their action at the head of other companies; but they did not acquire their very influence through their membership of the Suez Board indeed. Their only gain was with prestige, some kind of a “premium” charge – and providing them with plenty of cash (dividends and Board fees). Even among French business, the financial strength of the Suez Company was only gaining momentum through a little range of investments – for example in air transportation. Its financial portfolio remained still “anonymous” through bonds, and the Board did not long yet for financial power throughout French capitalism.

246

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Suez : Agency of the Peninsular & Oriental shipping company

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Pavilion of the Compagnie du Canal de Suez at the Exposition Coloniale de Paris in 1931, by architect Gras

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THE SUEZ COMPANY AND EGYPT (TILL 1940) The Suez Canal Company turned out to be a resounding financial success. Its income allowed it to quickly recoup the cost of constructing the canal, repay all loans and to slowly but surely increase its capacity of auto-financing upgrading works and even new investments in operational equipment. Its profits allowed its employees to enjoy significantly higher living standards than their peers in France or Egypt. Shareholders began to turn a profit from the turn of the century. Very soon, its share price, annual income and profit margins were such that its shares were worth their weight in gold. Not that the ship-owners were left out – they gained handsomely from their investments in the upgrading works and also by the Company’s profits, which allowed it to greatly reduce transit tariffs. The enterprise, its employees, its shareholders and its clients, all shared in its phenomenal success. In order to delve deeper behind the causes which led to the nationalization of the Company, we must first ascertain whether they had been brewing over for a long time and whether the behaviour of the firm, from even before WWII, had been such as to justify the extent of the Egyptian ire. 1. THE COMPANY AND THE EGYPTIAN AUTHORITIES The mindset of the Company’s directors may have been moulded, right from the beginning, into a certain highhandedness. Had Lesseps been guilty of extorting a criminally advantageous concession from a weakened Egypt? Did the Company’s constitution amount to a commandeering of the isthmus? A. The wording of the concession Was the viceroy blinded by his friendship with Lesseps ? The firman of 18541 gave “exclusive rights” to the future Company for 99 years 1

See the first article, 30 November 1854.

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from the date of the opening of the canal. The enterprise was also granted free lands for three objectives : the maritime canal, the fresh water canal and for “agricultural development”. It was exempt from paying any customs duty on all imports required for the work. It would also be paid an indemnity for all the material that it would return to Egypt at the expiry of the concession. It would seem that Lesseps had indeed received eyebrow-raising indulgences, and to top it all, as one of its founder members, he would get his share of a tenth of all profits ! On its side, Egypt did not have to finance any of the building or construction works and would get back the canal without having to pay anything. Moreover, it would get 15 per cent of the net profit, before the distribution of dividends. The firman also allowed it the option of increasing its revenue by buying into the Company’s shares. This first concession did not seem to be too extortionist. In fact, the firman of 18562 set down and clarified the role of the Company: over and above the canals, it was also to manage the entry and exit ports. Egypt retained its right to remain informed at all times by having a delegate sit in the firm’s corporate office in Paris. On its side, the Company would be represented by a senior agent posted in Alexandria. This second firman also added to the first concession by exempting the Company from paying any taxes for ten years on its agricultural land which was not be returned at the end of the 99 years. The time frame of the concession, the 10 per cent reserved for the founders and the gift of these lands for colonization would at first sight seem a little too much. But on second thought, the first two points were not actually that far fetched, considering the risks undertaken by the founders and investors. Moreover, Egypt would stand to gain handsomely over the next 99 years from its share of the profits3. B. A “colonising” Company? As for the lands, history has shown that this bit was indeed a little excessive. Lesseps had received this “largesse” from Saïd Pasha without having to bargain or bring any pressure to bear. The Company’s plans called for the development of 133,000 hectares, of which 63,000 were to be reserved for cultivation. The fresh water section of the canal would be accompanied by several secondary channels for irrigating these lands. The Company purchased the Ouadi basin, which had been created by

2 3

See the first article, 5 January 1856. See L. M. Rossignol, Le canal de Suez. Étude historique, juridique et politique, Ph.D., Paris, 1898. Ahmed Moussa, Essai sur le canal de Suez. Droit et politique, Ph.D., Paris, 1935.

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Mehmet Ali on some 10,000 hectares, and integrated it into its cultivation zone. Jules Guichard repopulated this land by leasing out plots to some 11,000 fellahs. The first steps towards colonisation had been taken…. Throughout this process, the Company joined a general move promoting “colonisation” as a way to drive settlers to develop rural areas thanks to development programs; even if it supported a technical and services “modernity” through the canal project, it was part of a system of mentality which, at this time, conceived the development of agriculture and settlement as so much important to growth than collieries, steel plants, or textile combines. Such purposed targetted either France itself – and the Vogüé family, so deeply involved in the history of the Suez Company, had drawn such schemes in the region where it owned large estates, the Berry –, or overseas territories. Suez set this activity within the scope of Saint-Simonian schemes favouring rural settlements, and its “colonisation project” grew in parallel with similar projects in Algeria4, for instance, without telling there about the new areas in the United States or in Russia. Soon, the Company turned into a major player in the real estate business, as had so many other firms throughout the far-flung reaches of the French empire. The isthmus was earmailed to a centre of rural and commercial development, overseen by a Company which was more or less in complete control of both the economy and the people. Right from the inception of his Company, Lesseps was very careful not to show any sort of condescending attitude towards this “occupied country”. Very conscious of having to hedge between Turkey and the United Kingdom, he could not afford to lose his temper with Egypt, which served as a diplomatic counterweight. He remained sensitive to Egyptian sensibilities and took all precautions to avoid any disastrous conflicts. In fact, he lost his cool when the English turned a deaf ear to the demands made by nationalists such as Arabi: “Let us leave this nationalist movement be.”5 He encouraged Egypt’s efforts towards selfrule and away from a regime of these traditional “capitulations” as the

4

5

Société générale algérienne received 100,000 hectares in Algeria in 1865, for instance. See Claude Lützelschwab, La Compagnie genevoise des colonies suisses de Sétif (18531956). Un cas de colonisation privée en Algérie, Berne, Peter Lang, 2006. Jeanne Verdès-Leroux, Les Français d’Algérie, Paris, Fayard, 2001. Jean Poncet, La colonisation et l’agriculture européenne en Tunisie depuis 1881, The Hague, 1961. Lucette Valensi, “Le monde musulman”, from: Pierre Léon & Gilbert Garrier (et alii, eds.), Histoire économique et sociale du monde. La domination du capitalisme, 1840-1914, Paris, pp. 507-510 and 525. Lesseps, from: Georges Edgar-Bonnet, Ferdinand de Lesseps, op. cit., volume 2, p. 52.

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nationalists called them. “We must not […] come against the way of progress.”6 Then, at the death of Saïd Pasha in 1863, the Egyptian government re-opened the issue of the benefits granted to the Company in a bid to solicit Turkish support. Ismail Pasha urged a retrocession of all the lands, a hike in Egypt’s share of the income and a reduction in the number of labourers employed at the worksites who were no doubt being paid, but as officially sanctioned forced labour, which gave the impression that at least a part of the government worked for the Company. “Nobody is more pro-canal than I am, but I want that the canal should belong to Egypt and not Egypt to the canal.”7 Finally, the conflict was settled by the intercession of emperor Napoleon III in July 1864. Against a compensation, the Company would return the fresh water section of the canal along with 60,000 hectares, including the Ouadi region, keeping only some 10,214 hectares required for the canal. In fact, it had to acquire an additional 4,000 hectares in 1884 when land was required for widening the canal. An agreement of 1869 stipulated that the lands bordering the canal would be held in common (“common domain”) by the Egyptian government and the firm, who would share the profits from the sale of these plots which would have appreciated greatly in value thanks to the proximity of the canal. The vice-roy thus evaded having to concede a “colonizatory” concession (as it had happened in China) to the French8. On its side, the Company was forced to ditch some ballast in order to break up any joining of Egypt and Turkey to form a unified front. Now pacified, Turkey ratified the concession in 1886. With commendable flexibility and lack of arrogance, the Company adapted itself to Egyptian nationalist sentiments. It gave up the idea of an agricultural colonisation to concentrate exclusively on its principal objective, the canal. It deliberately steered clear of any project which would divert Egypt’s natural resources while undermining its autonomy in the long term. We would have to conclude that there did not seem to be any external, dominating power meddling in Egypt’s affairs. Despite numerous positions different from our point of view – either from a few historians (David Landes, Caroline Piquet), or of course from Egyptian nationalist experts in the 1950s – and conversely to commonplace tradition, admitted as history, the relationships between the French negotiators – for legal, financial or economic positions – and the Egyptian authorities

6 7

8

Lesseps, letter of 13 May 1872, ibidem, p. 40. Ismaïl, in 1863, from: Mustapha El-Hefnaoui, Les problèmes contemporains posés par le canal de Suez, Paris, 1951, p. 54. See Jules Charles-Roux, L’Isthme, op. cit., volume 1, p. 349.

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were resolutely fair-minded in the 1850s-1870s. We still cling to our opinion that the Company and Egypt were two equal partners all through the years 1858 to 1869, and that Egyptian authorities had kept large margins of manoeuver in this precise case, which was quite different should we consider their dependance against European bankers for the day to day management of the Budget, of its permanent and deepening deficit, and of the Treasury’s debt – in particular after the end of the Civil War in the United States, which put a halt to the prosperity of the Egyptian cotton during the 1860s, cutting into the tax returns of the Egyptian State. One must avoid historical confusion, and one must not put on the same shelf the very positions of the 1858-1869 years and the future evolution of uneven relations between Egypt and “imperialist” attitude from the 1880s, caused by the overall insertion of Egyptian economy into the British business and trade area, like India for example.

2. THE COMPANY’S POSITION IN EGYPT While the Company did not impose itself on Egypt or Egyptian affairs, it obviously harboured a sense of superiority of the European civilization over the local culture. The question is, did this “superiority” show itself simply in the accomplishment of the task at hand or was there also some sort of condescension? A. The reinforcement of French interests in Egypt The influence of the Suez Company in Egypt was part of a “global system” which gathered a large range of French interests in a rapidly emerging country, which asserted itself within the international division of labour and exchanges. In comparison with the 1800s-1840s, when cultural aspects and public works and engineering predominated, the French interests in Egypt took shape along with commercial, banking and even industrial profiles. Even if the Indian cotton provided more and more the bulk of French cotton imports from eastwards, a forceful trend was preserved in favour of long-fiber and quality Egyptian cotton in Europe, because of the development of Egyptian agriculture9 thanks to the repair of the Delta dam in 1891, which raised the 9

Roger Owen, “The rapid growth of Egypt’s agricultural output, 1890-1914, as an early example of the green revolutions of modern south Asia: Some implications for the writing of global history”, Journal of Global History, March 2006, pp. 81-99. Roger Owen, Cotton and the Egyptian Economy: A Study in Trade and Development, 1820-1914, Oxford, Clarendon Press, 1969. Alan Richard, Egypt’s Agricultural Development, 1800-1980: Technical and Social Change, Boulder, Westview Press, 1982.

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levels of the high-level canals, and then thanks to the completion of the Aswan dam in 1902, which allowed an extra summer water supply10. Cotton exports constituted between 85 and 92 per cent of Egyptian exports11 in 1925-1930; trade and banking somehow prospered between both countries, with cotton traders and bankers (Crédit lyonnais, Comptoir national d’escompte de Paris12) much active in Alexandria – and such exchanges were complemented by trade on cotton grains (of oil) and sugar to be refined in Marseille or in the country (Sucreries & raffineries d’Égypte, linked with French firm Say), while French trading houses exported to Egypt corn and flour from the 1900-1910s – these exchanges being inserted within the frame of a new bilateral commercial convention signed in 1902. All in all, France kept a key position in Egyptian commercial exchanges, even it had been overpassed by AustriaHungary between the 1880s and WWI. Table 31. Egyptian trade in 1929 (thousand £) From Great Britain

To 11,898 Great Britain

17,959

France

5,440 United States

7,372

Italy

5,498 France

6,431

Germany

4,098 Italy

3,512

United States

2,795 Germany

3,027

Belgium

2,358 Russia

2,215

Total

56,090 Total

51,752

Source: La situation économique et financière de l’Égypte, notice from the General Secretary, division of economic studies, 4 July 1931, Historical archives of Société générale, Paris.

French interests kept an indirect or direct stake in rural development, either through the support of the culture of sugar cane at the turn 10

11

12

Terje Tvedts, The River Nile in the Age of the British : Political Ecology and the Quest for Economic Power, London, IB Tauris, 2004. La situation économique et financière de l’Égypte, notice from the General Secretary, division of economic studies, 4 July 1931, Historical archives of Société générale, Paris. Samir Saul, “Les agences du Crédit lyonnais en Égypte : l’insertion d’une banque de dépôts dans une économie d’outre-mer (1875-1956)”, in Bernard Desjardins, Michel Lescure, Roger Nougaret, Alain Plessis & André Straus (eds.), Le Crédit lyonnais, 1863-1986. Études historiques, Geneva, Droz, 2002, pp. 521-548. Hubert Bonin, “Le Comptoir national d’escompte de Paris, une banque impériale (1848-1940)”, Revue française d’histoire d’outre-mer, tome 78, n°293, 1991, pp. 477-497.

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of the century, especially on estates belonging to the State, or through the powerful Crédit foncier d’Égypte, which financed lending on mort, age for rather wealthy Egyptian landowners – then accompanied the distribution of State land to fellahs after the laws of 1912-1913. These elements indicate therefore that French interests in Egypt did not rely only on the Suez Company: they comprised a far larger scope – as it well demonstrated by the brilliant and rich thesis of professor Samir Saul13 –, and numerous French people expatriates were working for other firms, especially trading houses or banks. B. The firm between universal, French, and Egyptian basis The originality of the company came from its statutes: it had been conceived as a joint-stock company at a time when such statutes did not still exist in Egypt, which explained that it referred to French law; its legal basis was in Alexandria, but its managerial and financial headquarters in Paris – where was located the chief executive officer. Committees in London and Paris ruled over the relationships with maritime companies. The 1888 Agreement about the neutrality of the canal had added to the non-Egyptian embeddedness of the Company, thereafter involved in some kind of a “universal” over-look. Anyway, for day to day life, the Suez Canal Company enjoyed great autonomy in Egypt. Thanks to its financial dimension, to its key economic role, to its technical and engineering might and expertise, it was able to exert, in the same measure as other European rival “powers”, some actual influence at the khedive’s court, then to be an influent stake-holder of discussions with the authorities about economic life of the country. “It was a French flag which escaped French authority. The French ambassador at Cairo was a bit jealous of this autonomy. The Company’s representative at Cairo was almost like an ambassador in himself.”14 The Company’s “Principal Agent” at Alexandria did not take part to management; he was its representative in the world of “pashas”, in the heady atmosphere of Egypt’s landed aristocracy, in the padded labyrinth of diplomatic circles and at the Court. He met with and handled the high English officials who were the actual local administrators, and he saw to the welfare of the growing French “colony” – in terms of both its finances as well as its spirit. The Egyptian profile of the Company had been alleviated by empirical means. Mixed courts had been scheduled to tackle law arguments

13

14

Samir Saul, La France et l’Égypte de 1882 à 1914. Intérêts économiques et implications politiques, Paris, Publications du Comité pour l’histoire économique et financière de la France, 1997. Georges-Picot, interview of 22 June 1984.

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with foreigners in Egypt since a reform in 1875 and a decision from a court in Alexandria in 1908, which could have somewhat inserted the Company within the scope of Egyptian law. The bilateral convention of 22 February 1866 itself insisted on the fact that the Company had to bring to an Egyptian court the arguments which it could raised against the Egyptian State. But such a trend was strongly denied by the few experts who were committed to gauge the case15. This could have opened harsh arguments between experts and even powers, but the balance of power during the first half of the 20th century, and moreover the lack of any serious controversy between the firm and the State explain that the validity of such mixed statutes had never been tested…, and that the principle or the reality of “extraterritoriality” had not been questioned indeed, all the more since a large part of its activities and relationship with Egypt had been precised within the concession agreement and firmans of 1855 and 1856 – and the latter recalled a clause of the former and did not precise that Egypt could intervene in the choice of the CEO, such a power belonging to the Board along the statutes of the Company of 1858. 3. THE COMPANY CAUGHT BETWEEN BRITISH DOMINATION AND EGYPTIAN NATIONALISM Egyptians’ nationalist resentment had been hovering over British hegemony for decades, quite since the revolt of the 1880s, the bombing of Alexandria, and the solid establishment of troops and of an auxiliary police force. Egypte’s protectorate was a fiction of autonomous government, which stirred frustrations, despite the emergence of parties which could absorb it in their day to day revendications and action. The Company had thus to evolve discreetly within such a framework, and it had to balance its very insertion within the British imperial system on one side, and its will to represent an international and legitimate institution, dedicated to common good. But this could not prevent the fact that, more and more, the Suez canal was inserted within Egyptian political arguments16. 15

16

See mainly: Raoul Aghion, La société du canal de Suez. Son statut international, les capitaux investis et l’importance du transit, Paris, Librairie générale du droit et de la jurisprudence, 1939. P. Arminjon, “Les sociétés anonymes étrangères en Égypte et la jurisprudence”, Revue de droit international privé et de droit pénal international, 1908, n°6. Also see: Les juridictions mixtes en Égypte. Le Livre d’or. Cinquantenaire des tribunaux mixtes,Alexandria, 1926. Conversely: I. Hossan, Capitalisme et sociétés anonymes en Égypte, Paris, Librairie générale du droit et de la jurisprudence, 1970. See Hussein Husny, Le canal de Suez et la politique égyptienne, Montpellier, Imprimerie de L’Économiste, 1923.

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A. A sign of nationalist sensitiveness : Extending the concession? (1910) The rigourous power exerted by Resident Evelyn Baring Cromer17 on the Egyptian country and the enlargement of local elites led to disgruntled moves from circles of opinion, demonstrations, and nationalist parties. Some spirit of Egyptianism took shape against British hegemony and in consequence against all expressions of imperialist governance – all the more since in Constantinople liberal and independant-minded groups had started reshaping the Ottoman constitution. This explains the gut reaction which stirred the project to extend the concession of the canal18 from 1968 to 2008, because the Company wished to get a better opportunity to amortise its investments on a longer period and mainly to get a better guaranty for its shareholders to preserve the value of their assets. But such proposal met the opposition from shipowners in London, and from the British State. A way to convince Egypt and the whole stakeholders was to evoke a clause from the firman of 1856 which stated the possibily to extend the concession in exchange with a participation of Egypt into the revenues of the canal through a direct share of the profits, from 15 per cent on a first step to even 35 per cent later on. The managers19 thought of a cession of 2 per cent of the returns as soon as 1911, growing from 2 per cent each decade to reach finally 12 per cent in 1969, and then even 50 per cent from 1969 to 2008, with three Egyptians on the Board during that last period of time. Having gained a reduction of the taxes on transit, the British side joined the move, either the Foreign Office or the Chamber of Shipping. Far from scrutinizing the clauses of the project, and despite the fact that the Company had pledged to pay Egyptian £ 3,2 million – or about FRF 104 million – to the State in 1909-1912, influent circles of Egyptian opinion was informed of the project in October and claimed its hostility to the extension of the concession, which seemed to reinforce the domination of European interests on the Egyptian economy. Nationalist politicians and newspapers protested against it, which induced the Foreign Office to renege on its first involvement to the project20, despite 17

18

19 20

See E.J. Roger Owen, “The influence of Lord Cromer’s Indian experience on British policy in Egypt, 1883-1907”, London, St Anthony’s Papers, XVII, 1965, pp. 109-139. Henri Laurens, L’Orient arabe. Arabisme et islamisme de 1798 à 1945, Paris, ArmandColin, 2000. Jacques Berque, Égypte, impérialisme et révolution, Paris, Gallimard, 1967. Israel Gershoni & James-P. Janskowski, Egypt, Islam, and the Arabs: The Search for Egyptian Nationhood, 1900-1930, New York, 1986. Hossein Khalal, The Conspiration of the Extent of the Concession of the Suez Canal, Cairo, 1990 (in Egyptian). Note from the Company, 31 October 1909. We used Caroline Piquet, La Compagnie universelle du canal maritime de Suez en Égypte, de 1888 à 1956. Une concession française dans la tourmente d’une nation en

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a few amendments financially more favourable to Egypt. Without a direct link with the Suez affair, but as a sign of the tense political climate prevailing on Cairo, the Prime Minister himself, Boutros Ghali, was assassinated in February 1910. The project became a burning issue and had to be dropped in April 1910. Beyond the events themselves, a striking point was now obvious: the Company had to adopt a low profile in Egypt. It had to admit that the advantages gained in 1855-1888 were enough to guarantee its life in the isthmus and the revenues of its shareholders. A discreet relationship had to be entertained with British authorities, and new and subtler forms of relationship had to be conceived with the Egyptian ones. One can also pretend that it became suddenly more aware that it had to get a more favourable “image” in Egypt, which required a deeper “embeddedness” into the life of the isthmus: what was at stake was the perception of its contribution to Egyptian economy and progress. It had to assert its role in the isthmus, and to get less involved into political moves in Cairo (or Alexandria). B. The low-key profile of the Company among Anglo-Egyptian tensions (in the 1920s-1930s) The British empire attained its maximal expansion in the 1920s, with the English penetrating and reinforcing their hold in the Middle East (“the fertile crescent”). When Turkey entered WWI on the side of the Germans, the British unilaterally extended their protectorate over the whole of Egypt in December 1914. The nationalist insurrection in 1919 struck stakeholders because of its force and efficient organisation, as was related to the Board by Charles de Sérionne, the General Agent, and by Quellenec, the Chief Engineer, coming back from overseas to report to the managers and the directors: “Egyptians showed a sense of organisation which was not expected. Telegraphs, telephones were cut, railways stopped on precise points, and this all over Egypt. Beyond that, massacres, fire arsons. In a railway sleeping car, sixteen British officers were, literally, cut into pieces.”21 Such dire events forced British authorities to grant a formal independence in 1922, which was recognized by Turkey via the treaty of Lausanne in 1923; and some kind of a parliamentary regime was

21

marche, Ph.D, Paris IV-Sorbonne University, 2006, pp. 96-106 – and she used on her side archives from the Foreign Office, especially about the relations between the British consul in Cairo and minister Gray in London. Also see: Samir Saul, La France et l’Égypte de 1882 à 1914. Intérêts économiques et implications politiques, op. cit., pp. 262-280, based on direct documents from the Foreign Office archives. Abstract from Étienne de Nalèche’s diary, 20-21 April 1919, quoted by Odile Gaultier-Voituriez, book to be published.

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instituted in 1923. Sultan Fouad since 1917 became a king in 1919; despite the move towards more independant practices in the relationship between Egypt and Great Britain, king Fouad allowed the United Kingdom to look to the security of its empire’s communication network, defend Egypt and protect foreign interests. The canal came under all three clauses. The English maintained their troops while Egypt insisted on its capacity to respect the canal’s neutrality. The desire to preserve a balance between struggling powers in Egypt, to assert itself as an institution independant from balance of powers, explains that the Company succeeded in crossing the military and political events further on with resiliency and without being directly hurt by Anglo-Egyptian relationship – as proven by the archives of the French Foreign Minister and of its British counterpart, the Foreign Office, and by the reports of the Board22. It was in fact submitted to the military consequences of history in the Near-East – as studied in chapter 7 –, but it succeeded in keeping a positive corporate image by Egyptian circles of power. Having for example refused to welcome Egyptian nationalist leader of the Wafd party, Saad Zaghloul Pacha, when he came back from exile in September 1923 when some employees organised an event, it conversely showed its support to the young kingdom: the new city built by the Company on the Asian side of the isthmus and in front of Port-Saïd was inaugurated by the king himself in 1926, all the more since it had been called henceforth “Port Fouad”. And the relationship between the executives and the Egyptian commissary to the Company proved well-tuned: Ismaïl Sitty Pacha had been a minister for seventeen years and he served as Commissary almost throughout the interwar period, from 1919 to 1937; he was thus the key negotiator when the Company reached an agreement on 11 October 1925 which set up a mixed administration of the new Port Fouad development. And it provided some cash to the development of a few roads in the isthmus (Suez/Port-Tewfiq and Port-Saïd/Damiette). The canal remained at the heart of the negotiations between Egypt and Great Britain during the interwar period. The Egyptian authorities expressed their wish to get the canal under their guarantee for the neutrality – for instance at the Lausanne conference in 1920 – whereas British diplomats argued to maintain the power which London had gained during WWI when it had substituted itself to the Ottoman sultan as the ultimate referee in the isthmus. And the negotiations which fluctuated between agreement and rupture depending on the bouts of nationalism which swept through Egypt23 between 1923 and

22 23

See Caroline Piquet, Ph.D, op. cit., pp.124-130. See: M. El-Hefnaoui, Les problèmes, op. cit.

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1930 – which hindered the Company to promote efficiently its permanent design to extend the date of the concession, as it expressed it once more at the end of the 1920s, but without any chance. Finally, the rising threat of fascism forced them into signing a treaty in August 1936. The English had to mollify an Egypt which could otherwise perhaps be tempted into coming to an understanding with the Italians, who were already well established in the west (Libya) and south (Ethiopia). And Egypt’s true independence was finally declared. The British army was officially asked by the Egyptian government to protect the canal for the next twenty years “in view of the fact that though the Suez canal was an integral part of Egypt, it was also a route of communication between the different parts of the British Empire, [it] authorizes [the United Kingdom] to establish troops on Egyptian territory, in the vicinity of the Suez canal […] to defend the canal in cooperation with Egyptian forces […]. The presence of these troops is in no way in the nature of an occupation, and do not, by any means whatsoever, pose a threat to Egypt’s sovereign rights”24. The Company could breathe easy, as it had found a strong protector in case of war. But in the eyes of the Egyptians, British domination was linked inextricably with their presence in the canal zone. If so, did not the Company risk being embroiled in any future conflict between they two countries? Was it not dangerous that nationalists25 confuse British domination with the foreign-owned canal property to the extent of thinking that the one explained the other?

4. EGYPT AND THE CANAL’S MONEY The Company, enchanted by its income and its idyllic life in the isthmus, found itself becoming more conservative than the British government, whom it had roundly castigated for its “blindness” in the 19th century. The Company was prospering as never before while Egypt found itself being gradually deprived of its share of the profits. A. Egypt depriving itself from the canal’s revenues (1875) The khedive was supposed to receive 15 per cent of the profits and the dividends from his shares. But he had to buy them for FRF 89

24 25

Article 8 in the Anglo-Egyptian treaty of 26 August 1936. About the nationalist mood of the interwar period, see: Israel Gershoni & James-P. Janskowski, Redefining Egyptian Nation, 1930-1945, Cambridge University Press, 1995. P.M. Holt, Political and Social Change in Modern Egypt, Oxford, Oxford University Press, 1968.

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million. He compensated the Company to the tune of 84 million for the modification of the concession in 1864, for stopping the forced labour he had employed to fulfill the Company manpower needs and for taking back the lands which had been slated for an agrarian colonisation. In 1869, he paid the Company another FRF 30 million when he bought its installations (housing, hospitals) and he received half of the profits from the development and exploitation of the “common domain”. He paid ten million in 1866 to buy back the Ouadi lands and FRF 7.8 million in 1902 for the railway line linking Ismailia and PortSaïd. The total amounted to some FRF 220 million, almost as much as the cost of digging the canal ! Of course, this amount was not paid all at once. The FRF 30 million of 1869 were paid over a period of 25 years – the Company keeping for itself the “coupons”, dividends and interests due to Egypt against the shares it held. This was complicated further when the firm borrowed 30 million francs from its French shareholders26 and sought to pay back this debt with its Egyptian coupons. The khedive meanwhile lost the income from his shares for the next 25 years (1870-1895). Then he lost even the capital he owned. In 1875, financial difficulties compelled him to sell his Suez shares to the English government for FRF 100 million. Finally, in 1880, he consolidated a part of his foreign debt by relinquishing his share (15 per cent) of the profits of the Company to Crédit foncier de France. The creditors were paid off by Crédit foncier de France with 22 millions, which it recuperated by selling parts of a “civil company” created by investors who thus linked themselves to the canal’s prosperity. Egypt’s financial crisis deprived the khedive of the chance to share in the canal’s prosperity. Though he pumped in some FRF 190 million, all that he could show for it was the land which he himself had given away in 1854-1856, a railway line and, at the termination of the lease in 1968, the canal itself. Till this date, he received neither any income from shares (he not holding any), nor the 15 per cent of profits. All the money brought in by the canal went to Europe, with the lion’s share going to France (15 per cent for the “civil company”; the founders’ 10 per cent; the 2 per cent owed to the personnel; the three-fourths of 2 per cent given to the board of directors; and the 55 per cent in dividends) and to England: the dividends of 44.15 per cent of the capital, a quarter of 2 per cent as Board members. As the Company was registered as a foreign firm, it did not pay any taxes. Egypt gave up its political and military independence (not to speak of the FRF 190 millions) for a canal

26

The shareholders put in FRF 30 million in the form of 120,000 bonds of FRF 270 each, but these were reimbursed at a face value of FRF 500.

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which brought in only some FRF 34 million: that is 15 per cent of profits between 1875 and 1880, plus 44.15 per cent as interest paid to the shareholders in 1858-1869. This was short change compared to the FRF 4,754 million distributed as profit between 1870 and 1934, and the FRF 1,265 million given away as “discount” to the shippers between 1870 and 1934. Ultimately though, the canal was to be returned to Egypt in 1968, at which point it was variously valued at between FRF 799 and 1,161 million, an amount which was to become fully Egyptian. B. A late opening to an Egyptian stakeholding (1936-1939) By 1936, because king Fouad died and was replaced by (apparently) more nationalist king Farouk, and because of the geopolitical tensions, Great Britain understood that it would have to mollycoddle the rising Egyptian nationalism – all this while the Company had continued to cede only those meager financial and legal allowances which had been agreed upon at the time of the Second Empire and which had been further whittled down by the agreements of 1870-1880. It is true that – as has been said earlier there – in 1909 the British authorities, in conjunction with the Company, proposed a fourty years’ extension of the lease against an up front payment of four million pounds sterling and a share in the profits of the canal (a growing percentage of the income and from 1968 onwards, half of all profits). But after the project had been scuttled during the nationalist tensions in 1910, no negotiations were undertaken for the next twenty years (from 1910 to the 1930s). Perhaps Egypt found itself too weak and dependent on this foreign domination. Meanwhile the Company made the most of the profitable status quo. The only time that local authorities intervened was when they set up tribunals which regularly ruled against the firm in its financial battles with its bondholders. When some niggling monetary uncertainties were heightened by the introduction of the Egyptian piaster in 1935 and the abandonment of the gold-pegging of all values linked to the activities of the Suez Company, before Egypt came out of the Sterling zone in 1937, the enterprise had to attempt to deal with them by the means of an accord with Egypt, which started in March 1936 a process where Egypt (the ministry of Finance) and the firm (represented by Louis de Benoist) became actual partners to negotiation, and some kind of stakeholders vested in common interests for the management of the revenues of the waterway – and such a process short-circuited in fact the British stakeholder (and main shareholder) itself… This could have marked a turning point in the modus operandi of the Company in its relationship with Egypt. Stuck behind its “golden” clauses and the Conventions of the Second Empire, the Company at last began to feel the need of loosening

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its legal structure. When Jacques Georges-Picot was recruited as Inspector of Finances, it was as part of its effort to bridge the gap between its Parisian management and its Egyptian birth and existence. “Georges Edgar-Bonnet had seen right from 1937 that things were developing very rapidly in Egypt, that the relations with Egypt would soon become difficult.”27 Before considering any opportunity of durable institutional change – and the advent of WWII overrode all other considerations and the “question of the canal” lost its urgency for the time being –, immediate results were reached at the term of this stage of negotiations, and a first draft was precised. The firm acquired the right to raise transit taxes in order to maintain parity with the gold-value which had been chosen as the reference currency in 1856. In exchange, it had to concede a little to Egypt’s first attempts at curtailing its “independence”. Two Egyptians were to sit on its Board, which only instituted the rules defined in 1927 by the Egyptian law on joint-stock firms active in Egypt. A program for the “Egyptianisation” of the Company’s personnel was also undertaken, for about 25 per cent of employees. Further benefits from the ongoing development and exploitation of the canal zone were extracted, averaging 300,000 Egyptian pounds. Along with these direct negotiations, the framework within which the Company acted in Egypt met significative changes because of the evolution of Anglo-Egyptian relationships. A new treaty was signed between Great Britain and Egypt on 26 August 1936, which reinstaured Egyptian sovereignty on one side, but attributed to British troops the security of the isthmus – and the Company had to assume the maintenance of roads used by these troops – and to England the charge of foreign policy. A few months later, a round of negotiations in Switzerland (12 April-8 May 1937) led to the Montreux convention, which suppressed the famous Capitulations inherited from the Ottoman empire and which had already disappeared in Turkey or in the Levant. Foreign companies could no longer escape the collection of Egyptian taxes, or be prevented from Egyptian courts in case of law controversies, which ringed the end of so durable privileges indeed. On a middle term, the Suez Company had to consider dedicating part of its profits to the perception by Egyptian authorities and to accelerate the pace of Egyptianisation of workforce. Such moves provoked disgruntling reactions among foreigners and especially among the Company’s managers in Ismaïlia or Paris… In the wake fo such political treaties, the Company and Egypt concluded their own agreement, and a final version was signed in the 27

Georges-Picot, interview of 22 June 1984. See also Jacques Georges-Picot, “Le marquis de Vogüé”, op. cit.

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Summer 1937 and ratified by the Egyptian parliament in August 1937 – to be applied from 1938. A third of workforce should become Egyptian; a £ 300,000 allocation had to be paid to Egypt on the bulk of profits; two Egyptian directors shoud be elected on the Board – amid nineteen French, ten British, and a Dutch at this time. The Company felt that it had to admit concessions because nationalism had grown so much in Egypt and because the political and geopolitical environment weighed in favour of a policy of transaction with the Cairo authorities in order to preserve the essential, that is the independance of the management of the canal itself. Such an open-minded attitude, even reluctant, explained that the first Egyptian director was chosen, with Cherfi Pacha Sabry, who was the uncle of the king on the mother side, and had been educated in law: he expressed then the will from the Company to keep close to the king’s circles of power, judged able to countain nationalist demands. He was joined later on in 1939 by Ismaïl Sidqi, who was at this time the ministry of Finance himself ; he too promoted a moderate economic nationalism, which confirmed the trend started by the agreement: compromise was on the agenda.

CONCLUSION FROM “SPLENDID REMOTENESS” TO COMPROMISE The correspondence between Foreign Affairs experts or within the Company, which has been analysed by historian Caroline Piquet28 reveals the reluctant positions of the managers in front of the upsurge of nationalist requests, of the critics against what was judged as an unfair or unequal might or hegemony of the Company in Egypt, and against its exceptional power on the area and the life of the isthmus. These experts and managers were some kind of spectators from the European balcony over Egyptian moves towards parliamentarism, democracy, freedom of the press, and even economic claims. And the utilities (water, energy, tramways, the canal) were main targets from anti-imperialists. Despite its concerns, anyway, the Company succeeded in sailing through tempests and murky waters: it escape any project of Egyptianisation or nationalisation, which was not the case of French railways indeed, which were nationalised and merged into SNCF on January 1938… – to be true, because of their financial difficulties. The Suez Company was therefore better treated by Egypt than were railway companies by France, despite that it growled with displeasure against the nationalist

28

Caroline Piquet, Ph.D, op. cit.

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momentum. But it had to conceive some concessions to the Egyptian circles of power and opinion, which explains the agreement of 1937, opening narrow doors to some kinds of an institutional partnership with Egyptian State and authorities. Such small reform did not marked a revolutionary change, which contributed to confirm the managers into the good consciousness raised from the perception of what was the contribution of the Suez Company to the development of Egypt. Inconsciously, because of business and economic constraints, and of social and cultural mindsets, they became more and more committed to what became an ideological stance against a historical evolution which involved even benevolent and progressist stakeholders into the broad basket of what emerged as “western imperialism” in the Middle East29, even if the WWII events contributed to put a halt on such a trend.

29

See David Kenneth Fieldhouse, Western Imperialism in the Middle East, 1914-1958, Oxford, Oxford University Press, 2006.

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CHAPTER 12

THE COMPANY AND THE DEVELOPMENT OF THE ISTHMUS OF SUEZ In front of growing anti-European nationalism, proved by a few cases, and among resentment against the hegemonous presence of European symbols of power, the firm as an actual economic “institution” in Egypt became conscious that it had to further legitimize its presence in Egypt beyond its mere services to international transportation. What would be called today its “corporate image” was at stake. It insisted therefore more and more on its contribution to developing the canal zone. Indeniably it mastered a rationalised and coherent program to provide basic collective services to the whole local community, either Egyptian or from foreign origin, through an array of utilities which contributed to accelerate the rhythm of the insertion of the area into modern day to day life1. The commemoration of the fifthtieth anniversary of the opening of the canal on 17 November 1929 provided an opportunity to remind people of the array of achievements, and thus fuel self-justifying attitudes – even if some Egyptian nationalist newspapers denounced them2.

1. THE COMMON SERVICES TO LOCAL RURAL AND URBAN ECONOMY The Company greatly improved and added to the existing Egyptian hydraulic equipment and waterworks. It added the fresh water canal from Ismailieh to Lake Timsah and Suez to the one dug by the Egyptian

1

2

The high-end dissertation by Caroline Piquet, La Compagnie universelle du canal maritime de Suez en Égypte, de 1888 à 1956. Une concession française dans la tourmente d’une nation en marche, Ph.D, Paris IV, 2006, has considerably enriched the knowledge of the contribution of the Company to the valuation of the Suez isthmus. C. Piquet, La Compagnie du canal de Suez, une concession française en Égypte, 18881956, Paris, Presses universitaires de Paris-Sorbonne, 2008. See Caroline Piquet, Ph.D., op. cit., pp. 144-145.

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government; it was ceded to Egypt in 1869. In 1893, the firm replaced the cast iron pipeline it had laid between Ismaïlia and Port-Saïd with a canal, the Abassieh canal. It established the waterworks and departments at PortSaïd, Suez, and Ismailieh/Ismaïlia, and installed filtration plants which it then subsequently modernized. It also helped establish better transportation facilities all over the isthmus. In 1893, it built a steam powered tramway between Ismailia and Port-Saïd to facilitate the shuttling of its personnel, especially the pilots. It upgraded it into a standard railway line and ceded it to Egypt in 1902 so that it could be incorporated into the national network. It broadened the road which had been laid during WWI by the British army between Port-Saïd and Ismaïlia and extended it to Suez. In 1902-1905, the Company played an active role in the campaign against malaria which suddenly resurfaced after it had first appeared in 1877. It opened its hospital “Saint-Vincent” and three dispensaries to all who lived in the canal zone, “to treat all the poor people who did not belong to the Company”3. Moreover, the sisters who worked at the hospital went on excursions into the desert in an attempt to forestall any more outbreaks.

2. THE COMPANY’S CONTRIBUTION TO THE EGYPTIAN ECONOMIC DEVELOPMENT More and more the maintenance of the canal and the supplying facilities to transit spurred growth momentum alongside the waterway, in its main stopovers. One symbol of such developments could be the Egyptian building which stood since 1893 on the bank of the new harbour in Port-Saïd. A. The development of an area for facilities to the canal While the Company imported all the equipment required for digging the canal, it also quickly installed repair and maintenance workshops at Port-Saïd – with 900 people employed in 1893. They were used to repair ships’ hulls, dredges, and other heavy machinery as well as those ships damaged in transit. There were numerous workshops for the maintenance of boilers and especially the dredges which sustained heavy wear and tear, welding and painting works, a smithy, a foundry, a sawmill, a joiner’s workshop, and a thermal power station. A big warehouse lodged parts to be used all over the facilities of the waterway. They were joined by six holds for mid-sized ships plus 21 holds for 3

See: Jean-Claude Sournia, Souvenirs, op. cit., and: Jacques de Vogüé, “Le prince Auguste d’Arenberg, président de la Compagnie de Suez”, Bulletin de l’Association du Souvenir de Ferdinand de Lesseps, n° 6, April 1985.

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barges and smaller boats and a floating dock. A special space was attributed to the cementing of blocks to be used for quays and to consolidate banks. Little by little a large industrial area took shape in the northern part of the isthmus, with a concentration of workforce there: Port-Saïd was literally built and established by the Company with its canal port and its workshops. It was the contracting authority for the administrative buildings, a large office building, the houses for the higher personnel, two building for housing the pilots, and a condominium of houses for the labourers. It could be plausible to pretend that what Saint-Simonians had dreamed of in the first half of the 19th century, the Suez Company had achieved it…, with a more complex and diversified estate than the Heliopolis city which Belgian Baron Édouard Empain built at the turn of the century in the outskirts of Alexandria4. Then 1907-1919, as they grew bigger, the workshops were transported onto the Asian side of the canalwhich led the Company to establish Port-Fouad in 1925-1926, a city which was inaugurated by king Fouad himself on 21 December 1926. Table 32. Workforce of the Company for “industrial” tasks (in the workshops or for the dredging and the facilities along the canal) Registered stable workers

Trainees

Workers depending upon the subcontractors

1891

Total workforce 2,720

1894

930

1899

1,661

1,002

2,836

1910

2,460

1,061

3,521

1913

1,813

1,131

2,944

1914

1,844

826

3,307

1922

2,390

144

3,239

1923

2,425

98

1,907

4,430

1929

2,398

118

2,415

4,931

1932

2,281

34

1,330

3,645

1938 1939

1,740 3,000

Source: Caroline Piquet, Ph.D., op. cit., p. 801 (from various archives)

4

Robert Ilbert, Heliopolis, Le Caire, 1905-1922, genèse d’une ville, Paris, CNRS publishings, 1981.

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The Ateliers généraux (general workshops) asserted themselves at one of the hearts of the Company (with the Ismaïlia offices): an industrial island worthy of European or American plants took shape, which imported along the years some patterns of modern “rationalised” production. Recently historian Caroline Piquet5 for the first time scrutinized the aspects of such hive of activity, which caused pride to the Company and numerous photographs, either for the in-house journal or for technical and historical collection, as was commonly practiced in industrial corporations. About forty French foremen and dozens of team heads supervised several hundreds European and more and more Egyptian workers, whereas part-time workers – about a third in 1932 – joined the staff when necessary – and the overall workforce varied along with the rhythm of the “works programs” successively launched by the engineers, which caused redundancies or cut-offs between them. Trainees complemented the workforce, and a training school was opened in 1922. Table 33. Labourers workforce at the Ateliers généraux along nationalities (approximative amounts) 1899

1932

Greek

33%

19,4

Italian

15

15.4

12.4

Hungarian-Austrian (Croats and Dalmats) and Yugoslavian

11

1.2

3.3

5

2.6

French British (especially Maltese) Egyptian

1940

2.8 31

43,4

Source: Archives of the Company, quoted by Caroline Piquet, Ph.D, op. cit., p. 295.

B. Workforce all along the canal If the main poles of activities were rounding Port-Saïd and Port Fouad, all along the isthmus there were workers active too, with the manoeuvers linked to the dredging activities throughout the year or during the programs of works. Labourers were called regularly for the maintenance of the canal and often to develop the deepening and broadening of the three sections of the waterway. Dredging was a main provider of activities. Hand working accompanied machines under the guidance of supervisors – essentially from Greek origin – to keep the 5

Caroline Piquet, Ph.D, op. cit., pp. 283-317.

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banks well off. Hellenic people also prevailed on the dredgers themselves, because of their experience, availability – because of lack of employment in their still poor country –, and commitment, and because the concentration of working on six to ten months allowed them to get back to their country each year. Table 34. Labourers active on the waterway to maintain and modernise it (in 1930) Team heads

34

Supervisors

125

Head of the dredgers

110 Higher labourers

269

Specialised workers (for the maintainance of the dredgers, 813 machines, and the flotilla) Stokers (for the dredgers)

328

Mechanics

147 Middle-range workers

1,288

Seamen

503

Manoeuvers

243

Various people (fellahs as building labourers)

205

Low-range workers Total

951 2,508

Source: Archives of the Company, quoted by Caroline Piquet, Ph.D, op. cit., p. 266.

C. European management and welfare capitalism Egypt was in no way involved in the running of the canal. The management at Paris supervised all decisions taken by its Ismailia Bureau, especially those regarding finance. “Nothing happened in Egypt without Paris’s consent […]. Paris and Egypt were in constant communication.”6 The personnel at Paris and in Egypt formed two distinct groups and all through the pre-war period, no shifts or promotions disturbed the solidarity of the Company’s employees in the canal zone. Only the deputy general manager Max Bahon managed to have himself transferred from one office to the other. If we consider the global amount of workforce in Egypt, whatsoever the posted service, the Company’s employees were arranged in a strict 6

Georges-Picot, interview of 22 June 1984.

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hierarchy: the office staff (440 in 1931), the pilots (117), and officers of the transit equipment (22), foremen (41), and labourers (2,420). While all benefited from extensive social perks and while the salaries of even the labourers was around a third higher than the average Egyptian’s, the canal did have a certain “work aristocracy” and very few Egyptians were allowed in. At the beginning of the 20th century7, 33 per cent of the 1,660 labourers were Greek, 31 per cent Egyptian, 15 per cent Italian, 11.5 per cent Austro-Hungarian (often Croatians), and 4.5 per cent French. By 1930, the Egyptians had gained a majority, and, in 1939, they accounted for 52 per cent of the workforce, with the Greeks weighing in at 20 per cent, and the Italians at 18 per cent8. These workers were paid more than their Egyptian counterparts: “As for the salaries and cost of living […], there is a difference […] the salaries of the European labourers being double that of the indigenous ones. This difference was justified first by the universal law of demand and supply (every day saw a large number of locals clamouring at the Company’s gates, asking for employment), but also by the fact that, living in their native land and being accustomed from infancy to the frugal lifestyle so common in all hot climates, these indigenous workers needed only about half the amount required by their European counterparts.”9 In 1937, the Company made a distinction between those workers who had joined before that year and who were to receive the usual perks and benefits, and those new ones who had come after and were not eligible to have them. This distinction remained in force till 1946. In 1939, the majority of the Company’s European employees (management and workers) were French (59 per cent), followed by the Italians (14 per cent), the Greeks (8 per cent) and the English (7 per cent – among which Maltese people). As with so many other countries in this “colonial” era, the European “colony” could not help having a certain sense of superiority vis-à-vis the locals – a sentiment which does not seem to have been echoed by the employees of the Company. The question is, how did they manage escape such a common and widespread malady which had infected even the intellectual “elite” of those times? Even as eminent a sociologist and political scientist André Siegfried seemed to have been bitten by the bug. He wrote on his sojourn to Egypt: “On such a trip to the Eastern Mediterranean, it becomes quickly evident that unless we want to flirt with disaster, managerial posts must only be given to Westerners. Only they have this sense of order, the capacity to view things from a larger perspective, to see further in the distance. But we also quickly learn to

7 8 9

Jules Charles-Roux, L’Isthme, op. cit., volume 2, p. 235. André Siegfried, Suez, Panama et les routes maritimes mondiales, Paris, 1948, p. 72. Jules Charles-Roux, L’Isthme, op. cit., volume 2, p. 241.

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depend on these intermediary elements, the Greeks, the Italians, the Syrians and sometimes also the Jews, who seem to have a more lively and supple intelligence than we do ourselves, less sure but so useful […]! [The Greek], ingenious, practical, quick, who understands with half a sentence, indispensable. At the canal as in Egypt, we could not do without him.”10 “After having seen and worked with Egyptians for thirty years, I can say with reason how incapable they are, in general, to build anything of substance. Their nature is stamped with the endemic oriental negligence and “laissez-faire”. Stuck in its own rut, deceived by illusions, imprecise, their intelligence often seems totally incapable of following the simplest logical reasoning. [The] public services [of Egypt], such as its railways, prove on a daily basis that their management is innocent of any rational organization or the maintenance of any discipline.”11 Such strong sentiments explain why the Company could not think of transferring the management to the Egyptians any time before the concession lapsed. And even that option was pushed further back by the firman of 1856 which envisaged the possibility of renewing the concession. “These major world-wide services have been functioning so well and especially, so regularly over the past century, that we have almost forgotten how they are maintained […]. The impetus came from Europe, and it is the White Race which has provided the leaders, the technicians and in general, the organization and the required competence. There has arisen, these days, something like a revolt of these non-European nations. We awakened them, educated them, stimulated them, and they tell us now: ‘We have now learnt to use your tools and therefore we are your equals. Why should we not manage ourselves these services which lie on our lands?’ […] Europe’s and the West’s superiority is of a far more complex nature than is imagined by those who want to take their place […]. The intrinsic genius of the West lies in its ability to conceive, organize and run mega-projects which surpass in their scope any individual’s, group’s or even any one nation’s interests. This is exactly what most of these non-European peoples have shown themselves incapable of. Such a project needs a number of qualities […]: the sense of order, proportion between things, the capacity to foresee, the ability to grasp large concepts having a strong cultural essence.”12 The idea of an enterprise which catered to an international clientele and manned by an elite workforce prevailed. “It is well understood that 10 11

12

André Siegfried, Suez, op. cit., p. 72. Admiral Lucas, Controller of navigation, Deputy Chief, then Chief of Transit of the Suez Canal Company (1927-1952), Communication to the Marine Academy, Paris, 1957. André Siegfried, “Le rôle de l’Europe dans la gestion des services internationaux”, from: Autour de la route de Suez, series of articles which were published in the journal Le Petit Havre from October 1937 to January 1938, Le Havre, 1938.

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Egypt does not belong to the canal. At the same time, the canal too does not, and cannot, belong to Egypt. It belongs either to the entire civilized world, or […] to its users, that is to say, to the big European powers, especially England.”13 The Company’s European managers were the missionaries of “management” in Egypt, where they assumed “the white man’s burden” (R. Kipling) – at a time when the color of the skin had not yet become that important in Egypt. Such “mission” encompassed the achievement of some kind of “welfare capitalism” which, like in Europe and even in the United States, promoted “social patronage” to alleviate the hardness of life. The Company transplanted in the Suez isthmus the philanthropic philosophy that prevailed in the Paris enlightened circles14 which its main chairmen, directors and managers attended, especially among social-christian communities. And it was committed to investments into social equipments. The spirit of a “Suez large family” was conceived in the isthmus, either in Port Fouad-Port-Saïd or in Ismaïlia. Relatively high wages, a policy of housing, regular payments of travel expenses to European workers, a fund for lending to employees, a retirement fund, all were the attributed of a coherent social policy which kept momentum from the end of the 19th century, as a way to re-distribute (a little) part of profits, and moreover as a leverage to stabilise people in the isthmus despite the climate, the isolation from large cities, and from Europe. On the other hand, the local labourers at the work sites and on Company ships were not that lucky. Many were still employed on a monthly basis and enjoyed fewer perks than those given to full-time “employees”. Though they earned more than the local average, Egyptians’ salaries were less than half that of their European peers. There were mass redundancies in 1892 and 1898 (almost 500) when the major works on the canal were completed. But all in all, at the end of the 19th century, only 10 per cent of the 1,660 labourers had less than ten years of service under their belt; conversely stability prevailed, as two-thirds had been with the Company for the past ten to twenty years and 18 per 13 14

André Siegfried, “L’Égypte et le canal”, Ibidem, December 1937. See André Gueslin, L’invention de l’économie sociale. Le XIXe siècle français, Paris, Économica, 1987. Frederick William Crittenden, Corporation, be good!: The Story of Corporate Social Responsibility, Indianapolis, Dog Ear Publishing, 2006. Michael Porter & M. R. Kramer, “The competitive advantage of corporate philanthropy”, Harvard Business Review, 2002, 80 (12), pp. 56-69. Claude Beaud, “Les Schneider au Creusot : un modèle paternaliste en réponse aux impératifs du libéralisme et à la montée du mouvement socialiste”, in Erik Aerts, Claude Beaud & Jean Stengers (eds.), Liberalism and Paternalism in the 19th Century, Leuven, Leuven University Press, 1990. Andrea Tone, The Business of Benevolence: Industrial Paternalism in Progressive American, 1997. Sanford Jacoby, Modern Manors: Welfare Capitalism since the New Deal, Princeton, Princeton University Press, 1998.

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cent more than twenty years. Despite expatriation constraints, the Company would seem to have kept its manpower more or less intact. Until WWII there were only a few strikes, one in 1891 among European labourers (about wage premiums), one in 1893 – which caused the creation of the first trade union of the area in 1893 – and 1894 – when the social climate had been crumbling because of harsh redundancies among dredging workers: the Chief Engineer Lemasson was even killed by a Dalmatian worker on 29 September 1894, as the highest point of the social upsurge. That mobilised especially Greek and Italian employees – which led to a hard reaction when 150 Greeks were dismissed and rapatriated in Europe. Massive redundancies (about 420 people) pending in 1898 could have stirred the same dire effects, but the authorities favoured indemnisation and rapatriation of European people, which appeased the exasperation – even if Egyptian hand-workers could not but come back to their villages. Last a strike occurred among the pilots in 1918, who declared themselves unhappy with their retirement pension and bonus packages, came together in a “Society of Captain Pilots”; ultimately, an understanding was reached “in a spirit of mutual trust”15. A pessimist perception of the statutes and life of the Suez workforce, as was developed somewhat in the nationalist press, ought to be more seriously assessed, and a more favourable balance drawed16, but the crisis of 1891-1894 showed the epidermic sensitivity of people threatened to lose their job, as it was the case in the same year in western Europe because of a grave recession. The interwar period17 was marked by a trend of change when the social moves converged with the expression of nationalist discontent, opening a durable way till the 1950s. Several moves led to the organisation of a few trade unions or social organisations among European workers, all the more since they resented against the growing part played by local labourers within the Suez workforce and since inflation eroded the purchasing power. Among Egyptians themselves the political environment enticed people to confound social unrest and nationalist demands against a firm which somewhat symbolised European hegemony or might in the country, and was supported by British troops in the name of the security of the waterway: Political protectorate and social patronage began to be criticized altogether. First a general strike occurred in March-April 1919 throughout the country, without reaching the Suez employees; but all at sudden, on 13 May 1919, despite some concessions about wages, the Company and its neighbouring enterprises

15 16 17

Captain Paul Parfond, Pilotes, op. cit., p. 219. See Caroline Piquet, Ph.D, op. cit., pp. 320-353. Ibidem, pp. 403-428.

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in the isthmus faced a special strike – to extend holiday time, broaden the pension fund, reinforce housing and health facilities. Tensions between labourers, between them and the firm, led to a long strike for 28 days. Then negotiations allowed a consensual agreement when several demands were met – especially the eight hours-day, a wage increase, etc. Social peace did not reign over the isthmus because each years some claims were issued, and the firm did not show itself more talentful than the majority of French corporations in France indeed, balancing between promoting trade union leaders, reinforcing discipline and foremen’s authority, or setting up a favourable trade union from 1920, the Syndicat des ouvriers de la Compagnie du canal de Suez, which became the more important trade union there in the 1930s, and a durable representative of social unrest during negotiations leading to satisfying concessions, able to alleviate discontent and halt the confusion between social and nationalist aspirations. Its European membership seems dominant, whereas a few Egyptian organisations were developed in the meanwhile, without its dimension, surely because an important part of Egyptian workforce was not a stable one and joined the Company only during the booms of works on the canal or transit. But daily workers (or “tâcherons”) tried to build a specific trade union to defend their claims about wages and a more stable recruitment, either in 1919 and moreover in the 1930s, when the world crisis and the reduction of transit explained reductions in worktime for such sub-contracting suppliers of labourers. 3. THE SUEZ COMPANY BECOMING A PART OF EGYPTIAN HISTORY? Such reality explains why one has to understand how much the managers of the Suez Company were convinced of their legitimacy in the isthmus, because still in the interwar period they had contributed to extend “progress” there, that is economic and urban developments18. A. The creation of an actual Egyptian “frontier” The developments for facilities led to the drawing of new areas of activity and life: it was quite a new “frontier”19 to a Far East within the Near East, eastwards from Port-Saïd to Port Fouad, and southwards to Ismaïlia and Port Suez/Port Thewfik. Thanks to the workshops and transit headquearters and premises, the canal’s traffic gave rise to an 18

19

See Caroline Piquet, “The Suez Company’s concession in Egypt, 1854-1856: Modern infrastructure and local economic development”, Enterprise & Society, volume 5, n° 1, March 2004, pp. 107-127. In reference of course to the “American Frontier”.

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entire ancillary economy independent of the Company. And such boiling growth was supplemented by Egypt itself when it established Port-Ibrahim as a commercial platform in the Red Sea. Oil refineries sprang up in Suez and an oil port was built in 1927. Mainly in Port-Saïd/Port-Fouad and Ismaïlia, the Company designed and laid out both the townships too: It constructed the buildings, laid out the avenues and parks, maintained the electrical and water services20. Nevertheless, throughout the 19th century, Egypt had strongly opposed the development of Port-Saïd, because first the bourgeois pressure group at Alexandria had been rather efficient at blocking the growth of any rival port. Ships which brought in coal, left with their holds empty, except of course, with what was required for the return journey as Alexandria intended to retain its hold on the commercial exports of the country. It was only in 1902 that the Company was allowed to directly manage the port at Port-Saïd, which was declared a free zone and linked to the national railway network. But overall, because of the large size and effectiveness of the Alexandria harbour, and because the Alexandriote business community campaigned strongly by the Egyptian authorities against the development of the local role of its competitor, Port-Saïd did not grow in importance on an Egyptian level as a port either commercially, as a warehouse or for transshipments. In 1937, only 3 per cent of all port traffic passed through Port-Saïd, 13 per cent if we count the coal and oil required by the canal. “Port-Saïd did not evoke too much interest. Though a number of ships passed through its port, they neither took on or off-loaded merchandise as its links with the interior were not well established […]. Moreover, PortSaïd gave the impression of a ghost town. Its wide avenues were deserted, we hardly saw anything except a few desultory hackneys and bicycles. From morning to evening idlers could be seen whiling away their time on the terraces of cafes […]. The town woke up only at the arrival of any large passenger ship. Then, whatever be the time of the day or night, shops opened, glaringly lit, and hawkers swarmed down on the unfortunate few who had the temerity to disembark.”21 Despite such hindrances, though Port-Saïd had only 2,000 inhabitants in 1860, by 1908 it was teeming with 47,500, of which 35,000 were Europeans. In the wake of several initiatives from European corporations in Europe and even in Egypt – with the Heliopolis project22–, the 20

21 22

Céline Frémaux, “Santé et hygiénisme dans les villes du canal de Suez, Fin 19e-1ère moitié du 20e siècle”, Égypte/Monde arabe, Troisième série, 4/2007, pp. 75-101. Jean Morin, Souvenirs d’un banquier français, 1875-1947, Paris, 1984. Robert Ilbert, Heliopolis, op. cit, 1981. Robert Ilbert, “Égypte, 1900 : habitat populaire, société coloniale”, in État, villes et mouvements sociaux au Maghreb et au MoyenOrient, Paris, 1989, pp. 266-282. Also see Catherine Coquery-Vidrovitch & Odile

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Company founded a new city for its employees and built housing, mainly in 1920-1923, but the process took shape throughout the interwar period23. The intent was to fix the workforce coming from all over the Mediterranean area, and to promote welfare along with social-christian ideas – those of chairman Arenberg for example at the start of the century. All in all the revolution was not so much astonishing24 because the new condominium established in Port-Fouad did not reach so broad a dimension, with only 279 houses for European workers in 1939, 48 for local workers, and twenty for foremen, that is about 350 compared with a workforce of near 900 people – and in fact Port-Fouad lodged only 3,000 inhabitants in 1944 in front of 130,000 in Port-Saïd. Free market prevailed in the isthmus, and modest local real estate developers contributed more than the Company to the development of the urban area, as had also been the case in western Europe despite the valuation of social patronage by corporation and businessmen’s legends. But Port-Fouad became some kind of a symbol of “welfare capitalism” in Egypt and contributed highly to consolidate the legitimacy of the Company in the isthmus – and even in Europe thanks to pictures proving its commitment to social progress altogether with economic progress in transportation. Its large avenues with trees and grass spaces, with its beach, its nautic club, its garden city for the executives andmiddle-men’s houses, all in all created an impression of an oasis within the desert land – several decades before the huge cities developed along the Persian Golf like Abu Dhabi or Dubaï. Southwards in the isthmus, Ismaïlia gathered 9,000 inhabitants (with 2,000 Europeans), Port-Thewfik, Port-Ibrahim and Suez 16,000 each, including 2,500 Europeans. The Company had helped create an entire new province which, as in the delta and the valley of the Nile, had taken shape around existing waterways. Much of the activities in this new zone revolved around the firm and its initiatives. It directly employed close to 5,000, greatly improved the living conditions of many more, ably managed the townships, nursed the ill. It was an entire colony in miniature, almost achieving the dreams of Saint-Simonians of the mid19th century. “If it is terrible to be exploited by imperialism, it is still worse not to be touched at all.”25 The canal had helped hundreds of thousands

23

24 25

Goerg (eds.), La ville européenne outre-mers : un modèle conquérant (XVe-XXe siècles) ?, Paris, L’Harmattan, 1996. See Marie-Laure Crosnier-Leconte, Garnal Ghitani & Naguib Amin, Port-Saïd. Architectures XIXe-XXe siècles, Cairo, Institut français d’archéologie orientale, 2006. See Caroline Piquet, Ph.D, op. cit., pp. 560-585. The economist Joan Robinson, On the Topics of Imperialism, quoted by Jean Bouvier, in: Jean Bouvier, René Girault & Jacques Thobie, L’impérialisme à la française, Paris, 1986. And, on its practical application: Jacques Thobie, La France impériale, 1880-1914, Paris, 1983.

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lead secure and comfortable, if not affluent lives in an erstwhile desert. Every book and brochure insisted on highlighting these boons brought by the Company26, even though the investments were patently made for further development and exploitation: workshops for the equipment, housing for the workers, water, medicine, etc. In this area, one could pretend that Egypt did not feel as though it had been colonised, as it received fully half of the profits generated by the development of this “common domain” and the leasing of plots. The canal also helped the growth of other commercial activities such as handicraft, which brought in more money in the form of taxes. Moreover, it took in its own hands the development of Port-Ibrahim and proved that it did not depend on the Company for its town planning strategy. It made sure that Port-Saïd had a municipality so that it would share in the Company’s power. The firm meanwhile kept its hold on the management of Ismaïlia and Port-Thewfik. B. Suez’ Egyptian embeddedness? The Company felt therefore some degrees of “good consciousness”, and it express it within the Egyptian business circles themselves. Historian Caroline Piquet27 studied the forms of “embeddedness”28 of the firm in Egypt thanks to its participation to several societies gathering business and even cultural elites, especially the Société khédivale d’économie politique, de statistique et de législation (established in 1909) and the Fédération des industries d’Egypte (Industrialists’ Egyptian Society, founded in 1922), where its managers could meet their fellow businessmen or engineers, and evoke the conditions for a rapid development of infrastructures and production. The former, of whoch Frenchman Émile Miriel, the manager of Crédit foncier égyptien, was a vice-president, even edited a journal, L’Égypte contemporaine, to help a better understanding of the economic and social background where foreign firms were rooted. Suez 26

27

28

“The work done by the Suez Canal Company in Egypt”, from: Le canal de Suez, Notes et statistiques, Paris, 1950, pp. 65 to 78, which amounts to 14 pages out of 78. And: Henry Poydenot, Le canal de Suez, Paris, 1955, pp. 97-99. Caroline Piquet, “Les réseaux d’affaires en Égypte : patronat européen, minorités locales et notables égyptiens dans la réforme et l’industrialisation du pays durant l’entre-deux-guerres”, in Hubert Bonin, Catherine Hodeir & Jean-François Klein (eds.), L’esprit économique impérial (1830-1970). Groupes de pression & réseaux du patronat colonial en France & dans l’empire, op. cit., pp. 633-652. And Caroline Piquet, Ph.D, op. cit., pp. 136-148. See Mark Granovetter, “Economic action and social structure: the problem of embeddedness”, American Journal of Sociology, volume 91, 3, 1985, pp. 481-510. Brian Uzzi, “The sources and consequences of embeddedness for the economic performance of organisations: the network effect”, American Sociological Review, 1996, 61, pp. 674-698.

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was admitted to the board of the journal published since 1925 by the latter, L’Égypte industrielle, because it was indeed among of the main industrialist employeers in the country29. But one has to avoid exagerrating the fallouts of such involvement because such elites were too much confined within narrow circles, which prevented them to go past European or European-minded business, while nationalist business circles had set up their own societies and networks30, where they denounced imperialism – through campaigns of opinion in the 1930s –, and brought together benevolent investors and possible predators, in particular because of their links with the Wafd party. This explains that the firms managing conceded services (water, tramways, gaz and light) became the target of such critics, and among them the Suez Company of course, and projects of Egyptianisation started to be expressed at the end of the 1930s. Such contesting claims arouse concerns by the Company, which reacted with its first “p.r.” program: public relations and corporate communication were introduced empirically in the 1930. It financed the publishing of articles or reviews which presented favourably its achievements31, especially in the Arabic journals, as a leverage to counter-attack within the arabic opinion itself, thus breaking the “invisible wall” which had confined the Company to narrow elites circles in Egypt, either Europeans or close to the king’s power. And Caroline Piquet noticed that courses in Arabic were introduced at the Company for managers, in a way to prepare the intensification of bilateral relationship with Egyptian authorities and experts. C. Suez heritage legacy? Beyond mere economic and useful means of prosperity and equipment, the Suez Company helped implementing urban development in Egypt as part of the modernity schemes which also characterized a few areas in Alexandria, Cairo, or the Cairo suburbs (Heliopolis, the city built Belgian Empain firm). Such a legacy has now been reassessed through models of analysis dedicated to “heritage” – in the wake of industrial archeology and patrimonial refurbishing of firms’ ancient premises. Port-Saïd32 or Ismaïlia have for example become targets of 29

30

31 32

See Hélène Cottenet-Djoufelkit, “L’industrialisation de l’Égypte au XXe siècle”, in L’Égypte dans le siècle, 1901-2000, issue of Égypte/Monde arabe, n°4-5, 2/2000-1/2001, pp. 135-171. See Robert Tignor, Private Enterprise and Economic Change in Egypt, 1918-1952, Princeton University Press, 1984. See Caroline Piquet, Ph.D, op. cit., pp. 159-161. See Marie-Laure Crosnier-Leconte, Claudine Piaton, Gamal El-Ghitani, & Naguib Amin, Port-Saïd : architectures XIXe-XXe siècles, Cairo, Institut français d’archéologie

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academic research programs, which help get conscious that the Suez Company did invest seriously in durable equipment in its area of activity33. Itself wished to get established within a long-term of Egyptian history and to become genuine part of it: it favoured thus archeological excavations in the Suez isthmus, either by academics, or more and more along the tutelage of the Egyptian Department of Antiquity, which, thanks to French scholars indeed, asserted itself as a key leverage of preserving heritage in the country; and an archeological museum was set up in Ismaïlia to collect pieces and relics.

4. THE SUEZ COMPANY AS A EUROPEAN ENCLAVE? Despite our stance about the more even-that-told relation between Lesseps, the Company, and Egypt in the first years, one cannot hide a growing reality, that of a mighty Suez Company, endowed with an unequalled capacity of influence, economic activity, financial revenues and means of action in the country itself, and of humane and relational clout. Though mostly confined to the environs of the canal, the European personnel led a relatively good life despite the conditions of climate and expatriation, the requirements of daily work, and the booming times when the transit demanded to be faced. It was quite “a little France in eastern Mediterranea”34. As it was the case in most overseas activities, time-tables were adapted to the environment: In winter, these employees worked eight hours daily, but from May to October when the heat turned unbearable, they were required to work only in the mornings from 7:30 to 1 PM o’clock. Still, a large number of engineers also turned up in the afternoons – the pleasures of their daily life did not come in the way of their service to the Company. After the siesta, it was time for

33

34

orientale-IFAO, 2006. Claudine Piaton, Inventaire des immeubles de Port-Saïd, CDROM, Paris, École de Chaillot, 2006. See Mercedes Vollait (ed.), Architectes et architecture de l’Égypte moderne (1830-1950), Paris, Maisonneuve & Larose, 2005. David Peyceré & Mercedes Vollait, “L’âge des mutations : les XIXe-XXe siècles”, in A. Raymond (ed.), Le Caire, Paris, CitadellesMazenod, 2000, pp. 361-464. An important middle-term program has this been launched from the 2000s by a French and European team to reconstitute the evolution of architecture in the Suez canal zone (Mercedes Vollait, Céline Fremaux, etc.). See the exhibition by Marie-Paule Arnauld, Claudine Piaton, & Mercedes Vollait, Trois villes pour un canal. Des créations urbaines dans l’isthme de Suez, Paris, Cité de l’architecture et du patrimoine, 2009. Caroline Piquet, Ph.D, op. cit., p. 587. See her precise analysis of this micro-society in the isthmus in pp. 587-634. Jean de Reffye, “Le canal des années vingt et trente”, Bulletin de l’Association du souvenir de Ferdinand de Lesseps, n°5, April 1984, pp. 61-67.

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sports, recreation (tennis, horse riding, sailing, golf, swimming), and socializing. “‘The people of the Canal’ […] invited us to these gatherings which were a daily affair with them. They took turns in hosting these evenings which began almost before the afternoon had ended. Elegant robes and spanking white Spencers intermingled, laughed, played bridge and danced on lush lawns or in open grand villas accompanied by the soft whirr of ceiling fans […]. We flirted […]. Parties were hosted at home, at the English club or at the Circle and everywhere we were met by a silent and smiling service […]. This courtly, distinguished world was far removed from a war-torn France just emerging from a prolonged period of hardship and rationing. In 1950, we found ourselves transported to the inter-war era of colonial grandeur, reliving the atmosphere of a Somerset Maugham novel.”35 It was quite an island of prosperity and elegance in the midst of an under-developed desert, along with the purchase power, the social level (upper lower classes or middle classes, for a majority – under the executives themselves). In the words of Lyautey: “Sumptuous menu […], dining hall in the verandah overlooking a veritable botanical garden, complete with palms and bougainvillea […]. I find myself seated beside a young lady in pink who, born here some eighteen years back, talks to me of tennis, seasons’ tickets for music, reading and comedy (this winter’s big attraction at Ismailia). I tell her about Cairo, that I hope to be there in about five hours and that a person as well-informed as her could well give me a few tips…. But, in these past eighteen years, neither she, nor her sister, nor her mother have been there. Their entire Egypt consisted of a season’s ticket for readings at Port-Saïd and tennis at Ismailia.”36 Social life and relationship joined their effects with those of expatriation and confinement to a small area, far from Cairo and Alexandria, to constitute some kind of “Suez club” in the isthmus, mixing corporate culture – committment to transit and progress –, sense of (European, technician and educational) superiority over local people – despite the antique Egyptian civilisation –, habits of autonomy among Egyptian administrative and British military settings, and a perception of peaceful permanence, which was also the case in several other overseas large settlements (plantations, mining or harbour concessions, utilities, etc.). Still, such an impression should not be generalized, as that would do injustice to a community which was often as socially dynamic as it was

35

36

Jean-Claude Sournia, “Souvenirs d’un remplaçant du chirurgien en chef de l’hôpital Saint Vincent de Paul à Ismaïlia”, Bulletin de l’Association du Souvenir de Ferdinand de Lesseps, n°4, April 1983, p. 37. Philippe Lyautey, 17-18 October 1894, Lettres du Tonkin et de Madagascar, Paris, 1933, 3rd edition, page 16, in: Jean-Édouard Goby, “Le canal de Suez pendant la Première Guerre mondiale”, Bulletin de l’Association du Souvenir de Ferdinand de Lesseps, n°5, April 1984, p. 41.

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rich. A refined cultural sense brought together Europeans at the gatherings of the Alliance française which, for example, invited eminent literary personalities or arranged classical concerts. There were those who spent their free time studying geology or archeology and were of considerable help to the specialists in these fields, with links with the Institut français d’Égypte for example. The wives of many Company agents helped and supported the Egyptian Red Cross; and, besides issues of faith, religious life was a decisive leverage to relationship, cohesiveness, and sense of community – as was used in this time within a huge majority of French people, especially middle classes. Employees and their families stimulated scholarly pursuits. Last investments into schooling brought consecration to the effort to promote progress in the isthmus: a few elementary schools were built and subsidised for European employees’s children, in Ismaïlia as soon as 1883, reinforced in 1908, then in 1924 (with brothers and nuns in charge, mainly Frères de Ploërmel), and about 250 pupils worked there in 1950. Such schools were established too in Port-Fouad (1929), PortThewfik and Suez. Such a local policy was supplemented from the 1920s when grants were distributed for youngsters attending (religious) elementary and secondary schools in Alexandria or Cairo, Was it then a social paradise? The Company’s spokesmen certainly thought so and proclaimed it often: “The Prince d’Arenberg did not look to the welfare of the shareholders or the clients of the canal. He stretched his arms out to the personnel […]. He looked to the well-being, the ‘best-being’ of all, by improving hygiene, medical care, healthier and more comfortable accommodations […]. Malaria was conquered […]. The entire isthmus was transformed into a land of opportunity and Ismaïlia into a fertile oasis – it was a veritable Eden!”37 Though this might be overstating it somewhat, industrial relations remained serene despite bursts of discontent and even a few strikes. The management, the European employees and the pilots enjoyed pay scales and life styles far above those in the majority of French (and of course Egyptian) enterprises – and even stable Egyptian employees did participate to the distribution of money and welfare, on a lower scale or level. At the date of 1932 about 2,900 employees were registered in Egypt by the Company, which could represent an overall population of 11,000 people with their families there – and European employees could be estimated at about 300 to 600, supplemented by a hundred pilots.

37

G. Devin, Le prince Auguste d’Arenberg, booklet, Paris, 1924, p. 25.

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CONCLUSION THE SUEZ COMPANY AS A DEVELOPER? Indeniably the Suez Company contributed to forge a new landscape in Egypt on several locations of the isthmus: such developments in services, industry, and urban life shaped a region along with the corporations which set up industrial areas in Europe or America – think of Ford in Detroit-Dearborn, ot steelmakers and collieries in the Ruhr or Lorraine. Thus it acted as a leverage to economic and social progress in Egypt – beyond its mission to develop worldwide maritime transportation. It was therefore justified to claim its legitimacy as a supplyier of employment, a creator of cities, and the supervisor of some islands of welfare capitalism or business of benevolence. On its scale it helped almost a dozen thousands people to live in the isthmus. Just before WWII, despite discontent outbursts against redundancies (in the 1890s, still in the 1930s), despite inequalities between the layers of personnel (between European and Egyptian; between stable and daily workers), the Suez Company could feel pride, legitimacy, and a sense of duration – till the end of the concession in 1968 indeed. Perhaps such quietness led its managers to forget paying scant attention to the cultural changes in Egypt among middle classes and educated low classes: habits structured in the interwar period helped them to certitudes which could have afterwards fueled blindedness to social evolution in the isthmus.

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View over Ismaïlia

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Offices of the Company at Ismaïlia

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The offices building at Ismaïlia

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The Villa of the head of Transit at Ismaïlia

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Saint-Vincent hospital at Ismaïlia

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St Vincent hospital at Ismaïlia

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The station at the outfall exit (Déversoir)

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SUEZ AND PANAMA: TWO CANALS, TWO SYSTEMS, A COMMON GEOPOLITICAL ISSUE The comparison between both Suez and Panama canals is often spontaneous, and their parallel contribution to worldwide economic growth and to “general progress” is obvious. From the start, Michel Chevalier himself, the Saint-Simonian utopian economist, delivered a little study about a project of establishing a canal through both isthmus of Panama and Suez1. Later on, in 1948, the well-known scholar André Siegfried published a book mixing the history and maritime studies about both canals, just before the explosion of the oil traffic2. Drawing such a comparison might be still more striking because in both cases the personality and skills of Ferdinand de Lesseps were deeply involved. But the fate of such initiatives met quite different achievements: success on one side and failure on the other. Could we put in touch geopolitical and imperialistic considerations? That is: how to ponder the effects of the opening of both canals on the countries which welcomed them? Then which canal reached the greatest success if we take into account the transit figures?

1. PANAMA AS ANOTHER FRENCH TECHNICAL AND FINANCIAL ADVENTURE Huge differences can be reached between the programs of building each canal3, but on a first stage both were inspired by French engineering 1

2

3

Michel Chevalier, L’Isthme de Panama, examen historique et géographique des différentes directions suivant lesquelles on pourrait le percer et des moyens à y employer, suivi d’un aperçu sur l’isthme de Suez, Paris, Gosselin, 1844. André Siegfried, Suez, Panama et les routes maritimes mondiales, Paris, Armand Colin, 1948. See Miles DuVal, And the Mountains Will Move: The Story of the Building of the Panama Canal, Stanford University Press, 1947. David McCullough, The Path between the Seas: The Creation of the Panama Canal, 1870-1914, New York, Simon &

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and entrepreneurship, and completed through French initiatives and technology. Basking in the notoriety of his successful Suez canal triumph in 1869, Lesseps’ attention quickly focused on an even grander project: building a similar waterway through the Central America isthmus4. There was indeed a need for the growing maritime traffic between Europe and western America. Circumnavigation around South America, through the Magellan detroits, was difficult and time consuming. The intercontinental railways in the United States (from the 1860s), and even the railway track opened in 1855 through the Panama isthmus, could not provide enough opportunities because of the cost of transshipment of cargo – especially for raw materials and commodities or large equipment machines. Bonaparte Wyse, an unknown but crafty French engineer, had explored the isthmus in 1877 and succeeded in concluding a covenant with the Bogota government in 1878. Despite the hostility of American business and political authorities against such a French intrusion, an international congress of scientists was held in Paris in 1879 to consider the feasibility of five competing projects. In the end, the second shortest route (72 km), through the Colombia state, from the Limon Bay and Colon on the Atlantic coast to Panama Bay on the Pacific, was selected because it was believed this canal route could be accomplished without a lock system. The primary advantage over an American proposal crossing Nicaragua was that the level exceeded thirty meters only for a stretch of ten kilometers. The Compagnie universelle du canal interocéanique de Panama was set up in December 1880-January 1881 by Lesseps and his son Charles. Several Paris bankers issued equity and bonds, and by launching a large newspaper advertising campaign, individual investors were lured with the support of the recently developed deposit banks. Collecting FRF 850 million to dredge 75 million cubic meters seemed feasible within an eight-year deadline, especially because French public works companies had gained vast experience in numerous large projects (harbours, etc.). The dredging process, which started on March 1881, encountered numerous disappointments. In particular, large numbers of engineers and laborers were stricken ill or died of tropical diseases (around 5,500 deaths or 6 per cent), and dredging unstable grounds resulted in numerous landslides. Delays and costs grew rapidly. But Lesseps stubbornly stuck to the original plan of a non-locks canal even as construction swallowed tens of million of francs. With only a fraction of construction

4

Schuster, 1977. Ian Cameron, The Impossible Dream : The Building of the Panama Canal, New York, William Morrow, 1972. Ulrich Keller (ed.), The Building of the Panama Canal : Historic Photographs, 1984. Georges Edgar-Bonnet, Ferdinand de Lesseps. Après Suez, le pionnier de Panama, Paris, Plon, 1959.

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completed (by July 1888 55 millions cubic meters had been dredged which delivered a first canal 26 km long), and the company’s credit capital drying up, the enterprise collapsed in February 1889 when its last issue failed – and this led to a dramatic double financial and political crisis, the “scandal of Panama”5. Common points can thus be picked up: the decisive role played by Lesseps and his family, clan and engineering team; the dream of crossing a continent and spurring exchanges and shipping; the desire to “click and paste” the Suez project by dredging a canal without locks; the mobilisation of a group of engineering and public works companies, among which French ones, still combative on a worldwide scale; the gathering of thousands of people as the indispensable workforce to accompany the machines through the piercing of the isthmus – and the high number of victims of accidents resulting from the excavations. But differences were obvious: tropical diseases struck the Panama engineering team and the workforce; the “mountains” of rock and earth were quite different from the seas of sand of the Suez isthmus and could not be tackled easily, thus opening large doors to overcosts. And finally the collapse of the Panama Company thoroughfully dissociated both companies: if the Suez Company endured stiff financial difficulties (first when it tried to collect its initial equity, being rescued by the Egyptian State; then when the returns of the transit lagged far behind expectations, which hindered the service of the debt and the payment of dividends to shareholders), it succeeded in extracting itself from its initial demise, and reached profitability. Conversely, the Panama Company could not even complete its excavations and met a stalemate because bankers and investors refused to go on financing what seemed more and more a fanciful project, all the more because the worldwide state of the economy was declining towards a middle-term slump throughout the 1880s. 2. THE PANAMA CANAL WITHIN US GRIP A second issue concerns the geopolitical impacts of each canal. How its concession and its opening did influence the political, military, and geopolitical environment? Did they favour the same process of imperialistic achievements? In fact the Panama canal became quite instantly an American stake, because the very economy of the US was at stake indeed, which paved the way to a rapid and durable insertion of its 5

Jean Bouvier, Les deux scandales de Panama, Paris, Julliard, 1964. Jean-Yves Mollier, Le scandale de Panama, Paris, Fayard, 1991. Hubert Bonin, Histoire de la Société générale. I. 1864-1890. Naissance d’une banque, Geneva, Droz, 2006.

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destiny within the scope of US leaders6. As part of a larger Latin American strategy, the US seized the opportunity to use the economic development prospects of canal construction as leverage7. In 1903, Columbia transfered the concession – the uncompleted canal, the railroad, a narrow strip of Columbia – to the US. Resistance was vanquished through a secession movement supported by the US, culminating with Panama proclaiming its independence on November 1903. The canal zone (18 km broad) passed under the control of the US for a perpetuity mandate versus a yearly indemnity. The American authorities acquired the concession, the canal and the railroad for FRF 210 million from the French company’s shareholders and creditors. The building and the management of the canal, no longer outsourced, were placed under the responsibility of the local public authorities, led by the legendary American hero Georges Washington Goethals. Such an imperialistic grip could be easily understood because, for the US economy, the use of the Panama canal was of utmost importance. Gains in time were considerable for some routes: New York to San Francisco was reduced from 13,135 miles to 5,262 miles, and New York to Hong Kong from 16,579 miles to 11,539. Other routes were more marginal such as New York to Japan (New York-Yokohama, 9,714 miles versus 13,042), or to Australia slightly favored the Panama canal route. US ships constituted 50 per cent of the traffic in 1925 and 32 per cent in 1938. The Panama axis was, in essence, of an internal waterway for the US, much like the Great Lakes. Intense intercoastal tramping activity (such as oil products) accounted for 6,4 ton or 23 percent of total traffic in 1938. The Panama canal made possible rapid economic expansion of the North-Pacific coasts by cutting transportation costs to the East Coast and Europe. On one sense, the Panama canal had more political effects than the Suez one: the US cut down Columbia to create the Panamean pupper State and altogether cut down this latter to set up their direct colony, the Panama Zone, where they managed the waterway, the economy and finances, the daily life, military basis, etc. Conversely, the initial Suez Company did not tackle political and colonial issues, and the British Crown seemed satisfied to get about 40 per cent of the equity of the Company in 1875 – and the split of Egypt from the Ottoman empire had been completed before the intervention of Lesseps in the area. But 6

7

See Alfred Richard, The Panama Canal in American National Counsciousness, 18701990, New York, Garland, 1990. John Major, Prize Possession : The US and the Panama Canal, 1903-1979, New York and Cambridge, Cambridge University Press, 1993. Ovidio Diaz Espinosi, How Wall Street Created a Nation : JP Morgan, Teddy Roosevelt and the Panama Canal, New York, MJF Books, 2001.

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only a dozen years after the opening of the canal did the British Crown establish its grip on the Egyptian State, seizing the opportunity of the Arabi’s revolt of 1882: since then, Egypt had become its actual protectorate, British troops were based in the country and in the Suez isthmus – until 1956. And almost as soon as they left the country, the Nasserians took hold of the canal and expropriated the Company… Both canals were thus key geopolitical and even military issues, opening doors to imperialist action and to colonial attitude, even if the US always denied their neo-colonialist policy. The security of the waterways was at stake, and only when the British interests past Suez dwindled considerably did the British Crown resigned to an independant life of the Suez waterway, after an ultimate military coup in the Fall 1956. Finally the super-power of that time, the US, could not impose some western rule on Egypt to protect for instance the oil flows through the canal, because Egypt had been inserted within the Soviet sphere of influence: the Suez canal did not become an international casus belli – and only local conflicts involved it into military turmoils.

3. TECHNICAL AND FINANCIAL COMPARISONS The public works programs were similar in nature: both companies had to move huge amounts of materials to dredge the canals. At Suez, sand was the issue: 74 millions cubic meters were extracted till the opening of the waterway. At Panama, unlike the Lesseps group’s first projects, the American team decided on the use of locks to dramatically lower the amount of excavation; nevertheless, American builders (with 45,000 workers) still extracted 259 million cubic meters. Counting Lesseps’ work, total dredging reached 315 million cubic meters, over four times the volume for the Suez canal. Despite a huge landslide of 382,000 cubic meters on 10 October 1907 and another one in 1913, the twin-lock chambers, the Gatun dam and the Culebra corridor became emblematic achievements of this second program when steam shovels and dredgers had the key role. But afterwards the Panama canal was almost thoroughfully completed, despite several landslides which required emergency dredgings and excavating, whereas the Suez canal had been a permanent conquest over sand silting-up, a challenge over the desert, all the more because the Company broadened and deepened the waterway along with its half-a-dozen “programs of modernisation”: between 1884 and 1939, 153 million cubic meters more were extracted, that is 90 million in 18841914 and 50 million in 1914-1934; and every year, regular dredging excavated between 2 and 4 million cubic meters sand, that is a total of about 300 million cubic meters between 1870 and 1939.

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Table 35. A comparison between the Suez and Panama canals about excavations (million cubic meters) Initial excavations for the Suez waterway

74

Initial excavations for the Panama waterway

315

Further deepening and broadening of the Suez canal

153

Total of yearly dredging at the Suez canal in 1870-1939 (estimation)

300

On the side of the first Panama Company, the cost of the Panama canal and day-to-day management had reached FRF 1,300 million issued in the Paris market. If 93 millions were used to purchase the Wyse concession and 238 millions for the debt service, 700 millions were dedicated to the construction itself. Fresh cash needed to complete the dredging – woefully underestimated at 60 million cubic meters – was estimated at FRF 600 million. All the figures had doubled since the commissioning of the project in 1879. The project looked hopeless. Considering the massive amount of dredging needed to complete a lock-less passage, it is surprising that the firm never seriously considered the establishment of locks. A second company, the Compagnie nouvelle du canal de Panama, picked up the pieces in October 1894 – intimately linked with the previous financiers and bankers, but without the Lesseps clan. Its only aim was to keep the concession rights, pending a turnaround among investors. After American interests had taken control of the project, they invested $223 million for construction, and a total of $273 million with the purchase of the concession. This compared very favorably to the earlier effort because this total reached an equivalent of FRF 1,115 million versus FRF 1,300 million invested by the first French company, which draws to the conclusion that the overall expenses rocketed to the astonishing amount of FRF 2,415 million – which could be estimated as more than five fold the initial expenses for the Suez canal itself – as we studied them on chapter 8, that is FRF 442 million. But because the investments into improving and maintainance were renewed to optimize the Suez waterway, the total amount of the expenses till WWI reached an amount of 951 million in gold francs, which suggests that the Panama canal consumed 2,5 fold the expenses of its cousin, the Suez canal. This reveals how far from reality had worked Lesseps and his team when they had tried to replicate their success in the Suez isthmus in the Panama isthmus : they had neglected how much the Panama project genuinely differenciated from the Suez one.

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4. TRANSIT COMPARISONS What could be at stake is the contribution of each canal to the development of maritime transportation and to the integration of worldwide economy. Such an issue has already been considered by the Suez managers and stakeholders and by experts8 because the Saint-Simonian or positivist conception of progress involved the big waterways in its intellectual schemes. The obvious difference between both canals was the use of locks to cross the Panama isthmus. The Panama canal followed the courses of both Rios Chagre (down to the Atlantic) and Grande (down to the Pacific); the dam on Rio Chagre formed the artificial Gatun lake. The two parallel sets of the Gatun locks, each consisting of three flights, were needed to elevate from the Atlantic. The two successive double locks of Pedro Miguel (with one flight, and a way up or down for 10 meters) and Miraflores (with two flights, and a way up or down for 16,5 meters) linked with the Pacific side. The “Gaillard cut” is the narrower passage of the canal through the hills, with its bottom at a height of 12,2 meters above sea level. Such a complexity explains the key role of specially trained pilots for the transit. The 68 km Panama canal transit from coast to coast, or 81 km if the maritime fairways are taken into account, had a minimal width of 91 metres and an authorised clearance is of 11,27 m. It was greater than the Suez : 60 to 75 meters and a clearance of 10,36 m. The locks, 305 meters in length and 33,50 in width, set the ceiling for the “Panamax” designation – that is ships built just small enough to transit the Panama canal9, along with the Suezmax commenced to be used to differenciate those which could cross the Suez waterway. The first ship (the 10,000 tons Ancon steamer) crossed the isthmus of Panama on 15 August 1914 in 9.5 hours. In 1938, ships between 4,000 and 8,000 tons constituted the majority (67 per cent), over 8,000 tonnes a minority (17,5 per cent), with 6,000 tons being the average. Rapidly, as soon as the mid-1920s, the Panama canal overtook the Suez one because undoubtedly of the “inner” intercoastal US traffic reached 30 million tons in 1929, the very same year for Suez : Panama climaxed at 30,6 million versus Suez at 33,5 million. But the dire political, military and economic situation of the Far East after the Japanese offensive and the stiff slump of US economy led to a steep fall of the Panama transit – still going on declining – conversely with the Suez transit, which recovered momentum: with 36,5 million, it led over 8

9

André Siegfried, Suez, Panama et les routes maritimes mondiales, Paris, Armand Colin, 1940. William Friar, Portrait of the Panama Canal from Construction to 21st Century, Portland (Oregon), Graphic Arts Center Publishing, 1996.

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Table 36. A comparison between Panama and Suez about transit

1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944

Number of ships crossing the Suez isthmus 3,708 3,110 2,353 2,522 3,986 4,009 3,975 4,345 4,621 5,122 5,337 4,980 5,545 6,084 6,274 5,761 5,366 5,032 5,423 5,663 5,992 5,877 6,635 6,171 5,277 2,589 1,804 1,646 2,262 3,320

Number of ships crossing the Panama isthmus 1,058 724 1,738 1,989 1,948 2,393 2,791 2,665 3,908 5,158 4,592 5,087 5,293 6,253 6,289 6,027 5,370 4,362 4,162 5,234 5,180 5,382 5,387 5,524 5,903 5,370 4,727 2,688 1,822 1,562

Taxed tonnage transported through the Suez isthmus (thousand tons) 15,266 12,325 9,368 9,251 16,013 17,574 18,118 20,743 22,730 25,109 26,761 26,060 28,962 31,905 33,466 31,668 30,027 28,340 30,676 31,750 32,810 32,378 36,491 34,418 29,573 13,535 8,262 7,027 11,273 18,124

Taxed tonnage transported through the Panama isthmus (thousand tons) 4,888 3,093 7,055 7,526 6,910 9,372 11,596 10,883 19,566 26,993 23,957 26,030 27,734 29,616 30,648 30,018 25,065 19,799 18,161 24,704 25,310 26,506 28,108 27,387 27,687 27,299 24,951 13,607 10,600 7,003

Source : Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gaving Wright (eds.), Historical Statistics of the United States. Millenium Edition, New York, Cambridge University Press, 2006, Series Df733 and Df735. We thanks Richard Sutch to have provided us with these figures. The Panama waterway was opened in August 1914 but it was closed for seven months in 1916 because of huge slides. These data do not include US Government traffic; figures include oceangoing tolls-paying vessels and foreign naval vessels of three hundred net tons and oer (Panama canal measurement) for vessels rated on net tonnage, or five hundred tons displacement and over vessels rated on displacement tonnage.

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Panama (28,1 million). Only in 1940 did it lost ground against its challenger because of the conditions of war across the Mediterranean Sea, whereas the Pacific coasts were still havens of peace on the US side. Were both canals competing? British ships from Liverpool rather chose the Suez canal: Liverpool-Singapore: 8,211 miles through Suez versus 15,193 through Panama, and, generally, European ships were more oriented toward Suez. But each canal constituted its own customership along with its own advantage edge. The traffic from West to East through the Panama canal was important in tonnage (38 per cent in 1929) because raw materials and commodities (petroleum, nitrates, wood, sugar from the Philippines, minerals, crude foodstuffs and cereals) were exported by Latin America eastwards. Conversely, the westward traffic comprised either commodities (first-transformed metals, oil) or lighter (but more valuable) equipment goods (machinery, railway equipment, cars and car parts, etc.). The internationalisation of the transit during the interwar years followed the upsurge of Japanese purchases in the US (metals): ships from Japan weighed 5.4 per cent of the transit in 1938. But large shipowners still predominated, with British (23.1 per cent) and Norwegian (12 per cent) fleets, ahead of Germany (6.4 per cent) and France (tenth with only 1.9 per cent). Table 37. Geographical flows of the Panama traffic in 1938 Intercoastal US traffic

23.3%

European traffic with the Pacific coast of the US and Canada

15.4%

US traffic with the Latin American Pacific coasts

12.8%

European traffic with the Latin American Pacific coasts

10.8%

US traffic with the Pacific and Far-East countries

18.3%

US traffic with Australia

3.9%

European traffic with Australasia

4.5%

CONCLUSION Because of its key role in the US economy10 and its function as a gate to Pacific Latin America for US business, the Panama canal reached a more important hold in maritime history. Despite the intense commer10

See Julie Greene, The Canal Builders: making America’s Empire at the Panama Canal, London, Penguin Press, 2009. Alexander Missal, Seaway to the Future. American Social Visions and the Construction of the Panama Canal, Madison, The University of Wisconsin Press, 2009.

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cial and mining connections with Latin America, Europe had feld less involved in the destiny of Panama than it was committed to the evolution of Suez, all the more it was a corridor to British empire in India and in the Far East, then also, from the 1910s-1920s, to the British interests in the Middle East. All European countries had stakes beyond Suez, either the Netherlands about the Dutch Indies – and they shared with the British investors the control over Royal Dutch Shell –, or France, with Madagascar and La Réunion, and further Indochina and New Caledonia. Even Italia became an important customer of Suez as soon as it had invaded Ethiopia in the mid-1930s. Only the Russian fleet lost momentum in the Suez area after its defeat against Japan in 1904 and moreover after the Soviet Revolution. The impact of both canals was determinant on worldwide shipping because it had to conceive vessels along to their standards, the “Panamax” format or the “Suezmax” patterns; and Samuel’s Shell carriers were from the start designed to adapt to the specificities of the Suez canal. The comparison between the transit through both isthmus shows that Suez remained the main world trade waterway; but surprisingly figures also show that both canals were more and more narrowing their gap, with almost the same numbers for crossing vessels and for tonnage in the second half of the 1930s.

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CONCLUSION OF THE FOURTH PART AT THE THRESHOLD OF THE SECOND WORLD WAR, LESSEPS’ GRAND DESIGN STOOD VINDICATED BY ITS UNQUESTIONED STRATEGIC SUCCESS AND THE LEGITIMACY OF THE SUEZ CANAL COMPANY One undeniable fact overshadows all the historical analyses and all the geopolitical, economic and civic debates which have swirled around the inception and growth of the Suez Canal Company. Once the canal had opened for business and the world’s fleets began to make a beeline for the isthmus of Suez from the 1880s, it was clear that the firm was there to stay and to succeed. The firm and its directors confirmed the legitimacy of the concession, of its presence in Egypt, of its team of engineers and of its work and transit plans. In all good conscience they were now convinced that the Company’s “work” – public works and economic achievements – in Egypt helped in the development of the country, or at the least of the isthmus which it had single-handedly rescued from an economic morass. Moreover, they also felt that it contributed in no small measure to the world’s economy, international transportation and the overall progress of humankind. Even the famous French geographer Élisée Reclus, in spite of his strong leftist leanings, could not help but wax lyrical when he wrote about the sheer physical achievement in his Géographie universelle of 1886: “It is truly a grand spectacle to see this canal flowing between these two massive embankment-dunes rising some 15 meters on either side. And how can one remain unmoved when, looking out from the lighthouse at Port-Saïd, one sees this checkerboard of a town laid as a quilt over the desert sands, the vast port with its docks and basins teeming with ships, the white jetties marching on as far as the eye can see, and there, in the midst of dunes and marshes, these enormous steamboats, veritable floating palaces, which seem to be gliding on land, driven by some magical force?”11 There is no doubt that the cutting of the isthmus formed very much a part of the general movement of “Progress”12, progress in transportation and global trading. It also greatly helped to stimulate the economy of entire continents – of Europe to begin with and then of Asia too. The canal thus lived up to all the hopes and expectations of the Saint-Simonians. Its inauguration in 1869 marked the culmination of the new spirit of enterprise which had swept across France from the 1830s to the 1870s. 11

12

Élisée Reclus, Géographie universelle. L’Afrique, Paris, Librairie Hachette, 1886, p. 516; quoted by Claude Liauzu, “Poussée impérialiste et anticolonialisme (18801914)”, Histoire de l’anticolonialisme en Europe, Paris, Armand Colin, 2007, p. 81. See Robert Nisbet, The History of the Idea of Progress, New York, Basic Books, 1981.

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Two clear signs emblazoned the force of this conviction. The first was a gigantic statue of Ferdinand de Lesseps which the Company wanted to place at Port-Saïd, at the entrance to the canal, just like the iconic Statue of Liberty stands at the entrance to the port of New York. Statues were not uncommon for the French – in fact practically every major city in France, be it Paris or a regional capital, sported a statue of “La République”. While these two (the Statue of Liberty and La République) symbolised Light, in the case of Lesseps, the statue would represent the union of engineers, investors and “enlightened” pioneers who had dreamt and planned and worked for the cause of “universal” transportation. This “Universal” Suez Canal Company had indeed brought entire continents closer together. Be that as it may, in all these cases it was the thirst for progress which had impelled and guided the world. The statue had been ordered in 1896, two years after Lesseps’ death on 7 December 1894, and it was designed in bronze by Emmanuel Frémiet13, then erected on a special pedestal conceived by architect Henri-Paul Nénot at the end of the pier built in 1869. The monument was inaugurated on 17 November 1899 by the khedive himself and Lesseps’ widow, among 4,000 guests, which is another hint that, at this time, the spirits of pathbreaking Lesseps, of the Suez Company and of modernising Egypt were still united and that no divorce yet was putting edges between stakeholders – whereas the statue was dismantled in 1956 after the demise of the firm by the Nasserians. The second symbol commissioned by the Company to embody its vision was a series of oil paintings by Eugène Bourgeois (1855-1909). At the occasion of the installation of the statue at the northern entrance of the canal, these panoramic paintings would depict the principal sights of the isthmus and thus record for posterity the layout of the canal and of the isthmus at the turn of the 20th century. Just as the monarchs of yore had had their triumphs immortalized by artists whose work would also symbolize a decisive event in the history of their empire and their people, the Company wanted to record the march of technology and progress, the development of the isthmus and its inclusion in the world’s history14. It was “the Suez canal and French ingenuity”15. 13

14

15

See Marie-Laure Crosnier-Leconte, “Gloire, chute, retour en grâce? Le monument de Lesseps à Port-Saïd”, CTHS Bordeaux congress, 2009. We are referring to the work begun in 2007 by Hélène Brauner on the artistic depiction of the Suez Canal (paintings, drawings, engravings, photographs, films) by the artists who had actually been to Suez (ongoing doctoral thesis entitled: “Les représentations du canal de Suez. Approche esthétique, historique et critique”) and to the Museum which was opened by l’Association du souvenir de Ferdinand de Lesseps & du canal de Suez on 24 January 2007 at 1 Rue d’Astorg, which once housed the headquarters of the Suez Canal Company,. Étienne Micard, Le canal de Suez et le génie français, Paris, Éditions Pierre Roger, 1930.

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This positive perception forms part of what is called “a history of representations” which seeks to define the perception of an institution or an individual by the environment and society it finds itself in. The Company’s success was multi-faceted: it triumphed financially (the profits, the dividends, the stock-market valuations), technologically (efficiency of transit, the investments, the engineering plans, piloting), economically (the massive shipyards in the north of the isthmus, the ports) and socially (the creation of a “new civilization” in the isthmus, especially around Ismaïlia and Port-Saïd). The Suez Canal Company had now joined the ranks and had to follow the lead of the other big corporations such as the Compagnie du Nord, Paris-Orléans and PLM in the railroad business, the Mines d’Anzin and Mines de Lens in the coalmining industry, and other industrial giants like Saint-Gobain, Lafarge and Schneider which sought to reconcile, if not impress the public with their huge factories and massive machinery by putting up stalls in the world fairs, colonial exhibitions and regional trade fairs. They also commissioned paintings and coffee table books to answer the criticisms and pamphleteering aimed against them by unions and socialists. It is not surprising that there arose a sort of kinship, a “community of interests and of spirit” between the administrators and presidents of the Suez Canal Company and these other large corporations. In fact, many of them also sat on the Board of many of these companies (the Mines d’Anzin, for example). In a major “capitalist” move, the firm shifted its headquarters16 to Rue d’Astorg in 1913-1914. The Company’s nerve center was now a stone’s throw away from a major node of political power: the Palais de l’Élysée and the Ministry of the Interior. More importantly, it was now linked directly (the entire length of the Rue Saint-Honoré and down the Boulevard Haussmann in the direction of the Arc de Triomphe) to the City’s business district which, during the “Belle Époque” was located in the 8th arrondissement. The building itself was an imposing mansion with a grand, neo-classical portal and an inner courtyard which added to the Company’s prestige and legitimacy. Almost next door were the headquarters of the Saint-Gobain Company. The Company’s own publications were a series of neatly planned and executed corporate communications. A number of “publicists” (or shall we call them “business authors”) were more or less commissioned to write books and articles, just as several “scientists” investigated and analyzed the development of the canal, the transits, and the Company’s contribution to intercontinental maritime trade. Despite the global

16

See P. Couturaud, “Le nouvel hôtel de la Compagnie universelle du canal maritime de Suez”, La Construction moderne, 5 April 1914, p. 315.

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economic crisis, the question marks surrounding international maritime trade, the apprehensions regarding the situation in China and the China Sea (due to a Japan which was in quest of an “Asian co-prosperity”), and the economic struggles of French ports, the 1930s were the high point of this collective, if not patriotic “good conscience”. Actually, the Suez Canal Company had a triple role to play: advancing French expansionism, consolidating British interests in Egypt, and helping transcontinental trade. Meanwhile, the Company itself, its entire board of directors, its team of managers and its personnel in Egypt were convinced that the prevailing judicial, financial and maritime “system” would be retained indefinitely. In any case, there still remained a almost a third of a century before the expiry of the concession in 1968: the initiatives of the past had resulted in today’s success and there was no reason why the trend should not continue in the future17. No doubt there were a few disturbances which shook the placid flow of the canal for a while, such as the passage of Italian troops in the mid1930s (on their way to the conquest of Ethiopia and the occupation of Addis Ababa) and the sporadic flaring up of nationalist sentiments here and there. But on the whole, as the British gradually began to spread their influence over the flickering ruins of the Ottoman empire, and the Western powers awoke to the need of oil and the importance of the Middle East, the Suez Canal Company’s geopolitical and financial position could not but grow stronger. As the region and the canal grew in importance in the eyes of Europe, its “neutrality”, which was guaranteed by the power of the British military more than by the convention of 1888 – like the neutrality of the Panama canal18 was pledged by the US and international rules –, was further ensured – even as the British were loosening their hold on Egypt which had begun sliding towards political autonomy. Thus, the fact that the Company could continue in its mission of managing an international public service furthered its brand image as an important tool in maintaining the world’s trade and maritime balance and gave it a final and resounding stamp of legitimacy. One landmark for that latter was the direct participation of the Company to the Colonial Exhibition at the Vincennes park in 1931 – under the aegis of marshall Lyautey: it financed there a small pavilion – built by the architect Gras – to proclaim its contribution to the imperial transoceanic world. Anyway, heady with its prosperity, distracted by shareholders who were stridently protesting the reduction in tariffs accorded to shippers 17 18

See: Arnold T. Wilson, The Suez Canal : Its Past, Present and Future, Oxford, 1933. Richard Perruchoud, Le régime de neutralité du canal de Panama, Paris-Genève, Presses universitaires de France-Institut universitaire des hautes études internationales, 1983.

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and lulled by its confidence in the “Pax Britannica”, the Suez Company neglected more and more to keep in touch with the changes sweeping through Egypt. The unrealized accord of 1909-1910 could well have provided a long-lasting (up till 2008) solution which would have satisfied all the four parties – the English government, Egypt, French shareholders and the shippers. It would seem that by failing to revive it in the interwar period, the Company lost an excellent opportunity. By preferring to remain entrenched behind its legal stronghold and to stick to its now historical and legal heritage, it allowed itself to be flanked by History and the rising tide of Egyptian nationalism, a tide which was to exact a heavy political price from Great Britain. The FRF 165 million spent by Egypt19 when the waterway was being conceived and established brought in only 34 million over two-thirds of a century – because the shippers and shareholders had prevailed and kept a tight fist on all profits. The future of the canal was not under any immediate threat. It was the Company’s image which risked being tarnished in the eyes of Egyptians. Fortunately, the management seemed to have realized the situation. Would the Victory of 1945 be also the opportunity of an “entente cordiale” between the Company and Egypt? Of a peaceful and negotiated evolution of the statutes of the firm and of the terms of the concession to allow a more balanced share of the returns from the transit and of the responsibilities within the Egyptian organisation?

19

FRF 89 million in capital shares, 38 million as evaluation of the cost of the loss in furnishing the manpower, 30 million as compensation of 1869, FRF 8 million for the repurchase of the Ouahdi basin (which had cost 2 million to the Company) – which comes to a total of FRF 165 million.