J. T. Walton Newbold
Source: The Communist Review, August 1922, Vol. III, No. 1.
Publisher: Communist Party of Great Britain
Transcription/Markup: Brian Reid
Public Domain: Marxists Internet Archive (2007). You may freely copy, distribute, display and perform this work; as well as make derivative and commercial works. Please credit “Marxists Internet Archive” as your source.
IF one was endeavouring to put one’s finger upon the specific causes which led to the breakaway from the Liberal Party of that considerable fraction of monied magnates and industrialists who formed the backbone of Liberal Unionism one would have to ignore, in large measure, the generally accepted explanation that it was occasioned by Gladstone’s Irish policy and look very much further back than 1885.
The really critical year was not 1885. It was 1875. That was the year in which the approaching collapse of Egyptian finance became obvious; when the British Government, acting through the Rothschilds, acquired the Khedive Ismail’s holding of Suez Canal shares; when the Ottoman Government defaulted upon its loans. That was the year when the British Government, under pressure of the creditors, had to intervene and exercise diplomatic influence on their behalf both in Cairo and in Constantinople, but particularly in Cairo.
The diversion of shipping from the Cape route, where Britain’s power was established, to the Suez Canal route required that British influence should become paramount between Port Said and the mouth of the Red Sea.
The menace of French governmental intervention with a view to gain control of the Suez Canal waterway and the railways of the Egyptian delta necessitated the abandonment by Britain of her traditional policy in that part of the world. Whatever tendency, whatever factors have even a semblance of altering the status quo in India or on the approaches thereto become instantly the grave concern of the rulers of this country.
The triumph of the cotton merchants and manufacturers in the sphere of government, signalised by the rise of Gladstone to the Premiership, altered their attitude of passive hostility to a policy of expansion. The opening up of India after 1857 by the construction of railways and the entry of Glasgow and Liverpool merchants and shipowners into the commerce of all the seas from Zanzibar to Singapore and from Koweit to Kobe made an immense difference in the outlook of those who dealt in Manchester goods.
The completion of railway building in this country and the commencement of foreign competition in the supply of iron and steel resulted in a severe depression in the rail market during the “seventies.” The price of iron rails fell from £9 18s. 2d. to £5 per ton, and of steel rails from £12 1s. 1d. to £5 7s. 6d. in the years between 1874 and 1883.
Whilst British pig-iron production rose between 1870 and 1884 a matter of 31 per cent., foreign production rose 138 per cent New railway facilities made available to the steel masters of Pittsburgh the fabulous ore reserves of Lake Superior, and new technical processes rendered it possible to make into basic steel the hitherto useless phosphoric ores of Lorraine. German and American steel manufacture went rapidly ahead. British rail makers, as well as British contractors, had to look elsewhere than on the Continent or in the United States for a market capable of absorbing their output of material.
Now, as early as 1856, the Ottoman Government had granted to a British syndicate a concession to build a line from Smyrna to Aidin. This was followed, in 1863, by a concession to another group, for a short line from Smyrna to Cassaba, which, later, was extended to Alacheir, the main depot of the Anatolian carpet trade. In 1871 concessions were granted for lines, one to run from Haidar-Pachar, opposite Constantinople, which should, eventually, reach Baghdad, and the other from a Sea of Marmora port up country. Neither of these schemes proceeded very far.
When, in 1874, the British promoters stopped the construction, French interests advanced £500,000 to the Ottoman Government on the guarantee of the revenues of a line to run from Haidar-Pachar to Angora.
This was the beginning of the incessant squabbles that have since ensued as to who should or should not railroad Asia Minor.
It is interesting to learn from one of the great railway promoters of the 19th century, Sir Edward Blount, that—
“Perhaps the chief reason why Disraeli took Cyprus was that that island lay opposite the approach to the Euphrates Valley from the Mediterranean. That railway would have provided swift communication with the East, and would have carried our troops to India in much less time than is now required.” (Memoirs of Sir Edward Blount, pp. 108-9.)
The Euphrates Valley Railway, often discussed during the “seventies” and “eighties,” never came to anything, because “our Government, in the end, refused, as usual, a guarantee.” It was that project, however, abortive as it was, that gave to Britain the otherwise useless island of Cyprus, the chief material accompaniment of “Peace with Honour,” brought back by Disraeli from the Congress of Berlin. British capitalism, at this time, however, took but an occasional and inconsequential interest in projects of railroad construction in the Near East for the very good reason that its pre-occupation with the regions whence it derived its raw cotton, wool, corn and other foodstuffs led its investors to assist in the building of railroads, if not in India, then in the United States, Canada, and South America. Britain’s statesmen and their military and naval advisers saw in every scheme for connecting India with the Mediterranean or for improving the communications of either Turkey in Europe or Turkey in Asia a means to assist Russia to hasten her armies’ advance upon the Dardanelles or to help France to conquer Syria as a preliminary to an assault on the outworks of India. They had command of the sea and, in consequence, desired that all traffic should pass under the guns of the British Navy. Considerations such as these caused Britain in the imperialist period to throw every possible diplomatic obstacle in the way of the promoters of the Baghdad Railway and to encourage, instead, the idea of a railway from Cairo to the Cape. Hence the most important railway promotions of the “sixties” and “seventies” having to do with the Ottoman Empire were put through by interests either wholly or predominantly French in inspiration and in financial backing.
French capital—that of Baron Hausmann and the Société Générale de Paris—was placed at the service of the Khedive Ismail for the building of the railway across the Isthmus of Suez. French capital was also the main fund upon which the notorious Baron de Hirsch drew for his unscrupulous project of a railway to join up Vienna with Constantinople and Salonica. This Baron de Hirsch deserves more than a mere passing commentary. He was the first of three adventurers whose romantic careers have added new tales to the myths and legends of the East. He was the first of three characters, of three personalities, who, in their days and generations, were on all men’s lips. First was Baron de Hirsch. Second was Sir Ernest Cassel. Third was, and is, Sir Basil Zaharoff.
Baron de Hirsch, the herald of that great army of railway promoters, public works contractors, and shad financiers who have, at one time or another, plied their peculiar callings at Constantinople, was associated with the same financial house as Sir Ernest Cassel. Sir Ernest Cassel was associated in his manipulations at Constantinople with the same firm of armament contractors and financiers as Sir Basil Zaharoff.
There is visible a definite connection between the three “mystery” men. There has been behind each, in his time, the same lurking presence. It has been disguised with consummate skill. But conceal their tracks as they may, the most cautious of capitalists cannot mask their identity for all time from those of us who search for them with the applied science of the materialist conception of history.
Baron de Hirsch was the son-in-law of Senator Bischoffsheim, the senior partner in the great international financial house of Bischoffsheim, Goldschmidt and Co., of Paris, London, and Brussels. Bischoffsheims were of German extraction, and the founder of the firm came co Paris from Mayence, via Amsterdam and Antwerp. Bischoffsheim, Goldschmidt & Co. were concerned in the formation of the Société Générale de Paris in 1863, and the Banque de Paris et des Pays Bas in 1871. They had powerful connections in Amsterdam, Antwerp, Frankfurt and Liverpool. They were associated with the Seligmans in the promotion of the London and San Francisco Bank. Like with the Erlangers, the Oppenheims, and the Goschens, they belonged to a group of Jewish financial houses whose home-town was Frankfurt-on-Main, but which was two generations younger than the Rothschilds and one generation younger than and in opposition to the group constituting the Crédit Mobiler Francais. These firms seem to date from the Germany of the “48,” when they turned away from the Prussian State, relying as it did on the bankers of Berlin, and towards Brussels, Paris and London. They struck their roots deep into the Californian goldfields and into San Francisco commerce. They financed the cotton trade of Germany, France, and Belgium. They established themselves as bankers or as loan agents in Turkey.
The Bischoffsheims had their affiliations with the Sterns of Paris and London. and, what was much more important, with the Rallis of Alexandria, Marseilles, and Constantinople. It was as “freelance” of this house of Bischoffsheim, Goldschmidt and Co. that Baron de Hirsch executed one after another of the brilliant financial coups with which, in the “seventies,” he startled the world in general and the railway interests in particular.
“Though only a clerk,” says the Jewish Encyclopædia, “he soon became the master-mind of this great international banking house. Still, although he was the son-in-law of the senior member of the house, he never became a partner. . . . Having inherited from his father and grandfather a considerable fortune, which was largely. augmented by his wife’s dowry, he embarked in railway enterprises on his own account in Austria, the Balkans, and in Russia.”
In Russia he acted in collaboration with a war contractor and profiteer, de Gunsburg. It was through these two, de Hirsch and de Gunzburg, that Belgian investors acquired the earlier of those huge interests which, in these days, make the Belgian Government the bitter opponent of the Soviet régime.
In 1869 Baron de Hirsch obtained his concession from the Ottoman Government to construct a railway 2,000 kilometres in length through the Balkans. The syndicate actually built only 1,274 kilometres. It received 14,000 francs per kilometre from the Turks for construction, and when it was handed over the latter had to spend another 27,000 francs a kilometre in making it fit to use. Hirsch gave, in return for the grant, a loan to the Government. The amount with which the Turks were debited was 792,000,000 francs. What they actually got was 254,000,000 francs.
Hirsch passed on the concession to a Franco-Austrian syndicate at a substantial profit. Such was the origin of the Orient Railway Company. It was the one and only incursion of de Hirsch, as a principal, into the sphere of Turkish railway finance. After that experience the Turks returned to the habit of dealing with the Imperial Ottoman Bank and its Parisian and London associates.
The second adventurer of the series, Ernest Cassel, the wellknown “empire-builder,” also commenced his career in the house of Bischoffsheim, Goldschmidt & Co. Senator Bischoffsheim’s mother had been a Cassel, and it can, therefore, readily be understood how it came about that, in the days of his firm’s pre-eminence, Ernest, son of Jacob Cassel, banker, of Cologne, came to receive his training in the arts of international banking in this firm’s employ.
“Born in Cologne, after working at Brussels, Liverpool, and Cairo, Sir Ernest Cassel,” says the Economist (31/12/10), “first became prominent in London in connection with the firm of Bischoffsheim, through which he came into contact with the late Baron de Hirsch, and with the American firms of J. H. Schiff and Kuhn, Loeb & Co.” M. Poulgy, in Les Emprunts de Z’Etat Ottoman, says of him that—
“English by nationality, banker to the King himself, his influence had no bounds in England.”
The Economist described his business as “purely personal,” and “neither exactly that of a bank nor of a general financial house.” His particular sphere of activities, we are told, was—Egypt.
Now Bischoffsheims had been interested in the formation of the Franco-Egyptian Bank. This was the concern out of which, in 1889, grew the Banque Internationale de Paris which, in its turn, joined forces with the French Bank of South Africa to form that powerful promotion of M. Rouvier, i.e., the Banque française pour le Commerce et l’Industrie. This latter bank appears, from other indicators in this and other connections and directions, to have been one of the most important material interests inspiring the understanding between Britain and France known as the Entente.
The first mention of Sir Ernest Cassel that I have been able to trace occurs in a document relating to the re-incorporation as a limited company of what had formerly been the chartered Bank of Egypt. In the list of the seven original subscribers, dated April, 1887, Ernest Cassel appears as of “no occupation.” Associated with him were representatives of the financial families of Glyn and Grenfell. In the first full share-list there occurs, also, the name of a young man called Nathaniel Charles Curzon. This was just at the time when a coalition of Liberal-Unionists and Conservatives, forming the first Salisbury Government, together with a Court clique, led by the late Dukes of Argyll and Fife, were, with the encouragement of the late King Edward, then Prince of Wales, initiating the new Imperialism.
The financial advisers and the other public and semi-public functionaries who appeared in Egypt’s administration at that time and subsequently were now in Egypt, then in “Turkey, and again in India. To show how closely the officialdom of what was, avowedly, a dependency conformed to that of what was, nominally, something less than a protectorate and of what was, again, a sovereign and imperial state, we will take a few representative cases.
Lord Cromer, for instance, was, in 1880, Financial Member of the Viceroy of India’s Council, and from 1883 to 1907 H.M. Agent and Consul-General in Egypt.
Lord d’Abernon was from 1883 to 1889 Financial Adviser to the Government of Egypt, and from 1889 to 1897 Governor of the Imperial Ottoman Bank.
Sir Vincent Caillard was from 1883 to 1898 British representative on the Ottoman Debt Council, and in 1898 appointed to the directorate of the National Bank of Egypt, whilst Sir Henry Babington Smith, secretary to the Viceroy of India from 1897 to 1899, became British representative on the Ottoman Debt Council in 1900, and in 1909 was made President of the National Bank of Turkey, and is now Chairman of the Mortgage Company of Egypt, Ltd.
There is overwhelming circumstantial evidence to show that Britain has been working “according to plan” in the Near East, and that behind her officialdom and operating and inspiring them has been a clique of cosmopolitan financiers themselves, the agents of interests, yet further in the rear.
The finance, the diplomacy, and the arms of the British Empire have been slowly but surely penetrating the territories of the Ottoman Empire and the Persian Empire until, to-day, they are, in great part, “mandates” of this country, governed by officials from India and in course of development by British financial interests.
How the system worked was summed up very nicely in Near East, December, 1910:—
“The name of Cassel will be indissolubly associated with the modern history of Egypt. . . His influence there in the last few years of Lord Cromer’s régime was said to be almost supreme, and to his credit is due the financing of the mighty Assouan Dam.... Sir Ernest was instrumental in the formation of the National Bank and its offshoot, the Agricultural Bank, while he was also interested in the purchase of the Daira Sanieh Estates from the Government.”
The whole project of the construction of the Assouan Dam and its accompanying irrigation works was conceived not in the interests of the fellaheen of the Delta, but of the loan-mongers of London and Brussels, the land mortgage holders and estate owners of Cairo and Alexandria, the fabulously wealthy merchants who traded in the cotton and corn of Egypt.
The works were estimated in 1898 to cost nearly £5,000,000. They were to reclaim one-third of the land of Egypt. Two-thirds of the land was, in 1899, yielding £20,000,000 of rent, and this one-third was only yielding a little under £2,000,000. It was calculated that the direct ultimate return to the Government would be £750,000 a year, and that “the increased value of the crops would represent ten times that sum.”
The Khedive’s Government, in 1898 and 1899, was very busy granting concessions or selling properties to syndicates who, in return, were supplying loans for the construction of the irrigation works, for the improvement of the Sudan and for clearing off the outstanding expenses of Kitchener’s campaign in the Nile Valley. To pay for the works the Government borrowed the money from the Cassel syndicate, and, in return, it sold the Daira-Sanieh estate to this syndicate “at a price equivalent to the outstanding amount of the Loan, £4,310,000” (Economist, 25/6/98).
Associated with Cassel were Belgian and other financiers, notably M. Suares, a promoter of the Crédit Foncier of Egypt, of several railway, water, and other public utility companies, and the owner of great sugar refineries in the Delta region.
In 1898, Sir Ernest Cassel and Glyn Mills Currie Co. were setting up, under Khedival concession, the National Bank of Egypt, and the former was, in conjunction with Belgian and other foreign capital, buying up the Daria Sanieh estates in the Delta. In 1899 Cassel and his associates were advancing money to build the dam. In 1902 the Agricultural Bank of Egypt budded off from the National Bank as a means “to enable the cultivators to get out of the clutches of the usurers who swarm in the interior of Egypt.” Six years later, in 1908, Cassel founded the Mortgage Company of Egypt, Ltd. It was commenced under the most illustrious auspices. The first chairman was none other than Viscount Milner.
The largest shareholders were Sir Ernest Cassel, Lord Revelstoke (head of Baring Brothers and a cousin of Lord Cromer), the Banque de Paris et des Pays Bas, and the Société Générale de Paris.
This may be said to have marked the culmination of the economic penetration and subjugation of Egypt. It will be noted that, founded four years after the Entente, British and French banks were co-operating in the venture.
Not only were the two French banks, most cosmopolitan in character, and having traditional associations with the Bischoffsheim, Goldschmidt group, working in conjunction with Cassel. The Banque Internationale, connected with the Gunzburgs, and having intimate relations with financial circles in Brussels and London, was also operating in Egypt on behalf of French capitalism. Cassel was notoriously on the closest terms of intimacy with King Edward and the British imperialists. Rouvier, the Radical Minister of Finance in France, who was in the Government when the Entente was being cemented, was the man who welded the Banque Internationale, operating in Egypt, and another French bank, operating in South Africa, into one of the most powerful financial houses in France. The de Gunzburgs and the Sassoons are closely connected. The former were powerful in Petrograd. The latter were intimate with King Edward VII. Both are mixed up in Belgian high finance.
These were, it is clear, favourable to the new orientation of national interests which brought together Britain, France, and Belgium into one political alliance. These were the interests which strengthened, if they were not, indeed, the actual progenitors of, the Entente. Again, we would reiterate it, the Entente was built upon an understanding about Egypt, a country in which 46 per cent. of the investment capital, in 1918, was French, 37 per cent. was British, and 10 per cent. was Belgian.
Whilst the French rentier and the Belgian investment banker and industrialist had been attracted to Egypt, there to sink their money in State loans, in land mortgage, in public works, in tramways, and in sugar factories, the British capitalists, native and naturalised, as true heirs of the Palmerston tradition of trading with and travelling through Egypt, monopolised a great part of her commerce. In 1913 46 per cent. of Egypt’s exports and 37 per cent. of her imports were to or from the United Kingdom. All other nations were far behind.
The staple commodities of Egypt are cotton and corn. The biggest dealers in these staples are, in Egypt as in India, the mighty masters of merchandise and hence of money, that money with which, for at least two generations, unknown to all but a few famed financiers have juggled. They are the uncrowned and little recognised but very real masters of the British East, and, incidentally, of Greece—the house of Ralli.