The Colonial Economy and Agrarian Capitalism

The process by which capitalism emerged in Egypt is a complex story that can only be sketch-ily dealt with here. In part, the process must be recognized as having roots that go back to some sporadic events during the nineteenth century. Before this time, Egyptian society lacked some of the common features that define what economists and historians would describe as capitalist society. True, there might have been some capitalist transformation of the Egyptian economy by Muslim merchants and Mamluk rulers during the eighteenth century, as Peter Gran has argued convincingly (Gran, 1997). There is no doubt, however, that some prerequisites for a modern capitalist system began to appear and accelerate through the integration with Western Europe in the nineteenth century. These prerequisites revolve around the presence of the modern institution of private property and market system with its peculiar relations and factors of production: land, capital, and labour.

The history of private property in Egypt is vague and confusing to say the least. Timothy Mitchell contends that there is a silent history over the conditions that produced capitalism in Egypt, and argues that this might have been a necessity for power to operate and expand within the system (Mitchell, 2002). Surely, part of this confusion stems from the fact that scholars have applied their contemporary understanding of capitalism and private ownership of land on past forms, hence, framing the meaning with our contemporary biases and views. For example, scholars differ over the meaning of landholding during the nineteenth century: was it an object with a single claim, or was it, as Mitchell tells us, 'a system of multiple claims'? (Mitchell, 2002). No doubt that the 1882 British occupation of Egypt and the subsequent need to tax farmers and landowners was an important milestone in the history of property rights. Of course, at different points in Egyptian history, the right of some individuals to own property and wealth was recognized. But the right of ownership to all persons was never accorded until well into the nineteenth century. The peasants who worked on agricultural land, for instance, rarely owned it. Mohamed Ali, the ruler of Egypt between 1805 and 1849, announced at the beginning of 1814 that all the land of Egypt belonged to the ruler, and hence abolished even the limited ownership of land that existed under the Iltezam system of the eighteenth century.7 Although Ali granted some land to relatives, high-ranking military officers, Bedouins, and to the mashaikh, or heads of extended families, that collected the taxes from the peasants, not one of these landholders had the absolute authority over the land.8 For instance, they could not sell the land and some were not able to pass it to their siblings. Moreover, under Ali's land tenure system, the central government decided every minute thing concerning the land, from the type of fertilizers used to what the peasants sowed. For Ali's political power as well as his expansionist ideas, land was regarded as the basis for military power and civil administration through a particular system of control and taxation. Land was therefore not yet considered a real estate to be bought and sold, or developed for money profit in the modern sense.

In addition to the recognition and the institution of private property, for a fully-fledged capitalist system to emerge in Egypt, the development of a modern market system was required. Of course, there had always been a market place in medieval Cairo where merchants sold their goods. But the market system where land, capital, and labour were considered commodities to be exchanged for some abstract value began to develop only later, at the end of Ali's reign and during the time of the subsequent rulers.9 One significant event that marked these loose beginnings of the shift took place with the reform land laws in 1858, known as the Sai'idiya Code. The Code 'recognized hereditary rights to agricultural land formerly considered part of the state domains, thus facilitating the extension of private freehold ownership over much of the country' (Abu-Lughod, 1971, p. 152). In addition, under the Code foreign nationals were given the right to purchase and own land.

This being said, signs of the road to a capitalist economy may have begun to manifest even a decade earlier in the financial sector, particularly in 1843, when the government approved the establishment of the Alexandria Bank. We know that as early as 1837, Ali recognized the importance of banks and modern financial institutions as the steadiest sources of capital to develop the country. It is worthwhile noting that before the advent of institutional banking, usurious moneylenders, though prohibited by Islamic religion, were traditionally supplying peasants and city dwellers with cash, while royalty and nobles borrowed from wealthy merchants (OBG, 2001, p. 65). The impact of the Alexandria Bank was not so significant, because it was solely involved in discounting treasury bonds issued by the govern ment; it did not have sufficient cash in reserve to carry out other banking operations. And although the bank was not successful, shortly afterwards, in 1855, another bank, led by a foreign consortium and entrepreneurs, was founded. Like the earlier bank, this one too was little more than a joint-stock commercial enterprise with very limited funds, mostly tied to a single loan for a single member of the royal family, and thus, not unlike the earlier bank, it also foundered. The presence of a steadier and a truly banking environment would thus have to wait for another twenty-five years. I shall return to this point later.

During the liberal reign of Khedive Ismail, who took over from Said Pasha and ruled until 1879, Egypt became increasingly tied culturally, politically, and economically with Europe. This was so partly because of the cotton boom that began in 1861, when Egyptian cotton became the premier source for Europe's textile industry, and partly because of new geographic conditions brought about by the Suez Canal project.10 It might be accurate to describe the opening of the Suez Canal in 1869 as one of the most significant events in Egypt's modern history. Besides channelling a vast flow of international traffic through the country, increasing the linkage with the outside world, the opening of the canal drew Egypt into the geopolitical, colonial, struggle among European powers, thus, closer to the system of expanding Western capital. For Cairo, the event has been hailed as a benchmark for the beginning of the Westernization of the city, and for our concern here, it marks the inception of the process of space commodification in the capitalist sense. The Khedive was determined to make the event a spectacle before the eyes of the many European dignitaries whom he had invited - more spectacular than the, then, fashionable World Expositions. To boost his own image as a ruler of a modern, civilized nation, Ismail wanted the city to be developed and modernized along Western lines and, therefore, Cairo had to be a graft from the new urban design and architectural styles of Paris. Functioning like a vast developer, the government selected a 1 mile by 2 mile tract of land between the river Nile and the medieval city and launched a massive development project that would alter the face of the city forever.

In sharp contrast to the native, pre-indus-trial city, from which visitors could still see the silhouette of its skyline, the new Ismailia quarter was planned to include open squares that were adorned with statues, gas-lit avenues with sidewalks, underground sanitation, an opera house, gardens, pavilions, and palaces. The site was swiftly laid out and plots were given away to any one who was willing to spend a huge sum of money on a villa and finish it before the opening of the canal (Rodenbeck, 1998). During this time, members from the royal family entered the real estate business, including Khedive Ismail himself, who bought large tracts in the area, subdivided it, and then sold it to others for profit. In fact, the practice was so profitable that the Khedive emulated it in the newly developed suburban and winter royal retreat of Helwan. (It is important to note that these real estate ventures by the royal family continued throughout the rest of the nineteenth century during the reigns of subsequent rulers. Later, for instance, at the end of the century, Khedive Abbas Hilmi II went even a step further and planned, built, and sold the Khedive Apartment Buildings in Emad el-Din Street, in the Tawfiqia quarter, north of the Ismailia quarter (Muselhy, 1988, p. 228).) The gradual emergence of the European-like quarter to the west of the old city paralleled the gradual rise of the Egyptian bourgeoisie and an influx of foreigners. The new quarter accommodated these new urbanites and spatially facilitated the emergence of modern, European, urban lifestyle.

The lavish public and private expenditure during these days sky-rocketed Egypt's debts to foreign creditors and bankers, plunging the country into receivership and foreign control, particularly after the government was forced to declare bankruptcy. The European colonial penetration of Egypt became eventually a political, colonial domination when in 1882 the British military forces occupied the country. From this date, Egypt was ruled, in name, by a Khedive, but in reality, by the British counsul-general. A duel French-British control system of administration was installed to oversee the Egyptian economy, which would allow European creditors to ensure that the debt was paid off.

With a snooty counsul-general running the country as a business and whose simple objective was to pay back the debts to European creditors, the Egyptian economy became increasingly integrated with and subordinated to the expanding transnational European capitalist system. To Egyptians, the economic integration with Europe meant that in addition to the export-oriented economy and foreign capital flow in the country, there was an influx of foreign people, goods, ideas, and technologies. There is a great deal involved in this story of integration and subordination - of the changing ethnoscape, commodityscape, ideoscape, and technoscape - and, of course, many ways to narrate it, but I select one strand from this complex tale.

Timothy Mitchell tells us that the establishment of the department store in Europe played a crucial role in this drama (Mitchell, 1991, p. 16). The department store - a highly concentrated place for consumption which first appeared in Paris in 1852, Bon Marché, and then mushroomed in Europe and the United States - introduced the ideas of stockpiling, advertising, and fashion to the increasingly eager-to-consume urban bourgeoisie (Pevsner, 1976, p. 267). (It is important to note that the department store was a development of earlier building types, the arcade and the galleries, like the Royal Opera Arcade built in London in 1818 and the Galerie d'Orléans built in Paris in 1830, respectively. The arcade, so slightly different than the closed Parisian version, would appear later in Cairo, in Mohamed Ali Street, and eventually in Heliopolis.) The creation of the department store resulted in an unprecedented increase in profit that impetuously boosted the textile industry, which, in turn, demanded a further increase in the cultivation of cotton. Egypt's task became then to focus solely on producing more raw cotton for the British textile factories, something that the counsul-general, Lord Cromer, had guaranteed already. According to Beinin and Lockman, the rapid expansion of cotton and its export to Europe 'provided much of the impetus for the transformation of agricultural land into private property, a transformation that resulted in the restructuring of agrarian social relations' (Beinin and Lockman, 1998, p. 8). An export-oriented, single crop, economy, therefore, gradually replaced the subsistence economy.11

Gradually also came the removal of all state restrictions on private ownership of land for both nationals and foreigners and the authority to mortgage land, to pledge it legally against a loan. At this moment, land was treated as a commodity to be exchanged in the market, or as a source of income and profit (Chichian, 1988, p. 28). In fact, around 1894, one-third of the agricultural land was held as private property and the number of landowners climbed to a record high. Parallel to these changes in laws were gradual improvements in the system of recording land titles. Abu-Lughod tells us that during the 1880s 'a totally revised system of land ownership, in which the unchallenged dominance of private property provided a marked contrast to the state monopoly system that had prevailed under

Muhammad Ali' (Abu-Lughod, 1971, p. 152). Thus, it was not a coincidence to find, at the same time as the improvements in property rights and title recordings, the emergence of mortgage banks that specialized in loans against land security. It was first a French mortgage bank, with French capital, which began operations in 1880; upon its initial success the door was opened wide for other European financial institutions to follow. Thus, banking activities emerged and grew spectacularly for the first time since the 1850s, and Chichian quotes Crouchley remarking that during this time 'eight banks provided telegraph exchange in Paris and London and two foreign mortgage banks were opened in 1880' (Crouchley, 1936, p. 28).

But perhaps the most significant year for the Egyptian economy and the laissez faire, liberal economic policy was 1898. In that year two significant, interrelated events occurred: the founding of the National Bank of Egypt and the selling off of the Daira Sanieh, the largest state-owned company, to a private consortium (Raafat, 1997, p. 17). Samir Raafat contends that these two events sparked this unprecedented economic well being that, in the words of another historian, was 'not experienced since the Mamluk times' (Goldschmidt, 1988, p. 48). Soon afterwards, particularly in 1903, another important capitalist institution was established: the first Cairo Bourse. In a revealing gesture to the new economic orientation of the country, the site selected for the 'Bourse Khediviale du Caire', was the centre of Cairo's European district, Ismailia. The capitalization of the Cairo and Alexandria stock Exchange soared in a matter of a few years and, by 1907, 'the number of companies trading in the Cairo Bourse alone had reached 228 with a combined capital of L.E. 91 million' (Raafat quoted in Shahine, 1999, p. 14). Along with the expansion of capitalist institutions and rapid growth of the Egyptian economy, a considerable influx of foreigners to Cairo facilitated the flow of foreign capital. Foreign capital investment increased immensely during the first decade of the twentieth century with a high concentration on land speculation and mortgage (Chichian, 1988, p. 33). According to Charles Issawi, there was a spectacular investment boom so that 'between 1900-7, 160 companies with a capital of L.E. 43 million were formed' (Issawi, 1954, p. 39). Moreover, almost all the total value of the joint-stock companies was owned by French, British, or Belgian nationals.

Add to this economic ferment at the turn of the century, the re-conquest of the Sudan, the completion of the Aswan Dam, and the declaration that Egypt was solvent and one gets a picture of the optimism that prevailed among the foreign and national investors alike (Marsot, 1985, p. 78). In the short term, the influx of foreign capital inflated the economy and the stock market, yielding a very high return on investment to the speculators. This, in turn, attracted even more investment in real estate. Abu Lughod, once again, presents a concise summary of the condition during this era.

Since much of this new capital was in the form of loans on land rather than investment in productive facilities, it was natural that land values should have benefited most dramatically from the heightened competition. While agricultural lands, particularly those enhanced by the new irrigation system created by the Aswan Dam after 1902, experienced some of the sharpest upturns, all forms of speculation in land and buildings - especially on the lands outside of Cairo and Alexandria - yielded substantial profits. Land and building societies were founded in increasing number between 1901 and 1907, each following approximately the same procedure: 'to buy, wait for an increase in value, and then sell'.12 (Abu-Lughod, 1971, p. 153)

The incursion of foreign land speculators and investors as well as the introduction of new ownership laws and financial institutions trumpeted an up-coming boom in building construction. But for the rural areas, these changes, particularly in the land tenure system, did not mean that peasants would become suddenly wealthier, or that the real estate would flourish for the native Egyptians outside of Cairo. On the contrary, the changes in the rights of ownership, the increase in land tax rates, and the traditional inheritance system in Egypt, which tended to divide large properties to ever-smaller ones, made the great majority of landholders of agricultural land own less than five acres, hence, poorer (Zordoq, 1998, p. 364). On the other hand, a very small minority of Egyptian landowners held 44 per cent of the land, forming a new class, an agrarian bourgeoisie. Along with high officials, this minority constituted the Egyptian ruling class. Chichian reminds us not to confuse the emerging Egyptian bourgeoisie at the end of the nineteenth century with the European urban bourgeoisie, which was dependent on industrial production (Chichian, 1988, p. 33). In his analysis of the relationship between urbanism and colonialism, Anthony King has suggested that the shift to industrial capitalism at the colonial core is part of the same process as the shift to agricultural capitalism in the colonized periphery (King, 1990). It is important to add here a comment on how valid is Amy Chua's recent thesis in which she argues that free market economies do not spread wealth evenly throughout the whole society, but as Cairo's modern history tells us, produces a new class of wealthy individuals (Chua, 2002).

The concentration of economic surplus in the hands of a small, powerful and increasingly wealthy Egyptian bourgeoisie paralleled the concentration of the political, commercial, administrative, and leisure institutions in few urban localities around the country, which is a common feature of colonial domination. Cairo remained the dominant centre for this emerging network of urban centres. To connect these urban centres together, to Cairo, and to the outside world, the government extended throughout the country a network of roads, telegraphs, railways, and bridges. For governance and various services, skilled and unskilled labourers began to migrate to urban areas and, in particular, to the capital city. Besides the expansion of the government to accommodate the growing need for administrative services, the city drew an increasing number of landless peasants compelled to work as wage labour outside agriculture: from coal-heavers to domestic servants to transport and building construction workers (Beinin and Lockman, 1998).13 As a result, during the 1882-1897 period Cairo had an average annual growth rate of more than 12 per cent (Chichian, 1988, p. 32). This excessive rate of growth to the city's native population paralleled an increase in its foreign inhabitants - in 1907 almost one of every seven persons living in Cairo was a foreign national (Chichian, 1988, p. 32). It is important to note that between 1897 and 1907, which is around the time Heliopolis was being conceived, the number of foreign residents in Cairo doubled. In addition to the permanent ethnoscape of the city residents, the beginning of the twentieth century witnessed a new, truly 'global' phenomenon: seasonal workers coming to Egypt every year from southern Europe to work in building construction during wintertime (Beinin and Lockman, 1998, p. 36).

The integration with the European economies facilitated the flows of Western goods and technologies, hence, altering the Egyptian technoscape and commodityscape, to use Appadurai's words. An enormous growth in imports of textiles and food was facilitated by the eagerness of the rising Egyptian bourgeoisie to mimick the European fashions and ways of life. It takes only the merest glance at issues of the daily newspaper, Al Ahram, from this period to recognize a striking increase in the number of advertisements for European modern gadgets: basic tools such as lathes, shapers, drills, and grinders, to other consumer items such as Singer sewing machines.14 In building practices, not only building styles, but new materials and construction techniques using iron, steel, and reinforced concrete were introduced to Egypt a few years after they were used in Europe. For example, reinforced concrete was used in the construction of the Egyptian museum at the western edge of the Ismailia quarter only one decade after Francois Hennebique patented it.

The confluence of rapid urbanization, influx of foreigners, direct foreign investment, privatization, introduction of new technologies, and economic expansion exerted pressure on the physical structure of the city causing spillage beyond its peripheries. Roger Owen tells us that building construction prospered between 1897 and 1907. During this time, the Ministry of Public Works issued almost twenty thousand permissions for the construction of new buildings (Owen, 1970, pp. 509-510). As for the labour involved in this process, Owen tells us that in 1907 the number exceeded twenty-one thousand in Cairo alone. Building contractors were mainly Europeans from Italy, who had settled in Cairo since Khedive Ismail's construction boom of the 1860s and 1870s. Owen concludes that the prosperity of building construction, which was due to direct foreign investment and revenues from cotton exports, re-circulated most of the money within the country and it did not really leak outside, a view that is usually held (Owen, 1970, pp. 511-512).

But if there was a boom in construction and a pressure on the city to grow, to which direction did Cairo, actually, expand? From the founding of Al-Fustat in 640 AD, Cairo's urbanization has always tended to be along a south-north axis that runs parallel to both the course of the river Nile to the west and the Muqqatam hills to the east. The city expansion was therefore limited to the north and the south because of these natural barriers. It was not until the middle of the nineteenth century, and because of a slight recession of the river as well as filling and covering of some marshes in the area adjacent to it that the city expanded a little to the east. As we have seen, Ismail had converted this additional land to a modern urban commodity for sale. At the dawn of the twentieth century the city had new frontiers for its physical enlargement. Made possible by foreign direct investment, the building of the Aswan Dam in 1902 helped control the floods and flows of the river. This development facilitated not only the steady irrigation of agricultural lands along the Nile valley and the delta, but also the taming and confining of the riverbanks, particularly in the Cairo area. The stability of the river brought by the Dam had two important consequences on the urban growth of the city. First, it was possible to build bridges, hence, to cross the waterway and expand to the west; second, it became possible to fill and cover marshes, ponds, and swamps and, therefore, add more land to the city in the area between the river-proper and the Muqattam hills. Of course, the building of the Dam was parallel with other simultaneous developments that I have discussed in the preceding pages and other points I shall still discuss in the next section.

It was natural, therefore, with the increasing demand on housing that the city expanded in all directions peripheral to the north-south axis and across the river to the west. For the old, medieval area of Cairo - demographically described as the native and predominantly poor part of the city -the filling of ponds and marshes and the levelling of the rubbish mounds cleared some spaces for absorbing the incoming people from rural areas. However, the old city remained heavily populated and congested, and in the eyes of many, lacking the amenities of modern life. To the growing

Egyptian middle class, the new bourgeoisie, and foreign nationals, the city needed new spaces. As I mentioned earlier, between 1898 and 1907, land speculation had grown immensely, pushing the prices of properties, particularly those located in the new Ismailia quarter, to record highs. Although the planning of the district and the construction of many buildings were done earlier, until the turn of the twentieth century there were still millions of square metres of vacant sites. The centrality of the quarter within the urban area of greater Cairo, the presence of modern amenities and entertainment facilities, and the prestige, and cultural capital that comes with being associated with the European way of life, made this area the most preferable to live in for upper class Egyptians. The other directions of development include the south, the north, and, after the finishing of the bridges, across the Nile to the islands of Zamalek, Rawda, and the Dukki area south of the village of Imbaba and north of the village of Giza. Abu-Lughod reports on three hundred land and building societies between 1901 and 1907 that worked in real estate development in these new areas. Naturally, the city expanded to become 108 square kilometres (Abu-Lughod, 1971, p. 122). Among the makers and shakers of the city's physical expansions at the beginning of the century was the Cairo Electric Railways and Heliopolis Oases Company, to which I shall now turn.15

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