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By courtesy of Mme M. Dervieu

Edouard Dervieu 1824-1905

(at the age of 56)
Associate Professor of Economics^ Columbia University


General Editors: H. L. Beales and O. R. McGregor
First published in 1958

® by David S. Landes 1958

"William Heinemann Ltd
99 Great Russell Street, London, W.C.i
Printed in Great Britain by Butler and Tanner Ltd
Frome and London
Preface xi

I The Gentle Calling of High Finance 1

2 Bull Market 41
3 Klondike on the Nile 69
4 The Rise of Edouard Dervieu 102

5 Ismail 128
6 The Credit and Debit of Viceroyal Banking 147
7 A Digression on Suez 173
8 The Escape that Failed 189
9 The High Cost of Grace 208
10 End of the Cotton Boom 224
II Double-Cross, Redoubled; or the Ins and Outs
of Egyptian Finance ^43
12 No Exit 261
13 Panic 278
14 Liquidation 292
15 In Guise of Epilogue 302
16 Conclusion 319

Appendices 329
Bibliographical Note 341
Index 345

“ Archives du Ministere des Aiffaires Etrangeres, Paris
Alex.- Alexandria
A,N. - Archives Nationales, Paris
A, Neuf, - Archives de la maison De Neuflize, Schlumberger et Cie,
5 .Z. — Bulletin des Lois (France)
C.C. - CorrespondanceCommerciale (commercial series of the French-
consular correspondence)
C.P. - Correspondance Politique (political series of the consular
Z.O.- Records of the Foreign OfHce, Public Record Office, London
L.B Letter Book (correspondence of De Neuflize, Schlumberger et
M^m. et Doc. - M^moires et Documents (series of the French diplo-
matic records)

Note: all dates are given in the order of day-month-year; thus

3-5-1857 means 3 May 1857.


Frontispiece: Edouard Dervieu

facing page

I The Cotton Famine in Lancashire 80

II A Contemporary Map of Suez 81

m A Way Station on the Cairo-Suez Stage Line 88

IV The Place des Consuls, Alexandria, 1 869 89

V Alfred Andr^ 122

VI Ismail Pasha 123

VII Ferdinand de Lesseps 316

vin The First Procession of Ships up the Suez Canal 317


The story that follows is based on an unusually large and intimate

correspondence between two businessmen of the nineteenth century:
one, Alfred Andr^, a leading international financier; the other, Edouard
Dervieu, private banker to the Viceroy of Egj^t. The letters, which
cover the decade from 1858 to 1868, number over one hundred,
something less than half of them from Alfred Andrd, whose methodical
precision led him to make copies of his personal letters long before
the typewriter existed. They are long, often running to six and seven
pages, and are exceptional in their frankness and articulateness.
On the whole, they suggest more the plain, even blunt, words of
confidential conversation than the studied exchange of ideas on
The correspondence was found in the vaults of the Bank of France,
where it lay with the old business records of the Andre bank, now
De Neuflize, Schlumberger et Cie. The officers of this firm, giving
proof of an open-mindedness all the more remarkable in that it meant
a sharp break with French business tradition, were kind enough to
open their archives to a stranger. I am especially indebted in this regard
to Messrs Costa de Beauregard and Christian Monnier, whose gener-
osity and patient assistance went far beyond the recjuirements of
In a way, it is easy to build a volume around a correspondence: the
letters furnish the historian a ready-made thread of narrative. On the
other hand, the very pre-existence of this thread poses special prob-
lems. The writer is more or less compelled to follow and weave around
it, and thus finds himself at times in strange and unexpected places,

hunting for materials he might otherwise have ignored or neglected.

The letters, in effect, impose research, for the historian must provide
whatever information is needed for them to make sense - internally,
in secjuence, and in their total context.
In the case of the Andre-Dervieu correspondence, this last, especi-
ally, raised serious difficulties. The fact is that the relationship of the

wo men makes sense only in the triple context of the banking pro-
fession, the economic conjuncture, and the particular situation of
Eg\-pt in the i86o’s. It is impossible to comprehend either of the men
"?^’ifhout a kno’^’ledge of their respective places in the widespread

and variegated nework of international finance; to appreciate their

interest in a foreign country, in this instance a Near Eastern countr^^,

without some acquaintance with the company boom of these years, its
explosive effect on the equilibrium of a usually moderate profession,
and the growing interest of European, and particularly British, capital

in im-estments abroad; or to understand their success and failure in

Eg\*pt "vvithout taking into account the effect of the cotton boom on the
Egyptian economy, and the position of the Westerner in Egyptian
societi’. •/

It is these requirements which determined the organization of this

study. The first three chapters are intended to set the stage, to provide
the reader with a framework within which the story of Deivdeu and
Andr^ becomes intelligible. If the first two, particularly, are long and
sometimes heavily padced, it is because no comparable analysis either
of the structure of international finance or the expansion of European
capital in the i86o’s is available. The alternative would have been to
begin the narrative at once and interrupt it, especially towards the
beginning, with long and frequent digressions: this seemed inadvisable.
In a way, I have tried here to imitate die movie camerman who offers

first a panoramic view before panning down to the subject of primary

Generally speaking, an effort has been made to prune these first

chapters of all material not immediately relevant to the story that

follows. This has not always been possible, however, partly because
some of the generalizations made contradict more or less the traditional
interpretations of economic history and therefore need defending -
for example, the analysis of the financial revolution of the 1850*3 and
i86o’s and the appreciation and timing of its effects on the existing
banking structure - partly because condensation is sometimes obtained
only at the sacrifice of precision and logic, not to speak of atmosphere.
And atmosphere is one of the primary objectives of these early chapters.
It should be understood, moreover, that although, for reasons of
organization, the chapters on finance precede the story of Dervieu,

logically they are in large measure an outgrowth of the correspondence.

They represent an effort to study the structure of international banking
in the middle of the nineteenth century for its own sake, but an effort
guided and inspired by the materials in the Neuflize archives and
similar primary sources. They do not imply by their position a desire
to present a particular case in the light of a preconceived general frame-
work; rather, the general picture is derived from this and other par-
ticular cases and could just as easily follow as precede, if it were not
that this would pose some real obstacles to the intelligibility of the

Yet the historian must do more than simply introduce and surround
his letterswith such matter as is required to make them intelligible;
he must also derive from them the maximum of information and point
up as well as possible their significance for the larger historical forces
of which they are a particular manifestation. And just as the letters of
Alfred Andre and Edouard Der\deu make sense only in a context of
several dimensions, so their significance is multiple, and the historian

must once again follow where the thread leads. On the one hand, the
letters offer the economic historian, so far as I am aw’are, one of his

first explicit insights into the methods and motivations of international

finance as seen through the eyes of two independent figures of high

rank. At the same time, they throw a sharp light on the contrast in
business behaviour between two men of radically different upbringing
and temperament, and offer convincing evidence for the importance
of the human and entrepreneurial element in determining the rate and
direction of economic development.
On the other hand, the letters are also a document in the history of
imperialism; to the political and diplomatic historian, they offer first-

hand evidence on the role, hitherto only guessedof European


businessmen in the rise of the Eg5q)tian debt, and throw new light
on the responsibility of the Viceroy for the ultimate debacle. In com-
bination with the diplomatic archives of the period, they give a re-
markable picture of the spotty, irregular, but powerful combination
of business and political pressure for private ends, of the conformity
and clash of personal and national interests, of the important varia-
tions in aims and methods from one nation to another and from one
consul to another of a given nation. In short, they give depth and
variety to a great historical force that is only too often described in
flat, uniform tones.
Today, of course, when imperialism has become a dirty word and
the relationship of the nations of Europe to those of the Moslem world
a matter of anxiety for all, the story of Dervieu takes on heightened
interest. For one thing, it introduces us to a number of specific issues -

the Suez Canal question, for example - that have, as a result of recent
events, regained all the importance of a century ago. For another, its
significance goes far beyond the direct concern of its Egyptian locale.
The point is that we have here in microcosm most of the larger
problems that continue to attend the meeting of East and West:
the material and technological disparity, the political inequality, the
business manceuvring and manipulation, above all, the social and
cultural incomprehension. The penetration of Egypt in the nineteenth
century by the expansive Europe of a new industrial age was not only
U’pical of similar inroads throughout the Orient; it alsomarked the
beginning of a more intense phase of one of History's great millennial
dramas: the encounter of two civilizations.
This phase is still unfolding, and in studying the experience of
Dervieu, we something about our own time. Indeed, we learn
more in some respects than we can from the scrutiny of current events.
Thus our sources of the last century - public and private - speak with
a candour, even a naivet^, that would be unthinkable now. At the same
time,we see the beginning of the act, when the stage is still uncluttered
and the conflicts barely formed; and we get a sense of the deepness
of the gulf between two worlds, and the vanity of parmerships between
unequal partners, and the abiding difficulty of the task that confronts
us today. We of the twentieth century sometimes seem to
live in a
world of glib fantasy: easy slogans, quick smiles, overflowing sincerity,
the optimism of statesmen who talk and act and think as public
relations require. Fortunately there is nothing like history to make one
face up to reality.
An effort has been made to bring out these diverse aspects and
implications of the Andre-Dervieu correspondence in the course of
the volume. Their treatment, however, has always been subordinate ~
at least in principle - to the development of the narrative, which makes
its o^m points; and the later chapters and conclusion are concerned not
so much with detailed economic and political analysis, as with the
denouement and ‘moral' of the story. For the rise and fall of Dervieu
in Egypt is above all a story - a good story with important elements
of drama and even pathos. It deserves to be treated as such; especially

since it is not often that the economic historian has the privilege'and
pleasure of working with this kind of subject.

I should like to take this occasion to thank all those who helped,
intellectually and materially, to make this history possible. The book
is, in effect, a by-product of a larger study of the role of the business-
man in French economic development. The documents the story- is

based on were found on a research trip in 1948-9 financed by the

Sheldon Fund of Haiv^ard University and the Committee on Research
in Economic History. I was able to undertake further work in Europe
in 1952-3 thanks to the generosity of the Society of Fellows of
Harvard University, and a trip financed by the Social Science Research
Coimcil in the summer of 1955 made it possible to tie up a number
of loose knots. In the intervals, this and other research has been
significantly facilitated by grants from the Social Science Research
Council and the Ford Foundation, and a fellowship at the Center
forAdvanced Study in the Behavioral Sciences. I hope this history will
be recompense for the sympathy and patience of these patrons.
In France I owe a debt of gratitude to M. H. Costa de Beauregard
and the officers of De Neuflize, Schlumberger et Cie, whose assistance
and understanding went far beyond the conventions of hospitality;
may their enlightenment be an example and encouragement to others.
I am also obliged to Messrs Michel Frangois and Bertrand Gille of the
Archives Nationales, who made it possible for me to work in their
newly organized Division of Economic and Private Archives under
the most favourable conditions and without regard to hours, to
Mme Ozanam of the Minist&re des Affaires Etrangeres for her co-
operation in locating and obtaining documents not listed in the
catalogues, and to many others whose names would be difficult to

list here but who, in one way or another, added something to this
study. M. Gille, especially, has been more than helpful: it was he who
prepared a typed copy of the correspondence when, in 1949, 1 had to
leave France before I could read it in its entirety; he has continued to
give me the benefit of his unequalled knowledge of the archival sources
of French economic history.
In England, the late Paul H. Emden read the early chapters on
banking and furnished valuable biographical information on some of
the actors in the stor}\Mr Kenneth Goschen was kind enough to
open to me the remaining records of his family’s firm, Friihling and
Goschen, the pioneers in the promotion of Egyptian securities on the
London market.
In the United States, Mr Carl Lokke of the National Archives
assisted my research in the Egyptian consular records. At the same
time, a number of teachers and friends did the book a world of good
by reading and criticizing part or all of the manuscript. Among those
who were generous with their time and knowledge were Professors
Hugh Aitken, Sigmtmd Diamond, and Stanley Stein, then of the Re-
search Centre in Entrepreneurial History of Harvard University; Pro-
fessor and Mrs Ralph Hidy of New York University and New York
City;Mr F. H. Brunner of Amhold and Bleichroder, merchant bankers;
and Dr Fritz Redlich of Harvard University, who read the chapters
on banking and suggested numerous corrections and improvements.
Professor Helen Rivlin of the University of Maryland was similarly
helpful on those passages dealing with the Eg5rptian background, a
subject on which I was particularly in need of advice. Messrs Hugh
McLean and George Soulis, sometime Junior Fellows of the Society
of Fellows of Harvard University, brought to my attention and
translated for me certain materials in Russian and Greek. And Pro-
fessor Leland H. Jenks of Wellesley College read the entire manu-
script, saving it at many points and improving it considerably at others;
his criticisms of the argument were particularly enlightening. To all
of these I am deeply grateful.
There are those who have furthered my work in other ways: Mrs
Calista Aubert, who did most of the preparation of the index; my
daughter Jane, who helped read proof; above all. Mile Marie-Frangoise
Pierrette Coadou, whose care and thoughtfulness have eased the task
of research since my first trip to France in 1948,
To t\\’'o friends and teachers I owe special thanks: Dr Arthur H.
Cole of Harvard University and Professor Donald C. McKay, for-
merly of Har%’ard and now of Amherst College. Both have not only
helped with this study but have assisted and encouraged me in every
way almost from the beginning of my graduate training. Whatever
research is embodied in diis book was accomplished under their
guidance; without them the story would, and could, never have been

D. S. L.



ThevisitortoParis whose steps take him away from the bustling

crowds and prosperous department stores of the Boulevard Haussmann
up along the lower reaches of the rue Lafayette, will, if he turns right
or left, find streets whose unrelieved stretches of grey stone buildings,
fronting shopless on shopperless pavements, offer a startling contrast
to the plate-glass and colourful displays of the boutiques and magasins
only a few yards away. The prospect that offers itself is at times
oppressively monotonous, a succession of barred windows at ground
level, broken at intervals by the high, arched metal-bound doors of a
porte-cochere tightly closed against the passer-by. The only touch of
colour is the usual blue-and-white number plate above or alongside
each entry, and an occasional small brass plaque modestly announcing
the name of the business firm within: ‘L’Universelle, Compagnie
d’assurances . . . ’, or less specifically, ‘Durand et Cie*, or perhaps
simply ‘D. et Cie’-
The stranger who, intrigued by this self-effacement, allows curiosity
to overcome timidity and pushes past the heavy door into the dim
coolness beyond, enters an archway leading to a deserted interior
court and opening on the side to another pair of doors, even more
anonymous than the first. At this point, if he can persuade the concierge
who waits inside, to admit him to wander in the building itself - hardly
likely, for any who enter, enter on business and are ushered directly
to their destination - he steps into a rather gloomy edifice, heavy with
marble and hushed with carpeted floors, rather like an old-fashioned
private home or apartment house of the mid-nineteenth century.
There is little that betokens the occupations and concerns of busi-
ness. The halls are deserted, except for an occasional figure hastening
from one closed door to another. Some of these doors open on waiting
and meeting rooms, sparsely furnished with tokens of Victorian sub-
stance and complacency: chairs covered in tired green velvet or desic-
cated leather, many tablessmooth and shining and scrupulously bare,
long, sombre curtains gracefully framing the deep-set windows. The
walls are papered in a design whose faded details are lost in the interior
dusk; a few middling-sized portraits show the sideburns of a departed
age in the dark oval and rectangular frames of the period.
Other doors open on offices, where men work diligently behind
littered roll-top desks and leather-inlaid escritoires and the mantels

of the fireplaces are covered with the overflow of dossiers and ledgers.
The machines of commerce are conspicuous by their rarity and antiq-
uity. The same stiff portraits hang on the walls, and the same paper
has faded even more in the brighter light. Only the rustle of papers
and the scratch of pens disturb the silence.
One room stands apart from the rest; its door, by exception, stands
ajar. In appearance, with high counter and wire cage, it resembles

more the close confines of a rural post-office than the hub of a busy
Paris firm. And on the cage is affixed a small enamel plaque bearing
one word: Caisse.
For this building, funereal in its silence and gloom, is of all things a
bank. Not the sort of bank to be seen on the main street of an Ameri-
can dty, flaunting its pompous fafade, or in the City of London,
where fhe Big Five overpower the busy streets below, or on the boule-
vards of Paris, where the Sod^t^ Generale is nowise abashed by the
grandeur of the Opera before or the glitter of the Gaieties Lafayette
after.^ It is a spedal kind of bank, intensely conservative and de-
liberately anonymous, courting obscurity as zealously as others seek
attention, a private firm of small capital and few clients, by all appear-
ances inactive to the point of moribundity, ^et now and for decades
past a major power on the Paris capital market and a firm to be reck-
oned with in international finance - a house of merchant bankers.

Merchant banking, or ‘foreign banking’as it is often called, is the most

^ C£, on Germany, W. Sombart, Dh deutsche Volkswirtschaft im zp. Jahrhun-
dert (Berlin, 1927), p. 171, where the block-long bank buildings are described as
‘New Sans-Soud, New Versailles*.

difficult specialty of a The calculations required

difficult profession.

for the exchange of funds betw’een two or more markets with different
currencies are complicated, far more so than for analogous trans-
actions within a national market. At the same time, international
financial operations involve of their ver>" nature risks and delays not
present in ordinary domestic banking. As a result, merchant bankers
have always been a breed apart, and their methods and activities have
usually been carefully demarcated from those of their ‘regular*
As name indicates, merchant bankers were originally merchants,
traders whose purchases and sales in foreign lands compelled them
to understand and employ the instruments of international payment,
especially the so-called bill of exchange- This was fundamentally an
acknowledgement of a debt and a promise to pay at some future time
in another place and anotlier currency. Beginning as a remittance from
borrower to lender, it assumed by the early modern period its definitive
form of a draft of creditor on debtor, to be accepted by the latter in
recognition of a commercial transaction.^ As such, it was a convenient
means of settlement, and with the progressive specialization of inter-
national trade, merchants who had once paid for ffieir purchases abroad
by sales abroad began to find it simpler to concentrate on imports and
settle their debts with bills dra'^m by local exporters on the market
At first, were handled on a direct basis, merchants
these transactions
with bills to sell who needed them. As com-
finding other merchants
merce developed, however, certain firms began to specialize in negoti-
ating commercial paper, using their surplus funds to buy the drafts of
exporters and selling these drafts, or their own drafts, to importers at a
profit. These combination merchants and bankers - for the assumption

of financial functions did not mean the abandonment of mercan-

tile activities^ - were, together with money-changers whom success

^ Cf., for example, R. de Roover, ‘Le contrat de change depuis la fin du

treizieme siecle jusqu’au debut du dix-septieme', R&v. helge de phUolo^ et d'his-
toire^ XXV (1947), 119-20, and the same author’s Evolution de la Uttre de change^
XIV^-XVIIP siecles (Paris, 1953), ch. i, with extensive bibliography.
*As late as the middle of the nineteenth century, the foreign bankers who made
up the court, or board of directors, of the Bank of England were still known as
merchants. Cf. also the advertisements in the financial journals of the period; thus
the Economist, 12-3-1864, p. 348, advertisement of the North British and
Mercantile Insurance Company.

converted into tax farmers and bankers,^ the fathers of

international finance.
the middle of the nineteenth century, merchant
banking in
western Europe had centuries of experience behind it and had already

attained to considerable sophistication. The staples of the trade were

still the bill of exchange and bankers* drafts, to which now were
added letters of credit, mercantile and personal. The foreign banker
bought and sold paper drawn on outside markets, handled remit-
tances and made collections, gave advances on consignments,
currencies, shipped bullion and coin when the need for and price of

precious metals rose high enough elsewhere to cover the cost of ship-
ping, insurance, and minting if required - in short, performed all the

functions necessary to keep international commerce running smoothly.®

In the performance of Aese fiinctions, the ‘compleat* and orthodox
banker was guided by one fundamental principle: commercial credit
must be based on commercial transactions.® Thus all bills of exchange
discounted or accepted were presumed to be self-liquidating, origi-
nating in a real transfer of goods that would be sold before the maturity
of the note and would yield enough to reimburse the lender. Often, if
the credit of the drawer or drawee was not sufficiently established, the
banker would insist not only on the draft itself but on the documents
attesting to the commercial transaction behind it. On consignments of
unsold goods, the banker might even have the bill of lading made out
in his own name and transmit it to the consignee only on receipt of a
counter-remittance to balance the advance already given the con-
signor. And to make doubly sure, payments on unsold commodities
were carefully limited to some firaction of the estimated value to
allow for a possible fall in price.^
1 This was particularly true in Germany, where the profusion of kingdoms,
principalities, municipalities, and other political jurisdictions created a money-

changer's paradise. Cf. E. Corti, The Rise of the House ofRothschild (New York,
1928), p. 4; \V. Kahler, ‘Handel, Bankwesen, Versicherungswesen’, in J. Hansen;
ed., Die Rhemprovhv^: hundert Jahre preussischer Herrschaft am Rhein (2 vols.,
Bonn, X917), I, 523-4.
® For a selective bibliography on the development of merchant banking as a

technique, see D. Landes, ‘Vieille banque et banque nouvelle: la revolution

financi^e du dix-neuvieme si^le*, Rev, d^hist, mod,y III (1956), 204-22.
® It should be understood that we are speaking here specifically of the banking
techniques prevalent in the Europe of the raid-nineteenth century.
^ The most important discussion of the techniques and procedure of merchant
banking is to be found in R. W. Hidy, The House of Baring in American Trade

To clients of long standing and good credit, the banker might

accord the facility of drawing up to a certain amount in anticipation of
transactions, such drafts to be covered previous to maturity by dis-
countable paper or securities. To some, the banker might extend such
an ‘open credit’, as it was known, on a revolving basis, that is, the

credit would be automatically renewed as drafts outstanding were

covered. In all cases, however, the advance was presumed to be based
on actual mercantile transactions - it -w^as never intended to be a pure
and unrestricted loan - and under no circumstances was the banker
to be compelled to meet the drafts out of his own pocket.
A special form of open credit was accorded to other bankers. Since
bills of exchange were based on commercial transactions, and com-
mercial activity^ in most countries tended to var\" in intensity', the
supply, and hence the price, of bills ~ in technical terms, the rate of
exchange - on any given outside market fluctuated. In an agricultural
countrj’’, for example, drafts on customers for exports of food would
be plentiful after the harvest, scarce at other times of the year. If the
demand for manufactured imports, however, vras fairly constant, the
need for such drafts to pay for the imports would also be steady,
and their price would go up in one season, down in another. All of
which created not only a need for some source of instruments of pay-
ment when ordinary trade acceptances were lacking, but also an oppor-
tunity for profitable speculation. The result was the ‘banker’s bill’,
a draft of one banker against credit provided by another, to be covered
prior to maturity by paper purchased later when it was more abundant
and less expensive. It should be emphasized that in principle, bankers’
bills were no from commercial paper in deriving ultimately
from genuine commodity transactions - in this case, anticipated rather
than current. Nevertheless, ‘exchange accounts’, as they vrere called,
were carefully differentiated from the ordinary mercantile variety, and
bankers would sometimes maintain one type of relationship in a given
area and not the other.
All such open credits, revolving or otherwise, gave rise to far
and Finance (Cambridge, Mass., 1949). This history of a private banking firm is
unique in its detail and authority. See also the references given in the article cited

in n. 2, p. 4; as well as K. Samuelsson, ‘International Payments and Credit

Movements by the Swedish Merchant-Houses, 1730-1815’, Scand. Ec. H.R., III
(195 5), 163-202; and K. Jarvinen, Der Zahlungsverkehr tm Aussenhandel Finnlands
vor der Aushildung des einheimischen Bankwesens [Probleme der Weltwirtschaft,
Vol. XXX] Gena, 1921).
greater risks than advances based on current transactions,owing not
so much to the immediate danger that the borrower might not cover
in time, as to the long-run abuses that they encouraged. An open
credit of its very nature did not lend itself to the sort of close control
possible with ordinary advances. The banker, to be sure, could
stipulate that the documents covering the mercantile operations arising
out of such credits be assigned to him and forwarded as security,
but this was the exception. Generally open credits were offered only
to trusted clients and were left ‘uncovered’, that is, the borrower was
simply obliged to cover with negotiable instruments in time for
maturity. And, it goes without saying, there was no control whatever
over bankers’ credits. Under the circumstances, it was easy to employ
such facilities, not for concrete transactions, but as a sort of short-
term loan, which could easily become long-term if the credit was the
revolving kind and the borrower was careful to remit on time. The
process of automatic liquidation that was in theory the safety valve
of the profession, the guarantee that accounts receivable would always
be received, was maintained in principle and often sacrificed in fact.
The dangers inherent in such a situation were aggravated by the
frequent use of the accommodation bill, so called because it could
exist only as an accommodation of one businessman by another, the one
accepting the other’s draft in connexion with a transfer of goods that
had simply never occurred. Superficially, such notes resembled perfectly
the ordinary bill of exchange; in essence they were nothing better than
promissory notes with two signatures, pure paper credit with no basis
whatever in mercantile transactions. They were, indeed, far more risky
than real promissory notes, for they pretended to be something they
were not, andfalsely commanded an acceptance they did not deserve.

The combination of open credits and accommodation paper was an

explosive one. Bankers were frequently lured into disastrous positions
by unscrupulous or desperate clients who found this an easy way to do
business, or worse, to speculate, with other people’s money. Most
reputable merchants (merchants in the narrow sense) and manu-
of course, would never lend themselves to a procedure that
was morally and legally fraudulent, but even among the most respected
firms, there were always some to abuse their position. And when
pillars of commercial integrity lent themselves to such machinations,
they could do so on a scale that lesser houses could hardly hope to
match: false credits piled on false credits, accommodation paper covered

by accommodation paper, forgeries, straw men, all the apparatus that

ingenuity could devise to present to the world a legitimate front
and obtain money on commodities and transactions that never were.
Moreover, the danger was aggravated by the readiness of many
bankers to wink at this behaviour and, indeed, encourage it when
seeking outlets for surplus funds. New houses especially, anxious to
rise and eager to win clients, were less careful than their established
rivals. Moreover, even virtue did not avail. The most treacherous

aspect of accommodation and overtrading was that those very houses

that would not dream of conniving at these methods, found themselves
inexorably drawn into the all-embracing web of paper credit- After a
certain point, it was impossible to say where bad bills left off and good

bills began. And it was just as easy to go bankrupt discounting fictitious

paper as making it.

As a result, when money was plentiful and the market easy, the
credit structure would be inflated far beyond the actual requirements
of industry and trade. Some of this inflation was good for the economy.
Accommodation paper and revolving credits were a disguised mech-
anism of investment and made possible business expansion that could
not otherwise have taken place. On the other hand, the margin be-
tween expansion and over-expansion is a small one, and it was only too

easy to blow up credit to the point where the merest pinprick could
deflate the bubble.

Accommodation was probably almost as old as merchant banking.

it was already a serious problem; bankers
In the eighteenth century,
found the so-called ‘finance bill* indispensable in the absence of
adequate facilities for rediscount but were unable to keep its use
within bounds. In 1763, Amsterdam and Hamburg were shaken by an
unprecedented crisis whose severity was due largely to the collapse
of a wide and complicated network of systematic accommodation.^

^ The most important study of the crisis is that of E. E. De Jong-Keesing, D&

economische Crisis van zyffs te Amsterdam (n.p., 1939), which discusses the earlier
debate of Van Dillen and Mansvelt in the Tijdschrift voor GescMedenis of 1922.
The book also provides a valuable discussion of the Dutch money market and
merchant banking in the middle of the eighteenth century. On the same crisis in
Berlin: S. Skalweit, Die Berliner Wirtschaftskrise von lySs und ikre Hintergrtinde
[VSWG, Beiheft 34] (Stuttgart and Berlin, 1937). There is little on Hamburg; cf.,

however, R. Ehrenberg, Das Hans Parish in Hamburg [Grosse Hermogen: ihre

Entstehung und ikre Bedeutung^ Vol. II] Qena, 1905), pp. 9-12. On Frankfurt:
A. Dietz, Frankfurter Handelsgeschickte (5 vols.; Frankfurt, 1910-25), V, 440.
The Steady development of central banks, however, which were to
become more and more bankers’ banks, made this risky procedure less
necessary, and by the nineteenth century, it was the trader and manu-
facturer the chief sinners in this regard. The worst abuse
who were
was where the rapid growth of industry and commerce
in England,
created a strong demand for accommodation; by the 1840’s and per-
haps earlier, enterprising ‘agents’ were actually manufacturing bills
and advertising for clients.^ And although every commercial crisis
brought its casualties and re-emphasized the dangers of financing
masquerading as mercantile credit, every boom brought its harvest of
sham paper. More than any previous crash, that of 1857 was the result
of excessive commercial credit, and resulted in sanctions by the Bank
of England against bill brokers, to whose overtrading was attributed
much of the catastrophe.^ Yet in 1860, with trade somewhat recovered
from its depressed condition, the accommodation bill was flourishing
as vigorously as ever, the greatest hazard of a hazardous profession.®

International exchange and commercial credit, whether prudent or

imprudent, w’ere the core of merchant banking. They were not, how-
ever, the only activities to interest merchant bankers, who at their
best were men of ingenuity and flexibility, swift to spot a new oppor-
tunity and tack with the winds of economic change. At the end of the
eighteenth century, the biggest of the new opportunities was that class
of financial operations genetically described as investment banking.
Investment banking is essentially the provision of funds for long-
term use. This may take the form of contracting for an issue of govern-
ment bonds, or the floatation of industrial stock, or loans on mort-
gages. The important thing is that, in contrast to commercial banking,
w’hich aims at financing specific business transactions of limited
maturity, investment banking is intended to make possible the creation

^ Cf. Bankers^ Magcu^^ (London), III (1845), i-io; also the later issues of this
volume. [Henceforth all references to the Bakers" Magazine are to the English
* W. T. C. Kmg, History of the London Discount Market (London, 193d), pp.
®See the Bankers* Maga^, XX (r8(5o), 529-32, 542-4, 621-5, and passim^
for the scandalous pyramiding of accommodation credit in the leather

or utilization of durable capital. It implies, therefore, the immobiliza-

tion of the funds of either the banker or iht ultimate investor over a
considerable period of time.
This was hardly a field for deposit bankers, whose duty to clients
imposed a pre-eminent devotion to liquidity, or for banks of issue,
which always had to be ready to redeem notes on presentation.^
But it was just the thing to interest the merchant banker, who was a
free agent by comparison. His capital, of course, was his own. His
notes and acceptances fell due at known maturities, and a skilful
operator could so stagger accounts receivable and accounts payable
that inflow anticipated outflow. Finally, such funds as were left by
clients on current account w^ere usually deposited for administration
and investment and returnable only on due notice. In short, nothii^
in his debit column was payable without warning, and he could, if he
had the ability and the nerve, take
risks that would be morally and
sometimes legally censurable in a bank of deposit or issue.
If we define investment banking in the widest possible sense, it goes
back to those merchants of the late Middle Ages and Renaissance,
the Bardi and Peruzzi, the Medici, Jacques Coeur, and others, whose
loans contributed to the rise of the modern state. As a systematic
profession distinct from mere money-lending, however, investment
Britishbanking theory usually made a rigid distinction between the so-called
‘private banker' and the ‘merchant* in this regard. In principle, a private, or
deposit, banker could invest only in consols, exchequer bills, short-term com-
mercial paper, and other securities of unquestioned liquidity. Under no circum-
stances was he to immobilize his funds in long-term investments or speculative
floatations. In fact, most private bankers departed from this rule to some extent,
working in part, to be sure, with their own capital, but also with the money of
depositors. On the varied activities of these firms see especially L. S. Pressnell,
Country Banking in the Industrial Revolution (Oxford, 1956); and D. M. Joslin,
‘London Private Bankers, 1720-1785’, Ec. //.i?., ser., (1954), 1(57-86. Of
course, English banking represents a special case. In the early nineteenth century,
England was tlie only country in Europe where deposit in our sense and the
circulation of paper money were developed to any extent. On the continent, how-
ever, not only was deposit limited to long-term custody of substantial fortunes
rather than day-to-day care of disposable business and personal capital, but paper
money was a latecomer, a phenomenon of the late eighteenth or early nineteenth
century, and note issue was limited by the state to certain corporate institutions
under conditions specified in advance. Continental private banks were generally
merchant banks. The only distinction made was between those engaged in foreign
exchange and those who more or less restricted their operations to domestic
banking not possible in the absence of negotiable titles to wealth

and a market of investors to purchase them. These conditions were

not fulfilled until the seventeenth and eighteenth centuries, when the
growth of the national debts of England, France, and Holland and the
appearance of great chartered companies for the exploitation of foreign
trade produced a substantial supply of transferable securities. It was
this period also that saw the rise of shares made out to bearer and
issued in uniform denominations for the convenience of speculators
and investors.
The French Revolution and Napoleon gave new impetus to this
development. Years of war and political and economic ferment, with
their harvest of loans and subsidies, gave rise to financial transactions

on a scale never before imagined. New bankers appeared in all the

money markets of Europe, and old bankers learned new tricks. And
while many newly rich houses fell even faster than they rose, many
cut their teeth and stayed. Some of them have stayed right up to the
present day.
On the eve of Waterloo, the giants of investment banking were
Barings of London and Hopes of Amsterdam,^ older houses linked
by business ties since well before the Revolution and later bound
even more closely by marriage and common ownership, and Gebriider
Bethmann of Franfeiurt, chief lenders to the courts of central and
northern Europe.* But not too far behind them were a whole flock of
mercantile firms, most of them bom during the war years and all of
them nursed on transactions in foreign exchange and ready to be
weaned on the investment operations and floatations of the post-war
period. There were, to name only a few of those houses which were
to grow in importance during the decades to come, the Hottinguers,
Swiss patricians who came to Paris just before the Revolution and rose
to dominate Franco-American tracie and credit under the July Mon-

^ On these firms, cf. Hidy, Baring^ chs. i and ii; P. Emden, Mon^ Powers of
Europe in and zotk Centuries (N.Y. and London, 1938), p. 33, n, 2;
E. Baasch, HoUdndsscke Wirtschafisgeschichte 1927), pp* 197-9, 205-7;
V. Nolte, Punf^g Jakre in heiden Hemisph&ren (2 vols.; Hamburg, 1854), p. 262;
Dicuonary of National Biography^ ‘Sir Thomas Hope*.
* On this firm, see A. Dietz, Frankfurter Handelsgeschichtej V,
620-36, and
passim; also H. Pallmann, Simon Morit^ v. Bethmann und seine Vorfahren
(Fiankfiirt, 1898). Claus Helbing, Die Bethmanns: aus der Geschichte eines
aken Handelshauses :(u Franlfurt am Main (Wiesbaden, 1948), is thin and

archy;^ the Andrfe, returned to France in 1800 from Genoa, ire

their Huguenot ancestors had fled in the seventeenth century,

commerce;^ the Foulds, German immi-
specialists in Franco-Italian

grants to France who went bankrupt under Napoleon I,

managed a
remarkable comeback, and reached their height under the
Empire when they furnished Napoleon III with a Minister of Finance;*

the Sinas, who came to Vienna from Greece toward the end
of the
eighteenth century and, building their fortune on imports of scarce

merchandise into a central Europe starved by Napoleon’s Continental

blockade, rose from merchants and industrialists to bankers and barons
of the Austro-Hungarian Empire;^ the Oppenheims, who went from
Bonn Cologne in 1801, shortly after annexation to France opened
the city to Jews, and played a major role in the development of Rhen-
ish mining and industry;® the Mendelssohns, who set up in Berlin in 1795

and eventually became the purveyors of Russian bonds to the inves-

tors of Germany, yet are best remembered today for the non-financial

^ Dicu hist, et Hog, de la Suisse, art. ‘Hottinguer*; F. Redlich, ‘J»

Lallittc and
the Beginnings of Investment Banking in France*, Bulletin of the Bus, Hist, Soc,,
XXII (1948), 158; A. Hamon and X.Y.Z., Les mattres de la France (3 vols.; Paris,
1936-8), I, 260-4; H. $ 4e, Fraru^dsische Wirtschaftsgeschichte (2 vols.; Jona,
1930-6), II, 201. There is considerable material on the activities of IltMiinguers
in Hidy, Barings (see index).
2 For the history of this firm, then known as Andre and Cottier, sec b<‘I()\v,
pp. 121-2.
® There is very information on the
little early history of Fould, T'ould
Oppenheim and Co. At the time of the firm's failure in i8io,
it was apparently

especially interested, among other things, in iron manufacture and the in«,*tal
trade. O. Viennet, NapoUon et V Industrie frangaise (Paris, 1947), p. 117. C»f.
Archives of De Neuflize, Schlumberger et Cie [henceforth written A, Neuf,]^
no. loi.
^On this firm, A. Ch. Boumazos, ‘Simon G. Sina’, Proceedings of the Circek
Academy, VII (1932), 47-555 Eleutheroudake, Encyclopedic Lexicon, Xf, 49H.
[Both the above in Greek.]
® A. Kruger, Das Kolner
ankiergewerhe vom Ende des 1 8, Jahrhunderts Ins i .V 75
(Essen, 1925), pp. 64-72 (a superb study, based in large part on
private records);
also A. von Frankenberg u. Ludwigsdorff, ‘Abraham
Freiherr von Oppeii-
heim, 1804—1878 , Mitteilungshlatt der Industrie-^ und Handelskammer
V (1950), 297-300; R. Cameron, ‘Founding the Bank of Darmstadt*, Explorations
in Entrepreneurial History,
VIII (Feb. 1956), 113-30 (also published in Gmniux,
with appended documents, in Tradition: Zeitschrift
fur Firmengeschkhre und
Untern^erhiographie, H [1957], 104-31); idem, ‘Some French Contributions to
the Industnal Development of Germznf, Journal of Economic History
(1956), 281-321.
talentsof Felix;^ and the Heines, bankers of Hamburg since 1797,
connected with the most powerful Jewish firms in Europe, but once
again known better for the unbusiness-like gifts of Heinrich.^
important of were the Rothschilds, who became wealthy in
all, there
foreign exchange by supplying the armies of Wellington with money
to fight Napoleon and became Ae greatest power in international finance
by underwriting some of the debts created by Napoleon*s wars.®
For if revolution and war were favourable to operations in foreign
exchange, peace was even better. The end of combat meant a sharp
decrease in military expenditures, an over-accumulation of inventories,
a drop in prices and a crisis in trade. But meant indemnities,
it also
reconstruction, and international borrowing. In the decade from the
fall of Napoleon to the panic of 1825, more securities were floated on

the markets of the world, above all in London, than had probably
been floated in the entire preceding century. Not only did the great
powers borrow - France, Prussia, Russia, and Austria -- but second-rate
^ The best available history of the firm is in H. Rachel and P. Wallich, Berliner
Grosskaufleute und Kapitalisten^ vol. HI: Uelergangsieit ^um Hochkapitalismus
i 8 oS-i 8 $S (Berlin: privately printed, 1939), pp. 98-ni. Also useful is K.
Zielenziger, Judm
in der deutschen Wirtschaft (Berlin, 1930), pp, 52-63, who
apparentiy bases most of his early history of the bank on S. Hensel, Die Familie
Mendelssohn^ iy2Cf-i84y (2d ed,; Berlin, 1880). Unfortunately, Hensel, though
a member of the family, could not or did not want to get access to the business
records, and gives only tlie most summary sketch of the rise of the firm. The
books are almost exclusively devoted to the career of Felix,
® There is a short pamphlet by Joseph Mendelssohn (probably the founder of

the Berlin banking house), Salomon Heine: Blatter der Wurdigung und Erinnerung
fur seine Freunde und Verehrer (2d enl, ed.; Hamburg, 1845). The account in F.
Otto [pseudonym for Otto Spamer], Das Buck heruhmter Kaufleute^ ist series
(Leipzig and Berlin, i868), pp. 619-40, is based in large part on Mendelssohn,
but continues the story down through Karl Heine, son of Salomon and his
successor from 1845 to 1865. Heinrich Heine was the nephew of Salomon and
turned to studies and literature only after his uncle’s efforts to set him up in
business foundered on the rock of Heinrich’s incompetence.
® A library has been written on this family. The best sources currently available
on the rise of the house are Corn’s above-cited Rise (see n. i, p.
4); C. W. Berg-
hoeffer, Meyer Amschel BotkschUd^der Grander des Rothschildschen Bankhauses
(ad and R. Ehrenberg, Grosse J^ermogen^ Vol, I: Die
ed.; Frankfurt, 1923);
Fugger-^dtsckUd-Krupp (Jena, 1925), part ii. There is a great deal of new infor-
mation in Bertrand Gille, *Banque et credit sous la monarchie censitaire’ (fhJkse
de Doctorat-^es-Dettresy Univ. of Paris, 1957)* Unfortunately, the advance micro-
film of this manuscript that M. Gille was kind enough to send me
arrived too late
to be of assistance in the preparation of this book.

states like Spain and Portugal, would-be states like Greece, so-called
states like Guatemala and Nicaragua, and imaginary states like Poyais.^

At same time, the development and diffusion of new techniques

in industry and transportation increased the demand for, and offered
new opportunities to, investment capital Too often, to be sure, these
opportunities found many of the greatest firms timidly indisposed or
pompously indifferent. The same houses that had shown remarkable
initiative in the creation of an international market for government
bonds avoided the new railroad and mining companies like bad
debtors, and throughout western Europe it fell to newcomers - engi-
neers, publicists, industrialists, and promoters pure and simple - to
show the way to the established financial powers. In England, indeed,
when bankers were finally won over to the possibilities of company
formation, it was not a merchant banker but - the exception that proves
the rule - a private banker, George Carr Glyn, who set the example.®
Nevertheless, once they had overcome this initial reluctance, the

great merchant bankers fell to work with a will. In France, particularly,

there was hardly a corporation of any importance - canal, railroad, or
public utility -that did not feature among its founders and on its

board the names of one or more of those few firms who formed the
summit of the French financial hierarchy and have always been known
as the Haute Banque? In Germany, the great houses of Frankfurt
and Cologne were similarly prominent in the forges and mines of the
Ruhr, the textile mills of Wurttemberg and the Rhineland, and the
banks of issue established throughout the Confederation.^ And in

^ The best treatment of international finance after Waterloo is L. H. Jenks,

The Miration ofBritish Capital to iSjS (New York, 1927), ch. ii. The pages that
follow owe much to this superb work, which is, if possible, even more important
for the avenues it opens than for the ground it covers. On Poyais, see V. Allan,
‘The Prince of Poyais*, History Today, Jan. 1952, pp, 53-8, 80; D. M. Evans,
Speculative Notes and Notes on Speculation, Ideal and Real (London, 1864),
ch. xiii; Emden, Money Powers, bet. pp, 40 and 41.
® Cf. Landes, ‘Vieille banque et banque nouvelle*, Rev. dlhtst. mod.. Ill
21 1, n.2.
® The lists of subscribers and the members of the first board of directors of
almost every French corporation (soditi anonyme) foimded up to 1867 are to be
found in the decrees of authori2auon published in the Bulletin des Lois [hence-
forth cited as B.L.].
* Cf. A. Elriiger, Das Kolner Bankiergewerhe, pp. 126-89; Kahler, in Hansen,
ed., Die Rheinprovinc, I, 525-6; P. Benaerts, Les orpines de la grande industrh
aUemande, i844’>-i866 (Paris, 1933), ch. vii.
England, where they had to share much of the field with the new-
comers who preceded them and those private bankers who saw fit to
by-pass tradition and invest on their own initiative, the leading foreign
bankers nevertheless carved out a large sphere in industrial enterprise,
not so much at home, however, as abroad.^
It must be emphasized that investment banking on this scale was the
prerogative of a small group of houses, located in a handful of cos-
mopolitan money markets and possessed of abundant private means
and a wealthy clientele. Most merchant bankers, even in cities like
London or Paris, still more in lesser centres, were content with the
day-to-day profits of foreign exchange, commercial credit, and trade.
Even the Rothschilds were not above importing staples or lading
vessels if circumstances were favourable,® and Barings continued to
deal in things like ‘coffee from Java and iron from Russia* on their
own account in spite of criticism from their merchant clients.® For all

but the most active firms, promotion was more an occasional feast

than everyday fare.

Although all commercial paper, foreign and domestic, had its risks,

the task of the foreign banker was particularly hazardous. For one
thing, the distance and duration of many transactions imposed long
delays on remittances and settlements and provided opportunities for
special abuses. For another, the physical separation of the banker
from his clients in other countries made it impossible for him to know
them and watch them the way a local banker could know and watch
every businessman in his neighbourhood. The difficulty was aggra-
vated by the dangers of dealing with businessmen in countries gov-

The only comprehensive study in Jenks, Migration.


P. Dupont-Ferrier, Le marchi financier de Paris sous le Second Empire (Paris,


1925), pp. 76-7; Das Haus Rothschild (2 vols.; Prague and Leipzig, 1857), I, 201.
See also die fiontispiece in P. Deeg, Hojjuden (Niamberg, 1938 [N.B.: ed, and
pub. by Julius Streicher]), the famous cartoon of 1825 (in colour), picturing a man
on a horse carrying everything firom quill pens to liquor and umbrellas. The
caption reads: *Blauschild. Reisender fur KAufleute. macht Geschafte in alien
Zweigen des Handels.' This cartoon has frequentiy been reproduced, though not
in colour. Cf. Corti, Rise^ opp. p. 320.
* Hidy, Barings^
p. 161. This was in 1831. Barings was still dealing in iron for
American railways on the eve of the Qvil War. Ibid., p. 468.

emed by strange laws and usages. There was no consolation in having

a claim on an insolvent debtor if the debt could not be collected or if
what was thought to be a claim was really nothing of the sort in the
society concerned.
Because of these handicaps, merchant banking was an intensely
personal business. In the absence of objective criteria of business
ability, the banker was forced in dealing with clients to place special
reliance on the intangible but presumably consistent virtues of their
character. And in all judgements of character there was no more telling
testimony than a recommendation from someone the banker knew
and trusted, and no recommendations more influential than those of
the banker’s own correspondents.^
These correspondents, usually bankers in their own right but some-
times heads of firms that the first banker had a silent interest in or
simple subordinates in charge of agencies, were the critical pivots of
any international exchange business.* For one thing, they were in-
dispensable as financial collaborators, remitting payments, receiving
drafts and collecting debts, drawing letters of credit, and so on. But
equally important, they were in effect the eyes and ears of their distant
an intelligence corps whose strategic situation in customer
territory enabled the foreign banker to work smoothly and safely
with businessmen he had never seen.
For those bankers engaged in investment transactions, in the floata-
tion of foreign loans or the promotion of industrial corporations,
problems of intelligence and co-operation were still more acute. A
borrowing government was in the last analysis a client, although a
rather special one, and was subject to the same scrutiny as a private
borrower. Indeed, this scrutiny was all the more difficult and important
because of the exogenous political factors embroiling what, from a
purely business standpoint, was complicated enough. Furthermore,
scrutiny was only the beginning. There were always the tasks of
securing and effecting the loan, with all that these demanded in tiie

way of connexions and influence.

^ Cf. R, W. Hidy, ‘Credit Rating before Dun and Bradstreet*, BuUeun of the
Business Historical Society XIH (Dec. 1939), Si-S.
* The word ‘correspondent* is not used here in Hidy*s sense of a client. It

means here diose particular colleagues in foreign coxmtries who serve as chosen
instruments for the functions detailed below. Cf. M. Greenberg, British Trade
and the Operdr^ cf CJdna^ 1800-1842 (Cambridge^ i95i)» PP- 150-1.
Industrial ventures posed problems all their own. Aside from their
- there were still many investors
speculative character as floatations
of the mid-nineteenth century who would not touch industrial
securities under any circumstances - they involved technical matters
well beyond the ken of the ordinary banker. Moreover, company
promotion in this period was almost as much a political affair as the
negotiation of a government loan. Everywhere except in certain parts
of the United States, the joint-stock company remained until the

1850’s and i86o’s a departure from the norms of business organiza-

tion, an aberration requiring the express sanction of the state. Here

as in loan contracting, some representative or collaborator was needed

on the spot, both to furnish information and to provide a link with
local businessmen and officials.
Merchant banking, therefore, whether exchange or investment, was
of its very nature a team activity. Schematically, such a team might
consist of a nucleus of two or three correspondents in different major
markets - London, Paris, and Amsterdam; Paris and Frankfurt;
London, Liverpool, Boston, and New York - to all of which, either
singly or collectively, were attached outside houses in other com-
mercial centres. These outside firms would in turn work with their
own regional networks of foreign and domestic bankers, who gener-
ally dealtwith the great cosmopolitan houses only at second hand.
And so on. The solidity of the units in such a multiple network usually
varied inversely with their distance from the centre. The whole
hierarchy of fims formed a remarkable chain, in which each link
joined and yet separated the links on either side, a veritable comedie

financiered from the titans of the City or the Chauss^e d’Antin, to

their trusted correspondents in the great ports and entrep6ts, to small
local bankers in manufacturing centres and agricultural markets, down
to catch-as-catch-can go-betweens and money-lenders in the back
country of India.

In a business in which personal ties were so all-important, it was no

coincidence that the strongest banking groups were composed of kin.

The most famous example, of course, is the House of Rothschild, that
dynasty that began in Frankfurt, settled during the first two decades

of the nineteenth century in the great money markets of Europe, and


reigned from 1830 to 1848 as the undisputed kings of world finance.

But any number of outstanding families could be adduced as evidence
of the effectiveness of kinship in the difficult give-and-take of cos-
mopolitan banking. In America, die leading group in tlie first half of
die nineteenth century was the Browns, who began in 1801 in Balti-
more as Alexander Brown and Co., importers of linens, and by 1825
had established filial branches in New York, Philadelphia, and Liver-
pool.^ Swiss families like the Hentsches and Odiers sent their children
to Paris, where they set up houses that co-operated closely with the
firms of relatives in Geneva.® Most prolific of all, however, was
Germany, the home of a remarkable number of powerful international
banking dynasties, almost all of them Jewish. There were the Oppen-
heims of Cologne, the Bambergers of Mainz, the Habers of Karlsruhe,
the Heines and Warburgs of Hamburg, and above all the Frankfurt
contingent, which included, in addition to the Rothschilds, the Stems,
Speyers, Erlangers, Goldschmidts, Schusters, and Seligmans - among
others.® They formed an extraordinary group of enterprising, aggres-
sive financiers who were among the leaders of the money and capital
markets of the last century and -who in some instances have continued
to control great wealth to this very day.
Less effective only by comparison were those groups knit by friend-
ship, confidence, and a long experience in co-operation.^ In this respect,

^ F. R, Kent, The Story of Alexander Brown and Sons (Baltimore: privately

printed, 1925), pp. 149-50; J. C. Brown, A Hundred Years of Merchant Banking
The archives of the firm for the years
(N.Y.: privately printed, 1909), pp. 50-1.
1800-80 were recently deposited in the Library of Congress in Washington.
Am, Hist, Rev.^ LX (1955), 479.
® There was in effect a Paris-Lyons-Geneva financial axis, based in large part
on blood relationships, '^dth anne.xes in Basel and Genoa. On the Hentsch banks,
see B. Hentsch, ‘Historique de la famille Hentsch de son arrivee h. Geneve
jusqu’a nos jours, 1758-1929’ (typevTitten; I am grateful to M. Gustave Hentsch
for permission to read the manuscript); also Diet, hist, et hiog, de la Suisse, IV, 68.
On the Odiers: Notice pulliee par Lombard, Odier et Cie a Voccasion du tzS*
armiverscare de la fondamn de leur maison, Geneve, 1798-1923 (n.p., privately
printed, n.d.).
® Cf. Emden, Money Powers, passim, especially pp. 256-61, 39^91
Emden, Jews ofBritain (London, n.d.), pp. 344-50, 495-501. Brief biographies of
the more famous members of these families are to be found in the various Jewish
* Thus the London- Amsterdam-Paris trio of Baring, Hope, and Hottinguer;

or the Hamburg-Berlin combination of Heine and Mendelssohn; or the London-

New York team of George Peabody and Dimcan-Sherman, which one of the
the most frequent bond between bankers was a common national
origin: the majority of mercantile and financial teams were built
around the nucleus of an emigrant merchant and his friend or friends
at home. Wlierever there was a flow of commodities, traders from
one or botli ends of the stream settled at the other end to buy or sell
for their compatriots. In the earlymodern period, commercial com-
munities like those of Bruges or Antwerp were essentially bundles of
national groups whose members rested their businesses on their con-
nexions with the mother country. In later centuries, similar oppor-
tunitiesbrought Frenchmen to the Levant to sell cloth and buy spices,
coffee,and cotton, Swiss to Marseilles to ship Mediterranean and over-
seas products up the Rhone into central Europe, and Germans into
Scaninavia to send timber and iron back to their homeland.^ The
could be extended indefinitely- The most mobile were the English

and Scots; by the nineteenth century they were everywhere.

Some of these commercial connexions developed out of larger
migrations of a non-business character; thus German-American trade
grew rapidly after the exodus of 1848.® More often, merchants followed
the shifting flow of commerce; note the changing character of the
mercantile immigration into Bordeaux: Dutch in the seventeenth
century, German and British in the eighteenth, German in the nine-
teenth.® In either case trade gave rise to exchange and credit, and a
mercantile axis became a financial axis as well.

participants described as ‘almost as intimate, confidential, imdisguised and

identical as if we
were all partners in one and the same firm\ M. E, Hidy, ‘George
Peabody, Merchant and Financier, 1795-1869* (typewritten MS.; Cambridge,
1949), ch. xi, p. 6 . should like to thank Mrs, Hidy for her kindness in allowing
me to read this manuscript before publication.
^On French traders in the eastern Mediterranean, P. Masson, Histoire du
commerce fianfais dans le Levant au XVIP siecle (Paris, 1906), and Histoire du
commerce franfais dans le Levant au XVIII* siecle (Paris, 19 1 1). I am indebted to
M. Charles Latune for information on the Swiss in Marseilles; cf. also Masson, ed.,
Les Bouches-du-RhBne: encyclopidie departementah (i 6 vols.; Marseilles, 1913-38),
Xm, 189. On Germans in Scandinavia, Jarvinen, Der Zahlungsverkehr^ pp, 36-7;
cf.Samuelsson, ‘Swedish Merchant Houses’, Scand, Ec, H.R,^ III, 165.
* Cf. L. Beudn, Bremen und Amerika (Bremen,
1953), p. 109 f.
® T. Malvezin, Histoire du commerce de Bordeaux
(4 vols.; Bordeaux, 1892), 11,
309-10; 66-9; P. Meller, Etat-civil des families horderlaises avant la RivoluUon
(Bordeaux, 1909); A. Leroux, La colonie germanique de Bordeaux (2 vols.;
Bordeaux, 1918). Needless to say, the pattern of trade was itself affected by the
migrations and initiatives of merchants.

Often national ties were reinforced by religion- A shared faith was

more than a bond. In a profession that was of its nature international
and depended on the closest mutual confidence, the dispersion of certain
persecuted or disfavoured groups with common values and ways of
life to cement them from within, and common pressures and prejudices

imposing unity from without, was a positive advantage.

No group, for example, was better situated than the Jews. Once a
pastoral and farming people occupying a small comer of the Near
East, war and persecution had scattered them throughout the Mediter-
ranean and Hither Asia, and thence to the farthest parts of the world.
Wherever they stopped, they benefited from the cohesion that was
called forth by the hostility and suspicion of the gentiles around them.
Within the community, they were compelled to stand together, to help
one another in difficulty, to work with one another in prosperity.
Between communities, they travelled as from one home to another^ the
Jew who stopped among his brethren w^as almost never a stranger
within the gates. Their ties with co-religionists elsewhere meant in-
valuable contacts. No one could so easily locate goods in short supply;^
no one knew so quickly of a chance for profit; above all, no one was
possessed of so complete and effective an intelligence network, in
political as well as in business matters.^

Nor was community simply a matter of common religion within and

common pressure without. The prevalence of marriage within the
group together with rationalized matrimonial selection combined to
produce a business class that was almost a clan. Carefully weighing
dowry, family connexions, prospects, and all the other things that go
to m^e a sensible union, banker’s son married merchant’s daughter;
Amsterdam joined Frankfurt, and Paris, Cologne. And with blood and
marital relationships went business ties. Not always, of course. But it

was only natural that relatives should know each other well, that their

Note the importance of this factor in the success of the Jewish army con-

tractorand court purveyor in central Europe during the seventeenth and eight-
eenth centuries. S. Stem, The Court Jew (Phila,, 1950), chs. i and ii, especially
pp. 18, 27-8, 42-5.
® As Bismarck came to appreciate in his relations with the Rothschilds. When

itwas a question of appointing a court banker in Berlin, Bismarck was insistent

that only a Jewish banker would do, and Bleichroders was chosen. Emden,
Money Powers^ p. 252. Cf. H- L Bloom, The Econondc Activtiy of the Jews of
Amsterdam in the Seventeenth and Eighteendi Centuries (Williamsport, 1937), p.
1 81 f.
children should learn in one another’s shops and counting houses, that
they should be friends as boys and colleagues as adults, and that they
should seek their correspondents and collaborators from within the
clan. From Golden Gate, from Sassoon to
the China Sea to the
Seligman, there was an unbroken chain of Jewish merchant banks
joinedby blood or business, and usually by both.^
More concentrated, perhaps, geographically, but no less effectively
bound by religion, way of life, and persecution or discrimination, were
the Calvinists. Fleeing first Flanders and France in the sixteenth
century', then uprooted in central Europe by the Thirty Years War, and

finally dri\'en again from France by the revocation of the Edict of

Nantes, these refugees scattered throughout Europe, clustering at the

crossroads of trade routes and in the great ports, in Frankfurt, Geneva,
Basel, Genoa, London. Like the Jews, they were, everywhere they
w’ent, a solvent, a force from without, intrusive, ambitious, free of
the entanglements and commitments of vested interest. ^ They set up

^ On the remarkable inbreeding of one section of the Jewish financial com-

munity - probably the most important one - see A. Dietz, Stammhuch der
Frankfurter Juden (Frankfurt-a.-M., 1907), especially the genealogies of families
like Beyfus (pp. 29-31), Ellissen (pp. 66-7), Goldschmidt (pp. 109-27), Oppen-
heim (pp. 210-23), Rothscliild (pp. 244-50), Schnapper (pp. 264-8), Speyer
(pp. 289-92), Stem (pp. 295-9); slso Deeg’s anti-Semitic Hofjuden^ p. 348 et seq.,
especially pp. 356 and 362-3, on tlie family alliances of the Rothschilds; also
Emden, Money Powers, passimi the biased but valuable study of H. Schnee, Die
Hqffinani undder moderne Staat (3 vols.; Berlin, passim; A. Hamon and
X.Y.Z., Les maitres de la France, Vol. I, passim. The reader will note that much
of the material on Jewish family connexions has been assembled for anti-Semitic
On the Sassoons, who made their fortune in the Far East and did not move to
London until i860, see C. Roth, The Sassoon Dynasty (London, 1941), pp. 48-9.
In 1887, Sir Edward Sassoon married Aline Rothschild, daughter of Gustave, of
Paris. On the Seligmans, there is a family history: 1680-19301 DU vUrteltausend’^
jahrige Geschichte der FamilU Seligman foreword by
([Berlin]: private, 1935),

Ludwig Herz. There are manuscript histories of the American branch of the
family by Linton Wells and George S. Heilman on deposit with the New York
Historical Society. Cf. Heilman, ‘Joseph Seligman, an American Jew,’ Puh. of the
Amer. Jewish Hist. Soc., XLI (195 1-2), 27-40.
® On the Huguenots as carriers of innovation, see the articles by W. C.

Scoville, ‘Minority Migrations and the Diffusion of Technology’, Jour. Ec. Hist.,
XI (1951), 347''<5o, and ‘The Huguenots and the Diffusion of Technology*,
Journ. Pot. Ec., LX (1952), 294-31 1, 392-41 1 and the sources cited therein.
Scoville is at present preparing a general study on the subject. For the impact of
the first group of refugees from the Low Countries on the guild-controlled in-

counters and warehouses, introduced new manufactures and revolution-

ized old, discounted commercial paper and trafBcked in foreign
exchange. Whatever they did, they built their prosperity on the
ubiquitousness of their brethren, on this astonishing network of co-
religionists whose solidity and reliability was mutually reinforcing.
For example, no sooner were the French Calvinists, or Huguenots,
settled in cities of refuge than they sent their children back to France,
not as Frenchmen subject to discrimination and persecution, but as
foreigners covered by Swiss or Dutch citizenship.^ By the beginning
of the eighteenth century, there was in Paris an active colony of
Calvinist bankers, whose close relations widi relatives abroad were
supplemented by invaluable ties with Protestants who had never left

dustriesof Germany, see F. Bothe, Beitrdge :^r IFzrtschafts- und Soiialgeschichte

der Reichsstadt Frankfurt (Leipzig, 1906), pp. 43-44, 59-61, 78-9; also Dietz,
Frankfurter Handelsgeschichte^ Vols. IV and V, which discuss in some detail the
history of the individual firms; G. Witzel, ‘Gewerbegeschichtliche Untersuchungen
zur niederlandischen Einwanderung in Deutschland im 16. Jahrhundert*, West-
deutscke Zeitschr, f Gesch, u, Kunst, XXIX (1910), 117-82, 419-51; P, Koch,
Der Einfluss des Calvinismus und des Mennonitentums auf die niederrAeinische
Textilindustrie (Krefeld, 1928).
1 Thus, the bank of Tourton, originally of Annonay but apparently late of

Holland, operating in Paris in 1692, only seven years after the Revocation. J.
Bouchary, Les manieurs d’argent d Paris d la fin du XVllP sieck (3 vols.; Paris,
1939-43), III, 57, 259 f. Cf. V. Barbour, Capitalism in Amsterdam in the Seven-
teenth Century (Baltimore, 1950), p. 99. By 1719, at the height of the Law mania,
almost all the Swiss banks had representatives in Paris. A. E. Sayous, ‘Calvinisme
et capitalisme: Texp^rience g^nevoise’, Ann, d'hist,
ec, et soc,^ VII (1935). *39- Cf.,

on the between Geneva and Lyons, Sayous, ‘La crise financiere de

similar ties

1709 a Lyon et a Geneve’, Rev, d*Aist, ic, et soc,^ XXIV (1938), 61-2, 65-6; on
Amsterdam and Geneva, the same autlior’s ‘Le financier Jean-Henri Huguetan a
Amsterdam et a Geneve’, Bulletin de la Soc, d*hist, et d*arch, de Genive, VI, iii
(i937)> ^ 55 “74 fhe role of Geneva as a point of dispersal is nothing short of

remarkable. Cf. L. Dufour, ‘Industrie et etat social de Geneve au dix-huitieme

siecle d’apr^s les minutes des notaires*, Memoires et documents puhUes par la
Socidte d*histoire et d*archiolog^ de Geneve^ XX (Geneva, 1879-88), 260 et seq.,

who gives a of Genevans setded abroad in the eighteenth century, in France,


Great Britain, the Netherlands, Italy, Spain and Portugal, Germany, even India.
See also the important articles of H. Liithy, ‘La R6publique de Calvin et Tessor de
la banque protestante en France de la Revocation de TEdit de Nantes a la Revolu-

tion’, Bullettn du Centre de Recherches sur VHistoire des Entreprises^ I (1953),

1-35 [also published in the Schwev^er Beitrdge ^pjtr aUgememen Gesckichte^ XI

(1953)]; and L. Dermigny, ‘Circuits de I’argent et milieux d’affaires au XVm*
siede,’ Rev, hist,, CCXII (1954), 239-78.
the country. For despite the utmost diligence in suppression, the
authorities never succeeded in stamping out the Reformed Church, and
many of those Calvinists who stayed to be harassed and suffer the
manifold disabilities of heretics, devoted themselves to manufacture
and trade with exemplary success. The prosperity of the Protestant
entrepreneur was especially striking in the South, not only in Annonay,
Dieulefit, Mazamet, and other mountain redoubts of the persecuted
faith, but in Lyons, Marseilles, Bordeaux, Montpellier, and Nimes,

where the children of the hard-shelled Cevennes and the uplands of

Dauphin^ had settled in the flat land and in the ports, and sometimes
carved for themselves niches big enough to swallow the enterprises of
their more numerous Catholic neighbours.^
This inflow of Calvinist merchants and bankers, particularly from
Switzerland, has been a characteristic of French business life ever since.
It was probably during the last years of the Ancien Regime, when
Paris was becoming steadily more important as a capital market, that
the influence and prosperity of men like Perregaux, Necker, and
Clavifere gave rise to the saying that *one Genevan is worth six Jews,
and one NeudiStelois, six Genevans’.^ The Revolution slowed the
movement; the situation was distinctly unfevourable to normal ex-
change transactions. But while many of the older bankers lost their
wealth and sometimes more, many remained and were joined by new-
comers who found in political instability and monetary anarchy an
opportunity for profit that outweighed the risks. The influx continued
under Napoleon. Some, like Andre in Genoa, simply closed up shop
and moved their offices to Paris.® Others, like Hentsch in Geneva,
founded affiliates in Paris, or like Marcuard in Berne^ and Mirabaud in
^ The materials are widely scattered, and a detailed bibliography would take
too much space. Those interested might begin by consulting E. G. Leonard, Le
protestantfranpais (Paris, 1953), which itself says all too little about the economic
activities of Protestants in France. But then that is a story that still remains to be
® Cf. M. Chaminade, La monarchie et les puissances d*argenty t8 14“ 1848
(Paris, 1933), pp. 193-4, citing Toussenel.
® Apparently Andr4, Neveu et Cie of Genoa had failed around 1798. Cf.
Bouchaary, Manieurs^ III, 242. See also, below, p. 121.
^ Adolphe Marcuard entered the firm of Andr6 et Cottier in
1834 with a share
of 200,000 francs out of a total capital of 4,600,000. In 1843, after die retirement
of F. Cottier and C. E. Andr6 from active business, the firm became A. Marcuard
et Cie, with a capital of 2,000,000 francs, of which 500,000 invested by Marcuard.
A, Neuf,, actes de sodete.

Milan^ bought into an established French house. And sometimes a

novus homo like Paccard or Dassier arrived with little more than con-
nexions and family ties - worth more in Calvinist circles than hard
For here, too, social community was blood community, and both
implied economic co-operation. Before the Revolution, not only did
refogees in exile marry with one another, choosing their partners with
a careful eye to the aggrandizement of family fortune and firm, but
Protestants in France, who found it difficult to worship openly and be
educated and married within their faith, sent their children abroad when
possible to learn their trade and perhaps find a wife behind the counter
of some friendly co-religionist. The practice, if less necessary in a more
tolerant era, continued to be popular in the nineteenth century, partic-
ularly since this was an excellent way to pick up the languages and
contacts so valuable in trade.®
As a result, there grew up in we^em Europe a large Calvinist
business clan, centring in Paris, but reaching through cousins and
uncles and brothers-in-law, backward and forward across the genera-
tions, from cotton spinners in Normandy to bankers in Basel, from
Alsatian machinery manufacturers to merchants in Genoa.^ Within

^ There is a beautifully printed family history by Paul Mirabaud, Histoire

generate des Mirahaud d'Aiguesvives (Paris, privately printed, 1894). Cf. also
BartheUmy Paccard et Cw, i82z\ Mirahaud et Cie, zs>22 (n.p., n.d.). This is a
short pamphlet to celebrate the hundredth anniversary of the firm, and contains
only meagre details. It would appear from this that in 1846 the Paris house,
reversing the usual pattern, established an affiliate in Geneva.
® OnDassier, J, Capefigue, Histoire des grandes opirations financUres (4 vols.;
Paris 1858-60), IV, 153 f.; [G. Goy], Hommes et choses du P,L,M. (Paris, 1911);

J. A. Galiffe et al.. Notices gendalogiques sur les families gemvoises^ depuls Us

premiers temps jusqda nos jours (7 vols.; Geneva, 1829-95), ‘Dassier*.
® On the intensification of group consciousness and family ties within the

Protestant community, see J. Hashagen, ‘Kalvinismus und Kapitalismus am

Rhein*, Schmolkrs Jctkrhuck, XLVII (1924), 60-2. Hashagen correctly points out
that family-structured enterprise is an obstacle to, if not incompatible with,
modern ‘capitalism unlimited*. What he does not realize, however, is that the
superior family unity and group co-operation of the Protestants were major
advantages in this age of early capitalism, indeed still are in certain types of
* See Galiffe, Notices ginialoglquesi Hamon et X.Y.Z., Les mattres de la France^

passim; and the different family histories and genealogies, especially those of the
great textile dynasties of Alsace. Cf. P. Leuilliot, ‘Une industrie mulhousienne:
Timpression sur 6toffes*, Armcdes^ II, (1947)9 49h
this haute sociiti protestante^ as it is termed in France,^ banking families
held the highest place. Solid, conservative, extremely conscious of their
faith and their dignity as a religious minority, they formed a coherent
financial bloc, anchored on Paris and Geneva, but reaching into
every important market on the Continent. In discount transactions and
foreign exchange, they had enormous respect for, and implicit con-
fidence in, one another and received similar respect and confidence
from outsiders; in loan floatations and industrial promotions, they were
quick to consult and share among themselves. And though not
particularly wealthy, tlieir prudence, reliability, and co-operation as a
group gave them power beyond their numbers and personal resources,
so much so that in France, ‘high finance*, la haute banque^ and Prot-
estant finance, la banque protestante, have been almost synonymous.
Jews and Calvinists, of course, were only the most prominent
examples of this phenomenon. The same influences were decisive in
the success of those Greeks who, driven by oppression at home and
drawn by opportunities abroad, left the Ottoman Empire to seek their
fortunes throughout Europe and the Mediterranean. Their activities
attracted attention as early as the seventeenth century. The first great
exodus in modem times, however, occurred in the eighteenth century,
when the failure of the OrlofF expedition and the suppression of the
revolt in ihe Morea in 1770 were followed by a decade of Albanian
looting and destmction that wiped out entire cities and dispersed their

populations. Most of the refugees fled into the Austrian and Russian
empires, where the authorities were hospitable and the large grain
crops provided an excellent staple for trade. It was just at this time,
moreover, that the Treaty of Kuchuk Kainarji, imposed on Turkey by
Russia in 1774, opened the Dardanelles to Black Sea shipping and gave
a powerful stimulus to commerce between the food-exporting regions
of eastern Europe and the manufacturing centres of the West.
Almost all diis commerce was in the hands of Greeks. Like their
ancestors in ancient times, Hellenic merchants and peddlers found in
the great rivers that cut the mountains of the Balkan peninsula and the
steppes of South Russia - the Sava and Danube, Dnestr and Dnepr,
Don and Volga - natural avenues to wealth. From Vienna and Venice
to Nijni-Novgorod and Astrakhan, old colonies prospered and new
ones arose. At the same time, the Greek merchant marine, now
^ The letters H.S.P. are used in conversation much like the initials of academic

protected by the Russian flag, expanded spectacularly, and when the

English navy drove the Frencli from the Mediterranean at the end of
the century, these brash and nervy newcomers moved into their place
as the leading carriers of the Levant. The Napoleonic era capped this
commercial renascence. The Continental system, with its prohibitions
and shortages, was a magnificent opportunity for merchants who
possessed, in effect, the key to Europe’s back door, and who made
fortunes by the sale of Turkish cotton and silk and forbidden British
The second
great exodus followed the Greek revolt of 1821 and the
consequent Turkish persecution. Most of these refugees went south
and west to Egypt, France, and England. And while most of those
who went to western Europe settled in the great ports and entrepdts -
it was this period that saw the formation of the important Greek com-
munities of Marseilles and London - many of the immigrants to Africa
went beyond the cities into the hinterlands. Here, indeed, lay much of
their strength: where iheir French and British competitors preferred
the comfort of Alexandria, the Greeks, while not neglecting the seaport,
moved on up the Nile, some to Cairo where they helped to make the
political capital a commercial centre as well, others into the farthest
reaches of Upper Egypt and the Sudan, selling cloth, trinkets, and
hardware to the Arab cultivators and Bedouin herdsmen, lending
money on exorbitant terms, and buying the products of these regions
for shipment to compatriots in Alexandria and export overseas.^

^ Once again the sources are extremely scattered, and most of what is available
is in Greek, and so inaccessible to most scholars. See the bibliography in the
Megdk Helhnikl Enkyklopaideta [Great Greek Encyclopedia], X, 729 et seq.
The most important work in a Western language is N. G. Svoronos, Le commerce
de Saknique an XVIII^ sihcle (Paris, 1956) whose sources, unfortunately, are
inconveniently cited; cf., however, pp. xi-xvi and the notes, passim. Also L. S.

Stavrianos, Balkan Federation: a History of the Movement toward Balkan Unity in

Modern Times (Northampton, Mass., 1944), pp. 28-31; H. Halm, Oestereick und
Neurussland^ Vol. I: Donauschiffahrt und'^handel nach dem Siidosten, tyiS-tySo
(Breslau, 1943), pp. 79-81, 95-97 and passim^ and the references in n. 4, p. ii.
T. Stoianovich, ‘L’&onomie balkanique aux XVII® et XVIII® siecles’ (unpub-
dissertation, Univ. of Paris, 1952), deals more with the trade than the traders.
® On this second wave, cf. P. L6ris, *La colonie grecque de Marseille', Rev. des

Frangais, XVII (1913), 295-308; A. G. Politis, JJHelUnisme etVEgypte moderne

(2 vols.; Paris, 1929), I, ch. ii; P. P. Argenti, The Massacres of Chios (London,
1932), p. xxxiii f. On Greeks in Upper Egypt and the Sudan, cf. Politis, Hellinisme
II, 198.
Some of these Greek emigrants, children of business families, came
away from the Aegean with considerable fortunes; others, especially
those from Chios, were rebellious peasants with no other capital than
their personal shrewdness, ability, and courage. And some were not
refugees at all, but members of the old commercial houses of Con-
stantinople, Salonika, and Smyrna, sent out to set up branches abroad
and extend the operations of the parent firm.
For here, too, it was unity in dispersion that was the key to business
success. Those Greeks who had stayed behind prospered in trade
because of their brethren abroad. As early as 1812, one observer noted:

Some branches of the migrating families, however, are always left in Turkey,
either from from the possession of property in the country, or
from the convenience to both parties in a commercial point of view. Thus by
far the greater part of the exterior trade of Turkey, in the exchange of com-
modities, is carried on by Greek houses, which have residents at home, and
branches in various cities of Europe, mutually aiding each other, extending
their concerns much more variously than could be done in Turkey alone.^

Wherever they stayed, they showed a spirit of cohesion that never

failed to impress the rest of the business world.* In prosperity, they
worked together to make the transactions of each more profitable:
bought and sold in unison, reinforced their credit by accepting and
discounting for one another, reserved their custom to their fellows.®

^ H. Holland, Travels in the Ionian Islesy Alhaniay Thessalyy Macedonia etc.

during the Years 1812 and 1813 (London, 1815), p. 149, cited by Stavrianos,
Balkan Federauan, p. 30.
® Thus Sidi Lokman El Hakim [John Ninet], Les mille pertuis des finances du
Khedive et les hanques en Egypte (Vienna, 1873), pp. 30-1, on the Greek colony
in Alexandria.
® Cf. the somewhat exaggerated fears of the Alexandria correspondent of

The Times (London), 14-10-1856, p. 5; ‘. the Greeks threaten at no distant

. .

period to absorb the entire trade of Egypt, and to their combinations is attributed
the present high price of com. They possess a unity of purpose which belongs to
no other people, and which enables them to successfully compete with older
established merchants.’ Also S. T. Xenos, on the clientele of the Greek and
Oriental Steam Navigation Company: ‘With respect to the home cargo I had
nothing to fear. The Greek shippers in the Levant not only regarded my line with
a patriotic affection, but even went so far as on some occasions to pay five
shillings per ton higher freight to my steamers than my opponents were asking.’
Depredadons$ or Overendy Gurney and Co., and the Greek and Oriental Steam
Nayigamn Company (2d ed.; London, 1869), p. 38; also pp. 16-19 on commit-
ments by Greek firms in England to ship with this line.

In crisis, the honour of each firm was the honour of the group, and
every effort was made to save a Greek house in distress.^
Here, also, social community was cemented by blood ties. Pro-
foundly loyal to their faith, the Greeks rarely married outside their

small colonies and went to remarkable lengths to avoid assimilation. ^

The great families, the Zarifi, Zafiropoulo, Rodocanachi, Ralli, Vlasto,
and others, found their partners within their own circle of merchants
and bankers, especially when it was a question of preserving the Greek
character of the firm.® The result was the same kind of extended clan
as among Jews and Calvinists. And while not nearly so powerful as
these other groups, the Greeks, within their sphere, were a force
to be reckoned with, and one whose intimate connexion with the
commerce and finance of the Near East makes them of especial interest
for the story that follows.
Of course, in at least two of these instances, those of the Jews and
the Calvinists - and, for that matter, in that of the Quakers, who held
so prominent a place in English domestic banking - business success
rested on more than simple group consciousness and co-operation. In
all of positive religious sanctions for rational
these, the presence
behaviour, intensified by social and cultural separation from the rest of
society with all that it entailed in religious, political, and professional
discrimination, gave a powerful impetus to capitalist activity.^ On the
other hand, the very impressiveness of the similarities between Jews and
^ Cf. The Times^ 2-10-1865, p. 9. (References to TAeTiwcj are, throughout, to
the London newspaper.) Note Xenos’ sense of group responsibility, Depredations,
P- 75 *
® After passage in France in
1889 of a law providing automatic naturalization
of those children of permanent residents bom on French soil, many Greek families
of Marseilles sent their wives abroad to give birth, Masson, Encyclopidie, XIII, 190.
498, on the Sina bank I should like to express
® Cf. Encyclopedic Lexicon, XI,

my thanks here to M. Kostia Zarifi of Marseilles for information on the genealogy

of his family and on the Greek business community in general.
* This is not the place to discuss this problem, which is still stirring up argu-

ment, and on which almost all the empirical work remains to be done. On
the Quakers, cf, Emden, Quakers in Commerce (London, n.d. [1939]); A.
Raistrick, Quakers in Science and Industry (London, 1950), di. x. The Quakers
formed the same sort of interrelated in-group as the Jews, Calvinists, and Greeks.
Emden, in his Powers, pp. 187-8, introduces a chapter on Quaker
bankers with a few paragraphs that make no reference to a specific group and,
in their perfect applicability to Jews and Huguenots as well as Quakers, underline
as well as anything the similarities among them. The device is perhaps deliberate;
the chapter is entitled: ‘A Chapter Without a Heading’.

Huguenots on the one side and Quakers on the other only hfi iglitPns

the importance of the major difference, the geographical dispersion of

the former as against the relative concentration of the latter, in guiding

each into its respective sphere of banking activity.

Although personal and social bonds were a major factor in the grouping
of financial forces, it would be a mistake to overestimate their signifi-
cance. Thus even religious ties tended to weaken with success. Con-
nexions of this kind were of greatest importance for the beginner, the
man without the strength and contacts that wealth and time confer.
The established banker may have had preferences, but he did not need
his countrjmien or co-religionists; even more, he sometimes preferred
to do without them. Many Jewish finanders in particular sacrificed
their faith to their sodal ambitions and did iheir best to cut themselves
off from their fellows.
Even more significant in this regard, however,
was the fundamental
pragmatism of the financial profession. All
banking teams existed by
and for practical considerations, and the ties of family, friendship, or
habit, however strong, were operative only insofar as they furthered
Except where Aere was a concrete bond, where, for
practical ends.
example, one banker held a silent interest in another’s firm, each
member of the team was independent and free to act on his own judge-
ment That a banker in Germany, for instance, might not always
with his assodate in England about the credit of a given client or the
strength of the market, even more that there would inevitably be
objective differences between the situation of one banker and anfithfr
and between one market and another, were premises of business life
thathad to be reckoned with.
It was this that explained the complex ramification of exchange net-

works. In any ^ven area, each member of the nudear group was free to
deal with his own preferred correspondent (or correspondents,
there was often more than one). Even where there were kinship ties to
a firm in the area in question, it was by no means imperative to employ
it as a correspondent in all matters, although its help and advice was
usually more than welcome. Thus for some years, the New York house
of Brown Brothers maintained a spedal agent in Baltimore in place of
Alexander Brown and Sons, the parent firm.

The flexibility of the system is shown even better by the careful

distinction made between the regular commercial business
in practice
and investment banking. As indicated above, the latter was an accessory
activity, often spectacularly profitable but nevertheless uncongenial to

many of the more conservative bankers. In some cases it was not a

question of congeniality: what was profitable in one market was not
always profitable or even possible in another. In any event, members
of exchange teams could feel free to abstain from investment operations
without fear of offending the other members of the group.
By same token, investment banking often required the col-
laboration of outsiders. In loan contracting, there was the contact
man - merchant, banker, projector, or even confidence man - who had
the ear of ruler or minister and whose assistance was indispensable; note
the Habers in Germany, Hirsch in the Ottoman Empire, the Oppen-
heims in Egypt. ^ In industrial investment, there were specialists whose
technical experience made them valuable allies in any operation touching
their sphere of competence: thus Blount in Continental railroading,^

1 On Moritz von Haber’s role in the formation of the Darmstadter Bank, cf.

J. Hansen, Gustav von Mevissen (2 on Ludwig von

vols.; Berlin, 1906), 1 , 648-52;
Haber and the Vienna Credit- Anstalt and other Austrian firms, F. von Weech,
Badische Biographkn (Heidelberg, 1875), I, 324-5; cf. also, on the family, Emden,
Money Powers^ pp. 86-90. On Baron Hirsch, A. du Velay, Essai sur Vhistoire
financiere de la Turquie (Paris, 1903), pp. 250-60. On Oppenheim, see below,
Generally speaking, this influence of the concession-hunter was dependent on
his connexions with capital; the man who knew the wealthiest bankers was usually
in the best position towin official favour. On the other hand, one may be sure
that much influence with government was bought - tactfully, through gratuities
and accommodations, and crudely, by bribes. Cf. the brief excursus of J. Plenge
on corruption as a tool of banking policy, Griindung und Geschichte des Credit
Mohilier (Tubingen, 1903), p. 129, n. 23; also on the dubious methods of Hirsch,
P. Dehn, Deutschland und Orient in ikren wirtschaftspolitiscken Be^iehungen
(Munich and Leipzig, 1884), p. 42 et seq.; M. Dimtschoff, Das Eisenhahnwesen
an der Balkan Hcdh-Insel (Bamberg, 1894), pp. 16-56, especially pp. 32 f.,
® Before 1848, Blount had been partners with Charles Laflitte, nephew of the

famous Jacques Laffitte; the firm was an important link between English and
French capital in the financing of French railways. The firm was forced to
liquidate by losses incurred in the crisis of 1848. In 1852 Blount was able to return
to banking with the assistance of T. Brassey, the famous British railroad con-
tractor, and W. Buddicom, a machine and engine builder. The new bank was
active in the promotion of railways in France, Switzerland, Italy, and Spain. Cf.
S. J. Reid, ed., Memoirs of Sir Edward Blount (London), 1902, esp. ch. iii.
Seilli^re in iron and steel, ^ Oppenheim in German non-ferrous
Furthermore, the very nature of investment banking necessitated
the formation of syndicates that were wider and more heterogeneous
than the nuclear commercial team. There was the scope of the ventures:
the risk had to be divided. There was the need for access to several
markets to insure a good sale. There was the problem of competition
for contracts and concessions: it was easier to absorb rivals than to

fight them.
Because of these personal and market considerations, the composi-
tionof the team in investment operations was often different from that
in foreign exchange, and banks worked in each field with those houses
whom diey worked best with. Thus the Rothschild family, while an
extremely effective and tight unit in regular merchant banking, split
sharply on the question of industrial promotion. Neither the London
nor the Frankfurt house was active in the financing of railroads, al-
though Nathan in England was alert enough to recommend such opera-
tions to his brothers on the continent. In Austria, Solomon pioneered
with the construction of the Nordbahn, and extended his industrial
interests to embrace mines and forges whose products helped build his
road and fill his freight cars. The great industrial financier in the family,
however, was James in Paris, who, partly owing to the influence of
promoters like Eugene Pereire and engineers like Talabot, partly to the
substantial encouragement and guarantees offered by the state, con-
tributed on a of several French railways
large scale to the formation
and held almost as a baronial fief the most valuable line of all, the Nord.®
^ Among other things, ihis firm financed the acquisition and re-equipment of
Le Creusot in 1836-7 (the Schneider brothers were their agents), acted as bankers
for the Wendel firm, and helped finance the expansion of Krupp. I should like
to express my gratitude here to Mme la Comtesse de Durfort-Civrac for permis-
sion to consult the remaining records of the Seilli^re bank; to M. Charles Schneider
for opening to me the archives of Schneider et Cie; and to M. Maurice de Wendel
for his courtesy and hospitality in allowing me to study the papers of his family’s
enterprises in Lorraine. On Seilliere and Krupp, cf. W. Berdrow, Alfred Krupp
(2 vols.; Berlin, 1927), II, 85-6, 89.
® Cf, R. Cameron, ‘Some French Contributions’, /oi/rn. Ec. Hist.^
XVI (1956),
® On the early history of the French railways and the role of Pereire, see,
among others, M. Wallon, Les Saint-Simoniens et les chemins de fer (Paris,
1908), pp. 80-5 and passim', and Plenge, GrOndung und Geschichte, pp. 59-62.
On Talabot: A, Emouf, Paulin Talahot: sa vie et son asuvre, iy^^i885 (Paris,

After 1855, the skeleton of the French network had been laid
down and French was seeking investments abroad, James was

active in promoting roads in Italy, Spain, and above all, Austria, where
his position as head of the family and his command of the Paris market
gave him precedence over his nephew Anselm. From the start, he had
only token assistance from the London and Vienna houses; he worked
with railway specialists like Charles Laffitte and Edward Blount, or an
English promoter like Samuel Laing.^ On the other hand, Amschel
Meyer in Frankfurt had his own
collaborators for operations of local
interest, Bleichroders in Berlin^ and Philipp N. Schmidt in Frankfurt
itself, while underwriting alone a large number of those personal loans

of central European princelings that were so popular on the Frankfurt

1886); P. Cousteix, ‘Les financiers sous le Second Empire*, 18481 revm des
rivolutwns contemp,^ XLIII Quly 1950), 113-17, 123-4,
1 On Laing’s career, see the biography in the Vol. XXII (supp.);
A. Courtois fils, Des opirattons de bourse} manuel des finds publics et des sociites
par acuons (Paris, 1857), pp. 272, 290, 302; also Laing*s own Trade and Finances
of the British Empire (Wick, 1864).
^ And at the same time, BleichrSders split sharply with Amschel Mayer on the

question of railroad finance; from the 1840*5 on, the Berlin firm played a leading
role in the promotion and construction of the German railways. Cf. Rachel
and Wallich, Berliner Grosskaufleute^ III, 126-8; Kruger, Das Kolner BarJder-
gewerbey p. 140. Bleichroderswas fairly often associated in investment operations
with Oppenheim of Cologne, generally considered a rival of the Rothschilds;
their ties grew stronger with time. I should like to express my gratimde here to
Mr. F. H. Brunner for permission to use the archives of the BleichrSder bank, and
to Herr Alex von Frankenberg u. Ludwigsdorf for his assistance with the records
of Sal. Oppenheim Jr. and Co,
^ These were the successors of the traditional direct loans of banker to local
lord or princeling. Starting about the end of the eighteenth century, they were
represented by negotiable securities, which were introduced to the market by
leading bankers. In most cases, they were listed on the exchange with the name
of the bank that, by issuing them, morally guaranteed the trustworthiness of the
borrower. In 1862, there were forty-six of these standesherrliche Schuldverschrei-
bimgen on the Frankfurt market, plus eight lottery loans of the same type.
Rothschild and Schmidt were paired on a number of these. P. Schwartz, Die
Entwicklungstenden:(en im deutschen Privatbankiergewerbe (Strassburg, 1915),
pp. 1 6-1 8; Berghoeffer, Meyer Amschel Bjothschildy p. 232 et seq.; Frankfurter
Zeitungy 31-12-1862, p. 5. On Schmidt: A. Dietz, Frankfurter Burgerbuch
(Frankfurt-a.-M., 1897), p. 82 f.; idem, Frankfurter HandelsgeschickUy V,
689-90; Schwartz, Entwicklungstenderti^eny pp. 17-18. Other Frankfurt collab-
orators of Rothschilds were Grunelius &
Co. and Johann Goll und S6hne.
E. Korach, Das Deutsche Privatbankgeschdft (Berlin, 1910), p. 25.
In similar fashion, the trio of Barings, Hopes, and Hottinguers, a
powerful team in foreign exchange, became two where French rail-

roads were involved, Hopes apparently up such

preferring to pass
transactions. Nor was it unusual for Hottinguers to drop out from
certain American floatations, where Barings and Hopes or, more often.
Barings alone worked with an American house like Prime, Ward, and
King, or, in Canadian railways, with Glyn-Mills-Hallifax.^

The emphasis of banking - and in particular investment banking -

on practical considerations kind was a powerful counterpoise
of this

to the particularistic values that otherwise dominated the profession.

To be more accurate, the apparently contradictory universalistic and
particularistic elements reinforced each other: if bankers laid so much
stress on personal connenons - on who a man was and where he came
from - it was precisely because they told him something about what a
man could do and how he would do it.^
In the last analysis it was performance that counted, and increasingly
so as investment and promotion came to overshadow the older
activities of the profession. More and more the structure of the inter-
national banking community reflected the importance of achievement
as against personal and social affinities.® By the middle of the nine-
teenth century there was a profound difference between the relatively
small group of merchant and investment bankers at the top of die
profession and the great mass of aspirants in both big and little com-
mercial centres throughout the world. There is no question that

Rothschild and his Protestant and Catholic colleagues in the French

^On all the above, Jenks, Migration^ pp. 198-201.

*In this context, particularism denotes the acceptance of intrinsically personal
characteristics like family or religion as considerations in business decisions;
universalism, the exclusion of such elements and the restriction of consideration
to objective attributes like wealth, ability, and other means of performance. The
point is that in banking, more than in most businesses, particularistic virtues were
universalistic assets. On the sociological use of these terms, cf. T. Parsons,
Essays in Sociological Theory Pure and Applied (Glencoe, 111 .,
1949), passim.
® One may hazard the hypothesis t^t
this reflected not only the market
considerations discussed above, but also the easier measurability of performance
in investment as against commercial banking, where fees were liable to
little manipulation and variations in effectiveness were smaller.
Haute Banque had more in common, however great their differences
of faith and family background, than any of them had with some co-
religionists struggling in the lower realms of petty exchange and
second- and third-rate signatures, or seizing the main chance in some
out-of-the-way, underdeveloped community on the African coast. And
whatis even more to the point, these same men probably had more in

common with English or German confreres of equivalent stature, what-

ever their faith or social origins, than with their lesser compatriots of
the same persuasion.
For merchant banking in its higher forms was more than a profession
- it was a way of life. On the one hand, the considerable risks of
foreign exchange, the emphasis on the slow but steady multiplication
of minimal unit gains, and the confidential nature of the transactions
gave rise to an ethic in which the cardinal virtues were prudence, thrift,
and unobtrusive modesty. On the other, the importance of the human
element led to an exceptional emphasis on personal character. In some
places, cleanliness is next to godliness; in merchant banking, integrity
is next to wealth.
The caution of die best bankers was proverbial. Every bill was care-
fully scrutinized; every credit was rigorously covered. All accounts
were watched in Were their remittances prompt.^
their smallest actions.
Were Were they seeking
their signatures seen too often in the market?
credit elsewhere? If so, how much? Were they getting too big for their
means? At the slightest alarm - for the good banker tried to anticipate
trouble rather than meet it - the guard was up: credits restricted and
cancelled, consignments realized, pledged securities sold or exchanged
for commercial paper. Moreover, every standard he imposed on his
clients, the banker imposed on himself.^ If there was any doubt
about another’s operation or his own, profits, however tempting,
were sacrificed to security,* It is harder to keep money than to
make it.

^ Thus Barings made it a point to hold on to its commercial paper until maturity
rather than discount it with the Bank of England or with brokers. Hidy, Barings^

p. 149 f. Cf. the provincial banker in G. Simenon, Le Testament Donadieu

(Paris, 1937), p. 105, who
predicts a bad end for his son because the son has
borrowed on something the father had never done.
his signature,
*Note Gentz’s discussion of the fundamental business principles of the
Rothschilds, particularly their practice of ‘not striving after an exorbitant profit
in any undertaking, of assigning definite limits to each of their operations*.
Ehrenberg, Grosse Vermogen^ I, 154.
Prudence, of course, does not preclude imagination or initiative,
but it does presuppose calculation and a systematic minimization of
risk.In these, the representatives of high finance were notably diligent
and proficient. It was a profession of C3mics, wary of their fellow men
and dubious about the future. If all of them at one time or another
had their share of disappointments and losses, it was never for want
of reflection and that subdued mefiance that is the hallmark of the
experienced banker.
Even more striking, perhaps, than the apparent contradiction be-

tween the range and energy of high finance and the spirit of caution
that pervaded it, was the paradoxical contrast between the wealth of its
practitioners and the magnitude of dieir operations on the one hand,
and their almost parsimonious thrift on the other. Thrift, as is well
known, is a disappearing virtue, and the irresistible advance of luxury
in a world of conspicuous consumption is slowly but surely washing
away such vestiges of bygone habits as remain, even among merchant
bankers. But in the middle of the nineteenth century, when many of
these same bankers were only a generation or two removed from petty
trade or money changing, when many could still remember turning
envelopes and saving sealing wax to use again, ^ when most still thought
more in terms of 4 or 5 per cent discount and J per cent commission
than of glorious floatations and spectacular coups on the naarket - then
it was still a virtue to earn £5,000 a year and spend £200, to eschew the

estates and pleasures of die aristocracy and be content with the com-
forts of burghers, to plough every available penny back into the
family firm.®
There were, of course, extravagant bankers. The wealthy, established
children and grandchildren of penny-pinchers could buy the equipages
their fathem never thought to own and give the balls and dinners their
fathers never wanted, and never dared if they wanted, to give. For all

however, they retained a keen sense of the worth of old-fashioned


temperance for those whose fortunes were not yet made. In 1835 the
^Kahler, in Hansen, Rheinprovh^, I, 524; Capefigue, Histoire des grandes

opiratzons,IV, 153 f.
® Thus, even a weU-estahlished and fairly wealthy firm like Marcuard, Andr6

et Cie ploughed back in the form of partners' deposits, reserves, and, to a small
extent, pension funds 2,475,000 francs out of a to^ net of 5,076,000. Of the rest,
much was imdoubtedly placed by the individual partners in outside investments.
A, Neuf.y Inventories, i860-. This emphasis on self-financing was, and still is,

a powediil force for thrift: in the French business world.


American agent of the Barings wrote his superiors that a certain cKent
was ‘a man of prudence in his pecuniary concerns, and general good
sense, but fond of sporting and fishing, and good living’. The ‘but’
was an important one. Bankers were notorious for dieir disapproval of
good living.^
As for unobtrusiveness, some of the more powerful banks, the
Rothschilds particularly, found it impossible to avoid the public eye.
But such publicity, both favourable and unfavourable, was the penalty
of success, and the reputation of the Rothschilds was solid enough to
carry the burden and even profit by it. For other investment houses,
publicity was hardly to be distinguished from notoriety, and neither
was consonant with the secrecy indispensable to the relationship
between banker and colleagues or banker and client. Worse yet, they
were the unmistakable badge of the charlatan and mountebank, of
those penniless hoaxers who try to create credit by puffery and coin
money from air. Respectable firms had no need of such tricks and
devices. Their transactions spoke for themselves, and the satisfaction
of their clients was their only recommendation. A good bank was
like a virtuous woman - it gave rise to no talk, either in praise or
As for integrity, it was tlie sum of all these virtues and more. It was
the consideration tliat prevented a banker from overreaching himself
and abusing the facilities extended by his fellows. It was the honesty

that stopped him from conniving at the issue of fictitious paper. It was
the sincerity and reliability that made him abjure not only falsehood
but half-truths, that made his word as good as his signature, that made
him the friend and protector of his clients, the friend and team-mate of
his colleagues. It was the foundation of trust, the gauge of tranquillity,
and - and this is the crux of the matter - its value was directly pro-
portional to the hazards of the profession. It was just because merchant
banking was so risky, because there was so much reason for mistrust,
^ Hidy, Barings, p. 158. Cf. also the advice which D. M. Evans has his ‘Old
City HsdDitu^* give to the ‘Young Gentleman from the West*: ‘Glad to hear of
your favourable prospects. Hope they are not delusive; but pray take a word of
advice, as I know you will, from me. Your costume is a little too fast for City
life; tone down the colour of your coat, whatever may be the nature of your
introduction, lynx-eyed directors will not believe in them [j/c]; change above all
things your neck-tie and gloves, and let neither be too bright, nor too new.
By these means you will avoid the suspicion that you intend a swindle.' Specida^
dve Notes, p. 216 f.
that the reliability and trustworthiness of a few were especially potent.
Here, indeed, a good name was worth more than gold.^
These were the virtues of the master banker - prudence, thrift,
modesty, above all, integrity - but like most social values, they were at
best ideals, unamenable to precise definition and subject to varied inter-
pretation. They differed according to the individual, which is hardly
surprising, according to social and religious group, and, what is more
important, according to nationality- This is not the place to undertake

an extended analysis of the differences in entrepreneurial attitudes and

behaviour among the businessmen of western Europe. Suffice it to say
that in matters of prudence the French generally led all the rest, the
Huguenots all the other French,^ and that both British and German
financierswere more enterprising in adapting to the new conditions
created by a revolution in production and transport. Nowhere as in
France were the great merchant bankers so reluctant to branch out
from the traditional activities of exchange to the more speculative
operations of investment and industrial finance. And nowhere as in
England, at least prior to 1870, were they so free in accommodating the
credit requirements of foreign trade - the history of commercial crises
in the nineteenth century is dotted with the embarrassments of some of
the most respected houses in the City.®
In thrift and modesty, the French banks were again the zealous

^ This is a fairly common

social phenomenon. In any context of generalized
mistrust, people tend to seize on those few persons who, or things which, seem to
be worthy of trust and accord them an exaggerated degree of confidence. A
similar process was at work in the response of consumers to the pioneers of the
fixed price, right of return, and so on in retail trade in the eighteenth and nine-
teenth centuries. Cf. in this connection the analysis of an instance of effective mass
persuasion in a sceptical environment in R. K. Merton, Social Theory and Social
Structure (Glencoe, 111 ., 1949), pp. 102-5.
2 Cf. Capefigue, Hutoire des
grandes operations^ III, 184 f., who speaks of this
"Genevan finance in Paris, so timid in the face of the real hazards of credit, a sort
of motionless "grand-livre” [the register of ownership of rentes of the French
government] in which fortunes grow only by compounded commissions,
accumulated interest, purchases with option to sell back, current accounts on
mortgages, heart hard as Calvin, perpetual psalm of penitence for the poor
borrowers who turn to it in their distress; and yet of a rigid and uncontested
® On the liberality of British as against French merchant banking in the
financing of foreign trade, see letters of Marcuard, Andr4 et Cie to Friihling and
Goschen in A, Neuf.^ Letter Book [henceforth L.B.] 454, 21-1 f. 723; L.B.

460, 15-2-1862, f. 602-3.

custodians of tradition. Indeed, by a process not unknown in other
social contexts, they tended to place more and more emphasis on
externals, on the symbols of thrift and modesty, as the exigencies of
economic evolution imposed fundamental changes in the content of
the banker’s way of business and life. The older and wealthier the
house, the more value it placed on the dilapidation of its premises, the
austerity of its partners, the obscurity of its name outside the circle of
its business relations. The firm that figures so prominently in the story
that follows, Marcuard, Andre et Cie, now De Neuflize, Schlumberger
et Cie, recently abandoned its venerable offices in the sombre financial
district described at the beginning of this chapter for a modern
structure strategically and prominently placed on one of the comers
of the spacious Place de la Bourse. Yet when one of the officers was
congratulated on what seemed to be a decided improvement, he could
only smile with embarrassment and a touch of deprecation: 'Vous ne
le trouve^ pas itn peu trop voyant?

For these values were not immune to the erosion of time. If France
was still firm in her adherence to old standards at mid-century, in
England the pressure of new ways and new competition was by the
i86o’s already weakening the ascetic fibre of the established houses*
The private domestic banks - even the Quaker firms - were dressing
themselves up and putting on airs to meet the affluence and brilliancy
of the big joint-stock institutions. The editor of the Banker* s Maga:(tn&
deplored this tendency:^

All these changes, all these modifications are, however, typical of one thing,
which is, perhaps, one of the misfortunes of the age, - a love of show, leading
eventually to excessive expenditure, and sometimes to embarrassment. In-
stances have been seen of the great mistakes which frequently arise from this
state of affairs, in the tendency to encourage a desire for outlay, which is per-
meating every rank and condition of life ... . it is not setting a healthy
example to or the rising generation, to make this display,
clerks, subordinates,
which is more properly that allied with the spendthrift, than with the
cautious, plodding, accumulating banker. . . .

Nevertheless, as this censure itself indicates, these new ways were not
accepted without protest, and for most of die old private houses,
remained a derogation from the standards of commercial morality. The
merchant bankers in particular were pillars of conservatism, perhaps

^ Bankers' Magaiine^ XXIII (1863), 586-9, esp. p. 589.

because they faced as yet less competition from joint-stock companies,
with iheir greater resources and more pretentious techniques.
Yet this conservatism was certainly more than a superficial adherence
to the past, to crumble at the first change in fashion. Prudence, thrift,
and modesty were the virtues of an entire historical era, of a whole
social order, an order that was gradually disappearing to be sure, but
still in i860 held the allegiance of by far the greater part of European

society. They were the virtues of a world in which things moved

slowly, in which man’s wealth was typically in solid land and buildings,
in whiidi people were generally fixed in the status their parents had held
before them. It was not, to be sure, a static world, and ihe development
of commerce and industry had already created new channels of
mobility and introduced changes that modified considerably the values
and aspirations of an older, more agricultural society. But this was still
leisurdy commerce and small-scale industry, and even where, as in
Britain, the economy had gone along ihe path of technological

revolution, the traditional attitudeshad lagged behind. The English

bourgeois of i860 was still, like his ancestors of a century before, a
substantial, sensible man, John Bull with two well-shod feet firmly
planted on the ground.
In England, and still more on the continent, the bourgeois had made
his way slowly through years of effort, and any wealth he had received
from his parents had been accumulated in similar laborious fashion.
He thought in terms of generations, of carefully calculated marriages,
of a long, painful social ascent and an even more painful effort to

maintain the gains achieved. For the windfalls of a new age, for the
coups of the stock market and the bonanzas of distant El Dorados, he
had mingled envy and scorn. The luxuries and comforts of wealth
lay glittering about him, but they were for aristocrats and spendthrifts
and humbugs, for people so wealthy that they had lost all notion of
the value of money, for fools so weak-willed as to incur dogged debts
for the sake of fleeting appearances, for imposters so impudent as to buy
the prestige of fortune with the seeds of bankruptcy. He who sells silk
to others should wear wool himself.^

^ Auguste Vabre in Emile Zola, Pot-bouUUi *. . vend de la sole aux

autres femmes, on doit porter de la lame*. The increasing power of money under
the Second Empire, the excesses of speculation, and the rise of nouveaux riches to
emulate the old gave rise to a bitter outbmst against mammon-worship and the
new, speculative avenues to wealth. Cf, Dupont-Ferrier, Marchifinancier, ch. vii.

To these material temptations, of course, he sometimes succumbed,

more often than not to his utter discomfiture. For those who did not
stray, the lesson was self-evident. ‘Who is ignorant of the proverb of
“easy come’ V wrote the Englishman in righteous disparagement of the
bumptious wealth of the United States, ‘and whose experience does not
point to verifications so numerous as scarcely to admit of being num-
bered.^^ . . . “In the sweat of thy face shalt ihou eat bread,” says the
sacred writer; and wealth accumulated by the protracted labour of
mind or body is uniformly the most abiding.’ ^ A Frenchman would

have been even more reproving.

As the defenders of the antique virtues, merchant bankers were
members of world community transcending national and religious
boundaries, a world apart, with its own way of life insulated against the

corruption that came from outside. In a way, it was, for all its geo-
graphical dispersion, a small world, in which everybody who was any-
body knew or knew about everybody else of importance, a world of
big business and small talk about the personal lives of its members.
For, as we have seen, entrepreneurial performance and individual
character were inextricably intertwined, and the gala banquets of a
certain financier in Paris, or the gambling propensities of the brother of
a respectable banker in London, or the private speculations of a partner
in an eminent house, could be, and often were, relevant to the decisions
of other bankers thousands of miles away.^ It was a world of much
gossip, which fed on its own passion for secrecy, of afternoons at the
exchange where secrets and rumours and ballons Jlessai and canards
circulated from mouth to mouth, of luncheon conversations and after-
dinner chats where the same news and reports could be discussed more
of incessant business interviews where all that could not be put
on paper could be communicated in t6te-a-tete-
Within this little world, the Hauu Banque constituted a cohesive
inner circle, respected not only for their wealth but more important,
as the embodiment of all the time-honoured virtues of the profession.^

^Bankers* Mc^aiine, XXV (1865), 275.

® Every irregularity or crime affecting bankers was reported from one end of
Europe to the other. Cf. the Frankfurter Zeitung^ 15-1-1862, p. 7, on talk in
Berlin about felse bills of exchange drawn by the important St, Petersburg firm
of J. E. Gunzburg on Fould-Oppenheim in Paris,
® Note the difference in policy between Barings and such firms as Wildes and

Co. and Wilson and Co. in American exchange transactions. Hidy, Barings^
p. 170 f.
Bankers by blood and conviction, they formed a recognized aristocracy
of the breed. Some of them were extremely wealthy; most of them
worked with surprisingly little capital of their own.^ Names like Mallet,
Baring, Neufv^ille, and Andrd meant more than wealth. They stood for
tradition, international alliances, unimpeachable character. On a com-
mercial bill, they implied more than the simple ability of the bank con-
cerned to honour its signature. They meant - and this was far more
important in the intensely personal business world of the day - that
the house in question would never have given its signature if it had not
had the means to honour it.®

Beneath this professional nobility, equally old but poorer houses

and new, aspiring firms tended to imitate the ways of their betters.®
Others, representing a new outlook and new business techniques,
adopted other standards. Both imitators and rebels, however, stood
well apart from the Haute Banqwe. The boundary was informal and,
like most barriers of a sodal and economic character, not impassable.
It nevertheless marked a significant demarcation between patterns of
activity and levels of status. It meant the difference between important,
reliable floatations and lesser, more speculative ones; between first-

rate signatures, and second-, third-, and fourth-rate; between truly

awesome credit, which often surpassed that of the greatest nations, and
a reputation that, even for the greatest of the newer, more spectacular
corporate banks, was almost never quite free of suspicion.

^ Thus in 1861-4, Marcuard, Andr4 et Qe had average year-end total assets of

31,500,000 francs on a capital of 3,600,000 (4,000,000 in 1864), Net profit for this
period was over five million francs. A. Neuf., Inventories, i860-.
® Thus the above-mentioned
(p. 23) career of Auguste Dassier began with
nothing but respectable family connexions and a reputation for impeccable
integrity. See also a letter
of Alfred Andre of Marcuard, Andr6 et Cie to Henry
Oppenheim, n-6-1863, regarding possible associates in a company promotion:
T should like afterwards to speak of it to Messrs. Hentsch, Lutscher et Cie, a
Swiss firm . . that is of the first rank even though its operations are fairly small
[m affcnres sent peu importantes]' A. Neuf., carton 11, no. 186.
® George Peabody, the British merchant banker, is an excellent example of
professional assimilation. The gradual abandonment by Peabody of the incautious
practicesof his merchant days and his adoption of more prudent procedures,
wluch he could enforce all the better for his earlier experience are well brought
out in M. Hidy, ‘Peabod/, chs. xi and xii.


W ITHIN THi s CIRCLE of prudent, thrifty, discreet merchant bankers,

constantly rubbing shoulders in the intercourse of trade, feeling alike,
thinking alike, an unwritten code of mutual respect and consideration
was more effective in restraining competition and maintaining har-
mony than the iron-clad contracts of many a formal cartel. To be more
precise, international investment banking was non-competitive in ten-

dency - in tendency, because peace and co-operation was an equilibrium

towards which the profession moved but which, like most economic
equilibria, was alwa)^ just beyond reach.^
One must distinguish of course between merchant b anking proper
and investment banking. There was no intrinsic functional reason why
the former should not be freely competitive; the individual banker had
little reason to fear the direct reprisal of his fellows for any action he
might take. If he chose to cut his commissions, for example, others
could no more than do the same. Yet he had every reason to fear the
opprobrium of his fellows and the effect that such ‘unethical’ behaviour
might have on his standing m the profession, the value of his signature,
and his desirability as a member of promotional syndicates. Under the
circumstances, only the new, the ambitious, or the desperate resorted
S5tstematically to price competition. The established houses preferred
to win and hold by the quality of their services, the impor-
their clients

tance of their connexions, and the establishment of a personal bond of

reciprocal confidence. Obviously they could not always remain on this

plane and were forced at times to meet the terms of less fastidious firms.
Yet it -was one thing to initiate this kind of competition and another to
fight it: when business required that they extend a price concession to

^ As Jenks puts it, ‘the loan business was monopolescent’. The Migration of
British Capital, p. 273. The discussion that follows owes much to Jenks’ treat-
ment, pp. 272-80.
a particularclient, they never advertised the fact in the hope of drawing

o Aer accounts. The last thing they wanted was to have such exceptions
become the rule.
In investment banking, these customary limits on competition were
reinforced by overriding functional considerations. On the one hand,
ihe staples of the business - stocks and bonds - were far more sensitive
and treacherous than even bills of exchange. Investors were fickle; the
slightest rumour could throw the market into turmoil. And since even
a point on a loan contract or industrial issue could make a difference of
tens or hundreds of thousands of dollars, ihe promoters always ran the
risk of finding their profits shrunk to vanishing or, equally dangerous,
of freezing capital while waiting for the market to pick up. On the
other hand, in a situation of this kind the reprisals of rivals could be
serious. When so much depended on the volatile confidence of the
public and the availability of money, it did not take much - perhaps
even the announcement of a competing floatation -- to tighten credit
and turn a promising operation into a fiasco.
Both the positive incentive of profits, therefore, and the negative
requirements of prudence imposed co-operation. The wealthiest houses,
the Rothchilds and the Barings, thought it advisable to share their
operations with other firms.^ Even where competition was imposed by
the situation, as in the fight for a loan contract or a railroad concession,
the rival parties usually came to some arrangement before entering
their bids; they could not afford to let their differences cost them

money.® Further, once the bids offered and the contract or concession
awarded, the losers as a rule retired quietly and made no further effort
to hinder the operations of their successful adversaries. In some cases,
the losers - and even outsiders - went so far as to withdraw momen-
tarily from the market and leave it free to the promoters of the new

^ Note the efforts of Barings and Hopes to increase the share of French houses
in the liberation loans of 1817-19; also sharing by French subcontractors with
their compatriots. Hidy, Barings, p. 60; A. Neuf,, nos. 126, 127, 131. On Roth-
schilds, cf. Corti, The Reign of the House ofRothschild (N.Y., 1928), pp-V^j ^^71
E. Heyden, Galerie heruhmter und merkwurdiger Frankfurter (Frankfurt, 1861),
p. 56; Berghoeffer, Meyer Amschel Rothschild, pp. 245-7.
* Sometimes understandings of this kind were arrived at only after competition

had been tried and found to be too expensive. One of the best examples is the
contract of 1833 between some of the leading members of the French Haute
Banque (including Rothschilds) regarding future division of foreign loans. Cf.
Nolte, Funfiigjahre, II, 189; A, Neuf, nos. 148, 150, 151,
Aside from dieir desire to avoid the risk of surfeiting the public,
they knew only too well that they would also need a free field some day.
It goes without saying that these general rules of good banking

behaviour were not always observed. In particular- just as in com-

mercial banking - the new, ambitious house, ready to risk a lot to
make a lot, was less restrained in its methods than one that was firmly
The rise of the house of Rothschild is,of course, the most spec-
tacular illustration. In their native Frankfurt, where they rose in a
decade from upstarts to undisputed rulers of the market, reducing the
great Gebriider Bethmann to the galling position of the first Christian
bank in Germany;^ in England, where fhey gradually shunted aside
Barings as the leaders in European government finance, replaced them
as British agents of the American Department of State, and jostled
them in their chosen field of American loans;® in Austria, where they
humbled the great local powers. Fries and Co., Geymuller and Co.,
Arnstein and Eskeles, and George Sina;* and in France, where they
forced themselves into the ranks of the Haute Banque and then by-
passed those who once had looked down upon them - wherever they
settled, they drove their way to the top over direct and sometimes

bitter opposition.
Such conflicts, however, were never more than temporary. The
vested interests did their best to beat down the aspirants rising to
challenge them; they worked equally hard at absorbing them once
the barrier had been passed.® Once arrived, Rothschilds and other

1 Cf. the withdrawal of Barings and Reid-Irving from the bidding for the
West Indian loan of 1835; also the abstention of Rothschilds from the market in
American securities in 1848. Hidy, Barings^ pp. 199, 386. Cf. the CirculaT to
Bankers, 31-7-1835, p. ii; 7-8-1835, pp. 17-18; 15-8-1835, p. 29.
® Cf. Dietz, Frankfurter Hcaidelsgeschichte, V,
731-4; Corti, Bise, pp. 382-6,
® Hidy, Barings,
pp. 195-6, and index: Rodischild and Sons. The account of the
State Department was transferred to Rothschilds in 1835, returned to Barings in
1843. Ihid., p. 351.
* Fries and Co. failed in 1826 under tragic circumstances. Geymuller suspended

in 1841. In both cases, Rothschilds was either unable or unwilling to help.

Ehrenbeig, Grosse Vermogen, I, 115-18; Corti, Boign, p. 207.
® Thus, the Goldsmids in England in the 1790’s, the syndicate of receveurs^

generaux in France in the i82o*s. Cf. S. R. Cope, ‘The Goldsmids and the
Development of the London Money Market during the Napoleonic Wars’,
Economica, n.s., IX (1942), 180-206; Emden, Jews of Britain, pp. 85-6; Cape-
figue, Histoire, III, 115 f.
newcomers quickly found their places and played the game according
to the rules. And when, every so often, a maverick appeared, like this
Ouvrard who spent his life doggedly fighting the stolid, conservative
powers of French finance, opposing their wealth with his imagination,
their influence with his energy and persuasiveness, their self-righteous
complacency with his mercurial ambition, always falling only to rise
again with some new idea for a loan, a speculation, a contract, then the
ranks were closed and held. A man who dreamed up schemes like a
loo-million-franc joint-stock company to equip a fleet and army and
recapture and govern the lost American colonies of Spain.^ Who pro-
posed to revive the military power of the Knights of Malta and employ
them in the cause of Greek independence, and later perhaps for crusades
in Asia and Africa -all this in return for Rhodes, Crete, Cyprus,
assorted enclaves, theGreek fleet, and sundry other advantages.^^ Whose
business morals were so weak that he not only competed with the
Rothschilds, but attacked them in print, who embarrassed a colleague
with truths and half-truths about his profits and thereby let the public
into some of the secrets of the profession.?^ There was room for new-
comers, but not for rowdies.^
In the same way, whenever new opportunities for profit presented
themselves, the chase necessarily engendered friction. The railroad was
such an opportunity. Never before had so many fought for so much.
Merchant houses and private banks, wealthy rentiers and noble land-
owners, engineers, publicists, promoters, diplomats, ironmasters, and
stagecoach operators - the greatest of international financiers and the
smallest of local businessmen - all had their hats in the ring. The story
of French railway development, especially in the i840*s, is one of
repeated and complicated struggles for the major concessions, with
French, British, Anglo-French, and cosmopolitan groups of bankers and

^ Mimoires de G,~J, Ouvrard sur sa vie et ses

diverses operations financieres
(2d ed., 3 vols.; Paris, 1826-7), H, 223 et seq.; Ill, 353-62; II, 98-9, 296-8, 318-20;
III, 255-7, 280-92, 348-9. Cf. also O. Wolff, Die Geschafte des Herrn
(Frankfurt, 1933), ch. xii; A. Liesse, Portraits de financiers (Paris,
1908), pp. 1-67;
G. Weill, ‘Le financier Ouvrard*, Rev, historique, CXXVII (1918), 31-61. The
biography by A. L^vy, Un grand profiteur de guerre (Paris,
1929), is simply a
frothy popularization. On the resurrection of the Knights of Malta, cf. A.
Levandis, The Greek Foreign Debt and the Great Powers (N.Y.,
1944), pp. 7-8.
Recently Ouvrard received what is perhaps the ultimate accolade; he has become
the hero of a historical novel: E,
J. Tobi, Speculant onder Napoleon (Amsterdam,

capitalists jockeying one another for positionj often to the point where
no compromise seemed possible. Fortunes were spent on pamphlets
and winning over bureaucrats and legislators, in buying
publicity, in
out competitors whose sole motive in bidding for the concession was
to be bought out. Yet all the expenditure in the world could not guaran-
tee victory. All of these groups had the right to bid; each of them had
a chance to win.^
As most impressive thing about Continental railroad
a result, the
finance in this period is not the vehemence and bitterness that marked

these struggles but the sensible co-operation and understanding that

usually ensued. Sensible, and thoroughly pragmatic. The great finan-
cial powers had little patience for small competitors. Where they could

dismiss their opponents easily, they did so out of hand.® But they had
the healthiest regard for their peers, and they usually succeeded in
coming to some sort of an agreement with one another before the final
award of the concession. Some of these negotiations and compromises
are fascinating studies in tactics, in manoeuvres and counter-man-
oeuvres, in offers, demands, genuine concessions and subtle gambits.
Where there might at first be anywhere up to a dozen rival companies,
domestic and foreign, local and Parisian, thoroughbred and mixed
breed, there would remain at the end one or at most a few companies,
each a conglomeration of powerful rival groups, carefully pruned of
deadwood, each group obtaining a share of the total capital meticu-
lously proportioned to its strength. In the last analysis, it was better to
guarantee some return than to take a chance on none at all.®
Merchant banking was like that. For and ingenuity,
all its enterprise
it was and moderate. Above all, it was eminendy
at heart conservative
sensible. There was no room -or, to be more accurate, for even

^As even the Rothschilds discovered in the competition for the Orl^ans-
Bordeaux line. Cf. Journal des chemins defery III (1844), 538-40.
^ The story of many French railroads is one of local initiative, full of hopes of

accomplishment and dreams of fortune, stifled resolutely and effectively by

syndicates of English and Parisian promoters. Aside from the usual sources, see
J. Grunewald, ‘Etudes sur le financement des chemins de fer sous la Monarchic
de Juillet* (Paris; unpub. thesis for the Diplome d’etudes sup^r. d’histoixe, c.
1949). This is an exceptional study, based not only on the more or less neglected
materials in the Bulletin des Lois but also on the notarial records of the different
® Detailed reports of the mergers and the agreements they were based on are
to be found in iQnt Journal des chemins defer of 1845-6.
bankers are human, little room -for sentiment or pique.^ The same
financier who refused one opportunity because he felt his colleagues

were not him a share commensurate with his means and

dignity, would hasten to join these same colleagues in their next ven-
ture, and usually at their invitation. And conversely, promoters whose

one scheme had been rejected by confreres sceptical of its merit and
promise would make every effort to persuade the same men to join
them in their next transaction.^
Even the most sensitive and umbrageous of men, the ‘king of
bankers and banker of kings,’ James de Rothschild, found it expedient
to curb his temper when the occasion required. When Cavour awarded
the 1851 loan to Hambros, Rothschild, furious at this lese-^majeste^
exerted all his power to drive down the price of Sardinian securities on
the exchanges of London and Paris. For a while the new floatation was
touch and go. Hambros was stuck with a large packet of unsaleable
shares and James was able to allow himself a wry pun: ‘L’emprunt etait
ouvert, mais pas convert.’ But when the campaign against the credit of

^ There were exceptions. Labouchke apparently had an ‘invincible prejudice*

against doing business with the Rothschilds. Ehrenberg, Grosse Vermdgen^ 1 , 1 12.

Note Rothschild-Ouvrard and Rothschild-Mires. According

also the rivalries of
to Jules Mir^s, who had reason to dislike Rothschild, the latter was not only sensi-
tive about his share in hnancial transactions but perhaps even more about the
intangibles of prestige. A
mes juges: ma vie et mes affaires (Paris, 1861), pp. 96-7.
In the formation of the Credit Mobilier, James was excluded not by outright
omission but by the more subtle expedient of offering him a share not com-
mensurate with the dignity of his house. Plenge, Griindung, p. 81. The Roth-
schilds were a sensitive clan. Cf., on Nathan Rothschild, Circular to Bankers^
5-8-183(5, p. 22; also, on the vanity of the man, L. D, Steefel, ‘The Rothschilds
and the Austrian Loan of 1865*, Journ. Mod, Hist., VIII (1936), 29-30.
* This take-it-or-leave-it atmosphere is quite apparent in the letters of De-

jxs3sdtiy,fondi de pouvoirs and then partner in the Seilliere bank. When, in August

1864, Hottinguer and Mallet offer the Seilliere firm a share in a projected Italian
loan,Demachy tells them to wait until Seilli^e himself returns to Paris^ that,
on the other hand, they should not feel themselves obliged to wait but free
to deal with another firm if the opportunity arises. Letter 11-8-1864. On the
shifting composition of investment syndicates as early as the turn of the century,
cf. Cope, ‘Goldsmids’, p. 193. Jenks describes it: ‘Sixty odd merchants and
bankers competed in ever shifting combinations to derive their maximum ad-
vantage from the public Migration, p. 19. For the same phenomenon a

century later, cf. H. Feis, Europe, the World*5 Banker, 1870-1914 (New Haven,
The important thing to remember is that these combinations were not
1930), p. 9.
random, and that ‘maximum advantage* usually implied, among other things,
minimum competition. Cf. ibid., pp. 41, 64-5.

Piedmont failed in the long run and Hambros was finally able in early

1 852 to dispose of its holdings at a profit, James made quick to send his
son to Turin to propose a new loan to Cavour at a record price.^

The middle of the nineteenth century was the high point of merchant
banking as an economic institution. Its capacity for compromise and
collaboration had undergone its most serious test in the railway boom
of the 1840’s; its most serious test had been its greatest triumph. Nor

did the revolutions of 1848 and the international commercial crisis that
accompanied them change the situation. The resumption of normal
business in the 1850’s found most of the old order still enthroned,
indeed strengthened by the elimination of many lesser, unorthodox
competitors, and the same rivals sdll joining forces to take up their
railroad projects and government loans where they had temporarily
dropped them.
Yet at that very moment, merchant banking faced its greatest chal-
lenge. This was no isolated newcomer, trying to force his way into the
ranks, no individual to be cowed or absorbed amid a multitude of
others. This was a new institution, a new way of doing business, the
herald of a fundamental revolution in economic organization: the
finance company.
The innovation was threefold: the finance company was a joint-
stock corporation with much larger capital and resources than the
older private banks; it made investment banking its primary concern
rather than an accessory activity; and it sought its clients not in a small,
select group of friendly firms and affluent capitalists, but among the less

wealthy and far more numerous mass of savers and potential investors.
The idea was far older than its effective realization; at least as early
as 1825, an abortive attempt was made in France to create a Soci^te
Commanditairedel’Industrie capitalized at the then stupendous sum of
one hundred million francs.^ The notion of adapting the joint-stock

EMgn^ pp. 281-9. James was not only too good a banker to sacrifice
^ Corti,

profits to pride, but intelligent enough to learn from his own mistakes. Cf.
Landes, ‘Vieille banque et banque nouvelle', Rsv* d*hist, mod.^ Ill (1956), 212 n.
* Montg^ry, ‘Reflexions sur quelques institutions . . ./ Rsv. encyclopiSqtie^
7® ann., 2® s^r., XXVTI (1825), 625-47; J.-J. Baude, ‘Notice sur la Societe Com-
manditaire de Tlndustrie,’ ibid., XXXIX (1828), 28-41.
form to investment banking was a natural by-product of the increas-
ingly frequent recourse to corporate organization to meet the require-
ments of large-scale economic activity, in canal building, transport,

insurance, and trade.

Yet the idea alone was not enough. Specialized investment banking
required above all turnover, the constant re-employment of funds in

new joint-stock enterprises,^ and turnover requires a wide and active

market. There was no such market as yet for industrial securities. It
was being developed. People were slowly adjusting to paper wealth,
with its mobility, its ups and downs, its disconcerting symbolic con-
creteness, Yet well into the nineteendi century there was still consider-
able prejudice to overcome before a large body of investors would
place their savings in such ‘wild speculations* as railroads and forges
and mines.
In one sense, the fear of such investments was part of a larger state
of mind: a general suspicion of, and opposition to, anything that
smacked of easy money.® This attitude, which derived much of its
strength from the conviction that paper wealth and quick fortunes were
subversive of the established social order and reprehensible, has already
been described. Suffice it to note here that it focused on the two hetes
noires of the stock exchange and the (John Law’s
financial corporation

bank and similar bubbles were by no means forgotten in the nineteenth

^ There was a market for government bonds: consols in England,

fairly large
rentes in France, etc. But banking requires a more or less
specialized investment
steady supply of new ventures and floatations^ it cannot depend for its activity
on irregular government issues whose quantity and timing are in large measure
beyond its control. In other words, it must be able to manufacture its material,
and only private industrial and commercial promotions make this possible.
* A book could be written about the antimammonist tradition in Western

society: its antiquity - it goes back to the classical opposition between land and
commerce and the Biblical hostility to money-lending; its versatility - it has
informed the medieval struggle against usury, the opposition of feudal society
to rising bourgeois wealth, the multifarious expressions of anti-Semitism, the
socialisms of the nineteenth century; its powerful influence on literature and

art- wimess, for France, Turcaret, Robert Macaire, Nucingen, Jean Giraud.
There has really been no systematic effort to study the effect of these attitudes on
public regulation of business and on economic performance in the modern
period. Cf., however, H. Leiskow, Spekulation und dffentliche Meinung in der enten
Halfie des Jahrhunderts Qena, 1930); also Dupont-Ferrier, Le marchi
financier de Paris^ ch. vii; or various histories of the regulation of stock exchanges
and trading thereon.

century), and that it found expression in concrete political sanctions

against certain kinds of business activity.^ Worse yet, businessmen

themselves were not immune to these influences.®
one must remember diat the kind of investment banking
requiredby rail development and industrialization broke sharply with
old ways of thinking and working. Bankers for whom business had
always been an intensely personal and familial thing, who had always
restricted their clientele to a careful selection of reliable accounts, many
of them received from their fathers before them, could hardly be ex-
pected to take the initiative in creating impersonal mechanisms for
wooing the crowd. Every particle of their being, all the force of
habit and affection, protested against indiscriminate mass-production
On the other hand, this very incompatibility between old ways and
new needs was for many bankers an argument for the desirability of an
institution to effect those investment operations that the private banks
could not, or would not, recommend and to assist in
to their clients,
those ventures that were too large or risky for the merchant houses to
handle alone. In this regard, the railway boom of the 1840’s and the
crisis of 1848 provided a bitter lesson; the victory had been too costly.

With the exception of one or two Croesus-rich firms like the Roth-
schilds, all promoting banks were compelled to advertise for subscribers

^ In France, the refusal of the Conseil d’Etat to authorize the above-mentioned

Societe Commanditaire de ITndustrie (see n. 2, p. 47) was in large measure the
result of hostility by landed wealth to all that such a bank implied. Note also the
persistent opposition to corporate banks, which forced the caisses^ the progenitors
of the later finance companies, to take the form of joint-stock parmerships, or
commanJites par actions, which did not require government permission. Also
the curbs on speculation in the 1850’s, culminating in the ban on new stock and
bond issues in 1856. On Prussia, Hansen, Gustav von Mevbsen, I, 378-82,
646-9; W. Dabritz, Grundung und Anfdnge der Disconto^Gesellsckaft Berlin
(Munich and Leipzig, 1931), pp. 46-8; Leiskow, Spekulation und offentlicke
Meinung, p. 45. On Frankfurt, Korach, Deutsche Privatbankgeschaft, p. 28;
The Times, 19-5-1863, p. 12. On Holland, H. M. Hirschfeld, Het Ontstaan
van het moderns Bankw&(en in Nederland (Rotterdam, 1922), pp. 30-2.
® Thus,
J. Mir^s, A mesjuges, p. 13, describing the reaction to the railway boom
of 1845: ‘. . . there resulted, as in 1841 and today [1861], a flood of accusations
against the Exchange, business affairs, and the men who had directed them;
everyone denied having participated in these, just as one denies having committed
an evil action; certain people blushed like guilty men, if it was learned that they
might have earned money on shares or scrip*.
and open dieir doors to strangers in the effort to dispose of large blocks
of securities. This was distasteful. More serious were the real financial
diflSculties that all these houses - including Rothschilds - found them-

selves in when the bottom dropped out of the market after the February
revolution; within the space of a few weeks, some of the most reputable
merchant banks in Europe were dragged into bankruptcy by the
weight of unsaleable paper. This was intolerable.^
When the finance company came, therefore, the ground had already
been prepared. ^ Historical tradition has left us a picture of the Credit
Mobilier bursting on the business world like a bombshell and rousing
the older banks to armed resistance.® In fact, however, the new firm
was financed in large part by prominent private houses, at the head of
which stood Fould and Fould-Oppenheim of Paris.^ Nor was this the
first time that merchant bankers had found it expedient to transfer some

of their activities to corporate institutions created for the purpose. The

‘merchants* who founded the semi-official banks of England, France,
Frankfurt, and elsewhere did so in part precisely in order to have
at their disposal discount accommodation that they themselves were

^ For a short while in March 1848, French business, especially French banking,

stopped dead. There was simply no credit to be had at any price. In addition to
those firms that went bankrupt, such as the above-mentioned caisses and such
eminent private banks as Laffitte and Blount and d'Eichthal and Co., houses as
old and solid as Mallets, Hottinguers, Delesserts, and Foulds were forced to
‘decline all further business’. Bankers^ Maga^ine^ VUI (1848), 276 f. On Roth-
schilds, see Corti, Rdgn.^ pp. 240-3. On Germany, see Hansen, Mevissen^ I, 603;
A. Bergengriin, David Hansemann (Berlin, 1901), pp. 432-3; Leiskow, Speku-
ladon^ pp. 36-7.
® In France, the so-called *c<arj«*, beginning with Laffitte’s Caisse G^nerale du
Commerce de I’lndustrie in 1837, reflected directly the need for additional
financial accommodation in the age of the railway. In Belgium, the Society
G6n6rale of Brussels, an active investment bank from the mid- 1830*5, was by
1848 an example and potential model for the financial circles of western Europe.
On this whole question of the background of the financial revolution of the mid-
century, see Landes, ‘Vieille banque et banque nouvelle’, Rev, d*hisu mod,^ III
(1956), and the sources cited therein.
^ Thus even the recent thesis of L. Girard, La politique des travaux publics du
Second Empire (Paris, 1951), pp. 109-22. Cf. A. Gerschenkron, ‘Economic
Backwardness in Historical Perspective’, in B. Hoselitz, ed., The Progress of
Underdeveloped Areas (Chicago, 1952), who speaks of the conflict between ‘Old
Wealth’ and ‘New*.
^ For the subscribers to the Mobilier, Bull, des Lois^ lo® ser., supp., X (1852),

reluctant to provide. And the formation of the great joint-stock insur-

ance companies during the decades after Waterloo involved similar
elements of abdication, or rather renunciation, on the part of those
of the merchant promoters for whom insurance was already a side-

To be sure, the finance companies were a more dangerous innova-

tion,and were eventually led by their own interests to encroach on the
sphere of the merchant banker. Their managers, the first of a new race
of banking bureaucrats, began in part as the creatures of the older
houses that financed them but inevitably came to treat their firms as
ends in themselves, with their own raisons d'itre. In the 1850*3, how-
ever, all of this lay in the future, and the merchant bankers of the day
could not foresee the consequences of their actions. On the contrary,
the success of the Mobilier encouraged the creation of other joint-stoi
investment banks, most of them the work of solid, conservative mer-
chant houses. From France, the finance company spread to Germany,
then to Austria, Spain, and Switzerland, and eventually - within little
more than a decade - throughout Europe. ^
In these euphoric years, then, the coming of the finance company
did not seriously shake the co-operation and mutual understanding
that we have seen to be fundamental to international banking. There
were be sure; but these were essentially personal rivalries,
conflicts, to

and not struggles between two opposing systems of banking.® In this

sense, they were no different from the clashes that had frequently
marked in the past the entrance of new private houses into the financial

^ Needless to say, in all of these creations, the desire to transfer difficult or

hazardous functions to an autonomous instrumentality was only one of several
motives; also, in all of these, merchant bankers were not acting alone but rather
in conjunction with other groups - including, in some cases, the state itself -
each motivated by reasons of its own. See the references cited in Landes, ‘Vieille
banque et banque nouvelle’, p. 210, nn. i and 2.
® Much of this story is well told in R. Cameron, ‘The Credit Mobilier and the

Economic Development of Europe’, /ottr/i. PoL Ec,, LXI (1953), 461-88; cf. the
same author’s ‘Founding the Bank of Darmstadt’, Explorations in Entrepreneurial
History^ VIII (1956), 113-30.
® Thus the Pereire-Rothschild rivalry, which is usually cited as evidence of the

conflict between ‘New Bank’ and ‘Old’. This struggle, it is worth noting, was
never so implacable as contemporaries were wont to describe and historians have
been ready to assume. Not only did the autonomous allies of the principals feel
free - in the best banking tradition - to fraternize when fraternization paid, but
even the corporate creations of the protagonists co-operated when necessary.
community; and like these they were only the prelude to eventual
accommodation and absorption.^

So much for the Continent, where the early finance companies came
one by one, and sometimes by twos and threes, on the consent of the
political authorities and with die blessings of some of the most power-

ful of the older private banks. The story was different across the
The finance company came late to England. She needed it less than
the Continental countries. To begin with, she had no costly techno-
logical leaps to make in 1850. The basic plant of an industrial economy
was already built; her equipment was the most modem available; her
essential railway lineswere completed. All of this had been accom-
plished, moreover, without the intervention of the state or large private
investment companies. Much of it had been bought with the profits
generated by individual enterprises. Much had been financed by a
money market that, for all its want of organization, succeeded admir-
ably in channelling the liquid resources of the entire country into
manufacturing and trade. As for the larger undertakings - the canals,
docks, and railways - that required the immobilization of capital over
long periods of time, no country had so large, so wealthy, so open-
minded a body of investors, most of whom were returning to the
economy through joint-stock enterprises the money earned in private
industrial ventures.
In addition, as though the regular financial facilities were not enough,
no country was so willing as England to expand credit beyond the
limitsof commercial prudence. The accommodation bill had become
almost a staple by the middle of the century, and even the oldest and
most reputable discount houses were ready to furnish for a suitable
price what were in effect open and revolving credits on the most
questionable security.^ At the same time, the local banks customarily

1 Thus the long and fruitful collaboration between the Rothschilds and the
Berliner Discontogesellschaft, after the latter had won out in competition for the
Austrian loan of 1864. H. Miinch, Adolph von Hansemann (Munich and Berlin,
I93^)» PP- 79"84*
® It would be impossible to do justice here to the multifarious and scattered
sources on the financing of British economic development. On the role of the
bull market
allowed their clients quasi-permanent overdrafts that had all the
not the appearance, of long-term loans. It is impossible to
quality, if
understand the growA of British industry and trade in the nineteenth
century without taking into account the incalculable volume of this
concealed investment.^
In such an economy finance companies were, if not unnecessary,
at least unwelcome.^ As The Economist wrote, looking l^ack on the
grandiose pronouncements and idealistic promises of the early Credit
Mobilier, ‘English merchants do not like such advertisements. They
are suspicious, and justly suspicious, of novelties in money matters;
they are not favourable to new paper currencies;® they hate vague
eloquence where there should be precise figures. As the Credit Mobilier
was originally put forward, it may safely be said that scarcely anyone
in the sounder and more characteristic part of the London money
market would attend to it.’ As for the need for such ventures, the
writer was categorical: ‘The whole banking and borrowing system is
developed in England to an extent and with delicate minuteness which
no other country can equal. There is less call here than elsewhere for
new “developments” of credit, for there are already more developments
than elsewhere.’ ^

money market, the best work is still W. T. C. King, History of the London.
Discount Market; see also, on the earlier period, A. H. John, ‘Insurance Invest-
ment and the London Money Market of the i8th Century", Economical n.s.,
XX (1953), 137-58. On
railways, one may note the recent article of S. A. Broad-
bridge, ‘The Early Capital Market; tlie Lancashire and
Yorkshire Railway,’
Ec, HR,, ser., VIII
(1955), 200-12, which brings out the contribution of the
surplus capital accumulated by British industiy to the construction
of the early
^ Cf. J. H. Clapham, An Economic History
of Modern Britain (3 vols.; Cam-
bridge, 1950-2), II,
355, n. 4; ‘The sort of provincial banker who was dying out
at the end of the nineteenth century used to
speak of the men he had “made”
and wonder whether tlie modern type of banking would do the
work so well,*
Also ibid., 1, 266. The reader should consult the recent study of Pressnell, Country
Banking in the Industrial Revolution, especially ch. x.
® The
implications of the relative degree of economic development
for the
financing of industrialization were explicitly analysed
as early as 1857 by Gustav
Mevissen, with specific reference to the comparison
between England imd
Germany. Hansen, Mevissen, I, 619-20. Cf. A. Schumpeter, Business
J. Cycles
N.Y., 1939), 1 , 347-8, on the role of credit creation in
the development of
Germany and the United States as compared with England.
® A reference to Pereire’s intention to issue post notes.
^Economist, 9-5-1863, pp, 505-6.
Under the circumstances, the legal restrictions on the formation of
business corporations amounted to a veto on the creation of joint-
stock investment banks. There was no Napoleon in England to au-
thorize an innovation like the Credit Mobilier in the face of public
opinion; nor was there some outside jurisdiction to turn to as in Ger-
many, where the hostility of Prussia and Frankfurt simply drove the
earliest finance companies into lesser, more amenable states. In England

it was not until passage of the Company Acts of 1855 and 1856, which

provided for automatic incorporation with limited liability by simple

registration, that the formation of finance companies became feasible.^
And then the commercial crisis of 1857 came to tighten the money
market, paralyse the Exchange, and nip in the bud such projects as were
organized. It was not until the i86o’s that Britain was able to follow in
the path of Continental banking.^
By the time she did, her economic situation had changed, rein-
from the nations across the
forcing differences that already set her aside
Channel. She had always been a peculiarly extraverted country, more
dependent than any other on the sale and purchase of goods abroad.®
In the fifties, her overseas trade increased rapidly, and with it, her

^ Until 185(5, the more important companies still recpiired parliamentary

approval. An act of 1844 had provided for simple registration of joint-stock
companies with unlimited liability. H. A. Shannon, The Coming of General
Limited Liability’, Econ, Hhu [supp. of the Ec. /.], II (1931), 278-82; idem,
The First Five Thousand Limited Companies and their Duration,’ ibid., II
(1932), 397 and n. i. Cf. B. C. Hunt, The Development of the Business Corporation
in England, i8oo-i86y (Cambridge, Mass., 1936), chs. v and vi. England’s
legislation in this regard was some years ahead of that of the Continental countries.
In 1864, Samuel Laing, addressing the first general meeting of the General

Credit and Finance Company, declared that (the minutes of company meetings
are published in the financial journals in indirect speech) ‘the extension of
joint-stock enterprise and the passing of the Limited Liability Act for every
description of enterprise had given a great stimulus to that particular form of
association which was now applied to a vast variety of enterprises, which a few
years since would either not have been attempted at all, or have been left entirely
in private hands’. Bankers^ Mag,, XXIV (1864), 267. The reference is to the
General Limited Liability Act of 1862, which was in effect merely a consolidation
of the earlier acts of 1855 and 1856. Shannon, ‘First Five Thousand’, p. 399, n. r.
® There is a striking (juotation from the Report on Manufactures (P<zr/. Pap,,

1833, VI, p. 93) in H. J. Habakkuk, ‘Free Trade and Commercial Expansion,

1853-1870’, Cambridge History of the British Empire, II (Cambridge, 1940),
756 f. Habakkuk gives an excellent brief description of the role of overseas
consignment in the British economy.

export of capital. Such statistics as have been calculated - and they are
at best informed approximations - indicate that the annual surpluses
of the national balance of payments, which had averaged between
;£5300o,ooo and £6,000,000 during the thirty years from 1826 to 1855
and £7,600,000 during the period from 1851 to 1855, jumped to
£25,000,000 during the next five years. The total of British holdings
abroad increased from about £264,000,000 at the end of 1855 to
£388,000,000 at the end of i86o, a gain of almost 50 per cent, in five
years. Home enterprise seemed to offer a less and less tempting field
for investment.^
At the same time, there occurred certain changes in the pattern of
British international trade that were to have immediate repercussions
on the direction and character of foreign investment. Most striking -
and most significant for our purposes - was a shift in interest away
from older clients in Europe and the New World to the as yet neglected
possibilities of the Near and Far East. The movement, which began in

the 1840*8, was given impetus by the Crimean War and definitely con-
secrated by the crisis of 1857, which hit especially hard at Anglo-
American and Anglo-European commerce. Whereas British exports
to the United States, for example, dropped from £19,000,000 to
£14,500,000 in the year 1857-8, a year diat saw trade shrinking on
all sides, exports to India actually rose from £12,000,000 in 1857 to

£17,000,000 in 1858 and £21,000,000 in 1859.*

The shift became a precipitous rush when the American Civil War
cut off Britain from the major source of
most important import,

cotton, and compelled it to turn to India and Egypt for emergency

supplies. While imports from the United States fell from £49,000,000
in 1861 to a low of £18,000,000 in 1864, Indian shipments increased in
value at a spectacular rate, from £22,000,000 to £52,000,000 during
the same four years. Throughout the period 1862-5, India was the
most important of the purveyors to the United Kingdom, a position
which she had never held before and was never to hold again. Egyptian
^ The figures are from A. H. Imlah, ‘British Balance of Payments and Export

of Capital, 1816-1913', Ec. H,R,^ 2d. ser., V (1952), 234-6, On the export of
capital, see - in addition to Jenks’ classic work - A. Baster, The Imperial Banks
(London, 1929), pp. 1-2, Greenberg, Briush Trade^ pp. 153 fiF. On the same
search for higher returns abroad in the i86o's, Bankers* Maga::^^ (i860), XX
410; XXIV (1864), 108.
* H, Rosenberg, Die Weltwtrtschaftskiists von iSSy-iSSp [Vterteljahrschrift f.
Soi,~ u, Wirtschaftsgesckickte, Beiheft 30] (Stuttgart and Berlin, 1934), p. 148.
exports to the U.K. were somewhat slower to react to the rise in
demand but also slower to fall once the cotton boom was over. An
increase from £8,000,000 in 1861 to £22,000,000 in 1865 brought
Egypt from sixth position on the list of sources of British imports to
third in 1864 and 1865, behind France and India. Only ten years before,
in 1854, with £3,000,000 of shipments, Egypt had been a modest
fifteenth. If the gain was not comparable to India’s in the absolute
sense, the relative change was more spectacular.^
The consequences for British financial development were serious and
in part unpredictable. It might have been expected that when Britain
took up the credit mohilier^ the extraversion of the economy would give
rise to companies more interested in foreign operations than those of Con-
tinental Europe.^ What could not be foreseen was the extent to which
the special character of the Eastern trade would lead them to neglect
the legitimate objects of the finance company - railways, harbour im-
provements, colonial and state loans, and so on - for the large but hazard-
ous profits of accommodation credit and, even more, money-lending.
The growth of Western commerce with the lands bordering on
the Indian Ocean and eastern Mediterranean had encountered from the
start a major obstacle in the backward state of local banking and the

^ the U,K,, i854-iB68^ tables 8 and 9, pp. 13-19.

Stau Ahstr.for
®Although France, and in particular the Credit Mobilier itself, early showed
the same tendency to direct its attention abroad. Yet the French pattern was
somewhat different from the British. French financial enterprise in central,
Mediterranean, and eastern Europe was only to a small degree a natural outgrowth
of trade relations; essentially, and almost exclusively, it was an effort to utilize
capital more profitably than at home, where the most lucrative railway lines had
already been conceded and industry itself - however great its needs -was
inhospitable to outside financial intervention. At the same time, there was the
speculative character of the Credit Mobilier itself, which depended for its prestige
and even survival on its ability to effect spectacular promotions that promised
rapid returns; the slow gains of industry were not its dish. The failure of French
investment banks to develop home industry, which became toward the end of
the century a major political issue - was thus foreshadowed almost from the start
and reflected in the beginning not so much a lack of enterprise, as the existence
of an excessively speculative kind of entrepreneurship. Cf. the unwillingness of
the Pereires in 1855-6 to accept the limitation by the authorities in Vienna of the
operations of their projected finance company to the territory of the Austrian
Empire, Because of this, apparentiy, the Credit-Anstalt was left to the Roth-
schilds. I am indebted to Prof. R. Cameron for this information; the usual
explanation of the Pereires’ withdrawal in Vienna is the Austrian insistence that
the directors of the bank be native citizens.
primitive facilities of credit and exchange. In these ‘underdeveloped’
countries, where the civilizing rays of capitalism had not yet exercised
their mysterious faculties of enlightenment, there were few banks but
many money-lenders, little investment but much hoarding, no credit
but much usury. Here and there, in the most important centres, in
Bombay and Calcutta, Constantinople and Alexandria, private bankers
and merchants supplied the same sort of discount and exchange facili-
ties as existed in the cities of the West. Some of these bankers were

European; some, natives. More often than not, they were members of
those trading peoples which seem to flourish in these regions: Parsees
and the Gujrati caste in India; Greeks, Syrians, and Jews in the Levant
and Near East. Even in these centres, however, the price for such
accommodation was high, usually twice and three times the going
Western rate, and the lack of a steady current of exchange led to extreme
fluctuations that made commerce a gamble instead of a business. Out-
side the nodes, in Karachi, Madras, Salonica, and Smyrna, there was
nothing but the shroff and the usurer. The minimum rate of interest
on the best was from 12 to 20 per cent. For poorer risks, 3 and

4 per cent, per month was quite regular, while for the peasant,
borrowing every year on his anticipated harvest and trapped on a
hopeless treadmill of debt, rates of 5 and 6 per cent, per month were
not uncommon.^
It was this lure of fabulous interest even more than the needs of
trade that attracted British promoters and investors. The prospectuses
of new firms were explicit in their discussion of the high rates to be
charged and the magnificent returns to be expected.® The promoters
^ On banking facilities in the Levant, see the works of J. Lewis Farley, bank
promoter, publicist, and gadfly of Near Eastern finance; in particular, Two Years
in Syria (London, 1858), which from British consiJs in the
cites in extenso letters
Ottoman Empire, and Banking in Turkey (London, 1863). Cf. also the Semaine
financiere, I (1856), ii.
® In i860, the Bankers* Magaiine, pointing out that in England interest had

always varied on the average between 3 J and 4J per cent., that is, ‘the interest that
a man can get for the mere use of his capital upon good securities, without adding
no one could lend at a higher rate and expect the
a fraction of labour’, stated that
borrower to earn enough to remunerate his own labour and pay the interest.
Unfortunately, the editor remarked, ‘when a company is concerned, people forget
altogether this principle of commerce; they lend ^eir money upon flaunting
prospectuses promising 10, 12 and 15 per cent, upon the capital embarked; they
fancy some hidden talisman in a company enabling it to do the impossible .
and then, with typical Bankers* Magazine conviction: ‘We will venture to lay it
of one of the first of the British credits mobiliersy the General Credit and
Finance Company, enticed the public with visions of money bor-
rowed in England at 4 or 5 per cent, and lent in the East at twice
or three times that; its first creation was a land mortgage bank in
India.^ The sponsors of Turkish enterprises dazzled the investor with
the prospect of 3 to 6 per cent, per month.^ And the Egyptian Com-
mercial and Trading Company, organized presumably to exploit the
trade of the upper Nile valley, made it clear from the start that it ex-
pected to earn the bulk of its profits by lending to natives. In the words
of the advertisements: ‘As it is well ascertained that in Upper Egypt
and the Sudan, cultivators and traders can afford to borrow money at
4 and 5 per cent, per month and still amass wealth, the field of opera-
tions is almost illimitable.’® In all this, there was no guilty conscience:
British capitalism had long outgrown the irrational idea of usury; the
fair price of money was the price set by supply and demand. Besides,

high as were the rates proposed by the company promoters, they were
lower than the Orient had ever known. Indeed, if the British had not
expelled all irrational moral values from their conception of economic
behaviour, they might almost have congratulated themselves on their
There was one other development that was not foreseen at the time
the promoters prepared once again to introduce the finance company
to tile English capital market: the abundance of such floatations and the
readiness of the investor to receive them. And yet this might have been
anticipated. Where before, legal restrictions had made it more difficult
to found a finance company in England than on the Continent, now the
situation was reversed; registration was a formality. All that was needed
was a nervy projector, a few high-sounding names on the board of
directors, and an imaginative prospectus, and the public could be
counted on to do the rest. Moreover, where Continental legal require-
ments encouraged an initial payment of a substantial fraction of the
value of the shares and the rapid remittance of the rest, British corn-

down as a safe rule that every trading company that professes to say it can
realize much over 5 per cent, for its shareholders, is, prima facie, a bubble.*
XX (i860), 409-10.
^ Ibid., XXIII (1863), 476 f. Cf. J. Ninet, ‘La culture du coton en Egypte et
aux Lades*, Rev, des Deux^Mondes, 2d per., LXIV (i866), 365.
® Economist, 13-2-1864, p. 224; cf. Mon, Mar, Rev,, X
(1865), 523.
® The Times, 17-6-1863, p. 4.
panics asked very of the investor to begin with - as little as lo per

cent, of the nominal capital - and made fiinher calls only if necessary.^
In a market as rich as that of London and as optimistic as that of Ae
early i86o’s, this facility of promotion was an invitation to excess.
Yet all this is the wisdom of hindsight. The founders of the first
British finance companies were established bankers, merchants, and
industrialists of the same stripe as those who had created the credits
mobiliersof the Continent. They included a fair selection of the Court
of the Bank of England, the director of the London and Westminster
Bank, the greatest engineering contractor in the world, powerful
some of the finest Greek houses in
executives of Indian railroads, and
England. Their connexions abroad were with firms of equal influence
and reputation: with the Credit Mobilier, the Comptoir d’Escompte,
and half the Haute Banque in France; with Bischoffsheim and Gold-
schmidt in Belgium.
In founding finance companies, they had no intention of subverting
die established banking order - die last thing they were was revolu-
of their creations were designed, as on the Continent, to
tionaries. All

handle those investment operations that were not suited to traditional

merchant banking and to support diose that were beyond its capacity
unaided. Moreover they made much of their connexions with other
banks and expected great things from systematic collaboration with
their allies abroad.
They founded three firms. And then they rested, and felt that Eng-
land now had all the finance companies she needed. Informed opinion
was inclined to agree.^

The road to hell is paved with good intentions. If the founders of the
^ By the terms
of the 1855 act, companies claiming limited liability had to have
of their nominal capital paid up and one fourth of the capital
at least 15 per cent,
subscribed. These requirements were removed by the act of 1856. Shannon, ‘The
Coming of General Limited Liability’, Econ. Hist.^ II (1931), 289-90. In France,
by had to be subscribed in advance, a substantial part
contrast, all the capital
(generally one fifth) had to be paid in prior to authorization, and all (for railway
companies, one half) of the capital had to be paid in before bearer shares could be
issued. M. Block, Dicmmaire de V admirdstrauon frcmgaise (Paris and Strasbourg,
1862), p, 1476.
® On the first three British finance companies - the London Financial Associa-
tion (capital ,£1,000,000; least important of the three), International Financial
first banks expected to have the field to themselves, they
British credit
were soon disabused. As though to compensate for a decade lost,
British capitalists embraced the new business form with an enthusiasm,
almost a frenzy, that belied the moderation and circumspection that
Englishmen have always prided themselves on. Credit companies,
discount banks, finance corporations poured pell-mell into the London
market, forty-seven of them by the end of 1865, two thirds of them to
exploit and develop colonial and foreign enterprise.^
Even this remarkable figure hardly does justice to the vastness of the
movement, the extent to which credit expanded. The same three years
from 1863 to 1865 saw fifty new ‘banks’ and twenty-four ‘mercantile
and trading ventures’. Many of these were just what die classifications
suggest, banks in the strict British sense of repositories for deposits
employed only in short-term operations, and trading companies occu-
pied solely with the purchase and sale of commodities. But many - and
here we have evidence once again of that flexibility of entrepreneurship
which laughs at morphological locksmiths - found it difficult, indeed
impossible, to ignore the financial opportunities of an age of expansion
and inflation. TTius the Imperial Ottoman Bank, which was a bank of
issue, acted as agent for the Turkish treasury, floated the loans of the
Porte, did a thriving business in commercial paper, and helped create
and promote affiliated enterprises within the Ottoman Empire. And
the Egyptian Commercial and Trading Company, which we shall meet
again, found that some of its funds might be employed more lucratively
in loans to the Egyptian government than in die export of the products
of the Sudan and Central Africa.
This, indeed, was subversive. There was room for a few credit com-
panies in England -two, five, even ten. But dozens of tliem! The
pundits of the financial press, which had welcomed the first finance
companies with cautious approbation,® muttered gloomily, clucked
disapprovingly, spoke forth in deprecation, shouted denunciation.®

Society (capital £3,000,000), and the General Credit and Finance Company
(capital £10,000,000), see Mon, Mar, Rev., VI (1863), 402, 467; Economist^

2-5-1863, p. 504; B^ers* Mc^a;(in€^ XXIII (1863), 476 f., 518 f.

^ These figures and those which follow are from Shannon, ‘First Five
Thousand*, Econ, Htst,^ II (1932), 422.
^Economist, 9-5-1863, p. 505 Bankers’ Magazine, XXIV (1864), 322.
® Of course, saw the company boom in different ways. The
different journals
most conservative of all, the Bankers’ Magc^ne^ hardly gave the wave of pros-
perity a chance to rise before the editor was warning of eventual collapse: XX

Those same bankers who had encouraged the expansion of credit

facilities now found the market choked with competitors. Even the

proliferation of commercial opportunities and the multiplication of

investors could not keep up with the supply of projectors with little
money and big ideas. 1864 was the famous year of 7 per cent., when the
Bank rate averaged 7 per cent, and discount charges as high as 9 per
cent, were barely able to calm the ebullition of the market.^ Within
the United Kingdom, banks began hunting and fighting for customers -
‘touting’ was the expression commonly employed - and bank managers
complained that they could no longer treat wiih clients on equal terms. ^
The financial profession began to lose its dignity as the once stately
money market took on the air of a bargain basement.
Among the areas of fiercest competition was, naturally enough, the
Near East. Here, as in England itself, things began quietly and the
finance company came late. The early response to the growing demand
for credit facilities was an increase in the number of private banking
houses. As in western Europe before, numbers of merchants - Greeks,
Jews, Syrians, and Europeans - found that trade was the gateway to
finance. In the 1840’s and 1850*5, some of these local entrepreneurs
tried to organize joint-stock commercial banks, usually with the co-
operation of British interests; the Bank of Egypt was organized in

(i860), 409-10; xxn (1862), 337-40, 770-1; xxin (1863), 51-3, 385, 736-8;
XXIV (1864), 1070-1. The Times was almost as diligent in dirowing cold
water on the fires of speculation: 13-1-1863, p. 7; 19-1-1863, p. 7; 28-1-1863,
p. 7; but cf. 21-5-1863, p. 9. At the other extreme was The Money Market
Review^ which enthusiastically beat the drums for the great new era of limited
liability, opened its columns to stockholders who felt that their fevourite securities

were not sufficiently appreciated by the public, and attacked The Times as a tool
of reactionary interests: VI (1863), 27, 108; VII (1863), 335 f., 413; VIII (1864),
52-3. Cf. also The Economist^ which was sceptical but willing to be shown:
9-5-1863, p. 505 f.; 19-3-1864, pp. 349-51; 20-8-1864, pp. 1045-6.
^ Cf. G.
J. Goschen, ‘Seven Per Cent,* in Essays and Addresses on Economic
Questhnsy i865-i8d3y (London, 1905). On the impatience of the market,
Bankers* Maga(tne^ XXIV (1864), 1070.
® Ibid., XXV (1865), 530-1, 668. On the one hand, this competition among
deposit banks led to the indiscriminate acceptance, and encouraged the formation,
of speculative companies that used the name of their banker to give themselves
the appearance of respectability. The Times^ 6-7-1863, p. 7. On the other hand,
the rise of new credit companies aggravated the struggle for deposits. Thus the
Oriental Banking Corp., founded in Bombay in 1842, chartered in London in
1851, opened a branch in Edinburgh and offered 2 to 3 J per cent, more on deposits
than Scottish banks would allow. Baster, The Imperial Bcmks, p. 106.
this manner in Alexandria in 185 5.^ At the same time, British business-
men were taking the initiative in exploring the possibilities of Oriental
finance: in 1856, on the heels of the Crimean War, a London group
created tiie Ottoman Bank in Constantinople.® Shortly thereafter, the
crisis of 1857 imposed a moratorium on further projects.

At this point ihe financial histories of Turkey and Egypt diverge.

The history of Ottoman banking is in large measure the history of the
Ottoman Bank. This institution, intended in principle to engage only
in ordinary commercial banking, built up over the years the closest
relations with the Turkish government: the directors proved most
helpful and understanding in tiding the prodigal and inefficient
sultanate over repeated financial difficulties. The kind of manoeuv-
ring and machination needed to get ahead in a world of political as
against rational capitalism came as a surprise to the English directors.
In a report to the stockholders in 1861, it, was stated that the bank
had made its way in spite of opposition ‘marked by an amount of
unscrupulousness, intrigue, and mystification, which was altogether
unknown in England.’
This sympathetic policy was amply justified by subsequent events.
The years from 1857 to i86i saw the finances of the Turkish govern-
ment deteriorate rapidly, a process that was greatly accelerated by the
difficultyand cost of borrowing money in a tight market. The effort
of an Anglo-Greek group to organize a national Bank of Turkey in
i860 foundered on this rock: the syndicate took a big share of the
Ottoman loan of that year and lost a fortune in the operation. By 1861,
deterioration had become collapse: nineteen houses suspended in
At this point, the Ottoman Bank saw its opportunity. With its local
rivals in Constantinople momentarily crippled and the foreign credit
of the Porte destroyed, it became in 1861 the mainstay of the treasury.

^ A, Baster, ‘The Origins of British Banking Expansion in the Near East,*

Ec, V 6934), 78-9-
®Ibid., pp. 81-2. The best general introduction to the history of banking
in the Ottoman Empire is Du Velay, Essai sur Vhistoire financiere de la Turquie*
^ Bankers^ Magaqine^ XXI (i86i), 820, first seen in Baster, ‘Origins’, p, 84.
^ On Bank of Turkey, Baster, ‘Origins’, p. 83 f.; The Times, 19-3-1 857,
p. 10; Bankers* Magaqme, XX (i860), 81. On the loan of i860, Du Velay, Essai,
pp. 153-65; Mir^s, A mesjugesi Bankers* Magazine, XXI (1861), 288, 533-8, 592,
663, 820-1, 889. On the crisis of 1861 in Constantinople, ibid., pp. 134 f., 194,
197, 205, 209, 279 f., 453 £, 456, 596 f.

In the general meeting in September of that year, the chairman

reported to the shareholders that the Turkish state owed the bank
1 5 2,000and that the company was doing more business at the time
with the government than it was with private trade. ^ And when, in

1862, a loan was floated to liquidate the circulation of tlae much de-
preciated paper money, a prerequisite to the establishment of a national
bank, the Ottoman Bank underwrote the issue together with Charles
Devaux and Co. and the Glyn firm. The loan was an unqualified
With the stage set for the formal establishment of a new imperial
bank, a group of French financiers entered the scene. Whether they
were greeted from the start with open arms by the well-entrenched
directors of the Ottoman Bank is doubtful. Nevertheless, they were
there, wealthy, well-connected, and prepared to match the offers of
their English TurHsh government, delighted with
rivals. Besides, the
the prospect of combining British and French resources and of assur-
ing itself a tie, political as well as economic, with Paris, exerted every
effort to bring the two groups to agreement.® In November 1862, the
Anglo-French syndicate was formally organized; in February 1863,
the government officially accorded the concession; in March the
old Ottoman Bank liquidated and the new Imperial Ottoman took

^ Ibid., p. 710.

® Ibid., XXn (1862), 239, 644-8; Du Velay, Essai, p. 264. The loan, nominally
for £8,000,000 and yielding £5,440,000, was oversubscribed seven times. The
Bankers' Maga^^ine called this *a result almost unprecedented in the history of
loan transactions’.
® The Times, 29-11-1862, p. 7; Frankfurter Zeittmg, 11-12-1862, p. 7.
^ On the English side, the syndicate of founders and promoters was composed
largely of the leading directors of the old Ottoman Bank. On the French side,
there was the Credit Mobilier and some of its friends - more or less the same
group that was to help found the International Financial Society a few months
later (see n. 2, p. 59). The Imperial Ottoman was given the widest powers. Not
only could it engage in all kinds of commercial banking, but it was also a bank of
issue, and collector of revenue, disbursing officer, and exclusive agent of the
Turkish treasury. Du Velay, Essai, pp. 189-96; Bankers' Maga:[me, XXIII
(1863), 263-70 (final meeting of the original Ottoman Bank); also A. Biliotti,
La JBanque impiricde ottomane (Paris, 1909), chs. i and ii; and G. Poulgi-Bey,
*La Banque imp 4riale ottomane’, Annales des sciences politiques, XXV (1910),
364-^0. G. Young, ed., Corps de droit ottoman (7 vols.; Oxford, 1905-6), V, ch.
Ixxxiii, gives the full text of the act of concession and a history of the early years

of the firm.
The new firm was thus a symbol of financial co-operation. It was
also bom in bitterness and hostility. The concessionaires of the defunct
Bank of Turkey fought the new bank tenaciously in the British courts,
which refused to mix in what was felt to be a matter for Turkey to
decide -noble forbearance of innocent pre-imperialistic years. ^ The
matter was thrashed out in the newspapers, which were really helpless
to decide the issue either way. In the end, the evicted British and
Greek promoters were forced to abandon the struggle, but they were
hardly subdued. There was room for more than one bank in Turkey,
and most of them came back to fight another day.
The directors of the new national bank were intelligent enough to
appreciate the situation; it was a question of liking or lumping - they
could not possibly expect to maintain a monopoly. So like good
bankers, they yielded with a smile. In 1864 was estabUshed the Society
G6n4 rale de TEmpire Ottoman, capital £2 million, a sort of credit
mobilier whose investments in local commercial and industrial enter-
prise and promotion of new companies would complement the
activities of the Imperial Ottoman as a bank of issue, deposit, and

discount. The founders of the new corporation were a magnificently

heterogeneous group, a mixmre of at least three distinct financial

interests.There was first of all the Imperial Ottoman Bank; then,

the great Greek dynasties: Baltazzi, Zographos, Missiroglou, Ralli,
Camondo, Zafiropoulo, and Zarifi; then the Anglo-German syndicate
that had launched the first Egyptian state loan on the European market
in 1862 and was to play a leading role in Egyptian finance for the next
decade; Friihling and Goschen, S. Sulzbach of Frankfurt, and Oppen-
heim-Alberti of Constantinople;^ and finally, and indicative once again

^ Bankers^ XXIII (1863), 34-7, 248-50.

® The Oppenheims are discussed in detail in ch. iv andbelow. Siegmund
Sulzbach, together with his brother Reuben (later Rudolph), had formed a
banking house in Frankfurt in April 1856. For the first ten years the firm was
known legally as S. Sulzbach and Co.; the popular name of Gebriider Sulzbach
was not formally adopted until 1866. The Sulzbach bank was among tlie founders
of the Mitteldeutsche Creditbank (Bank of Saxe-Meiningen), which, with the aid
of Friihling and Goschen, floated the first Egyptian loans on the European
market. Franz Lerner, Bestand in Wandelj dargetan an der hunder^ahrigen
Geschkhu des Frankfurter Prtvathankhauses Heinrich Kirchholtes und Co.^ vorm.
Gebriider Sul^hachy z^ 5<S‘- 2^)56' (Frankfurt: G. Ammelburg, n.d.); [idem], Hundert
Jahre im Dienste der deutschen Wirtschaft: ein Ruckblick ^ur Erinnerung an die
GrUndung der Mitteldeutschen Creddthank can Fehruar i856 (Frankfurt:

of the flexibility of financial alliances, Stem Bros, of the International

Financial Society consortium and BischofFsheim and Goldschmidt of

the General Credit and Finance Company - Societe Generale axis.^
This was rational banking behaviour. As Sir William Clay explained
the situation to the shareholders of the Imperial Ottoman Bank at their
first annual meeting in 1864:^

The idea which led the bank to join in the project was, that in Turkey
there were two distinct spheres of action in finance and trade. For all such
matters as related to intercourse with the west of Europe, and loans to be
taken up in Europe for the Turkish government, the Imperial Ottoman Bank
was the appropriate instrument. But on the other hand, there were many
financialoperations connected now with the government, others with
municipal bodies, and others again with individuals, in which local experi-
ence, knowledge, and connexions of the native bankers and capitalists of
Constantinople made them the most fitting instruments. It became clear,
therefore, that a combination might be formed between the bank and those
parties who were generally very wealthy, powerful, and experienced,
and it
was the general feeling of the directors that it was far better to have such
persons as friends and co-operators with the bank than as rivals.

To which his listeners replied, if we are to tmst the report, ‘Hear!

Yet even the most rational and indulgent of enterprisers could hardly
come to terms with the spate of would-be bankers who rushed to make
Commerz-und Credit-Bank, 1956). (Strangely enough, neither of these sources
says anything about the Egyptian interests of the Mitteldeutsche Creditbank.)
On Frtihling and Goschen we know very little. The firm was established in
1814 when Frtihling, a prosperous London merchant who had immigrated firom
Bremen, took into partnership Wm. H. Goschen, the son of a well-known book-
sellerof Leipzig. For a long time, the firm showed litde interest in investment
banking and concentrated on mercantile and exchange activities. Of the firm's
records, only the summary balance sheets and a few curiosa remain. For permis-
sion to see these, I am indebted to Mr. Kenneth Goschen. See also Emden,
Money Powers, pp. 300-3. Neither the biography by George Joachim Goschen
(First Lord of the Admiralty, 1871-4, 1895-1900; Chancellor of the Exchequer,
1887-92; and author of the classic Theory of the Foreign Exchanges) of his grand-
father in Leipzig: The Life and Times of George Joachim Goschen, Publisher and
Printer of Leip:^, tySz-'iSzS (London, 1903), nor A. D. Elliot's biography of
the grandson: The Life of George Joachim Goschen, First Viscount Goschen,
iSgi^iQoy (London, 1911), contains any information to speak of on the history
of the firm.
^Du Velay, Essai, pp. 199-200.
^Bankers* Magapjne, XXIV (1864), 580, 652.
their fortunes in the great land of 12 and 20 per cent. Simultaneously

with the Soci^t6 Gen6rale de l*Empire Ottoman there appeared the

Ottoman Financial Association, capital 1,000, 000, another cridit
mobilier to assist trade and industry and negotiate concessions for
public works, in addition of course to lending at remunerative rates.
This firm was the creation of J. Lewis Farley, tireless traveller, prolific

promoter, and expert on the Near East, who secured the financial sup-
port of some of the Greek merchants who had been overlooked by the
Society G6nerale de I’Empire Ottoman and of the directors of such
recent English creations as the Continental Bank Corp., the Imperial
Bank, and the Mercantile Credit Assn. The children of the boom
fathered their own children.^
Moreover, for every bank whose headquarters lay within Turkey,
there was one in London or Paris ready to establish a branch on the
Golden Horn or send an agent to compete with local firms. Thus the
Mercantile Credit Assn., Ltd., founded in London at the beginning of
1864 by a syndicate comprising some of the leading Anglo-Greek
merchants in the Levant trade, came to play an active role in Turkish
banking not only in regular discount and exchange but in the sponsor-
ship and promotion of local and affiliated British firms.^ Similarly, the
General Credit and Finance - Soci6t6 G6n6rale consortium, which had
thus far taken no interest in Turkish finance, was quick enough to
seize an opportunity when one was offered and underwrite a loan of

£3,636,363 for the Porte in 1865, to the intense discomfiture, may it

be said, of the Imperial Ottoman.®

And this activity of local and Western bank corporations is only

Mon, Mar, Rev, VIII (1864), 158; Bankers* Maga:(me^ XXIV (1864), 308,
103 1-5. In this case, the child was not too healthy. After a bad year in 1864-5,
when was apparently more interested in financing British than Turkish
the firm
Ottoman Financial Assn, merged with the London and Bombay
enterprise^ the
Bank, which in turn absorbed the London and Mediterranean, these last two both
enjoying indifferent success. Ibid., XXV
(1865), 481-8, 786, 1284-8.
This firm merged that same year with the Imperial Financial Co. to form the
Imperial and Mercantile Credit Assn. Among the directors were Xenophon Balli,
J. G. Hom^e, and Michel Zarifi of Zarifi Bros., all leading Greek merchants.
Economist^ 2-1-1864, p. 31; 27-2-1864, p. 283; Bankers* MagcupnOy XXIV
(1864), 308, 400, 562-5; XXV (1865), 415 f.

® Ibid.,
pp. 781-2. The promoters included, in addition to the above, the
Nederlandsdie Crediet- en Deposito-Bank, the Credit-Anstalt, Erlangers of
Frankfurt, and the Banque de Credit G6nevois. For the reaction of the Imperial
Ottoman, see the report of the meeting of 26-2-1865. Ibid., pp. 862-6.

part of the story. This is the obvious surface turmoil, the rivalry and
whose reports are available in the
interplay of large public institutions
press and whose every move is commented in the columns of financial
journals. Behind these were dozens of discreet, unobtrusive private
houses, some with the prestige of decades, odiers bom only yesterday
to try their hand at the combination of business and intrigue that
constituted Levantine finance. The stmggles and alliances, machina-
tions and manoeuvres of these smaller players are known to us only
incompletely and haphazardly. For every scheme to form a bank that
we know of M. Hava, whose bank-
of, like that ^(^5, 000, 000 project

mptcy had not discouraged his ambition, how

in the crisis of i860
many are there that died stillborn in the shops of Galata or the con-
ference rooms of Princes Street^ ^ For every private loan to the Turkish
government that was publicly announced, like that of Oppenheim-
Alberti in 1863,® how many are there that were never reported for
reasons of state? The records of these private firms have never been
opened to outsiders; the personal papers of their directors are destroyed,
or lost, or jealously guarded. These directors controlled, direcdy or
indirectly, a good part of the commerce and banking of the Empire;

they were lenders and advisers to sultans and ministers. But their
modest careers, so prosaic by comparison with the lives of viziers and
diplomats, have never been the siAject of a biography, and they are,
most of them, irrevocably lost in the limbo of undocumented history.

Yet by comparison with ^gypt, Turkey was calm, owing largely to the
preponderance of the Imperial Ottoman and its affiliates. The banking
world of Constantinople in the boom years of the sixties was more akin
to the ordered system of Continental Europe than to the anarchy of
English finance. The Imperial Ottoman was -and has always re-
mained - the merchant beer’s image of what a joint-stock financial
institution should be like.
There was no Imperial Ottoman in Egypt. The Bank of Egypt was
tom between the conservatism of its English directors and the temerity
of its resident manager, a Greek merchant from Smyrna named Pasquali.
By 1861, the bank had most of its capital tied up in loans to the more

^ Economist^ 25-7-1863, p. 822. ^ Mon. Mar. VI (1863), 251.

profligate princes of the Egyptian royal house, and was in no position to
provide commercial credit, not to mention investment capital.^ For
the rest, there were some private merchant houses, none of them of any
stature as yet.
The was thus wide open, and was to become all the more

tempting because of the situation in Turkey. For many merchants and

bankers, the eastern Mediterranean was a single, integrated economic
region, to be exploited as a unit, and the overflow of entrepreneurial
energy from Constantinople was always ready to seek an outlet in
Alexandria.® This flow, and the immigration of business talent and
capital from other parts of the world, was to increase precipitately after
the beginning of the cotton boom consequent on the American Civil
War. Within a few Egypt not only became a major node of
trade and finance in its own right, but gained further importance from
its position on the road to India, where prosperity was even more

feverish and financial enterprise even less restrained.

The business world of Alexandria boiled over. The older houses,
yesterday’s arrivals, outsiders from Constantinople, London, Paris,
and Marseilles, mighty financiers and poor projectors, big corporations
and small merchants, the honest, speculative, adventurous, and false -
all poured into the m&ie. And in the process, the protocol and in-

tegrity of high finance were abandoned; the highest shoved with the
But now we are anticipating our story, which, like many stories,

begins in many places: in the chancelleries of Europe on the eve of the

Crimean War, in the banking houses of London and Paris on the
morrow of the crisis of 1857, in the tents of the Viceroy of Egypt on

the occasion of the concession of Suez, in the vessel that brought a

steamship executive named Edouard Dervieu to Egypt in 1855, and -
imder the guns of Fort Sumter.

^Another £120,000 was out to other borrowers on similar security. The

capital of the firm was only £250,000. Bankers* XXI (1861), 251.
® Thus the Mercantile Credit Assn, complemented its interest in the Ottoman

Financial Assn, with comparable ties to the Society Financiere d’Egypte. Bankers*
Maga^^ XXTV (1864), 808. On this last firm, see below, pp. 138-41. Cf.
also themerger of the Ottoman Finandal Assn, with the London and Mediter-
ranean Bank, a firm whose focus of activity was Alexandria. Economist^ 29-4-1865,
p. 520.
typical private house with business in both Constantinople and Alexandria
was, of course, Oppenheims, one of the principals of the story, that follows.


Scarcity is the greatest alchemist of all. In the seventh decade of the

nineteenth century, a long anticipated yet wishfully unexpected civil
war in America erased at one stroke most of the world’s supply of
cotton, ravaged the greatest of manufacturing industries, and turned
fuzzy white fibres into gold.^
To the great mills of Manchester and Rouen, of Flanders and Alsace,
the famine came slowly. In i860, the United States furnished five
sixths of the European supply of cotton,^ The crop that year was
superb, and merchants in New Orleans and Mobile, sensing the
approach of hostilities, hastened to ship to markets overseas. Haste
became fever after Fort Sumter, and between January and August of
1 Within England, the cotton industry led all others in numbers employed (we

exclude of course agriculture and the multifarious building trades), value of

output, volume of power consumption, share of foreign trade, and almost any
other criterion selected. According to an article in The Times 19-9-1861, the
industry at that date supported one fifth of the entire population, consumed
over one billion pounds of raw cotton a year, exported 2,800,000,000 yards of
cloth and almost 200 million poimds of yam, and employed machinery requiring
300,000 horse power. J. Scherer, Cotton as a World Power (N.Y., 1916), p. 263
f., citing J. F. Rhodes, History of the United States from the Compromise of i860

(N.Y., 1906), in, 503 n. Cf. Clapham, An Economic History of Modern Britain^
II, 24, on the
distribution of the British working force in 1851.
®And 80 per cent, of the British supply. W. O. Henderson, The Lancashire
Cotton Famine^ z 86z -5 (Manchester, 1934), p. 35. G. McHenry, The Cotton Trade
(London, 1863), p. 52, gives 85 per cent. Henderson's study is the best single work
on the famine. Still useful are R. Arnold, History of the Cotton Famine (London
1864-5); and J. Watts, Facts of the Cotton Famine (London, 1866). On France,
see Claude Fohlen, Hindustrie textile au temps du Second Empire (Paris: Plon,
1956), and the sources dted therein. For contemporary comments, see E. Reclus,
‘Le coton et la ctise am6ricaine’. Rev, des Deitx^Mondes^ 2d per., XXXVII
(1—1-1862), 176-208; and J. Ninet, *La culture du coton en Egypte et aux Indes',
ibid., ad per., LXIV (1866), 350-76.
1 86 1 over three million bales arrived in Europe to swell stocks that

were already bulging. In the following months only a few improvident

and the inefficiency of the Union blockade
industrialists felt the pinch,
of Southern ports gave the manufacturing interest reason to feel that
their fears had been exaggerated.
By Christmas, the situation was changed. There was not yet a
shortage, butnew arrivals of cotton were few, and the prospect of a
long war in the United States permitted little hope of immediate im-
provement. The price of cotton, which had hovered about 7| pence per
potmd during the first half of i86i, went to 12 by October and, after
some hesitation, jumped spectacularly during the summer of 1862^ by
the end of August it was up to 26^.^ The exchange was taken over by
speculators,who sold, resold, and sold again - sometimes fifty times
and more - cotton that never left the warehouse for delivery.^ Lan-
cashire was in agony. Mules and looms stopped; plants closed;
thousands of men and women walked the streets. And while com-
mittees were organized to care for the hungry and royalty set the
example in contributing to succour the unfortunate, crewmen were
looting cargoes to sell what had once been a bulk staple at a black-
market price of a pound. In France, where the prestige and
shilling a
stability of the Empire had been pledged for an unpopular commercial
treaty with England, the very idea of depression was subversive. As the
cotton shortage became more acute, Napoleon was reported ready to
intervene, if need be, to put an end to the fighting.®
The cotton manufacturers, who were losing hard cash daily,
exercised every ingenuity to circumvent paralysis. They made thinner
fabrics - for the first time since the great Napoleon, filmy muslins
were the height of fashion. They imagined marvellous combinations of
cotton warp and woollen or linen weft to shift part of the burden to

^ The prices given are of Middling Orleans. Le Havre prices followed the same
pattern. See Appendix, pp. 334-6. Unless otherwise indicated, English prices
quoted in the text are as given in Henderson, Lancashire Cotton Famine, pp. 1 22-3.
* Henderson, Lancashire Cotton
Famine, pp. 14-17; Fohlen, Vmdustrie textile,
pp. 294-5. Fohlen cites a report by the inspector of theBank of France in Le
Havre that speaks of certain lots of cotton going through seventy or eighty sales
without effective transfer.
® Not — the co-operation of England was indispensable to
alone, of course
such an operation. Fortunately French ardour was cooled by British prudence.
Cf. C. F. Adams, A Crisis in frowning Street^ Proceedings of the Massachusetts
Historical Society, XLVII (1913-14), 373-424.

Other textiles. They learned to eke out their cotton yam with flour and
other sizes that increased the weight of the fabric as much as half.^ To
no avail. There simply was not enough cotton, and if America could
not furnish it, some other place would have to.

Few places in the world are adaptable to the cultivation of cotton

on a commercial scale. In the i86o*s the only practical possibilities were
India and Egypt, ^ although the great manufecturing powers were
ready to try any place - Spain, Australia, even the Fiji Islands® - in
their desperation. Of the two, India was by far the more important for
sheer quantity, shipping in i860 almost six times as much cotton to
England alone as the entire Egyptian crop. Unfortunately, the Indian
fibre was so short diat most European textile machinery had to be re-
adjusted to work it, and so filthy that Surat was a byword for cheap,
dirty work.
The short fibre was the work of nature and correctable only with
time. The filth was man’s work and as such presumably susceptible of
more rapid improvement. Yet the obstinate resistance of the Indian
middleman to Western notions of commercial integrity and fair
dealing -the two business communities hardly spoke the same
language - proved at least as stubborn an obstacle as the geographical
environment, and the inferior condition of the Indian product remained
throughout the cotton boom a major deterrent to its utilization. Cotton
buying in the Bombay of the i86o’s was a frustrating business: the seller
determined to cheat, the buyer equally determined to stop him. But
where the European broker, with his delicate constitution and sensitive
dignity, stood off in the shade and tried with the aid of native servants
to obtain unadulterated goods of uniform quality, the Indian merchant
remained out on the open floor, called, cajoled, nagged and flattered,
showed the best cotton from mixed bales and lauded their purity,
yielded on a bad bale to return with its brother - in short, displayed

1 On the last point, see K. Marx, Capital^ I (N.Y., n.d. [a leprint of the Kerr
edition of 1906]), 500-1; III (Chicago, 1909), 153 f,
® Brazil was a poor third. In i860, Brazil's cotton exports
were about one fifth
those of Egypt and were to increase less rapidly than those of Egypt in the
following years. The statistics given by A. P. Canabrava, O Desenvolvimento da
Cidtura do Algodao na Provinda do Sao Paulo^ i 8 Si-i 8y5 (Sao Paulo, 1951),
p. 7, are misleading since they are given in bales and the Brazilian bale weighed
only about fifty kilograms, or about one quintal. Cf. the statistics on Egyptian
exports in quintals in the Appendix.
® The Tirmsy 31-1-1863, p. 6.
the patience of a saint to sell the wares of a thief - until the buyer,
overcome with fatigue if not with remorse at his own fussiness, settled

on cotton little if at all better than that rejected at the start, cotton
filled with as much rubbish and waste as it could hold and still keep its
For all this, the need for Indian cotton in the years of the shortage
was urgent enough to override considerations of quality. Prices rose
to fabulous heights, and the country went through a period of pros-
perity and speculation that for fever and frenzy will bear comparison
with the most spectacular booms in business history. Nevertheless, the
ferment remained on the surface, and the foundations of Indian agri-
culture were left undisturbed. Indian exports to Europe increased only
at the expense of local consumption, and the cost of production re-

mained at a level that, allowing for differences in quality, precluded

competition with American cotton in a normal market.®

^ There is a fascinating article by Andre Siegfried on his father’s experiences as

a cotton broker in Bombay during the boom: ‘Cotonniers aux Indes’, Revm de
Paris, LVII (Dec. 1950), iz-28, the substance of which also appears in the same
author’s volume of memoirs: Mes souvenirs de la IIP Ripublique, mon pere et son
temps (Paris: Presses Universitaires, 1952). Cf. also John Martineau, The Life and
Correspondence of Sir Bank Frere (2 vols.; London, 1895) 1, 411; Money Market
Review, VII (1863), 21 1; The Times, 4-7-1863, p. 10.
It should be emphasized that the Indian merchant was by no means alone in
his attempt to sell rubbish for cotton; the effort was made wherever there was
cotton to sell and was corrected in the long run only by official grading. Yet the
problem of dirty cotton was clearly far more serious in India in the mid-nine-
teenth century than anywhere else. Thus there is, to my knowledge, only one
complaint of adulteration of cotton in Egypt in this period: A,E,, C.C., Bene-
detti-Walewski, 27-6-1856, f. 91. And the European merchants of Alexandria
were hardly the sort to restrain themselves in matters of this kind. Nor is there any
mention of this problem in a report on Egyptian cotton of 21-7-1856 by the
American Consul De' Leon. Library of the U.S. Dept, of Agriculture, Case 26,
Shelf 7: Patent Office - Incoming Records - Letters, Reports, Essays, etc,, XI,
927 am indebted to Prof. Helen Rivlin for communication of this report.

The reader will also understand that adulteration was not limited to the cotton
trade. Such practices were only too common in many branches of British manu-
facturing; in the case of cotton, however, the Englishman found himself on the
side of purity. On some of the less savoury aspects of British commerce, see the
essay (which appeared anonymously at first) of Herbert Spencer, The Morals of
Trade’, Westminster Review, LXXI (1859), 357-90.
* On the relative costs of production and the market position of Indian
American cotton, see ‘Indian vs. American Cotton’, Economist, a5-i--i862, pp.
85-7. Note, however that while cotton exports from India to the U.K. sank after

The problem was as much social as economic. The agricultural

techniques of the Indian peasant, or ryot, were pathetically primitive,
and he had neither the incentive nor the means to improve them.
Pressed by the burden of rent and taxes to the very margin of Oriental
subsistence, constantly confronted with the problem of merely keeping
alive, he was far more concerned with growing grain to eat than

cotton to sell.^ Those who did grow cotton did so only with the
assistance of moneylenders and merchants, who thoughtfully advanced
capital and seed and more often than not owned the harvest before the
What is more, the usurer, who fixed the price of the anticipated
crop, not only took for himself the windfall profits of the boom and
deprived the peasant of inducement to increase his yield, but

apparently preferred to sacrifice the possibility of larger total profits

rather than raise the traditional price to the cultivator and diminish
his own rate of return. Before this combination of blind traditionalism
and inverted entrepreneurship, the British businessman stood con-
founded. A demand were not
place where the laws of supply and
operative.^ "There are The Economist soberly commented,
[in India]’,

Very unusual and singular difficulties, which arise out of a strange

1866, they never returned to the pre-war level. Shipments during thei86o's (in
bales of 400 lb.) ran as follows:

i860 563,000 1866 1,848,000

1861 986,000 1867 1,509,000
1862 1,072,000 1868 1,452,000
1863 1,230,000 1869 1,496,000
1864 1,400,000 1870 1,064,000
1865 1,267,000

G. Watt, A Dictionary of the Economic Products ofIndia (London, 1890), IV, 50.
On shipments to France (much smaller than to England), which actually grew
after the war, see Fohlen, Hindustrie textile, pp. 362-3. Unfortunately, we have
nothing but guesses for the total Indian crop during these years. Reclus, ‘Le
coton’, p. 202, speaks of estimates ranging from two and one half million to four
million bales per year.
^ McHenry, Cotton Trade,
p. 58 n. The very news of an intended survey of
land in cotton cultivation, with a view to increased production, was enough to
make many peasants tear up their fields for fear of the tax collector. Fohlen,
Dindusttie textile, p. 360.
®A situation that continued to paralyse Indian agriculture right into the
twentieth century. Cf. L. C. Jain, Indigemus Banking in India (London, 1929),
p. no, dting H. W. Wolff, Cooperation in India, p. 3.
State of society and which counteract the ordinary effect of the habitual
motives of human action.’ ^

Still worse, European traders found it almost impossible to step in

and furnish credit on better terms. The influential opposition of the

native moneylender and the passive resistance of the ryot^ whose
suspicion of change and fear of the usurer were stronger than his
desire for gain, presented obstacles all the more frustrating for their
elusive indefiniteness. Nor were European cultivators prepared to step
in and take the ryot^s place. The confusion and obscurity of Indian
property law discouraged foreign investments in land,^ and besides, it
was much easier to make money as a middleman on a small investment
than to plough large sums into the hazardous and demanding business
of cultivation. With the mill owners of Lancashire afraid to risk their
money in the improvement and extension of the Eastern crop and the
Britishgovernment resolved on principle not to interfere with the
normal flow of investment capital,® Indian cotton was forced to mark
time and watch the opportunity of the millennium go by.^
Like India, Egypt had a long tradition of cotton growing.® And if

it is true that the output of the Nile valley was small by comparison
with that of the Punjab and Bengal, this was compensated in part by
the superb quality of the long Egyptian Jumel fibre, second only to the
American Sea Island for the manufacture of fine yam. On the other

^ Economist^ 4-10-1862, p, 1094.

® Cf. A. Bedford, Manchester Merchants and Fore^ Trade^ Vol. II: zSSo~~

1939 (Manchester, [1956]), pp. 14-15.

® Cf. E. M. Earle, ‘Egyptian Cotton and the American Civil War’, PoL Set.

Quarterly^ XLI (1926), 528.

* See, in addition to Ninety ‘La culture du coton’, Rev, des Deux-Mondes^ 2d
per., LXIV (1866), 360-5, the following pages in The Economist, 25-1-1862,
pp. 85-^; 4-10-1862, pp. 1093-6; 24-1-1863, pp. 89-90; 11-4-1863, pp. 396-7;
10-6-1865, pp. 685-6. Also the Mon. Mar, Rev,, VII (1863), 211 (article based
on Sam Smith, Cotton Trade of India),
® There an excellent general history of Egyptian cotton cultivation, which

gives full treatment to wider economic and political considerations: F. Charles-

Roux, La production du coton en Egypte (Paris, 1908). The book does suffer,
however, from errors of detail. More scholarly and impressively thorough is a
manuscript by Prof. Helen A. Rivlin, ‘The Agricultural Policy of Muhammad Ali
in Egyp^, Ph.D. thesis at Oxford University, 1953. I am greatly obliged to
Prof. Rivlin for allowing me to consult a revised version of this manuscript in
advance of publication. On the effect of the famine on Egypt and Egyptian
most convenient source is the above-cited
cotton, the article of Earle, ‘Egyptian
Cotton and the American Civil War’.

hand, the weaknesses that balked all efforts to develop the Indian crop
were no less a handicap in Egypt. In ignorance and poverty, in inept-
ness of method and persistence in ineptness, the fellah was every bit

a match for the ryou Even the presence in Egypt of an enlightened

despotism - one tenth enlightenment and nine tenths despotism - to
set the example of efficient cultivation and impose change on the un-
changing mass, was as often as not a liability. For, as in all despotisms,
the short-range interests of state and the long-range interests of the
economy did not always coincide, nor was power always tempered
with understanding or good intentions balanced with good judgement.
Thus, for Mohammed Ali, founder of the Khedivial dynasty, father
of modem Egypt, and promoter of Jumel, cotton meant revenue. It
was the increment yielded by the new crop that enabled him to pay for
an Egyptian army and navy and wrest by arms the hereditary pashalik
from a reluctant Constantinople. With these political objectives in
mind, Mohammed Ali pushed the new plant like a flower in a hothouse.
Energetic direction from above worked wonders; in the three years
after its introduction in 1820, the yield of Jumel went from about 650 to
over 18,000,000 pounds, far surpassing anything the older, indigenous
varieties had attained.^ European importers were delighted with the
qualities of the new fibre, which rapidly won itself a privileged position

on the markets of Liverpool and Le Havre.

Yet Mohammed Ali’s efforts to increase his income through cotton
proved in the long run self-defeating. Dissatisfied with the tax revenues
yielded by the traditional system of land tenure, he had - even before
Jumel - succeeded in dispossessing all the landholders who stood
between the state and the je/ZczA. Almost all of Egypt was turned into a
huge government farm, and the peasant was reduced to the status of a
serf. He sowed what, when, and as he was told, and when, after some
exertion, he brought in his crop, he could not sell it, but was forced
to turn it over to the government at arbitrarily imposed prices that
barely sufficed to cover taxes. Moreover if, through trickery, ingenuity,
^ G. R. Gliddon, A
Memoir on the Cotton of Egypt (London, 1841), pp. I2-I4*
Gliddon does not make clear whether his figure of 200,000 cantars (the cantar
equalled about 122^ lb. up to the end of 1835) for 1823 includes other varieties
than jumel. We have assumed that it does, and have deducted the other yields
mentioned. These figures may be compared with those of J. Rabino, ‘Some
Statistics of Egypt*, Journal of the Statistical Society of London^ XLVII (1884),

426, which are based on a report of i860 to the Manchester Cotton Supply Associ-
ation, and which give the total crop in 1823 as 16,000,000 lb. (see Appendix).
super-human economy, or otherwise, liie fellah succeeded in delivering
a surplus, he was paid, not in cash, but in a credit against future taxes.
Such entries, which by their rarity can only have been a source of
confusion to the accountants, were not likely to last long. By an in-
genious system of solidarity, oach fellah was responsible for the taxes of
any and all his neighbours in his village, each village for the other
and each district for the others in its province.
villages in its district,
And when, after years of evasion and procrastination, of extraction
by threats and kurbash, a village reached the end of its means and
succumbed beneath the burden of its own taxes and those of its
neighbours, the state confiscated the livestock and tools of its in-
habitants. The land was turned over to - often forced upon - a tax
farmer, whose unhappy task it was, to succeed where the government
had failed or pay up out of his own pocket. The cultivators were
reduced from Ae status of tax-pa3dng serfs to that of sharecroppers or
salaried proletarians, receiving wages so calculated as to permit a sort
of existence on the border between malnutrition and starvation.^
This relendess system was justified on the ground that the fellah

was he would not move a finger unless forced to by fear of

lazy, that
hunger. There was undoubtedly much truth in this: indifference to the
stimulus of accumulation, of gain for the sake of gain, is the rule rather
than the exception outside a very narrow segment of Western society.
On the other hand, some of the shrewdest observers of the Egypt of
the i83o*s were convinced that the fellah loved money as much as
the next person and was just as likely to respond to the incentive of
In any event, the cure was worse than the disease. The Egyptian
peasant is a patient, long-suffering, submissive subject, but these very
qualities create a capacity for infinite intransigence. The short-sighted
cupidity of Mohammed Ali crushed the incentive of those who had
adopted the cultivation of Jumel in the hope of greater income and
confirmed the intractability of the vast majority of fellahin who
objected to cotton from the start. With all chance of profit gone, the
fellah simply bowed to his masters and went through the motions.

^ RivUn, ‘Agricultural Policy’, chs. ii and iii; Gliddon, Memoir^ 22-7, 38-44;
Roux, Production, pp. 40-8.
® In addition to Gliddon, see Bowring, Report on Egypt and Candia \ParL
Papers^ 1840, XXI, 1-236] (London, 1840), p. 14, Also Rivlin, ‘Agricultural
Policy*, ch. iii, p. 103.
Many fled ~ to other villages or, better yet, to the city, for thieving and
begging were preferable to field work and the bastinado.^
This flight from the soil was aggravated by the Pasha’s military
policy: for the first time since the Pharaohs, the^/M was compelled
to be a soldier. At the height of his campaigns, Mohammed Ali’s
army comprised some 127,000 regulars and 42,000 reservists, as against
a total population of perhaps two millions. ^ Thousands more avoided
conscription only by mutilating themselves; others fled to the cities,
Syria, even the desert. (The only consolations of even the most
wretched peasant are his family and his freedom from the direct con-
trol and confinement of barracks or factory.) Those who stayed be-
hind, including the maimed, were required to do the work and pay
the taxes of all those who left, for neither illicit flight nor official

conscription was ground for the abatement of the fiscal obligations of

the community.
As a result, the phenomenal spurt of Jumel’s early years was followed
by decades of spasmodic fluctuation. The quality of the crop de-
teriorated and the price in Europe fell sharply. The efforts of Moham-
med Ali to make up for this decline in revenue by enlarging the area
devoted to cotton and reducing payments to iSa&fellahm only stimu-
lated resistance and led to still sloppier cultivation. In the last years
of his reign, from 1845 to 1848, annual yield averaged about 230,000
cwt., hardly more than in the mid-i82o’s.®
The death of Mohammed Ali in 1849 set the stage for a new rise in
cotton output, Abbas (1849-54) had neither the ambitions nor visions
of his predecessor. By abandoning his grandfather’s costlier projects,
above all by cutting the army and navy to a fraction of their former

^ On the effects of the tax system and the beating and abuse of the peasantry,
see ibid., ch. iii, pp. 39, 53-4, 63, 88, 101-3; ^igbt from the soil, ibid.,

pp. 63-4.
® According to U.S. Dept, of State, Egypt, Thayer-Seward, 5-3-1863. This
number presumably includes Bedouins, Sudanese, Turks, and other troops of
foreign origin. The greater part of the army, however, was composed of native
Egyptians, some of them drawn from the cities, but most from the land. On the
whole question of military service and the peasantry, see Rivlin, ‘Agricultural
Policy*, ch. viii.
* See Appendix. It should be noted that cotton prices also reflected economic
conditions in Europe; and that the area sown varied, among other things, not only
with the European price for Jumel, but also with the price of such substitutable
crops as wheat
size, he reduced the fiscal burden of the peasantry and returned tens of
thousands of men to the soil.^ From a low of 1 19,965 cwt. in 1848, the
cotton crop rose to 670,129 in 1852 and settled at about the half-
million mark for the rest of the decade.
It remained for Said (1854-63), uncle of Abbas and son of Moham-
med from a regulated to a comparatively
Ali,® to effect the transition
free agricultureand from a closed to an open market in cotton.® The
modalities of this change are hard to establish. For one thing, our
European sources tend to confuse informal policy with constitutional
reform. For another, most of them - and particularly the French - had
reasons of their own for presenting Said and his reign in the most
favourable lights they have left us a carefully touched-up picture of a
great modernizer and liberator.^

^ On the army under Abbas, see Rivlin, ‘Agricultural Policy*, ch. viii, p. 20.

Note, however, that Abbas could be prodigal in his personal outlays. M. Sabry,
Episode de la question d*Afrique: V Empire egypnen sous Ismail et Vingerence anglo^
franpaise, 2863-187^ (Paris; P. Geuthner, 1933), p- 15-
* By the Treaty of 1840 among Turkey, Austria, Great Britain, Prussia, and
Russia, which fixed the viceroyal office in the family of Mohammed Ali, succes-
sion to the throne was by the oldest male agnate. Not until 1866 did a firman of
the Sultan establish succession from father to son.
® Free traffic in grain and other commodities, both imported and domestic,
was permitted in Egypt back as 1838, under the terms of the
in principle as far
treaty of that year between the European powers and the Ottoman Empire, But
this commerce, which was conducted mainly by itinerant Greek and Levantine
peddlers, was Mohammed Ali and Abbas, neither of whom was
limited under
quite ready to abandon the system of monopolies. Even where the pressure of
foreign governments made overt suppression difficult, indirect techniques of
curtailment proved almost as effective. Rivlin, ‘Agricultural Policy*, ch. vi,
pp, 27-36; P. Merruau, ‘L’Egypte sous le gouvemement de Said Pacha,* Revue des
Deux-^Mondesy 2d per., XI (1857), 347; U.S. Dept, of State, Egypt, De Leon-
Marcy, 2-3-1854; G. Gliddon, An Appeal to the Antiquaries of Europe on the
Destruction of the Monuments of Egypt (London, 1841), 148 n. (148-55); The
Timesy 29-8-1853, p. 8; 29-9-1853, p. 8; 14-11-1853, p. 8. On the other hand,
sometimes the alleged viceroyal monopoly was no more than successful competi-
tion in an open market, and European moral indignation was really the irritation
of business men beaten at their own game by a spoilsport. Ibid., 1 5-3-1854, p. 10.
To be sure, Abbas was a competitor who could, and apparentiy did at times,
disregard mundane considerations of profit and loss to suit his fancy or gain his
end. Ibid., 28-4-1854, p. 9.
* The best source for these reforms is still Merruau’s article, cited above, and
his DEgypte contemporaine de
Mehime>AR d Said Pacha (Paris, 1864). But all of
Merruau*s work must be handled with caution. He was a dose fnend of Lesseps,
The results, however, seem clear. owing to conviction, partly
to the persuasion and pressure of European nationals, Said allowed
foreign merchants - in fact as well as in principle - to trade directly
with landholders and fellahin.^ As a concomitant, he permitted the
peasant to grow, buy, andsell what, where, and as he pleased. Finally

he abolished the principle of solidarity of taxes and wiped out

had long passed the bounds of possible repayment. The
arrears that
effectwas to increase the rewards for careful, diligent cultivation
and to open the door for even stronger pecuniary incentives in the
"When the cotton famine came, Egyptian agriculture was ready for

Seen in larger compass, this growth of Egypt as a centre of cotton

cultivation was only one aspect of a national renascence, a great
awakening from the sleep of centuries. When Napoleon landed at the
mouth of the Nile in 1798, he found the husks of civilization, a people
in weary bondage, the crumbling remnants of a long-forgotten past.
So well, indeed, was the past forgotten that when Napoleon brought
his carriage ashore, he was, according to some sources, reintroducing

eventually replacing Barth 4lemy Saint-Hilaire as chief publicity agent for the
Suez Canal, and his writings were intended to present as attractive a picture of
Said and of Egypt as possible. Auriant, Franfois Bravay^ ou le 'NatoF (Paris,
1943), pp. 27-9; G. Edgar-Bonnet, Fer£nand de Lesseps (Paris, 1951), p. 308.
See also A. M. Hamza, The Public Debt of Egypt (Cairo, 1944), pp. 31-25 D, M.
Wallace, Egypt and the Egyptian Quesnon (London, 1883), pp. 264-70; The
Times^ 30-6-1856, p. 8 (on the abolition of the octroi),
^ Egyptian writers have tended to look upon these concessions as a grievous

mistake that exposed the population to the rapacious exploitation of the foreigner.
Thus Sabry, Empire egyptkn, pp. 30, 37, 47. Yet the most usurious Greeks and
Levantines were as nothing compared to the Egyptian state: never was the peasant
so thoroughly plundered as during the reign of Mohammed Ali. Moreover, none
were so thorough in draining him dry as his fellow Egyptians, who far surpassed
the Turks in cunning, persistence, and ruthlessness. Rivlin, ‘Agricultural Policy^
ch. iii, pp. 53-5. From the days of Pharaoh to the present, xh&fellak has hardly
improved his lot. Yet it is worth noting that such small gains as he has made are
largely due to his direct contact with foreign merchants, who on occasion (as in
the i86o's) have paid him well, and with foreign doctors and scientists, who have
saved him from the Malthusian consequences of his poverty.
the wheel to Egypt.^ He also reintroduced Egypt to the statesmen and
businessmen of the West.^
In this, of course, Napoleon was only anticipating the inevitable.
The absorption of Egypt into the sphere of European political and
economic rivalries was implicit in the aggressive, expanding character
of Western technology and business. The long isolation that had
followed on the Portuguese discovery of the sea route to India was
impossible in an age of steam and finance-capitalism.
Ironically enough, it was the weakness of the early steamboats that
made Egypt the pivot of the trade routes of a new age. Steam could not
compete with sails in the long haul around the Cape in those early days
of low-pressure boilers and paddle wheels, but it served admirably for
short voyages in the Mediterranean and Persian Gulf. To be sure, all
this required transhipment, but for articles of high value in proportion
to weight, the time saved more than compensated. Besides, there was
always the possibility of a railroad or canal to link the Red Sea and the
As early as 1830, the East India Company planned a steam service
between Bombay and Suez, to connect at Alexandria with other ships
coming from England. By 1834, the two were in operation,
joined by an organized system of overland Within the next
decade, four new steamship companies had entered the field, and the
trip from England to Alexandria had been reduced from forty to

fourteen days. The overland stage, once a tedious, uncomfortable, and

^A. E. Crouchley, The Economic Development of Modern Egypt (London,

1938), p. 77. J. Tagher, ‘La vie au Caire et a Alexandrie il y a cent ans*, Cahiers
d'histoire igyptierme^ II (1950), 412, mentions an earlier carriage offered by
French merchants in Egypt to one of the Mameluke beys. Crouchley’s study,
only convenient general treatment of Egyptian economic
incidentally, is the
history. Though somewhat short, the book covers the ground well and contains
some excellent statistical appendices. For those interested in detailed research,
there is a superb Bihliographie iconomique,juridiquey et sociale de VEgypte moderne^
by R. Maunier (Cairo, 1916).
® L. firmer, VEgypte de ly^S a 1900 (Paris, 1901), ch. i. Other general treat-
ments of the rise of modem Egypt are G. Hanoteaux, ed., Histoire de la nauon
igypttenne (7 vols.; Paris, 1931-40), Vols. VI (1936) and VII (1940); Pricis de
Vhistoirede VEgypte par divers historians et archeologues (4 vols.; Cairo, 1932-3
Rome, 1935 [Vol. IV]), Vols. Ill, pts. ii (Jacques Bainville) and
[Vols. I-III];
iii(Edouard Driault), and Vol. IV (A. Sammarco); A. Hasendever, Geschichte
Aegyptens im 19, Jahrhundert (Halle, 1917). M. Rifaat, The Awakening of Modern
(London, 1947), is not always accurate, and is marred by chauvinism.

even dangerous journey requiring anywhere from five to eighteen

days, was gradually cut to three. Steam tugs were brought in to draw
the passenger barges from Alexandria through the Mahmoudieh Canal
to the apex of the delta; in 1841, the first steamboat, the Jack 0^ Lantern^

began trips between the Mahmoudieh and Cairo; the desert road from
Cairo to Suez was improved to allow the use of wheeled vehicles. New
hotels and way stations, however primitive, made the trip more bear-
able for theEuropean traveller. Altogether, the Mediterranean route
from London to Bombay took only forty days, as against four months
by sail around the Cape. Trafiic increased spectacularly: where only
275 passengers were carried in 1844, there were 2,100 a year later and
3,000 by 1847.^
Much of this improvement was due to the active co-operation of
Mohammed Ali, who, in his desire to make Egypt a powerful nation,
encouraged every effort to introduce the techniques of Western
civilization.^ He himself brought in European specialists to organize
and direct the state programme of modernization. The French were
particularly prominent in this group. Colonel Seves, a veteran of
Napoleon’s campaigns, created and trained the new Egyptian army;
Besson and Cerisy built and staffed a fleet; Clot organized the first

medical schools; Linant, Mougel, and others planned the delta barrage,
a dam across the Nile that would make it possible to irrigate the most
fertile region of Egypt all year round, did much to restore the net-
work of irrigation canals and waterways, and improved port facilities
at Alexandria and Suez. Much of the traditional and oft-repeated
French claim to spiritual hegemony on the Nile traces back to this con-
tribution to the Egyptian renascence of the early nineteenth century.®

L. Wiener, L*Egypte et ses chemins defer (Brussels, 1932), pp. 54“^> Crouch-

ley, Economic Development^ pp. 82-3. For some picturesque descriptions of the
‘overland route*, see B. Cable, Hundred Year History of the P, & O., Peninsular
and Oriental Steam Navigation Company^ 1837-1937 (London, I937)-
® See, inter alia^ the new study of Moustafa Fahmy, La r&vohmn de Vindustrie

en Egypte et ses consiquences sodcdes au 19^ siecle^ iBoo-iSSo (Leiden, 1954)9

which, despite the distortions of chauvinism, is useful for details taken from the
Egyptian archives.
® This theme is a commonplace in French literature on Egypt (cf. French

histories like Brehier, DEgypu^ or G. Hanotaux, ed., Histoire de la

igyptienne), particularly in works treating the Anglo-French rivalry for
hegemony in the late-nineteenth century. See, to cite only two examples, P.
Giffard,Les Franpais en Egypte (Paris, 1883); J. Delafosse, ‘Comment nous
avons perdu TEgypte*, Le Correspondanty 10-10-1898, pp. 4-5 [ofl^rint].
Abbas was less favourably disposed towards these projects, many
of which weighed heavily on the Egyptian treasury. He dismissed most
of Mohammed Ali*s European technicians, abandoned a number of
engineering enterprises, induding the Nile barrage, and closed down
the professional schools of his predecessor- In addition, he system-
aticallyopposed the attempts of Western businessmen to increase the
scope of their activities. It should be noted, however, that this pro-

gramme of retrenchment and Egyptianization was never quite the

drastic reaction that Western diplomats and historians have pictured
it Mohammed Ali*s reign had already seen a
to be: the last years of
retreat from the over-ambitious plans of the twenties and thirties.
Some schools, for example, had already shut down; Abbas simply con-
summated the trend. ^ Nor was Abbas actuated - as history would have
it - solely by xenophobia, though clearly his experience with foreign

infringements of Egyptian sovereignty had made him bitterly resentful

of Western influence even before his accession.^ In the last analysis,
self-interest took precedence over passion, and Abbas’s main concern

throughout his reign was the preservation of Egyptian autonomy. To

this end he sought the support of England, and die effort of France to
make use of Turkey to redress the balance only led him to strengthen
his ties with what he felt was the stronger power: in 1854 he invited
Robert Stephenson to build Egypt’s first railway, from Alexandria to
Said, the successor of Abbas, was in all respects the antithesis of
his dour, sullen nephew. Personable, with a veneer of cultivation, he

^ Cf.
J. Heyworth-Dunne, A History ofEducation in Modern Egypt (London:
Luzac, n.d.).
® Sabry, Empire igyptkn^ p. 21. Contemporaries have left us the picture of a

sombre, moody, vicious man; thus the American Consul de Leon: ‘This man
combines in his own Person all the evil instincts and habits, relieved by none of
the virtues that characterise the Turkish Rulers; he is at once vindictive cowardly
and cruel, and hates every Foreigner with a fanatical hatred - shunning all inter-

course even of an official character with the Foreign Agents. While his private habits
are such as to make him a living libel on our Species, his public administration is
characterised by revolting extortion rapacity and cruelty. Neither the life liberty
or property of any subject is safe from day to day
. • U.S. Dept, of State, Egypt,
De Leon-Marcy, 2-3-1854. On the other hand, much of this testimony comes
from Westerners who had reason to resent Abbas’s policies (though cf. Sabry,
Empire egypuen^ pp. 14-5). An objective history of Egypt in this period is
yet to be written, and we may some day find that we have to revise our

had been educated by his tutors to admire Western ways.^ If anything,

he admired them too much. He accepted the suggestions of his
European friends imcritically and undertook more than he or Egypt
could afford. Some of his projects never reached fruition; others were
completed only under his successor Ismail. Nevertheless his reign
marked a return to the programme of rapid westernization promoted
by Mohammed Ali.
In 1854, the electric telegraph replaced the semaphore along the
road from Alexandria to Cairo, and by 1 862, Africa was tied to Europe
by cable through Constantinople and Malta. The railroad from
Alexandria to Cairo, begun under Abbas, was finished in 1856, and in
1856-8 another line, from Cairo to Suez, completed the trans-isthmus
link— in all, 245 miles of new track, but track whose commercial and

political importance was far out of proportion to its length.® At the

same time, he worked to improve the streets of Alexandria, where
inadequate paving and primitive transport facilities made the short
distance from ship to railhead a more costly hurdle than the thousands
of miles of water that separated Egypt from Europe.
Nor did Said neglect the problem of water transport. He dredged
the Mahmoudieh, the vital canal that linked the Nile and the port of
Alexandria; it was so run down that it almost had to be rebuilt.® He
repaired and widened the port of Suez; promoted and subsidized a
corporation to provide steam haulc^e on the Nile and Mahmoudieh;^

^ Thus in 1853 Said, then heir apparent, took the revolutionary step of import-

ing an English governess to take care of his expected child. The Times^ 30--J i-
1853, p. 7.
® The best short treatment is in Wiener, UEgypie et ses chemins de fer, pp.

64-87; see also H. L. Hoskins, British Routes to India (Phila., 1928), pp. 226-35,
297-302, 376-86. Hoskins offers a useful history of telegraphic and cable com-
munication between England and the Orient, which sidfers somewhat by not
being handled topically. For Said’s concession of cable rights in February 1856,
see P. G61at, ed.. Repertoire de la ligtslation et de V administration egyptierme^
18^4-1896 (3 vols.; Alexandria, 1897-99), HI, 163-6; N. Senior, Conversations
and Journals in Egypt (2 vols.; London, 1882), I, 186-96, ll, 121-4.
* Said’s intentions,however, often outstripped his achievements. There were
many delays in the execution of this project, and in June 1856 the entrance from
the canal into the port of Alexandria was still stopped up. A,E.^ C.C., Alex.,
XXXV, Benedetti-Walewski, 27-6-1856, f. 91. See also, on Said’s early neglect
of roads. The Times^ 5—2-1856, p. 8; 20-4-1856, p. 10.
* Said awarded a concession for the operation of steam tugs on the Nile and on

the Mahmoudieh Canal in 1854, but the effort of the concessionaires to secure a fat
and encouraged in like fashion a steamship company, the Medjidieh,
to operate in the Red Sea and eastern Mediterranean.^ Most important,
it was Said who awarded Ferdinand de Lesseps the concession for the
Suez Canal.
The importance for agriculture of his relaxation of controls over
cultivation and his tax reforms has already been mentioned; his efforts
to supplement this clearance of old obstacles with the positive stimulus
of material improvements were less successful. For years he poured a
fortune and the labour of thousands offellahin into the completion of
the Nile barrage; but so much of the money and men was diverted in
the process to the fortification of the area and other non-essentials
that in 1862, at the end of Said’s reign, the dam was still useless.^

Nevertheless, thanks largely to the efforts of some of Said’s relatives,

who seemed to sublimate their forced political inactivity by agronomic
enterprise, Egyptian agriculture was introduced to steam irrigation
pumps and steam ploughs. Model farms were established, ginning
facilities, expanded; European specialists, brought in to teach the
fellah to farm better.®
With this encouragement, agricultural output climbed, and exports
rose to match the growing demand for machines and other products of
European industry. During thefive years from 1850-1 to 1854-5, Egypt-
ian exports averaged £2,329,600; during the next five, £2,954,200.^
Imports rose even faster, from £1,985,600 to £2,706,400. From the

ruck of lesser commercial sources and markets, Egypt emerged in the

reward at the expense of the public delayed the actual formation of a company
for two years. In 1856 the firm was reorganized with the founders getting the still
appreciable sum of £30,000 in stock out of a total capital of £200,000. The
Viceroy liimself took a big block of shares. This was the first foreign joint-stock
company to be formed in Egypt under the patronage of the ruler. The Times^
2-6-1856, p. 6; 17-1-1857, p. 9; C.C., Alex., XXXV, Beneditte-Walewski,
27-6-1856, f. 92; Hamza, Public Dehu, p. 12.
C.C., Alex., XXXV, Benedetti-Walewski, 20-8-1856; Sabatier-
Walewski, 5-4-1858, ff. 336-7; The Times^ 5-5-1857, p. 8; Hamza, Public Debt,
p. 12.
® F.O., 142-^5? Colquhoun-Russell, no.
174, 24-12-1860; M. Eyth, Lebendige
Krafie (Berlin, 1905), p. 214; A. Sacr6 and L. Outrebon, VEgypte et Ismdxl
Pacha (Paris, 1865), p, 249 f.; The Times, 28-7-1862, p. lo.
Eyth, L&ben£ge Krafte, pp. 214, 218; U.S. Dept, of State, Egypt, Thayer-
Seward, 11-7-1862.
* On the source of these statistics and the difficulties they raise, see the intro-
ductory note to the Appendix.

1850’s a trading country of major importance, not quite first-rank, but

moving up rapidly.^
At the same time, through traffic on the Mediterranean route to
India boomed, and, for the first time since the Middle Ages, Alex-
andria was again one of the world’s great entrepots. The ancient city,
which possessed the only harbour in Egypt where the seagoing vessels
of Europe could moor, grew from a small, sleepy town of possibly
10.000 at the time of the French invasion to a bustling city of some
150.000 by the middle of the 1850*5.2 The volume of shipping, espe-
cially during the rush season that followed the harvest, outstripped the
facilities of the port and strained the capacities of even so fast-growing
a population.®
The harbour was a forest of masts and funnels, a confusion of long-
nosed xebecs and swift feluccas from the inlets and archipelagoes of the
Mediterranean, of high-masted brigs and schooners from Genoa and
^ Thus, in the years from 1848 to i860, Egypt went from twenty-sixth to
twelfth place as a customer for British products, and in the period from 1854-
1860, from tenth to sixth place as a source of British imports. (British import
figures previous to 1854 are based, not on real values, but on arbitrary ones fixed a
century and a half before.) Statistical Abstract for the U.K.^ 1847-61^ pp. 30-3,
10-13. Egypt’s place in French trade was comparatively less important, although
shipments to France rose from an average of 13,100,000 francs per year in the
decade 1847-56 (fifteenth place) to 41,900,000 in the years 1857-66 (twelfth
place), and purchases from France increased from 6,400,000 francs per year
(fifteenth) to 28,600,000 (eleventh) in the same period. M. Block, Statistique de la
France (2d ed.; 2 vols,; Paris, 1875), II, 291--2.
* Egyptian population statistics for the nineteenth century are at best approxi-

mate. Thus Bowring, Report^ p. 10, puts the population of Alexandria in 1838 at
about 60,000, as estimated by the ‘best authorities’; the Bureau de la Statistique
of the Egyptian Minist^re de I’lnterieur, Essai de statbtique generate de VEgypte
(Cairo, 1879), gives the high figure of 164,000 for 1846; Crouchley, Economic
Development^ p. 256, citing the official census of 1847-8, gives 143,000 for those
years; and H. Thuile, Commentcdres sur V Atlas historique de VAUxandrie (Cairo,
1922), pp. 47-51, estimates the total as 100,000 in 1848, 100,000 in 1854, and
250.000 in 1866. On the reasons for this imprecision, cf. Bowring, Report, pp.
4-5; N. W. Senior, Conversauons and Journals, I, 32-3. The above-mentioned
census of 1847-8 was based on a count of dwellings.
® In the two mails of May 1856, the value of British cargoes (including specie)

passing through Egypt to and from India and China equalled :£i,577, 149- Yet as
recendy as 1851 it had been considered remarkable that ^£2, 500,000 of English
property had passed through in the preceding eighteen months. The Times,
30-6-1856, p. 8, The period after 1857 was to see an even more rapid development
of the transit trade.
Trieste and lateen-rigged tartans from the ancient trade centres of the
Levant, of the mighty paddle-wheelers and screw-steamers of Liver-
pool and Marseilles and the humble jerms and barges of Egypt. The
docks, such as they were, were crammed to overflowing: bales of
cotton heaped pell-mell, crates of machinery and immigrants* trunks,
cases of cloth, chests of tea, bags of spices, sacks of grain - all the
products and impedimenta of East and West meeting and parting at
this crossroadsof world trade — the whole scattered in profusion on
the lumpy cobbles and dusty earth, overwhelming the docksmen and
drivers and carters, who tried vainly to make animal strength and
human muscle do where cranes and freight cars were desperately
In little over half a century, Egjrpt had come a long way. The quiet
eddy, by-passed by centuries of history, had been caught up in
the mainstream and was rushing to make up the lost time. When the
cotton famine came, Egypt was already in Ae throes of an economic

Opportunities have rarely wanted for ambition, nor wealth for

appetite, nor gold for greed With the good and evil of westernization
came and worst elements of the European and Mediterranean
the best
world: bankers and usurers, merchants and thieves, staid English
brokers and mercurial Levantine peddlers, proper clerks for the offices
of the Peninsular and Oriental, painted harlots for the Square of the
Consuls in Alexandria, dedicated scholars for the temples of Abydos
and Kamak, cut-throats and confidence men for the alleys of Cairo.
When Napoleon came to Egypt in 1798, there were probably less
than one hundred Europeans resident in the entire country, most of
them traders in centres like Alexandria and Damietta. They lived in
closed quarters, for like the
Jew of medieval Europe, the Christian of
Mameluke Egypt was an inferior being, a pariah whose presence was
tolerated only on condition of physical isolation. When the giaour left
his ghetto, he was exposed to the insults of the passerby, who could
easily distinguish him by the dress he was forced to wear and the
donkey he was forced to ride. And even when he remained in the safety
of his home, he was subject to the exactions and requisitions of the
^ Cf., among other sources, The Times, 17—11-1856, p. 10.

who considered the regular Frankish contributions merely

a down-payment on Egyptian hospitality. In the years preceding the
French invasion, European trade with Eg5rpt was dying, and more
and more Western firms were closing shop and taking their business to
more friendly climes.^
After 1798, of course, things changed. Once the Westerner had
given sufficient evidence of his physical virtues, his spiritual blemishes
were forgotten and he rose from inferiority to be the equal, and even
superior, of the Moslems. The infidel returned, slowly at first, but more
rapidly as cotton production grew and Egyptian trade grew with it.
Alexandria, in 1837, contained more than seventy foreign mercantile
firms, with Greece, France, England, Austria, Italy, and the Levant
most heavily represented.^ In 1821, the first year of Jumel, there had
been only one British cotton house in the city; in 1837 there were nine
of them; by 1843, over one hundred British natives were permanent
The retrenchment of the closing years of Mohammed Ali*s reign
and the hostility of Abbas temporarily reversed the trend. Most of
the European technicians left, either voluntarily or by request, and
even businessmen, whose interest in Egypt was increasing steadily and
whose were more than adequately protected by their con-

sular representatives, were discouraged by the hostility of the Pasha.

The accession of Said was as the lifting of a shadow. ‘From every
comer of Europe, at the first word of the death of Abbas Pasha, [the
manipulators and seekers of gold] came en masse to fell upon Eg5q)t
as on a new California.* * From 1857 to 1861, an average of over
30,000 newcomers entered the country every year.®
^ Cf. Br^er, UEgypte^ pp. 20-2; C. F- Volney, Voyage en Egypte et en Syrie

pendant Us amies 1783^ 1784^ et iy85 (5th ed., 2 vols; Paris, 1822), I, 187-8;
P. Masson, Hlstolre du commerce franfids dans le Levant au XVIII* silcUy pp.
594-605; F. Charles-Roux, Les origines de Vexpidiuon d*Egypte (Paris, 1910),
chs.i and ii. For a comparison between this and other business ghettos and a

penetrating discussion of the ability of the Christian merchant to develop the

‘virtues and vices which the ghetto demands’, see A. To3mbee, A Study of
History (10 vols,; London, 1935-54), II, 230-4.
® Bowring, Report^
pp. 80-1.
® Part. Papers^ 1849, XXIV, 370.
Sabry, Empire igypmn^ p. 37 f., quoting a letter of 2-10-1854 from Sabatier,

French consul in Alexandria, to the Ministry of Foreign Affairs in Paris.

® The correspondent of The Times wrote, 14-10-1856, p. 5, that the Christian
population of Alexandria had quadrupled in the past ‘few’ years. American
Yet it was the combination of Suez and the cotton boom that turned
the influx into a real Klondike. In 1862, 33,000 foreigners, including
visitors, arrived in Egypt; in 1863, 43,000; in 1864, 56,500; in 1865,
80,000. Not until cotton prices collapsed in 1866 did the steady cre-
scendo pause and fall off to 50,000.^
Some of these visitors and immigrants went on up the Nile, to Cairo
and beyond. But the vast majority of them stayed in Alexandria, a
booming, sprawling dty inhabited almost entirely by Europeans and
their servants, lackeys, and employees.^ It was an ugly city: shacks
upon hovels; narrow, dark, winding streets, thick wifh dust in the
dry season, deep with mud in the rain; natives hawking fly-covered
pastries or selling brackish water; mangy dogs yapping
at the heels of
naked children; Europeans riding the ubiquitous little donkeys to keep
their feet clean. There was nothing attractive, nothing exotic to relieve
the picture -not a monument preserved from the great city of
Alexander, not a turret or minaret from the golden age of Islam; only
the long clearing of the Place des Consuls, with its water fountains, gas
light,and pavement, and its fasades all the more depressing for their
cheap imitation of some fashionable square in Paris or Rome. And over
all and everywhere, there lay the fetid odour of garbage and excrement,
piled high in front of die houses until it obstructed the streets, then

visitors alone increased from 'between twenty and thirty’ in 1850 to ‘four or five
hundred* in 1859. D. R. Serpell, ‘American Consular Activities in Egypt 1849-
1863*, Joutn, Mod, Hist., X
(1938), 354. On the resulting housing shortage and
inflation of rentals, U.S. Dept, ot ‘ate, Egypt, De Leon-Marcy, 1-5-1856;

The Times, 16-3-1853, There was even a servant crisis.

p. 5; 1-6-1857, p. 7.
Ibid., 14-10-1856, p. 5,
1 ParL Papers, Commercial
Reports, 1867, LXVII, 302. Most of these, of
course, were semi-transients. These figures, presumably based on the returns of
the Passport Bureau of the Egyptian police, may well underestimate the influx.
Cf. U.S. Dept, of State, Egypt, Circular no, 291 of Stephan Bey, Minister
Foreign Affairs, to D, S, McCauley, United States Consul, 15—2-1851; also ibid.,
Hale-Seward, 24-2-1865, which speaks of up to two to three thousand immigrants
per week at the height of the rush.
* Westerners in
permanent residence in Alexandria in 1864 were estimated at
about 50,000 to 60,000, of whom 15,000 were Greeks, almost as many Italians,
xo,ooo French, and 6,000 British (including Maltese). Thus over a
third of the
population was made up of foreigners. There were only
5,000 or 6,000 permanent
foreign residents in Cairo. C. Hale, ‘Consular Service and
Society in Egypt*,
Atlantic Monthly, XL (SepL 1877), 286, 3h the above-cited letter of 24—2—1865,
Hale wrote of 7%,ooo ‘Franks* in Alexandria.











des shacks




removed to the shores of the Mediterranean where it could catch and

ride the sea breezes as they wafted over the city.^

Alexandria was hardly fhe place to attract the sensitive visitors from
more refined countries. But then, Alexandria was where the money
was, and few of the newcomers were ready to sacrifice their pockets
to their noses. With rare exceptions, they were a hard, opportunistic
crew, out to make their fortunes and not too particular how. By all
European standards of breeding and gentility, they were insufferable:
no feeling for family or background; no respect for character or
morality; no interest in ‘who.^’ or ‘where from.^* only in ‘how much?*
In any respectable society, few of them would have been prepared to
discuss their past; in Alexandrian circles, none of them hesitated to do
If the more ‘proper’ members of European society in Egypt were of
questionable water, the great mass of the immigrants were the dregs
of the Mediterranean. The overcrowded ports and villages of Malta,
Sicily,and the Levant sent forth their surplus children - the poor,
the unemployed, the discontented - to the new land of plenty. They
pressed into Alexandria, where they supervised the menial labour of
natives and catered to the needs, pleasures, and lusts of the boom; they
kept shops and back-alley stalls, restaurantsand gin mills, gambling
and whorehouses. Many were true proletarians,
casinos and dives, inns
living and breeding as parasites on the prosperity around them-
scrambling for the bones that fell to the floor or stealing scraps from
the table.®
In all this, the similarity of Alexandria to other centres of European
trade in the Orient is obvious. Every seaport has its dubious elements
and scum - think only of Antwerp, Marseilles, or Naples; but allowing
for size of population and volume of trade, we will find nothing in
Europe comparable to the crawling white-trash colonies of the emporia
of the East, where backward, ‘inferior* countries ofier psychological

^ See especially Sacre and Outrebon, VEgypte^ pp. dy-yd.

2 Nothing illustrates better the contrast between what the sociologist would
call the particularistic society of Europe and the universalistic society of the
expatriates in Egypt than the scandalized comments of Mme Olympe Audouard,
Les mystkres de VEgypte divoUis (Paris, 1865), pp. 478-80.
* Tagher, ‘La vie au Caire’, CahUrs d'histoire igypmnne^ H (1950), 421 f.;

Th& Times^ 29-3-1864, p. 4: refuse of Europe coming to Egypt and ‘reveling in

lawlessness’; A,E,j C.C., Alex., XXXVIII, Outrey-Drouyn, 28-10-1865, if.
4oa-b; U.S. Dept, of State, Egypt, Hale-Seward, 4-5-1866.
and political advantages unknown at home. The wide-flung shore
line of Western commerce is dotted with the flotsam and jetsam of
Western society.^
The point is that up until very recently Westerners enjoyed a
privileged status in the weak, underdeveloped lands of the Orient.
Thus for the citizens of the great powers across the seas, the Egypt of
the nineteenth century, if nominally independent either in its own
right or as a province of the presumably independent Ottoman Empire,
was in fact a colonial territory. In this poor shadow of a nation, the
Englishman or Frenchman, Prussian or Austrian could tread heavily,
secure in the knowledge that whatever he did, might made it right.
The principle of extra-territoriality for Westerners in the Ottoman
Empire went back centuries: the famous capitulations of Solyman the
Magnificent (1535) in effect confirmed and codified the prevailing
practice that European nationals in the Empire should be ruled by dieir
own law. The system originated in the concept of law as something
personal rather than territorial; there was also the feeling that Christians
could not be expected to live and trade with each other in accordance
with the alien usages of Moslem society.
With the passage of time, however, the privileges freely accorded by
were converted into prescriptive rights. Moreover,
successive sultans
the vagueness and empiricism of extra-territoriality were such that its
true content tended to reflect, not the principles it rested on, but rather
the balance of power between the local government and the foreign
Thus in dvil matters, the intent of the capitulations was that
European law should govern litigation between Europeans only; dis-
putes between Europeans and natives were to be decided by Otto-
man tribunals(in fact, those courts convened by the administration for
diispurpose traditionally comprised both Christians and Moslems).
Westerners soon learned, however, that they could do better before
their own consular courts, and by
the nineteenth century the mixed
tribunal was rarely used in cases
where the European was defendant.
Similarly in criminal matters, the law required that crimes by Europeans
against natives be judged by Moslem courts; but usage soon established
the right of the alien to be tried by his owm consular authorities. Since
the exercise of ordinary police functions by the Ottoman administra-
^ Compare the European proletariats of present-day Morocco, Tunisia and
Algeria; see, among others, Herbert Luethy, France Against (New York;
Praeger, 1955), Part IE.

tion was paralysed by the legal attribution of quasi-diplomatic im-

munities to the persons, homes, and enterprises of foreign nationals,
the outsider, unless caught flagrante delicto^ was almost untouchable.
No place in the Empire was the abusive extension of these privileges
pushed so far as in Egypt. Here the usual advantage enjoyed by
Westerners by virtue of the military superiority of their home countries
was augmented by the peculiar political weakness of the Egyptian
regime. The autonomous yet subordinate status of Mohammed Ali*s
dynasty - their fear of Turkish encroachments on the one hand, and
their desire for greater power on the other - made them particularly
eager for European favour, hence vulnerable to European pressure.^
Once the representatives of the Western nations learned that the
Viceroy was incapable of resisting threats of force, that the mere
lowering of a consular flag was enough to bring him to his knees, the
gates of corruption were opened wide. Not only were most consuls pre-
pared to defend the causes of their own nationals - whatever their
merit - but for a sum they would take the case of anyone, alien or even
native. Every Western power had its list of proteges, permanent and
temporary, and the passport became a commercial commodity rather
than a warranty of nationality.
What is more, Westerners in Egypt soon learned to exploit their
power, not only for their defence, but also to support their suits
against natives or the Egyptian government. The vicero)^! treasury
was a and one consul vied with another
particularly tempting target,
in pressing the most importunate, the most preposterous, the most
fantastic claims - for both nationals and proteges - in return for a fee
or a percentage of the booty.
The result was a spoiler’s field day. Nothing was too far-fetched
to serve as an excuse for a raid on the viceroy’s purse. If a man was
robbed because of his own negligence, the government was at fault
for not maintaining law and order. Indemnity. ^ If a man sailed his boat

^ The best legal treatment of the capitulations and the status of foreigners is to
be found in J. H. Scott, The Law Affecting Foreigners in Egypt (Edinburgh,
1907); see also A. Benoit, Etude sur les capitulations entre VEmpire ottoman et la
France et sur la riforme judidaire en Egypte (Paris, 1890). For the abuse of con-
sular privileges, see M. Sabry, V Empire igyptien^ which is based in large part on
the archives of the British and French foreign offices. See also, for some non-
commercial abuses, G. R. Gliddon, An Appeal to the Antiquaries of Europe*
^ Sabry, Id Empire igypuen^ p. 20; Viscount A. Milner, England in Egypt

(London, 1904), p. 54.

poorly and caused it government was at fault for leaving
to founder, the
the sandbar there. Indemnity. litigant, an Austrian noble named
Castellani, succeeded with the help of his government in extorting
700,000 francs on the grounds, manifestly falsified, that twenty-eight
cases of silk cocoons had been ruined by exposure to the sun when a
train from Suez to Cairo started late.^
Said consoled himself with laughter - that he might not weep. On
one occasion he is said to have interrupted a conversation with a
European businessman to order a servant to close the window. ‘If this
gentleman catches cold,* he said, ‘it will cost me £10,000.*

It should be noted in all fairness that some of die grounds that

justified the original establishment of extra-territoriality were still valid
in the nineteenth century. It would not have been easy for a European
from the Egyptian police or an equitable verdict
to obtain fair treatment
from a Moslem tribunal. There was too much hatred of foreigners. The
hope never died that some day the infidel would be driven out of Egypt
or returned to the confinement and humiliation of old. The natives
looked to each ruler in turn for leadership in a crusade of purifica-
tion, and each change of reign was the signal for anti-Christian riots.*
On the other hand, much of this hostility was itself a reaction to
foreign abuses: the arrogance of the giaour made the Moslem*s gorge
rise. Moreover, the friction that was inherent in the situation was aggra-

'Said made the mistake of submitting the dispute, ‘as one gendeman to
another*, to the Archduke Maximilian of Austria for arbitration. When he was
informed of the Archduke’s outrageous award, he wrote in pained surprise to beg
His Highness to reconsider. At which Maximilian haughtily reminded the
would-be gentleman from Cairo that he had asked for a decision and committed
himself to abide by it, and that he, Maximilian, had hardly expected to see the
Viceroy of Egypt go back on his word. Such is the price of gentility. Sabry,
V Empire egyptien^ pp. 39-43; A,E.^ C.C., Alex., XXXVI, ff. 1 19-62; F. 0 . 142 -25,
Colquhoun-RusseU, no. 43, 21-5-1861; no. 50, 8-6-1861; 141-45, Russell-
Colquhoun, no. 15, 26-6-1861; no. 16, 18-^-1861; Bloomfield-RusseU, no. 318,
20-6-i86i;no. 368, 11-7-1861.
® This apocryphal adventure has been variously attributed
to botb Said and
his successor Ismail. Cf. Sabry, JJ Empire egypden^ p.
43, and Miber, England in
Egypt, p. 44. What is somewliat amusing is that Sabry, in addition to his own
version of the story, permits himself to quote Milner’s some two hundred pages
later (p. 232).
® U.S. Dept of Egypt^ McCauley-Clayton, 1-7-1849; Jones-Marcy,
August 1853; Leon-Marcy, 18-4-1854, 4-5-1854; 3-7-1856; Thayer-
Seward, 17-2-1863.
vated by the economic and social condition of the two populations.
The Europeans were mostly employers - bosses - with all the im-
patience and scorn of the Westerner for the slower, less precise ways
of other people; or proletarians whose sole consolation was their
presumption of superiority over the native. Almost all were convinced
of the fundamental fanaticism and barbarism of the Moslem and saw
themselves as living on a bed of smouldering coals of hatred that, but
for the threat of retribution, would burst into flames.^ On the other
hand, most of the Egyptians who came into contact with Europeans
were either officials frustrated in the exercise of their functions and hurt
in their pride by the immunities of the foreigner;^ or domestics, workers,
beggars, and thieves - all of them desperately poor - who found it
easy to translate every grievance of their condition into a passionate
detestation of the infidel.
The behaviour of die government itself inevitably reflected some of
this animosity. It would be a mistake to picture the Egyptian state as
the passive victim of Western exploitation; Mohammed Ali and his
successors were as interested in using Europeans as Europeans were
interested in using them. The administration played the foreign
merchants against one another and preferred private ‘deals’ to im-
personal market negotiations. Its informal techniques of business made
disputes inevitable, and the corruption of its officials were an invitation
to knavery. Even when justly defending itself against fraud and ex-
tortion, it too often resorted to tortuous and even dishonest devices
that only exposed it to further abuse.®

^ Cf. the letter of De Leon to the Secretary of State Lewis Cass concerning a
massacre of Christians at Jidda in July 1858, De Leon asked for American war-
ships to deter the Egyptian population from following the example of their
Arabian brethren: ‘The Viceroy will do his duty, but we are a handful in an
Enemy’s camp, and even he might be powerless to protect us against a popular
fanatical movement, instigated by the priests . . .’ U.S. Dept of State, Egypt,
® Like the police officials who consoled themselves for their inability to secure
convictions by manhandling their prisoners before releasing them. Cf. The Timesy
3-1864, p. 4-
® As Ninet, an observer generally sympathetic to Egypt, points out, when
‘the truth is hidden under a bushel, justice is not long in following*. El-Hakim,
MUU pertuisy p. 53 on this process of reciprocal abuse, F, 0 142-25,
f. Cf., .

Colquhoun-RusseU, no. 3-5-1860; F. 0 . 142-23, Colquhoun-Russell, no. 20,

20-2-1860; also A.E.y C.P., Alex., XXX, Beau'val-Thouvenel, 26-4-1862, ff,
Clearly, in such a situation neither side is all black or white: wrong
feeds upon wrong.
Moreover it is only fair to point out that not all Western nations were
equally unprincipled in their dealings with the Egyptian government.
Much depended on the character of the consul and his staff. Some of
these men w^ere shamelessly venal and terrible in their rapacity: Said

was said to tremble at the very sight of the French agent Sabatier.
Others did their best to reconcile their behaviour with the usual canons
of equity. Most of them, unfortunately, were businessmen themselves
and cultivated their own interests if not those of others,^
The policy of the home government was also important. In some
coimtries the foreign ofBce was as corrupt in itsown genteel way as the
most knavish of its representatives abroad; there are cases of home
officials peremptorily overriding the objections of the consul in
Alexandria and exacting his support of a patently fraudulent claim.
More however, the departments in Europe were indifferent and

looked upon extra-territoriaUty, with all its excesses, as an inevitable,

even indispensable, feature of politics and business in a backward area;
besides, distance alone made it necessary to allow agents in Egypt
considerable freedom of action. Only a few countries - England in
and the United States to a lesser degree - deprecated the un-
warranted exaggeration of Western privilege, saw the very concept of
protection as an abuse, and assumed that the same principles of liability
that prevailed at home should regulate the claims of their nationals in

^ In the literal sense. It was not until 1841 that Britain took the Alexandria
post away from Mr Larking, related by marriage and interest to Briggs and Co.,
and turned it over to a career officer. And as late as 1849, American interests there
were represented by Mr Tod of Tod, Rathbone &
Co. Most of the smaller
nations with modest budgets for foreign afiairs or limited contacts with Egypt
continued to rely on local businessmen throughout our period. Of course, the
formality of occupation was less important than the reality of a consul’s interests.
Men like Sabatier of France and De Leon of the United States, though nominally
diplomats, were in fact entrepreneurs.
* Thus A.E.y C.C., Alex., XXXVm, Drouyn-Tastu, 28-4-1863, ff. 166-7.
® The only consistent exception was England, which made it a point, in the
face of business pressure, to separate the private interests of her subjectsand the
official interests of the state.not to say that the British government was
This is

not concerned with furthering the trade of its citizens; it did so as a matter of
policy, and was at least as effective in this regard as any other government. But it
refused to be drawn into the petty corruption and abuse of influence that were the

The however, is that even the best

essential point for the historian,
intentionswere helpless to alter the logic of the situation. So long as it
was accepted by all in Egypt that the prestige of a consul and the
nation he represented was tied to his success in defending and pro-
moting the causes of his nationals, that a ‘hand of iron in a glove of
velvet’ was the only language a ‘Turk’ could understand,^ extortionary
pressures on the Egyptian government tended to rise to the highest
common denominator. It is customary to speak in the West of the
oriental concern with ‘saving face’ - as though Westerners were free
of, and above, this vanity. Yet the representatives of the West in

nineteenth-century Egypt - as in other areas where ‘face’ was impor-

tant - were obsessed on this point. The newer or smaller countries like
the United States and Sardinia were determined to show themselves
just as worthy of consideration as Britain and France;^ and the consuls
of Britain and France were always watching each other.
Yet all of these abuses of immunity and exaggerations of damages
were only part of the story: those foreigners who were content to
plunder the treasury only when they had suffered real or imaginary
injury were playing for petty cash. The real stakes lay in contracts and
concessions - for the construction of public works, the creation of

shame of the foreign consular corps. Cf. in addition to the letters cited above,

3 ? P- 93? ^* 0
141-47, Russell-Saunders, cons. no. 15, 27-10-1862; 142-26,

Colquhoun-Russell, nos, 31 and 32, 26-2-1863; 141-52, Russell-Colquhoun, no.

13, 19-3-1863; also Sabry, JJ Empire, igyptUriy pp. 43-50, 52; F. S. Rodkey, ‘The
Attempts of Briggs and Company to Guide British Policy in the Levant in the
Interest of Mehemet Ali Pasha, 1821-1841’, Journal of Modern History V
(1933), 324-51; Senior, Conversamns^ 11, 38; A. Baster, ‘The Origins of British
Banking Expansion’, Economic History Review^ V (1934), 79. On the United
States, U.S. Dept, of State, Egypt, De Leon-Marcy, 2-3-1854, 6-7-1854;
F. Dainese-Seward, 21-7-1864, 4-8-1864, 12-8-1864, Hale-Seward, 27-8-1864,
4-9-1865. The French contented themselves with pious sentiments: cf. A,E.,,
C.P., Alex., XXX, Beauval-Thouvenel, 18-2-1862, f. 121; A.E,,, C.C., Alex.,
XXXVI, Beauval-Thouvenel, 29-4-1862, £ 345, and ibid., XXXVH, Beauval-
Drouyn, 18-2-1863, £ 35.
^ U.S. Dept, of State, Egypt,De Leon-Marcy, 4-6-1854.
®Ibid., McCauley-Buchanan, 22-3-1849; McCauley-Webster, 21-2-1852,
16-3-1852, and passim throughout the McCauley correspondence. Also ibid.,
De Leon-Marcy, 4-12-1856 and appended letters, regarding a dispute with the
French consulate over alleged reciprocal discourtesies: *. . in this Country, a

rigid adherence to the rules of courtesy is not only a right to be enforced, but a
duty on the part of any Foreign Agency, which desires to retain the respect of
others, and of the Egyptian govemmenf
public services, the purchase of supplies, the exploitation of mineral
resources. Some of these enterprises were legitimate ventures, like the
company established in 1857 by Frenchman named Cordier for the
distribution of fresh, piped water in Alexandria,^ or the tramway built
by an English corporation in the early i86o’s to connect Alexandria
with the new and fashionable suburb of Ramleh.® Some were frauds.
Some enterprises were large and more or less permanent, like the Suez
Canal. Some were short-term projects. But all were designed to exploit
the needs of Egypt and the weakness and ignorance of the Egyptian
government. All aimed at making the most of a good thing, imposing
one-sided conditions and charging exorbitant fees. All were intended
to yield exceptional, even fabulous, profits, although it must be
admitted that results did not always meet expectations. And it goes
without saying that none was expected to show a loss. The foreigner
who invested in Egyptian ventures had no intention of venturing his
money, and where the normal returns were not sufficient, there were
always ways to convince the Viceroy that he owed it to Ws credit, to
his people, and to fair play to save the skin of his guests.
For the fact was that the foreigner, for all his abusive presumption,
was indispensable. Egyptian society did not contain the entrepreneurs,
investors, or engineers to effect an economic revolution, nor did it

possess the values that would encourage the recruitment of progressive

businessmen and technicians.® Only Europeans could supply the

^ There is a history of the Cordier enterprise

in C.C., Alex., XXXVII,

Tastu-Drouyn, 9 ^4-1867, ff. 52-5. Cf. also F. Charles-Roux, ‘Le capital
fran9ais en Egypte*, JOEgypte conumporaine^ II (19 ii), 480,
* A. E. Crouchley,
The Investment of Foreign Capital in Egyptian Companies
and the Public Debt [Egypt, Ministry of Finance, Technical Paper no. 12] (Cairo,
1936), P- 35 -
Fahmy, La rivolution de VindustrU^ pp, 95 —7, maintains that the system of

monopolies imder Mohammed Ali seriously depleted the ranks of the trading
classes. This, however, is at best a partial explanation for the persistent
of Egyptian entrepreneurship throughout this period of growth. Much of the
difficulty lay in the poverty and insecurity of the mass of the
population, whose
all-consuming object in life was simply to survive. As for money, there was no
better place forit than the dumb ground. See, on this subject,
Senior, Conversa-
tions, II,130-1; also a report of 24-2-1863 by A. LeMoyne to the French
Ministry of Foreign Affairs estimating that since
1845 ±e fellah had hoarded over
one billion (milliard) francs in an effort to evade the fisc. J.E., M6m. et
Egypte, II. Even for those who had both capital and the appetite
for the
general values of Islamic religion and Egyptian society would
seem to have been

capital and skill to implant the techniques and structures of Western

civilization. The Europeans knew it too, and they demanded and
received every farthing the traffic could bear.
This rape of the Egyptian treasury was closely connected with the
particularistic cliaracter of the society and economy. Government
was personal, centring almost and his family,
entirely in the Viceroy
and capriciously authoritarian, with any concept of a
little if

continuing, sovereign body of law. Public offices were not the im-
personal embodiment of public functions, but private properties ex-
ploited by their holders for whatever they would yield. ^ In general,

a deterrent to effective commercial and industrial enterprise. The difficulty, of

course, is that Moslem religious doctrine - like that of almost any faith - is con-
tradictory, and one can quote Koran and commentary to almost any purpose,
Cf. the citations in S. D. Goitein, ‘The Rise of the Near-Eastern Bourgeoisie in
Early Islamic Times*, Journal of World History III (1957), 583“(>04. On the really
critical issue of the influence of religion on everyday life - in other words, the

ethical implications of Islam - we have almost nothing. The economic history of

the Moslem world has been grievously neglected, and one can hardly expect
meaningful analyses of the influence of social attitudes and values on business
behaviour in the absence of minimal empirical data. See, on these gaps in our
knowledge even of the golden age of Moslem commerce, Claude Cahen, ‘L*histoire
^conomique et sociale du monde musulman m^didval*. Stadia Islamica^ III (1955),
93-115. For impressions and speculation on this subject, however, see C. H.
Becker ‘Islam und Wirtschaft*, Archiv fur Wirtschaftsforschung im Orient^ I
(1916), 66-77 [reprinted in his Islamstudieny I, 54-65], and A. Riihl, yom
f^rtschafisgeist im Orient (Leipzig, 1925); also A. Bonn4*s excellent State and
Economics in the Middle East: ASociety in Transition (London, 1948), passim
and ch. xxii; C. Issawi, Egypt: an Economic and Social Analysis (London, 1947),
ch. xi, and the papers given at a Colloquium on Entrepreneurship in the Middle
East at Harvard University on 9 and 10-5-1957.
^ Stephen Cave, in his famous report of 1876 on the financial condition of

Egypt, attributes this widespread dishonesty and malfeasance to the ‘precarious

tenure of office*. As given in J. C. McCoan, Egypt As It Is (London,
[1877]), p. 385, Cf, also The Times^ 31-8-1855, p, 8, But it would seem obvious
that malfeasance so common as to be an institution is more than just the result
of uncertainty of tenure, but rather the expression of an attitude toward office
fundamentally different from our own. From the Viceroy down, the boundary
between the officeholder and the office was indeterminate, so much so that, in the
case of the ruler, it was extremely difficult to distinguish between the national
treasury and the privy purse. Thus in 1856, El-Hami Pasha, son of the late Abbas,
sued the Egyptian government for the cost of the Cairo-Alexandria Railroad,
alleging that the construction of the line had come out of his father*s pocket.
The Times^ 19-3-1856, p. 7; 2-6-1856, p. 6; 28-4-1860, p. 10. Nor was El-Hami*s
case so poor as it might seem. To be sure, the Viceroy pointed out that he had
position and prestige depended not on achievement or merit, but on
relations and background, not on what you did but on who you
As a consequence, success in the great Egyptian concession hunt was
not to the fastest fairest, but to the canal builder who
or cheapest or
knew from diildhood, or the merchant who dined with
the Viceroy
the Minister of Public Works, or the promoter who slept with the
mistress of the Minister. On the more exalted levels of the administra-
tive hierarchy, friendship and influence could be bought with timely
services, tactful kindnesses, tasteful gifts. With minor functionaries,
crass bribes were at least as effective.^
Much, of course, depended on the character of the ruling Pasha.
Mohammed Ali accepted the principle of business based on friendship,
but was nevertheless far from an easy mark. Despite his affection for
certain favoured merchants, he made a serious effort to handle his sales
of Jumel on an impersonal, auction basis. He went even farther. On one
occasion, he attempted to impose a fixed price on the cotton houses of
Alexandria, which found it too high and refused to buy, whereupon
the Viceroy proceeded to ship his bales directly overseas and by-pass
the regular exporters.* And while the attempt was not successfiil and
cotton sales eventually reverted to the usual system of influence,
favouritism, and intrigue, with all the opportunities it offered for
bribery and corruption, the respect of the foreigner for the Viceroy was,
ifany^g, all the stronger.* To the day of his death, Mohammed Ali
kept his guests on their best behaviour.
His descendants were not so successful - partly because Western

built the line from Cairo to Suez and that, although he was pocketing the re-
venues, he would not think of claiming it At the same time,
as his property.
however. Said, who
never forgot that his children would not rule after him (see
n, 2, p. 78), was busily building other railroads in the name of his son Toussoun.
F, . 142-23, Colquhoun—Russell no. 29, 15—3—1860, For analogous corruption
in Turkey, cf. N. Senior, Journal Kept in Turkey and Greece (London, 1859),
pp. 107, no.
^ Ihe resulting atmosphere of intrigue and chicanery, which was of course
equally prevalent in Turkey, was one in which most European businessmen were
lost, at least at first. Cf. the report of the directors of the Ottoman Bank in 1861,

dted above, p. 62.
Gliddon, Memoir^ pp. 32-4.
* In
1843, £165,835, or one third, of the proceeds of Mohammed Alfs crops
were obtained by private sales to favoured ^t)uyers; the rest,
£328,220, was
realized m pubUc auction. ParL Papers, 1849, XXIV, 369. In the absence of

pressure was increasing steadily, partly because they lacked the force
and character to hold out. Abbas, in his fear and detestation of all
things foreign, was even less susceptible than his grandfather to alien
blandishments but at the same time less resistant to alien threats.

And with the accession of Said, the floodgates were opened. Good-
natured and debonair. Said lacked the unlettered shrewdness and the
will-power of Mohammed Ali. He was eager, even anxious, to please,
and his inability to say no made him the prey of as fine a pack of
fawning, sycophantic jackals as ever prowled a despot’s court.
He had no conception of the value of money. He decorated one of
the reception rooms in his palace at Abdin for ten million francs - two
million dollars, vintage 1855.^ Sometimes we know what the money
bought “those six ‘magnificent electro-silver state bedsteads’, for
example, price two thousand pounds each, ordered by Abbas for the
marriage of his son and accepted by Said for heaven knows what, one
of which was placed on display by the proud manufacturer and
described in detail by The Times,^ Usually, however, we can only guess.
That set of goblets, for example, for two million piastres - one hundred
thousand dollars.^ Were they incrusted with rare gems? Were there
hundreds of them? Or were they faery vessels that always stayed full?
The archives offer only the barest details of these transactions -a bill

of sale, a line in a contractor’s statement - and leave the rest to the

But the imagination fails to grasp the naivete, the gullibility, the
frivolity of the man. When, on one occasion, a vulture named Bravay
complained that a certain estimate in Italian lire was too low, Said simply
had him put it in English ‘livres’ - etymologically, they were the same
word.^ His thoughtful purveyors extended him credit at usurious rates,

annual figures, we may venture a guess that this proportion of private to public
from year to year with the Pasha’s financial position.
sales varied considerably
The more pressing the need for funds, the more likely he was to make special
arrangements with the export houses.
^ Baron de Malortie, Egypt: Native Rulers and Foreign Interference (2d ed.;

London, 1883), p. 69, n. 307.

* 22-9-1857, p. 12.
® Hamza, Puhlk Debt, pp. 14-16.
* Malortie, Egypt^ p. 69 n. 307. This adventurer, the model for Alphonse

Daudet's N^ab, was dming two reigns the favourite jester, confidence man,
and parasite of the Egyptian court. Over a decade, from about 1858 to

1868, he midcted the Egyptian government of several fortunes, which were spent
while he lent to friends without interest, and sometimes abandoned
the principal as well. He had an easy ear: no proposal was too fanci-
ful tobe considered; no promoter, too disreputable to be heard. He
had a careless tongue: promises came cheaply; redemption was more
Things reached the point where people sought concessions despite
their inability to carry them out, indeed precisely on that account, for
a cancelled contract, whatever the justification, was certain to bring
an indemnity.^ And what indemnities! One plaintiff, at once Greek

merchant, French proteg^, and Consul-General of Belgium, demanded

the unconscionable sum of three million pounds because Said refused
to recognize a verbal commitment, allegedly made by Mohammed Ali
over a decade before, to concede him the handling of goods in transit

across the Isthmus. Before the campaign of agitation, appeals, and

pressure was over. Said was glad to buy the tardy claimant off with
three million francs.® And this was a trifle by comparison with

as fast as they had been made. Yet though the impudence of his demands was too
much even for so zealous a defender of French interests as the consul Beauval,
Bravay never quite wore out his welcome in Cairo. With Said, particularly, he
had an astonishing gift of robbing His Highness and making him like it. Cf.
C.C., Alex., XXXVI, Beauval-Thouvenel, 29-1-1862, f. 293; 5-12-1862, f. 454.
There is a biography by Auriant, Frangob Bravay ou U ^Nabah\ based in large
part on newspaper and periodical sources and written in a lively journalistic style.
Unfortunately, the book suffers from numerous errors of fact and appreciation,
and the author was not able to examine the important material in the archives
of the British Foreign Office. See F.O. 142-23, Colquhoun-Russell, no. 20,
20-2-1860; 142-26, Colquhoun-Russell, nos. 31 and 32, 26-2-1863; 142-27,
Colquhoun-Russell, no. 129,28-8-1863; no. 15 2, 6-10-1863; no. 154, 15-10-1863;
no. 155, 16-10-1863; no. 164, 17-10-1863; no. 175, 22-12-1863; no. 177,
23-12-1863; no. 178, 23-12-1863; no. 4, 6-1-1864,
^ See an anonymous but obviously informed
note to the Ministry of Foreign
Affairs in Paris regarding French abuses in Egypt (^.^., C.C., Alex., XXXVIII,
ff. 7-13) which pictures Said laughing to tears while giving orders or concessions

to people whom he never expected to fulfil them.

® To be exact, 3,250,000.^,0.
142-25, Colquhoun-Russell, no. 135,4—10-1860.
The claim had already been rejected by the Cour de Contentieux in Paris as
having *no foundation in dtker law or equity* [Italics Colquhoun’s.] Cf. also S.
Baddon, Un mot sur le Fice-roi d*Egypte et son proces des cent mUlions (Paris,
iS59)> “^bo thought that there had been a verbal commitment by Mohammed Ali
to indemnify the plaintiffs for loss of the concession, but that the Viceroy had
more than kept his promise. At least there was no complaint under Abbas. In
any case, Baddon thought Said should stand firm and settle for five millions. At
that price, three millions was .a real bargain.

the burden that the concession of Suez would one day impose on
When the cotton famine came, it was open season on the Nile, and
one of the hunters was Edouard Dervieu.


Alexandria^ 25 December 2858

My dear Andr^
Our dx^am is still go and retire in our native land, as soon as a small
fortune will permit Very fortunately, I have no complaint about having

quit the Messageries. My little deals have done well, and I have begun to put
something aside.

Edouard Dervieu was the descendant of one of those families of

small businessmen which formed the backbone of the old French
bourgeoisie. His ancestors of the seventeenth and eighteenth centuries
had been tailors at Condrieu, a country town on the banks of the
Rhone not far from Lyons, One branch of the family, prosperous and
ambitious, had left the shop to purchase the dignities of office and
noble rank. The ancestors of Edouard Dervieu had remained content
with the less brilliant but more enduring rewards of slow, prudent
mercantile accumulation. From tailors they became drapers; from
drapers, ixom fabricantSy nigociants and citizens of Lyons.
Robert Dervieu, the father of Edouard, was bom in 1795 into an age
of ferment and change. Perhaps it was the iconoclastic spirit of the
times that led him to break with the bourgeois traditions of genera-
tions and strike out along new paths of business enterprise. Perhaps
the family had suffered financial reverses during twenty-five years of
revolution and war, and some new, exceptional effort was required to
restore their fortune. The record does not say. In any event, Robert
Dervieu, after serving in the army until well after the general demobil-
ization of 1815, abandoned the dour, Jansenist industry of Lyons for
the colourful, volatile commerce of Marseilles, where he and an uncle
became partners in the merchant house of Barry, Dervieu et Cie. But
cargoes of wine and consignments of cloth did not suffice; from the
start, Dervieu was interested in the possibilities of Algeria as a field of


enterprise. He bought property in Algiers and became alderman of the

city and a spokesman for Franco-Algerian business interests. He
acquired lead mines, promoted corporations in France for their ex*
ploitation, and became under the Second Empire the friend and busi*
ness associate of some of the outstanding merchants in Marseilles.^
Edouard Dervieu was his second son. Bom in Marseilles in 1824,
he grew up in a family in transition from one level of wealth and status
to another. When he reached maturity, the new Dervieu patrimony
had not yet crystallized in the solid, unencumbered form suitable to the
creation of business dynasties. Like his father, Edouard was to spend
his life making his way up the social and economic scale, seeking his
fortune and seizing the main chance throughout the Mediterranean.
Thanks to family connexions, he began as an office executive, an
early example of the business bureaucrat so familiar today. In 1843,
when only nineteen, he was director of the Oran agency of the Bazin
steamship line. After a disappointing interlude as head of his father’s
mines from 1848 to 185 1, he returned to the shipping business, running
a succession of agencies of the Messageries Maritimes in Greece, Syria,
and finally in Egypt.^
As chief of the Alexandria oflSce of the greatest French steamship
line in the Mediterranean, Dervieu was an important figure in the local
French colony. In 1856, he was not only listed officially among the
‘Frangais notables’ but was appointed to the consular court, which had
jurisdiction over all French nationals in Egypt,^ Nevertheless when,
the next year, the Viceroy offered him the post of director of the
Medjidieh, Dervieu gave up the Messageries to join the new firm.*

^Most of the above is derived from Tamille Dervieu de Condrieu, 1547-

1939’, a typewritten history of the family by Paul Dervieu, son of Edouard. The
pagination is irregular. The copy that I was able to consult, thanks to the kindness
of Mme Paul Dervieu, contains inclosures and hand-written insertions and correc-
tions by the author. Also valuable is Commandant Dervieu, Monographie d'lme
famille lyotmaist; lafamiUe Dervieu (Macon, 1907). On the companies of Robert
Dervieu, see B.L,y ii® sdrie, supp., IV
(1854), 989-99 (Compagnie des Mines de
Kef-Oum-Th^boul); and two pamphlets by Robert himself, Notes giniraks sur
les mines de Gar~Rouhan et Ma^h^ . . . (Marseilles, 1856), and Statute de la Com-’
pagrue des Mines de Gar-^Rouhan et Ma:^ . . - (Marseilles, 1856).
* On the Bazin line and the Messageries Maritimes, see Hubert Giraud, Les

origines et Vivoludon de la navigation d vapeur d Marseille^ 182^1500 (Mar-

seilles, 1929).
® C.C., Alex., XXXV, Sabaiier-Walewski, 22-3-185(5.
* See above, p, 84.
was an important step forward. To be sure, the new position had

its drawbacks, which foreshadowed almost prophetically the diffi-

culties that would harass Dervieu later in his career. In 1858, two

years after the company’s organization, its finances were still not in
order - the Viceroy and other members of the royal family had yet to
pay up on their shares. On the other hand, the company had succeeded
in beginning operations and w^s planning to exploit in 1859 the Red
Sea traffic, alw^ays dependable thanks to the annual pilgrimages to
Mecca. And w^hile the small, fumbling Medjidieh was not the Message-
ries, at least Dervieu w^as a big fish in his little pond, and his company
was advantageously linked to the interests of the Viceroy. Moreover,
for Dervieu the ties with the court were especially close; he had married
the daughter of Koenig Bey, once the tutor, now the private secretary
of Said Pasha. He did not neglect these connexions.

Besides my direction of the Medjidieh, I have several other small commercial

and industrial which are doing well. I give you all these details because

I know your me and because I am convinced that you will be

interest in
pleased to hear of my successes in the new path I have taken.

It was fortunate for Dervieu that he had these little business deals
on the side, for he was not too successful as a steamship operator. In
all fairness, the conjuncture did not favour his efforts - Egyptian busi-

ness had slumped as a result of the European commercid crisis of

1857-8.1 In any event, in i860, with the Medjidieh on the point of
failure,® Dervieu left to set up his own banking house.

1 Cf. C.C., Alex., XXXV, Sabatier-Walewski, 30-6-1858, ff. 369 et seq.

11-5-1859, ff.
479 et seq. Crouchley’s figures on Egyptian foreign trade for
1856-S are as follows (in thousands of pounds Egyptian, equals approximately
oj. 6d. sterling) :

Imports Exports Total

1856 2,569 4,030 5,599

1857 3,149 3 .»oS 6,254

1858 2,715 2.534 5,249
Economic Development^ p. 266,

*A,E.j C.C., Alex., XXXVI, Beauval-Thouvend, 19-10-1861, ff. 256-60,

speaks of the expected dissolution of the Medjidieh; A.E.f C.P., Alex., XXX,
Beauval-Thouvenel, 28-10-1861, f. 37, speal^ of the company as dissolved.
Needless to say, the Egyptian government reimbursed the shareholders for the
amount of their investment. Hamza, Public Deht^ p. 12.

On I December i860 Edouard Dervieu et Cie, a partnership

ized at themodest sum of 400,000 francs, was officially constituted]i4a4
partner, E. A. Gallo, was unquestionably the junior member of the firm,
as his omission from the raison sociale indicates. We know little about
Gallo, except that he began as a broker, not a merchant. The corre-
spondence offers a vague picture of an office manager, more concerned
with operations than policy: indispensable, but definitely subordinate.
To his new business, Dervieu brought two immaterial assets, either

more important than connexions

his contribution to the capital: his
with the Egyptian court - already mentioned - and his friendship with
Alfred Andre, Paris banker and international financier- The two men
had apparently met in 1856 or 1857, when Andr6, who had been estab-
lished since 1854 in Constantinople to handle business arising out of
the Crimean War, made a prolonged and Egypt before
visit to Syria

returning to his family’s firm in France.^ Perhaps Dervieu spoke to

him at that time of his entrepreneurial ambitions. At any rate, once Der-
vieu began his career as an independent businessman, he cultivated
the relation assiduously. On 3 January 1861 - never again would years
elapse between letters - he wrote to Andre’s firm, Adolphe Marcuard
et Cie, offering to represent them in Alexandria and asking them to act
as his correspondents in Paris. Marcuards agreed on both scores and
opened an account in Dervieu’s name at 5 per cent, favour Paris,
4 per cent, fevour Alexandria, and J per cent, commission on the
highest balance either way.® It is worth noting that these terms were
somewhat dearer than those offered Marcuards’ regular correspondents,
especially the rate of commission, which was ordinarily only per cent.
But then, Marcuards was a prudent house and Dervieu was only
a beginner. He spent his first year feeling his way: lending money
on commercial transaaions; tiying unsuccessfully to interest French
capitalists in Egyptian securities;® importing jewels for the vicero]^
court;^ and bringing in gold to take advantage of the rates of exchange,
^ A. Ajadr4, Madame Andri-Walther, i 8 oy-i 886 ed.; Paris, 1896), p. 285,
^ A. Neuf,^ L.B. 434, i8-i-i86i to Dervieu, ff. 751-2.
® Paris was sceptical: ‘. . . we fear that their merit would not be appreciated by-

French capitalists, who generally do not like to risk their funds in litde-known
enterprises, and who consider, rightly or wrongly, that the countries of the Orient
offer little in the way of guarantees.' Ibid. Andr4 was to change his mind on this
® In co-operation with Issaverdens and Co. of Constantinople,
also corre-
spondents of Marcuard et Cie, Ibid., L.B., 444, 2<S-6-i86i to Dervieu, ff, 845-6.
only to find that commissions, cost of shipment, and insurance had
eaten almost all the profit.^

Yet if international commerce had its successes and its disappoint-

ments, the new bank always had one ‘sure thing’ to fall back on: the
paper of the Viceroyal government. Which brings us to the Egyptian
debt, whose vicissitudes were to shape and be shaped by those of
Dervieu throughout his career in Alexandria.
It is hard to say when the debt began. Even under Mohammed Ali,

the government always seemed to be short of funds. In the beginning,

extraordinary expenditures were covered by borrowing from certain
merchants and firms of Alexandria and Cairo, the Peninsular and
Oriental for example, against nominative promissory notes.^ In spite of
the generosity of Aese lenders, however, and their willingness to renew
the Viceroy’s paper, direct credit of this kind was necessarily limited.
Under Said, Ae need for funds became even more pressing, and Ae
acceptance of important commitments toward Ae Suez Company
finally compelled Ae Viceroy in 1858 -apparently at Ae suggestion
of Ferdinand de Lesseps - to
bonds of short maturities.®
issue bearer
In Ais way, Said was able to circumvent not only Ae prudence of his
regular business creditors - Ae only limit on Ae issue of such bonds
was Ae confidence of Ae piAlic - but also Ae supervision of his suze-
rain in Constantinople, whose approval was necessary for a formal loan.
The impecunious Ae treasury bond a godsend. By Ae
Said found
end of 1859, Aere were £2 million of government paper in circulation;
six months later, 3-5 millions.^ Yet Ae salaries of government employees

^ A. L.B, 456, 6-12-1861 to Dervieu, f. i86; 13-12-1861, f. 441;

L.B. 460, 3-2-1862, ff. 61-2.
® The TimeSy 24-11-1858,
p. 7; J.C. [Jean Claudy], Histoire financiere de
VEgypte depms Scud Pacha^ i 854-1876 (Paris, 1878), pp. 3-4; El Hakim, Mdle
pertuisy p. 5 f. In the days of monopoly, Mohammed Ali had met his financial
needs by contracting in advance for the harvest with the merchants of Alexandria.
As early as 1855, however, these advances on security were being replaced by
outright loans on promissory notes. Bowring, Reporty p. 48.
* El Hakim, MUk
pertmsy p. 15; Hamza, PuhUc Debty pp. 41, 44n. 3; J. C.
Histoire^ pp. 4-5; Sabry, Empire, p. 63.
^ The Times, 9-12-1859,
p. 9; i^O., 14^-25, Colquhoun-Russell, no. 77:
2-^-1 860 (information supplied by Mustapha Pasha, one of Ae princes of the
royal family). These are only estimates, of course. No
one, except perhaps the
Coptic accountants of Ae Treasury, had accurate information on Ae amount of
were months in arrears, ^ the selling in May i860 at 14 to
bonds were
17 per cent, discount, and the state coffers were empty. For a moment
Said was forced to face up to reality. So he cut down on railway ser-
vice, firedsome of his policemen - who prompdy turned to crime to
earn their bread - and sold at knock-down, distress conditions the
gold plate and djets d'an for which he had paid such outrageous
prices.* At the same time, he was spending millions of pounds
finance Suez, to bail mismanaged European firms out of trouble,® and
to buy cannon to arm the grandiose but useless fortifications of the
barrage — all the while diligently enriching his patrimony by accprir-

ing land in his son’s name.®

Happily for both prmce and creditors, there was help on the way.
On the steamer of ii September i860, the first instalment of a loan
firom the Comptoir d’Escompte and Charles Laffitte et Cie in Paris® of

paperin oration. On3-j-i8(5o (Colquhoun-Russell, no.

52), the British consul
gave an estimate of £2-5 million outstanding. Two months earlier he had put the
figure at £3-3*^ million. F.O., 142-23, no. 21; 21-2-1860,
* Ten mondis at the end of i8j8. Dervieu-Andr^, 25-12-1858.
* F. 0
142-25, Colquhoun-Russell, no. 117, 27-8-1860.

® Thus the Nile Navigation Co.(see above, n. 4, p. 83), which had mllapcwj
in 1858. According to Dervieu, S^d bought up the shares at up to
70 per cent,
above real valuej Sabry, Empire, p. 64, speaks of five times the market price.
S^d even indemnified the ofixcers of the firm for their abanrinnmw't of a con-
cession that they were no longer capable of exploiting. The total cost
of this
benevolence was twelve million francs.
More expensive yet was the salvage of the Bank of Egypt. See above, p.
67 f.,
and below, pp. 112-5.
* Ibid.,
Colquhoun-Russell, no. 52: 3-5-1860; also F. . 142-23, Colquhoun-
1 5-3-1860. On the barrage, see iove, pp. 81, 84. On the interest
Russell, no. 29:
of the ruler in increasing his family estate, see Senior, Correspondence^ I, 36-7.
® On the Comptoir d’Rscompte,
see B. Mehrens, I^ie JEntstehung und Entwich^
lung der grossen franiosischen Kreditinstitute (Stuttgart and Berlin,
1911), pp. 42-
77; Dupont-Fertier, Marche financier^ pp. 91-101. The bank was founded in 1848
as an emergency measure to combat the paralysis of credit. It remained
a semi-
public institution, in large part government-owned and controlled, until
when it was reorganized as an independent corporation. Thereafter it broadened
its activities to include foreign banl^g, and by i860 had established
a number of
branches abroad. It also began to engage in company promotion and investment
operations of the kind represented by the Egyptian loan.
On Charles Laffitte, see above, n. 2, p, 29. The bank established by Laffitte
after the liquidation of 1848 was never so strong as that created by his former
partner Blount. Laffitte continued to be especially active in railway promotion,
but he was unhappy in his choice of ventures and was forced to suspend in
28 million francs -which actually yielded less than 21 millions
arrived in Alexandria. The palace and Ministry of Finance were
stormed by claimants.^ The only difficulty was that 21 millions were
ridiculously inadequate. They were lost in the 100 millions in bonds
already outstanding, and government spending had in no way dimin-
ished.Moreover, for his 21 millions the Viceroy had not only indebted
himself for 28, but had committed himself to issue no fur Aer short-
term bonds without the permission of his French creditors. It was an
impossible situation, which Said resolved in royal fashion by issuing
more bonds, but under a new name.
For his French creditors, however, a bond was a bond, by whatever
name. They protested indignantly. To which Said replied that the new
bonds were really different; that they were intended only to cover
debts incurred previous to the French loan, and besides, he did not
intend to issue more than a paltry 15 million francs’ worth.^
This was in December i860. Six months later, the floating debt had
somehow reached the sum of million, plus more than a million
owed to the Comptoir d’Escompte, as against a total of 3 to 3.5 mil-
lions only a year before.® How this increase was achieved, we really do
not know. In spite of the passionate interest of contemporaries and
careful research since, the growth curve of the Egyptian floating debt
remains a mystery. In any event, the coffers were as empty as ever, the
of 1862 and large parts of 1863 and 1864 were already
entire revenue
mortgaged, and the maturities of the French loan were ominously
close.^ Dunned by his creditors, who were now being put off from day

1866 after a last-minute effort to save the situation by converting to a joint-

stock, limited-liability company and merging with the equally afflicted Ottoman
Financial Association. Bankers^ Magas^na^ XXV 155-7, 294-6;
(1865), 48,
XXIX (1869), 294-7; Economist^ 9-12-1865, pp. 1498, 1513; Journal des chemins
defer, XXIV (1865), 197; XXVIII (1869), 549 f.; The Times, 3-7-1866, p. 7.
^ F.O. 142-25, Colquhoun-Bulwer, no. 60, 13-9-1860. This loan, which was
made with the blessing and the guarantee of the French government, was
nominally at 6 per cent., but with commissions, fees, and divers hidden charges,
the real rate came to about 15 per cent. The revenues of the Alexandria customs
were pledged in security. The loan was a mistake in every respect: it was usurious;
it was too small; and it tied the Viceroy^s hands for the future, for not only did he

pledge himself not to issue any more short-term bonds, but he also gave fhe con-
tractors a preferential option on any further loans. Sabry, Empire,
p. 90.
142-25, Colquhoun-Russell, no. i6i: 26-11— 1860; no. 171: 10-12-1860.
® Ibid., Colquhoun-RusseU,
no. 75: 29-7-1861.
*Ibid., Colquhoun-RusseU, no. 41: 10-5-1861; no. 68: 13-7-1861.

to day, and harassed by

all sorts of claimants, whose ardour increased as

the credit of the

government diminished. Said hastily sent emissaries to
Europe to negotiate another loan and fled to the isolation of his yacht.^
The effort to obtain a new loan was a failure. The Comptoir
d’Escompte and LafEtte were ready to help and lend almost enough
money to consolidate the entire floating debt. All they wanted was a
minimum of 6jo million francs over twenty-nine years for a sum that
might, and probably would, be as low as 150 millions. Included in the
670 millions was a commission of 6 per cent., or 15,000,000 francs, on
the nominal amount of the loan. This, plus the fees for payment of
coupons, evaluated at i\ per cent, of the amounts disbursed, and the
profitson the placement, added up to a potential return of tens of
millions.Even Said, who was not unaccustomed to usury, gagged.®
While Said was spinning around helplessly, the Egyptian treasury
was touching new depths.® The economy drive was resumed. The
Viceroy’s superb stud was sold, government employees were fired
wholesale, the army was cut to a token force of 2,500, and tons of
military uniforms and equipment, much of it second-rate but all of it
expensive, were the market.^ And through it all Said con-
dumped on
tinued to buy land wherever he could,® threw fortunes away in largesses
and indemnities, and ran up a deficit for 1861 alone of about ;^3 million,®
^ Ibid., no. 50; 8-6-1861; no. 69: 15-7-1861. It was
just at this moment that the
Austrian government succeeded in bullying the Viceroy into indemnifying
Castellani. This submission brought momentary peace with Austria, but yielded
in turn a harvest of preposterous claims encouraged by Said's weakness. On
Castellani, see above, p. 92 and n. i.
®F.O. 142-259 iio- 75^ 29-7-1861; no. 78: 3-8-1861. To top things off, the
Comptoir d'Escompte insisted on the establishment of a foreign commission to
supervise the Egyptian treasury and budget - here one may surmise the hand of
the Ministry of Foreign Affairs - and wanted the loan guaranteed by the revenues
of the delta, by that part of the customs that was not yet committed, and perhaps
even by a mortgage on the privy purse. An effort by Said to arrange a loan of
50 million francs on somewhat more favourable terms failed. Ibid., no. 87:
® Thus, after some nine or ten
years of systematic debasement, the piaster was
now worth half as much
under Abbas. Hamza, Public Deht^ pp. 37-8.
32: 23-7-1861; F, 0 , 141-25, Russell-
^ F.O. 142-25, Colquhoun-Bulwer, no.

Colquhoun, no. 24: 10-10-1861 and enclosure; jF.O. 142-26, Colquhoun-Russell,

no. 1 12: 11-U-1861; The Times, 17-10-1861, p. 7; 16-12-1861, p. 9.
^ F.O, 142-25, Colquhoun-Russell, no.
40: 10-5-1861.
® By contrast, the deficits of the preceding seven years of his reign (including
1854) averaged under £300,000. See Appendix D, below.
By the end of the year, the floating debt was at a record £ii
If treasury bonds, which proved so easy to print, were a welcome
resource to the impecunious monarch, they were at least as popular
with the businessmen and of his country. Their high rate of

discount, ranging at times up to 30 per cent., made them a lucrative

investment, while the amplitude and frequency of their fluctuations
were ideal for speculation. Moreover, the several kinds of bonds, of
varying maturity and dependability, offered a wide field for arbitrage
and manipulation. Businessmen who knew the ‘right’ people or put
money in the ‘right’ pockets could cash their securities without delay.
Others found this so difficult that it was simpler to sell out to someone
with more influence. All, however, found dieir profit.
As a result, the wealthier businessmen and landowners poured their
money into the bond market
to the neglect of regular trade. For a
moment, the merchant houses of Marseilles were actually afraid to deal
with Alexandria, where commerce had been allowed to fall into the
hands of a crowd of small, opportunistic houses of the most question-
may be said to the credit of Dervieu that, unlike many
able solidity.^ It
of his colleagues, he did not throw everything over for the paper
In the long run, whether in regular trade or speculation, Dervieu
prospered. The depths of 1857-60 lay far behind and Egypt was feel-
ing the first stirrings of the cotton boom. On i January 1862, after
thirteen months of activity, the bank increased its capital from 400,000
to 1,000,000 francs.

At this point, Dervieu was still on probation in banking

circles. Most
houses inFrance discounted his paper somewhat more than that of first-
class firms; even Andre, who was more generous
than the others, had
not yet extended his most favourable terms.® Yet already Dervieu

^ C.C., Alex., XXXVI, Ciccaldi-Thouvenel, 10

-10-1860, ff. 43-5; F, 0 ,

152-26, Colqhoun-Russell, no. 112; 11-11-1861.

* Nor, apparently, were
Dervieu’s charges and interest rates so exorbitant as
those of some of his colleagues. Cf, El Hakim, MUle
permis, who speaks
p. 27, of
9 per cent.
» Andr6 was taking Dervieu’s remittances of paper at i per cent, less dis-

solid enough to recommend others to his friend in Paris. In a letter of

12 March 1862 he wrote: 1 recently took the liberty of recommending
Messrs- Oppenheim to you. I did it without fear because I knew that
with these gentlemen there was nothing to fear.’
This was the start of a long and checkered association. Hermann
and Henry Oppenheim were bankers by birth. The family came
originally from Windecken in Oberhessen, where, the story goes,
they were money-lenders of some disrepute. When Windecken became
too uncomfortable for them, they left for Frankfurt; it was there that
Henry was bom in 1835. In 1850 they moved again, this time, like so
many Jewish merchant families of western Germany, to the greater
economic and social opportunities of London, where Simon Oppen-
heim, brother of Hermann and father of Henry, set up the banking
house of Simon Oppenheim and Co. The firm prospered, in part no
doubt owing to its connexions with houses in Germany, in part
because it was alert enough to move into the rapidly expanding field
of Near Eastern commerce. The Crimean War saw Henry Oppen-
heim, still a stripling, in the Levant, keeping one eye on his father’s
ships, which were moving food to the British troops, the other on the
commercial possibilities of the area. In the meantime, Hermann was
following a similar path. Partner in Alberti, Pinto, Oppenheim and Co.
of Paris and Oppenheim, Alberti and Co. of Constantinople, he had
founded still another firm in Alexandria under the name of Oppen-
heim, Chabert and Co. Subsequently he took his nephew Henry into
the business, and when, in 1862, Oppenheim, Chabert and Co. liqui-
dated, he joined with Henry in forming a new bank in the same city.
In view of Hermann’s occupations elsewhere, the Egyptian firm was
more or less left to Henry’s direction.^
The house of Oppenheim and Nephew was stronger than Dervieu’s,
both in resources - it was capitalized at 50,000 - and in connexions -
it was one unit in a fairly powerful and well-placed family team. Yet
its reputation in Egypt was mixed, and its credit - at least in the begin-
ning - left something to be desired.

count than other bankers. Dervieu-Andre, 12-3-1862. Andr6 was still charging,
however, ^ per cent, commission, except on special operations like the above-
mentioned importation of jewellery, where the rate was i per cent.
^ I am indebted for most of the ^ove to the late Paul H. Emden. Also Hamza,

PuBUc Dehty p. 52 f. In the rest of the text^ the name Oppenheim alone will be
understood to mean Henry Oppenheim.
You probably that Messrs, Oppenheim had assumed the adminis-
tration of the fortune and properties of the Prince El-Hami Pasha, son of
Abbas. The Prince died last year after having squandered his fortune, and it
was asserted at the time that the Oppenheims had contributed to this in no
small way. The Viceroy named a commission to liquidate the estate of the
Prince, and this commission recognized and affirmed that the administration
of Messrs. Oppenheim had been most honest and upright. Ajiother judicial
commission was named to estimate the damage and indemnities due to
M. Oppenheim which the executors have not wanted
for breach of contract,
to maintain, or rather it was necessary to sell the
have not maintained, since
properties to pay the debts. This commission has just rendered its verdict
awarding an indemnity of £93,000 to M. Oppenheim.^

The story of the ruin of El-Hami Pasha is so obscured by charges

and counter-charges that hard to say where truth ends and rumour
it is

begins. When Abbas died in 1854, his son inherited an estimated 80

million francs in mobile wealth alone, plus a fortune in land.^ From the
beginning, ‘the young Prince’ placed himself in the care of experienced
businessmen® - the better to enjoy the infinitely varied pleasures that
the Orient offers the voluptuary. By two years after the
1856, hardly
death of his father, he had consumed his body and much of his wealth.
Dr Burguieres, physician to the Egyptian aristocracy and the leaders
of the European colony, described him as an old man at twenty-one.*
In spite of- or perhaps because of- the tutelage of his bankers, his
80 millions were gone. A few years more, and his lands were covered
with debt.
To increase the income from his lands, El-Hami turned them over to
Oppenheim, Chabert and Co. to manage for a period of twelve years.
The arrangements were extremely advantageous to the bank: not only
was their annual fee sizeable, but the purchase of machinery and agri-
cultural equipment and the sale of produce might be expected to yield
substantial commissions. Moreover, the contract was so worded as to
give Oppenheim what amounted to a power of attorney over the
property. In return, the Prince received immediate monetary assist-
ance. The coffers of the bank were opened to him, and so lavishly did

^ Dervieu-Andre, 12-3-1862.
According to El Hakim, Mille pertuis^ p. 7, Abbas
* J, C., Hzstoire^ p. 2; left his
son a fortune worth as much as $200 million.
® The Times, 2-10-1854,
p. 9.
* Senior, Convtsrsations, I,

the Spendthrift avail himself of this credit that paper on Oppenheim

and Chabert was soon selling at the fantastic discount of 24 per cent,
on the Alexandrian market.
With their own resources strained, Oppenheim and Chabert found
for their client a new source of funds. Pledging the Prince’s estates,
they succeeded in borrowing 162,000 from the Bank of Egypt against
90-day notes. And while we have no information on the terms of these
loans, we may be certain that they were as harsh as the feeble state of
both El-Hami’s and Oppenheims* credit made possible. The Bank of
Egypt was ‘an establishment’, to quote the British consul, ‘generally
accused of not dealing on the most liberal terms with its customers.
M. Pasquali, its director here, has the reputation of being an over-keen
financier —
^his clients generally finishing by being compelled to abandon

their property to the Bank.’ ^

On the other hand, the creditor was hardly in better posture than the
debtor; 162,000 was an enormous sum to be owing from one indi-
vidual, especially on such illiquid security. More than that, it repre-
sented almost two-thirds of the Bank’s effective capital, and the
nervousness of the managers as the debt accumulated and the notes
approached maturity may well be imagined.
The El-Hami from Egypt in i860 brought
projected departure of
the whole mess to a boil. The
notes were protested, and the Bank of
Egypt learned that a commercial bank cannot meet short-term paper
wifh real estate. Everyone concerned hunted for a scapegoat. The
directors in London fired their manager, Pasquali; Pasquali blamed
Oppenheims; Oppenheims returned the reproach. The dirty linen was
washed in public to the intense discomfiture of all.
At this point, the situation of Oppenheim and Chabert was desperate.
Their signature was on the Prince’s notes and by any system of com-
mercial law, they were equally responsible for payment. But in Egypt,
where the only law for a foreigner was the law of his consulate, ordi-
nary rules did not hold. In the face of urgings and menaces die Prussian
consul refused to declare Oppenheims bankrupt,^ and the Bank of
Egypt was forced to turn to the usual resource of Europeans in financial
difficulty: the Viceroy’s treasury. And while Said struggled desperately
and haplessly to reject a mess of trumped-up claims, thereby showing
^ jF.O. 142-24, Colquhoun-Bulwer, no. 38: 14-7-1860.
2 jP.O. 142-25, Colquhoun-Russell, no. 86: 18-7-1860; Colqpjhoun-Bnlwer,
no. 44, 6-8-1860.
themost shameful indifference to his family’s honour^ - Oppenheim
and Chabert on their side worked swiftly to ease their position by
wholesale disposal of the Prince’s estates. Not, to be sure, at anything
near their real value - there was not enough money around for that in

i860. But there were a few businessmen keen enough to sense a bargain
and prepared to buy good property h remere^ that is, to pay about one
quarter to one third of the real value while giving the seller an option
for repurchase at some time in the future.® In effect, this was a form of
mortgage loan, extremely favourable to the creditor, who in this case
had every reason to believe that El-Hami would never be able to take
up the option in time.
In the meantime Said fought harder than was his custom. His
treasury was empty and he knew only too well that any help given the
Bank of Egypt would bring all the other creditors of El-Hami down
on his head.® He never had a chance. Afraid to help, yet even more
afraid not to, he finally agreed to pay El-Hami £40,000 in arrears of
appanage, a personal allowance that S^d had once granted the Prince
but which, as even Colquhoun admitted. Said had every right to with-
draw, and consented to consider another claim that even the solicitor
of the Bank of Egypt declared to be ‘entirely unfounded’.*
At this point, El-Hami died® and the impleasant muddle, which
seemed on the point of solution, was more confused than ever. Oppen-
heim and Chabert, particularly, found themselves in an unenviable
situation. For one thing, the liquidation of the estate would presumably
entail a verification of their accounts as stewards of the deceased. This

could be - indeed, many expected it to be - embarrassing. Secondly,

death seemed to cancel Aeir contract with the Prince, which had more
than ten profitable years to run. Finally, the assistance expected from
Said Pasha was no longer available. Where, before, the Viceroy had
been confronted only with Oppenheims and the Bank of Egypt, death
had brought everybody into ihe argument. The creditors threw them-
^ This insensitivity to scandal pained Colquhoun, who, though unsympathetic
to Pasquali and the local management of the Bank, was concerned for the stock-
holders in En^and. Ibid.; also Colquhoun-Russell, no. 130: 10-9-X860.
* Ibid., Colquhoun-Bulwer, no. 58: 29-8-1860; no. 61: 18-9-1860.
® Ibid., Colquhoun-Bulwer, no. 51: 20-8-1860.
* Ibid., Colquhoun-Bulwer, no. 58: 29-8-1860; Colquhoun-Russell, no. 130:
* In September i860, in his home in Turkey. El-Hami was married to the
dau^ter of the Sultan. Ibid., Colquhoun-Bulwer, no. 6x: 18-9-1860.
selves upon the estate, claim piled upon claim, and Said hastily re-
pudiated his commitments.
who anticipated Hermann Oppenheim’s discom-
Those, however,
fiturereckoned neither with the special character of Egyptian justice
nor with the shrewdness of the banker. The executors who camp to
look at his books were handed a statement of El-Hami’s account
that Oppenheim and Chabert had conveniently got the Prince to ap-
prove before his final departure from Egypt. Not only was there not

going to be an examination, but there was now no way to rhallpngp

their claims for unpaid balances.^ As for the contract, Hermann Oppen-
heim had no intention of lettii^ an ‘act of God’ deprive him of a
decade’s profits: he insisted that his firm be maintained in its steward-
ship. The executors, however, had no choice in the matter; they simply
had to sell the Prince’s estates to pay his debts. At which Hermann
sued for breach of contract, with the result described by Dervieu.
Even the reserve of Said was eventually overcome. Knowing the
pressure he would be exposed to if the dispute continued in Egypt, he
tried to shift the litigation to Constantinople, where the case might be
decided on purely legal grounds. This was the last thing the creditors
wanted. An anguished protest, supported by the strongest diplomatic
representations, forced Ae Viceroy to give in.® From then on, there was
no hope. Creditors turned up from the most unexpected places bran-
dishing the most questionable lOU’s. Even the British consul, who bore
much of the responsibility for the debacle, recoiled before die ‘tissue of
iniquity’ now uncovered and offered the incredibly naive su^estion
that all doubtful creditors be put to oath.® Since Said was paying
however, there were few to join Colquhoun in his concern for fair play.
And while we do not know die details of the awards, we may be sure,
in view of Oppenheims’ success, that they were generously conceived.
The kind words that the directors of die Bank of Eg3q)t had for Said in
later years were more than mere politeness and more than deserved.*
The only difficulty - and Dervieu’s letter shows that it was not much
of a difficulty - was that even in Egypt, the Oppenheims’ bdiaviour
was hard to swallow. It was bad enough to mismanage die Prince’s
* Hud., no. 65: 2-io-r8do. * Ibid., Colquhounr-Bulwer, no. 71; a^ro-
1860; F.O. 141-42, Russell-Colquhoun, no. 34: 8-ri-i86o.
^F. 0 . 142-25, Colquhoun-Russell, no. 156: 25-11-18(50.
*‘B(oJceri? Maga:(vte, XXI (i 8 5 i), 19, 250-3, (S39-41; XXII (1862), 167-9;

XXni (1863), 203—5; XXIV (1864), 29(5-8, 851-2; The Times, 28-4—1860, p. lo;
9-10-1860, p. 5; 8-11-1860, p. 11.
fortune and abet its But then to sue for breach of contract
because the presumably unintentional death of the unfortunate client
had precipitated the settlement of his debts As Colquhoun put it with

British delicacy, the ‘whole thing’ was ‘of very bad odour’A The
breath of scandal was to stick to the Oppenheims throughout their
career in Egypt.
To be sure, ^(^93,000 was only a drop in the milking of the great,
patient cow of Ae Nile; Henry Oppenheim was interested in bigger


M. Oppenheim is leaving at the same time as this letter for Paris and
Frankfurt; he is taking with him the loan contract that he has just signed with
the EgyptianGovernment and which he is going to present for ratification to
a syndicate of German bankers, at the head of which is the Bank of Saxe-
. .

Meiningen. This loan, which is for forty million francs, is an excellent affair.

As shown above, by late i86i the Egyptian treasury had reached the
end of the road. Some sort of loan was indispensable, and the unac-
ceptable offer of the Comptoir d’Escompte only made Said look else-
where without giving his would-be French creditors even the courtesy
of a fare-thee-well. The new saviour was Oppenheim, who despite his
poor reputation in Alexandria, claimed to represent a syndicate of some
of the most powerful and respected firms in Germany.^ And while
the terms proposed were hardly better than those of the Comptoir
d’Escompte - sixty million francs at ii per cent, over thirty years
Said was ready to accept almost anything to rid himself of the leeches
in Paris with their guarantees and options and supervisory commissions.
Naturally the French objected, the banks because they had no wish
to lose a lucrative affair, the consulate because the Imperial govern-
ment rightfully considered loan contracts and concessions diplomatic
weapons.® London, in turn, instructed Colquhoun in Alexandria to give
his ‘moral support’ to the Oppenheim syndicate.^ As usual, the con-
F.O. 142-24, Colquhoun-Bulwer, no. 38: 14-7-1860.

“According to F.O. 142-26, Colquhoun-Russell, no. 103: 12-12-1861, the

group included Gebriider Bethmann, Raphael Erlanger, Gebriider Sulzbach, and
W. F. jSger in Frankfurt; the Darmstadter Bank; the Mitteldeutsche Creditbank;
M. Koenigswarter; S. Koenigswarter in Hamburg; E. J. Mayer of Berlin; and one
of the Habers.
^j4,E,y C.P., Alex., XXX, Beauval-Thouvenel, 8-10-1
861, ff. 10-14;
13-10-1861, ff. 19-22; 14-10-1861, ff. 26-7; alsoF. 0 . 141-45, Russell-Colquhoun,
no. 27: 4-11-1861, and enclosure; Cowley-Russell, no. 1284: 31-10-1861.
*F.O. 141-45^ Russdl-Colquhoun, no. 28; 15-11-1861.

flict was settled to the satisfaction of everybody at the expense of the

Egyptian treasury. The Comptotr d’Escompte instituted a claim for
indemnity on the ground that the continued issue of treasury bonds
had violated the loan contract of i860. There was no question of mone-
tary loss, but in Egypt this was irrelevant. The point was that the
Comptoir d’Escompte wanted 840,000 francs as balm for the loss of the
new loan. Said settled for 500,000.^
The final arrangements with the Frankfurt syndicate were con-
cluded in March 1862.^ They provided for a net loan of 40 millions,
later increased to 60 when the smaller sum was seen to be grossly in-
sufficient. Actually, Said did not get even that. After deduction of
commission, service charges, and other extras, he received about
65 per cent, of the nominal value of the bonds, or some 53,500,000
francs;® for this, the Egyptian government agreed to pay 198 million
These annuities, furthermore, were secured by
francs over thirty years.
the state revenues, especially those derived from themost fertile pro-
vinces of Lower Egypt. Most of the loan sold through Friihling and
Goschen to the English market, where it was floated at 82J and 84J
and oversubscribed by at least 60 per cent.^ Messrs. Oppenheim had
every reason to be satisfied with the transaction.®

^ The Times^ 30-6-1862, p. 10. Sabry, Empire, p. 96, states that Said paid the
full 840,000 francs. The - of all people -
matter was submitted for arbitration to
Thouvenel, French Minister of Foreign Affairs. Frankfurter Zeitung, 10- 1 -i 862, p.7.
® As finally constituted, the syndicate consisted of the Mitteldeutsche Credit-
bank (the so-called ‘Bank of Saxe-Meiningen’), Erlangers of Paris, Gebr. Sulz-
bach, and Haber. Friihling and Goschen of London were technically subcon-
tractors, but floated by far the greater part of the issue. The Times, i5-n-i86i,p.5;
Frankfurter Zeitung, 6-4-1862, p. 6 f.

® This is based on a Memoirs prepared for Oppenheim in 1866 in connexion

with another loan (see below, ch. xi). This information corrects and completes in
effect the chart of Egyptian loans given by Hamza, Public Dehu, pp. 256-7, based
in large part on the findings of the Cave Commission of 1876. Hamza estimates
the amount realized on the 1862 loan at >£2,500,000, but points out that, according
to the Cave Report, the actual sum received was unknown.
* Thus, even a friend like Alfred Andr6, supported by the recommendation of

Oppenheim, Neveu et Cie, could get only £25,000 out of £40,000 requested on
the first part of the loan. For the second slice, Marcuards did not name a specific
subscription, but asked Oppenheim to set whatever figure it would take to get
£25 ,ooo-£30,ooo. A. Neuf, L.B. 464, 7-4-1862 to Oppenheim, Neveu et Cie,
f. 274; 12-4-1862 (telegram), f. 536; 12-4-X862 to Friihling and Goschen, f. 521;

L.B. 468, 30-6-1862 to Oppenheim, Neveu et Cie, f. 1x76.

®See, in addition to the diplomatic correspondence cited above, Sabry,
You can see, therefore, that from the standpoint of integrity and fortune,
hese gentlemen offer every guarantee, and my information must coincide
vith yours, since you have accorded them the credit of 500,000 francs
requested by telegram.

This was indeed a mark of confidence. Adolphe Marcuard et Cie

were notably cautious in matters of credit, and while their rigidity in
this regard re-enforced their reputation for solidity, it did not add to

their popularity and them

often cost customers. As a rule - and for
Andr^, rules were not made to be lightly broken - no client could ex-

pect credit until he had proved by the size and activity of his account
that he was a good risk. Even then, the bank considered such credit as it
parsimoniously accorded as something special, as an accessory that was
under no circumstances to become the raison d'itre of a business
relationship.^ So that when, after only two weeks as one of Marcuards’
accounts, Oppenheim asked for and got a credit of this size, it was
nothing less than revolutionary, a fact that Marcuards did not fail to
stress in its letter of confirmation.® Apparently, however, the impor-
tance and attractiveness of Oppenheim’s projected loan to the Egyptian
government outweighed the usual considerations and Andr^ , for all his
strictness, was supple enough to take advantage of what was just about

a sure thing.® Moreover, the financial connexions that enabled Oppen-

heim to secure the loan were obviously out of the ordinary.* All the
same, Marcuards reminded its client that cover for drafts should be
sent previous to maturity. There were to be no cash advances.

Empire^ pp. 91-101 (a superb discussion); Hamza, Public Deht^ pp. 48, 53-4,
58-9; The Times^ 17-10-1861, p. 7; 15-11-1861, p. 5; 16-12-1861, p. 9; 17-4-
1862, p. 5; Frankfurter Zeitung^ 10-3-1862, p. 6; 3-4-1862, p. 6; 4-4-1862, p. 5;
6-4-1862, p. 6 f.; 13-4-1862, p. 7; 15-4-1862, p. 6; 10-7-1862, p. 6; 17-^-1862,
p. 7; 6-8-1862, p. 8; 31-12-1862, p. 7. As severe as these conditions were, they
were much better than those offered by the Comptoir d*Escompte.
^ Cf. A. Neufy correspondence, passim^ among others L.B.
454, 21-11-1861
to Friihling and Goschen, f. 723; 23-11-1861, f. 809; L.B. 460, 15-2-1862,
ff. 602-3; b.B. 584, 18-4-1867 to Union Bank of New Orleans, ff.
*Ibid., L.B. 462, 8-3-1862 (telegram), f. 365; 10-3-1862, ff. 409-10.
* There is no explicit evidence that the credit was
intended to fadlitate the issue
of the loan, but the tenor of the letters makes this almost certain. In order to secure
the loan contract, Oppenheim probably had to offer Said immediate funds and
needed for the Vicero/s disbursements in France a credit in Paris.
* It is worth noting in this regard that, when
Marcuards accepted the account of

In the meantime, Dervieu’s progress, though less spectacular, was more

than satisfactory. His bank netted 32 per cent, on its initial capital of
400.000 francs for the first thirteen months of operations.^ His house
represented in the new loan, for one fifth of the total amount, the
Egyptian element: the local business houses plus that small group of
native landholders and officials being initiated into the mysteries
of international capitalism. He himself subscribed the modest sum of
300.000 francs, esteeming his nominative share of 20 per cent, more
than enough for purposes of prestige.^ He was clearly akeady a leader
of the Alexandrian business community.
At the same time Dervieu participated with Oppenheim in a loan of
4.500.000 francs at 10 per cent, to Prince Mustapha Pasha. The loan
was for nine years, interest and amortization to be paid by Marcuard
et Cie in Paris.®
In effect, Der\deu and the Oppenheims were floating here the kind of
standesherrliche Schuldverschreibung that we have seen to be so popular
on the Frankfurt market^ - they could hardly swing an ordinary loan
for an amount almost equal to the combined capital of both firms. The
plan was to dispose of the Prince’s notes to investors in Europe inter-
ested in something more than and 6 per cent. In the mean-
the usual 5
time, the original lenders in Alexandria were to hold as collateral the
Prince’s revenues and the proceeds of his harvests, to be deposited to
his credit in a current account. There is no mention of interest on these
deposits; if, however, the Prince became overdrawn, he was to pay 12
per cent.
Actually, Dervieu’s rates of 10 and 12 per cent, were fair for Egypt,
especially since this type of business could prove quite dangerous -
witness the El-Hami affair. Besides, although Mustapha was a very
important personage - nephew of Said and second in succession to the
throne - his friendship could hurt as well as help. It is not always a
good idea to lend money to heirs to the throne, especially in Oriental
countries. But Dervieu was not to learn this lesson until later.

At the moment, Dervieu’s balance sheet of past profits and prospec-

Oppenheim, Chabert et Qe, the terms granted were the same as for their ‘oldest
and best friends’. Thus commission was to be calculated at ^ per cent., as against
\ per cent, for Dervieu et Cie. Ibid., L.B. 460, 26-2-1862 to Oppenheim, Chabert
et Cie, f. 1073.
^ Of which 14 per cent, was divided between Dervieu and Gallo, and the rest
among the shareholders. Note prepared by E. Dervieu and dated 30-6-1864.
® Dervieu-Andre, 12-3-1862. ® Ibid. ^ See above, n.
3, p. 31.
tive returns was an impressive one. He could, with all modesty, assume
that he had passed his probation successfully. He felt he was now
some credit.
entitled to
Andre agreed. On 28 March 1862, he wrote Dervieu to remind him
that as a rule Marcuards proportioned the size of its credits to the turn-
over of the account; by this standard Dervieu was entitled to a ‘rela-
tively insignificant’ amount. In view of the somewhat ‘exceptional*
character of Dervieu’s operations, however, Andre was placing at his

disposal a credit by acceptance of 100,000 francs.

The difference between this credit and the 500,000 francs granted to
Oppenheim was glaring. Undoubtedly, the wealthier, more active firm
merited more extensive support. Nevertheless Andr^, who was sensitive
to the human foibles of his colleagues and competitors, feared that
Dervieu might resent such discriminating generosity. After all, it was
only a few months before that old-firiend Dervieu had been kind enough
to introduce newcomer Oppenheim to the Paris house. Having put
Dervieu in a good mood, therefore, with the first part of his letter,
Andr6 used the rest to forestall any complaints: the Oppenheim credit
was made under special circumstances; the Oppenheims had not even
used it; if they should now want to, they would need a second approval;
in the future, the real credit would probably be much lower.
We have no indication of Dervieu’s reaction. Presumably the credit
offered by Andr^ sufficed for the moment - there are no more letters
until eight months later. And when Dervieu did write, in November,
he showed that he was quite aware of the difference between his own
firm and Oppenheim’s.

My DEAR Andre Alexandria^ 5 November 1862 ,

... I hope that on your side, my dear friend, you will have been able to judge
by our manner of working the full extent of our prudence and of our desire
to earn for ourselves a good name and an unquestioned reputation for faith-
fulness and integrity. We could have thrown ourselves in with our friends,
the Oppenheims, on a vaster stage, but we have preferred to remain content
with our regular train of affairs on the Alexandria market. We undertake less
than they, but we work more surely.

Dervieu knew what he was saying. Such zealous prudence was ideally
calculated to impress his colleague in Paris. The sdon of seven genera-

tions of Huguenot bankers, Alfred Andre found himself in 1862, at

the age of thirty-five, the effective head of Marcuard,
Andre et Cie, one
of the oldest private banks in Europe.^ It dated from 1667, when
David Andr6, a religious refugee from Nimes, founded a merchant
house in Genoa. The new firm, which engaged particularly in the ship-
ment of leather goods and textiles to and from France and central
Europe and in the importation of colonial products, prospered; the
merchants soon became merchant-bankers. Their financial activities
grew directly out of their commercial relations: arbitrage and change,
commodity loans and consignments, the discount and acceptance of
short-term paper. Here the international fellowship of the Huguenot
exiles was invaluable — Andre was able to deal with known and reliable

correspondents in every European centre. The bank in Genoa extended

its operations, gave birih to offshoots in London and Geneva, even went

so far as to underwrite on occasion large personal and industrial loans. ^

At the end of the eighteenth century, the Revolution had made
France once again a safe place for Protestants, while the campaigns of
Napoleon momentarily paralysed Italian trade. The bank in Genoa
was forced to suspend and liquidate, and in 1800 a new house was
established in Paris. There the family continued its traditional opera-
tions, concentrating at first on Franco-Italian commerce but gradually
widening the sphere of its activities.

It was after the fallof the Empire, however, that the house firmly
established itself as one of the most influential in Paris. Extending its
activities to include participation in French and foreign government
loans and investments in industrial undertakings, Andr^, Cottier et
Cie, as was then known, was a full-fledged member of the Haute

Banque, were the Mallets, Hottinguers, and similar houses,

Its friends

most of them Protestant, all of them solid, conservative firms- And

even within this group, Andre and Cottier had a special reputation for
prudence, which its partners took pains to cultivate.®

^ By contracts of July 1862, Adolphe Marcuard et Cie changed its name to

Marcuard, Andr4 et Cie.

* The talent of the family was not limited to banking. For American and British

readers, the best-known representative of the line will be the gifted but unfor-
tunate Major John Andre of the Royal Army, who was captured by the American
forces in 1780 while negotiating the betrayal of West Point with Benedict Arnold
and convicted and executed as a spy. Alfred was the second cousin, twice removed,
of Major Andr6.
® Cf. Nolte,Ftt«^r^ Jahrcy II, 130. This perhaps exaggerated conservatism had
Louis-Edouard-Alfred Andre fitted the traditional pattern perfectly.
The son of Marie-Jean Andre, banker and receveur des finances^ he
received as a boy the usual education of his group, a strict grounding
in Protestant schools and a practical commercial apprenticeship. These
two influences set the tone of his character. Devout and righteous,
ascetic and purposeful, Andre was at once the image of Weber’s
Calvinist and the epitome of the French private banker. Active in
church and affectionate with femily, he nevertheless dispensed charity
with Puritan severity and tempered personal sentiment with calculation.
In business he was cautious and conservative, a firm believer in the
antique virtues of arbitrage and exchange, of ample commissions and
the ninety-day note. He was profoundly convinced that good banking
restson unshakable liquidity and the proportioning of ends to means.
Above all, he had faith in character first, and money second; a risk was
only as good as the man behind it.^ He had old-fashioned notions, the
idea that a contract is a contract, that a man’s word is as good as his
signature, that debt is abhorrent and a sign of moral weakness, that
slow and steady wins the race. Alfred Andre could never have made
much in Egypt.

apparently characterized the Genoese ancestor firm in the first half of the eighteenth
century. At least, note the opinion of the Lyons banker Jean-Robert Tronchin,
who describes David et Guillaume Andre as the leading French house of the place
(though not nearly so strong as the Italian firm of Pareti) but ‘narrow-minded in
every respect*. L. Dermigny, ‘Circuits de Targent et milieux d’affaires au XVIII®
siede,’ hist.^ CCXII (1954), 259 n. 6.
^ In asking for information about potential clients, Marcuard, Andr^ et Cie
almost always used the formula ‘moralite et solvabilite*; nor was the precedence
accorded ‘morality* an accident. In this connexion, Marcuard-Andr6 accorded
Oppenheim, Neveu et Cie before they knew of the latter’s role in
their credit to
the El-Hami nor was Dervieu’s subsequent letter calculated to enlighten

them. Besides, the credit was not in blank, but was earmarked for a particular
operation. There remains, of course, the question whether Andr6 would have
deprecated an abuse of confidence toward an Egyptian prince as severely as similar
misconduct toward a European colleague.
This brief summary of the history of the Andr4 family and the career of

Alfred Andr4 is derived in large part from the archives of the bank itself, which
contain some of Alfred Andre’s personal correspondence. Printed materials
include two histories of the firm: De Neuflv^e et Cie^ notice kistorique puhJiie a
Voccasion du cent vm^dnqmerm V etabUssement a Paris de leur
anniverscdre de
mcason de hanque (Paris: privately printed, 1926); and De Neufliqey Schlumherger
et Cie, iSoo~icf 5 o (Paris: privately printed, 1950). There is an excellent biography
of Alfred Andre in the Dicmnncdre de biographU franqaxse, II, 898-99.
By courtesy of De NeufUie^ Schlumherger et Cie

V. Alfred Andre 1827-1896

(after a photograph by Nadar c. 1890)

In Alexandria Dervieu was taking in money hand over fist. During

the first half of 1862, net profits were at the rate of 26 per cent. They
rose to 3i|- per cent, for the second half - this after capital had been
increased from one to three million francs.^ Most of these profits were
derived from what the merchant bankers of the period would have

described as normal operations; arbitrage, exchange, the discount and

acceptance of short-term paper.
Yet Dervieu was already well on his way to the higher sphere of
royal banker. His letter of 5 November informed Andre of a major
transaction under negotiation: pa5mient for the Viceroy of 21 million
francs to the Comptoir d’Escompte in Paris; this was the remainder
due on the loan of i860. Dervieu wanted Andre to serve as his agent
in Paris - to receive the remittances from Alexandria, discount them,
and pay the Comptoir. And since a few concessions might make the
difference, Dervieu asked his friend to give him some leeway by reduc-
ing the usual banking commission from i to J per cent.
What Dervieu was asking for was, in effect, more credit. To be sure,
Andr6 would not have to lay out any money. He would simply take the
paper sent to him from Alexandria, discount it, and transfer the pro-
ceeds to the Comptoir. The rub was that, to discount the paper, Andr6
had to endorse it, thereby engaging the responsibility of his firm. In
other words, he was to sell Dervieu not only his services but his sig-
nature, and no one knew better than Alfred Andr6 the worth of his
name. Besides, he was nobody’s fool. If Dervieu wanted to help the
Viceroy pay old debts with new, Andre had no objection to handling
the Paris end of the transaction. But he could not see why he should
pay for Dervieu’s eagerness to do the Egyptian government a favour.
The reply from Paris, dated 14 November, was brief and to the
point: the ‘major inconvenience’ of handling business at reduced rates.
Similar requests were always coming in, Andr^ said, and Marcuards
was always turning them down; even the Oppenheims were unable to
obtain concessions on large shipments of gold to Egypt. And, as Andre
pointed out, if his firm was going to be sticky in matters of arbitrage
and exchange, it was certainly not going to make allowances for ‘a
government that can and must pay’.
In short, it was a question of prindple. In refusing to reduce its
commission for Oppenheim, Marcuards had declared flatly: ‘Our

‘Note sur la Maison Dervieu,* by Edouard Dervieu, 30-6-1964. The note is
experience has shown us for a long time that the immoderate reduction
of commissions does not benefit in the last analysis either the banks or
their customers/ ^ Besides, Andre had every reason to believe that Said
would not turn down an offer of financial assistance for J per cent.; he
was in no position to be difficult. And so it turned out.^

There were to be other clashes between Dervieu’s opportunism and

Andre’s principles. There was, for example, a moment of strained
relations when Andr^ learned that Dervieu had arranged for credits
with two other bankers in Paris.® This was bad enough in itself - how
could Andr6 proportion his advances intelligently if Dervieu was bor-
rowing unknown sums elsewhere.^ Even worse, however, was Dervieu’s
choice of lenders. Neither Roulaud nor Blonay was solidly established,
and the latter in particular was an ‘over-keen’ newcomer, an interloper
whose ‘ardour’ obviously conflicted with banking ethics as Andre
understood them.^
Andr6 wrote Dervieu on 26 January 1863 to express his disapp^al:
‘In view of a relation like ours and our eagerness to place ourselves
entirely at your disposal, I confess to you that I have been very
pained. . ’
Some three weeks later, he received an unrepentant reply:
. .

‘I was pleased to hear your reproaches concerning our drafts on M. de

Blonay, and should be delighted not to deserve them any more. But
with our business expanding every day, we need credit on Europe more
than ever.* The letter went on:

, • . Without flattering ourselves, our paper is very much sought after, and
we are very sober about giving it .1 have made a special effort with your
firm to prove that we deserved your confidence; with Roulaud and de Blonay,
I have simply used the credit I had, when I had to. ... In a word, we deal
with you in everything that we have to do with Paris, but when we have
reached the limit of the credit that you have extended us, we draw on other

not dear whether these percentages are calculated per annum; I have assumed that
they are.
Neuf,, L.B. 478, 7-11-1862 to Oppenheim, Neveu et Cie.
* Cf. ibid., L.B. 484, 26-2-1863 to Oppenheim, Neveu et Cie, f. 1113.
® This multiplication of credit was not uncommon, but the more conservative

banks preferred to avoid such accounts. Cf. Hidy, Barings^ p. 143.

^ On at least two previous occasions, in reply to requests of
Dervieu et Cie for
information, Marcuards had warned of Blonay's ardour. A, L.B. 460,
7-2-1862, ff. 266-7; L.B. 468, 18-6-1862, ff. 645-8.

correspondents. There is the key to the riddle, my dear friend, it is simply up

to you not to have to guess at others of the same sort .... we ask nothing
better than to work with you, but in that case, increase the blank credit that
you make available and rest assured that you have nothing to fear.^

Dervieu could afford to adopt this high and mighty tone: 1862 had
been a banner year both for Eg3rpt and his firm. The American blockade
of Confederate ports had now become a stranglehold, and England saw
her total supply of cotton cut more than half, from 630,700 to 266,550
tons, in the space of twelve months.® The Liverpool market was in a
fever - an unprecedented 46 per cent, of all transactions in 1862 were
purely speculative.® With cotton prices more than doubled and Egyptian
cotton acreage at a new high, the flow of goods and money in and out
of Alexandria reached undreamed of Moreover, thanks to the

recent loan, money was easy; government bonds went from 15 per
cent, to less than 5 per
cent, discount between January and June.® All
in was one of those wonderful years at the beginning of a cyclical
all, it

boom when business is good and everyone expects it to be better, when

few people have as yet had the time to make the mistakes that will
plague them later, when everyone is too busy making money and
thinking of ways to make more to do anything else. ‘Egypt at this
present moment,’ said the Alexandria correspondent of The Times^
‘is in the happy position of requiring but the smallest possible space

on the pages of contemporary history, and that little simply for the
purpose of recording an appearance of prosperity, the reality of
’ ®
which it is difficult to see any reason to doubt. . . .

Further, as Dervieu was careful to point out, all this was but a
piddling indication of what the future would bring. On 18 January
1863, Mohammed Said Pasha, Viceroy of Egypt, died in Alexandria.

^ Dervieu- Andre, 9-2-1863. ® Henderson, Cotton Famine^ p. 35.

* Ibid., p. 15. In contrast, most of the merchants in Alexandria were content to
work as brokers and avoid the risks of speculation, Dervieu-Andr6, 19-11-1862.
This prudence served them well in 1862; by November, cotton had dropped 90
francs a quintal from its high of the year.
* Cf. Appendix,
p. 329. Because Egyptian commercial statistics were calculated
for the Mohammedan year, it is impossible to allot exports and imports by the
Western calendar. Nevertheless, the record increase is obvious.
® A.E.y C.C., Alex., XXXVl, Beauval-Thouvenel, 8^-1862, f. 380; The

Times^ 30-6-1862, p. 10. Since the bonds paid no interest, 5 per cent, was almost
the smallest discount possible.
® The TimeSy 30-6-1862, p. 10.
That same day his nephew Ismail was proclaimed Viceroy in Cairo.
And where under Said, Dervieu had been dealing with the former
pupil of his father-in-law, under Ismail he was dealing with an old
friend.^ In an absolute monarchy where everything depended on the
good will of the ruler, where market competition was subordinated to
privilege and political favour, such a tie was without price. The quiet
hopes of yesterday were forgotten; the sky was the limit.
All of this was not lost on Andr6. He had already received in January
a visit from Dervieu’s brother Gustave, who did not neglect to paint
for him the bright future awaiting Edouard now that Ismail was ruler.®
Andr6 could see Dervieu growing - growing too quickly in fact for
Andre's conception of credit as an accessory at best to regular business.
Yet some concession was obviously called for. On 7 February 1862,
therefore, even before receiving Dervieu’s reply to his letter of 26
January, Andr^ voluntarily reduced his commissions on Dervieu's
current transactions to those paid by the best and oldest clients of the
Dervieu's letter of February, however, made it clear that something
more was called for. On the twenty-fourth, Andr^ wrote to Alex-
andria to express his regret that he had not been made aware of his
friend's needs sooner, and to raise Dervieu's credit to ‘200 or 250,000
francs'. This carefully worded appeasement was followed by a para-
graph of admonition:

It seems to me that your legitimate ambition and the requirements of your

business will in that way be largely satisfied. In the position you find your-
self in today, disposing of an important capital and distinguished patronage.

^ Ismail had apparently used Dervieu et Cie as his personal bankers for some
time previous to his accession. Cf. jF.O. 142-27, Colquhoun-Russell, no. 109:
® Gustave was a partner in the merchant house of Didier, Dervieu et Cie,
The new firm began operations
successors to Amable, Didier et Cie of Alexandria.
on January 1863 with 200,000 francs, of which 100,000 from Didier, 50,000

from Gustave Dervieu, and 25,000 each from Edouard Dervieu and Gallo. At the
very start, it opened a Paris office to fadlitate import operations. Didier-Dervieu

became increasingly active in Egyptian trade as Edoiaard Dervieu’s bank rose in

influence and importance. Dervieu-Andre, 19—11—1862. By the end of October
1864, reinvestment of profits had raised the capital to 400,000 francs. Neuf,y A .

carton ii, note on Didier, G. Dervieu et Cie, undated (c. middle of i866). The
same note speaks of the initial capital as 225,000 francs.
^ A . Neufly L.B. 484, 7-2-1863, f. 323.

your success seems assured, and you are continuing, I am sure, to seek much
less after speculative undertakings and vast combinations than after legiti-
mate negotiations and sure transactions. I hope the new facilities that my
associates have been pleased to place at your disposal will convince you that,
if I have your success at heart, as is quite natural when I think ba(i to our
good relations in the past, I am also confident that neither they nor I have
cause to regret what we intend to do to be agreeable to you by contributing
to the development of our relationship.

Andr6’s hand was forced; Dervieu had become too promising a

client to lose. All the same, Andrd was reluctant to give him carte
blanche. The pride and optimism of the Alexandrian’s letter were
encouraging, but to the practised eye of Andr6, there was a certain
elation, even inebriation, about it that gave him pause. To the sober
Puritan, enthusiasm and banking simply did not mix. Two hundred or
250 thousand francs. Andr^ hoped that his friend would stick to the
lower figure.


The character of Isma’il, first of the Khedives, is one of those

moot questions that are the spice of history. In the thirteen years fol-
lowing his accession, the Egyptian national debt rose from £^^ 00^000
to ^£91, 000, 000; in 1876 Egypt was bankrupt, an easy prey to foreign
domination. So much is fact.^ The rest, the reasons and responsibilities,
is conjecture and controversy.®

1 Actually, even ‘facts* are not always certain. The figure of £3,300,000 is the

one usually given in histories of the reign of Ismail, Hamza, Public Deht^ pp. 61-4,
however, gives the ‘actual debt* leftby Said as ££6,500,000, of which ££2,700,000
was left from the reign of Abbas. (One pound Egyptian was worth a litde over
one pound sterling; for the purposes of this context, they may be considered
equal.) Hamza apparently arrived at this figure by deducting assets 'conserva-
tively estimated’ at ££5,600,000 in cash, goods, and equipment, plus ££400,000
left over from the loan of 1862, from a total treasury debit of ££12,500,000. Since
goods and equipment^ however, even when conservatively estimated, hardly
qualify as assets in calculations of this kind, the net debit was surely even higher
than ££6,500,000. £ven so, the increase of the debt to £91,000,000 by 1876 was
nothing less than phenomenal.
® The best history of Ismail’s reign, though somewhat colourless and definitely

pro-French, is G. Douin, Histoire du regne du Khidive Ismail (4 vols.; Rome,

1933-8). Unfortunately, the first two volumes of Douin’s work are exasperatingly
lacing in foomote references, even for citations. Less detailed, though much
stronger on the less savoury aspects of the period, is Sabry’s strongly pro-
Egyptian Empire igyptien. On Ismail himself and his responsibility for the bank-
ruptcy of 1876, there is a whole literature pro and con. Following the spectrum
from most favourable to most censorious, some of the more important work are
P. Crabit^s, IsmcdL, the Maligned Khedive (London, 1933); G. Zananiri, Le
Khidive Ismail etVEgypU^ 1830-1894 (Alexandria, 1923); S. Keay, Spoiling the
Egypuansi a Tale of Shame (London, 1882); E. Farman, Egypt and Its Betrayal
(New York, 1908); E, De Leon, The Khedivds Egypt (New York, 1878); [M. Bell],
Khedives and Pashas (London, 1884); E. Dicey, The Story of the Khedivate
(London, 1902); idem, England and Egypt (London, 1881); Lord Cromer

For many historians, he has always been Ismail the Profligate, a man
who found his country rich and thriving and left it poor and in bond-
age, a man of overweening ambition and reckless prodigality, a wastrel
and voluptuary, spendthrift and fool. For others, he is Ismail the Mag-
nificent, pathfinder and statesman, a man of vision and sincerity whose

only desire was the happiness and greatness of his people. If he bor-
rowed, it was for the worthiest of reasons: to help his subjects in their
misfortunes, to build public works, to bind his nation with railroads
and steamboats, to convert Alexandria and Cairo into healthful, com-
fortable cities. And if he borrowed too much, it was only because he
was at the mercy of as unscrupulous a band of knaves as ever plucked
a bird.
Actually, the tangled, contradictory facts of Ismail’s life furnish evi-
dence for both points of view. As a young man, he was a highly suc-
cessful landowner. By progressive, efficient farming, he increased his
holdings threefold and multiplied his income by five. His cotton was
the best grown; his sugar refinerywas the wonder of Egypt; his fortune
was untouched by debt.^ At the same time, he did not neglect poli-
tics, and had learned something of the problems of the Egyptian gov-
ernment before becoming ruler. Under Abbas, he had led an informal
family opposition, a parti des princes^ and had almost paid for his temer-
ity with Ws life. As heir apparent under Said, his situation was quite
different. In a country where proximity to the throne could be danger-

ous - Ismail’s older brother died in a railway accident that may not
have been an accident - Ismail was wise enough to remain quietly on
his estates and stick to his cotton and sugar.® Nevertheless Said, who
was not particularly fond of his nephew, felt compelled to recognize
his status and prepare him for the responsibilities of government.
Ismail was given a ministerial portfolio and sent to Paris and Rome on

[Evelyn Baring], Modern Egypt (New York, 1908), vol. Ill; Milner, England in
Egypt",Anon., Egypt for the Egyptians (London, 1880); W. B. Jerrold, Egypt
under IsmcSi Pasha (London, 1879).
1 Cf. A,E,, Mto. et Doc., Egypte, H, report of A. Le Moyne on the condition

of Egypt, 24-2-1863, f, 22. According to A.E., C.C., Alexandria, XXXVI,

Beauval-Thouvenel, 16-9-1862, f. 406, Ismail’s cotton alone gave him more
than six million francs for 1862.
142-26, Colquhoun-Bulwer,no. 5; 3-2-1862; De Leon, TheKkedivds
Egypty pp. 157—8; Dicey, Story of the Khedivate, p. 56; Sacre and Outrebon,
UEgypte, p. 13. Cf. also The Times, 3-4-1857, p. 8; 4-4—1862, p. 12; 23-4-1862,
p. 12.
he became President of the Deliberative Council,
Special missions. Later
to which, in principle, were submitted all non-routine decrees and
decisions; and when, in 1861 and 1862, Said left Egypt to visit Mecca
and Europe, it was Ismail who acted as regent. By comparison with his
uncle, he was strikingly efficient. ‘Never before, perhaps, within the
recollection of the present generation,’ wrote the correspondent of The
Timesy ‘has public business been transacted with anything like the
promptitude and regularity which have lately marked its progress.’ ^
For some, he was too good an administrator. His careful manage-
ment of his fortune was avarice to those habituated to ihe largesse of
Said. There was something unroyal about it, something bourgeois
which the bourgeois leeches of Alexandria resented. The French consul
found him ‘less a prince, less a King than his uncle’.® Even Colquhoun
thought he did not have ‘some of the qualities which really distin-
guished Said’.® Nevertheless, the general feeling in themore respon-
sible quarters was Egypt needed some good management badly.
Ismail did not disappoint them. On 20 January 1863, in accepting
the congratulations of the representatives of the foreign powers, he
explicitly endorsed a programme of economy and reform, beginning
with himself:

I am firmly decided to devote to the prosperity of the country that I am

called upon to govern all the perseverance and all the energy of which I am
capable. The basis good administration is order and economy in
of all

economy by every means possible, and

finance; I shall seek this order and this
to give an example to all, at the same time as a proof of my firm intentions,
I have decided as of now to abandon the system followed by my predecessors
and to set myself a civil list that I shall never exceed.*

In short, Ismail’s intentions were good. The question was, were

good intentions enough?
His predecessor left him an impoverished throne. The loan of 1862
had given Egypt a brief moment of respite from financial crisis, but the

^ The Ttmesy 30-<^i8(j2, p. 10. It should be remarked that the Alexandria cor-

respondent of The Times in this period was rather partial to Ismail- Nevertheless,
the item is corroborated by F.0. 142-25, Colquhoun-Russell, no. 17: 1 1-2-1861;
no. 26: 5-3-1861; Colquhoun-Bulwer, no. 10: 4-3-1861; F,0. 142-26,
Colquhoun-Bulwer, no. 21; 26-5-1862; no. 4: 19-1-1869.
* C.C., Alex., XXXVI, Beauval-Thouvend, 16-9-1862, f. 407.
®F.O. 142-26, Colquhoun-Bulwer, no. 4: 19-1-1863.
* Among others, Douin, Histoire^ I, 1 f.

euphoria of the moment when it became apparent that

faded quickly
Said would not and could not put house in order.
The old prodigalities continued. Nothing was too small for the
generosity of the Viceroy; nothing too petty for the greed of his Euro-
pean friends. A French furniture merchant was going bankrupt and
needed 100,000 francs to pull through At the request of the consul the
Viceroy took some of the man’s unsaleable merchandise oflFhis hands.^
The daughter of an old doctor of Mohammed Ali found herself an
orphan and poor? The ever-solicitous French consul brought her case
to the attention of the ever-benevolent Said, who settled a dowry on
In May 1862, before leaving for Europe, the Viceroy distribut-
ed in one magnificent gesture seven million francs in liberalities and
settlements - two words for the same thing. Among them were various
claims against Mohammed Ali, carefully nurtured during the ungra-
cious reign of Abbas to be presented in their compound glory to his
gullible successor. One was based on a so-called ‘bill of exchange’ for
over a million francs - probably the oldest piece of short-term paper in
the world.® With these disagreeable matters finally taken care of. Said
was free to leaveEgypt and take one of those royal trips that are always
so expensive now that kings can no longer visit and live at the expense
of their vassals. As befits his rank, he travelled in luxury and spent
without care, multipljing his day-to-day outlays by orders for gun-
boats, hothouses, and similar baubles. For a short time, debts and bonds
and maturities were forgotten. But ‘forgotten" was not ‘gone". The
budgetary deficit hit a record million; by the end of the year, the
60 million francs of the loan were down to 10, and the floating debt
had passed £12 million. Sick in body and heart, Said confided to
Bulwer in Constantinople his remorse at having dilapidated his
country’s fortune.^
A month later he died. The vultures gathered, their appetites sharp-
ened by the prospects of leaner days ahead. Said’s death served his
friends and suitors well. No one was left to dispute their claims, based

C.C., Alex., XXXVI, Beauval-Thouvenel, 29-4-18(52, f. 345. The

forms were stricdy observed; two independent French merchants, one of whom
was Dervieu, fixed the prices of the pieces chosen.
^ Ibid., 15-3—1862, f. 326. * Ibid., 10-5-1862, f. 349.

^F, 0 141-52, Bulwer-Russell, 15-12-1862, in Bulwer-Colquhoim, no. i:


10-1-1863. On the treasury deficit, see below, Appendix D. The reader will not
be surprised to note that there is no precise corrriation between the budgetary
statistics and estimates of the fioating debt.
more often ilian not on alleged violations of alleged oral promises and
contracts. Bravay, for one, turned up with a sulphur concession that
Said was awarded in dying to the Due de Bassano - the
said to have
nobility of France was not going to yield in imagination and rapacity
to that of Austria,^ At the same time, Ismail was pressed to show his
benevolence to his guests from across the seas, whose feelings - and
sometimes more - had been hurt by the usual anti-Western riots at the
accession of a new ruler. He gave M. Conseil, a de bonne famille"
who was in Egypt for his health, 10,000 francs and an annual pension
of 3,600 to compensate him for a beating at the hands of Egyptian sol-
diers. Others received lesser sums. The French consul recommended
to his consideration a certain Mme Escalon, worthy widow and mother
of five; she got 12,000 francs. Ismail’s complaisance even encouraged
some French nationals whose shops had been damaged by a recent fire
to institute claims for indemnity. The consul Beauval found this un peu
fort; but he did suggest that Ismail lend them one million francs, pay-
able in ten years; as he wrote Paris, he felt that the Lyons silk trade
would suffer if they did not get back on their feet. Ismail agreed to
advance three quarters of the amount.^
Colquhoun, the British consul, who had long led the fight against
foreign extortion and exploitation- although his own record was not
perfect - realized that here was a turning point. He wrote to London:®
I plainly perceive that the acts of the new Viceroy within the next few
weeks will influence his whole reign: if he can be made aware that he will be
supported in a resistance against a system of persecution on the part of Euro-
peans backed by iheir authorities, ... I think Ismail Pasha will not only put
in order theCountry in spite of the heavy burdens which weigh it down, and
must do so for some time, but that with his practical knowledge he may be
induced to undertake works of great public utility. , . .

The important point, of course, as Colquhoun stressed repeatedly in

^ Cf. 142-26, Colquhoun-RusselI,nos. 31 and 32: 26-2-1863. Itis interest-
ing to note that Beauval, in a letter of 18-2-1863 to Drouyn de Lhuys in Paris
C.C., Alex., XXXVII, f. 35), said nothing about this claim of a verbal
concession, merely ihat he hoped to get the abandoned sulphur mines for the
Marquis [sk:] of Bassano. On the twenty-seventh, he wrote to say that the conces-
sion had been promised and that he felt it was essential that the mines be in
French hands. Cf. the Castellani affair, p. 92, above.
* C.C., Alex., Beauval-Drouyn, 18-2-1863, 19-2-1863; Chambre de
Commerce, Lyons, to Tastu, 6-3-1863.
* F. 0 . 142-26, Colquhoun-Russell, no. 32: 26-2-1863.

his letter, was that Ismailhad to be helped. But when Colquhoun talked
with his fellow consuls, he found that, while all of them deprecated the
abuses that prevailed, each felt that in all fairness he had to give his own
nationals the support available to citizens of other powers. The French
consul Beauval, who was at once one of the most pious in his dis-
approval of the system and one of the most energetic in his recourse to
it, realistically confided to the ministry in Paris that he did not think

Ismail could effect his programme in the face of foreign pressure.^

And what of Ismail himself.^ In what wellsprings of character was he
to draw the courage and determination to resist.^
he was a benevolent despot, with
Essentially, all the merits and
faults associated with so paradoxical a position. Solid and methodical
in everyday life, Ismail was nevertheless a visionary. He had big plans
for Egypt, a sincere interest in the welfare
and greamess of his people.
Unfortunately, these visions were not tempered with the practicality so
He lacked a sense of propor-
indispensable to effective statesmanship-
tion.His plans were more than big; they were grandiose: huge public
works, an empire in Africa, a position of international eminence - all
the paraphernalia and creature comforts of Western civilization, all the
prestige and trappings of Western power, the accomplishment of
centuries, in a matter of years.
Nor was he capable of the day-to-day decision and manoeuvre that
such a programme implied. Not that he was lazy. Ismail was a con-
scientious manager. All those who knew him were impressed by his
assiduity in accomplishing the paper work and formalities of govern-
ment. But diligence is not skill or tenacity. In the continual skirmishing
for advantage, in his struggle with Lesseps over Suez, with European
bankers over loans, concessions, and contracts, with England, France,
and Turkey over the status of Egypt, Ismail seemed to lack the ability
to assess the possibilities of his own position or the doggedness to stand
and fight when a little resistance or persistence would have made all the
difference. He was at bottom an oppormnist who preferred to skirt
obstacles rather than overcome them - a fetal mistake. For not only did
it prove costly in specific negotiations with diplomats and financiers
who never forgot the business at hand, but each redoubt turned rather
than stormed remained a threat to his rear, sapping his strength and
eventually dragging him down.
^ A.E,^ C.C., Alex., XXXVII, Beauval-Drouyn, confidential, no date (January
1863), f. 14.
This tendency to dodge issues derived in part from a certain tender
concern for the dignity of his station. Ismail wanted to govern as well
as rule, but he was not ready to demean himself, before Westerners
especially, by rolling up his sleeves and messing with the pettiness and
chaffer of business and politics. The fact that some found him ‘less a
Prince, less a King, than his Uncle’ only increased his determination to
play the lofty monarch: a dangerous conceit in the face of adversaries
who cared little or nothing for their own self-respect.

In Ismail, this conflict between the dignity of his rank and the
requirements of his position was especially acute in that, personally, he
was not above worrying about little things. The reputation for thrift of
Ismail, the man, was not unearned; to the end of his days he was almost
miserly about die expenses of his household. He could fight with his
gardener over trifles or refuse a tip to his bellboy in a Paris hotel. ^
Unfortunately, Ismail the Viceroy could not see the pounds for the
farthingsand demonstrated before long an appalling talent for spend-
ing money. Not that he was a sybarite. Even when he spent on palaces
and entertainment, it was for the palaces and entertainment of the Vice-
roy, not of Ismail. But he felt keenly the dignity and duties of office,
and in the Oriental tradition placed great emphasis on the efficacy of
pomp and circumstance as instruments of policy.
He had one real asset. Though far from prepossessing in appearance
- one observer has described him as ‘undoubtedly ugly’, with ‘large,
thick, and broad’ ears, eyebrows projecting in a ‘ragged, red tangle’,
and one eyelid drooping more than the other - he was a fascinating
personality, a superb conversationalist with a feel for human beings.
Unlike most absolute monarchs, Ismail was always ready to receive
visitors, important and unimportant, with courtesy and kindness. Swift

in his observations and acutely adaptable, he was never the same thing
to different people. As the same observer expressed it:
‘I have heard him

praised by different people for precisely opposite and contradictory

qualities. To one man he would be all suavity and mannerism, and you

would hear him praised for his polished manner and knowledge of
savoir-faire. Another man would laud him because he was businesslike
and went straight to the point.®

^ Des Micheb, Souvenirs de ccariere, i8 S5-iB86 (Paris, 1901), p. 117.

® [Bell], Khedives and Pashas^ p. 9 f.

Under the circumstances, one must credit Dervieu with sincerity if not
perspicacity in his optimistic assessment of the prospects of Egypt
during the coming reign. On 27 March 1863, he wrote Andre:
With Ismail Pasha as Viceroy of Egypt, we are going to see the country
prosper more than ever. He We shall no
has a serious, thrifty disposition.
longer see those government contracts yielding an incredible profit, those
monstrous law suits, those rapid fortunes which characterized the reign of
Said Pasha. We shall see business done regularly, coherendy; we shall see the
credit of Egj'pt establish and fortify itself.

Of course, there was more to it than good administration and the

anticipation of ‘regular, coherent’ business. Where, after all, w^ould the
Dervieus have been if the Viceroy had really been thrifty,^^ The same
letter of 27 March continued:

My relations with Ismail Pasha continue to be excellent, even intimate.

They have not yet produced results, to be sure, in a material way, but that
will am certain that no big financial operation will be organized with-
come. I
out my participation; we have a lot of plans on the fire with Oppenheim.
There is no need to tell you that the first ones we shall think of to work with
us in Europe will be you.

The weeks passed, however, and nothing happened. Dervieu fretted.

He found himself in the position of the man who sat down hungrily to
dinner only to find that the table had not yet been set. Worse yet, there
might not be any dinner at all.
His fears proved groundless. On 8 May he wrote Andr^ in barely
contained triumph that Ismail had asked him to increase the capital of
his bank from three to ten millions so that he might *take over Ae first
place in the countryand undertake all the affairs that the desire of His
Highness to develop the agriculture, commerce, and industry of Egypt
will give rise to*, "^^at is more, Ismail had promised to invest at least
two million francs of his own in the new firm - in other words, he
would be one of the silent partners.
You must understand, my good friend, you who understand the Orient,
what possibilities the participation of His Highness opens to me. He could
have done nothing that would be more agreeable to me, that could bring
morehonour to me, and it puts me in a position to preserve my individuality
and make a fortune in a few years.

This was spectacular progress, even for the Egypt of the cotton
boom. Barely two years before, in December i860, Dervieu had started
with a paltry 400,000 francs, some good contacts, and a healthy dose of
optimism; now he was on his way to ^the first place in the country*. His
account with Marcuard-Andre, where items of a few hundred or a few
thousand francs had once dominated, was now filled with entries in five
and six figures- His profits for the year ending June 1863, he wrote,
would yield a dividend to capital alone of 16 per cent. - this without
benefit of ‘privileged* undertakings.^ How much greater, would

they be in the future! Dervieu gave Andr6 the details of the new
company and asked him if he, or any of his friends in Paris, would care

to join.2
Even before Andre received Dervieu*s letter, however, he had
written to Alexandria on 10 May to propose something entirely differ-
ent: the transformation of the Bank of Egypt into a national institution

similar to the Ottoman Bank. ‘The public’, he had noted, ‘looks favour-
ably on the organization of firms of this nature. .

Here lay Andre’s real interest, and the magnitude of the project gave
something of the measure of his thinking. The Imperial Ottoman
Bank, as we have seen, was international high finance at its highest. The
creation of some of the strongest firms in Europe, it held in its hands
the financial life of an Empire. It was solid, its future guaranteed by
privileges and monopolies. It was versatile and flexible, with all-
embracing statutes that permitted it to shift its activities in whatever
direction was most profitable.
Above all, it had been a magnificent promotion, such as falls to few
financiers. In the weeks preceding issue, British investors had fallen
over one another in the rush to buy scrip at up to 13 and 14 pounds
premium a share.® And 125,000 of these shares had been expressly
created for, and sold to, the promoters at par as a reward for their

^ Sixteen per cent, to capital would mean a total net of 26^ per cent. In fact, the
year eventually yielded 31 J per cent., of which 19 to capil^. A, Neufy ‘Note
sur la maison Dervieu', 30-6-1864.
® According to Dervieu’s letter of 8 May, the conditions were: limited partner-
ship; four years’ duration (Dervieu hoped to get along alone after that or even
retire to Europe); first 6 per cent, of profits to capital, the rest shared 60 per cent,
to capital and 40 per cent, to the active partners (Dervieu and Gallo); salaries
totalling 25,000 francs to the active partners. According to P. Dervieu, ‘Famille
Dervieu', pp. 12-15, the arrangements were 5 per cent, to reserves,
57 per cent, to
capital, 38 per cent, to the active partners. These figures were apparently based on

the acte de society,

® The Times, 3-4-1863, p. 5.

efforts - not to speak of 10,000 more that could not even be accounted
for and apparently ‘had been given away’.^
The whole operation was a splendid example of every thing-for-the-
promoter-and-let-the-stock-holder-be-damned. The shareholders of
the old Ottoman Bank were notified of the contemplated change to the
status of imperial bank by a circular of 10 February 1863- The circular
was sparing in its details, and a reply was required by the fourteenth.^
Most of the shareholders never had a chance to think the matter over,
much less convey their opinions to the management in the delay per-
mitted. Nevertheless, the transaction certainly looked like a good
thing; it was not until the first annual meeting in June of 1864 that the
shareholders learned just how much of a good thing. In addition to the
above-mentioned stock bonuses, there was a levy of 10 per cent, on dis-
tributed profits for the benefit of some twenty-five or thirty unnamed
‘founders*. There were salaries and other expenses that amounted to
over ;;C54jOoo, almost a quarter of the gross profits. There was a bonus
to the directors over and above the 10 per cent, to founders. And when
there was a lucrative promotion by the bank might mitigate for the
stockholders the pain of these managerial tolls - the new Soci^te G^n^-
rale de I’Empire Ottoman, for example - the stock of the new firm
was reserved for the already richly rewarded promoters of the old. As
one unhappy shareholder put it; ‘I confess I like to reap the profits of
my investment and I do not like risking my money for the benefit of
other people. I am at issue with the plea that the bank is a mine in
which certain persons are to dig for their own advantage. . .* ® .

It was one thing to be at issue and another to do something about it.

The new Imperial Ottoman, unlike its predecessor, did not come under
British law. The stockholders could fulminate to the newspapers;
their hands were tied. Besides, there is nothing like money to soften
indignation, and the Imperial Ottoman paid handsome dividends

^ Money Market Review^ IX (1864), 42, 79: bitter letters from the under-
privileged stockholders. The Money Market Review fairly quivered with indigna-
tion at such shameless plimder, perhaps because so much of the money was going
into French pockets. ‘The instances of joint-stock promoters who have pocketed
their £5,000 or £10,000 sink into perfect insignificance beside this case. Here is
half a million of money coolly pocketed by promoters who did not promote,
founders who did not found, and were not, in fact, founders at all, but only
jobbers on a grand and magnificent scale.’ Ibid., p. 104; also p. 371.
® Ibid., p. 105, * Ibid., p. 109.
This was the sort of possibility Alfred Andre envisioned for Egypt.
The were tremendous; the field, wide open. As regards possible
competition, there were only two conceivable candidates, neither of
which was really a threat: the Bank of Egypt and the Sod^te Finand^re
The Bank of Egypt had the right name, but as Andr6 wrote Der-
vieu, it was really not what the name suggested. For one thing, it was
weak. Just when most Egyptian firms were falling over daemselves in
the scramble for wealth, the Bank, hard hit by
mismanagement of
Pasquali, was pinching pennies to make up losses.^ At the same time -
and this was probably more important in die long run - it was small in

vision and scope. Its British directors were not cut out for royal
finance. They were sober, conservative men who liked regularity in
their dividends and orthodoxy in their transactions- Even before the
Pasquali d&acle, they had chosen to miss the boat. When Said came to
them in 1858 to ask for a loan, they did exactly the opposite of what
the Ottoman Bank was doing in Turkey: they turned him down.^ This
was good banking. It was wretched business.
The difficulties of i860 strengthened this conservatism. At a meeting
of stockholders in August 1861, the directors defended the infrequency
of their operations with the government on the grounds that business
ties would lead to a loan, which they would rather avoid.® Later on

they came to realize their mistake, but by then it was too late;* the
Oppenheims and Dervieus had taken over. From Andre’s point of
view, the Bank of Egypt was simply good clay - if moulded by the
right people.
The Societe Finand^re was had
quite another story: a bank that
almost been stillborn and had survived as a deformed anomaly. It was
a second-rate creation, conceived in bitterness by Pasquali, who was
determined to show his former employers what a mistake they had
made in firing him, and delivered in confusion by a mediocre and
^It was not until 1864 that the Bank was able to distribute more than its
customary pre-Pasquali 7 per cent.; the meeting of 29 July 1864 announced a
dividend for the first semester at the rate of 10 per cent. Bankers* MagazmSy XXI
(i86i), 639—41; XXII (1862), 167-9; xxin (1863), 203-5; xxrv (1864),
296-7, 850-4.
* The Bank refused to lend £j milHon on the security of the railway revenues.
The Times, 5-3-1859, p. 10.
* Bankers* Magaiine, XXI (1861), 639-41.
*Ibid., XXIV (1864), 296.

motley board of directors.^ There were among the French members of

the board a Duke, a Count, and two Knights of the Legion of Honour,
none of whom possessed that mercantile distinction that is far more
effective than crests and escutcheons in unsealing the purses of bour-
geois, There was one director of some standing: the well-known
banker, E. Rougemont de Loewenberg. But the greatness of the
Loewenberg house lay in the past, and while it still retained something
of its old prestige and clientele, its financial weakness was leading it
into increasingly questionable undertakings. For insiders, its participa-
tion in the Society Financifere d’Egypte was not a recommendation, but
a warning.® Otherwise, there were only commercial nonentities, who
probably derived far more prestige from the company than they con-
ferred upon it. The English representation was composed of similar
hopefuls - ungraced, however, by coronets.® Here the guiding spirit
was J. Lewis Farley, ubiquitous publicist and projector of Levantine
banking, who commanded wide respect in England as an expert on,
rather than as a practitioner of, Near Eastern trade and finance; Farley
became, together with Pasquali, one of four resident managers in Alex-
andria. The company did have, to be sure, a distinguished group of
correspondents, most of them Greek houses, throughout the Mediter-
ranean and Orient,^ But these were simply firms that had agreed to

^ The Timesy 2-12-1862, p. 4; Economisty 19-3-1864, p. 376. The nominal

capitalof the firm was £600,000, of which £180,000 was said to be paid in. Money
Market Review VII (1863), 415. If we are to trust the declared percentages of
dividends, however, the actual paid-in capital was only 3,166,666 francs (approxi-
mately £126,000). Bankers* Magaiiney XXIII (1863), 54 f.; The Timesy lo-ii-
1863, p. 6; Economisty 19-3-1864, p. 376.
® Cf. A, Neuf,y L.B.
498, 26-9-1863 to Dervieu, f. iioo. Loewenbergs failed
on 9 November 1864 with liabilities of £800,000 and questionable assets of
£620,000. Mon, Mar, Rev,y IX (1864), 543. Andr6 wrote in a postscript to an
official letter to Dervieu et Cie: ‘The suspension of payment by the old house

Rougemont de L. [«c], though expected for some time, is nevertheless distress-

ing.’ L.B. 526, 9-11-1864, f. 395.
® The English agents were Cavan, Lubbock, and Co., a merchant house com-
pletely independent of the well-known private bank of Robarts, Lubbock and
Co., although Neville Lubbock of the former was one of six sons of Sir John
William Lubbock, senior parmer of the latter. Bankers* MagaAney XXV
* The Times 2-12-1862, p. 4. Apparently through its ties with the Greek
houses, the Society Finandfere became the Paris and Alexandria agents of the
Imperial and Mercantile Credit Association, Barkers* Magaiiney XXIV (1864),
handle, for a compensation, the transactions of the Sodetd Financifere
in their respective dries. Their names were impressive in the adver-

tisements, but in fact said little about the intrinsic solidity of the
The bank had real difficulty constituting itself legally. In Egypt as in
Europe, permission for the establishment of a joint-stock company was
contingent on the subscription of the capital, and the promoters of the
Soddte Finandere found it far easier to draw up prospectuses than to
draw in investors. In order, therefore, to persuade certain merchants to
subscribe, the promoters were compelled to promise them credit from
the firm-to-be equivalent to, or greater than, the paid-in value of their
shares. In effect, the bank was mortgaging its prosperity before it

began. Even more serious, such procedures made its very status ques-
tionable and exposed it to damaging lawsuits.^
To top off this concoction of machination and misrepresentation,
both directors and stockholders had parridpated in the company on the
misapprehension, energetically cultivated by Pasquali, that the firm
would from the Egyptian government. This
receive all kinds of favours
was predsely the deception Pasquali had practised upon the English
directors of the Bank of Egypt,^ and here, as there, the Egyptian
authorities were quick to demur. In i86i and 1863, the promoters were
reminded that while the Viceroy was pleased to permit the establish-
ment of new banking facilities in Egypt, he would under no circum-
stances confer special status on any one firm.® These categorical state-
ments did not suffice, however, to discourage the promoters. They
invited Sabatier, former French consul general in Alexandria and an old
hand at bullying and extortion, to join the board, and went on pro-
claiming their privileged position.* In Egypt, Europeans did not have
to take no for an answer.
At the same rime, in order to begin as impressively as possible, Pas-
quali tried to hire away some of the best-known employees of the other

^ Cf. Th^ Timesy 10-11-1863, p. 65 12-11-1863, p. 7; 23-11-1863, p. 6; also

Mon, Mar, Rev,^ VII (1863), 415.
Magcv^ey XXIV (1864), 851. Cf. A.E,y C.C., Alex., XXXV,
Sabatier-Walewski, 22-2-1856. At that time, the French consul described
Pasquali as ‘already known in Egypt for very sad business antecedents*.
^A,E,y C.C., Alex., XXXVI, f. loi: copy Koenig Bey-Pasquali, 3-4-1861;
f. 169-70: copy Zulfiqar Pasha-Soci6t6 Financi^re d’Egypte, 10-6-1861; The

Timesy 19-1-1863, p. 12; 10-11-1863, p. 6.

* Dervieu-Andr^ 18-4-1863.

banks by 'rolling out a golden carpet for them’,^ The effect was to unite
some of the most powerful houses with the government
in Alexandria
in their opposition to the interloper. Moreover internal dissension soon
aggravated the handicap of outside hostility. The bank was in principle
international, the product of a merger between French and English
interests. But there was all the difference in the world between the

almost instinctive collaboration of the cosmopolites of high finance and

the grudging co-operation of neophytes with all the national peculiar-
ities and prejudices that go with limited commercial horizons. From the

start, the French and English directors quarrelled. There were reports

of diversion of funds, of a fantastic payment of £30,000 to Pasquali and

the other promoters for the special privileges that they claimed to be
bringing the company. There were rumours of Farley’s resignation and
an attempted purge of the English directors.* By the end of 1863, the
Soci^te Financiere d’Egypte was, after Suez, one of the most popular
whipping boys of the loyal British financial press. All of which hardly
helped it.

Under the circumstances, Andre was more than justified in planning

a new, truly national bank and in counting on Dervieu to handle nego-
tiations at the Egyptian end. He had not counted, however, on things
moving so fast in Alexandria, and Dervieu’s announcement of an
expanded partnership must have seemed an unfortunate diversion. The
change was nevertheless a step in the right direction and in no way pre-
cluded the later creation of a national bank. On 17 May, Andre wrote
in haste to congratulate his friend and to accept a share in the new
In the meantime, Dervieu had just about completed the subscription
of his ten millions by the beginning of June. Not only had the Viceroy
taken 2,500,000 francs rather than the minimum of 2,000,000 francs
promised, but many of the princes and high officials had invested large
amounts as well. The new firm also included some of the leading
merchant houses of Alexandria: Briggs and Co. for 500,000 francs,
^ Ibid, The prospectus was advertised in England in December 1862. Actual
operations began in February of the next year. The. Times^ 31-10-1863, p. 7.
® The Times^ 28-10-1863, P- 75 31-10-1863, p. 7; Banker^ Magaiine^ XXIII
(1863), 724; Money Market Review^ VII (1863), 298, 415. Farley did in fact resign
by October 1863.
® Initially Andre asked for 300,000 francs in his firm’s name. This was shortly

after broken down, however, into 150,000 francs for Marcuards and 150,000 for
the brothers Heine^ See below, p. 143.
Ruyssenaers for 600,000, Dumreicher for 325,000; even a competitor
like Hermann Oppenheim had subscribed for 250,000 francs in his
wife’s name.^
There was an uproar when the business community of Alexandria
learned of Ismail’s participation in the new bank. The bogy of monop-
oly, laid since the death of Abbas, reappeared in new guise: where
before it was the Viceroy himself who threatened to comer the market,
now it was a small group of insiders, who ‘had wound themselves
round the Viceroy to the exclusion of all others’. The smaller British

merchants, particularly, were aroused and came loudly protesting to

Colquhoun, who found himself tom between of free
his veneration

trade and his respect for free enterprise. After he could hardly tell

the Viceroy how to invest his money. Until there was specific evidence,
therefore, of a return to a reign of privilege, Colquhoun felt he could do
nothing. But he expected the worst - the Dervieu bank would ‘bear
It certainly would. Dervieu had arrived ~ not only in Egypt but also
in the world of international banking. Theretofore, his only tie with
the powers of this world had been through Andr6, and, firiendship
had been one of banker and client. Now they
aside, their relationship

were partners. Moreover Andr^ had brought some of his friends with
him. There was Denion du Pin - the name was orthographically if not
phonetically impressive - one of the leading capitalists of the day, a
director in such powerful firms as the Messageries Maritimes, the
Forges et Chantiers de la Mediterran^e,® and the Imperial Ottoman
Bank. Du Pin invested 100,000 francs. There were also the brothers
Heine. Like Andr^, they were bankers by profession and tradition,
members of the same family of which Heinrich Heine was at once the
most exceptional and remarkable progeny. It was a family that had, like
the other great German financial clans, sent forth its children to the

^ Dervieu-Andre, 3-6-1863. Ruyssenaers was Dutch consul general for Egypt;

also,an officer of the Suez Canal Company and Lesseps* chief representative there.
®F.O. 142-27, Colquhoun-Bulwer, no. 37: 30-5-1863; Colquhoun-Russell,
no- 93: 4-6-1863.
® A shipbuilding corporation that had been formed in
1853 to take over the
Taylor yards at La Seyne (Var). Among the founders were Ernest Andr6 and
Adolphe Marcuard, and Marcuard-Andr6 continued to be closely interested in the
success of the firm. Cf. Soddtd des Forges et Chantiers de la Mediterranee, Nonce
Justoriqm et descripnon des etahlissements (Paris; privately printed, 1913);
iieserie, suppL, I (1853), 14^54.

four comers of the globe, wherever business was good and social con-
ditions better than in anti-Semitic Germany. Armand and Michel had
made their fortune in New Orleans, where they had long been in close
relations with Marcuard, Andre et Cie.^ Now established in Paris, they
were about to start on a new career that was to make them in one gen-
eration leaders of French finance and bring Michel to the Board of
Regents of the Bank of France.^ They were important people, and, as
Andr^ put it in a carefully empty, yet pregnant phrase, it was possible
that it would not be a matter of indifference to Dervieu in certain cir-
cumstances to find himself in relations with them. Armand and Michel
each placed 75,000 francs in the new firm.
In the meantime, Dervieu’s letters made it clear that, for the moment
at least, Andre’s idea of a national bank would have to be abandoned.®
The feet was that Oppenheim and Dervieu had anticipated their friend
by suggesting such a project to Ismail, who had categorically rejected
it. Apparently Ismail was set against the introduction of paper
money; he felt that ihefellak was not ‘civilized enough’ to use it and
was convinced that the prosperity of Egypt rested on hard cash.
Shortly thereafter, the promoters of the Imperial Ottoman approached
the Egyptian government for the same purpose- Oppenheim and Der-
vieu took advantage of these dimarches to renew their own proposals.
The answer again was no - and for the same reasons.
Oppenheim and Dervieu then suggested something different: a bank
of agriculture and public works. The government would guarantee
6 per cent, interest in return for half the profits above that percentage;
these monies, however, would not go directly to the treasury but would
be used to buy up a number of shares each year at a 50 per cent,
premium; eventually the government would own the bank.
This was a remarkable proposal that deserved to be rejected for its
one-sidedness: investors would have to look far to find such a unique
combination of security, high potential income, and guaranteed capital
gains. Ismail turned it down, however, for odier reasons which throw
light on his attitude toward European business. His main objection was
to the guarantee of interest, not so much in itself, but because he felt it

^ On the fenuly connexions of Armand and Michel Heine, see L. Wolf, Essays

in Jewish History (London, 1934), pp. 55“9-

* In 1865, the brothers Heine joined the firm of Fould and Fould-Oppenheim,

which has since become the Banque Heine.

® See especially Dervieu-Andre, 20-5-1863.
would lead and litigation. In this connexion, he particularly
to claims
feared a corporation. Things might be all right at first, he told Dervieu,
while he, Oppenheim, and other friends of Egypt were on the board.
But what would happen he asked, when strangers succeeded

them? He preferred, therefore, that Dervieu husband his resources and

develop his own firm. ‘You can imagine,’ Dervieu wrote Andr^,
‘whether I rejected such proposals.’
In all this, was evident. To
the contrast between Andre and Dervieu
begin with, there was an important difference in objectives. The Paris
banker was thinking in terms of big international operations, of the
organization of corporations whose floatation would yield sizeable
profits, and the service of whose stocks and bonds would mean com-

missions in the future. Dervieu, to be sure, had by his own admission

gone along with the Oppenheims to suggest an establishment of this
sort to the Viceroy. But we may be certain that the whole thing was the
Oppenheims’ idea. They were the ones who had experience in inter-
national promotion and would think along these lines; they were the
ones who, thanks to connexions in London, Paris, and Frankfurt, could
command their share of the profits in a cosmopolitan syndicate. Der-
vieu had only French connexions; indeed at that time he still had only
Andr6. In this kind of operation, he could at best be a useful instrument
and would be recompensed accordingly. Besides, a national bank had
for Dervieu competitive implications of the most distasteful nature;
with a bigger and better Demeu et Cie, what did Egypt need with
institutions of that kind?
What is more important, this disagreement between Paris and Alex-
andria derived not only from a momentary divergence of material inter-
ests, but from a deep-seated conflict between two philosophies of bank-
ing.Andre was a financier by calling - what else would an Andre do?
He saw his house as a permanent institution, filling a well-defined niche
in the business world. Indeed for Andr^, the very permanence of his
bank resided in its performance of a definite of
role: the transaction
financial matters fora small, intimate circle of businessmen and inves-
tors,one of many such circles built around similar banks. The private
bank was of its essence particularistic: its clientele was restricted to
friends and friends of friends, to whom it had responsibilities that went
beyond the strict letter of business contracts; its operations were secret;
its whole procedure, as confidential as possible. Among such firms

there existed a certain understanding, a sort of gentlemen’s agreement


that restricted competition and made high finance a well-bred game.

Note, in this regard, Andre’s readiness to share with some of his friends
his participation in Dervieu’s new company - despite the prospect of
substantial dividends. The important thing was, not to maximize imme-
diate profit, but to strengthen the network of relationships that the
ultimate prosperity of his house rested on from one generation to the
Beyond this dignified sphere lay the impersonal, universalistic cor-
poration - the Ottoman Banks - dealing with anything and anybody
so long as the risk was good, publicizing its operations and even

advertising for clients, unloading its promotions with a fare-thee-well.

To be sure, was often the private bankers who promoted and con-

trolled the joint-stock companies, precisely because they could do

things as directors of corporations that they could not do as heads
of merchant houses. Nevertheless, they never forgot the distinction
between the two spheres of activity, and they never forgot their
Dervieu was aware of these fine points of banking behaviour but
tended to neglect them. Unlike Andr^, he was thinking in terms of a
very limited foture - in the very letter announcing the expansion of his
firm, he expressed again the hope of retiring in four years. His objective
was simplyto make as much money as possible as quickly as possible.^
The favour shown by Ismail in preferring Dervieu’s little firm to a
powerful national bank, in asking him to expand to accommodate the
projected development of Egyptian agriculture and commerce, and,
even more, in offering his moral and financial support, represented a
fabulous opportunity. The question never entered Dervieu’s mind of
the possible incompatibility of the character of his firm and ^the task
imposed on it. He was ready to tackle the whole of Egyptian finance

^ Compare the get-rich-quick attitudes of British businessmen in far-off

Shanghai at about the same period. One told his consul: 'In two or three years at
farthest I hope to realize a fortune and get away, and what can it matter to me if
all Shanghai disappear afterwards in fire or fiood.^ You must not expect men in my

position to condemn themselves to prolonged exile in an unhealthy climate for the

benefit of posterity. We are money-making, practical men. Our business is to
make money, as much and as fast as we can; - and for this end all modes or means
are good which the law permits.* Cited from R. Alcock, TAe Capital of the Tycoon
(2 vols.; London, 1863), I, 38, by J. K. Fairbank, Trade and Diplomacy on the
China Coast: the Opening of the Treaty PortSy 1842.-1854 (2 vols.; Cambridge,
Mass., 1953), 1, 161, note c.
and trade if need be. As for the discontent of his Alexandrian competi-
tors, it only redoubled his enthusiasm. He flaunted the Viceroy’s par-
ticipation in their faces by proclaiming it in the preamble to his statutes
and in the public announcements of the new company. It was too bad
they did not know the Viceroy too.^

^ Cf. Dervieu-Andre, 3-6-1863.



Being royal banker in die Egypt of the cotton boom had its

advantages. Pecuniary, to begin with. As the Viceroy’s preferred

financial agents, Dervieu and Oppenheim naturally handled a large
proportion of the purchases, remittances, and other transactions of
Ismail and his government. And when one considers that in 1862-3
the Viceroy’s income in his own right was over ten million francs, that
revenues came to more than 150 millions in 1863 and that ex-

penditures were well over twice this amount, one gets some idea of the
sort of client Dervieu was dealing with.^
Much of this, of course, never passed through Dervieu’s hands, but
even after deduction for administrative salaries, direct transactions,
orders through Oppenheim and other bankers, and so on, there was
more than enough left over. There were the regular, anticipated ex-
penditures: payments to European creditors like the Comptoir d’Es-
compte in Paris, supplies for public services, steam engines and cotton
gins for Ismail’s estates, cement and iron for dams and factories. And
there were the emergency outlays. By some perversity, never in cen-
turies had so much misfortune afflicted Egypt as in the prosperous
year of 1863. It was as though Fate, regretting her generosity in
granting the cotton boom, were determined to redress the balance.
In June some cattle died in the delta. The disease was unknown; it
defied treatment; and it killed within a few hours of the appearance of
symptoms. The epidemic was ignored at first. Cattle were always
dying in Egypt, where animal - and, for that matter, human - mor-
tality rates were among the highest in the world. Epidemics were in

^ On Egyptian revenues and expenditures, see below, Appendix D; on Ismail’s

personal income, Dervieu-Andr^ 19-6-1863.
effect endemic. But by the end of the month it was apparent that this

was no ordinary plague. In spite of efforts to localize the disease, it

spread throughout the delta, killing with incredible thoroughness - the

sources speak of a death rate of 100 per cent. The sluggish branches of
the Nile were choked with thousands of putrefying cadavers. By the end
of September, the richest provinces of Egypt were swept clean of
cattle, and the murrain had started to work its way upstream.^

In a country where the machine and steam engine were still phenom-
enons, nothing could have been more disastrous. The thousands of
water wheels once turned by plodding donkeys and oxen stopped and
left acres of fertile land to the desert. Even
the indomitable energy of
the fella/i, yoking himself to his plough and hauling his water pail by
pail, was cope with the catastrophe; for a moment
insufficient to it

seemed that the cotton crop would be completely ruined.

To fill the cup, the Nile, which had been disquietingly high since
midsummer, chose this moment to break through the dikes - at Cairo,
below, and in the delta. It was the worst flood within memory;
20,000-25,000 bales of cotton and tens of thousands of bushels of grain
were destroyed. At the same time, railway communication with
Alexandria was broken, both on the main line from the capital and on
the branches that served the agricultural areas; tons of cotton and other
merchandise were cut off from the seaport; the resulting backlog of
freight was to choke the railway system for months to come.^
If Ismail was negligent at first in fighting the plague, the prospect
of the loss of his cotton revenues spurred him to action. Hundreds of
thousands of animals were ordered, for draft and for food, and through-
out Europe and South-west Asia the round-up dragged in just about
everything on four legs that could be spared from the farms and the
glue factories. When the first arrivals died of the murrain, thousands

^ A E.y
^ XXXVII, Tastu-Drouyn, 29-7-1863, f. 200; 29-9-1863,
C.C., Alex.,
ff. 211-13 French correspondence contains in addition detailed veterinary
reports on the nature of the disease and measures of control); The Times^ 6-6-
1863, p. 7; 29-6-1863, p. 6; 29-8-1863, p. 6; 19-9-1863, p. 10; 28-9-1863, p. 9;
30-10-1863, p, 8; 28-11-1863, p. 6; 8-12-1963, p. 8. The disease was eventually
halted only by an exception^y cold winter. Ibid,, 27-2-1864. Estimates of the
losses range from 250,000 to 900,000 head, depending on the total number of
cattle assigned to Egypt at the time. Ibid., 25-1-1864, p. 7; Douin, Histoire^ I,

233 f.

* Ibid, pp. 235-36; The Times^ 28-9-1863, p. 9; 6-10-1863, p. 7; 28-11-1863,

p. 6. Dervieu set ten million francs as the maximum loss from this source.

more were bought to take their place. Never had unsaleable livestock
had such a sale. In addition, the Viceroy increased his earlier orders for
steam pumps and ploughs and bought large stocks of butter and other
food to be distributed through village and city markets at prices well
below those exacted by the profiteers of the crisis. For mmy fellahiny
impoverished by the loss of their animals, such paternal thoughtfulness
was a godsend; nor did it matter that they were eating ‘butter* that
was half lard and violating with every mouthful the law of the Prophet
- in religion as in other things, ignorance is bliss.
All this, of course, was done through houses like Dervieu et Cie,
which placed their orders with specialists in Trieste, Marseilles, and
other centres and added their own sizeable commissions to the already
oversized price.^
At the same time, there were the more or less lucrative operations
of company organization and promotion, at the behest or with the
assistance of the Viceroy. For apparently Ismail was not opposed to
joint-stock corporations as such - only to those, like national banks,
which presented a potential threat to his sovereignty. Indeed, the
business venture that was perhaps closest to his heart was the Medjidieh:
the Egyptian Steam Navigation Company.
This was a revival of the ill-fated creation of Said Pasha.^ Ismail was
a devotee of the sea and ships, and one of his cherished dreams was to
give Egypt a merchant marine ~ all the more cherished because on his
accession he found the remnants of the fleets of the old Medjidieh and
Nile Navigation companies, dearly bought by his predecessor, pressing
with all their laid-up bulk on the Egyptian treasury.® In May 1863,
therefore, he arranged to form a syndicate in which some of Egypt*s
most powerful nobles joined Dervieu, Oppenheim, and a Cairo banker
named Sakakini as founders and directors of a new shipping line.^ The
firm was showered with favours. The Viceroy accorded a monopoly
for thirty years of services in the Red Sea and Mediterranean; a similar
monopoly of steam haulage and navigation on the Nile was promised;
the interest of 6 per cent, on the shares was guaranteed by the govem-

^ On Ismail’s steam engines, cf. E3rdi, Lehendige Krdfte^ pp. 218-20.

* See above, p. 84 and n. i; p. 104 and n. 2,
® On the Nile Navigation Co., see above, n.
3, p. 107.
* Maximos Sakakini was head of Sakakini Fr^es, which served as Cairo agent
for both Dervieu and Oppenheim, Dervieu-Andre, 9-2-1863. Although pre-
sumably Greek, he is not mentioned in Politis, HelUmsme*
ment- In return for which, the company took the long-neglected fleets
of the old steamship firms off the Viceroy’s hands at what was prob-
ably more than a reasonable price.^
The capital of the corporation was fixed at first at ^£400,000 and
then doubled in July.^ Of the 40,000 shares, almost all were taken by
Egyptians. Ismail took half; the noble gentlemen who graced the board
and some and
of their relatives
friends took 16,000 more; only 2,689 out
of 4,000 allotted were taken by Europeans. In this respect, the firm

represented a revolution in Egyptian business, and its indigenous

character was to give it a special status in Ismail’s eyes. It was always

his favourite, his ^enfant chirt\^
Actually, this overwhelming predominance of Egyptian capital was
not deliberate. Both Ismail and Dervieu would have liked to place a
large block of shares in Europe, if only to give the company a place on
the international capital market and facilitate future sales of stock.
Ismail, especially, was probably thinking ahead to liquidating part of
his enormous holding, which initially was to have been only one fourth
of the original capital of In this connexion, Dervieu
thought at once of Andr6, but found his friend in Paris reluctant to
undertake any floatation for the moment. For one thing, Marcuard,
Andr6 et Cie, prudent to extremes, were beginning to sense a lull in
die bull market in the late spring of 1863 and were trimming their sails
months before most of the other banking houses.^ For another, they
were not impressed by the guarantee of interest. As Andre’s partner
the Baron de Neuflize put it in a letter of 29 July, the investor could
buy ‘excellent European railroad bonds, perfectly guaranteed, that
yield at least 6 per cent., not to mention speculative securities that,
owing to the recent sharp drop, are going to attract capital’. Neuflize
felt that a guarantee of 10 or 12 per cent, was the very least that would

be required, and that even this would not be enough to waken the
gorged and sleeping capital market. Put the promotion off, he said;
‘for His Highness, as for you and us, it is essential not to begin with a

^jF'.O. 142-27, Colquhoun-Russell, no. 76: 11-5-1863; A. Neuf,^ Andr^

Dervieu correspondence, ‘Proposition of merger between the Egyptian Naviga-

tion Company and die Egyptian Commercial and Trading Company’, 27-2-1864;
Douin, Histoirey I, 250-1.
* ££400,000 = c. £410,000 sterling. ® Douin, Histoire, I, 253.
* Cf. the analyses of die French market by Forcade, editor of the Semaine
financiered VIII (1863), 470, 497, 501, 5x3, 516, 548-9, 561-2.

So that in the end, in spite of the large interests taken by the Viceroy
and his obedient court, the capital of the company was never completely
The Egyptian Commercial and Trading Company was technically
more successful. It was essentially European, attracted the funds of the
leading merchant houses of Alexandria and some of the best firms in
London and Paris, and was heralded in England as one of the most
promising ventures ever presented to the discriminating investor.^
Yet at bottom it had all the weaknesses of the boom-bom firm - ex-
cessive ambitions, inadequate capital, inexperienced management
and finished by hopelessly disappointing its sanguine promoters and
subscribers- Its history is a microcosm of the business vicissitudes of
the i86o’s. It is also an excellent illustration of the gulf that separated
a parochial entrepreneur like Dervieu and the cosmopolitan financiers
of western Europe.
The Trading Company, originally known as the Sudan Company,
was unknown, hence extremely promising,
to exploit the relatively
regions along the Upper Nile. We do not know who first conceived of
the enterprise. Perhaps it was Ismail himself. At any rate, for Dervieu
and the other Egyptian businessmen presented with this proposition,
such a company was to be a helpful auxiliary which, by developing the
commerce of a region outside their sphere of operations, would increase
the flow of commodities through Alexandria and add to their prosper-
ity.^ The Viceroy was,
if anything, even more fevourable to the new
venture. In 1863 the Sudan was attached to Egypt only by the most
tenuous of ties. The trip from Cairo to Khartum was a long one,
communication was slow and intermittent, and Ismail’s personal
representatives could be depended on to prefer their personal in-
terests to those of the government. Effective control was limited
to a few convict stations along the Nile. To convert nominal
suzerainty into real sovereignty and, so doing, to lay die founda-
tions of an African empire, was one of the Viceroy’s fondest ambi-
tions. Under the circumstances, a company ihat would create new
commercial ties with the regions to the south and so reinforce the

1 Even the cautious Times^ 29-5-1863, p. 5, predicted a brilliant future for the
new firm. The extravagantly sanguine Money Market Review^ VII (1863), 53,
compared it to the East India and Hudson’s Bay companies and would not even
try to estimate the ‘almost fabulous’ profits that might be expected.
® Cf. Dervieu-Andr^, 20-5-1863,
economic solidarity of the Nile basin, fit in perfectly with state

In May 1863, therefore, after completing negotiations in Egypt,
Henry Oppenheim left for Europe to mobilize financial support. There

he found that businessmen were less concerned with the personal

interests of the Egyptian founders than with the conditions of a profit-

able floatation. Far from limiting the company to specified activities in

the Sudan, the European promoters wanted its attributions as broad as

possible. Henry did not argue. He himself was at least as interested in

the friendship of and Goschen in London and the

firms like Friihling
Mitteldeutsche Creditbank in Meiningen as he was in that of the
Egyptian houses that had sent him on this mission. Besides, there was
no point in arguing. If the company was going to come out on the
London market, it would have to come out on European terms.
As published, the object of the company conformed more or less
to the intentions of its Egyptian sponsors. ^ The Money Market Review^
for example, saw of success in the identification of the private
a gage
interests of die directors with those of the corporation.® It soon became
apparent, however, that these interests were, rather than concurrent,
overlapping and even potentially competitive. The key to the situa-
tion lay in the change of name, a change that was more than nominal:
the European promoters had deliberately taken all of Egypt as their
All of this went on without theknowledge of Dervieu. Oppenheim
wrote nothing; Andre’s letters were evasive.^ Not until late July,

^ The best source on the condition of the Sudan and Ismail’s African policy is

Volume III of Douin’s history. This excellent study, in contrast to the earlier
volumes, is annotated.
See TAe Times^ 17-6-18^3, p. 4. The newspaper reports also laid great stress

on the huge interest rates that could be charged in the area. Traders in the Sudan,
itwas alleged, paid 10 per cent, a month at Khartum on two good signatures;
yet since their profits were said to run to 200 per cent, a year, they still made
money. Ibid., 29-5-1863, p. 5.
^ Mon. Mar. The board of directors included Prince
Rev.^ VII (1863), 53.
Halim Pasha (Chairman); Henry Oppenheim; Edouard Dervieu; John Cater of the
Bank of Egypt; H. Ross of Briggs and Co.; M. Ruyssenaers; Alexander Tod of
Tod, Rathbone and Co., Alexandria, and Stephen Kennard and Co., London;
J. W. Larking of the Imperial Ottoman Bank; R. Sulzbach of Gebruder Sulzbach,
Frankfurt; and W. F. Scholfield, formerly of A. and S. Henry and Co., Man-
chester. The manager was to be Maximos Sakakini of Sakakini Fr^res.
* See Andre’s letters of
26-5 and 6-6-1863.

about a month after the announcement of the Trading Company in

England, did Dervieu learn the truth. He expressed his discontent to
Andrd, criticized the cost and terms of the floatation, and deprecated
particularly the change in the character of the project. At Ae same
time, he knew it was too late. ‘Keep these recriminations, my good Sir,
to yourself, it would do no good to make them known to our English
colleagues and still less to the public. The affair is laimched, it is good,
our names are engaged, we shall set to work, and we hope to have good
results.*^ Dervieu was right to think of the public. The shares went very
slowly, and the promoters’ syndicate was agonizingly slow in liqui-
dating its position.^
For the small merchants of Alexandria, the Trading Company was
proof of the favouritism shown Dervieu, Oppenheim, and the rest of
the small camarilla, a step on the road to group monopoly.® For an
outside observer like The Economist, the firm was a symbol of a new
business age; where only a short time before, ‘it was considered highly

^ Dervieu-Andr^, 26-7-1863. See also Dervieu-Andr^, 19-6- and 27-6-1863.

The nominal capital of the company was £2,000,000, of which 10 per cent, was
paid in. Three quarters of the shares were disposed of privately; the rest were
floated in London by the International Financial Society, which took a commis-
sion of 2 per cent, of the £500,000 issued to the public (they had originally
demanded 2 per cent, of the part that had been privately subscribed). On the
negotiations in London, see the letters between Henry Oppenheim and Andr6 in
A. Neuf., carton ii, no. 186. They throw interesting light on the difficulties of
forming a promotional syndicate and the criteria for the selection of participants.
® On the difficulty in disposing of the stock: Neuflize-Dervieu, 18-7-1863;

Andre-Dervieu, 17-1-1864; A. Neuf., L.B. 528, 15-12-1864 to Friihling and

Goschen, f. 734; L.B. 530, 25-1-1865, f. 1370; L.B. 532, 6-2-1865, f. 202.
® On 25-6-1863 all the British merchants of Alexandria, except, of course, those

connected with the Trading Company, met and prepared a petition to Colquhoun
expressing their fear of a return to monopoly. Colqiflioun was sympathetic, yet was
reluctant to protest officially without concrete evidence of privilege or favourit-
ism. He did, however, call Ismsurs attention to the importance of keeping the
interests of the e/iftVe business community at heart. F.O. 78-1755, Colquhotm-
Bulwer, private, 20-7-1863; F.O. 142-27, Colquhoun-Russell, no. 93: 4-6-1863;
no. 109: 1-7-1863. On 4 August Colquhoun reported that, sure enough, the
government was exerting pressure on cultivators in at least one district to do their
borrowing from the Trading Company. F.O. 142-27, Colquhoun-Russell, no.
1 1 5. This is confirmed by Hamza, Public Debt, p. 71. Dervieu was delighted by

all this agitation. ‘This protest can only do us good,' he wrote Andre on 27 June.

The issue seems to have subsided as soon as it became clear that there was plenty
of room for all the would-be moneylenders in the Nile Valley.
merchant to support a company in the same
inconsistent’ for a private
line of business, here were merchants not only supporting, but

creating a competitive firm.^ A new age indeed. Only insiders like

Andr^ knew how unhappy the founders of the Trading Company
were. Dervieu had had his first lesson in international finance: that the
men who hold or command the money generally call the tune.
The disappointments attending the promotions of the Medjidieh and
the Trading were xyyi.QsX of many Egyptian projects in 1863. It was a
year in which almost nothing seemed impossible in the land of the
Nile, and tens of schemes were conceived for every one that was
delivered. Unfortunately the historian is only too often limited by his
materials to a knowledge of realizations rather than projects. Thanks
to newspapers, business journals, diplomatic correspondence, and so
on, we more or less well informed about the Trading, the Naviga-
tion Company, and similar promotions, whose proliferation in the
cotton boom led the correspondent of The Times to write that the reign
of Ismail Pasha had ‘certainly inaugurated a new era in the trade and
industry of Egypt, and communicated an energy to commercial enter-
prise never known before’.* Yet these say little about the ferment
underneath, and even so detailed and intimate a correspondence as
that of Dervieu, abounding in more projects than Andr^ could ever
keep track of, gives only a glimpse of the bubbling of ideas and
plans in the business community of Alexandria and the court at
Ismml was Even before he had
particularly prolific in this regard.
cleaned up the mess bequeathedhim by Said, a task that seemed
farther from completion all the time, he was busily thinking up his own
projects, all of them worthwhile, but all of them expensive. He wanted
to build an artificial port at Alexandria, reclaiming the land from the
sea, as at Marseilles. He planned to beautify Cairo with a new quarter
h la pamieme^ resplendant with boulevards, a monumental railway
an ‘Egyptian Museum’, hotels, theatre, and stock exchange.

(With an eye to future profits, Ismail intended to erect some com-

mercial structures for his own account.)® There was also to be a rail-

Th& Economist^ 22-8-1863, p. 931. ® The Times^
31-5-1863, p. 14.
Dervieu-Aadre, 19-6-1863, Although a stock exchange was one of the last
things the Egypt of 1863 could use, Ismail was apparently fascinated by this
symbol of financial maturity. Cf. Dicey, Story, p. 98, on Ismail’s reaction to the
l^s Bourse.

road from Cairo to Khartum -- over a thousand miles of hot and often
difficult terrain - another step towards African empire,^
IsmaiFs chosen instrument for many of these projects was Dervieu,
who turned to his friend Andre for help. Who in France could do this
kind of work? Marcuards thought a while - perhaps because it was
summer and things moved slowly, perhaps in order to negotiate favour-
able arrangements - and then recommended Gouin et Cie, the Societe
des Batignolles, one of France’s leading engineering and machine-
construction firms. This concern was not only eminently competent,
but,more important, eminently respectable. As Neuflize put it (Andr^
was on vacation): ‘We are personally acquainted with these gentlemen,
who justly enjoy the finest reputation for capacity and integrity; they
are also people with whom it is agreeable to do business.’ ^ He might
have added ffiat among the silent partners in the Batignolles were such
fellow-bankers as the Rothdiilds, Eichthals, and Hottinguers.®
In the end, however, despite Ismail’s ‘seriousness’ and ‘persever-
ance*, nothing came of these matters. The fact was that these pro-
jects cost more and that
in the contractor’s estimate than in Ismail’s,
for all theheady prosperity of the cotton boom, the Egyptian treasury
was much poorer than the new and overconfident ruler had realized.'*
Nevertheless, the fact that Dervieu was intermediary in negotiations
of this kind, abortive though they may have been, gave him important

^ Dervieu-Andre, 27-6-1863. Qi.The

Timesy 7-4-1863, p. 7; 29-5-1863, p.5.
The concession for this road was sought by a syndicate of British contractors,
who wanted it badly enough to do without a subsidy. Ismail was determined,
however, to do the job himself. F.O. 142-27, Colquhoun-Russell, no. 122,
15-8—1863. Colquhoun remarks that the first thing the line would do would be to
open up the Viceroy’s sugar plant and estates in Upper Egypt: *He is acting as
every newly succeeding sovereign in this country will act, laying the foundation
of his own and his family’s fortune .

® Letter of 18-7-1863.
® Archives of the Society des Batignolles, list of shareholders, undated (c, 1850-
71). I should like to thank M. Henri Gouin for his kindness in making these papers
available to me.
*It goes without saying that many Western businessmen killed the goose
before it ever had a chance to lay a golden egg. The Egyptian reputation for
prodigality and gullibility encouraged altogether too many manufacturers and
contractors to try to make their fortune at a stroke and led them to set prices
utterly incompatible with regular, continued business. Surprisingly
American merchants and manufacturers were among the worst sinners in this
regard. Dept, of State, Thayer-Seward, n-7-1862.
economic leverage. As a potential source of business patronage, he was
now the target of all manner of blandishment, flattery, and solicitation.
Among Ae most insistent petitioners were those representatives of
French industry who saw in the Egyptian government an outlet for
manufactures that could not compete in the world market on tiie basis
of price and quality; there is always more than one way to skin a cat or
dispose of a product.^ Andr^, for example, was an ardent booster of the
Forges et Chantiers de As early as 10 May 1863, he
la Mdditerranee.

had written Dervieu to remind him that Adolphe Marcuard, senior

partner of the bank, was one of the directors of the Forges et Chantiers,
and to ask him to see to it that if, as was reported, Ismail planned to
order three armoured frigates, the affair ‘might profit the firm in which
we Dervieu hastened to answer, the
are interested*. Unfortunately, as
report was incorrect - there would be no
orders for the Forges et
Chantiers for the moment. Nevertheless, Paris did not abandon hope,
and in a letter of 29 July Neuflize took pains to qualify his earlier
recommendation of Gouin et Cie: they might well seek to execute
orders for ships and engines as well as contract for construction
projects; in such cases, however, the preference should go to the
Forges et Chantiers.
Dervieu was obviously a good person to know. Even his regular
banking business - discount, - reflected by its
acceptance, exchange
growth new
his ‘We have the good
position as favourite of favourites.
will of all,* he wrote on 26 October. ‘It is known that we do not take
advantage of the clientele,^ that we work faithfully, that we have the
support of the Viceroy. Hence everybody in business, big and small,
comes to us, and even if our capital were three times the size, we could
use it all.’

In effect, the combination of ‘fabulous* prices - the first bales of the

season were selling in Alexandria at 250 francs per quintal, or over two
shillings a pound® - and an unprecedented harvest gave promise of
magnificent business. ‘Our principal clients,’ wrote Dervieu content-

^ In 185(5, the French consul reported that the Egyptian government obtained

most of its supplies in France, the exception of machines and similar equip-
ment, which came from England. Li i860, however, even the machines were
bought for the most part in France. The shift is eloquent testimony of increased
French influence under Said. A.E.y C.C,, Alex., XXXV, Sabatier-Walewski,
5—4-.1856; XXXVI, Ceccaldi-Thouvenel, 10-10-1860, f. 53.
* See above, n. no. *
2, p. Dervieu-Andr6, 26-1 0-1863.

edly, ‘Briggs, Planta, Dumreicher and a few others expect to have

orders for no less than 40 to 50 million francs each/ With that kind of
activity, he could afford to be fussy: ‘We have indicated to them that

we would accept only drafts on banks and have urged them to write
to their principals to send them specie/ Loans to cultivators, ‘excellent
and unusual affairs* though they were, were reluctantly left to the
Trading Company and the perambulant usurer. Dervieu needed all

his resources for die cotton merchants of Alexandria.

This need to mobilize his capital was evidence that Dervieu was
spreading himself thin. He was everywhere at once, in cotton ginning,
irrigation, land speculation, agricultural machinery, cottonseed oil. If
a new enterprise was started, he was sure to be on the board of directors.
The time was coming when this versatility would be costly; but the
danger was remote in the euphoria of 1863.
still moment at
least, it was Dervieu this and Dervieu that - he stood at the head of
the Egyptian business world.

At least as satisfying to Dervieu, however, as the crinkle of bank-

notes and the jingle of coins was the psychic income of his new, exalted
role. For as royal banker, he was in effect a man of state, a minister
without portfolio, an adviser on problems of national and international
import: budgets, loans, the Suez Canal, the foreign relations of
Egypt. How much real influence Dervieu exercised in these fields, it
is impossible to say. In any event, these quasi-oflidal concerns made a
heady brew. Bursting with pride, impressed with his own importance
to the point of antagonizing those around him, the Alexandrian never
tired of impressing it on his friend in Paris. His letters were spiced with
remarks like:

I have just passed a week with the Viceroy in Cairo. . . . Yesterday evening
I remained alone in t^te-^-t^te with the Viceroy . . .

I spend my life between Alexandria and Cairo. I have in a way replaced

Nubar Pasha for the Viceroy, and you can well understand the intimacy
created between His Highness and myself by this job of interim private
secretary. Although it doubles my work and does not leave me a moment’s

^ Dervieu-Andr^ 20-10-1863.
rest, I am very happy about it, since it builds up my credit and my

Moreover, Dervieu’s position of influence necessarily reinforced his

French community. He was probably
prestige, already great, within the
the first in the eyes, if not the hearts, of his countrymen. In February

1863 he was elected by his fellow ‘notables ’ deputi de commerce

of Ae French colony in Egypt.^ Shortly after, he was named to the
criminal court of the consulate.® And when, in May 1863, the Prince
Napoleon visited Egypt and asked the French consul to suggest some

members of the colony for nomination to the Legion of Honour,

Dervieu was one of three chosen. In a letter to the Ministry of Foreign
Affairs in Paris he was described as ‘the merchant who honours the
colony perhaps the most, by his character, the origin of his fortune,
which has been made outside the whole odious procurement system
of the last reign, and who, in addition, being banker of the Viceroy and
in a way his private Minister of Finance, enjoys the greatest and most
legitimate influence over him, which he uses in favour of French
interests only’.^ Outside the French colony, his reputation was in a
sense even more impressive, attaining almost legendary proportions.
Colquhoun, who had good reason to resent the success of Dervieu et
Cie, nevertheless described the firm, created less than three years
before, as ‘an old French banking house, long established and of great

^ Dervieu-Andre, 26-10-1863. Nubar Pasha was an Armenian Christian by

descent. His uncle Boghos Bey had been Mohammed Ali's foreign minister.
Nubar had served Egypt abroad under Abbas, had run the Medjidieh and then the
railways imder Said, had handled the negotiations for the loans of i860 and 1862.
By 1863 he had reached the height of his authority: he was Ism^l’s right-hand
man and the unofficial grand vizier of Egypt. The most convenient biography of
Nubar is to be found in J. Tagher, ‘Portrait psychologique de Nubar Pacha/
Cahiers d*histotre ^ptknne^ I, nos. 5-6 (1949), 353-72. There is a mediocre
study by A. Holynski, Nubar Pacha deyantVhistoire (Paris, 1886). Cf. also Sacr6
and Outrebon, L’Egypte, p. 113 f.; A.E.^ C.P., Alex., XXXVI, Outrey-Drouyn,
9-8-1865, ff. 41-2. Nubar was in Paris at this time (autumn and winter, 1863-4)
negotiating with the French government and the Suez Company a revision of the
original canal concessions. See below, p. 184 f.

C.C., Alex., XXXVII, Beauval-Drouyn, 9-2-1863.

Tastu-Drouyn, 1-5-1863, f. 170.

^A,E,y C.P., Alex., XXXI, Tastu-Drouyn, 30-6-1863, f. 319.

142-27, Colquhoun-Russell, no. 76 : n-5-1863.

Unfortunately, these advantages and perquisites were more impressive

in appearance than in substance. True, Dervieu’s profits were large,
but to a great extent they existed only on paper and by the grace of an
extraordinary combination of viceroyal favour and cotton boom,
neither, of its nature, eternal. Dervieu’s books, for example, were
filled with bills outstanding and accounts receivable, for nowhere was
credit so easy and accommodation paper so popular as in Egypt.
Nor was unmixed blessing- Ismail was
the favour of the Viceroy an
a splendid client; he spent munificently. But true lord that he was, his
prodigality in spending was matched by his parsimony in paying, so
that his purveyors and creditors were at once reluctant to abandon so
excellent a customer and afraid to carry so negligent a debtor.
Yet Ismail was generous with promises. Since his signature was
considered ample security, he found it a simple matter to issue all kinds
of notes, bills, bonds, and similar instruments, which fed the fires of
Egyptian speculation and floated through the markets of Europe. From
Dervieu’s point of view, of course, this technique of deferred payment
was dangerous only insofar as his bank held on to the Viceroy’s paper
and listed it among receivables. More often, however, he disposed of it
through Andr^ and other intermediaries to European investors.
More serious was Ismail’s penchant for borrowing on current
accoimt; indeed, one of his prime motives in investing two-and-a-half
million francs in Dervieu’s bank to begin with had been to secure
drawing privileges. For Ismail, borrowing by overdraft had it all over
the issuance of notes and other types of formal indebtedness. It was
private - there could be no unpleasant publicity that might affect
adversely his credit on the open market. It was flexible in a way that
regular loans could never be. It was a personal matter that by-passed
even the moral strictures of his ministers and evaded any effort at
control by Constantinople.
His calculations were not disappointed. For the two-and-a-half
millions invested, Ismail had already drawn some seven millions by the
end of 1863. Dervieu was badly squeezed. Half his capital was tied up in
an unsecured account, with little prospect of release. For one thing,
Ismail’s financial difficulties had a certain perennial quality about them.
For another, there was little Dervieu could do about this particular
client. Dervieu’s prestige and profits depended on the favour, of the

Viceroy, which was contingent in turn on the facilities extended by

Dervieu, which facilities in turn weired ever more heavily on
Dervieu’s business operations -a vicious spiral that could well lead
to ruin. At the same time, was no way in the world of preventing
Ismail from borrowing from Oppenheim, Pastre, or any odier banker
who was ready, like Dervieu, to trade security for the profits of
viceroyal finance. And in fact, Ismail was busily doing just that, to the
sum of tens of millions of francs. So that each of these complaisant
firms was not only flirting with difficulty in its own right, but by doing
so, was increasing the danger for its fellows.
By autumn of 1863, only nine months after IsmaiPs accession, the
Viceroy had just about exhausted the credit that the businessmen of
Alexandria, for all their willingness, were able to extend. The time was
drawing near when some sort of public loan would be indispensable for
all concerned. Dervieu discussed the matter with Andre in a long letter

of 20 October, which he wrote "on the Nile* on his return from a week
in Cairo. (Floods had washed away part of the railroad dike, and the
only rapid connexion between Alexandria and the capital was by
Dervieu sketched for his friend a balance sheet of IsmaiPs finances.
On the debit side, the heritage of Said had yet to be liquidated. There
was a floating debt of 40 million francs, plus a fortune in accounts pay-
able and claims pending. Most costly of these was Suez; by the con-
vention of March 1863, Ismail had promised to pay 1-5 million francs
a month starting in January 1864 up to a total of approximately
35,400,000 francs “this in addition to 12 million francs in 1864-5 to
meet treasury notes issued previous to his accession.^ Moreover, Ismail
was resigned to further outlays at the conclusion of the negotiations in
progress over the abolition of the corvee and the territorial grants pro-
And with good reason: the
vided for in the original canal concessions.
arbitration of Napoleon III was Egypt another 84 million francs.
to cost
Of course this was only the backlog. Ismail also had his own ex-
penses to worry about: millions of francs for cattle and machinery to
compensate the losses of the murrain, millions more to repair the
damage of the great flood. And this was nothing to what he planned

^ See bdow, p. 178 and notes. The convention of

1863 provided for pay-
ment by Ismail of the second and third calls of one hundred francs each on the
Suez shares subscribed by his predecessor. The twelve millions’ worth of notes
already in circulation had been issued by Said and represented the one hundred
francs of the first call less certain advances to the canal company from the
Egyptian government.

to Spend - if his projects were ever realized. In addition to the schemes

discussed above, ^ there was the great Nile dam to be completed after
decades of neglect, an irrigation network to be built in Lower Egypt,
rail branch lines to be laid to the cotton districts.

Against these commitments and projected expenditures, there was

the rapidly rising income of cotton-rich Egypt. Dervieu wrote of an
expected harvest of two million quintals; at 150 francs a quintal - the
prevailing price was 225 or 235 - there would be 300 million francs
coming into Egypt during the harvest year.® Not all of this was Ismail’s
of course. But the Viceroy was the largest landowner in Egypt, and his
personal income was counted in the tens of millions; Dervieu expected
it to double in the next harvest year. At the same time, he estimated the

revenue of the Egyptian government at one hundred millions.

In short, the Viceroy needed money, deserved it, and would have
no trouble paying it back. Nevertheless, he was reluctant to float a
public loan; the memory of Said’s dissipations was too fresh. Dervieu
had tried to persuade Ismail that time was of the essence, that the state
of the European capital markets called for quick action. To which
Ismail had replied:

All your reasoning is quite correct, my dear Dervieu, but I do not want to

make a loan before the completion of the Suez Canal and before my ministers
themselves come and ask me to do so. I have had the question submitted to
the Council of Ministers, at the same time laying open to them the situation
of our finances. Naturally, they did not dare to tell me that I was not right,
but I saw that certain of them had reservations and doubts. ... I understood
quickly enough: these gentlemen recall the past regime and believe that if I
floata loan, I will spend it, waste it in a year as my predecessor did. Therefore
I assumed the attitude of not insisting in the least, showing the greatest con-
fidence in the resources that the Minister of Finance claims he can find within
the country, and I am waiting for the day when he will come himself to tell me
that we absolutely must have the loan.

Unfortunately, as Ismail admitted, this wait was going to ‘incon-

venience’ him needed money at once - six or seven
exceedingly. He
hundred thousand pounds. Some one hundred thousand would go to
buy English machinery alone, and the people who lent the money could
have the commission on these transactions as well. Could Dervieu get
him this amount?
154 f.

* The Egyptian quintal weighed approximately 99 lbs. See below, p. 332.

Dervieu in turn put the question to Andr6. He conceded that
Oppenheim was against die project and wanted to push Ismail into a
piiblic loan by revising all short-run accommodation. Nubar Pasha,
IsmaiFs most trusted minister, was also of this opinion.^ Yet Dervieu
felt thata large public loan, however profitable for its contractors,
would at the same time hurt them; once Ism^l had cash in his pocket,
he would be able to do business with anyone he pleased. Dervieu was
also unhappy about floating another bond issue through Oppenheim’s
English and German allies: Friihling and Goschen and the Mittel-
deutsche Creditbank. He wanted someone like Andrd to carry out the
operation: ‘As a French house, we would be happy to see the credit of
Egypt established in France.’
Dervieu preferred, therefore, that the short-term loan of £700,000
be raised in Paris. He and his friends would take, say, £80,000, and
Andre could no doubt find the rest, perhaps with the help of the
Credit Mobilier.® Dervieu was afraid of a big corporation like the
Mobilier, which was rumoured to have its eye on Egypt: ‘I should not
like this loan to be a means for the Credit Mobilier to absorb us later

on; it would have to promise not to do anything in Egypt without

my firm or without its intermediary.’ But Dervieu was ready to play
with fire to serve his royal master well. The very prospect of business
with Ismail filled him with pleasure; the same letter of 20 October

I do not know, my you know, whether you really

dear friend, whether
appreciate our new Viceroy. is that the more I know him
All that I can say
myself, the more I am intimate with him, die more I am surprised by his
intelligence, his good sense, and the more I have the firm conviction that we

are going to witness a great reign, I would even go so far as to say a regenera-
tion of the Orient.

The plot was beginning to thicken and, like all good plots, revolved

^ It was frequently
stated at the time that Nubar was tied to British interests in
Egypi^ not actually in the pay of die Foreign OflSce. The French Ministry of

Fordgn Affeirs was convinced of this connexion, which has never been proved,
however. It had always been British policy, of course, to support the Oppenheim
group against French capital in the competition for loans. Cf. F.O. 141-45,
Russell-Colquhoun, no. 28: 15-11-1861.
* Marcuards had just participated with the Credit Mobilier in the formation of

the Imperial Ottoman Bank.


around certain conflicts. Of these, two form as it were the main themes
of the story; (i) the divergent objectives of Dervieu and his European
and (2) the running war between the
associates in international finance,
Egyptian treasury and European banking.
The first of these has already been discussed, especially in con-
nexion with the Trading Company, Here we see the conflict again -
this time,however, in a potentially more virulent form - over the
question of the projected loan.
The second is the struggle that has hitherto cornered the attention of
historians, who have debated the pros and cons in such pungent terms
as *The Rape of Egypt’, ‘Egypt and its Betrayal’, and so on. It is quite
obvious from the correspondence cited that for Dervieu and, for
that matter, all the other businessmen in Egypt, Ismail’s treasury was
simply a grab-bag. The question was not what, but how: how to
encourage the Viceroy to spend and for the right things, how to force
him to borrow from such and such a group, how to lend him funds in
the most lucrative way, how to keep him on a leash.
On the other hand, Ismail himself was no babe in the woods.
Dervieu’s of 20 October testifies to the Viceroy’s remarkable

power of fascination, which one observer described as ‘his most

extraordinary gift’; ‘I have never met a man’, he wrote, ‘who failed for
the moment to succumb to it.’ ^ Ism^l was spending beyond his means
and knew it. He had already borrowed for too much money on current
account and short-term advances, yet was able to devise all manner of
combinations to induce his creditors to furnish more on the same basis.
To be sure, he was ready to pay dearly for this convenience, just as he
paid dearly for the things he bought with the money. Nevertheless, it
was an important convenience, and represented an equally important
risk for his creditors. In short, there was no innocence on either side -
only a delicate balance of mutual advantages and disadvantages, an
area of uncertainty in which borrower and lenders fenced in an effort
to outwit each other.
Around two fundamental themes turn the personages of the
drama: the principals - Dervieu, Oppenheim, Ismail; the supporting
cast - Andr^, Friihling and Goschen and the divers merchant houses
and banks of Alexandria; the latecomers - the Trading, the new
Medjidieh, the Credit Mobilier. Among them is woven a complicated
web of alliances and rivalries, some open and obvious, others latent and
^ [Bell], Khedives and Pashas^ p. 7.
barely discernible. In this regard, certain aspects of the situation are of
special interest:

(1) The conflict between Dervieu and Oppenheim. This has already
been foreshadowed in the narrative. In essence, it rested on the same
difference of interests that separated Dervieu and Andre. Oppenheim,
unlike his Alexandrian colleague, had powerful ties with an established
syndicate of international bankers. He had already contracted the first

Egyptian loan for this group; he was ready and anxious to arrange
With different interests went different ideas and
im- attitudes. It is

possible, of course, to say whether came first;

interests or attitudes

the fact remains that Dervieu and Oppenheim not only did not act
alike, they did not think alike,

(2) The menace of the Credit Mobilier. In the field of international

banking, the Credit Mobilier was a sort of juggernaut. Aggressive and
imperialistic,it reached out everywhere, and wherever it went it wanted

to be master.^ Dervieu had good reason to fear that, like the frogs of
the fy^le, he might finish by exchanging the unhappy anarchy of the
status qm for the grip of a voracious despot.

(3) Dervieu’s patriotism. In a country where money was a jealous

god, intolerant of other values, patriotism was almost the rarest of
virtues. In a letter of i6 September 1862 about Ismail, then heir
presumptive, the French consul Beauval had written Paris as follows:
‘[Ismail] is surrounded by mediocrities, by Frenchmen at that, but in
Egypt that proves nothing- Greed outweighs all other considerations,
and such and such an affair, of great interest to France, is often opposed
by our nationals. (I am
no way exaggerating.)’ * It is hard to
imagine that this criticism was directed at Dervieu, who had been a
supporter of the Suez Company as fer back as 1858 when most of the
Alexandrian business community was vigorously opposed to a canal.
Moreover, the evidence of his correspondence with Andre, confirmed
by Tastu’s comments regarding Dervieu’s nomination to the Legion
of Honour, shows clearly that by the middle of 1863 Dervieu had

^ This was especially true in 1863, when internal weaknesses made it imperative
for the Mobilier to put across some
spectacular promotions if it was to maintain
its and profits. See the annual Rapport prSsenti par h ConseU d*admimstra*
tion of 1863 and earlier years for the bank’s lack of liquid resources and the exten-

sive immobilization of funds in the stocks and bonds of its own promotions.
* C.C., Alex., XXXVI, f. 407.

taken his stand as the champion of French business interests in

To a degree this noble attitude was also good banking. National
rivalries inEgypt, particularly that between England and France, were
sometimes so strong as to be a significant factor in business com-
petition. Dervieu was able to argue on the board of the Medjidieh, for
example, that comparative costs notwithstanding, it would be an
affront to France if all the company’s ships were ordered from the
Peninsular and Oriental; ‘heaven help us’, he wrote Andre, ‘if vre do

not turn out as good material as the English’.^ At

same time the
ultimate resource of the European enterpriser in Egypt was the support
of his consulate; and the French consulate, like others, had a particu-
larly warm spot in its heart for good, patriotic nationals like Edouard
For all this, the language of Dervieu’s letters
would seem to indicate
that patriotism was more for him than an instrument. He seems to have
felt a sort of responsibility for French interests, to the point where one

consul felt impelled to complain to Paris of his officiousness and in-

trusions. Dervieu was the kind of man who was above all sincere, w’ho
had to believe in what he was doing and saying. Whatever may have
been the original reasons for his chauvinism, it was based in 1863 on
genuine love of - and pride in - flag and country.
Indeed, in Dervieu’s case patriotism was not always materially
beneficial, was sometimes even a handicap. It is hard to be a good
international banker if one is too zealous a nationalist. In this sense,
Dervieu was at an extreme disadvantage as against the Oppenheims -
raised in Frankfurt, Prussian citizens for purposes of protection in
Egypt but closely tied by business and family to England and France
(eventually Henry was to take out British citizenship and Hermann
French), and at heart pure cosmopolitans. In this sense, Dervieu was
also very different from Andre and the other members of the Prot-
estant Haute Banque, most of them Unked by family to half the
coimtries in western Europe and many of them possessed of dual
French and Swiss citizenship, a combination so advantageous that
many have retained it right up to the present day.
(4) The position of AndrA We have already seen that, if the old
private houses of the Haute Banque were intimately involved in all the
conflicts, alliances, and promotions of a new joint-stock age, they
^ Dervieu-Andr4, 20-10-1863.
were careful to maintain their identity, distinctive character, and
freedom of action, Andr6 was, if anyAing, even more aware than
Dervieu of the danger for little houses of being swallowed by corporate
giants. Unlike Dervieu, however, he realized diat there was no quicker
way for little fellows to be swallowed than to get too big for their

At the same of a business dynasty that had seen two
time, as the heir
hundred years of persecution, flight, revolution, and war and had
lived under half a dozen constitutions since its establishment in France
at the beginning of the century, Andre's attitude towards the state -
any state - was quite different from Dervieu’s. For Andre, the state
was always a potential enemy. It was a good client and useful protector
on occasion, but it was also, and only too often, defaulter and despoiler.
By comparison with family, even one's own government was a
transient, essentially foreign thing: use it, court it, even love it, but,

for heaven's sake, don’t be fool enough to trust it. As for other
governments, no precaution was too strong.^
It is against this mottled background of rivalries and alliances, differ-

ences and sympathies, that Andr4's answer may be understood.

His long letter® - as long as Dervieu’s - began with Ismail: ‘Honour
to whom honour is duel’ Andr6 was prepared to accept his friend's
evaluation of the great man; ‘I understand how pleasant it is to undergo
his influence and further his vast projects.' Unlike Dervieu, how-
ever, he felt that Ismail’s virtues were reason for caution rather than

This type of permanent absorption of your which he makes use of


and which he could abuse, this excessive sensitivity that he is animated with
so far as his credit is concerned, this calculating and bargaining mind that he
gives evidence of in circumstances, prove to me that you are dealing with

a strong party. ... You are evidently placed in a difficult position so far as
he is concerned. You have to give him all the assistance possible and, in
view of the increasing needs which are manifesting themselves, you have to
exert all your efforts to keep up with your task. But at the same time, you
must hold yourself on the defensive, for the tendency of all governments, in
Egypt as in France, is and shall always be to take over for their own profit
the credit of the houses or establishments around them. In this struggle

^ Cf. D. Landes, ‘French Entrepreneurship and Industrial Growth in the Nine-

teenth Century*, Journ, of Econ, Hisu^ IX (1949), 53-4.
* Of 5-11-1863.

against the powers on which you depend, you are helpless as it were, and
you must always be on guard; if not, you will come to see at a given moment
(at a moment of opportunity) your resources paralysed in your hands.

In the light of these considerations, Andre, like Oppenheim, would

have preferred an immediate state loan to enable Ismml to reimburse
Dervieu and his other creditors. Since the Viceroy did not want to hear
of this for the moment, however, Andre turned to the question of a
temporary advance. To begin with, he wrote, Dervieu’s project of a
large loan to Ismail on current account was out of the question: ‘To
make a loan on account is for the lender to place himself absolutely at
the discretion of the borrower, is to risk not being reimbursed at a fixed
date, to submit to extensions, to find oneself disputed perhaps by a suc-
cessor to the throne.* On the other hand, a loan represented by negoti-
able bonds of fixed maturity would be entirely feasible.
In the meantime, Andre noted, Oppenheim had also been working
on the project, along somewhat different lines. Instead of wasting his
time asking his banker friends to lend Ismail money on current account,
he was negotiating a comparable loan from the Egyptian Commercial
and Trading Company, the latter to raise the necessary funds by an
issue of its own debentures. As Oppenheim well knew, a joint-stock
corporation would do things that no private house would consider.
Andrd was not too pleased with the idea; if the issue of debentures
succeeded, well and good; but if it failed, the credit of the Trading
would suffer severely.^ Nevertheless, such an issue represented prob-
ably the best reconciliation of the demands of Ismail and good business
practice- Andre realized, of course, that Dervieu would be unhappy
about any solution that left him out: Dervieu was too ambitious to
accept competition, too insecure to bear with it, too single-minded to
adjust to it. Andre counselled patience: he who abstains and collects his
pay lives to lend another day.
In this connexion, Andr6 was worried about his friend's relations
with Oppenheim. He sensed a fundamental difference in attitudes and
principlesbetween the two Alexandrian houses that could, he felt, give
rise some day to a ‘disastrous* rivalry. And yet ‘there is for you and for

them an equal advantage in joining your forces, in exercising your

influence together in order to husband these forces, in strengthening

^ A point of importance to Andr^, who held over five hundred shares, which he
was impatiently waiting to dispose of.
the treaty of alliance that binds you’, Andre advised Dervieu, there^
fore, not to push ahead with his efforts to find Ismail his £700,000 and
diereby risk thwarting Henry Oppenheim’s negotiations in London;
as one of the directors of the Trading, Dervieu would also profit from
Ismail’s gratitude for any help extended him by the English company.
As for Dervieu’s bugbear, the descent of the Credit Mobilier into
Egypt, Andre felt that it was inevitable. This establishment, a vast
agglomeration of avid capital and bold minds, aims at absorbing every--

thing everywhere. The law of its existence is to move ahead; for it, to
stand still is to decline. Therefore you will see it extend successively its

sphere of influence everywhere.’ Besides, as Andre pointed out, the

spectacular growth of Egyptian trade and banking was an invitation to
European finance: If it was considered nsefid or desirable six months
ago to establish in Egypt a bank of issue and circulation, its creation
seems to me indispensable today.’ If not the Credit Mobilier, then the
Comptoir d’Escompte,^ or the projected Societe Generale,^ or perhaps
even Rothschild himself would step in to profit by the situation. Andre
urged Dervieu to talk to Ismail once again about a national bank.
In concluding, Andr^ took the opportunity to lecture his friend
once again on the importance of liquidity and on the need to re-
sist Ismail’s excessive demands. Cotton, he felt, was too high; the

bullion reserves of western Europe were declining; and the rate of dis-
count was probably going to go up. At the same time, there was always
the danger of a political revolution in France - like all good French-
men, Andr6 never took the stability of his government for granted:
‘God protect us, my dear Dervieu, from another 1848!’ If an 1848 did
come, however, Andre wanted to be prepared for it. He told Dervieu
to stick as much as possible to drafts on banks rather than industrial
firms, to take only short paper, to keep his own signature off* the

^ See above, n. 107.

5, p.
® Planned as the French sister firm to the General Credit and Finance Company
of 1863, the Societe Generale pour Favoriser le Developpement du Commerce et
de rindustrie en France did not come out imtil 1864 because of long delays in
obtaining official authorization. It was the first finance company permitted in
France since the Cr^t Mobilier itself. The promoting syndicate included the
usual private banks; Blount, BischofFsheim and Goldschmidt, Hentsch, Lutscher
and Co,, plus Eug^e Schneider of Le Creusot, Paulin Talabot, the railway man,
and B. Parent, the leading French railway builder. XI® serie, supp.,
XXni (i8<S4), 1357-^5; P* 6J76,

What I want to convince you of is the utility, both fox you as well as for us,
of handling one’s credit with extreme care, of never opening oneself to criti-

cism in any way, and of not taking the chance of attracting, I shan’t say the
blame, but only the attention of the public by serving as intermediary in
operations that are too vast, so that the accumulation of current risks during
a prolonged period does not constitute ... a real peril.

That evening Andrd added a postscript: the discount rate was up to

6 per cent, as foreseen; the loan from the Trading was almost con-
cluded; and Dervieu should be happy at the thought of being reim-
bursed. Andre was clearly afraid that his friend was going to be most
The debentures of the Trading were to pay 7 per cent, semi-annually
and mature in two years.^ Most of them went to the promoters and
directors of the firm: the International Financial Society took 000;
the Sulzbach group in Frankfurt, £^^ 0 ^ 000; Friihling and Goschen,
Oppenheim, Dervieu, and others took comparable amounts. The
Trading expected to dispose of some ;Cioo,ooo more to those manu-
facturers who would be favoured by the orders of the Viceroy - that
was the least they could do in return for the opportunity to sell their
products.2 In the end, of course, Ismail would pay for the favour in
higher prices; but that was not the concern of the Trading.

Andre’s normal reservations about the ‘rapid and excessive develop-

ment’ of Dervieu’s affairs, his almost instinctive suspicions of an alien
way of business, were aggravated by the shakiness of the European
money market. The fall of 1863 was one of liquidation and retrench-
ment for European finance. It had been a boom year in company for-
mation: in England alone, security issues had absorbed £145 million;
in France, 1,200 million francs.® At the same time, millions were
being siphoned away to the Orient, especially to India and Egypt,
where the farmers had an immemorial penchant for hard coin. By June
1863, the drain was apparent in the bullion reserves of the B^iks of
England and France. Before the end of the year, the former was
1 The Timesy 11-11-1863, p. 3.
* Henry Oppenheim-Marcuard, Andr^ et Cie, undated.
* According to the Mon, Mar, Rev.^ VII (1864), 67. French investors actually
subscribed about £62 million in nominal capital during the year.
discounting at 8 per cent.; the Bank of France held to 6 and 7 only-
under pressure from the government, which feared the effect of a crisis
on its Mexican War loan.
With the rise in the rate of interest, stock values began to fall. In
England even consols were hit, but the sharpest drop came in the more
speculative securities, especially those of foreign origin.^ The Paris
Bourse, sensitive to every move and velleity of a court that seemed to
be getting more irresponsible and combative all the time, was still
weaker, cautiously lying low and picking up occasionally only to fall
back at the first rumour of trouble.^ This was definitely not the moment
for a prudent banker to expand credit.

These considerations of a general character were reinforced for

Andre by the state of Dervieu’s account. In effect, the persistent bleed-
ing of Dervieu et Cie by Ismail had given rise to a continuous deficit in
Paris, which by the end of 1863 was approaching two million francs;®
this w’as an enormous sum when measured by the 3,600,000-franc capi-

tal of Marcuard, Andr4 et Cie. On 18 January 1864, therefore, the Paris

bank curtly reminded Alexandria that it was counting on continued
remittances.* Andre was somewhat more gentle but equally insistent
in a personal letter: ‘We are delighted to see that over and above your
large capital, the activity of your operations makes it necessary for you
to ask us for such important facilities; but at the same time, we ask

that you make it a point not to leave your account debited perma-
nently.’® Another week went by, however, without bringing the
expected relief. Andrd took the trouble to add a personal postscript to
one of his firm’s official letters: ‘We must remind you, gentlemen, of
what we have said in our earlier letters about the state of your account.
We were expecting important remittances by the last mails.’ ®
^ Mon. Mar.
Rev.y VII (1864), p. 524.
*The Time$^ 4-8-1863, p. 10; 3-11-1863, p. 6.
^A. Neuf.y L.B. 504, 26-12-1863 to Dervieu et Cie, f. 1239. This deficit in-
cluded outstanding acceptances by Marcuard-Andr6 of drafts upon them by
Dervieu et Cie as well as actual cs^ outlays by the Paris firm.
*Ibid., L.B. 506, f. 876. ® 17-1-1864.
• Ibid., 26-1-1864, f.At this time, the deficit of Dervieu et Cie was about
one million fiancs, inducHng acceptances outstanding. Oppenheim, Neveu et Cie
were having the same difficulties; as early as July 1863, Marcuards had had to call
for remittances, and by the end of November, the Alexandria bank was 820,000
francs behind. Ibid., L.B. 494, 27-^-1863, f. 1323; L.B. 502, 18-11-1863, ff.


There are some people for whom time appeases all anxieties. They
eat agood lunch, and thou^ their difficulties remain, their worries are
gone. And there are some people whose anxieties feed on themselves
and whose cares multiply with reflection. They cannot leave their
homes for a moment without locking the door, closing the metal shut-
ters, throwing the spare and setting the burglar alarm; every
precaution haunts by its insufficiency and incites to further precautions.
Alfred Andre was a worrier. On rereading his postscript to Dervieu
et Cie, he was not satisfied; the situation called for a detailed, personal
letter. Especially since Dervieu, flouting all the rules of good sense and
good banking, had just taken over with Oppenheim, at a fixed price,
38 million francs* worth of Egyptian treasury bonds representing pay-
ments due to the Suez Canal Company.

... I am sorry to see you embarked at the moment with the Viceroy in such
a big affair. . . . Not only are all the objections made in November on the
occasion of the affair of the £700,000 still valid, but even more, since it is a
question of a much bigger operation, you will not be able to stop the public,
if it should so decide, from thinking that you were wrong to put your signa-
ture on 38 millions’ worth of securities that, however well guaranteed they
may be, can place you at a given moment in a dangerous position. Finally,
my dear Dervieu, then as now, I think that your only chance to succeed here
at this time was to present the affair as only the first step of the loan, and I
believe that you would have better served your true interests had you,'
instead of involving yourself more and more every day with the government
simply refused the Viceroy facilities that the resources at your disposal do not
permit you to make available now. I am sorry that I do not have a good hour
before me to develop my ideas, for I feel that you have an interest, from the
standpoint of the large credit that one must enjoy in the business world, in
not losing sight of the ideas and principles of France and in guarding your-
self against the dangerous traditions of the Levant, all the more dangerous
because they are more tempting in their immediate results.

The difference in outlooks could not have been stated better. For
Andre, the business traditions of the Levant were an inversion of
everything that constituted good banking. He was a pessimist, by in-
clination and conviction, and the ebullient confidence of Dervieu made
little impression - and that unfavourable - on his sceptical tempera-
ment. For the prudent sdon of generations of prudent Calvinist bank-
ers, all this apparatus of promises, accommodation paper, debts piled on
debts - jail this mess of notes and bills and bonds and overdrafts - was
but an invitation to disaster. From his office in Paris, he saw the distant
gyrations of Egyptian commerce, the gay dance of paper prosperity,
with the jaundiced eye of a defender of the faith confronted with the
distasteful twitchings of some heretical sect of shakers.
Andr4 was particularly upset by the Suez operation. Dervieu’s posi-
tion was weakened enough by Ismail’s borrowing without further
burdens of this size. Even worse, to announce this imprudence to the
financial w’^orld was folly- Marcuard, Andre et Cie were extremely care-
ful about their signature, which symbolized decades of dependable
banking and was not given lightly to circulate from hand to hand in the
money markets of Europe. In finance, as in other things, familiarity
breeds contempt. Marcuards charged good money for the use of their
name and, indeed, pointed out to correspondents on occasion that even
money could not pay for the bad impression created by a promiscuous
signature.^ Yet here was Dervieu putting his name on securities
amounting to almost four times the capital of his firm.
Furthermore, the Suez transaction had nasty overtones. The pay-
ment of 38 million francs, important as it was, was only one aspect of
a touchy and complicated situation in which important national inter-
ests and the political future of the Near East were at stake. Dervieu,
flattered and exhilarated by his proximity to affairs of state, was, with
the reluctant co-operation of his friend in Paris, getting involved in
matters that smacked more of diplomacy than of banking. The mixture
could easily be explosive.
' Thus remittances from foreign
correspondents were never to be endorsed to
the name Marcuard, Andr4 et Cie, but always in blank, so that if Marcuards wanted
to negotiate them, it could do so without putting its own name in circulation.


In 1865 J- Charles-Roux, future president and historian of the Com-

pagnie Universelle du Canal Maritime de Suez, visited Egypt for the
first time as a member of an international committee of businessmen

invited by Ferdinand de Lesseps to see with their own eyes the progress
of the work. In a report to the Chamber of Commerce of Marseilles he
described his first impressions: ‘Arriving in Alexandria, we perceived
to our astonishment that this city was a focal point of ardent opposition.
Most of the representatives of the great European and even French
business firms were outdoing one another in inveighing against the
canal, which they, like Lord Palmerston, called a chimerical enterprise.
The fear of seeing one day Port Said dethrone Alexandria and draw off
to its own profit a part of its flow of trade, was the real reason for this
hostility, which exists even today/j^
However the body of Alexandrian businessmen may have felt about
the canal, Dervieu was for it from the start. In his first letter to Andre,
dated 25 December 1858, he wrote at some length of the diplomatic
conflicts that complicated and threatened the Suez Company’s early
existence, and concluded: ‘Whatever the story may be, I strongly
desire, for my part, that the Suez Canal be built. This enterprise would
bring large amounts of capital into Egypt and would most certainly
mean prosperity for the country.’
This sympathy of Dervieu for a project that in the long run could
only deprive Alexandria of some of its flourishing transit trade was
probably due firstly to his patriotism, and only secondly to material
considerations.^ The latter were nevertheless important: his interest as
a banker in the commercial currents to and out of Egypt as against

^ J. C. Roux, Ulsthme et U caned de Suei (2 vols.; Paris, 1901), I, 356.

* Later letters of Dervieu*s show that this support of the canal was not the
enthusiasm of a difficult moment. Cf. Dervieu-Andre, 5-11-1862, 19-11-1862.
those simply passing through, his prior concern with capital and finan-
cial operations as against goods and shipping, his immediate need for
business in a year of crisis.
Nor was Dervieu disappointed in his hope that the canal would'
bring business and There was, to begin with, the movement of

Suez shares, which fluctuated widely and were the subject of a certain
amount of speculation. Dervieu acted as intermediary in some of these
transactions. Even more important in the long run, however, were the
financial difficulties of the canal company itself, which gave rise to

credit arrangements and transfers of funds that could be effected only

with the co-operation of bankers in Alexandria.
In order to understand these operations and Dervieu’s role therein,
it is necessary to stop for a moment and review the early history of the
company and its relations with the Egyptian government. These were
characterized above all by a friendly informality - a weaving of things
said and unsaid - that inevitably gave rise to the kind of misunder-
standings that carefully drawn contracts might have prevented.^

^ The primary sources for the history of the Suez Canal and the
conflicts surrounding it are the British and French diplomatic correspondences.
The letters and other documents published by Lesseps for public consumption:
Percement de Vhtkme de Sue:[ (6 vols.; Paris, 1855-66); LettreSy journaly et docu-
ments pour servir a Vhistoire du Ccmal de Sue^ (5 vols.; Paris, 1875-81); Souvenirs
de quarante ans (2 vols.; Paris, 1887), are usefid, but only too often have been
chosen and modified to convey a particular point of view. The archives of the
Suez Canal Company itself, which would certainly throw important new light on
the problem, have been used thus far only by ‘official* historians, executives or
former executives of the company. The personal papers of Lesseps himself also
have yet to be studied by ‘outside’ scholars.
There is a large body of solid secondary material. Outstanding are the treat-
ments of Douin, Hlstoirey I, chs. ii-vii, 19-204; 11, 138-56; Sabry, Empirey
pp. 55-80, 258-314; C. W. Hallberg, The Canal: Its History and Diplomauc
Importance (New York, 1931). Still valuable are Roux, Ulsthme et le canal
[excellent bibliography], and Voisin Bey, Le Canal de Sue^: hzstoriquey adminis-
tratify et aetes i85j^iqo2 (7 vols.; Paris, 1902-07).
consdtutifs de la Compaffdey
On Lesseps himself, the old biography of A. Bertrand and E. Ferrier, Ferdinand
de Lesseps; sa vie, son ceuvre (Paris, 1887), itas since been replaced by G. Edgar-
Bonnet \£recteur-giniral honoraire of the Canal Company], Ferdinand de LessepSy
I (Paris, 1951), based in large part on the private archives of the Company and
the Lesseps ffimily. A second volume is in preparation on the latter part of
Lesseps’ career. Portions of volume I appeared in advance in the Rev. des Deux-
Mondesy 11 (March-April 1950), 193-221, 389-409, 588-618; HI (May-June
1950), 23-50, 279-309, under the title ‘Ferdiniid de Less^s; la lutte politique
pour la oration du C^al de Suez, 1854-1866’.

The story is told that, while yet a boy, Said Pasha began to show
signs of that corpulence which was characteristic of the male members
of the Egyptian dynasty in their maturity. To an old campaigner like
was an abomination. Mohammed
his father, this softness of the flesh
Ali placed the boy on a spartan regimen. He spent the day climbing
rigging, jumping rope, and running around the walls of Cairo, and
when by dint of exertion he had earned his evening’s rest, he sat down
to a table of lentils and greens. Only the consul of France was per-
mitted to receive the lad on the outside, and Said turned often to this
source of relief from the rigours of exercise and the pangs of hunger.
There at the home of his good friend Ferdinand de Lesseps, hidden
from his father’s eyes, he could indulge his weakness for spaghetti and
Whatever the truth of this tale, the feet remains that Lesseps was and
stayed to the end an intimate friend of Said and that this friendship was
the most important single factor in the promotion and construction of
the Suez Canal.The original concession of 1854 began expressly: ‘Our
friend,M. Ferdinand de Lesseps, having called our attention the . .

second, in 1856, was couched in similar terms.® Nor was this initial
favour, unprecedented and generous as it was, the end of Said’s benevo-
The same firman of 185(5 spoke of the ‘loyal co-operation of the
Egyptian government’. Under Lesseps’ persuasion and pressure, co-
operation was soon translated into financial commitments far beyond
anything the Viceroy had ever envisaged. In the last analysis, Egypt
paid for Suez, for the canal as conceived and presented by Lesseps to
the ‘capitalists of all nations’ was impossible of execution.
Ferdinand de Lesseps was a projector, a man with an idea. Imagina-
tive and enterprising, he combined the agility and practicality of a
career diplomat - he served with the French consular and diplomatic
service for almost a quarter of a century - with the zeal and dedication
of a visionary. The idea of a canal across the isthmus was thousands of
years old: the Pharaohs had actually succeeded in building a waterway
from the Nile to the Red Sea, but centuries of disorder and neglect had
returned it to the desert. Interest in the subject revived in the modem
period. The scientists and engineers who accompanied Bonaparte in

^ Bertrand and Ferrier, Lesseps^ p. 16.

* These concessions are given verbatim in Roux, Istkme et canaiy I, 442-4>

447-52. The first concession was sent to Lesseps with an accompanying letter
addr^sed ‘To my devoted friend, of high birth and of distinguished rank .

1798 turned their attention to the problem, and in the 1840’s Prosper
Enfantin and his Saint-Simonian disciples even formed a company
to prepare a preliminary project. Yet it was Lesseps who, thanks
to his friendship with Said, finally succeeded in uniting idea and
In the beginning he stood almost alone. England was determined to
stop him; France was not yet for him; the Turkish court vacillated
between British threats and Egyptian reassurances. But Lesseps was
ready to fight the world. In an age of slow and uncomfortable trans-
portation, the fiery missionary was everywhere at once. He exhorted
the sceptical rentiers of France to open their purses and believe. He
pleaded with the hard-headed merchants of Liverpool and Glasgow to
see as he saw the benefits the canal would confer on British trade. He
cajoled the Viceroy in Cairo, courted the Sultan in Constantinople,
even bearded the redoubtable, white-maned Palmerston in his den and
attempted to persuade the unpersuadable. And when the time came to
organize a company, he turned his back on precedent, rejected the
assistance of Rothschild and the other powers ojf the day, and

went directly to the investing public. He was consumed with the flame
of a prophet. Fluent in speech, prolific with pen, Lesseps made of Suez
all things to all men. To the idealist, the canal was to be a great step

toward a bright new world - ^Aperire terrain genubus^ he wrote to

Cobden in 1854. To and even to citizens of
the patriotic Frenchman,
other European countries, was to be a body blow at perfidious

Albion.^ And to tightfisted capitalists, it was presented as a magnificent

investment that the Egyptian government, it was hinted, was morally
committed to guarantee against loss.®
And yet Lesseps’ inspiration and ingenuity alone could never have
won the day. "W^en subscriptions to the Compagnie Universelle du
Canal Maritime de Suez were opened in the autumn of 1858, only
222,358 of 400,000 shares were taken by the general public. The rest -
and under French law the company could not be regularly constituted
until all the shares were effectively subscribed ~ were taken by Said.

^ Lesseps, Lettres^ journal^ et documents^

V, 380.
* Ibid, n, 350-3, 356-7. In a note circulated to French and foreign newspapers,
the promoters declared: ‘[Said] wanted, in addition, to assure the remuneration of
the capital engaged in the enterprise. This was the . . . aim of his liberal conces-
sion’ (p- 353). Cf. also in, 33, circular to correspondents of the company in
There is not the place here to go into the details of this transaction, a
master coup by a past master of the fait accompli. Suffice it to say that
Said, who had originally subscribed to 64,000 shares and might have
been ready to accept up to the 96,000 reserved for the Ottoman Empire
- Turkey took nothing - found himself saddled by his good friend
with 176,000 shares, or 44 per cent, of the total capital, before he even
knew what was happening.^
Said swallowed his objections. The magnitude of the burden was
more than counteracted by his affection for Lesseps, reinforced by vain
dreams of immortality as the Pharaoh of Suez and by even less justified
hopes that the canal would be the means of securing complete inde-
pendence for Egypt. Besides, Lesseps assured him that he could pay the
money when he was able, a concession ideally calculated to appeal to
the Viceroy’s penchant for temporization.
In August i860, therefore. Said mortgaged the future and concluded
an arrangement with the Suez Company to pay his liabilities as a stock-
holder by means of treasury bonds. This agreement bore on the first
1 00 francs per share. On 177,642 shares, this amoimted to
francs, only 2,5 16,1 57 francs of which had been paid by April i860; the
rest was to be covered by the aforementioned bonds, the first of
which would not mature until 1863.^
By the end of 1862, however, the situation had changed. Three hun-
dred francs had been called up per share, and the Viceroy’s immediate
liability had grown from 15 million to 54 million francs. The Suez

Company was feeling the pinch, and Lesseps was reluctant to risk
further calls for funds while the corporation’s biggest stockholder was
not paying anything. At this juncture, Said died, and Lesseps’ own
papers show what a blow this must have been.® The new Pasha was not
a personal friend, nor was he favourably disposed toward the canal by
paternal predilection as Said had been. Ismail had not originated the
idea; it was left to him as an expensive legacy. At best, he might be

^ Cf. ibid., n, 412, Lesseps to Albuf^ra, 31-12-18^8, stating that unsold shares
would go to the Viceroy, ‘in conformity with his instructions*. No written evi-
dence of these ‘instructions’ has ever been presented nor is there any proof of the
authentidty of the letter in question. See, on this point, Sabry, Empire, pp. 64-75,
and Edgar-Bonnet, Lesseps, pp. 328-30. Edgar-Bonnet’s discussion rests in part
on a misreading of an important piece of evidence: F.O. 142-25, Colquhoun-
Russell, 3-6-1860.
* Lesseps, Lettres, journal, et documents, HI, 391-2.
» Cf. ibid., IV, 276-9.
unentlmsiastic; at worst, he could be hostile. Indeed, previous to his
accession he had depreciated and deprecated the project.^ Yet more than
ever now, Lesseps needed a friend, a generous, kind friend, was to
if he

pull through.
In the beginning at least, Ismail did not disappoint him. The new
ruler was prodigal in assurances and reassurances of sympathy. He was,
he declared, more ‘canalist’ than Lesseps himself.^ And while he had
reservations about certain provisions of the original concessions, nota-
bly the exploitation of corvee labour and the abandonment to the com-
pany of large tracts of land, he proceeded to demonstrate his good will
by accepting the liability of the Egyptian government for the shares
subscribed by Said. The
convention of 20 March 1863 confirmed the
earlier arrangements of August i860 with regard to the first 100 francs
per share. The remaining 35 millions
- the next 200 francs per share -
would be paid starting January 1864 at the rate of 1,500,000 francs per
month, in cash or in short-term notes remitted thirty days before pay-
ment, all expenses of negotiation to be borne by the Egyptian govern-
ment. Ismail explicitly rejected the idea of a bond issue to cover this
debt; at that stage in his career, he was still rigidly opposed to public
loans as a financial technique.^
At this point, Dervieu’s earlier instinctive equation of the canal with
business - *this enterprise would bring large amounts of capital into
Egypt, and would most certainly mean prosperity for the country ’ -
began to bear fruit. He
and Oppenheim took at yj per cent, discount
10 million francs* worth of the bonds remitted in payment of the first
and an option on the 37 million francs owed on the second and

Dervieu in turn wrote Andre that the affair was a good one:
third calls,^
•Money is so plentiful on our market that we have no doubts about
placing these securities again at from 6J to 6| per cent, discount.*
Nevertheless, if Andrd could dispose of a large block in
Europe at the
same rates or better, Dervieu was interested.
Andr6 declined the offer. There were plenty of good European

1 Sabry, Empire^ p. 259; Edgar-Bonnet, Lesseps, p. 363. Cf. F, 0 . 142-26,

Colquhoun-Bulwer, no. 21: 26-5-1862.
* laments, IV, 279-82.
Lesseps, Lettres, journal, et
* Ibid.,
IV, 279, 282-3, 293-6; Lesseps, Percement, VI, 73-7.
* Dervieu-Andr4 27-3-1863. The option contract is given
, in Lesseps,
Lettres,joumal, et documents, IV, 298-300, As we have seen, Dervieu and Oppen-
heim took up the option at the beginning of 1864. Above, p- 171.
securities that paid better; capitalists
had come to ei^ect more from
Egyptian investments; and besides, was as prosperous as Der-
if Egj^pt
vieu said it was, why come to Europe?^
Dervieu had no answer to this return of his own arguments. He
wrote Andr^ on 18 April that he had merely wanted to turn the bonds
over that much faster in order to release funds for other operations.
Three weeks later he wrote that he was disposing of the bonds ‘without
difficulty at 6J and 6| per cent.’ ®

In the meantime, relations between Egypt and the canal company,

seemingly arranged by the conventions of March, remained as unsettled
as ever. British pressure on the Egyptian and Turkish governments to
halt or at least hinder the construction of the canal had not abated,
indeed had increased with the concessions of Ismail to the point of
open threats.® The primary objective of Russell, Palmerston, and the
Foreign Office was to prevent the canal altogether. And since the Suez
Company had never stopped to obtain the sanction of Constantinople
required by Turkish law and stipulated in letters appended to Ae
original concessions — another of Lesseps^ Jiiits accomplis — the British
could argue with some cogency that the whole project was illegal.
Unfortunately for their eflEbrts, the force of vested interests and the
counterpressure of France made Again and
drastic action impossible.
and Cairo acquiesced with British
again, the officials in Constantinople
importunings and, primed with new courage, promised to take a firm
stand. Each time courage melted in the heat of French indignation, and
all concerned went gratefully back to the dilatory, evasive course that

had proved quite comfortable in the past - and quite convenient for
The only possibility was an oblique attack, and England soon found
it expedient to concentrate her protests on two particularly vulnerable
and, at least in appearance, critical aspects of the project: the use of

corvee labour and the extensive concessions of land bordering the con-
templated canal system. The first was condemned on humanitarian
grounds, although the use of forced labour by a British firm like the

^ Andre’s arguments may be inferred firom a letter of Dervieu of 18-4-1863.

® Dervieu-Andr6, 8-5-1863.
* Hallberg, Sue^^ Canal^ p. 96; Douin, Histoirey I, 56-
Peninsular and Oriental gave a hypocritical tinge to these protesta-
tions.^ The second gave rise to more material objections. According to
Lesseps, the grants of land were to be the basis for a colony, an oasis of
fertility, a new Goshen in the heart of the desert. Could Turkey afford
the existence of a French-dominated enclave at one of the most stra-
tegic points in the Empire? Could Egypt tolerate this threat to her
sovereignty, this alien cancer? Could England suffer a potential enemy
to encamp on the short-route to India?
In fact, England had seriously misjudged the vulnerability of the
Suez Company in these respects.® Construction, which had proceeded
steadily since i860, was nearing the point where it was possible, indeed
advisable, to substitute dredges and other machines for hand work.
The withdrawal of forced labour might raise the company’s bill some-
what, at least in the beginning, but would hardly prove mortal. If any-
thmg, as later events were to show, the continued use of gang workers
would have made it impossible to complete the project in anything like
die scheduled time.® Similarly, the realization of Lesseps’ plans to con-
vert the brown sands of the desert into a green paradise and build cities
to rival Alexandria,^ plans that had undoubtedly helped to sell Suez to
some investors, lay at best far in the future and could hardly be of criti-
cal relevance at the moment. In the last analysis, the immediate survival
of Suez depended on Lesseps’ ability to complete the canal quickly
and make it yield income, and the frustration of such accessory specu-
lations would hurt the company more in its sensibilities than in its
All this, of course, is the knowledge of hindsight, although the

^ Hallberg, Suei Canal, p. 201. The British contractors who built Egypt’s rail-
roads had also used forced labour. Cf. Lesseps, Lettres, Journal, et documents, IV,
307: ‘

one may say that the rails rest on thousands of Egyptian cadavers.*
Also Lesseps* memorandum of 8-5-1862 and his letter of 23-5-1862 to Layard,
Under-Secretary of State for Foreign Affairs. Ibid., pp. 218, 230. It should be
noted that in the beginning the Egyptian government had been as anxious as the
Suez company to have the canal built by corvee labour. Said had feared the con-
centration of thousands of foreign workers - hence potential occupiers - on his
soil and insisted that four fifths of the labour be Egyptian.
* British opinion confidendy assumed that the end of forced labour would

mean the end of the canal. CL ibid., pp. 321—2, citing the Standard, Spectator,
Saturday Review, and Economist.
® Sabry, Empire,
pp. 281-3; cf. the report of Lesseps to the stockholders of the
Suez company, 1-3-1864: Lettres, journal, et documents, IV, 427-30.
* Sabry, Empire, p.
263, citing a letter of Lesseps to The Times.

Foreign Office should have known that at least as early as 1862 Lesseps
was negotiating the construction and employment of dredges with
French engineering and contracting firms.^ In any event, in 1863 the
coTvie and the land concessions seemed to be crucial issues, and in Lon-
don, Paris, Constantinople, and Cairo the battle was joined.
The motives of Ismail in this struggle have given rise, as in other
things, to diverse interpretations. From was
the start of his reign he
hostile to the corvee^some say on obvious humanitarian and moral
grounds, others say for economic reasons: the corvee was a drain on
agricultural manpower; there was a fortune to be made in cotton; and
Ismail was the biggest landowner in Egypt. ^ Similarly, his opposition
to the land concessions has been attributed both to a genuine fear of a
French threat to Egyptian sovereignty and to a desire to forestall a

Turkish counterthreat. Moreover, the picture is seriously clouded by

the curious inconsistencies of Ismail’s behaviour. He was for the com-
pany and against it; he accepted the debt of his predecessor, but rejected
the terms of his concessions; he feared Turkish interference, but
pleaded with England that he could not act without orders from the

^In a letter of 12-11-1862, the American Consul Thayer reported that the
Company was importing twenty steam excavating machines ‘of immense power’,
which, according to engineers’ estimates, were expected to finish the work in
three to four years using only one to two thousand men. U.S. Dept, of State,
Thayer-Seward, 12-11-1862. Cf. the documents published by Lesseps himself,
Empire ^ p. 281; Douin,
Lettres^journcdy et documents ^ IV, 355-6, 428; also Sabry,
Histoire^ 129-30; Edgar-Bonnet, Lesseps^ p. 395 (who remarks that Lesseps

was not ready to compromise on the question of the corvee until convinced that
the men could be replaced by machines).
® Sabry, Empire^ pp. 265-6, 274-6; Douin, Histoire^ I, 29, 36, 41. The intent
of the canal concession had been that Egyptian agriculture shoidd suffer as litde as
possible from the drain of labour to the Isthmus. The exact language of the con-
tract of 20-7-1856 was; ‘The number of workers shall be set taking into considera-
tion the seasons of agricultural work.’ In fact, the demands oi the company
rapidly took on the character of a vested right to an invariable labour supply -
this, despite Egypt’s chronic shortage of hands, which was at its height in 1863
as a result of the cotton boom, the murrain, and the disastrous floods. In that
critical year, the construction of the canalwas absorbing 50,000-60,000 men at
any given time; 20,000-25,000 at work and the rest on their way to and from the
Isamus. On the farm labour problem, see U.S. Dept, of State, De Leon-Marcy,
1-5-1856; Thayer-Seward, 28-8-1861, 11-7-1862, 12-11-1862; ^, ,^ C.C,, E
Alex., XXXVIII, Outrey-Moustier, m^moire accompanying letter of 29-12-1866,
f. 407; Senior, Conversations^ I, 28 (observations of Mougil Bey, a prot6g6 of

i 82 bankers and pashas
Sultan; he gave the representatives of England repeated assurances of
his determination to go along with their campaign to revise the con-
cessions, but at critical moments let them down; he alternately threat-
ened and reassured the company with word and deed, yet all the while
stubbornly pushed his claims. In short, his actions suited the complex-
ityof the man, and historians have hitherto preferred to pass his
motives by and take his deeds at face value. Generally speaking, they
have tried to reconcile the contradictions by treating Ismail as a pawn
balancing and shuttling among stronger players.
Yet the letters of Dervieu show a different Ismail, whose actions
make better sense in the light of his own initiatives and manoeuvres.
In the above-mentioned of i8 April, Dervieu followed his dis-

cussion of the transaction in Suez bonds with an intriguing bit of bait

(Der\deu had an affection for mystery, which nourished his sense of
importance): ‘I hope to be able soon to speak to you of a more impor-
tant affair, w^hich is on the carpet and which, this time, will prove, I
thitik, completely to your liking.* Then, after some intervening matter,
he went on to make an innocent request: 1 should be very grateful if
you would keep us up to date on the price of Canal shares and especi-
ally on the quantity offered on the Paris exchange. We shall probably

have occasion to have you buy or sell this security.*

A subsequent letter of 8 May threw a little more light on the matter:
‘I beg of you once again not to fail to quote us the shares of the Canal

by every mail. There may perhaps be a big affair there, which we will
not fail to entrust to you.’
The next letter brought further incomplete information. On 20 May,
Dervieu wTOte:

We shall probably have a big affair to entrust to you in connexion with the
Suez Canal, but it calls for the greatest discretion. It will involve, depending
on the course taken by the negotiations under way regarding the canal, sell-
ing or buying a large number of shares. Right now, I can not yet give you
full details. I hope to be able to do so shortly. In the meantime, take note that

if I wire you to sell or buy ‘Egyptians* at the best price, that will mean Suez

Canal shares. If I tell you to buy, you must act immediately so as to bring the
price down. If, on the other hand, I tell you to sell, you must make them go
up, but everything leads me to believe that it will be purchases that we shall
instruct you to make.

Dervieu was not ready to give full details, but the letter spoke for
itself. There were two possibilities. One was that he or someone else

with access to inside information on the progress of negotiations

among Egypt, the canal company, and the European powers was pre-
paring to exploit this information on the stock market, buying if an
agreement favourable to the company was near at hand, and selling if
discussions seemed to be breaking down. This was the more obvious
interpretation. More subtle but not implausible was the possibility that
someone was interested in Suez shares not for the sake of speculation
but of control, and that the purchases predicted by Dervieu were con-
tingent on an impending rupture of negotiations that would send Suez
stock plummeting.
Andre’s reaction to this proposition was less than enthusiastic. It

smacked of speculation, and conservative houses Marcuard-Andre like

did not speculate - at least in principle. Moreover he had little faith in
Suez, which in his eyes, and in the eyes of all the traditional houses that
had been rejected by Lesseps, was nothing more than a grandiose
gamble. In any event, the proposition was not practical. As Andre
pointed out in a letter of 6 June, there was not much of a market in
canal shares, which were ‘astonishingly well placed*. (Most of them
were in the hands of small investors rather than speculators.)^ As a
result, any large-scale bu5dng or selling would shift the price consider-

ably. Andr6 promised nevertheless to ‘act for the best*. ‘With all the
vicissitudes that this enterprise still seems destined to undergo, I con-
fess to you that I cannot understand the level at which this stock is

maintaining itself.*

Suez shares were indeed doing surprisingly well. After sliding a few
francsbelow par on the accession of Ismail, they went back over 500 at
the beginning of April, rose to a high of 552 fr. 50 on the tenth and

eleventh of that month, and slipped back to the low 500*3 by the begin-
ning of June. 6 June, the date of the above letter, marks in fact a low
that is not touched again until October-*
In the meantime, circumstances were making it unnecessary for
Andr^ to act. The fate of the negotiations in progress was more indeter-
minate than ever. ‘I have nothing to tell you regarding the Suez shares,*

^ A breakdown of subscriptions in Paris showed that the i88 biggest stock-

holders averaged only 170 shares. There was only one block of a thousand.
L*Isthme d& 10-12-1858, cited in Lesseps, Lettres^journaly et documents^ 11,
393-5. The article concluded: ‘These shares, even before delivery, are placed in
safe and sound hands; they will not leave them.’
® These are the official quotations as given in the Moniteur urdverseL
wrote Dervieu on 3 June. The Viceroy is very much undecided.
Nubar Pasha has left for Constantinople and it will not be until we
know the intentions of the Porte that we can think of doing some-
thing.* And on 19 June, with negotiations still dragging, Dervieu
wrote Andr^ again that he had nothing to tell.
There the matter rested for another six months. In Constantinople,
Ismail’s representative Nubar finally succeeded in August in getting the
permission of the Porte to negotiate directly with the canal company.
In return for this favour, of great importance to a ruler so umbrageous
as Ismail and so sensitive to Turkish interference, Nubar committed
Egypt to buy back the land concessions at whatever price was required.
He also got six months to negotiate the abolition of the corvie\ at the
end of that time, the problem would be turned over to the Ottoman
Constantinople welcomed the agreement; it offered a convenient,
face-saving exit from a delicate situation. France accepted it as a con-
secration of the status qux>^ for with Turkey’s recognition, Lesseps*
legal position would be impeccable. Even the British ambassador Bul-
wer felt that an important step had been taken toward the revision of
the concessions.^
On 12 August, Nubar returned to Egypt to receive the generous
thanks of his master, who presented his envoy with a magnificent estate
all fitted out with the latest agricultural machines in token of his pleas-
ure. Nubar stopped for but a moment. A week later he was off again,
this time to Paris to negotiate the projected changes with the Canal
company. From the start, both sides girded for battle. Lesseps, who
could be sure that the changes desired would not cripple the enterprise,
was ready to sell them as dearly as possible; Ismail was willing to pay
for the changes, but not for the canal. Both sides beat their breasts and
cried out to all to witness their ill-treatment. Lesseps directed his col-
leagues not to treat with the Egyptian envoy and insisted that the loss
of die land grants and corvee labour would kill the canal. Nubar issued
statements to the press attacking the legality of the project, and
attempted to strike at Lesseps* strongest point of support, the French
government, by enlisting the aid of the Due de Momy, President of the
Corps Ldgislatif and half-brother of the Emperor. The fall and winter
of 1863-4 were filled with charge and countercharge, lawsuit and

^ Douin, Histoire^ I, 59-65; Hallberg, Sue^ Canal^ pp. 202-3.


countersuit, British notes and French memoranda, hot words and cold
pressures.^ Canal shares declined.
It is at this point that Dervieu re-enters the stor}^ On 15 Januar\',
Gallo, for Dervieu et Cie, and Hermann and Henry Oppenheim - all
of them in Paris at the time - turned over to Marcuard, Andre et Cie a
collective letter confirming a verbal agreement to set in motion the
long-dormant Suez-share scheme. The letter requested Marcuards to
open for them a joint account, and authorized the Paris bank to buy for
this account as many shares of the canal as it could find at 470. All

shares so purchased would remain in the hands of Marcuards until

further arrangement.
The confirming letter had barely been signed, howwer, when a little
experience convinced Andre that Ae w^hole idea w^as impracticable. On
17 January he wrote Dervieu that either the scheme had leaked or the
market was even thinner than he had expected; a small purchase had
sent the price up fifteen points. He concluded by insisting that if Der-
vieu planned large-scale purchases, he had better place the funds in
Marcuards’ hands in advance: T know that your client keeps his purse
strings very tight, but I urge you to insist as much as possible on this
point, because the circumstances prevailing at the moment are such as
to impose on each of us a great deal of reserve and prudence.’
This is the first explicit reference to Dervieu’s client, the man behind
the proposed operation. The reader will have guessed that Dervieu (or
Oppenheim for that matter) was hardly in this on his own initiative.
Had he wanted to engage in a stock-market speculation - and any per-
sonal operation of Dervieu in Suez shares could be nothing but specu-
lative - Andre was the last person he would tell about it. Only Ismail,
already the owner of 44 per cent, of the outstanding stock, could have
any interest in a raid of this kind.
Was it then Ismail who was behind the scheme.^ It is not the privi-
lege of the historian to draw up a bill of particulars on the basis of infer-
ential reasoning. For us, even Andre’s letter does not settle the matter.
The provoked Dervieu to a
reference, however, to tight purse strings
reply that confirms what otherwise would be at best an informed guess.
‘Permit me,’ he protested in a letter of 2 February, ‘to destroy an
opinion that you expressed to me in your last letter, that the Viceroy
is tight-fisted.’

Ismail’s motives in this project are not hard to divine. No one was in
^ Lesseps, Lettres^ journals, et documents, IV, 349-71, 430-44.

a better position than he to know how the negotiations were progress-

ing, and few could so easily guide lines desired. To be

them along the
sure, he was not a completely free agent. Diplomatic pressure could
easily compel him to act against his wishes, and the pressure increased
tremendously once the French government announced, on i6 January,
that the Emperor was ready to arbitrate the dispute. But Ismail had
every reason to believe that he could put off or block this showdown,
that thanks to Momy he could count on French support rather than
opposition.^ Support on what terms.^ Not to destroy the canal, which
w^s far too valuable a potential asset of French diplomacy. To eliminate
Lesseps? - now that was another matter. He was a thorn in Ismail’s side,
and another director would surely prove more tractable. Moreover he
was an obstacle to Momy, who may well have contemplated taking over
a reorganized canal company - Momy was an experienced business
buccaneer who liked nothing better than to mix statecraft and enterprise.^
Unfortunately, this pact between the Viceroy and the ambitious
duke is to a great extent a matter of conjecture. And necessarily so.
Even if we were so lucky as to possess the papers of the principals,® we
should probably still be in the dark about most of the arrangements.
This is not the sort of thing that people put in writing. But we may feel
sure that Momy did not offer his support for altruistic reasons; and we
do know that Ismail was hoping, at least as late as the end of January,
to take over control of the canal company.^

Edgar-Bonnet, Lesseps^ pp. 395, 396, 401, This was a disastrous miscalcula-

tion.As Thiers pointed out, the Emperor had to support the Company; ‘he could
not do otherwise without discrediting himself in the eyes of the public.’ Ibid.,
p. 390.
* Edgar-Bonnet, Rev, des Deux-Mondes, III (i 5-5-1950), pp. 283-6, 288;

idem, Lesseps^ p. 386. Cf. Roux, Ulsthme et te canal^ I, 286; also Lesseps, Lettresy
journaly et documentSy IV, Nos. Cl, CVII, CVIII, CXII, CXVII, which contain
all manner of allusions to the allegedly nefarious role of the Duke. Momy was
probably the most versatile of the political adventurers spawned by the Second
Empire. Minister, ambassador, poet, playwright and financier, he had his fingers
in any number of business pies, including railroads, coal mines, sugar refineries,
iron mills, banks, and caneds. Much of was unquestionably linked
this activity
to and facilitated by where *Morny est dans
his political position, to the point
Vcffaire* became a veritsble password assuring the success of any transaction.
* Momy seems to have been one of those enterprisers who are most comfort-

able in oral negotiations. He wrote little. Edgar-Bonnet, Lessepsy p. 385, citing

M. Boulanger, Le Due de Moray,
* Cf. A,E,y C.P., Alex., XXXIII, Tastu-Drouyn, 9-2-1864, S. 62-6; also

There is one point that remains particularly obscure. If Ismail’s

primary objective was to break off negotiations, drive the stock dovm,
and pick it at bargain rates, why was he buying in advance of the
debacle? Was
he hoping to pick up enough shares to give himself
majority control by &e time of the stockholders’ meeting that Lesseps
had scheduled for March 1864? Since the voting power of each share-
holder, however large his holding, was limited, it would have required
considerable manipulation to translate Egypt’s enormous investment
into effective votes; what more, since Ismail’s shares were not paid

up to the extent of those of the other owners, it was questionable

whether he could vote all of them.
The Viceroy may have thought that he could get around these diffi-
culties; or perhaps that by turning them into legal issues, he could

create delays that would paralyse the project and bring Lesseps down.
On the other hand, he always had- to consider the possibility that he
would be compelled to submit to arbitration and indemnify the stock-
holders; in which case it was important to acquire as many shares as
possible in advance, while the price was low. Ismail clearly had to
envisage a number of conflicting eventualities and provide for all.
Unfortunately, all his plans went awry. For one thing, he could not
buy the shares as cheaply as he had hoped; from a low of 461 fr. 25 on
8 January, Suez rose to 475 by the end of the month. How much this
was due to Ismail’s brief foray in the market, and how much to the dis-
counting of the arbitration, which seemed inevitable, it is impossible to
say- In any event, the price was too high; the scheme would not pay
unless a reasonable margin were established between the purchase price
and par. Nor was he ever in a position to break off negotiations and
panic the other stockholders into selling. There were too many impor-
tant interests determined to prevent such a debacle, foremost among
them Napoleon himself. The Viceroy was forced to go along. Reluc-
tantly, fearfully, hopefully, he bent himself before stronger men. On
30 January, the Viceroy of Egypt humbly requested the Emperor of
France to arbitrate the dispute.
The game was almost over. On 2 February, Dervieu wrote from

Edgar-Bonnet, Lesseps^ p. 395. The very idea aroused the indignation of the
French consul: ‘AU this, Sir, is crude, wretched, based on so scornful an estima-
tion of French people and things that it took all the energy given to my convic-
tion by past experience to pick up this rumour and present it to Your Excellence.’
The purchases of Suez shares could have become quite sizeable, if a settle-
ment between die Company and the Viceroy could not have been arranged,
for the intention of His Highness would have then been to buy up every-
thing he could find. But today, a transaction is imminent, and these purchases
will have to stop. There is no more interest in speaking to you about them.

Nevertheless, for your guidance, the order still stands to buy everything we
can below the market price.

The game was almost over, but not quite; Ismail refused to abandon
the field. The letter to Andre had not yet arrived in France when

Tastu, French consul-general in Alexandria, felt it necessary to warn

his superiors that matters could not be taken for granted: ‘People talk
of an arrangement. Yet the disposition of the Viceroy is still unfavour-
able,’ and Ismail ‘is not hiding the somewhat scornful joy that the
success of his campaign against the Isthmus affords him*.^
Yet however the Viceroy twisted and squirmed - and he continued
to do so right up to and after the decision of the Emperor - the abor-
tive stock-market raid was finished. By early February, Suez was up
over 480 again, and on the seventh, at about the same time as Tastu was
advising Paris of Ismail’s ill-temper, Dervieu instructed Andr^ to halt
the purchase of even those few shares that could be had below the

market price. Nothing was ever said about the scheme again.^

Edgar-Bonnet, Rev, des Deux-Mondes^ HI (i 5-5-1950), 293.
Although, if we are to believe Lesseps, the scheme was revived in a some-

what different form after the Imperial arbitration. In May 1864 he wrote Paris
that a company had already been formed by Oppenheim and some of his friends
with a capital of 250 millions to take over Suez if Lesseps were forced out, that
the firm was to be named the Compagnie universelle de navigation, and that its
shares would soon be quoted on the London Exchange. This information was
based on a letter of 19-5-1864 from someone unknown [the signature has been
cut out], A,E,^ C.P., Alex., XXXIII, Lesseps to Marquis [de Moustier (? — signa-
ture also cut out)]. There may have been some confusion here with the projected
merger of the Egyptian Commercial and Trading Company and the Medjidieh.
See below, p. 194. For the terms of Napoleon’s decision, see the citation in
extenso in Lesseps, Lettres^ journal^ et documents^ IV, The
476-93. canal com-
pany was awarded 38,000,000 francs for the loss of corvee labour, 30 millions for
the land returned to Egypt, 10 millions for the work done or to be done
on the
fresh-water canal linking the maritime canal to the Nile, and 6 millions for
tolls that would be collected on the fresh- water canal
were it not turned over to
Egypt — a total of 84 million francs. See also below, p. 224 and n. 2.


While European bankers were trimming their saik, Egyptian

prosperity continued unabated. In spite of a record harvest, the price
of Jumel at Liverpool rose fiom 21 pence a pound in July to 2^ in
October of 1863.^ Cotton was even higher at Alexandria and in the
interior higher soil, an inversion of the usual price structure that points

up better than anything the inflationary tendency of the Egyptian

market. The country was flying free: Europe could do as it pleased;
business was going up in Egypt. From the Viceroy, who owned some
eight or nine million pounds of cotton and was looking forward to
almost miUion in income from this source alone, to long-destitute

fellahin. who were now able to eat white bread and meat and buy slave
girls for domestic work and distraction, everyone connected with the
cultivation or trade of the new white gold was workir^ a bonanza.^
No one was exploiting this vein more vigorously than Ismail. For
centuries the rulers of Egypt had traditionally devoted a good part of
their efforts to the a^randizement of their personal fortunes, and
Isnml was no exception. As the price of cotton rose, his appetite for

cultivable land became insatiable. No one, even relative or friend, was

safe fiom his covetous eye. And when the Viceroy of Egypt offered
what he felt was a reasonable price for a piece of land, the proprietor
made haste to accept the honour, however much he may have been
otherwise inclined. If he refused, he found his irrigation canals cut off,

his feUaMn gone in the night; the sight of crops blighted and fertile

fields returning to desert would bring anyone to reason. By such means,

Ismail quickly doubled, tripled, eventually decupled the already enor-
mous domains he held on his accession.® At the same time, he built a
^ Cf. Appendix, p. 334.
* Cf. Wallace, Egypt and iJie Egyptian Quesdoa, p. 319 f. Prosperity also had
its disadvantages; the new wealth of the ^yptian peasant apparently made him
tempting prey for bedouin marauders. The Times, 28-9-1863, p. 9.
* Eyth, Leben£ge Krafie,-^. 213.
network of railroad branch lines whose structure was determined more
by the location of his estates than by any other consideration. Fortu-
nately, however selfish his motives, Ismail could not help serving his
neighbours while serving himself.^
Everything in the Nile Valley was sacrificed to cotton. Even in

Central and Upper Egypt, where irrigation facilities were lacking and
little cotton had been grown before, peasants were cultivating the plant

in small patches of less than an acre strung out along the life-giving
Nile.® Egypt, a coimtry that had always shipped its beans and grains
throughout the Mediterranean, was now at the point where imports of
food were necessary to stave off famine.® Prices rose precipitately.
Eggs were three or four times as high as in 1862, oil and vegetables had
and fowl were up 400 per cent.^ Mutton, the staple meat
tripled, grain

of the Mohammedan, had gone from 4 pence to a shilling a pound.®

And while inflation made life difficult for all residents on fixed salaries,
including consuls who humbly begged their governments to increase
their appointments, the new rich of the cotton boom took the prices
in stride and by their intemperate luxury drove them even higher.®
In this euphoric atmosphere, the bearish fears of Andr6 seemed far
away. On 2 February 1864, Dervieu replied confidently to his friend’s

^ Cf.F. 0 . 142-27, Colquhoun-Russell,no, 122: 15-8-1863. For the complaints

of Ismail's abuse of his position to exploit the railways to his own advantage at
the expense of the European merchant community, see F, 0 . 141-53, Russell-
Colquhoun, no. ii; 24-2-1864, with enclosed ‘Memorial of the Directors of the
Manchester Chamber of Commerce,' 22-2-1864; jF.O. 142-27, Colquhoun-
Russell, no, 27; 25-3-1864; no. 47: 19-4-1864; no. 63: 3-5-1864; A,E,^ C.P.,
Alex., XXXni, Tastu-Drouyn, 26-2-1864, ff. 88-94; C.C., Alex., XXXVII,
Tastu-Drouyn, 20-2-1864, f- 248; The Times^ 9-2-1864, p. 5; 6-2-1864, P* 12;
14-4-1864, p. 14; 21-4-1864, p. 12; 25-5-1864, p. 6.
p, 9. The Viceroy had been the grow on a
® Ibid., 28-9-1863, first to cotton
had sown 4,000 acres; in 1863, 19,000 were
large scale in central Egypt. In 1862 he
planted. By supplying farmers in the area with free seed, he hoped to plant
70,000-100,000 acres in 1864.
* The Times correspondent wrote: ‘It is a strange thing to see this land of

abundance forced to seek abroad for its daily food.' 27-2-1864, p. 12. From
8-4-1864 to 1-7-1866, the export of grain and flour was forbidden by law.
Douin, Htstoirey I, 261.
* Ibid., pp. 235, 259-60. Cf. also Y. Artin, Ess(d sur Us causes du tenchensser
m&tt de la vie matdrielU au Caire dans U courant du XIX* siecU^ iSoO’-^i^oy^
(Cairo, 1907).
® The Times^ 24-12-1863, p. 10.
® F.O. 142-27, Colquhoun-Russell, no. 147: 25-9-1863.

tedious lamentations. He boasted of his new

role as private secretary
to the Viceroy during Nubar’s absence in Paris and pointed out that
the extra work more than paid for itself. At the same time he vigorously,
even indignantly, defended his patron against Andre’s insinuations.
Ismail, he insisted, was not tight-fisted. He had inherited his financial
embarrassments from his predecessor, who had managed to squander
over fifteen million francs on his last trip to Europe alone, buying ‘green-
houses,^ silver fireplaces, jewels, a yachtmaking twenty miles an hour,
two machines of 600 h.p. each without hulls, etc., etc.’ All these useless
baubles were now being exchanged for railroad stations, freight cars,
tugboats, etc. - unfortunately at a loss. There was also the expense of
restoring the stocks and stores that Said had dilapidated; of re-estab-
lishing the army; of making up salary arrears for all government
employees - under Ismail, everyone was to be paid on the dot.
Moreover, all of this was merely the burden of the past. What of the
present and future: the expansion of cotton cultivation by better irri-
gation, the introduction of steam pumps and power gins, the con-
struction of new railway lines, the improvement of canals and harbours?
And what of the murrain, which had necessitated the importation of
livestock in unheard-of numbers?® Dervieu asserted that the last item
alone would balance the exports of cotton.
In short, Ismail’s enormous outlays were dictated by circumstances,
and both Oppenheim and Dervieu had no choice but to help. They
may have gone too far: at one time Dervieu was out five million francs -
half his capital. But this was now down to three,® and besides, such

^ The letter appears to read ‘serres de tronchon^, which does not make sense-

Hamza, Puhlic Debt, p. 67, n. 3, speaks of winter garden plants ordered through
a Mr. Terenchon, but it hardly seems likdy that Dervieu would have dted the
purveyor’s name in this one case and not in others.
® Although the murrain cost Egypt a fortune, the government itself did not

suifer so much as the complaints of Ismail would indicate. The Viceroy did spend
large amounts for cattle, horses, machines and so forth, but most of this livestock
and equipment was resold to the peasants at prices which, though well below
those asked by independent middlemen, were nevertheless not too far below
those paidby the Viceroy to the import houses. According to J. C., Histoire, the
budget of 1864 showed only ££125,000 lost on the whole operation.
* Thanks to Ismail’s loan from the Trading, £100,000 of which went to

Dervieu. Pasted got £50,000 and Oppenheim £232,057 in two instalments.

Hamza, Public Debt, p. 73. This was not the first time, nor was it to be the last,
that Oppenheim’s firmness proved more profitable than Dervieu’s deferent
co-operation had led to some extremely lucrative orders. Unfortu-
nately, these ‘good heavy advances: ‘you must not be
deals’ required

surprised that we have made full use of the credit by acceptance that
you opened to us.’
Dervieu was equally strong in his defence of the operation in Suez
bonds that Andr^ had found so dangerous.^ In a letter of 7 February
1864, he insisted that the transaction was sensible and prudent, and that
he did not need European capital to carry it through; in offering shares
to Andre and a few others in Europe, he was only trying to do them a
favour. At the same time, of course, European participation would
release Egyptian capital for other investments. The most important
reason was left for last: Egyptian funds would perforce dribble in, and
Dervieu needed money then and there, the ‘more easily to support the
outlays that the Viceroy imposes on us, or, to put it better, that our
business relations with him impose on us.’
We may note that Dervieu was repeating here a theme already ex-
pressed in earlier letters: that his position required him to place his
fortune at the disposal of the Viceroy. The alternative was abdication.
‘It would have meant introducing another element than our own and
creating competitors who up to now have exerted all their efforts to
supplant us, without ever succeeding.’ Andre might have replied that
no banker can long survive as a prisoner of his ambition; and that free-
dom of action - freedom to turn down as well as undertake - is a sine
qua non of business survival.
The trouble was that at this point Dervieu was not too interested in
anything Andr6 might say. He had completely missed his friend’s point
about the inadvisability of too promiscuous a signature. On the con-
trary -he was indignant about Andre’s captious timidity. In Egypt
people were throwing money around, and in Paris and London the
most powerful international bankers were marking time, cutting credits,
and calling in their funds. Surrounded by prosperity, Dervieu felt
that he was being unjusdy penalized for the perverse afflictions of the
European market. Nevertheless, he ceded to Andre’s exhortations
By the end of the first quarter of 1864, his deficit with
to liquidity.
Marcuards was only 412,582 francs, as against almost two millions only
three months before.®
This improvement of Dervieu’s position, plus a general easing of
^ See above, p. 172.
^ A . Neuf^ L.B. 504, 2<>-i2-i863, f. 1239; L.B. 512, 4-4-1864, f. 115.
the European money
market,^ led Andre to soften his tone. He was
convinced that Dervieu was over-extended, that Egyptian prosperity
was swollen, that sound banking is the same anywhere any

time, and that infractions of the rules are sooner or later fatal. Still,
there was no point in antagonizing his correspondent, who was
obviously beginning to be restive under the steady scolding. In a letter
of 1 March, Andr^ reluctantly admitted that perhaps money was as
abundant in Egypt as Dervieu insisted, though Europe, he maintained,
was less fortunate. This diflference in climate might lead from time to
time to differences in judgement - nothing, however, that ‘an exchange
of friendly information’ could not cure. As for his irrepressible pessi-
mism, Andre felt he had nothing to apologize for. ‘You are going to
accuse me perhaps of always seeing the dark side of things, but I prefer
to see the foture from that side than from the other. It is more prudent.
All the better if I am wrong.’

Andr4 was right from the start. So long as Dervieu’s prosperity de-
pended on the favour of Ismail, he was building on quicksand. The
finances of the Viceroy swallowed everything: unprecedented cotton
revenues, record tax receipts, and loans from every businessman in
Alexandria who could spare him money. The more he borrowed, it
seemed, the more he needed. The murrain and the flood were now
past, but there were large amounts due the Suez Canal with further
engagements in the offing, miles of railroad being built with more in
the planning stage, new port installations under construction at Alex-
andria and Suez, and so on well beyond the means of the Egyptian
For all his prodigality, Ismail was almost as good a borrower as he
was a spender. Each loan due was paid on the dot with the proceeds of
another, and each loan repaid was immediately renewed. For a while,
he seemed to have discovered a nineteenth-century philosophers’ stone,
a magic formula for maintaining his credit undiminished while steadily
increasing his debts. Unfortunately, the resources even of the ‘nabobs’
of Egypt had their limits, and these same ‘nabobs’ found their Euro-
pean friends far more careful with them than they were with Ismail.
So that after a while, when the Viceroy opened the water tap further,
^ On 25-2-1864, the Bank of England had gone from 7 to 6 per cent.
the supply was choked off at the source and the flow of funds dwindled
with every effort to increase it.

How many schemes Ismail devised to meet the emergency, we do

not know. Unquestionably he had quiet talks with every one of his
business friends, drawing on each for as much as possible and sug-
gesting ways and means to find more. He wheedled, coaxed, and cajoled,
heaping promise upon promise, concession on concession. In particu-
lar, he arranged a spectacular 18 per cent, semi-annual dividend for
the Medjidieh to tempt the Egyptian Trading Company into a merger,
and sweetened the bait with the promise of important monopolies and
privileges.^ His aim was in part to take the Trading out of trade, where
its contacts with the fellahin and other natives were potentially sub-
versive of his authority; more important, he wanted to bring it

under Egyptian control and use it in tapping the capital markets of

Unfortunately for Ismail, the stockholders of the Trading were
naive enough to believe everything the directors told them about the
prosperity of the company. Why, then, the need for a merger.^ Also,
they were mistrustful of Egyptian management and jurisdiction, for
unlike experienced hands, they did not realize that this was the best
any event, Ismail dropped
possible protection for their investment. In
the matter. Once he saw the way the wind was blowing in London, he
did not even wait to be turned down by the meeting, but huffily an-
nounced that he had rejected the plan ‘with no possibility of recon-
sideration*.® His haughty indignation may have reflected in part a
momentary improvement of his financial position; the Medjidieh had
taken advantage of the talk of merger and profits to double its capital

in June; the issue was subscribed 50 per cent, over.^

^ The dividend was probably ‘rigged* for the occasion and no doubt represented
a levy on capital.
As conceived by Ismail, the merger also called for the issue of £1,000,000 in

new stock, over and above the combined capital of the two companies. Mon.
Mar. IX (1864), 75.
® Henry Oppenheim-Andr6, 1-7-1864. See the reports of the meeting in

Herapa^^s^ 1864, pp. 814-15; Mon. Mar. Rev.^ IX (1864), 80-1; Bankers*
Magazine, XXTV (1864), ^7-9.
* The Tzmesy 3-6-1864, p. 12. It would be interesting
to know how much of
this new capital came firom Ismail's courtiers.

This amalgamation was only one of several projects by which Ismail

hoped to obtain funds, and by no means the most promising. If the
British stockholders and directors of the Egyptian Commercial and
Trading Company turned out to be less appreciative of the Viceroy’s
generosity than had been expected, Dervieu’s fidelity was proof against
such ingratitude. Ismail’s first idea, in February of 1864, was a spec-
which would enable Dervieu to
tacular increase in his friend’s capital,
resume his advances to his royd master. Since Ismail and his court
would double their investments, Dervieu could no doubt raise ten to
twelve million francs in Egypt, and there was always Europe.^ The
Viceroy’s confidence, reinforced by Dervieu’s own lack of funds,
proved very persuasive: Dervieu wrote deprecatingly of the project
to Andre, but he clearly liked it and wanted it.
Yet the very idea was ridiculous. Who was going to look with
j&vour on the expansion of a firm that only eight months before had
increased its capital from three to ten millions? Andre turned the
project down so sharply that Dervieu felt compelled to apologize in
he had never wanted the increase in the first place, and
his next letter:
it was only out of obedience to the Viceroy that he had even raised the

The reverse was only momentary. Three months later Dervieu had
an even bigger project for Andre’s consideration.® According to
Dervieu, Hermann Oppenheim had been ‘pestering’ Henry Oppen-
heim and him for almost a year to establish a big credit corporation
in Egypt. Henry and he had resisted; they saw no point in creating
competition for themselves. To which Hermann had replied that if
they did not take this step, outsiders would move in and take it for
Hermann had been afraid of the Ottoman Bank and the new Societe
Gen^rale de I’Empire Ottoman, which would no doubt have liked to
extend their spheres of influence to the other side of the Mediterranean.
Here he was wrong: the very power and wealth of these Constantinople
firms were a handicap in Egypt, where Ismail resented anything that
smacked of Turkish poaching on his sovereignty. But he was not
wrong about the general idea. On the one han^ Jules Pastre, partner
in what was perhaps the oldest French firm in Egypt, Pastre Freres of
Marseilles and Alexandria, was planning a credit bank which, rumour

^ Dervieu-Andr4, 2-2-1864. ® Ibid., 5-3-1864. * Ibid., 4-6-1864.

had it, would be capitalized at 100 million francs.^ On the other, Lub-
bock, of the English merchant house Cavan, Lubbock and Co., was in
Egypt to check on stories of mismanagement of the Society FinandSre;
the English shareholders had more or less had their fill of Pasquali and
his cronies, and Lubbock was looking into the possibility of founding
another finance company altogether.

According to Dervieu, Lubbock had offered to buy out his bank

and convert it into a joint-stock company, paying £200,000 for good
will if Dervieu would remain in charge for three years. In addition,
Gallo and Dervieu would enter the new firm as founders. The scheme
was not so far-fetched as it might seem. More and more promoters
found it easier to sell companies when these were grafted on older
firms of experience and reputation; and more and more private houses
found such a conversion the perfect solution for over-extended positions,
unhappy speculations, and frozen assets as yet unsuspected by the
public. As Dervieu put it, ‘this sort of affair [was] very fashionable at
the moment in England*.
Dervieu had replied to this proposal that he would have to consult
his partners. Among the first he spoke to was Henry Oppenheim, who
felt, as he did, that there was no point in giving such a good thing to

Lubbock when they and their friends in Paris and London could make
a go of it themselves. Of course, they could always find room for Lub-
bock and even Pastre, ‘who probably would want nothing better than
to find a nucleus of business, a ready-made clientele, intimate contacts

with the Viceroy, and lastly, without flattering myself, a director who
has proved himself.* Dervieu was always unhappy at the thought of
He enclosed a preliminary draft of the project with his letter of
4 June. The corporation would be capitalized at 100 million francs in
200,000 shares of 500 francs each. It would be empowered to engage in
about any kind of business, except perhaps commercial operations,
which would trespass on the sphere of the Trading Company, and

^ Jean-Baptiste Pastr6, founder of the Alexandria branch of this firm, had spent

a decade in the Egypt of Mohammed Ali and made lucrative business and political
connexions; then had returned in 1835 to France, where he came to dominate the
trade between the Nile and the Rhone to the point where it was almost his private
domain. Previous to Ismairs reign, Pastrd Fr^res had apparently restricted itself
to mercantile activities. Cf. P. Masson, ed., EncyclopedU des Bowhes-durBhBney
Vol. XI, ‘Pastre, Jean-Baptiste*.

land and farm credit, which might be left to an eventual mortgage

bank. There would be a maximum of fifteen founders, including

Dervieu, Gallo, and Henry and Hermann Oppenheim. The founders

would have preference in subscribing up to half of any future stock or
bond floatations of the company; they would receive 10 per cent, of
the profits after deduction of 6 per cent, interest on capital; they would
automatically sit on the first board of directors, which would hold
office for five years. Dervieu would be director; Gallo could be co-

director if he desired; the salaries were not fixed, but Der\Teu w'ould
get 2 ^ per cent, of the net, over and above his share in the founders’
10 per cent. The firm would
offer Oppenheim, Neveu et Cie one third

of with
all credit operations the Egyptian government and of all
promotions, mergers, floatations, etc. In return, the Societe de Credit

d’Egypte, as it was to be called, would receive 50 per cent, of the

Oppenheims’ participation in any such transactions. Finally, the plan

retained the salient feature of the Lubbock proposal: Dervieu would
get £200,000 for the good will of his bank, £100,000 to be divided
among the shareholders, the other £100,000 to be shared bet^-een
Gallo and himself.
In presenting the project to Andr6, Dervieu took pains to depreciate
his own interest therein:

Its realization would diminish, I think, my personality. I shall be no more

than the director of a concern, a big one to be sure. I should be placed under
the supervision of a board, whereas today I am perfectly free. Besides, my
present partnership will be over in three years. At that time, I shall probably
be able to part company with a large number of my partners, to have my firm
almost to myself, and to leave it later on to my children and those of Gallo.^
Iwould quite certainly have realized the profit offered me in the three years
which remain, and perhaps sooner. I hope to give 20 per cent, to my
shareholders for the year whidi is concluding.^

^ This was quite a change from Dervieu’s original ambition to retire in three or

four years and return to France. The project for conversion to a joint-stock
company, as tentatively drafted, provided that Andr£ Dervieu, younger brother
of Edouard Dervieu, and Edouard Amic Gallo should be assistant managers.
® Since the statutes of Edouard Dervieu et Cie provided for
5 per cent,
of net
profits to reserves and 38 per cent, to the management, Dervieu expected to earn

3,500,000 francs for the year 1863-4 and pay a dividend of 2,000,000 francs. As
things turned out, the bank earned 3,141,000 francs and paid 1,881,000 francs.
On the other hand, Dervieu conceded that the plan had serious

... the realization of this project frees my name of all eventualities, assures
me of a handsome fortune right away, places me at the head of an affair which
will dominate the country, and prevents any other firm of similar nature
from coming and establishing itself here. My capital of ten millions is no
longer sufficient to handle the development of my business. The government
is absorbing the greater part of it, and I still have at the present moment over

seven million francs of orders to carry out. And I will obtain a lot more the
day that Fll be able to get along without pestering the Viceroy for money any
more. Besides, Ismail Pasha will in a few years be well in the clear, financially
speaking. He will float a loan without fail after coming to a decision on the
Suez afiFair.

And he Viceroy approved of the scheme

stressed the fact that the
‘whole-heartedly’j indeed it was an ‘indiscretion' of Ismail that had

first revealed to Dervieu the need to move rapidly to meet the threat

of competition from Pastr6: ‘He asked us to keep it secret.'

Contrary to what might have been expected, Andr6 approved of
Dervieu's proposal. He objected to one or two details but was de-
lighted with the general idea.^ In the first place, a joint-stock company
would in effect mobilize Andre's holding in Dervieu et Cie, As a matter
of principle, Marcuards did not like to furnish investment capital for
other firms; in participating in company promotions,
its aim was

always to sell its view of Dervieu’s

share as quickly as possible; in
overindulgence in viceroyal finance, moreover, Marcuards had extra
incentive to dispose of its interest in the Alexandria bank. It was no
doubt with this in mind that Andr6 suggested that the right of the
founders to 10 per cent, of the profits be represented by negotiable
shares. Secondly, Andre had never forgotten his dream of a national
bank of Egypt, and this could be it. Dervieu had rejected the idea before
for fear of competition; now, for fear of even more disagreeable com-
petition, he was reproposing the idea of his own accord.
Dervieu, of course, was being astonishingly naive about the whole
thing. The ‘indiscretion' of the Viceroy, who had been urging Dervieu

^ Andre was opposed to the founders’ preference on

Interestingly enough,
future promotions: ‘This always subject to criticism and will frequently open

the door to regrettable practices.* Andr4 pencilled a note to this effect on the draft

to expand for some time, in disclosing the possibility of a competiti\^e

credit mohilier must have made even the dour Andr4 smile. And the

request of His Highness that this ‘accidental* revelation be kept a

secret must have made him guffaw. The fact remained, however, that
Egyptian finance was indeed becoming extremely competitive, that
several groups, both inside and outside the country, were considering
the creation of new joint-stock banks, and that Andre would have to
move quickly if he wanted to be first - especially since his prudence
and that of his colleagues in Paris were not shared by British capitalists,
who, in the face of continued high rates of discount, were founding
companies and floating securities more diligently than ever.^ Even the
disturbing news of war in Schleswig-Holstein was not enough to
dampen the eagerness of hopeful investors and ambitious speculators
ready to snatch up everything offered. By the end of April 1864, Ae
value of new England had passed half the total of
security issues in

1863, itself an exceptional year. Nothing like it had been seen since the
railway boom of the 1840*3.*
Andr^ did move quickly. On receipt of the letter of 4 June, he wired
Dervieu his unqualified endorsement: ‘Full approval in principle of
Count on large parti-
projected combination. Accept position offered.
and agency.* This was followed two weeks later by a detailed
encomium, whose religious overtones shed some li^t on Andr^*s
devoutness and the place he accorded to divine favour as a factor in
business success.

... I told you in my wire: I approve the principle in every respect, and what
I see you inclined to do is only the execution of a scheme long ripened in my
mind. We considered it a year ago with Hermann Oppenheim, and I see
further evidence of the favour shown you by Him who directs for us all

and advantageous to all inter-

things, in the fact that a combination, desirable
ests, has captured here on various occasions the attention of eminent men and

given rise to conferences, projects, etc. which after all seemed certain to
result rather against you than for you, yet nothing of the sort has happened.

During the first four months of 1864, the bank rate never fell below 6 per

cent, and averaged nearly 7. Clapham, Bank^ II, 429-30.

® According to The Times, the first six months of 1864 saw 17 1 new corpora-

tions in England, with a nominal capital of £116,000,000. Banks and finance

companies accounted for over half the total amoimt subscribed. Mon. Mar. Rev.,
IX (1864), 35.
You have profited by the delay. Stronger and more firmly seated in the
country, you take the matter in hand once again -well done! How many
advantages there are to this sort of abdication, more apparent than real, the
idea of which troubles you and gives you pause! You are mobilizing your
capital; you are discounting fortune. In governing a business of the first
order, your importance as a man of affairs increases rather than shrinks. You
necessarily keep a hand in everything of advantage and importance done in
Egypt, and if, as I foresee and hope, you steer your handsome bark well
through the reefs and currents, you will not be making a mediocre contribu-
tion to the development of the public prosperity and civilization of the coun-
try’ to which you are henceforth attached. It seems to me that, however vast

your ambition may be, there is much satisfaction in these perspectives.

Among your partners, there will no doubt be some who show themselves
less satisfied, who will miss no longer being en famiile, as it were, in your
firm, and who would have preferred to continue being partners with you in
affairs which, while less vast, are relatively more certain and lucrative. Some
(I think diat it will be a minority, but there will be some) will feel that one
could or should proceed otherwise in the division of the sum that the new
company would pay for your contribution. But on the whole, the trans-
formation will be understood as being in the common interest, and, if the
circumstances are in the least favourable and the statutes satisfying, your
affair will appear before the public assured of success.

Andr6 had some comments to make on the projected floatation.

He would be a mistake to rely on only the Lubbocks for the
felt it

Ei^lish market; they had compromised themselves by their support

of the ill-reputed Sodete Finand^re. On the other hand, Marcuards
would take care of the French syndicate, grouping around it ‘a few
influential houses among those who, having already more or less of a
direct foothold in Egypt, might have been tempted either to poach on
your preserves or to thwart your negotiations’. Andr6 thought Pastre
should be invited to join this group, though only after the affair had
already been arranged. As for the distribution of Ae shares, the largest
block of course should be reserved for the founders and promoters;
a good part of the rest, placed with friendly banking houses; while
something between a third and half should be offered to the public so
as to establish a market.
Andr4’s letter concluded:

But we shall come back to this when things are more advanced. For the
moment, I want to repeat to you again that it is adyisahle to hurry, Circum-

stances compel you to take prompt action. At tlie opening of the coming
[cotton] season, you must be there, all ready to serve all the interests of the

Unfortunately, the enthusiasm of Andr4 was soon dampened by two

letters from widely different sources. The first was from a journalist
named Horn who had made himself a reputation as an expert in finance
and was financial editor of the influential Journal des Debats in Paris.^
Horn had spent the first few months of 1864 in Egypt studying local
industry, commerce, and banking, with a view no doubt to finding a
niche for himself. Oppenheim and Dervieu had found him useful; he
returned to Europe as their representative, entrusted among other
things with negotiating the formation of the projected Soci^t^ de
Credit, of which he would be one of the ‘founders’. He stopped in
Paris and discussed the project with Andrd in mid-June; then went on
to London to sound out financial circles there.
He found the market ‘in a state of complete stagnation’, paralysed
by the menace of renewed war between Prussia and Denmark. Egyptian
affairs in particular were sluggish, with a number of unfulfilled pro-

jects smothering the market like an incubus. To top things off, the

dead summer season was on hand, and both investors and bankers
preferred to avoid new engagements. In short, there was nothing to do
at the moment.
This gloomy appraisal was reinforced by an equally discouraging
estimate of the French market by Denion du Pin, Andre’s good friend
of the Messageries Maritimes and the Forges et Chantiers de la M^di-
terran^e. Du Pin, in Egypt on business, wrote from Alexandria on

29 June to express his concern at the failure of Dervieu to secure suffi-

cient British support. To be sure, Dervieu ‘would be very much
inclined’ to give Andr6 and the French market a larger share of the
floatation than had been originally planned; but Du Pin did not think
that Paris could absorb an issue of this size. Furthermore, he was
uneasy about Pastr^, who seemed to be making headway with his own

^ See his biography in the Grande encyclopidk and in Vapereau’s Dkmnncdre

universel des contemporcdns,
® Hom-Andre, 25-6-1864.
project;^was there not some way to draw him in and avoid dividing a
market that was already strained?
Such letters, plus conversations that we unfortunately have no
record of, gave Andr^ pause.® He had urged Dervieu to make haste,
but haste was manifestly impossible. The floatation of a large corpora-
tion is never a simple thing. It takes time and skill to assemble a pro-
motional team, reconcile the interests of the different members, and
juggle commitments long enough for conditions to be met and promises
to be kept. And all this is particularly difficult when - as in this in-
stance - there is no one in the affair big enough to choose the line-up
and fix the rules.
Moreover, the task was complicated by the presence of Dervieu.
In effect, our Alexandrian banker was going to be an expensive team-
mate: £200,000 or 5,000,000 francs - in whatever currency expressed,
it remained a tremendous sum. To international financiers, accustomed
to split such windfalls among themselves, this must have seemed an
unwarranted prodigality to an outsider who had little more to contrib-
ute than good will. And while Dervieu^s good will and banking ex-
perience would presumably yield big profits in the future, such distant
rewards cannot have had too much attraction for capitalists whose
primary objective was to put across a remunerative floatation. Divi-
dends could well be left to the investor, who would hardly look with
favour on a venture burdened from the start by so great an outlay. To
the prospective stockholder, Dervieu and his £200,000 would not be
a guarantee of prosperity, but an augury of ruin. In sum - and this
little afterthought must have occurred to several of the Europeans
consulted - was Dervieu really necessary? There had been no Dervieu
in the Imperial Ottoman.
At any rate, there were doubts from the start, and even Henry
Oppenheim, who had helped Dervieu prepare the project, seized the
occasion to peck at his friend. On i July, he wrote Andr6 that he felt

1 Pastr6 was apparently

working with the London firm of Devaux, represent-
ing in this case the General Credit and Finance Co. This combination is an excel-
of the separation maintained between exchange and investment in
lent illustration
international banking. For although Devaux and Marcuards were working on
different sides of the Egyptian promotional contest, few firms were closer in
regular commercial affidrs.
* We do have an undated note from Charles Mallet to Alfred Andre, stating
that, after consultation with his brothers and associates, he did not think he could
participate in the ‘Egyptian project^ Neuf., carton ii.

the sum reserved to Dervieu and his partners to be much too large:
1 have looked for a combination that would make it possible for us to
give Dervieu’s partners simply an interest in the new operation, the
success of which would secure them a premium, but here that meets
with little understanding/ It was not that he, Oppenheim, personally

objected to Dervieu’s good fortune; but after all, ‘we have to think of
the public/
Andre could see that the formation of the Societe de Credit was not
going to be so easy as he had thought.

For Dervieu, however, the failure of his scheme was unthinkable.

demands of Ismail had sapped his strength. He
Inexorably, the steady
tried to nurse his resources along by turning away new business and
adjourning almost ten million francs in orders from the Viceroy.
Fortunately, a general diminution in Egyptian business activity eased
the pressure. As early as March 1864, a slight drop of prices at Liver-
pool had brought tihe cotton campaign to an untimely end, with
Egyptian merchants and landowners preferring to hold on and wait for
the rise. Transactions with Europe fell off sharply, and with them, the
need for discount facilities and credit. Dervieu was able to hold his
deficit in Paris to reasonable proportions - at the end of June he was
only 660,000 fiancs behind, including acceptances outstanding^ - and
was only too happy to see his weakness covered by the general lull.
But that was spring. Now it was summer, and in a few weeks the
fellahin would be picking the cotton, ginning and pressing it, and ship-
ping it to Alexandria. Time was running out. The summer is a hot,
uncomfortable season in Egypt, especially for cultivators like Ismail
who have spent the proceeds of last year’s harvest and are awaiting
autumn with impecunious impatience. But debtors, particularly
habitual borrowers, are rarely as miserable as their creditors. Dervieu,
rich in promises and poor in cash, cringed at the very thought of the
approaching cotton season. On 30 June he wrote Paris to say that
-^idr6 and Du Pin had ‘convinced’ him of ‘[his] interest in accepting
the conversion of [his] firm into a joint-stock corporation’; that it was
important to hurry; and that since Oppenheim was lukewarm and

^ A, Neuf.y L.B. 516, 25-6-1864, £ 1063.

Fruhling-Goschen unreasonably demanding, it was up to Andr^ to
carry the ball alone. He even put words in his friend’s mouth: ‘since
you offer me your collaboration in London in case that of
should be wanting, I accept it whole-heartedly.’ And
he added with a
virtuous air: ‘I feel, like you, that the London market is necessary to
our affair, but do not lose sight of the fact that, while desirous that our
shares enjoy a handsome premium, I do not want to make our affair a
At the same time, Dervieu tried to counter the objections to the
premium of ^200^000 for the owners of the old firm. In an accompany-
ing note, he showed that his bank had averaged 30 per cent, profit over
the first four years, ^ and that at that rate, investors could pay twice
par for the shares of the new corporation and still make 1 5 per cent,
per annum. A premium of 50 per cent, for good will - five million
francs on a capital of ten millions - was therefore in no way excessive.
This was all the more so, since these handsome returns had been made
in large part without the assistance of Ismail, who had been in power
less than eighteen months; Dervieu anticipated even better results in
the future.
It is doubtful whether Andrd was influenced by this argument. For
one however
thing, impressive it may have seemed at first glance, it
did not stand up well under careful scrutiny. As Henry Oppenheim
pointed out in his letter of i July, Dervieu’s remarkable profits rested on
a peculiarly favourable combination of circumstances that was not
going to last forever. There was also the question how much of these
profits had actually been realized, and how much was nothing more

than numbers in a book.

Even more important, however, the argument was irrelevant. What
interested Andre was not the justification of Dervieu’s demands but
their effect on prospective associates and on the investing public;
indeed from this point of view, they were only one element of the
critical larger issue: the feasibility of the promotion. If Dervieu thought

that confidence, fancy figures, and a certain presumption could persuade

a man like Andre to ignore the real stagnation of the summer market
and fi^t the whole of international finance single-handed, he was in
for a disappointment.
In the meantime, Jules Pastr^ was making headway. This must have
surprised Dervieu, who considered himself the better man and affected
^ Dervieu was anticipating sUghtly the dividend for 1864.

to be somewhat amused by his rival’s pretensions: . . despit^all the

esteem I have for Mr and putting aside all modesty, l

fear him at the head of a competing company,’ Yet Pastre’s strer^^

lay precisely in his lower place on the ladder of Egyptian finance. He
was less ambitious than Dervieu - only half as ambitious, to be
he and his associate Sinadino were asking for only £100,000 for the
good will of their private firms. ^ They foimd less difficulty in getting
support for a two-million-pound, one-quarter-paid-in company than
Dervieu for his four-million-pound colossus; and they got it in Eng-
land, where it The Anglo-Egyptian Bank came out in July
under the patronage of the Agra and Masterman’s Bank, which wanted
a financial way station on the road to India, and of the General Credit
and Finance Company of Laing, Devaux, et aL The new corporation
absorbed the houses of Pastre Frferes and E. Sinadino and Co., retain-
ing their chiefs as managers. In this way, the Anglo-Egyptian expected
to find itself from the start ‘in a most prominent situation, the engage-
ments being sure to yield large profits, the co-operation of parties
having been secured who are intimately acquainted with the usages of
the country, and who have for a long series of years retained the con-
fidence of the government and of the mercantile community in Europe
and the And although the shares were set at the inconvenient
nominal value of £50,® the prospects seemed so good, or more realist-
ically, the promotion was handled so skilfully, that the issue was over-


^ Jean Sinadino, a native of Chios, had come to Egypt during the reign of
Mohammed Ali and become a partner in the firm of Jules Pastre. According to
Politis, HeUinisme^ II, 261, n. 2, Pastre had retired from the business around
18 yo, leaving it in Sinadino’s hands. This does not accord with the references to
two firms in 1864. Perhaps Pasted Freres was the old Marseilles house, with a
branch in Alexandria,
* XXIV (1864), 788 £; The Times, i9-7--i8<54, p. 4; A.E,,
Bankers Mag<x(me^
C.P., Alex., Tastu-Drouyn, 9-7-19(54, ff. 15-17; Mon, Mar, Rev., IX
(1864), 149-50; Baster, ‘Origins’, p. 80. The dty article of The Times reported
^e sum paid Pastre and Sinadino as equal to three years* net of their respective
houses - no specific figure was given. 19-7-1864, p. 13.
* The firm was constituted on payment of the first cril of £5 per share of £50.

By the end of the year, however, one quarter of the capital, or £12^ per share,
was called up.
* Only too often, of course, such ‘oversubscription’ was rigged. The technique

was to place only a small portion of the issue on public sale and get the jobbers to
commit themselves to deliver more shares than were available, then dispose of the
Dervieu learned of Pastre’s success almost immediately after sending
Andr6 his hortatory letter of 30 June. We do not know how he took
the news; he was probably stunned at first. Once the initial surprise
had worn off, however, the realization that his companion in misery
had left him to suffer the pains of impecuniosity alone must have
goaded him as the pains themselves had not. More dian ever, he fretted
at his impotence in Alexandria while strangers dawdled over his fate
thousands of miles away. Enough of this chatter and intrigue - it was
high time he took the matter in hand himself. On 3 July, Dervieu sent
off a cable to Andre announcing his departure within the week.^ His
answer was a dash of cold water: If trip motivated by affair of 8 June,
better to put it off until September.’ ^
The water was not cold enough; probably no water could have
been. Dervieu was going to Paris, sure that once he was there, all the
obstacles would vanish, that if he could only talk to these bankers
face to face, they would understand what a good deal this really was.
Mallet, Fould, Hottinguer et aL were as good as in already, and
Dervieu did not hesitate to say so to his friends in Alexandria before

he left.®

He could not have been more mistaken. It was not only that the
London market was momentarily choked with Near Eastern offerings^
and the Paris market too weak to digest anything. It was that the
bankers themselves were not even around to talk to: they had no
intention of giving up their traditional sununer vacations for this kind
of dish. Andr6 himself had left Paris for the rest of July; when he
returned, Dervieu’s personal intervention served only to dramatize
the difficulties and crystallize resistance. Andre had written Dervieu,
with hopeful connotation, that ‘ideas ripen by contact and discussion’;
the question was:what ideas? Marcuards slowly but surely retreated -
from enthusiasm to caution to doubt to rejection. By the end of August
Andre had decided that the best thing for everybody would be either
rest at famine prices. As in the case of the Trading Company, however, the
manoeuvre did not always work.
^ The cablegram has not survived, but its existence is obvious from Andr6’s

reply; the date is inferred from a confirming letter of

5 July.
® A. Neuf., L.B.
518, telegram of 5-7-1864, f. 228.
* C.P., Alex., XXXrV, Tastu-Drouyn, 9-7-1864, ff. 15—17.
* At this time, London was busy absorbing the newly floated Soci6i6 Genfrale

de TEmpire Ottoman (see above, pp. 64-5) and the Society Agricole et Indus-
trielle d'Egypte (see below, ch. xii).

a large increase in Dervieu’s capital, or the status quo for Dervieu and
the creation of a new, privileged institution like the Ottoman Bank in
Egypt,i He had no idea how disastrous the latter plan would be for

Dervieu, Howcould he? Dervieu could hardly expect to collect

^200,000 by telling the truth about his troubles.

1 Neufiize-Henry Oppenheim, 10-7-1864; Henry Oppenheim-Andr6, 5-8-

1864; Andr6-Henry Oppenheim, 17-8-1864 and 26-8-1864.


When Dervieu returned to Egypt at the end of September 1864,

the only thing left for him was a public loan. He was broke. On paper

he was still rich, important, the first banker in Egypt. His books showed
a splendid surplus - Ismail alone owed him far more than his total
liabilities. But there is owing and owing. Where Dervieu’s creditors

were European firms for whom ninety-days was ninety-days, and no

nonsense, Ismail’s overdrafts had no maturity date.
Furthermore, for the moment at least, the Viceroy could not pay
anyone even if he wanted to. He had long since exhausted the proceeds
of the harvest of 1863. He had sucked both Dervieu and Oppenheim
dry - by September he owed them the unconscionable sum of forty
million francs.^ The Trading Company had done its best by lending
repeatedly during the first semester of 1864,® but when it refused
Ismail’s offer of a merger with the Navigation Company, it lost the
means to help and offended him to the bargain. Every banker and
merchant in Alexandria, down to Bravay and the dregs of the business
community, had been milked to the limit. The only untapped possi-
bility was the new Anglo-Egyptian, but the Viceroy already owed
large sums to the parent houses of Pastre and Sinadino that the suc-
cessor firm wanted to collect,®
Not ihat Ismail was particularly interested in reimbursing his
1 C.P., Alex., XXXIV, Tastu-Drouyn, 10-9-1864, f. 148.
* The £700,000 debenture issue had only been the beginning of its advances to
the Viceroy. Cf. Hamza, Public Deht^ p. 78 and n. 3; Bankers* Mc^as^Lne^ XXIV
(1864), 697. These loans were apparently placed on the books under ‘current and
other accounts’, a rubric that rapidly assumed embarrassing proportions. At the
first annual meeting, a question concerning these mysterious accounts was care-
fully overlooked by the chairman. Mon. Mar. i2ev., IX (1864), 80-1.
* As late as June, the Viceroy had borrowed £100,000 from Sinadino. A.E.y
C.P., Alex., XXXni, Tastu-Drouyn, 29-6-1864, ff. 385-6.
where he had to in order to borrow more. He had
creditors, except
come a long way from the thrifty prince who had pointed ^ith pride
to his well-managed estates and promised to restrict himself to a ci\il
list. The burden and stigma of debt had long lost all meaning; if any-
thing, debt had become almost an addiction: the more he owed, the
more he wanted to borrow. A mountain of obligations that would
have crushed a lesser man merely enabled him to climb higher and see
new and more expansive vistas.
His ambition and imagination startled his listeners. In this hot,
straitened summer of 1864 he was thinking not only of canals and rail-

roads, but of Paris-on-the-Nile and of Ismail, Emperor of Africa. .Cairo

would have its grands boulevards^ Bourse, theatres, opera; Egypt would
have a large army, a powerful fleet. Why? asked the French consul.^
He might also have asked. How?
For Ismail too, therefore, the only thing left was a public loan. Yet
this was the one form of debt the Viceroy disliked. It was open, and
subject to the approval of his Suzerain in Constantinople. It meant
disagreeable bargaining. It placed his credit on the block as it were, to
be scrutinized and priced in the market place. More important, public
loans imposed punctuality - when a rentier clipped his coupon, he
wanted to collect, right away. And finally, there was the little spark of
pride that remained: like the fallen woman who clings to die last appear-
ance of virtue, Ismail cherished the illusion that he had not added to
Egypt’s national debt.
For once it was hard to get Ismail to borrow money. Oppenheims,in
particular, had been pressing a loan on him since his accession - having
effected one very profitable floatation, the firm was understandably
eager to handle another. Dervieu, as we have seen, was less enthusi-
astic at first, but he had come around under the pressure of circum-

The pressure first became imcomfortable late in the winter of 1 863-4,
at a timewhen Andr6 was dunning Dervieu et Cie for remittances and
the Viceroy was inventing ways to make the firm richer so that it could
lend him more money. A loan suddenly became very attractive to
Dervieu. Aside from making it possible for Ismail to repay his debts,
it would yield handsome profits to the issuing houses, and Dervieu had

long been assured by Ismail that he would be charged with any such
^ Ibid., XXXIV, Tastu-Drouyn, 19-8-1864, ff. 120-2.
Ismail was not so persuaded as his creditors, however, of the urgency
of the matter. The campaign of February and March 1864 was foiled
by his assurance that the loan was coming; it was decided; but it would
have to wait until the settlement of the Suez affair. The position was a
reasonable one. The indemnity that Ismail expected to have to pay -
though he could not have foreseen the exorbitance of it — would pro-
bond issue.
vide excellent justification for a
Yet came
the arbitration of Suez and went, and still no loan. By this
time, though, Dervieu did not even care. He was too wrapped up

in his project for conversion, which promised to solve his money

problems more agreeably than any loan could. As soon as it became
apparent, however, that there would be some delay in forming and
floating the Societe de Credit, Dervieu rejoined the ranks of those
Egyptian businessmen who were desperate for a loan to save their
skins,and anxious to handle it to line their purses.
There was no lack of prospective lenders. Like a maiden heiress, the
Viceroy was courted by a small crowd of unctuous suitors, falling
over one another to place themselves at his disposal. There was, of
course, Oppenheim and his Anglo-German syndicate; there was
Pastr£ and the new Anglo-Egyptian, which would have been only too
happy to start its career with a spectacular operation; a third offer of
anywhere from 50 to 150 millions came from a group represented by
Sabatier, former French agent in Alexandria, a man of notorious
venality who had long sought in Egyptian business a compensation
for the lost and lamented profits of lus consular office;® Bravay was in
die lists, still the same ingratiating charlatan, blusteringly presenting
himself as representative of the Rothchilds; even the Soci6t6 Financi^re
d’Egypte, long humbled for its pretensions and shunned as the black
sheep of Egyptian banking, offered its services.® As for Dervieu, he

found himself in the unenviable position of trying to ride two horses

^ Thus Andr^, always market problems, wrote Dervieu on i8 March:

alert to
‘I am very Viceroy set his mind to making a loan of some
satisfied to see the
importance to setde the Suez affair. Tliat will be perfectly appreciated, and I shall
be very happy to be able to profit by the occasion to introduce your bonds to our
market.* The bonds of the Egyptian loan of 1862 had not been marketed publicly
in France and were not quoted on the Bourse.
® On Sabatier, see above, p. 9^1; also Malortie, Egypt^ p. 69, n. 3 10; Roux, Isthme^
1, 300; and M. EmSrit^ *La crise syrienne et I’expansion econoxmque firan^aise en
tSdo/ Rbv. CCW (1952), 217.
* Cf. C.P., Alex., XXXIV, Tastu-Drouyn, 19-8-1864, ff. 123-4,

at once.He would have liked to be the principal contractor of the loan

as head of the projected Societe de Credit. But with the creation of his
firm ever farther off, he had to cover by cultivating the old tie with
Oppenheim and reserving a place in the latter’s syndicate. In the
process, he had a good chance of losing his hold on both sides and
falling in between.
Needless to say, none of these banks had any money to lend. All of
them needed money desperately and most of them were counting on
getting it firom the loan they wanted to handle. In the last analysis, it
was the European capitalist who would furnish the funds required, and
all that these would-be contractors were offering was, in effect, to

introduce the Viceroy to. those bankers in London or Paris who in

turn could get at the pocket-books of the ultimate investors. Indeed,
the weaker their financial position, the more they wanted a contract
that was expected to prove extremely lucrative; of - or
and this in spite

rather, because of - the very depression of the capital market, w-hich

gave credibility to the most exaggerated demands.
Let it be said in favour of our avid and avaricious money-lenders
that Ismail was not an easy man to deal with. As late as the beginning
of September, when government employees were going unpaid,^ when
half die firms in Alexandria were agonizing for lack of funds and he
himself was penniless, he let it be understood that reports of an im-
pending loan w^ere premature, that his obligations were not so pressing
as intimated (it alldepends on who is being pressed), and that he hoped
to do without a loan for some time to come.® He was counting, of
course, on the receipts of the new harvest to tide him over until the
next crisis. Unfortunately, the cotton market was not what it once was:
in 1863 the price had surpassed even the most sanguine expectations;
by 1 864, the psychosis of inflation had passed the prices by. Ismail found
himself getting only two thirds of what he expected - two hundred
instead of three hundred francs a bale.®
In point of fact, he got nothing instead of three hundred francs.

Vexed what he considered a ridiculous price, the Viceroy simply


held his cotton off the market. The loan was now unavoidable, and the
winning bid was that of Oppenheim and consorts. On 10 September,
Henry Oppenheim wired Andre that they had concluded with Ismail;
everything was settled - except the details.
^ As reported by Tastu, ibid,, 12-9-18(54, f. 157. ® The Tzmesy 7-9-1864, p. 6.
A.E., CP., Alex., XXXIV, Tastu-Drouyn, 9-10-1864, f. 207.
As is SO often the case, the little details proved to be the big obstacle.
Or perhaps they were only the pretext. At any rate, the Viceroy and
Oppenheim argued over the security for the loan, the designation of
the contractors, Oppenheim’s ties with the Prince Mustapha, Ismairs
brother, and divers other matters, relevant and irrelevant.^ And
Ismail refused to sign. Instead, he went off to Upper Egypt to sulk in
one of his palaces and let it be known that he was still amenable to
other offers.^
Yet when the chips were down, there was only Oppenheim.
Sabatier was not prepared to meet his terms; Pastre lost his nerve;® and
Bravay’s great Rothschild syndicate somehow never turned up.
Dervieu, of course, was only too happy to go along with his good
friend Henry.
Ismail dragged and hedged as long as he could. On i8 and 19
September, the telegrams to Paris reported that negotiations had been
broken off. On the 21st, it was announced that an agreement had been
definitely* concluded.^ Yet as late as the 27th, according to the French

1 The Prince Mustapha was the younger brother of Ismail. By Moslem law and
male in the family of Mohammed Ali, was also
tradition, he, as the next oldest
heir presumptive to the throne of Egypt. One of Ismaifs fondest dreams, how-
ever, was to obtain from the Sultan a revision of the law that would vest the
succession in his own line by direct descent, an ambition that inevitably led to
conflict with Mustapha. For his own safety, the Prince left Egypt for Turkey,
where he became a sort of bogy for his brother; Ismail lived in constant dread
of plots allegedly - and quite possibly - concocted by Mustapha with the con-
nivance of the Ottoman court. In an effort to destroy his brother, Ismail con-
ceived the Machiavellian scheme - humanitarian by oriental standards -of
providing him with money and letting him run hims^ into debt. Experience is
the best teacher: there was no greater authority on the dangers of credit than
Ismail himself. Oppenheim and Dervieu were instructed, therefore, to place
themselves at the Prince’s disposal, and in effect, the correspondence of the
Andre bank shows important payments to Mustapha, from Oppenheim particu-
larly. Cf. L.B. 514, 27-5-1864 to Oppenheim and Alberti, f. iii; L.B. 516,

27-6-1864 to Oppenheim, Neveu et Cie, f. 1144. On the scheme, see A.E.y C.P.,
Alex., XXXIV, Tastu-Drouyn, 10-9-1864, ff. 149-50; 9-10-1864, f. 208.
*Ibid., 19-9-1864, f. 183.
® The Viceroy declared later to a representative of the French consulate on
mission in the Sudan that he had offered to float the loan through Pasted on the
same terms offered by Oppenheim, but that Pastre ‘lacked boldness and lost in that
way a wonderful opportunity to accredit his new bank’. A.E.^ C.C., Alex,
XXXVH, Gamier-Tastu, 12-10-1864, f. 296.
* Dervieu (Marseilles)-Andr6, 28-9-1864.

consul, the Viceroy was still ready to receive other offers.^ And al-
though we do not have the exact date on which the contract was
signed, it was not until 8 October that Dervieu u-as finally able to
write Andre with a sigh of relief, that the loan was sec ‘There we are
now, saved, financially speaking.’ ®

Saved? Yes and no. For Dervieu, the moment the sand was poured on
the signatures and the seals affixed, the money was as good as in his
pocket. His own experience with the stillborn Societe de Credit
d’Egypte should have taught him otherwise. There could be no
floatation until the promoting syndicate was constituted and the part
of each participant fixed and accepted. Moreover, there were still
numerous points to be discussed betv^een the contractors and the
Egyptian government, notably with regard to the modalities and terms
of payment. All of which meant hundreds of hours of give-and-take
before any attempt could be made to woo the investor.
While the promoters were manoeuvring and preparing the ri^t
moment for issue, Dervieu, who had been weakened enough by
Ismail’s steady leeching to succumb under the most favourable circum-
stances, found himself caught in a business crisis far more severe than
that of 1863-4- As is always the case, the crisis had been long heralded,
yet came as a surprise. For months the bank rate had been almost at
panic level;* yet so buoyant was the market that costly money hardly
dampened the enthusiasm of investors, and even when the summer
^ C.P., Alex., XXXIV, Tastu-Drouyn, 29-9-1864, f. 192.
® A letter from Andre to Antoine Schwabacher {fonde de pouvoirs of Oppen-
heim, Neveu et Cie) in London would seem to indicate that the contract
signed either the 28th or 29th of September. The loan was for the nominal
amount of £5,704,200 at 7 per cent., payable in fifteen years. For his bonds, the
Viceroy got £5,000,000, less £135,937 in *jouissance* to the contractors. (This
was a sort of disguised commission, or usufruct^ created by fixing the date from
which the Viceroy would pay interest on the loan at a point in advance of the
began from 1-10-1864,
actual remittance of the principal. In this case, interest
while the of four instalments on the £5,000,000 was not turned over to the

Viceroy until i Nov.) The contractors r^y

got the loan, therefore, at 85 plus
some minor expenses. Actual charges on ihe net proceeds were 8-2 per cent,
interest and 4.5 per cent, amortization, or 12.7 per cent, per annum. Hamza,
Ptdlic Debt, p. 79 f.
® Cf. Gosciien’s famous essay ‘Seven Per Cent.'.
finally brought a was generally felt to be only seasonal; the first
lull, it

breath of invigorating autumn air would pick things up again.

But then on 4 August the Bank of England went to 8 per cent., and
on 8 September to 9, the highest, vdth the exception of two earlier
weeks in 1864, since the terrible 10 per cent, of November and
December 1857.^ And this time it was not, as in late 1863, simply a
question of a momentary drain of bullion to finance cotton purchases
in the Orient.® For the first time in several years, commodity prices
were falling and trade was suffering.
Of all commodities cotton was hit hardest. On 4 May 1864, Grant
crossed the Rapidan to begin the Virginia campaign that was to end
at Appomatox; by 15 June, the Union Army had driven to the breast-

works of Petersburg, and the steady attrition of Lee*s forces made the
outcome only a question of time. In Liverpool and Le Havre, rumours
of peace began shakmg the cotton exchanges. For a while prices held,
owing to the exhaustion of the previous crop. But when, in September,
the harvest of 1864 began to pour new supplies into the ports of
Egypt and India, the four-year bull market broke. From an all-time
high of 30 pence a pound at the end of July - it was still 29^ a month
later - the price of Egyptian feir dropped to 21 by the last week in

The effect of the collapse was felt in every comer of Egyptian life.
The country remained an important producer and exporter of cotton -
annual yield was never to return to Ae small figures of pre-Civil War
days -but had been the driving force
the fabulous inflation that
behind the crop increases of the early i86o’s was now gone. The
fellah lost his record income and was left with record taxes. Merchants
of all types - cotton brokers, textile importers, small shopkeepers, and
itinerant peddlers -all found themselves overextended, their capital
and expectations hopelessly frozen in goods that would no longer sell.
The financial world of Alexandria was even worse off, for much of the
taut web of credit was anchored, not on commodities, but on other
credit, and a forced liquidation could not help but produce some very
painfid surprises.
Conditions in Europe were equally precarious. In the rush for easy
profits, the finance companies had so forgotten their role as suppliers of
long-term capital as to place their signamres on millions of pounds of
^ Clapham, Bank^ II, 429-30. ® Cf. Claphani, Economic History^ 11, 374.
® The piices are t^en from The Economist of 30-7, 27-8, 3-9 and 29-10-1864.

commercial paper. It was too easy. Why burj^ money in slow-ripening

factories and railroads when trade was swarming with hundreds of new
houses, all riding the commodity inflation and ready to pay good
prices for discount and acceptances? The finance company turned itself
into a commercial bank, and this massive re-enforcement of the
traditional credit structure added to the momentum of the boom,
encouraging in turn still further injections of credit, and so on.
On this mountain of paper, much of it the worst sort of accommo-
dation paper, many finance companies heaped their ow’n bills and notes.
If their clients were able to pay their way by marketing the trade
acceptances of the finance companies, why could not these do the same?
From the start almost of all them were short of funds. Their own
low figures to entice the investor and often
capitals, deliberately set at

wasted from the start by hea\y promotional levies and similar ‘ex-
penses’, quickly proved inadequate to their grandiose ambitions. At
the same time, the problem of disposing of unsold blocks of stock pre-
cluded further calls on the shareholders. The creation of accommoda-
tion paper, sometimes wdth the connivance of outside firms, sometimes
by the absurdly simple device of having foreign branches draw on the
home office, was the perfect solution.^
At least it seemed perfect until the crisis came. When the drop in
commodity prices pidled the supports out from under the house of
paper, the acceptances and bills of the finance companies were the first
to fall; the Bank of England would have no part of such trash. Upon
which the discount houses and banks turned about and cut off all
credit to their overenthusiastic clients.® An important firm like the
Joint Stock Discount Company found itself momentarily without
tesources and was forced to call in ^5 a share in a market already
strained to the limit.®
In a highly integrated economy, the shock w^as by everybody,

from the oriental trader who depended directly on some finance

company for the acceptance of his drafts, to the conser\"ative private
banker like Andr6 whose clients had clients who did business widi these

^ Cf. Mon, Mar, jRev., IX (1864), 375,

® Ibid., The same thing happened in the Netherlands,
pp. 263, 295, 344, 41 5-6.
where the Bank of Holland informed finance companies in Amsterdam and else-
where that it would not discount any bills drawn on them by foreign concerns.
The Times^ 11-10-1864, p. 5.
^ Mon, Mar, Rev,^ IX (1864), 517.
merchants. For the moment, seemed that the long-impending shake-

down had come, that the great fever of the i86o’s was finally over.^
At the very moment, therefore, when Dervieu needed Andre most,
Andre was not able Dervieu was getting his second major
to help him.
lesson in banking. He would hardly have known his friend: firm - yes;
even strict - yes; but so grim, so peremptory and inflexible! The letters
from Paris were always cordial and sympathetic. But they never
minced words.
The first note of w^aming was sent on 27 September, at a time when
Dervieu was returning to Egypt to handle a momentary crisis in his
firm’s relations with the Viceroy. The note reminded him that his
account with Marcuards had always shown a large debit balance by
acceptance; even worse, that he was often behind for large sums of
cash. Furthermore, Dervieu relied too much on ‘long paper’ to cover
his liabilities,^ paper resting on ‘transactions resultingfrom an ex-
ceptional commercial situation that can undergo large changes from
one moment to another’. All of this would have to stop.®
Marcuards had reason to be disturbed; the cash deficit of Dervieu’s
account had assumed frightening proportions. Where on 30 August
Dervieu et Cie had had a net cash debit of only 72,158 francs, one
month later they were behind by 709,712 francs, plus 1,024,806 francs
by acceptance.^ By comparison, Oppenheim’s deficit of ioo,ooo
francs cash and 1,200,000 francs by acceptance was tolerable, but only
by comparison. He also received a sharp v^^ming.® Marcuards was
calling in every cent it could and heading for cover.
Dervieu was nowise abashed by Andre’s requests for relief. He
could not afford to be. However long the syndicate might be in
floating the loan, Dervieu somehow had to pass the liquidation of
October, which threatened to be disastrous, and he could never make
itwitiiout further help from both London and Paris. To this end, he
wrote Andre a long letter on the twelfth outlining his financial position,
stressing his fundamental soundness, and demonstrating the need and

^ Cf- Bankers* Maga^ine^ XXIV (1864), 993-6.

® That is, paper at sixty or ninety days, as distinguished from thirty-day or
sight bills.
® A, Neuf*^ L.B. 522, 27-9-1864, f. iioi.
*Ibid., 3-9-1864, f. 97; L.B. 524, 8-10-1864, f. 328.
*Ibid., L.B, 522, 28-9-1864, f. 1177; Andr6-Schwabacher (personal),

justification for additional forbearance and generosity in Paris. He

confessed to seven million francs in outstanding drafts on Europe,
including 1,250,000 francs on the Alliance Bank against a deposit of
securities;^ in addition, he owed something over a million francs,
maturity 18 November,^ To meet these debts, he had succeeded in
obtaining from Ismail assignments on the first rcv’O instalments of the
loan, £20^^000 on the ist of November and the same amount on the
I St of January. Against
this, however, had to be set his obligation as

one of the loan contractors to fiimish ;£ioo,ooo to the Egyptian govern-

ment on each of these dates. And while the public sale of the bonds
would presumably raise the money required, it was by no means
certain that this would occur before the ist of November instalment
date. In that event, Dervieu’s assignment represented net assets of only
£105,000, or little more than a third of his accounts payable. Even the
remittances that Dervieu could expect from those other creditors of
Ismailwho would now be liquid again, could not fill so large a gap.
What is more, an assignment is not cash. It is simply another kind of
promissory note, or more accurately, a post-dated registered cheque.
As a result, Dervieu was compelled to ask his European correspondents
for what was in effect more credit, not only to pay his debts to them,
but also to settle his obligations to others.

To be sure, Dervieu did not see things this way. To him the
Viceroy’s assignment was ‘money in the bank*, and he saw nothing
amiss in asking Andr4 to pay his debts on the strength of it. Indeed,
he found the general situation ‘in no way disturbing*: since July, when
he had given a dividend of 24 per cent,, he had not merely not lost
money; he had ‘realized not a little profits*. The trouble lay not with
him, then, but with the European money markets. All he needed was
two or three months to liquidate his position.
Whether Dervieu was affecting such confidence to impress Andre

^ The Alliance Bank of London and Liverpool was one of the products of the
boom. Founded in 1862 with a nominal capital of £2,000,000, it had been active
in financing the cotton trade and was now caught by the drop in the Liverpool
market. Both Dervieu and Oppenheim, and through them Andr^ were involved
with the Alliance for important sums in drafts against both securities and cotton
shipments to clients of the Liverpool bank, Mon. Mar. Rev.y VI (1863), 108, 431;
Andre-Schwabacher (personal), 14-10-1864.
* Nominally he owed over two million francs; but half of this sum was the

responsibility of Sinadino and Co., who were sharing in this particular operation

on a fifty-fifiy basis.
or whether, in his usual irrepressible fashion, he really believed that the
situation was ‘in no way disturbing’, is hard to say. In either case, the
effect on Andre was the opposite of what Dervieu had intended. To
admit in one breath to gross mismanagement - the report was an un-
conscious mea culpa and all the more damning for being unconscious -
and then to speak in the next of the very paper profits that had led him

to the edge of ruin, was inconsequent folly. Even if it were possible to

pull Dervieu out of his current mess in ‘two or three months’, his
ultimate redemption must have seemed to Andre less certain than ever.
The reply from Paris, sent 22 October, was part reprimand, part
sermon. Andre reminded his friend that Marcuard, Andre et Cie had
always been extremely prudent, that as a result, they were less ‘affected
by the preoccupations of the moment’, that is, by market crises, than
other houses. This did not mean, however, that they were free to ignore
these difficulties; on the contrary, the wide circulation of their signature
and the general confidence in their solidity required them to show
even more prudence in time of stress.
Things were difficult at the moment. In England especially, all new
banks and finance companies were on the index; rates of 9 and 10 per
cent, seemed to have no attraction for frightened capitalists; the values
of all securities were falling and the bears were having a field day. In
such circumstances, a banker’s first duty was to reduce his engagements
and hold as much capital as possible in reserve for emergencies.
Andr6 ticked off the consequences for Dervieu. In the first place, the
prospects for a successful loan floatation in the immediate future were
far from bright; Ismail’s assignments were worth far less, therefore,
than Dervieu had imagined. Secondly, it would be impossible to renew
existing loans; Dervieu would have to meet his liabilities on the dot.
Finally, it would be impossible to arrange for new credit; and while
Andr6 could not speak for other firms like Fruhling and Goschen,
Marcuards planned to reduce its commitments in Egypt and was
counting on Dervieu for remittances.
The letter closed with a little homily on the dangers of royal finance:
You know how often we have brought to your attention die inconve-
niences offered by your advances to the Egyptian government. They had
finally reached a figure altogether out of proportion to your resources and
the importance of your capital. However excellent your principal debtor may
be, you find yourself today with your hands tied, and very much prevented,
as a consequence, from devoting your efforts and resources to the service of

your the execution of the orders that might be entrusted to you,

clientele, to

to die serviceof your day-to-day connexions. If I remind you of this, it is not

with the feeling of sterile satisfaction of the man who says, 1 told you so,’ but
because it me very important for you, once you get out of this
seems to
impasse, not tothrow your freedom of action away any more, and to prefer
commercial operations proper, where the profit is reduced but certain, to the
more lucrative but more perilous role of money-lender to the government.

Der\deu*s return to Egypt in early October was never intended to

be anything but brief. He was anxious to get back to Paris and London,

where his very existence was bound up with the prompt and successful
floatation of the loan. Andre’s unwillingness to co-operate, of which
Dervieu had warning by cable long before the letter of 22 October
arrived,^ hastened him on his way: he had to cover in Europe or
suspend. His departure spared him not only the little sermon cited
above but also an official advice of 26 October w’hich repeated the
usual polite reminders and injunctions and notified Der\’ieu et Cie
that there was no more credit available - all drafts on Marcuard, Andre
et Cie would have to be accompanied by covering remittances.®

At this point we have no letters because Dervieu w^as in Paris where

he could talk to his friend in person. We can at best only imagine,
therefore, the frantic activity of these few critical weeks: the trips
between Paris and London; the conferences with Firihling and
Goschen, the Alliance Bank, and others; the offers, suggestions, de-
murrers, urgent reminders and polite ultimatums- . . . We should like
so much to help you, but ... If it were up to me - of course; but . .
We regret having to ask you at this time, but you see . .

Somehow Dervieu squeezed through. He ‘passed the cape* of

^From his brother Gustave, of Didier, Dervieu et Cie of Alexandria and Paris.
^A. Neuf., L.B. 524, 26-10-1864, ff. 1247-8; ‘personal to Edouard Der\ieu;
to be forwarded if he has already left Alexandria.’ The day before, a similar letter
had gone out to Oppenheim and Alberti in Constantinople, and was followed on
the 26th by a reminder to Oppenheim, Neveu et Cie of Alexandria that its deficit
was still running too high. Ibid., 25-10-1864, f. 1382; 26-10-1864, f. 1270. It is
worth noting that in a crisis like this, the first concern of Marcuard-Andre was to
get its signature off the market and diminish its future commitments, even at the
expense of current resources in cash. Thus when, in October, Oppenheim,
Neveu et Cie decided to pay a sum of £B,ooo owed Fruhling and Goschen
through Marcuards and asked the Paris firm to accept drabs of Fruhling and
Goschen on them for that amount^ Marcuards preferred to pay the money to
Fruhling and Goschen immediately in sight bills on London. Ibid., 25-10-1864
to Fruhling and Goschen, f. 1207.
31 October, realized his assignment on the November instalment of the
loan, and stayed on to watch the actual floatation on the i8th of the
The operation was skilfully carried out. Nine hundred investors
subscribed for £6,100,000, more than amount of the
the total nominal
loan and almost twice as much were ready to place
as the promoters
on the market. In order to cover themselves against a weak demand,
the syndicate had issued the loan at 93, a point and a half higher than
the figure originally set. The precaution was unnecessary; a small
premium was established, which hdd as long as the promoters did not
unload too quickly. On 22 April 1865, three weeks after the syndicate

was supposed to dissolve, it was still operating, and Andre, who

wanted to liquidate his share in the issue, asked to be excused from his
commitments.^ Not until over tw^o years later were the books of the
operation finally closed.®

Dervieu was saved, then, ‘financially speaking’. He was also ruined.

His influence in Egypt rested in the long run on his influence with the
Viceroy, and by collecting on his loans, Dervieu had thrown away his
master’s favour: Ismail preferred creditors who did not expect their
money back. Dervieu did his best. He dunned his master tactfully,
humbly, apologetically. To no avail. Once the Viceroy had to pay
Dervieu more than he could take from him, the banker had not only
lost his usefulness; he was a nuisance.
Actually, the undermining of Dervieu’s position as court favourite
had begun well before the signing of the contract for the loan. The
verj'^ fact of his privileged status was enough to excite the envy of
his fellows; his ill-concealed pride and presumptuous officiousness

^ Mon. Mar. Rev., IX (1864), 567.

® A. Neuf,^ L.B. 536, 22-4-1865 to Friihlmg and Goschen, f. 1033; 25-4-1865,
ff. 1127-8.
* The setdement of the accomits gave rise to a bitter dispute between Mar-
cuards and Fruhling and Goschen over the calculation of Goschens’ expenses as
bankers of the syndicate and the deduction of commissions and other charges
from the sums credited to the partidpants. In the end, the French house ceded,
but broke off relations with its former assodate. Ibid., L.B. 568, 6-8-1866,
ff. 233-5; L,B. 570, 20-9-1866, ff. 747-9; 1-2-1867, ff. 29-30; 6-2-1867,
ff. 214-5.

served to pour wound.^ A scandal sheet made its appearance,

salt in tlie

the Argus^ to report for the edification of literate Eg\pt the activities
of Dervieu and the rest of the palace guard - tlie *neo-divorants\ so
called to differentiate them from the old vultures of Said’s regime.
Rumour had it that Bravay was behind the Argus; and if it is true that
‘it takes one to know one’, the accuracy of the new'spaper’s shots would

seem to point to inspiration from the greatest ^devorant^ of all.^ Ismail

banned the sheet, which continued for a while to function clandes-
tinely. But censorship could not heal the bitter breach that split the

European colony, or the genuine fear of many of the smaller merchants

that the spectacular success of Dervieu, Oppenheim, and company was
the prelude to privileges and monopolies that would put the less-
favoured firms out of business. We have already seen the swelling
resentment boil over in the affair of the Egyptian Commercial and
Trading Company in the summer of 1863.® A year later, the rival
groups had abandoned petitions and come to blows. Richard-Koenig,
brother-in-law of Der\deu, had to be expelled from Eg^'pt temporarily
for assaulting one of the more impertinently pertinent critics of the

It is probable that, however much Ismail resented these attacks, he

was also impressed by them, if only because he did not like to be a
laughing stock. Also, they coincided with his vexation over Dervieu’s
assistance to Mustapha Pasha. And they may well have provided him
with convenient food for rationalization when pecuniary embarrass-
ment began to sour his own relations with Dervieu. From this stand-
point, Dervieu’s trip to Europe in the summer of 1864 was particularly

^ Cf. Audouard, Mysteres^ p. 182. The author was prejudiced against Dervieu,

hut the banker's own letters confirm her testimony about his reaction to influence
and power.
53 and n. 3.
* Cf. Auiiant, Bravay^ p. 78. ® See above, p. 1

C.P., Alex., XXXni, Tastu-Drouyn, 9-6-1864, ff. 285-90, Amelie

Koenig, daughter of Koenig Bey and sister of Dervieu's x^ife, married a M.
Richard of Lyons, who took the name Richard-Koenig. Dervieu's brother-in-law
eventually proved to be a source of considerable anxiety and expense. He was a
speculator who went from the heights of affluence to the depths of need with
disconcerting frequency; in 1881 he was said to have 36 millions; a year later, with
the crash of the Union Generale, he was ruined for the fifth and last time. Needless
to say, Dervieu was forced to come to his aid on several occasions and lost a con-
sider^le sum before he was through. P. Dervieu, ‘Famille Dervieu', p. 25;
A. Neuf,y L.B. 578, 18-1-1867 to Dervieu et Cie, f. 924.
To begin with, absence rarely makes the heart grow fonder, es-
pecially when there are plenty of rivals still around to offer themselves

while maligning the distant suitor. Moreover, although Dervieu was

carrying out his mission at least in part at the urging of Ismail, all the
Viceroy knew was that the banker was floundering around in Europe
while his partner in Alexandria kept pressing the government for
money, and pressing with a crude insistence that Dervieu would have
been careful to avoid. Gallo was panicky. Appalled by the prospect of
ruin, he was flailing out on all sides, calling in advances, refusing loans,

cutting off credits. It very understandable; but under the best

was all

of circumstances debtors have even less understanding than money to

spare for their creditors, and despots are notoriously worse in this

regard than ordinary mortals. Finally, and most important, Dervieu’s

mission in Europe wrs a failure. In spite of all his promises and

boasting, he was not able to form his Sod6t6 de Credit. Where were
all his vaunted contacts, his powerful friends? what was all this talk of

£200,000 bonuses? The man was a fraud or a fool; in either case, he

should know better than to try and make a fool of the Viceroy of
Egypt. By the end of September, Ismaifs affection for his old friend
was much diminished, his vexation at his financial difficulties was
mounting daily, and only the excuse was lacking for an explosion.
When the blow-up came, die victim was Gallo.
On 26 and 27 September, at a time when Dervieu was in Marseilles
preparing to return to Paris to assist in the loan negotiations, he got a
call for help from Alexandria stating ‘that Gallo has got in bad with

the Viceroy; that the good man is sick about it; that he doesn’t know
what saint to pray to; and that it would be a good idea for me to spend
a week in Alexandria to raise the morale of my dear partner and see the
Viceroy’.^ Dervieu left for Egypt by the first boat.
When he arrived, he got the bad news: the Viceroy had refused to
have Dervieu’s name in the loan contract. It was a terrible blow, so
terrible that Dervieu did not have the heart or courage to discniss it with
Andre. In his of 12 October he spoke only of Gallo’s short-

comings - his lack of nerve and presence of mind, his impulsiveness,

his awkwardness - and the blunders he had committed. His partner
was simply not experienced enough to handle alone the wei^t and
responsibilityof so large and delicate a business. His indiscriminate
safety measures had alienated all the clients of the house, including
^ Dervieu (Marseilles)-Andr4, 28-9-1864.

Ismail himself. Dervieu admitted that he might well have done the
same, but the fact was that he had not been in Egypt and could, by dis-
associating himself from Gallo’s behaviour, restore the firm’s damaged
relations. This was in effect a repudiation of his partner, who made
arrangements to quit the firm. Dervieu in turn was not happy to see
him go: T don’t want him to leave me, but let him stop antagonizing
in this way everybody in Egypt from die biggest to tlae smallest.’ In
the meantime, Dervieu insisted, his own position was unshaken;
indeed, ‘modesty apart’, his presence had been enough to repair all
the damage.
Andre replied reassuringly.^ He too was unhappy to learn of the
break with Gallo; Dervieu would miss so ‘honourable, conscientious,
experienced, and prudent’ a collaborator. To be sure, his mishandling
of the firm’s difficulties was not entirely surprising: ‘The energy and
presence of mind necessary to dominate a difficult situation are rarely
found in combination with the extreme circumspection of character
and the modest manner of your former associate.’ All the more was it
essential that Dervieu remain in Egypt: ‘Thanks to your presence at
the side of the Viceroy, there will soon be nothing left of the incident
that threatened to lose you his favour.’
In the end, Dervieu and Gallo forgot their differences and kept the
firm intact. But the loss of the loan had dealt a severe blow to the
bank’s prestige, and, Andre’s reassurances to the contrary, Ismail did
not forget.^ Dervieu’s return to Europe to liquidate his autumn com-
mitments gave his enemies three months to cultivate and nourish the
Viceroy’s unpleasant memories. When Dervieu finally came back to
Alexandria in January 1865, he had definitely lost his position as
palace favourite.

^ Andr^-Dervieu, 32-10-1864.
* Cf. AjE,^ C.P., Alex., XXXIV, Tastu-Drouyn, ^10-1864, f. 308;
19-10-1864, f. 336.


Dervieu began campaign to return to favour the moment his

ship landed in Alexandria. His effortswere handicapped by a new
complication: the Viceroy had conceived - at least for the moment -
a strong aversion to foreigners, Frenchmen in particular. The Suez
arbitration had embittered him as nothing else. Vexatious and costly
as earlier abuses had been, none had ever attained the scope of this
confiscation masquerading as equity. Once before, for example, in the
Castellani affair, the Egyptian government had made the mistake of
appealing to the honour and justice of a European aristocrat to settle
a dispute.^ But then it had been a question of only some hundreds of
thousands of francs. The French decision of 1864 had stipulated an
indemnity of 84 millions to a company whose total investment was
scarcely larger, to compensate for work not yet done and for help that
had never been promised.®

^See above, p. 92. and n. i.

®This is not the place to discuss the pros and cons of this decision, which has
been a source of controversy since it was pronounced. Suffice it to say that the
bulk of the indemnity was intended as compensation (1) for land bordering the
canal,conceded by Said and now returned, and (2) for corvee labour, promised
by Said and now withdrawn. The arbitrators calculated the value of the land by
estimating its worth when irrigated and cultivated, although no step had been
taken in that direction and there was no proof whatsoever that the land was suit-
able for cultivation or that the construction of fresh-water canals to feed this
particular area was commercially feasible. Years later, after the bankruptcy of
Ismail, a foreign debt commission evaluating the properties of the Egyptian
government wrote off the land as worthless; an effort to sell the most promising
section was a miserable failure. As for the canal company, it was one day to
have the occasion to ask the government for a piece of this land back; the govern-
ment offered it at the same price stipulated in the arbitration of 1864. The com-
pany rejected the proposal on the ground that the land itself had no value; in
which they were perfectly right. On the corvie labour, see above, p. 181 and

For a long time Ismail baulked at carrying out the terms of the
decision, although he must have known in his heart that eventually he
would have to yield.^ In the meantime, however, the constant bicker-
ing with Lesseps and the steady tug of war vdth the French consulate
left a sour taste in his mouth, which soon extended to everything

French. To Ismail’s further exasperation and resentment, Mustapha

chose this moment to visit Paris. To see the Louvre.^ Possibly. But
Ismail hardly needed convincing that his brother was plotting against
him with the connivance of France; and, indeed, it is not implausible
that the Prince had in fact gone to Paris to fish in troubled waters,
with or without the invitation of the government.
Ismail became frightened; in the Near East, where rivalries over
thrones are often settled by the assassin’s dagger or the poisoner’s cup,
his concern, though excessive, was not entirely unfounded. He fired
all his European servants, ate only in the safety of his harem, turned

visitors away and shunned outside distractions. As Dervieu put it, he

made his life ‘definitely as miserable as possible’.®
For some people, the situation does not exist that can not be turned
to pecuniary advantage. If Ismail was going to become a maniac and
chase all Europeans fromhis door, why then, the Europeans w^ould
learn to live off his mania.For a moment, the most popular profession
in Egypt seemed to be that of private detective. The palace was besieged
with tale-bearers with open mouths and open hands. Each had his own
story of a conspiracy to be nipped and eadi made the Viceroy an easier
prey for the next swindler.® And while most were nothing more than
adventurers on the hunt for hard cash, some were eminendy respect-
able citizens who were intelligent enough to perceive and seize an
opportunity to dispose of their enemies and rivals. It is probable that
Dervieu was one of their favourite targets.
In the meantime, Ismail took his revenge in eveiy^ w^ay he could.
With the threat of Mustapha hanging over him, he no longer dared

n. 2.On this whole question, see the sources dted in ch. vii, above, especially
Douin, Histoire^ chs. iii and iv (the most detailed treatment, favout^le to the
company), and Sabry, Empire^ pp. 277-88.
^The dispute was eventually settled by the conventions of January and
February 1866.
* Dervieu-Andr6, 25-1-1865-

^Audouard, Mysthres, pp. 188-91. Cf. also C.P,, Alex., XXXIV,

Tastu-Drouyn, 12-9-1864, f. 58; XXXV, 19-1-1865, f. 28.
to go around telling the world that he had to get rid of ‘all these
Frenchmen’.^ But he could and did place orders for almost £ 1 ^ 000^000

of rails, cars, locomotives, and other equipment in England. A contract

for t^’elve new steamships went to the Peninsular and Oriental. The
same firm '^’as going to handle the repair of the existing Egyptian fleet.^
It was not only that British prices were lower or their material better;

the Egyptian government had never based its purchases solely on such
rational considerations. Rather, it had always so distributed its orders
as to keep everybody happy; was known in diplomatic parlance

as ‘being fair*. Now, however, was determined not to give a

centime to France if he could help it. For the first time since Abbas,
British influence dominated at Cairo.®

Dervieu was upset. Why, it is hard to say. If we are to believe his

he himself was exempted from the general ban. He wrote, for

example, on 25 January 1865, that he had returned to the ‘same

benevolence, the same cordiality’ as always, that indeed the Viceroy
had favoured him with an order for a steam tugboat. Perhaps Dervieu
was really less confident than he pretended: the same letter alluded to
earlier unfriendly remarks that Ismail apparently had made concerning

him, and closed with the wistful hope ‘Aat business picks up soon, and
that the Viceroy does not forget us*. Perhaps Dervieu found ihat the
Viceroy’s increasing hostility to all things French was placing him in
the uncomfortable position of a renegade. There may have been sli^ts,
affronts, insults -not personal, just generic. It is not easy to be a
‘good’ Frenchman with a man who dislikes Frenchmen - especially
when one is as aggressively and virtuously patriotic as Dervieu.
In any event, Dervieu chose to make an issue of the Viceroy’s new
policy and take it up with people in France. He sent a note to Du Pin,
and Arough him to Armand B6hic, the Minister of Agriculture, Com-
merce and Public Works, protesting against the favouritism the
Viceroy was showing to English industry. Dervieu was especially

^ C.P, Alex, XXXV, Tastu-Drouyn, 1-2-1865, ff. 36-7.

*Ibid., 19-2-1865, ff. 84-5; 31-3-1865, f. 128.
®Cf. Serpeli, ‘American Considar Activities’, p, 344 and n. 3; Sammarco,
Precis de Vkistoire^ IV, 11-14. A. Chafik, DEgypta moderne et les influences
hranghes (Cairo, 1931), leaf opp. p. 6, offers a graph of the relative strength of
English, French, and Italian influence in Egypt from the twelfth century on.
Chafik’s fluctuations are much too roi^y cdculated. He has French influence
rising steadily under Ismail to a peak in 1869, the year of the opening of the Suez

exercised about the award of shipbuilding contracts to British yards.

Since Behic was chairman of the Messageries Imperiales and a member
of the board of the Forges et Chantiers de la Mediterranfe, Der\deu
confidently expected a sympathetic hearing.^ The letter concluded with
an appeal for official French intervention.
A second note followed similar lines. This time Dervieu was upset
about the cold reception given the French banker G. Delahante, who
had come to Egypt to solicit the concession of operating the railways.
The letter was addressed to our old friend, the Due de Momy, who
may well have been directly interested in Delahante’s demarches.® And
even if not, Momy would not be long in seeing the pecuniary possi-
bilities of the situation. Once again, Dervieu had chosen his corre-
spondent carefully.
Dervieu arranged to have Andre apprised of the contents of these
letters.He felt sure, in view of Andre's reminders of his interest
in the Forges et Chantiers de la Mediterranee, that his friend would
share his indignation. He could not have been more mistaken. Tme,
Andre and his partners held stock in the French shipbuilding concern.
Yet this connexion was not decisive; Andr^ was above all a banker,
an international banker, with all the catholicity of interests that that
implies. He was at all times engaged in a number of directions, some
of them conflicting; his business came from all over the globe. In-
evitably, his decisions had to be based on an objective estimate of
relative advantages and disadvantages.
Moreover, he was a man experienced in the machinations and pitfalls
of politics. The naivete, the impetuosity, of his friend must have left

^ The Messageries Imperiales was the new name assumed by the Messageries
Maritimes under the Empire.
* On Momy, see above, p, 186 and notes. The Delahante firm was in the

second rank of French private banks. In i 8 55 , the firm already had important

interests in Spanish, Portuguese, and Italian railroads. Cf. A, Vitu, Guide financier
(Paris, 1864), pp. 703, 706, 729, 731, 741, Delahante was not the first European
businessman to try and lease the Egyptian railways. Under Said Pasha, Gisborne,
the man who brought the transmarine cable to Egypt, made repeated efforts in
this direction but got no support from the British Consul, who felt that the rail-
road was best left in the hands of the Egyptian government. F.O, 142-25,

Colquhoun-Bulwer, no. 60: 13-9-1866; Colquhoun-Russell, no. 136: 5-10-1860.

There was such a gap between the actual returns of the exploitation and the
potential product, that anyone who could lease the roads on the basis of current
revenue and reorganize them on more efficient lines stood to make a fortune.
him Demeu’s manoeuvre were ever known - and this was
aghast. If
an excellent possibility - his position in Egypt, all the work and effort
of years, was irrevocably destroyed. Ismail was notoriously a ruler who
did not like to be crossed.
Above all, however, Andre was opposed to sentiment in business.
Dervieu apparently had nothing to lose by the new situation -if
anything, he was better off than before. After all, a franc was a franc,
a pound was a pound, and both were backed by the same gold. Besides,
the whole thing was like tilting at windmills; Andr4 knew better lhan
to waste tears over the plight of the great French iron and engineering
firms - they were quite capable of taking care of themselves.
Andre’s reply was a rebuke, a classic lesson in business realism.

My dear Dervieu Paris, t8 February i865

I receive with the greatest interest the interesting
[sic] communications

which you take the trouble to send me from time to time, but I am obliged
to accompany my thanks with a warning, for which you must excuse my
friendship and which may be expressed in four words:

You write too much,

I underlinethem because they are, believe me, of capital importance. You

are too honest and too trusting for the world in whidi circumstances have
placed you. You imagine that because you are animated with righteous
intentions and because you are seeking for yourself and your country nothing
but things that are open and above board, you can write letters and notes,
play around with the wheels of politics, stir die interest or awaken the spirit
of intrigue of certain personages, and all that without danger to your per-
sonal position I implore you, take caret Your interests run the risk of being

seriously compromised if indiscretions are committed, if your remarks are

reported and twisted, as will surely be the case, if you expose yourself to hav-
ing your confidential communications intercepted by those who are seeking
arms against the present government of Egypt. Are you the one to become
their ally? And when you are the only one exempted from the general dis-
grace and you can, for that very reason, derive considerable advantage from
this exceptional position, is it not a serious imprudence to take up the cudgels
in favour of interests tiiat your own and that will not be really
are not
compromised unless our government and those around it allow.
Confine yourself, believe me, to regretting within what goes on without-
Have your boats made in the Clyde or the Mersey if your royal friend so
desires at the moment, and if he wants English rails or locomotives, address
yourself to Sheffield or Birmingham and r^e sure of your own remunera-

tion without bothering yourself about getting the preference for our yards
or for our factories. Our turn will come when the tray of the political scale
climbs again. In the meantime,you must not be surprised if he who pays pre-
on being served to his own taste. You should also, it seems to
fers to insist
me, carefully abstain from anything that might appear on your part as
opposition or interference of a sort to alienate the sympathies and die support
of your friend Nubar, who can be more useful to you than ever in these

Period. Dervieu did not even reply.

Such velleities of resistance and independence were not only rash; they
were utterly out of character. Dervieu was glad to forget them and
concentrate on his traditional policy of propitiation and accommoda-
tion. He realized that in the last analysis, there was only one avenue of
return to favour: the Viceroy wanted money and loved those who
could give it to him. Andof the growing reluctance of his
in spite
friends in Europe, despite his own financial weakness and his in-
creasing awareness that this was the path to ruin, Dervieu persisted
almost to the end of his banking career in the effort to raise money for
Ismail. He watched for every opening, lay in wait for the slightest
weakening of his competitors, outdid himself in ingeniousness in
devising plausible schemes.
With Ismail, he did not lack for opportunity. Like a righteous man
defending his integrity, the Viceroy had resisted fiercely the bitter
corruption of his first loan; but like many a sinner, even before the
transgression was consummated, he found the bitter sweet and pre-
pared to make a habit of it. In drawing up the contract, he made it a
point to define the security for the bonds as vaguely as possible so as
to leave room for future floatations.^ And the bonds had not yet been
issued on the European market - indeed, Ismail had not yet received
his first instalment - when he made it clear that a paltry £5,000,000
would barely suffice to balance his budget.
Did this mean that the loan was not enough.^^ Not by the rules of
Ismailian logic. With cash on hand to meet his most pressing engage-
ments and £1,500,000 ‘to take care of accidents*, Ismail felt he could
look the future straight in the eye. ‘I repeat,* he insisted, ‘I have plenty
^ C.P., Alex., XXXIV, Tastu-Drouyn, 29-9-1864, f. 193.
of time ahead of me. For the first three years, I’ll be a little squeezed,
but after that I calculate that my finances will give me a surplus of a
few millions.’
Besides, he expected to increase the government revenues by
raising the land tax. This was only fair in away: there had been little
ifany change in the tax since the reign of Said, and the fellah was
obviously wealthier now than then. But the timing was bad. The
statesmen and officials could talk all they wanted about incomes pre-
and post-cotton boom; the fellah would never join them in their
judicious comparisons. He would be a stubborn, thick-headed,
down-to-earth peasant, look back at the magnificent year of 1863,
and point to lower cotton prices and smaller revenues in 1864. And
then he would hurry and find a deeper hiding place for his money.
This, however, was not what was bothering Ismail. ‘People will give
- 1 expect it - a malevolent interpretation to this measure [of increasing
taxes]; for I am accused, I know it, of parsimony and even of avarice;
unjustly so. I love order,economy, I grant, but a wise economy is as
far from avarice as prodigality from generosity. I know how to be
generous and spend when I have to. But I refrain from the wild
expenses of which we had so many examples before me. Those who
exploited the costly fancies of my predecessor cannot forgive me for
having stopped up the source of their scandalous fortunes; I don’t
care, people who are sincere will give me credit for my reforms and
approve of me for having substituted order for waste, and regularity
for dilapidations.’
Never again would Ismail have the pleasure of assuming these airs
of injured virtue. The realities of Egyptian finance had already made
them ridiculous. On the morrow of the 1864 loan, Ismail himself esti-
mated the Egyptian debt at 531 million francs, or more than double
what it had been on his accession some twenty months earlier. By far
the greater part of this sum - over 90 per cent. - consisted of four
items: the sWes in the Suez Canal, only one-fifth paid in, 83 mil-
Suez indemnity, 84 millions; Ae 1862 loan, 180 millions;
lions; ^ the
and the 1864 loan, 140 millions. The rest -the purchases of cattle

C.C., Alex., XXXVII, Gamier-Tastu, 1 2-10-1864, f* ^9^-

®The 83 millions included presumably some 71 millions representing 400
francs on each of 177,600 shares - give or take some - plus those of the notes
given in payment of die first 100 francs that were yet to fall due. See above,
p. 177.

during the murrain, the orders inherited from Said, and the other
things that Dervieu liked to stress in his letters -was trifling by
Moreover these were only the existing liabilities. Now that he was
liquid again, Ismailwas full of plans and projects, enough to absorb all
the available cash before any of it ms dissipated in payment of old
debts. Some of these projects, like the Cairo-Wadi canal, were imposed
by the circumstances.^ But if the canal was to cost 40 millions, there

^A.E.y C.C., Alex., XXXVII, Gamier-Tastu, 12-10-1864, fF. 296-7. The

complete breakdown was as follows:

Suez shares 83 million francs

Suez indemnity 84 n 99

Debt to Comptoir d’Escompte 15 n 99

Egyptian treasury' bonds 10 n 99

1862 loan 180 99 99

Warship offered to Sultan 7 99 99

Orders left by Said 6 99 99

Cattle purchases 6 99 99

1864 loan 140 99 99

531 million francs

This sum, of course, represents the gross national debit, and is much larger
than it would be if it were calculated net of available cash assets. Thus the new

loan added 140 millions to the debt, but there were also 125 millions to collect,
leaving a net debit of 15 millions. On the other hand, this statement did not
include the personal debts of Ismail, which ran perhaps as high as 50 million
francs. Even the Viceroy, however, wotild have been lost trying to calculate the
total of all his overdrafts, promissory notes, accounts payable, and so on.
* This canal was another step in the construction of Suez at the expense of
Egypt. By the concession of 1856, the company was obligated to build a fresh-
water canal from the Nile at Cairo to the trans-isthmus maritime canaL Since part
of the area to be crossed was already cultivated and in private hands, provision
was made for reimbursement by the company of the existing proprietors. It soon
became evident that the canal would be a costly affair, if only because of the high
value of land in the Cairo area. Lesseps constructed, therefore, only that part of the
canal from Wadi to Ismafla, which could draw on an old, semi-abandoned fresh-
water canal at Zagazig, and when, in March 1863, this source became insufficient^
arranged with Ismail to cede the still-to-be-built Cairo section of his canal free of
charge to the Egyptian government.
The terms of the cession are worth stopping to consider. According to Lesseps
and his associates, the company was ceffing its ‘right* to build the canal; the
convention with ihe Egyptian government speaks of the abandonment of a
‘droit* . This was also the position, naturally, of the French consul, and the word
was a pleasure dome at Giza that was to swallow thirty more, a
veritable Xanadu. The mighty monarch had had a branch of the Nile
damned up; thousands of splendid trees were transplanted to line the
desert sands- There was also a palace on the Bosphorus to serve for the
occasional visits to the Padishah in Constantinople. And there was
always the dream of African empire to suggest further ways to spend
Ismail had great plans for the little-known lands along the Upper
Nile. He told Dervieu that Egypt, was
this area, three times as large as

well populated and fantastically fertile - cotton grew wild. If only it

were properly administered by officials who were under the effective

guidance and control of the government in Cairo, it could one day
become the Indies of Egypt. To this end he wanted to build a railroad
from Isna in Upper Egypt to Khartum, a distance of over a thousand
kilometres. Ismail was acting here as the heir of the Pharaohs. Even in
her weakest moments, Egypt had maintained at least nominal suzerainty
over the political vacuum that existed to tlie south; and the Turkish
firman of 1841 that made Mohammed Ali Viceroy of Egypt for life

specifically recognized his overlordship of the Sudan and the regions

adjacent.® Yet where earlier rulers had been content with the appear-
ances of sovereignty and occasional tribute, Ismail was determined to
has been repeated since by historians like Douin. Yet nowhere is there the slightest
justification for this point of view; the concession clearly imposed the fresh-water
canal on the company as a condition of its privileges. And while the use of the
term ‘right’ may have helped Lesseps to soften his customer Ismail for what was
unquestionably an unusual transaction (see what a bargain this is! the right to
build a canal, for nothing!), it is astonishing that this very pretense of generosity
did not put the Viceroy on his guard and spoil the sale. In the entire history of
Suez, this was the only time that Lesseps ever gave away something for nothing.
From the business standpoint, it is impossible to say without the records of the
Suez Company - if they contain the information - what Lesseps really expected
the canal to cost. According to Douin, the ofiicial company estimate anticipated
3,500,000 francs for construction and about the same for expropriation - a far cry
from Dervieu’s estimate of 40 millions. These are also the figures given by
Tastu, the French consul, who probably got them from the same source. Seven
millions or 40 millions, however, the Suez Company was in no position to
build a fresh-water canal. As of February 1863, one month before the cession,
the company had only 12,000,000 francs in the treasury, and they were going at
the rate of 1,500,000 francs a day. For the above, see Douin, Histoire^ I, 49;
C.C., Alex., XXXVII, Beauval-Drouyn, 18-2-1863, f. 36; Tastu-
Drouyn, 27-3-1863, ff. 87-8.
^ Cf. * Sabry, Empire^ p. 384.
J. C., Histoire^ P* 31 f*

establish his rule - to bind his dependencies to Cairo, wipe out the
slave trade, regenerate the land, and civilize the savage - all for the
greater glory of his reign.^
Unfortunately, glory comes high. Ismail could have established
cheaper communications with the Sudan by means of a rail line from
Khartum or Berber on the Nile to Suakin on the Red Sea, there to
connect with steamer service to Suez, Yet he wanted an all-land route
so as not to expose himself to possible enemy naval action, and when
Cairo-Khartum promised to cost four hundred million francs, ^ he was
ready to settle for the Isna-Khartum line at half-price. Even this, how-
ever, v^as far too costly for Egj^pt. As usual, Ismail sounded Dervieu
out about the possibility of a special loan, and Dervieu dutifiilly
brought the subject to Andre’s attention.® A project of this kind was
expected to cost at least two hundred million francs, the initial capitali-

zation of the Suez Canal Could they not take over both con-

struction and floatation and set aside enough profit on the former to
cover any reverses on the latter.^ Dervieu was thinking in terms of a
cost-plus contract, and his mouth watered at the prospect. ‘Don’t talk
about it yet,’ he asked his friend, ‘for we should see competitors spring
up on the spot.’
For Andr^, of course, the only thing that mattered was the feasibility
of the proposed floatation. He raised the question whether the public
was ready to invest in such a long-rage project in a country where so
much depended on the good-will and benevolence of the ruler. What
would happen when Ismail was gone?^ One suspects that Andre offered
this objection merely as a pretext; properly sponsored and wrapped in
suitable legal documents, almost any venture could be sold to the
public “ so long as the market was good. At bottom, Andre simply
mistrusted Ismail and feared his insatiable appetite for money. All his
talk about what might happen under Ismail’s successor was a polite
way of expressing his misgivings about Ismail himself.

Nothing ever came of the project.® Before Dervieu could press the
1 See above, p. 151 f. * Sabry, Empire^ p. 388 f.

* Dervieu-Andr4, 18-2-1865. *
Andr^Dervieu, 28-2-1865.
preliixunary study of the Assuan-Khartum stretch was made by
engineers in 1865. Owing to the lack of European interest in the project^ it was
matter further, his hands, and those of the other merchants and
bankers of Alexandria were full of more urgent problems.
If the autumn of 1864 marked the first halt in the steady crescendo

of cotton prosperity, the spring of 1865 was thestart of the decline.

In the face of falling cotton prices, the cultivators and shippers had held
the new crop off the market, certain that a
little forbearance would

bring a return to ‘normar. For a while, the manoeuvre worked.

Eg}-ptian fair, which had fallen from 32 pence per pound at the end of
July and 3 if at the beginning of September to a low of 2 ^^ by the end
of October, went back to 29 J a month later. ^
Yet the forces making for deflation were far too strong for the
action of any small group of businessmen and proprietors. The
American Civil War was rapidly approaching its end and importers and
manufacturers in Europe were discounting the return of Southern
cotton to the world market. Although this eventuality was still far off
owing to the prostration of the defeated Confederate States, the spinners
and weavers of Europe, like the foresighted businessmen they were,
refrained from buying in the certainty Aat time was working in their
As it was, by March 1865 the price of Egyptian fair in Liverpool was
down to I5|-, the lowest in years. More vexed than ever, the Viceroy
and the other big cultivators were piling their bales in warehouses and
borrowing to tide themselves over until better times. Business in
Alexandria was at a standstill. Fortunately, most of the exporters were
essentially brokers, taking a commission but not risking their own
money in the purchase and sale of cotton. They were weak for lack of
profit, but not yet ready to die of malnutrition. The firms that really

suffered were the banking houses and credit companies, which had
made good money lending to cultivators and small traders at high rates
of interest against the security of cotton andnow found that the secu-
ritywas not worth the advance. Since few, if any, of their debtors had
any intention of paying the difference out of the revenues of previous
years, the lenders had no choice but to realize their cotton at a loss.

tabled until 1871, when Ismail had another English engineer prepare a new sur-
vey. In 1873 construction was begun, but as a result of the financial difficulties of
the Egyptian treasury soon slowed down and then stopped altogether. Sabry,
Empire, p. 39. There is still no rail link between the upper and lower Nile.
^ The cotton prices in this chapter are from The Economist, Cf. Appendix,
PP- 334-5-

The Egyptian Commerdal and Trading Company was among the

hardest hit. It had neglected from die start its mercantile aspects to

specialize, among other things, in orop loans at some 1 5 or 20 per cent,

per annum^ - actually an eminently reasonable rate for Egypt. As a
result, the crisis of autumn 1864 caught it with half its capital frozen in
cotton; the other half was out on loan to Ismail.
By one of those paradoxes peculiar to finance, the Trading sought
its merger with another company starving
salvation at this point in a
in the midst of ample but unrealizable assets. This was Briggs, the
oldest British firm in Alexandria.^ The merger was presented to the
somewhat sceptical stockholders with the usual specious arguments and
bluster. The company was doing very well, indeed had netted 23 per
cent, on the first year of operations. It could not be affected by any
drop in cotton since it held no cotton - it only lent on cotton! But it
needed the business and goodwill of Briggs to get connexions that
otherwise would take years to make. Tliis, the directors pointed out,
was especially important in Egypt, where there were many older firms
‘and where the current of trade had run for a long period in a channel
from which it was difficult to divert it’. When one of the stockholders
rose to express his contentment with the channels that the Trading had
dug for itself and to say that he would be quite happy to get along on
23 per cent, per annum, the chairman pointed out that competition in
Egypt was keen and that the company could not afford to stand

marriage did not work out too well. If it helped the Trading
to surmount the immediate crisis, it left the company with an extra
burden that hurt in the long run. The relief of November, when cotton
rose and Ismail received his first instalment on the loan, was only too
short-lived. With the second break of cotton prices, the Trading found
itself worse off than before, and succeeded in maintaining itself only by
an extravagant circulation of accommodation paper and a systematic
^ jF.O. 142-29, Colquhoun-Russeli, consular no. ii; 22-4-1865-
® The was to be three years^ net on the basis of returns
price paid for Briggs
over the previous six years, but in no case more than 5C559254, the sum to be paid
in shares of the Trading. For this sum the company got a firm whose assets
consisted mostly of advances on cotton, loans to the royal family against mort-
gages on real estate, and accounts receivable on sales to the Egyptian government.
Mon> Mar. Rev.^ IX (1864), 519; XI (1865), 560-1.
^HerapatKs^ 1864, p. 1191 (meeting of 30-9-1864); p. 1285 (meetii^ of
exploitation of every conceivable source of credit. To the surprise of
Marcuards, which was theoretically the exclusive French agent for the
company, the new management wrote indicating it would hence-

forth proportion its business to the credit afforded. Andre peremptorily

rejected to heretical suggestion: ‘Credit transactions can in effect be
only an accessory to regular business.* Marcuards was ready to help
when help was required, ‘but we expect to find our compensation for
these exceptional affairs in your concentration of all your regular
business with Paris in our hands. The company owes us this re-
muneration as its agents, and we are justified in claiming it on this

Andre did not realize, of course, how serious the situation was. Had
he known, he might have saved himself the trouble of sermonizing.
When the Trading found Marcuards* cash box closed, they simply hied
themselves elsewhere, taking credit wherever available and all the
while issuing large amounts in drafts of the Alexandria branch on the
London office.® By the beginning of January 1865, Marcuards was
notifying its correspondents not to remit any more paper on the
Trading, and before the month was up, Andre asked Fruhling and
Goschen to sell his 5 10 shares in the Egyptian firm. He could not com-
pel the company to concentrate itsFrendi operations inhis hands, but he
would be hanged if he would leave his money in that kind of business.®
The Trading was not alone in its misery. In January the Society
Financi^re d’Egypte, Pasquali’s unhappy excuse for a bank, had the
brass to call in £4 per share to handle ‘the rapid development of the
business of the society’.^ Oppenheim was also in trouble, and Mar-
cuards was even less inclined to be patient than in September: ‘. . we
would call your attention to the fact that the account of your house
in Alexandria is persistently behind by a large sum, aside from the
overdraft that can result from short-term operations or unexpected
payments*. The deficit was 1,200,000 francs. ‘Now, what we are
complaining about is not only the importance of the figure, but the
L.B. 528, 10-12-1864 to Trading, Alexandria (confidential),
ff. 493-5; 17-12-1864, Alfred Andr6 to Director, Trading, Alexandria (personal),
ff. 840-2.
*Ibid., L.B. 530, 9-1-1865 to Fruhling and Goschen (personal from A.
Andr6), ff. 441-2; 3-1-1865 to Dervieu et Cie, ff. 78-9.
®Ibid., 25-1-1865 to Friihling and Goschen, f. 1370; 27-1-1865, ff. 1477-9
(personal from A. Andr6); L.B. 532, 6-2-1865, f, 202.
* Mon. Mar. iZev., X (1865), 145.

permanerKe [italics in letter] of the overdraft, and we are urging your

house to increase its remittances/ ^ It was not the business of the
merchant banker to supply capital.

By February ship--
All this time cotton was fallii^. 1865, the drop in
ments to Europe had made exchange so expensive that it almost paid
to send gold instead. Not everyone was so fortunate as Dervieu, who
could draw for the moment on Andre. A break was imminent.
As usual the panic came with a rush. In March and early April
Dervieu was writing reassuring letters to Paris about the abund-

ance of money in Alexandria and the firmness of the banking houses. If

anyone was in trouble, it was those few mercantile firms which had not
been able to reduce the proportion of their advances to the cotton
growers, some of the Greek and Syrian houses in particular.® Even
these, however, were not too badly hit, thanks to the availability of
bank credit, which had given them a chance to adjust to the falling
Then, on 9 April, C. Joyce and Co. of London, East Indian and
Egyptian merchants, collapsed unexpectedly.® The firm was one of
the most important in the cotton trade, with interests in both the Old
and New Worlds, and its failure, which was quite unexpected, threat-
ened to bring down both its debtors and creditors. Rumour spoke of
three steamers captured trying to force the American blockade; also
of an error in a cabled order for 2,000 quintals of cotton, transmitted as
‘20,000 quintals’.* Withal, it was hard to believe that so rich and old a
firm could have so quickly dissipated the febulous earnings and wind-
falls of the preceding years.® For a moment, the whole cotton network
trembled. Alexandria was seized with panic.
In the end, however, Alexandria took the blow better than London

^A, Neuf,^ L.B. 528, 15-12-1864 to Henry Oppenheim, London, f. 748.

®But the Trading received a severe jolt on i April, when Kelson, Trutton and
Co. of London, East India and general merchants, suspended with liabilities
estimated at £900,000; the Trading was in with Kelson for £10,000. Cf. Dervieu-
Neuflize, 8-4-1865; Bankers* Magazine, XXV (1865), 671.
® Bankers* Maga^e^ XXV (1865), 671; The Ttmes^ 17-5-1865, p. 12.
* Dervieu-Andre, 19-4-1865.
® According to Dervieu, when the Alexandria branch, Joyce, Thurbum and

Co., had liquidated only six months before, the partners had divided a ‘handsome
fortune’. Joyce alone was said to have realized £160,000. Since then the parent
firm had netted £24,000 on the construction of an ‘American railway^, that is,
a street-car line, in Alexandria.
or Bombay.^ The old firm of Walheim and Co., a pillar of the Austrian
business colony, was caught with a large amount of Joyce’s paper and
failed. An named Taylor also turned in his books.
English merchant
An effort to muster support among the other members of the business
community was abandoned when the Viceroy refused to match the
amount raised privately. The rest pulled through. Of course, all lost

something, and many Oppenheim, for example,

lost substantial sums.

was out ^25 ,000 on cotton that the Viceroy had ‘sold’ him in November

and delivered in late March; the other pdace favourites paid similarly
for their privileged position. Only the extraordinary profits of the fat
years and the long quiet of the Alexandria market, which had been
relatively sober and easy since the loan of 1864, made it possible to
write off losses that would have swallowed an ordinary firm.
Dervieu himself lost some £1,500 in the Joyce failure and £10,000
on Ismail’s procrastination.® ‘What a suit we would press,’ he wrote, ‘if
he were not the Viceroy.’ Andre must have smiled; Dervieu was al-
w^ys most amusing when he least knew it. What a suit he would press
if the culprit were not the Viceroy! But that was precisely why a suit

would be both effective and profitable. Bravay would not have

hesitated a moment to ask for reimbursement plus indemnity. He
would have got them too. And
he would have got them witliout
alienating the affections of the Viceroy forever after. Dervieu knew
this. He knew - at least he said he knew - that Ismail’s friendships
were dependent on the profit he could derive therefrom, that the Vice-
roy would always have affection to spare for those who had money to
spare. And he should have known that Ismail respected strength far
more than humility.
It is not easy, however, to change character to suit the demands of
reason. Dervieu was not Bravay and could never be Bravay. For one
thing,he was too decent; his relations with Ismail had never rested on
bullying and aggression but on the patient cultivation of ties of service
and friendship. At the same time, he had a fundamental repugnance for
strong-arm methods. As shown in his disagreement with Oppenheim

^ On the crisis in Bombay, see D. E. Wacha, ^ Financial Chester in the History

of Bombay Ciiy (2d ed.; Bombay, 1910).

* Dervieu had a net credit of
£1,750 with Joyce and Co. In October 1865, they
paid a first dividend of two shillings in the pound. At that time, it was felt that the
best that could be expected was 35*. or 4^. 6d, in the pound. The TimeSy
13-10-1865, p. 7. On Ismail’s procrastination, see Dervieu-Neuflize, 8-4-1865.
over the tactics to employ in getting Ismail to make his first public
loan, Dervieu characteristically preferred the carrot to the stick.
The difficulty was that like many asses, Ismail responded at times
to the carrot, at times to the stick. The easy things - orders, com-
missions, and the privilege of lending money -could be had by
sweetness and light; money, however, had to be beaten out of him.
Dervieu’s attitude was perfectly suited to the happy days of 1863-4;
by 1865, his affability and complaisance were more a handicap than an
asset. They made it hard for him to be firmwhen firmness was indis-
pensable, and they made Ismail resent all the more the banker’s half-
hearted out of character. Confronted with the breakdown of a

relation based in principle on mutual affection, Dervieu was incapable

of shifting to cold, contractual ties. The more his mind told him that
the old love had cooled and that the new situation called for new
measures, the more desperately he clung to the past: the Viceroy still

likes me, the Viceroy still likes me, the Viceroy still likes me - the
refrain appears in letter after letter. And more
the wish diverged
from the reality, the more became concerning the
insecure Dervieu
friendship of Ismail and the more humble and acquiescent he made him-
self in a dogged effort not to antagonize and not to offend.
Even at the height of the crisis, his letters continued to talk of
Ismail’s need for funds. Now it was the Daira, the Viceroy’s private
fortune, that was running short. Ismail had spent enormous sums on
land, cattle to stock it, and machinery to cultivate it. With most of his
cotton in warehouses, he had been forced to borrow one million
pounds from the Anglo-Egyptian Bank; the money was no sooner in
his hands that he was looking for another half million; and within a
few weeks - by the end of April - the amount required had almost
Fortunately for Dervieu, Andre w^s not a man to be easily persuaded.
He ignored his friend’s explicit proposals, and replied with generalities
about the sooihing convalescence of the market after the long months
of Tever and emotion’. ‘In moments like these’, he wrote, ‘people
collect themselves, calculate, lie in wait for good deals. They are
sparing of thdr resources and prepare themselves in that way to enter
the lists in good shape at the ri^t moment.’ ®

The trouble was Aat Dervieu was tired of lying in wait. For months
^ Dervieu-Andre^ 19-4-1865; Dervieu-Neufiize, 28-4-1865.
* Andre-Dervieu, io-6-x865«
he had been doing nothing. He had paid his which shrank
to about half a million francs; his portfolio of commercial paper,
had been up to 25 or 30 millions on the eve of the loan, was down to
800,000 francs by early April.^ Not in years had he been so liquid; yet
never had there been so little profit.

In the meantime, there still remained a few matters to clean up before

the liquidation of Egyptian trade could be said to be complete. Many
European firms had not on cotton, but on land, and
lent to iiie fellah^
in these cases the security had proved almost unrealizable. With the fall
in the value of cotton, the bottom had dropped out of the Egyptian
real-estate market; no one wanted land.
The only hope was to get the Viceroy to come to the rescue - as usual.
A committee of businessmen, headed by Dervieu, presented Ismail with
a proposition. The government would take over the so-called ‘village
debts’ and repay the European creditors with treasury bonds at 7 per
cent,; the treasury would in turn collect from the peasants over a period
of seven yearsat 12 per cent. In this way, the money lender would be
reimbursed, the peasant would be relieved of interest charges ranging
from about 3 to 6 per cent, per mondi, the government would be
spared the confusion and recriminations that would inevitably accom-
pany a general expropriation, and last, but certainly most important,
the treasury would be making money on the operation. The plan
appealed to Ismail and was accepted. ^
In Paris, Andr4 also liked the idea. He had one objection, however.
‘Your idea’, he wrote on 10 June, ‘seems very practical to me, but I
should not like to see the government speculate on the distress of the
governed. Why have the government get the difference between 7 and
12 per cent., or, at least, if it is necessary to leave a certain margin to
guard against bad luck, let it be understood that the Viceroy will
employ the profit that will accrue to the treasury for things of public
utility.’ Aside from the moral aspects of the question, Andr^ never did

trust Ismail.
But the promoters of the project were not concerned with public
They wanted to insure repayment of their loans, and even more,

to make the most of a potentially lucrative transaction. The point was

that many of the debts involved were questionable. Technically, each
was subject to separate verification by a mixed European-Eg3q>tian
^ Dervieu-Andr6, 19-4-1865.
* C.P., Alex., XXXV, Outrey-Drouyn, 15-6-1865.

commission, but the promoters of the redemption plan offered the

creditors, legitimate and illegitimate, to handle all the debts en hloc for
a fee varying with the dubiousness of the claim. In a short time, they
had concentrated over 17 millions francs’ worth in their hands and were
negotiating the total sum with Ismail at a rate that must have left them
a sizeable profit.^ And Ismail in turn almost surely charged each peasant,
whatever the discount applied to his debt, the full principal and interest.
All this may have been speculation on the distress of the governed,
but Dervieu and consorts could have made out a good case against
mixing business and sentiment, and Andr^ would have been hard put
not to agree.
This ingenious transaction, which seemed to please everj'one con-
cerned, closed the crisis. Egyptian business survived with reputation

enhanced by its resilience in the face of adversity. 'V^^Tiat was less ap-
parent, however, was had been bought at a high price,
that survival
that the fat of the cotton boom had
been burned in the fever of the
collapse. All the firms of Alexandria, from tlie new joint-stock banks to
the small merchant houses, had stripped their resources to save their
capital.® The next illness might be less severe, but it would find them

with powers of resistance much diminished.

It was June, and Alexandria was becoming unbearable again. The air

was hot and dusty; insects crawled and flew ever3rw^here; the gagging
stench lay like a pall, unmoving. Business was at a standstill, and the
European colony was getting ready to leave for vacations in the salu-
brious climes across the Mediterranean. Then the cholera came. One
day a few victims died; the next day, a few more. Then it was a dozen,
then scores, then hundreds. And for every cadaver declared to the
authorities, several were disposed of quietly, in private gardens and

® Cf. Times^ 17-10-1865, p. 5; 7-2-1866, p. 12; Mon. Mar. i2tfv.,X (1865),
476; XI Commercial and Trading Co.; Bankers' Maga-
(1865), 560-1: Egyptian
s[ine, XXV (1865), 1080-2: Bank of Egypt; Ibid., pp. 1 107-10: Eastern Exchange

Bank of Liverpool. The Anglo-Egyptian apparently made out better than the
others, perhaps because most of its money was tied up, not in loans on cotton,
but in advances to Ismail. Ibid., pp. 1375^.
cellars- In the foul, crowded hovels of the native quarter?, death was
running amuck. ^
Terror seized the city. Though the disease was striking mostly at
the poor, the rich, who had so much more to live for, were the first to
flee.® The Viceroy himself set the example. Livid with fear and visibly
trembling, he hastened aboard his 5^cht for a few days of ‘rest’. He
came back six weeks later.® At his heels, the European population
stormed the harbour, fought their way on to overcrowded ships, paid
fortunes to risk their lives on tiny craft that were never made to leave
fresh water. Vessels entering the harbour did not even have a chance
to unload their cargoes of merdiandise before leaving with their
cargoes of humans. In the space of two weeks, almost 30,000 West-
erners succeeded in getting out of Egypt.^ As the French consul put
it, it was not fear, not even panic — it was a rout.®

Eg3q)tian business stopped dead.

^ The history of the epidemic may be followed in detail in the French and
British diplomatic correspondence of the period. Cf. especially, A,E.^ C.C.,
Alex., XXXVII,
2 Cholera is essentially a disease of the poor. See Rene Baehrefs interesting

article on die epidemic of 183 1-2 in Paris, *La haine de classe en temps d’epid^mie*,
Annales^ VII (1952), 351--60.
®Cf. A.E,, C.P., Alex., XXXV, Outrey-Drouyn, 19-6-1865, ff. 308-12;
The TimeSy 5-8—1865, p. 12.
^Ibid., 7-^-1865, p. 12; A,E.^ C.C., Alex., XXXVII, Outrey-Drouyn,
28-6-1865, f. 394. The United States Consul, Hale, writes of 36,000 having fled
by early July. Dept, of State, Egypt, Hale-Seward, 7-7—186$.
^A.E., C.C., Alex., XXXVII, Outrey-Drouyn, 28-6-1865, f* 393-




Dervieu did not return to Egypt until the end of the year. He spent
six months in Paris, six months about which know very little be-
cause there -was no correspondence with Andre.
We do know that they were quiet months. 1865 a queer, in-
between business yean The crisis of 1864 had deflated the boom con-
siderably, without, however, bringing it back to earth. The finance
companies and banks, if much subdued, were still alive and hunting
for customers. The promoters had suffered serious losses in the market,
but their appetite for new floatations was, if anything, whetted by
adversity. At the same time, however, the resources of the investing
public had diminished considerably, and their prudence and mistrust
had increased in proportion. In short, there was a precarious balance
between the forces of inflation and deflation, a deadlock between bulls
and bears that reflected the incomplete liquidation of the past and
portended the crash still to come.
Not that contemporaries could see as we do the looming debacle of
1866. But they could sense that business was not healthy, that the
catharsis was not complete, and in spite of temptingly low bank rates,
they refused to support another market boom. ‘This stagnation of
business,’ wrote one financial journal, ‘cannot help but give rise to
serious anxiety. There is no use saying that this is the ordinary re-
action to a crisis produced by the effervescence of the spirit of
enterprise and speculation. The fact remains that this slacking is

dragging itself out beyond reason and is much more intense than
In both England and France, security offerings receded from the
high mark of 1864 to the still impressive levels of 1863.2 But many of
the new stocks were in themselves symptoms of weakness. The trick
of converting sick private firms to public corporations, thus reaping
the benefits of overpriced good will while avoiding the dangers of
unlimited liability, had become more popular than ever now that so
many houses were suffering the hangover of earlier excesses.® In July
^ Mordteur des intuits materiels (Brussels), 4-^1865, p. 216. Also 19-3-1865,
p. 108;26-3-1865, p. 128; 16-4-1865, p. 160; 30-4-1865, p. 184. Over the year, the
aggregate loss on the London Exchange of all stocks, including those floated in 1 865,
was estimated at from twenty to thirty million pounds. The Times^ 20-1 2-1 865, p. 7.
2 In England:

New Capital Capital

Companies Authorh(ed Offered Paid-in

1863 263 £100,053,000 £7 ^, 135,000 £8,875,000

1864 282 155,887,000 106,523,000 12,545,800
1865 287 106,995,000 75,578,000 12,174,790

Plus £15,090,600 in new issues in 1865 by already existing com-

panies (as against £35,315,000 in 1864), of which £7,379,640 paid
in (as against £7,844,000 in 1864). To which should be added
£46,236,363 in foreign loans, of which £20,231,663 called up.
The Economist^ Supplement^ 10-3-1866, p. 34.
In France:

Total Securities
Subscribed Paid-in
1862 48,000,000 francs 34.300.000 francs
1863 63,520,000 48.880.000
1864 87,362,480 76,394,480
1865 68,192,313 50,279,741

Ibid., p. 33. It cannot be too strongly emphasized that the figures, especially for
France, are at best rough approximations of public issues through regular chan-
nels. They do not take into account investments arranged privately through
bankers and other intermediaries - particularly important in France, where
official floatations were severely limited -or, on the other hand, securities
assigned to one country but eventually disposed of in another.
2 In Egypt, aside from the above-mentioned merger of Briggs and Co. with the
Trading, there was the amalgamation in April 1865 of E. Landau and Co. of
Alexanckia and the Continental Bank Corp. of London to form the London and
Mediterranean Bank. This in turn merged before the end of the year with the
of 1865, one of the greatest private firms in Europe, the famous ‘comer
house* of Overend, Gurney and Co., incorporated. The fortunate
public, as the financial journals put it, were to have the favour of shar-
ing in the fabulous profits of this magnificent company, hitherto
reserved for a few privileged partners. Yet behind its impressive fagade,
Gurneys was rotten from top to bottom - no single transaction reveals
so well the deceptiveness of this Indian summer of prosperity.
There were, however, some genuine signs of health. Commodity^
prices, which had declined steadily during the fall and -winter of

1864- 5, finally touched bottom and began to climb again. Cotton,

the hardest hit, reached its low point in April, w^hen new-s of die fall of

Richmond set off a last flurry of selling.^ At this point, prices were
about 50 per cent, of what they had been only three months before. It
soon became evident, however, that the influx of American cotton had
been overdiscounted. Stocks were not so big as expected, and the
South obviously had a lot of -work ahead before it could resume its
pre-war place in the world market. Moreover, the end of hostilities
brought with it a tremendous demand for textiles and other consumers’
goods. Exports to the United States increased sharply, and manu-
facturers, who had long put off purchases of raw cotton in the antici-
pation of a further decline in prices, began to
buy again.^ At Liverpool,
Egyptian fair climbed steadily from less than 13 pence a pound to 25
by the middle of October. Once more, bullion began moving east, and

sicklyLondon and Bombay Bank, and the resulting hybrid combined at once
with the languishing Ottoman Financial Association. The Economist^ 29-4-1865,
p. 520; Bankers' Maga^^ne^ XXV
(1865), 481-8, 786, 1284-8. Like the Jukes and
the Kallikaks, subnormal joined with subnormal to produce ever more hopeless
^ The Economist^ Supplement, 10-3-1866, p. 19.
* Ibid., pp. 1-2. Exports from Liverpool of British manufactures of cotton,
wool, silk, and flax to New York, Boston, Philadelphia, and New Orleans (in

iSSo zSSi tses zSSj 1864 ises

ist sixmonths 103,669 42,126 58,867 60,206 80,569 52,126
2nd six months 111,172 30,792 69,716 74,075 34,158 131,804

*14,841 7a, 918 128,583 134,281 114,707 183,930

Re-exports of foreign textiles showed the same trend.

Bombay and Alexandria experienced for the moment something
approaching the affluence of 1863.^
Dervieu apparently did not share much of this prosperity. He had
overexpanded in the fever of those first successful years and had buried
too much of his capital in enterprises and commitments that had little
or nothing to do with merchant banking in the narrow sense. His gin-
ning mills and factories had proved much less lucrative than anticipated.
He had invested large sums in Egyptian joint-stock companies that,
like the Trading, had never been supple enough for the manoeuvring

of Oriental business and were now crawling reluctantly toward inevit-

able liquidation. He had engaged in real-estate speculations that had
been thwarted by the recession of 1864- 5 and IsmaiFs inability to
effect his programme of urbanization-

At the same time, he had been overgenerous in his support of other

firms. Unlike Marcuards, Dervieu et Cie had made credit not the acces-
sory, but the basis of its business. And while most of these funds had
been called in successfully during the crisis of the previous year, some
still remained to be realized. The house of Dervieu*s brother particu-

larly, Didier, G. Dervieu et Cie of Alexandria and Paris, had long

disposed of a sizeable credit that to all intents and purposes had

become an addition to capital. Other credits had been accorded to
Audibert, Schwabacher et Cie of Marseilles, a merchant house whose
chief, Henri Audibert, was Dervieu’s brother-in-law,® and to some of

the joint-stock companies that Dervieu was already interested in as

shareholder and director. And all these firms, along with Dervieu et
Cie, were still tied to the Viceroy and the Egyptian government by
accounts receivable which, in spite of long and persistent efforts, they
had never been able to reduce to reasonable proportions.
As a result, the semester from July to December 1865 was for

^ £1,120,000 in gold and silver went out from England to Egypt and the

Orient in the first half of 1865, £3,876,100 in the second half. Ibid.
* Edouard Dervieu’s younger sister, Claudine Jenny, had married Henry

Audibert in 1857. Dervieu, MonograpMe, p. 40. In September 1864, a particu-

larly difficult time, Edouard Dervieu et Cie had opened a credit of 500,000 francs
for Audibett-Schwabacher with Marcuard, Andre et Cie. A» Neuf.^ L.B. 522,
17-9-1864, £.691. Four months later, Marcuards was forced to ask Dervieu et Cie
to stop remitting the paper of the Marseilles firm, whose heavy circulation was
‘not calculated to make a good impression on the public*. Ibid., L.B. 530,
3-1-1865, ff. 78-9 (in Alfred Andr6*s hand). Audibert-Schwabacher was forced
to suspend in x866.
Dervieu a sort of extension of the campaign of consolidation and
entrenchment begun asfar back as July 1863. The correspondence with
Marcuards shows almost nothing but small, routine remittances. Even
the improvement of the cotton trade did not seem to help. In December
1865, Andr6 actually had to remind the office in Alexandria that they
were allowing important opportunities for profit to slip by. ‘There
have been recently/ he wrote in a postscript to an official letter, ‘a fair
amoimt of shipments of gold to Egypt. We were looking forw^ard to
receiving some sort of order from you, and we think that in view of
the exchange, we shall be getting a letter from you at any moment.’ ^
And when, shordy after Dervieu’s return to Egj^pt, Marcuards had the
occasion to thank him for New Year’s greetings, Andre once again
took the trouble to add a w'ord of encouragement: ‘that your account,
very inactive these past months, may soon resume its old acti\ity’.*

Eighteen months of consolidation w^as dangerously long. It was bad

enough to abandon the first place in Egyptian finance (although Andr4
was probably pleased by that development), but it w^as far w’orse to
sink into a sort of torpor, to let entrenchment become, not the prelude
to further advances, but a stop along a retreat. Dervieu et Cie needed
desperately to pull themselves together and resume the initiative-
Dervieu knew and returned to Egypt primed with ideas and

determination. Essentially his plan was the same as that w^hich had
failed in 1864: to convert into a joint-stock company big enough to

dominate Egyptian finance. This time, however, he proposed to amal-

gamate with the new-born Soci^te Agricole et Industrielle d’Egypte,
which was limping, and by liquidating the less successful operations
of both firms, begin afresh with a clean, dependable balance sheet.® Of
course there would be no bonus of five million francs; Dervieu was
ready to settle for another chance.
He had made preliminary arrangements with Andre and the
other shareholders in his bank and was working to wind up affairs in
Alexandria, when he was distracted. It was the same story: in spite of
all his experience, Dervieu could not resist the deceptively large profits
of viceroyal finance.

1 Ibid., L.B. 552, h-i2-i 8(55, f. 734. ® Ibid., L.B. 554, 8-i-i8<56.
® On tbis firm, which was floated in the summer of 1865, see below, ch. xii.
The situation seemed made to order. Undeterred by business de-
pression and cholera, the Eg5rptian government had continued to spend
money throughout 1865 in its usual prodigal manner. The boom in
public works went on unabated; new canals were dug, new railroad
track laid.^ The Viceroy’s personal foibles were not neglected: aside
from palaces on the Bosphorus and the Nile, a new yacht was built to
join the already impressive fleet assembled since the reign of Abbas,®
Above all, Ismail continued to buy land on all sides, doubling and re-
doubling the huge estates he owned on his accession.® Nor were
government expenditures likely to diminish: the was Sudan railroad
on the agenda, the modernization of Cairo and Alexandria had not

been forgotten, the Suez Company was still pressing for the execution
of the imperial arbitration; and Ismail was dreaming his expensive
dreams of African empire.^
A good part of these outlays was being defrayed by further borrow-
ing. Although the loan of 1864 was quickly consumed in repa3anent of
the debts that preceded it,® Ismail’s credit in Egypt was by that very

fact momentarily restored. By reducing his overdrafts on current

account and easing the market for short-term treasury paper, he had
proved in a sense what a good debtor he was. Now he could, and did,
ask for more money.
The difficulty was that, although the number of potential lenders
had increased - and the field of Egyptian banking was unquestionably
growing more crowded - their means had diminished. Aside from
losses incurred in the fall of cotton, it was the restrictive credit policy
of their correspondents in London and Paris that hurt most. After
the escape of March and April 1865, houses like Friihling and Goschen
and Marcuard-Andr^ had no intention of letting the situation get out
of hand again, and so long as Europe was not ready to carry Alex-
andria, Alexandria, with the best of will, could not carry Ismail very

So that by the summer of 1865, Ismail was once more in the market
for a public loan. For two, in fact. He wanted to borrow something
^ Hamza, 'PuUic Deht^ p. 88.
® The Times^ 9-8-1865, p. 6; E. Dervieu, Les emprunts de la Datra vice^rqyale
(Alexandria, 1870), p, 12.
® Where in 1863 Ismail owned some 60,000 ^eddans (ontfeddan equals 1*038
acres), the Dana was able to mortgage 365,000 inDecember 1865 as security
for the loan of that date. Ibid., pp. 47'-9.
* The Times, 11-11-1865, p. 12. * Hamza, Public Debt, p. 81.

over two million pounds on the security of the railroads, and some
three million more against his private fortune, or Daira. This time,
Dervieu was not in the lists. But Oppenheim was there, and the
Austrian Credit-Anstalt, the Comptoir d’Escompte, the London
Financial Association, and private banks like Bischoffsheims and
The profligacy of the borrower and the inurement of the lenders had
not done Ismail’s credit any good. But the Viceroy was the last person
to realize this. When Oppenheim offered to take Egyptian railroad
bonds a price of 75, as against 85 for the loan of 1864, Ismail indig-
nantly rejected the offer and ordered Nubar Pasha to shop around for
other contractors. In vain. After knocking atsome of the most im-
posing doors in the Chaussee d’Antin, Nubar was compelled to return
to Oppenheim and Even worse, he had
accept the original conditions.
to ask the banker to be kind enough to advance tvdce as much as re-
quested at first, on those same disagreeable terms.
The agreement was signed 17 October 1865. For £3,000,000 of
bonds at 7 per cent, for eight years - the eventual total to be paid by
the Egyptian government was £4,155,000 - Ismail got £2,237,000, or

75 per cent. In addition, he had to pay i per cent, commission on all

proceeds paid in Alexandria, and anoAer i per cent, on all funds re-
mitted in Alexandria for the payment of coupons.
These were harsh terms, which unduly anticipated the eventual
deterioration of Egyptian credit. Earlier loans were still beii^ quoted
at rates over 90, and Oppenheims was able to place most of the railroad
issue with subcontractors in Paris, London, Frankfurt, and Constanti-
nople at the rate of 85. This ten-point margin was not quite so big as it
seemed; some sacrifices were required. The Oppenheims negotiated with
each firm separately, making concessions when necessary, sometimes
guaranteeing the eventual placement of the bonds to gain the assistance
of their more sceptical colleagues. There were additional minor obliga-
tions: the contractors, for example, had to endorse the paper remitted

The Ttmesy 10-8-1865, p. 6;

^ C.P., Alex., XXXVI, Outrey-Drouyn,
5^-8-1865, ff. 39-40; M^moires et Documents, Egypte, II (1863-1884), ‘Mtooire

a consulter pour MM. H. Oppenheim, Neveu et Cie, 4-5-1866’ [henceforth dted

as Oppenhehn Memmre\, On the Cre^t-Anstalt, see F. G. Steiner, Die Entmhr
lung des MoWhankwesens in Osterreich von den Anfangen his :(ur Krise von 1873
(Vienna, 1913); on the London Financial Association, see above, p. 59 and
by the Egyptian treasury to meet the coupons. Nevertheless, the profit
was magnificent, even by the high standards of high finance.^
At the same time, the Daira loan went its tortuous way. This opera-
tion was not so easily justified as a loan for railway construction, which
would presumably pay for itself out of increased revenues. The
Egyptian government unblushingly resurrected arguments that had
been cold for over a year: the losses of the murrain, the cost of steam
ploughs and engines for cultivation, ginning, and irrigation, a desire to
develop the country.^ The loan was almost a replica of the 1864 aflfair,
even to the vacillation and coquetry of Ismail, who now wanted a loan,
then had enough money, then wanted to borrow, then was not sure,
and so on.®
In the end, of course, he borrowed. He had no choice. As one of his
aides wrote Nubar during the negotiations, ‘the question of a loan is

VERY URGENT [capitals in text] His Highness, while recommending

. . .

you to hurry the issue and to advise him by cable in the following
terms: “The afiar in question is terminated,” waits impatiently its
solution, and asks me continuously for news from you concerning this
subject.^ ^

The potential contractors comprised originally the Comptoir

d’Escompte, Pastr6 and the Anglo-Eg5q)tian, and the Oppenheims, but
the first dropped out as early as October, and the loan was left to the

others on a half-and-half basis.® As finally arranged in December 1865,

an issue of :jC 3,387,300
would be floated, paying 7 per cent, interest
over fifteen years;® for this Ismail received ;^3, 000,000, or 88| per
cent. These were excellent terms. The Viceroy was readj^ Pastre was
^Most of the above is taken from the Oppenhehn Memoire^ which juggles
statistics shamelessly to minimize the margin obtained. As the Mimoire puts it,
was not really big when compared to the amounts realized on the
this profit
Egyptian loan of 1862 and the Tunisian loan of 1864. On the first Egyptian loan,
the Oppenheims had taken at 65 and issued at 82}. The Timisian loan was for
27 million francs, and was issued at Paris in March 1865 by the Comptoir
d’Escompte, Oppenheims was the contractor. The Economist, 25-3-1865, p. 343;
Journal des ckemins defer, XXTV (1865), 179-80.
* The Times, 4-10-1865,
p. 5; E. Dervieu, Emprunts, p. 12.
p. 5; AM,, C.C., Alex., XXXVIII, Outrey-Drouyn,
® The Times, 20-10-1865,

10-1865, ff. 34-5. ^ As translated by Hamza, Public Debt, p. 91.

^ AJE., C.P., Alex., XXXVI, Outrey-Drouyn, 9-8-1865, ff. 39-405
9-X865, ff, 332-3; C.C., Alex., XXXVIII, Outrey-Drouyn, 18-10-1865,
ff. 34-5.
®E. Dervieu, Emprunts, pp. 12-13; Hamza, Public Debt, pp. 256-7.

ready. Schwabacher was ready. All the parties gathered at the palace
to sign the contract. And then, in a scene that hardly seems credible
outside a cinema, just as the contractors stepped up to write their
names a messenger came in with a cable from Oppenheim in London
directing Schwabacher not to sign. Confusion and consternation!
The situation was saved by Pastre, who gallantly agreed to take over
the entire loan for the Anglo-Egyptian Bank.^
Why Oppenheim backed out, especially under circumstances that
could not fail to antagonize and irritate all concerned, is hard to say.
According to the Oppenheim Memoire on the railway loan, the bank
had never agreed to tike half the Daira issue. Rather, they had bid for
the whole in a ‘desperate’ eifort to control the floatation and prevent a
disastrous competition between the two operations. According to this
version, the attempt failed in the face of an ‘impossible’ offer from
In the light of the other sources, however, this attempt to picture
the Daira loan as something unexpected, coming up at the last moment
to vitiate all calculations concerning the railway issue, is sheer nonsense.
Negotiations on behalf of the Daira had begun as far back as July, and
Oppenheim had been in on them from the start.® Nor is there the
doubt about Oppenheim’s successful bid for half the loan at
the same ‘impossible’ price as Pastre, or his last-minute withdrawal.
The insistence on aU-or-nodiing seems to have been nothing more
than a pretext: the important thing was to get out from under.
For unlike Pastr^, Oppenheim was an old hand at international
he had no intention of breaking his own neck to save Ismail’s.
Aside from generally imfavourable market conditions, the Daira loan
particularlywas never received with much enthusiasm and must have
looked worse as the weeks passed. Among other things, Ismail, who
had long been known in Europe for his fabulous wealth and enlightened
ambitions, was now better known for his fabulous debts and inordinate
ambitions. A number of books and pamphlets appeared, some of them
inspired by the sort of personal grievances that abounded in the foreign
colony of Alexandria, and created a sensation in Europe. For the first
time, the Western world was told that if Said was bad, Ismail was not
much better, ihat the good reputation of the Viceroy on his accession
^ Dervieu-Andr^, 12—12— i8<S5; J.C., Histoire^ p. 38; C.P-, Alex.,
XXXVI, Outrey-Drouyn, 9-12-1865, f. 232; 18-12-1865, ff. 241-3.
® Hamza, Public Debt^ p. 90,

was belied by the misdeeds of his reign, that in short - and it did not
take much to put two and two together - a loan to Ismail was a worth-
less investment.^ By the middle of December
- and here we can only
imagine what happened - the Daira loan must have looked as bad as it
ultimately turned out to be; a fiasco. One thing is certain: only the
most imperative considerations could have made Oppenheim betray
so brazenly an umbrageous despot like Ismail.
The reaction was swift. A few days later, Nubar Pasha wired Oppen-
heim that the railroad loan was off, that the Minister of Finance would
not countersign the bonds. The banker howled in protest: from the
first of October on, Ismail had been drawing on the contractors in

accordance with the agreement, indeed had even anticipated in his haste
the instalments fixed in the contract. Moreover, the prospectus was
printed and the floatation prepared; any delay could only hurt the
credit of the Egyptian government, to say nothing of that of Messrs.
Oppenheim. Ismail contended in rebuttal that Oppenheim was making
too much money on the operation, and that he had tricked Nubar into
accepting terms that were far less favourable than at first glance. To
whiA Oppenheim retorted that he was not making too much money,
that the Egyptian government knew full well what it was paying when
it signed the contract, and that, anyway, ‘When every day a new ava-

lanche of Daira, Treasury, and Public Works bonds comes in, in all
shapes and forms, to call up capital, when jewellers propose loans and
every individual who comes to find some summer coolness in Europe
has a loan in his pocket and claims to be authorized, when, finally, the
wellis used up, then you have to tempt the buyers by means of price.’

Oppenheim was forgetting that in his early days he had been only too
happy to import jewellery into Egypt.®
Dervieu heard of the disagreement from Nubar, who wept bitterly

^ Among^ these publications was a small anonymous brochure entitled Les

emprunts igypUms^ apergu de la situanon Jmanciere de VEgypte (Paris, 1865), and
the books of Mme Olympe Audouard, Les mystkres de VEgypte devoilis and
Sacr4 and Outrebon, EEgypte et Ismail Packa^ both cited above. Cf. A.E.^ C.P.,
Alex., XXXVI, Outrey-Drouyn, 19-9-1865, ff. 332-3. There is good reason to
believe that Mme Audouard was writing for Bravay, who had found cajolery in-
effective and was turning his hand to journalistic blackmail. As for Sacr4, he was
an old enemy of the Dervieu-Oppenheim ‘camarilla* and an outspoken opponent
of the new regime. Cf. ibid., XXXIII, Tastu-Drouyn, 9-6-1864, ff. 285-90.
® Oppenheim Mirrmre,
* Cf. A, Net^.y carton 11, Henry Oppenheim-Alfred Andre, 27-4-1863.
that Oppenheim had betrayed him, that he had taken advantage of
Nubar’s unlimited trust to slip by a loan whose real cost was almost
15 per cent., instead of the 9 per cent, agreed upon.^ Nubar said that
Ismail was most understanding, even indignant that Oppenheim would
so betray the man who had made him, who had got him his first loan
and raised him to the position of first banker in Egypt, The difficulty,
Ismail had pointed out,was that ‘others’ would not understand; Nubar
had many enemies, and people would be only too glad to think that he
either had made some kind of deal or was simply incompetent, no better
than the ‘Turks’ to whom he was set up as a model.®
Ismail was being either coy or tactful. He was saying, in effect, that
while he would never reproach Nubar himself, he would be obliged to
sacrifice his faithful friend to public opinion if something were not

done to correct the situation.

This was where Dervieu came in. Nubar did not suggest explicidy
that the banker make a counter-proposal in the event that Oppenheim
proved obdurate, but the implication was obvious. Indeed, it does not
seem unreasonable to suppose that this was the whole purpose of the
weeping and breast-beating: to convey to Dervieu a sense of oppor-
tunity, induce him to enter the competition, and provide Ismail with
an additional arm against Oppenheim. The discovery of the real cost
of the contract was too neatly timed to be the horrifying coincidence
that Nubar made it out to be.
Dervieu was completely taken in. Nothing could have pleased him

more than a definite split between Oppenheim and the Viceroy. Things
had come a long way since the days when Dervieu wrote Andrf of
sharing all business with the Eg3T)tian government between Oppen-
heim and himself. After Dervieu’s exclusion from the loan of 1864, the
ostensible cordiality that continued to prevail masked increasing
hostility and resentment. Dervieu’s letters to Paris were filled with
admonitions to Andr6 to keep things to himself, to say nothing to any-
one of this project or that, lest the profits fall into other pockets. In one
instance, there was the specific injunction: ‘Do not speak to Oppen-
heim of the Sudan affair.’ ® Oppenheim in turn could do better than

^Dervieu worked out the cost to be 13.25 per cent. Dervieu-Andre, 2-i--i86<5.
®Nubar was an Armenian Christian, while most of the ruling class in Egypt
were Turkish Moslems. Ismail himself was of Albanian descent through Moham-
med Ali, but the viceroyal dynasty had since married into the Turkish nobility.
® Dervieu-Andre, 18-2-1865.
merely admonish: he had seen to it - with the connivance of Nubar -
that Dervieu knew nothing about the railway loan until the contract
was signed.^
Dervieu urged Andre to try and organize a syndicate to float a loan
in place of the Oppenheim group. There would, he wrote, be 6 per
cent, net profit, plus i per cent, commission — on a nominal
issue of six millions- Even if Oppenheim got an indemnity of £200,000,
which was improbable, that would still leave £220,000, plus a minimum
profit of 10 per cent, on at least £200,000 in orders for railway equip-
ment. According to Dervieu, there were a lot of people who would
like to earn this kind of money: Alphonse Pinard of the Comptoir
d’Escompte, who was said to be unhappy about his relations with
Oppenheim;® or the Credit Industriel et Commercial, where Dervieu’s
old fnend Albert Rostand was one of the directors.® Even the Credit
Mobilier, Andre’s aggressive, expansive monster, looked good at this
Before Andt6 had a chance to reply, however, Oppenheim and the
Egyptian government came to terms.® Dervieu was hardly daunted.

^ Dervieu-Andr^, 2-1-1 8 <56 .

* The difference ailluded to probably arose in the course of negotiations over
the railway loan. Alphonse Pinard was co-director of the Comptoir d’Escompte
with Hippolyte Biesta.
® After Dervieu’s return to France from a hard and disappointing year at the

head of his father’s mines in North Africa, it was Albert Rostand, then one of the
directors of the Messageries Maritimes, who found him a post in the firm’s
Piraeus office. Later, when Rostand and Denion du Pin visited Greece to look
into the possibilities of a new line in the Aegean, they had Dervieu assigned to
them as secretary. In 1865, Rostand was no longer on the board of the Messa-
geries, but was still one of the directors of the Credit Industriel et Commercial.
On Rostand and the Messageries (which built its fleet around the vessels of the
old Rostand line), see H. Giraud, Les origtnes et revolution de la navigation a
vapeur a MarseiUes^ 1829^1900 (Marseilles, 1929), pp. 45-7. On the Credit
Industriel et Commercial, which was created in 1859 in the image of the English
joint-stock commercial banks, see XE® sir., Supp., XIII (1859), 968-83;
Mehrens, Entstehur^ und Entwicklung, 148-9; Dupont-Ferrier, Marche, 145-50.
* The Credit Mobilier was apparently drawing closer to the Credit Industriel

after a disagreement with the Comptoir d’Escompte over the Austrian loan of
1865. Dervieu-Andre, 2-1-1866.
* By the contract of 5-1-1866, Oppenhdm paid £2,640,000, or
88, instead of
the £2,237,000 ori^ally agreed on. Even with deduction of commission and
fees, Oppenheim still had to lay out 85, or no more than he was getting from his
subcontractors. At the same time, Oppenheim gave up his right to reimburse

He was forced to tell Andre to forget the whole thing, but left a small
ray of hope that a new opportunity would present itself in the future-
Afterall, £3,000,000 would never hold Ismail for long, even though

(Dervieu could not make things look too bad) government revenues
were up thanks to higher taxes and better methods of collection. ^
Dervieu might have kept his ray of hope for himself; for Andre, the
whole was a fahk de La Fontaine designed to prove that ^entre

Varbre etVicorce^ il m
faut pas mettre le <Ioigt\ On 18 January he wrote
Alexandria that in his opinion, Dervieu’s proposal had never had a
chance of success: ‘The two parties at variance had a major interest in
coming to an understanding, so that after a few skirmishes, peace
would have been made behind your back . . . ’ ®

It took more, however, than the cold ink of Andre’s pen to chill

Dervieu’s enthusiasm.The letter of 18 January had barely arrived in

Alexandria, when a new opportunity presented itself. On 30 January,
the Viceroy and the Suez Canal Company signed an agreement that
finallyput an end to the twenty months of acrimonious argument that
had followed the imperial sentence of 1864. The company agreed to
give up at once that part of the fr^-water canal, from Wadi to Suez,
Aat had been built by Lesseps and returned to Egypt by Napoleon; in
return, Ismail would pay the price of ten million francs stipulated by
the arbitration immediately. At the same time, the government repur-
chased for ten million francs the Wadi estate, a large tract of land that
Lesseps had bought from Said in 1861 for two millions and much im-
proved since, though hardly to the extent of eight million francs. Most
important of all, Ismail agreed to speed up payment of die fifty-seven
million francs still owing the company by virtue of the imperiad award

himself out of the proceeds of the loan for monies owed his bank by the Daiza
and the Treasury. He also abandoned hiscommission on remittances at Alex-
andria to meet coupons in London and Paris. In return Ismail promised Oppen-
heim £1,320,000 in orders for railway equipment (half the net amount of the
loan) at 5 per cent, commission. Oppenheim was probably all the happier to come
to this arrangement as he had good reason to fear the revelations that might result
from litigation; he had certainly not told his fellow promoters that he was pocket-
ing a difference of eight to ten points. A. Neuf.^ carton 11, contract of 5-1-1866.
^ Dervieu-Andr6, 8-1-1866. * Andr6-Dervieu, i8-i-z866.
from fourteen years to three; and if the Canal were to call up during
1866 - as it was almost certain to do - the 100 francs remaining per
share, the Viceroy was to pay the eighteen millions that would then
become due on his stock by the end of 1867, In return for all this, the
Egyptian government was given the right to occupy those points on
the land alongside the maritime canal which it required for strategic or
administrative purposes.^
It is easy to understand why Lesseps welcomed this agreement. The
Suez Company was down to its last few million francs; the payments
staggered over the years to come were of little help to pay contractors
and labour in 1866; Lesseps was faced with the alternatives of raising
cash or suspending. By providing, therefore, twenty million francs at
once and another seventy-five millions over the next three years, the
convention of January 1866 gave the company a new lease on life that
was expected to pull it through until completion of the waterway. By
comparison with this reprieve, the fifteen to eighteen millions gained

by a faster schedule of pa3nnents were, however welcome, only the

gravy on the roast.®

V^y Ismail signed the agreement is another matter. The concession

to the Egyptian government of administrative and military privileges
it had never abandoned may have been an agreeable boost to his amour-
propre^ a recognition of sovereignty all the more welcome because of
Turkey’s ambitions in the isthmus. The repurchase of Wadi had similar
implications. It is also possible that the Viceroy was simply tired of
arguing; in the words of Douin: ‘
... the discussion had worn off the
sharp edges, eaten away the entrenched positions, and by its very
length, given rise in the opponents to a lively desire for conciliation.
This was the moment that the Viceroy, with great cleverness, had
seizedupon to conclude the final agreement directly with M. de Lesseps.
He thus resumed an initiative that should never have escaped him, and
appeared and acted once again as a sovereign.' ® The historian may be
permitted, however, to add to these considerations of prestige and
fatigue a more material explanation of what would otherwise remain
a magnificent act of abnegation. The fact was that Ismail desperately
needed French help for the success of the Daira loan, and an arrange-
ment with Lesseps was probably the condition of imperial permission
^ Douin, Histoire^ I, 188; Sabry, Empire^ p. 294 f.
* This is the estimate transmitted by the French consul; C.P., Alex.,
XXXVin, Outrey-Drouyn, 1-2-1866, f. 70. ^Histoire, 1, 189.

to float thebonds on the Paris Bourse.^ Ismail may have loved prestige,
but he did not get tired that easily, and he was no altruist.

Dervieu was delighted at the prospect of further outlays by the

Eg5^tian government. In a letter of 3 February i866,he described with
evident satisfaction the ‘treaty of peace of 30 January’:^ ‘The Suez
Company, pushed to its last financial ditch, came to understand that
the Viceroy alone could save it.* Since the Viceroy would be hard
pressed to find the wherewithal to ‘save* Suez, Dervieu felt there was a
real possibility of a new loan - even though Ismail was sure he could
do without one by reselling the land regained from the company and
by issuing treasury bonds. Dervieu pleased with Andr6 to help:
‘Make it thus possible for me for once to prove to the Viceroy that we
can get along without the Oppenhdms.*
Dervieu may have seen the agreement as a surrender of the Suez
Company, ‘pushed to its last financial ditch.* Andre was not that naive.
He could still count. His reply of 17 February is the very expression of
^It seems reasonable to assume that the French government would never
authorize floatation in France so long as Ismail peristed in resisting the imperial
arbitration. Whether Ismail simply anticipated this objection, however, or came
to his understanding with Suez at the suggestion of French oflicials is impossible
to say. The records of the Service du Mouvement des Fonds of the Ministry of
Finance, which might contain evidence of such a bargain, do not go back for
Egypt beyond 1890. Nor has the Ministry of Foreign Affairs been able to locate
the correspondence that it must have conducted with the Ministry of Finance
concerning admission of the Daira loan to the Bourse; their oldest dossier on
Egyptian finance concerns the Daira loan of 1869-70. Nevertheless, what we
know about the struggle of the promoters and the Egyptian government to
obtain permission to float the loan in Paris lends colour to the belief that the
timing of the Suez convention was not a coincidence. In December the French
consul in Alexandria had written the Foreign Ministry on behalf of the con-
tractors, and as late as 18 January, Andre remarked in a letter to Dervieu: *What
I do know for sure is that they are not authorizing its quotation here, despite all
the influences already exerted to obtain it.’ In a letter to the French Foreign
Minister written shordy after admission to the Bourse had been obtained, Ismail
explicidy cited his concessions of January in a request for French support in
the event of still another loan. Cf. A,E.j C.P., XXXVII, Outrey-Drouyn,

27-12-1865, ff. 255-6; XXXVIII, Ismail Pacha-Drouyn, 25-3-1866, flf. 136-7.

* Following the line of the French consul Outrey, Dervieu, in a note of

February 1866 prepared for Andr6’s information, wrote of the agreement as

follows: Tn sum, [the Egyptian government] becomes once again the legitimate
owner of a province, possession of which gave to die Company a political
character that the Viceroy, with remarkable perseverance, has endeavoured to
strip it of since the first days of his reign.’
cynical laughter. It is also as good an analysis of the machinations of
Lesseps and Company as is to be found.

My dear friend Paris^ ly February 1B66

Although disposing of only a few moments, I do not want to let this mail
go without thanking you for your interesting letter of the third of this month.
If Egypt were not governed by the shrewdest of sovereigns, one might
think it in the hands of the most simple-minded, for really, when, in future
centuries, people add up everything that the famous canal and its instiga-
tors will have been able to squeeze out of their position in the land of the
Pharaohs, w'hen they throw in for the record the vexations, the recrimina-
tions, the lawsuits, the struggles for influence, etc. with which it is fitting to
pepper the sauce so as to bring out the merits of this ragout, they will pretty
well have to admit that never has been seen, or will be seen, anything
Now the farce is played, and if there were some moral to be drawn from
it, I should like at least those who profit from the cooking to help him who
treats obtain the necessary ingredients. It is the directors and the stockholders
of the canal who should take on themselves to assume at a fixed price the

new loan that their unreasonable demands are going to make necessary once
more. Outside of them, it is hard to see who will be concerned about it. At
this moment, past and future savings are going to be divided among the
strongboxes of Italy, Austria, and Mexico. Spain is at the door waiting for its

bagatelle and tapping discreetly at our pockets in the form of small disguised
As for the Orient, people find it very quick to return to die attack, and it

would have been highly desirable that the public, whose eyes have been for
some months bigger than dieir stomachs, had had the time to digest a litde
sooner the various indigestable dishes which have been served them and on
which they have thrown themselves too quickly without reckoning their
faculties of absorption.

In short, Andre did not think there was much room for another
Egyptian loan. He was joined in this opinion by Ismail, who was in
one of his self-sufficient moods. For the moment, the Viceroy felt that
he could get along without borrowing; he changed his mind a month
^ In retaliation for Spain’s repudiation of her foreign debt, there was an un-
written agreement among bankers and brokers not to extend further financial
assistance inany form. This did not prevent certain bankers, however, from
making the most of the opportunity and lending Madrid money in profitably
devious terms. Cf., for simil^ transactions in i8<S4, The Ttmes^ 4-5-1864, p. 12;
5-5-1864, p. 9; 6-5-1864, p. 10; 24-5-1864, p. 12; 3-6-1864, p. 12; 4-^1864,
p. 12;and passim; Mon. Mar. Vm
(1864), 704-5; IX (1864), 591.

later. In the meantime, however, Dervieu wrote on i8 Februarj' to call

the whole thing off. Once again, he tried to close on a hopeful note: he
had, he said, Ismail’s promise that the first loan to take place would be
entrusted to his new company.^
Yet a third loan was out of the question: the railroad loan was
languishing; the Daira loan was a failure.® With expenses greater than
ever, Ismail was resolved to take strong measures: the Egyptain people
would have to help by pajdng more taxes. No matter that lower incomes
were hardly calculated to make the fellahin receptive to new burdens;
'competent people’ assured the Viceroy that the projected levy Vas in
no way exaggerated and that the high price of cotton allowed him to
impose this charge on the country’.®
It must be said in extenuation of such inaccurate counsel that Ismail’s

advisers did not yet realize how heavy" a charge he was going to impose.
As the embarrassment of both ruler and treasurj" increased, the taxes
projected rose in proportion. In Februaiy" the Viceroy proposed to
levy an additional six piastres per fecUan^ In April, \vitli the Daira

^ On this new company, see above, p.247, and below, ch. xii.
* The bonds sold poorly from the start, and the contractors still had
large blocks on their hands two months later in March, when the issue of the
Daira loan sent all Egyptian securities down. The railroad-loan syndicate asked
Ismail for help in sustaining the market; Ismail was in no position to help any-
one; whereupon the contractors hired lawyers, entered huge claims for damages,
and, instead of suing, threatened to deduct the amount claimed from the already
collected proceeds of the loan. In fact, they never went so far, but used this as a
threat to secure indemnification on the occasion of a later loan. Hamza, Puilic
Deht^ 96-9;
pp. C.C., Alex,, XXXVm, Outrey-Drouyn, 9
-6-i 8 56 , <

f. 230; ibid., C.P., Alex., XXXIX,

Outrey-Moustier, 26-2-1867, f. 97.
The Daira loan was a complete washout out of 75 million francs, 7 million
was sold. The operation would have destroyed the Anglo-Egyptian Bank if
Ts mail had not been ‘persuaded* to come to its rescue. E. Dervieu, Emprunts,
XXXVm, letter of 19-7-1866; A.E,^
p. 14; A,E.y C.C., Alex., C.P., Alex.,
XXXVm, letter of 9-7-1866.
^A.E.^ C.P., Alex., XXXVm, Outrey-Drouyn, 19-4-1866, f. 154. Prices

were in effect much higher than the low of April 1865 (see Appendix), though not
strong. It is questiona