 |
Al-Ahram Weekly 29 July - 4 August 1999 Issue No. 440 
|
||
Published in Cairo by AL-AHRAM established in 1875 |
| ||
|
Al-Ahram Weekly 29 July - 4 August 1999 Issue No. 440
|
||
| Published in Cairo by AL-AHRAM established in 1875 |
| ||
Egypt Region International Economy Opinion Culture Profile Travel Living Sports Time Out Chronicles People Cartoons Letters Al-Ahram:
A Diwan of contemporary life (296)
Cotton has always been modern Egypt's best cash crop and any crisis affecting it would send ripples, if not shudders, through most fields of activity -- economic, financial and political, let alone agricultural. One such crisis hit Egypt in 1920, driving cotton prices down to an all-time low after a boom that accompanied a bumper crop the previous year. The crisis sparked off a nationwide debate in which Al-Ahram played a leading role. The government, the target of much criticism, responded by reducing the area cultivated with cotton and had to buy up the surplus cotton farmers could not sell. Dr Yunan Labib Rizk * reviews the crisis from reports and articles published by Al-Ahram
The white gold calamity
Broad sections of Egyptians eagerly await the coming of autumn, the season for harvesting cotton, the country's primary crop. It is then that they reap the fruits of the efforts they exerted before the cotton blossoms bloomed and collect the returns on the cash they had invested in this crop. Unfortunately, the autumn of 1920 proved very disappointing and a financial disaster for some.
Lord Curzon
Hussein Hilal Bek
Lord Allenby
Beyond those directly involved in the productive process -- hired hands, farmers, medium to large landowners, provincial merchants and exporters -- many others were dependent on the cotton industry.
For example, the autumn in the countryside was also traditionally the time for marriage ceremonies and other rural celebrations. These occasions naturally generated a demand on the urban marketplace -- from furniture merchants to fabric and clothes stores and manufacturers as well as goldsmiths.
In the autumn of 1920 the bottom fell out of the cotton market. The "cotton catastrophe", as Al-Ahram called it, followed immediately on the heels of the end of World War I. The period of war (1914-18) and the following year, brought an unprecedented demand on Egypt's "white gold" and prices soared beyond all imagination. The boon induced a range of speculative behaviour that would augment the scale of the calamity.
In the race for greater profits, many had invested in the purchase of tracts of land, the prices of which had also risen sharply. For the most part these investors had not yet completed their payments on the land when disaster struck. Hussein Hilal Bek, a lawyer and member of the Legislative Assembly, admonished such speculators in a letter published by Al-Ahram on 29 September 1920. He wrote, "Some of you started to speculate on the stock market in spite of the fact that you had no idea how it operates. Others began to spend exorbitantly, purchasing automobiles and other luxuries and wallowing in every amenity and comfort, heedless of the consequence, even as the moneylenders kept their eyes on you."
Understandably, reactions were proportional to the scale of the disaster, as the shock rippled through the cotton industry, economic and financial circles and the government. The British protectorate authorities ostensibly wrung their hands, although British archives would ultimately demonstrate that they were not entirely uninvolved.
Certainly, the British policies in Sudan had already given Egyptians cause to look askance at the British. London had embarked on an ambitious irrigation scheme, with the intent of putting large tracts of land in the Jezira area of Sudan under cotton cultivation. The policy provoked an outcry in the Egyptian press in early 1919. But even a year later, Egyptians still felt they had cause to remain sceptical. In April 1920, Lord Dewar was touring north and central Africa in order to inspect the state of the cotton industry. In his statements to the press, reported in Al-Ahram, he said that Egypt had never before witnessed such prosperity. "They are selling cotton at six times the price it was before the war. The revenues of this commerce have gone to their heads and now they are uprooting wheat in order to plant cotton in its place. Given the low cost of living of the peasants, they must be making enormous profits. It is difficult to calculate the millions that are buried under the shacks and mud huts. Egyptians also take delight in low taxes."
Having vented some unwarranted envy on the Egyptian fellah, Dewar turns to the Sudan, which had newly joined the ranks of the cotton-producing nations. "It will not be long before we shall see what the British Empire will be able to produce. It is perhaps advisable to augment the direct intervention of the British government so as not to delay the development of that great vast country."
Shortly after Dewar delivered these statements Egyptians were predicting another large harvest. But, contrary to expectations, prices plummeted to a quarter of their levels the previous year.
At first, Egyptians thought the drop in prices was only temporary. Legislative Assembly member Hussein Hilal penned off several letters to Al-Ahram which appeared under the title "Farmers, do not sell your cotton!" There were perfectly logical explanations for the sudden drop in prices, he explained, as he exhorted farmers to patience until the emergency passed. The reasons were six: workers' strikes in every country, especially Great Britain; the refusal of local banks to lend merchants the necessary funds to purchase cotton; the spread of rumours estimating the cotton yield at over seven million kantars (approximately 350,000 metric tonnes); the drop in the prices of American cotton; rumours of cotton stockpiling accompanied by demands for lowering the prices; and, finally, the fact that merchants were encouraging the spread of such rumours in order to persuade farmers to sell their crop cheaply.
Taking these causes in turn, Hilal argued: firstly, that the workers' strikes could not last for long, particularly in a country such as Great Britain whose backbone was industry. Secondly, he suspected that the banks, in their refusal to grant loans, were acting in collusion with foreign merchants "eager to get their hands on the cotton at prices disproportionate to its quantity and production costs." He continues, "There is a certain maliciousness that we must fight. We must not surrender to those merchants who, as we have learned, have no regard for our future as they gobble up our cotton at prices convenient to them." Hilal apportioned some of the blame to the Ministry of Agriculture for having fed the rumours regarding an enormous yield. Its estimates were "filled with conjecture", having based them on calculations made in August, "the month in which one can be the least certain of the final yield, since most cotton pests occur in September."
Hilal attributed the drop in the price of American cotton to a curious cause: "The American automobile industry has grown so rapidly that it has come to dominate world markets. The many strikes that have afflicted their factories and railroads have induced the clothing manufacturers to content themselves with the cotton they already have in stock."
The Legislative Assembly member also refuted predictions that the prices of cotton textiles would also plummet, predictions fed by the growing piles of cotton commodities lying idle in the customs depots. There was no relationship between the two phenomena, he argued. The reason cotton products were being held up at customs, he explained, was that "some small merchants were careless and purchased more than they could afford. Thus, when they wanted to secure the cash in order to clear the goods out of customs, the banks refused to accommodate them."
Rumour-mongering was one of the major causes of the temporary drop of cotton prices, in Hilal's view. The blame for this he laid squarely at the feet of merchants "who always succeed when resorting to this ploy in our poor country which has never had the courage to counter with a ruse of its own, that is, by refusing to sell until the buyer caves in and purchases the commodities he wants in accordance with the fundamental law of economics: supply and demand."
Hilal concludes his letters with an appeal to all segments of cotton producers to hold on to their produce until they can obtain a fair price. He also exhorted the rich to support the newly-created Misr Bank, the indigenously-owned bank that would not collude with foreign merchants in undermining Egyptian interests.
These two demands were the subject of numerous commentaries that appeared on the pages of Al-Ahram over the autumn of 1920. The first was taken up by Hussein Hilal, himself, in a subsequent article. Describing how the American cotton producers confronted the drop in cotton prices, he wrote that a team of cotton farmers "tours the length and breadth of the country in order to lobby against the sale of cotton until the price reaches the level the producers set." He added that he and a team of experts calculated the total cost of producing a kantar of cotton from its initial cultivation to the time it arrives in the warehouse. They came up with a figure of LE10, inclusive of the rent of land. He asks Egyptian cotton producers, "Given this estimate, how could you possibly accept handing over the fruit of your labours at the current rates?" He maintained that all producers, from the smallest farmers upwards, had the wherewithal to bide their time. If small farmers needed ready cash to pay government taxes, for example, "they can sell four pounds of ghee which has now risen from LE4 to LE20 per kantar. Or they can sell three chickens at the current cost of 30 piastres each." Larger cotton producers could gin their cotton, enabling them to raise money on the profit that would gain, he said.
The smaller cotton producers in Egypt were quick to promote the idea of supporting the Misr Bank. Perhaps the letter sent to Al-Ahram by Shaaban Mohamed Gouda from Al-Mahalla Al-Kubra best expresses the sentiments of this class. He suggested that "our masters who have millions stashed away in banks abroad would do well to speedily withdraw their money from those accounts and deposit it with the Misr Bank, either as savings or in exchange for shares. I am certain that such an undertaking will prove clearly that we are an emerging nation that merits respect. Simultaneously, their action will strengthen the power and sway of the Misr Bank, which is under the directorship of one of the world's most capable financial experts as foreigners themselves have testified, thereby enabling it to fulfil its noble promise to the country."
Some writers disagreed with Hilal's analysis of the drop in cotton prices, arguing instead that its causes were global, rather than domestic, in origin. Youssef Nahhas was one to have argued that the crisis Egypt faced was the product of what he referred to as "La vague de baisse" (the downward wave), a form of government-sponsored drive against inflation that was causing a stir around the world. With governments clamouring for lower prices, "people have begun to hail this blessed wave that they hope will sweep away high prices". Nahhas went on to explain that out of their conviction in the coming of this wave, people have stopped buying, which in turn has forced merchants to stop placing demands with factories with which they had contracted. "The factories in turn, were forced to reduce working hours and cut down on the purchase of primary materials," he said.
Amin Pasha Yahya, a major cotton exporter, also took up this view. Under the caption "The Cotton Crisis" he wrote, "Yes, it is a global crisis whose bane has reached all cotton-producing countries and has preoccupied all economic, financial and commercial sectors. However, Egypt has suffered the greatest share of the disaster." The reason was that as temporary exigencies forced the prices of cotton down to unprecedented levels, experts in the market, such as himself, who were in a position to give sound advice were not heard.
Confidential British documents reveal that the British High Commissioner in Cairo and the British government in London had a hand in developments, although such information never made its way into the Egyptian press at the time. On 26 October 1920, the representative of the High Commissioner telegraphed Foreign Secretary Lord Curzon to inform him of the deteriorating conditions in the Egyptian countryside due to the drop in the prices of cotton and the rise in the cost of land rents. He related that the tenant farmers on the estate of the mother of the khedive had stopped paying their rent, refused to vacate their land and forcefully prevented estate officials from bringing in hired farm labour from outside. Lastly, he warned that the collapse in cotton prices and the refusal of landowners to reduce their rents threatened to provoke massive unrest in the countryside.
Twenty days later, Curzon dispatched a reply to High Commissioner Lord Allenby, instructing him to make a tour of the provincial directorates where he should announce that he intended to advise the Egyptian government to set rents for land under cotton cultivation, as the government had already done with house rents. Allenby did not implement the instructions. Instead, he wired back to counsel that the measure was ill-advised because it would generate discord. Were he to go ahead and make such an announcement, he argued, it would be interpreted as encouragement to the farmers to continue to refuse to pay their rents, which would fuel unrest rather than quell it. He also feared that the action would weaken the position of the sultan and the Egyptian ministry. The British would be accused of meddling between the government and the people and this would give the leaders of the nationalist movement the opportunity to cast aspersions on the intentions of the British government which, through the Milner Commission, had promised to grant Egypt "self rule".
Lord Curzon found Allenby's arguments convincing and wrote back instructing the High Commissioner to do what he could to curb the deterioration of conditions in the countryside. Towards this end he should take measures to protect the tenant farmers to prevent an outbreak of unrest and to consult with the sultan and the government on the best means to accomplish this.
Following Allenby's consultations with the Egyptian government, the government issued a communiqué on the "state of cotton". Published in Al-Ahram on 29 November, the statement took the position that conditions in Egypt were the product of an international trend. The high prices of cotton the previous year, it said, had resulted from a "wave of financial extravagance that had infected all quarters of the civilised world following the end of the war, generating an escalation of prices on all commodities. As Egyptian cotton is a luxury item, it benefited from this wave out of all proportion to other commodities. While the price of general products rose following the armistice by an average of 50 per cent, the price of Egyptian cotton soared by 300 per cent. Now the backlash had set in and all countries were clamping restrictions on private and public expenditures and on speculative activities. This is what has precipitated the drop in the prices of all commodities, some of which have fallen below their levels two years ago. American cotton in particular was so affected. Those who are concerned with the state of Egyptian cotton should understand clearly that the cause of the fall in its price stems from universal economic conditions and not from the influence of the producer countries."
The communiqué went on to state that the government was taking all possible measures to alleviate the distress. However, it exhorted all individuals, especially landlords, to assist in overcoming the difficulties. It advised landlords not to "press for exorbitant rents which farmers cannot afford to pay so as to help them to endure the current strain resulting from the drop in cotton prices." By such forbearance, landlords "will not only serve the general good, but they will have performed a useful action that will work in their favour in the long run."
If the fingerprints of British policy seemed apparent on the government communiqué, the composition of the committee that was formed to study the effects of the drop in cotton prices would make them more obvious. Chairing the committee was Ahmed Ali Pasha, the deputy minister of interior, revealing the extent of the authorities' anxieties over domestic security. It also included Mohamed Zaghlul, deputy minister of awqaf (religious endowment foundations) and three senior British officials in the Egyptian government, suggesting that the British had resolved to keep a tight rein on the matter.
Al-Ahram was not satisfied. In the same issue in which it published the government communiqué it featured an editorial which began: "We had asked for relief and instead we got advice, as though advice were the dearest commodity on the market." The newspaper took issue with the government's estimate that the price of cotton had risen by 300 per cent. Before the war ended, the government had imposed a compulsory rate on the price of cotton whereas it should have based its calculation on the price of cotton in the open market. After a lengthy comparison of wartime and post-war prices, Al-Ahram contended that the government "did not probe the finer details which are undeniably complex and intricate".
It is interesting to note that most of the participants in the debate over the crisis felt that limitations should be set on the amount of land allotted to cultivating cotton. From Minya, a cotton grower called Abdel-Malak Narouz used Al-Ahram as his forum to appeal to the government "to restrict the land allocated to cotton to a quarter of the total cultivable land. This will bring the price of cotton up and force European factories to purchase our cotton at higher rates, if not now, then later."
Mohamed Muntasser, a cotton grower and merchant, was more extreme. He appealed to all cotton growers to "voice your intention through the national press to refrain from cultivating cotton next year and to ask the government to issue a decree prohibiting the cultivation of cotton."
One concrete product of the crisis was the formation of the Agricultural Syndicate whose first resolution was to reduce the ratio of land under cotton cultivation from a half to a third of the nation's cultivated area. Their recommendation was approved at the meeting of the Directorate Councils, which was held on 6 December. The following day, the Council of Ministers met to adopt the necessary measures to put the recommendation into effect. British authorities welcomed the move. The last we heard from British documents on the matter was that, within a few months, the Egyptian government, under the pressure of public opinion, resolved to buy up the cotton that farmers had not been able to sell. If this measure brought a satisfactory end to the cotton crisis of 1920, it would not be the last crisis to beset Egypt's "white gold".
* The author is a professor of history
and head of Al-Ahram History Studies Centre.
