Bankers and Pashas

BANKERS AND PASHAS
By courtesy of Mme M. Dervieu
Edouard Dervieu 1824-1905

(at the age of 56)
DAVID S. LANDES
Associate Professor of Economics^ Columbia University
BANKERS
AND PASHAS
INTERNATIONAL FINANCE
AND ECONOMIC IMPERIALISM
IN EGYPT
HEINEMANN
LONDON MELBOURNE TORONTO
KINGSWOOD BOOKS ON SOCIAL HISTORY
General Editors: H. L. Beales and O. R. McGregor
*
First published in 1958
® by David S. Landes 1958
Publishedby
"William Heinemann Ltd
99 Great Russell Street, London, W.C.i
Printed in Great Britain by Butler and Tanner Ltd
Frome and London
TO
SONIA
CONTENTS
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
vii
OF LIST
SPECIAL ABBREVIATIONS
USED IN FOOTNOTE REFERENCES
“ 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,
Paris
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
correspondence)
Z.O.- Records of the Foreign OfHce, Public Record Office, London
L.B Letter Book (correspondence of De Neuflize, Schlumberger et
Cie)
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.
viii
LIST OF ILLUSTRATIONS
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
ix
PREFACE
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
paper.
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
hospitality.
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.
xii PREFACE
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

interest.
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,
PREFACE xiii
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
letters.
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

at,
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.
XIV PREFACE
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
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
PREFACE XV
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 Haivârd 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.
partial
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
xvi PREFACE
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
VTitten.
D. S. L.
CHAPTER I
THE GENTLE CALLING OF

HIGH FINANCE
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
B I
2 BANKERS AND PASHAS
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, êt 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*.
THE GENTLE CALLING OF HIGH FINANCE 3
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*
colleagues.
As name indicates, merchant bankers were originally merchants,
the
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
concerned.
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.
4
BANKERS AND PASHAS
converted into tax farmers and bankers,^ the fathers of

modern
international finance.
the middle of the nineteenth century, merchant
banking in
By
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,
changed
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

financiê 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 -wâs 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
different
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
facturers,
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
periodical.]
* W. T. C. Kmg, History of the London Discount Market (London, 193d), pp.
185-205.
®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
trade.
TPIE GENTLE CALLING OF NIGH FINANCE
^
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 wêre 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
1
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
trade.
banking not possible in the absence of negotiable titles to wealth
is
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
disappointing.
II
THE GENTLE CALLING OF HIGH FINANCE
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
Second
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
to
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.
Ôn 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
B
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
Kiiln,
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
Unternêrhiographie, H [1957], 104-31); idem, ‘Some French Contributions to
the Industnal Development of Germznf, Journal of Economic History
XVI
(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.^
Most
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 ûm 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 Jêrmogen^ 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-ês-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

the
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
(1956),
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
associate,
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.
i6 BANKERS AND PASHAS
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 Chaussê 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
encyclopedias.
* 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
C
l8 BANKERS AND PASHAS
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
list
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.
Ôn 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.
THE GENTLE CALLING OF HIGH FINANCE I9
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 wâs 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 mê 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-
1
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
purposes.
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,

list
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 Schwevêr 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
written.
® 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
cash.^
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 weêm 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
business.
* 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
degrees.
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
manufactures.^
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
necessity,
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
Money
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
agree
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,
for
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-
the
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,
passim.
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 Beîehungen
(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.,
52-3.
® 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
metallurgy.®
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),
281-321.
® 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^î885 (Paris,
THE GENTLE CALLING OF HIGH FINANCE 3I
when
After 1855, the skeleton of the French network had been laid
down and French was seeking investments abroad, James was
capital
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

market.®
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, Entwicklungstendertiêny 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
Ôn 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
relatively
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.
D
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

that,
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
criticism.
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
honesty*.
® 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
far
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

lorsqtton
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
a
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
quietly,
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* Mcâiine, 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, Neufvîlle, 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.
CHAPTER 2
BULL MARKET
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.
41
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,
BULL MARKET 43
Aside from dieir desire to avoid the risk of surfeiting the public,
issue.^
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
established.
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
Ouvrard
(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.
J,
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,
1950).
BULL MARKET 45
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
Âs even the Rothschilds discovered in the competition for the Orlâns-
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
companies.
® 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

allotting
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 Seilliê 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
Jieeds.*
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.
BULL MARKET 47
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.
BULL MARKET 49
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
Finally,
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
finance.
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*.
E
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^ Magaîne^ 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
et
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),
785-7*
BULL MARKET 51
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-
line.^
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
Channel.
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 lâck 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
7,^
(1955), 200-12, which brings out the contribution of the
surplus capital accumulated by British industiy to the construction
of the early
lines.
^ 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
vols.5
the development of
Germany and the United States as compared with England.
® A reference to Pereire’s intention to issue post notes.
Êconomist, 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.
BULL MARKET 55
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,
its
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
19;
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.
BULL MARKET 57
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
security
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 êir 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
philanthropy.
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.
BULL MARKET
59
panics asked very of the investor to begin with - as little as lo per
little
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
<5 o BANKERS AND PASHAS
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; Bêrs* Mcâ;(in€^ XXIII (1863), 476 f., 518 f.

^ These figures and those which follow are from Shannon, ‘First Five
Thousand*, Econ, Htst,^ II (1932), 422.
Êconomist, 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
BULL MARKET 6i
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
Constantinople.^
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,
the
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.
BULL MARKET 63
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
success.^
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
over.^
^ 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^îne 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 hunderâhrigen
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 ûr Erinnerung an die
GrUndung der Mitteldeutschen Creddthank can Fehruar i856 (Frankfurt:
BULL MARKET <55
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!

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,
iSgiîQoy (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.
F
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. Homê, 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.
BULL MARKET 67
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
field
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
years,
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
lowest.
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.
Ânother £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.
A
typical private house with business in both Constantinople and Alexandria
was, of course, Oppenheims, one of the principals of the story, that follows.
CHAPTER 3
KLONDIKE ON THE NILE
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.
69
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.
KLONDIKE ON THE NILE 71
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
name.^
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
and
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
sowing.^
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
all
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
is
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
profit.®
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
J.
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; îgbt 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
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
future.
"When the cotton famine came, Egyptian agriculture was ready for
it.
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.
8o BANKERS AND PASHAS
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
Mediterranean.
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,
sections
joined by an organized system of overland Within the next
transport.
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
Â. 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.
KLONDIKE ON THE NILE 8l
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
A
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

nadon
igyptienne), particularly in works treating the Anglo-French rivalry for
Egyptian
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
Cairo.
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
judgements.
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 haulcê 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
%4 BANKERS AND PASHAS
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
needed.^
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
revolution.
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

authoritieSj
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
residents.®
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-
activities
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. Brêr, 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
of
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.
Library
Picture
Hulton
1869
o/'
courtesy
domestics
By
Alexandria,
housed
roofs
Consuls,
the
on
des shacks
Place
wooden
The
The
IV.
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
so.®
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
residents.
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
One
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,
State,
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
28-
to knavery. Even when justly defending itself against fraud and ex-
tortion, it too often resorted to tortuous and even dishonest devices
29-
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,
7-1858.
® 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,

51,
20-2-1860; also A.E.y C.P., Alex., XXX, Beau'val-Thouvenel, 26-4-1862, ff,
153-4.
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 wêre 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
ofteti,
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-
particular
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
Egypt.®
^ 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
a
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
weakness
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
Doc.,
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
H
position and prestige depended not on achievement or merit, but on
relations and background, not on what you did but on who you
were.
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.
0
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

imagination.
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 Nâb, was dming two reigns the favourite jester, confidence man,
and parasite of the Egyptian court. Over a decade, from about 1858 to
'fixer’,
1868, he midcted the Egyptian government of several fortunes, which were spent
lOO BANKERS AND PASHAS
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
expensive.
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.
KLONDIKE ON THE NILE lOI
the burden that the concession of Suez would one day impose on
Egypt.
When the cotton famine came, it was open season on the Nile, and
one of the hunters was Edouard Dervieu.
CHAPTER 4
THE RISE OF EDOUARD DERVIEU
Alexandria^ 25 December 2858

My dear Andr^
Our dxâm is still go and retire in our native land, as soon as a small
to
fortune will permit Very fortunately, I have no complaint about having
it.
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
lOZ
THE RISE OF EDOUARD DERVIEU IO3
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
It
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, alwâys dependable thanks to the annual pilgrimages to
Mecca. And w^hile the small, fumbling Medjidieh was not the Message-
ries, at least Dervieu wâs 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
affairs,
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

Commerce
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.
THE RISE OF EDOUARD DERVIEU 105
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.
J
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
score.
® 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.
I06 BANKERS AND PASHAS
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; iÔ., 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
to
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.,
0
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, Iîe 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
1854,
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:
27-8-1861.
® 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.
as
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.
no BANKERS AND PASHAS
By the end of the year, the floating debt was at a record £ii
million.
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
capitalists
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
bonanza.^
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
felt
^ 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-
THE RISE OF EDOUARD DERVIEU III
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 ôve 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-
know
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,
242.
THE RISE OF EDOUARD DERVIEU II3
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.
1
II4 BANKERS AND PASHAS
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 Enând. 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:
10-9-1860.
* 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.
THE RISE OF EDOUARD DERVIEU HJ
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 suêstion
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.
Il6 BANKERS AND PASHAS
fortune and abet its But then to sue for breach of contract
dilapidation.
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
things.
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.
792-3.
*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
it
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
affair;
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 Neuflvê 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
still
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 disappâl:
‘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
totals.^
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
bank.®
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:
1-7-1863.
® 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
i
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.
CHAPTER 5
ISMAIL
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
128
ISMAIL 129
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.
K
130 BANKERS ANB PASHAS
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.
that
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-<î8(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.
ISMAIL I3I
euphoria of the moment when it became apparent that

faded quickly
Said would not and could not put house in order.
his
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-
thegirl.2
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.
ISMAIL 133
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.
ISMAIL 13s
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, wôuld 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*, "^ât 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
then,
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.
ISMAIL 137
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
that
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
withal.
^ 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
stakes
competition, there were only two conceivable candidates, neither of
which was really a threat: the Bank of Egypt and the Sod^te Finand^re
d’Egypte.
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
the
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
Ît 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.
ISMAIL 139
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

Cf.
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
(1865),
1316,
* 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),
808.
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
concern.
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.
Magcvêy 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*.
Â,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.
ISMAIL I4I
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
firm.®
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
all,
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
watching’.®
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 Mediterranê,® 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.
ISMAIL 143
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
later,
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

ISMAIL 145
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
next.
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-
it
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
colleagues.
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.
L
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.

CHAPTER 6
THE CREDIT AND DEBIT OF

VICEROYAL BANKING
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-
official
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.
147
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.
THE CREDIT AND DEBIT OF VICEROYAL BANKING I49
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 Frês, 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 ênfant 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
fiasco’.
^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.
THE CREDIT AND DEBIT OF VICEROYAL BANKING 151
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
subscribed.
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
policy.^
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
province.
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-
are
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
Cairo.
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.
station,
(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
enough,
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
reputation.^
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
respectability’,®
*
^ 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.
®Ibid.’,
Â,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
i6o BANKERS AND PASHAS
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
there
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
steamer.)
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.
THE CREDIT AND DEBIT OF VICEROYAL BANKING l6l
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?
ip.
154 f.
* The Egyptian quintal weighed approximately 99 lbs. See below, p. 332.

M
i 62 BANKERS AND PASHAS
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
rhapsodized:
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
if
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
letter
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
these
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
others.
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
in
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*
prestige
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

Egypt.
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
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
Dervieu.
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
breeches.
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
confidence:
This type of permanent absorption of your which he makes use of

capital,
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
all
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
market
^ 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 Eugê 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
unhappy.
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 Bîks 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.
Cf.
Â. 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
1338.
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.
789-90.
THE CREDIT AND DEBIT OF VICEROYAL BANKING I7I
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
latch,
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’ôrld 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.
CHAPTER 7
A DIGRESSION ON SUEZ
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.
173
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
profits.
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
traditional
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 i85jîqo2 (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 Câl de Suez, 1854-1866’.
A DIGRESSION ON SUEZ 175
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
macaroni.^
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
lence.
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
action.
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
financial
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 - Âperire 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
it
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. "Wên 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
Austria.
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
17,764,200
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.
N
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
call,
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 eiêct 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
Lesseps.
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-
l8o BANKERS AND PASHAS
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
pocket.
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.
A DIGRESSION ON SUEZ l8l
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
În 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
I,
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
Lesseps).
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-
letter
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
government.
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 wâs 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-
1
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
up
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
is
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
Alexandria:
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.’
i8S BANKERS AND PASHAS
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
still
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
the
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.
CHAPTER 8
THE ESCAPE THAT FAILED
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.
189
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’-îôy^
(Cairo, 1907).
® The Times^ 24-12-1863, p. 10.
® F.O. 142-27, Colquhoun-Russell, no. 147: 25-9-1863.
THE ESCAPE THAT FAILED 191
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
complaisance.
BANKERS AND PASHAS
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 ESCAPE THAT FAILED
m
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
artificially
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
government.
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

Europe.®
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
subject.^
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
them.
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
competition.
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,
just
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
advantages:
... 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
is
the door to regrettable practices.* Andr4 pencilled a note to this effect on the draft
contract.
to expand for some time, in disclosing the possibility of a competiti\ê

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
cipation
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.

also
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
country.
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
2
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-
terranê. 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
-îdr6 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
Goschen
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
speculation.’
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: . . despitâll the

esteem I have for Mr and putting aside all modesty, l
Pastrd
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
exact:
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
counted.
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
East.’^
nominal value of £50,® the prospects seemed so good, or more realist-
ically, the promotion was handled so skilfully, that the issue was over-
subscribed.*
^ 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
XXXIV,
(1864), 149-50; Baster, ‘Origins’, p. 80. The dty article of The Times reported
ê 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.
CHAPTER 9
THE HIGH COST OF GRACE
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* Mcâs^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.
208
THE HIGH COST OF GRACE 20^
where he had to in order to borrow more. He had
creditors, except
come a long way from the thrifty prince who had pointed îth 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-
stances.
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
operation.
^ Ibid., XXXIV, Tastu-Drouyn, 19-8-1864, ff. 120-2.
P
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 firanâise en
tSdo/ Rbv. CCW (1952), 217.
* Cf. C.P., Alex., XXXIV, Tastu-Drouyn, 19-8-1864, ff. 123-4,
THE HIGH COST OF GRACE 21
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 wêre 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

at
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.
s
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 betvêen 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
first
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
October.®
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 tên 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 wâs by everybody,
felt
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.
2I6 BANKERS AND PASHAS
merchants. For the moment, seemed that the long-impending shake-
it
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 wâming 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* Magaîne^ 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),
29-9-1864,
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.
2I8 BANKERS AND PASHAS
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 wâs 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.
Â. 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
month.^
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 twô 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
‘camarilla’.'*
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
ill-timed.
^ 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 xîfe, 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-
letter
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.
CHAPTER lO
END OF THE COTTON BOOM
Dervieu began campaign to return to favour the moment his

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
224
END OF THE COTTON BOOM 225
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 wôuld
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^ wây 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-
Âudouard, Mysthres, pp. 188-91. Cf. also C.P,, Alex., XXXIV,

Tastu-Drouyn, 12-9-1864, f. 58; XXXV, 19-1-1865, f. 28.
Q
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
this
as ‘being fair*. Now, however, was determined not to give a

Ismail
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
letters,
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
Panal.
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.
22 $ BANKERS AND PASHAS
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 rê 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
circumstances.
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
comparison.^
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
Â.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
money.^
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, vâs 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-
itself.
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
favour.
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
still.®
The
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
31-10-1864),
2)6 BANKERS AND PASHAS
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-
that
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
^
basis.*
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),
JVeuf,y
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.
END OF THE COTTON BOOM i37
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-
still
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
market.
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
Â, 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* Magaê^ 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
sallies
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
the
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
doubled.^
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
obligations,
to about half a million francs; his portfolio of commercial paper,
which
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,
utility.
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
ilbid.
® 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^.
B
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.
Îbid., 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$.
Â.E., C.C., Alex., XXXVII, Outrey-Drouyn, 28-6-1865, f* 393-
CHAPTER II
DOUBLE-CROSS REDOUBLED;
OR THE INS AND OUTS OF

EGYPTIAN FINANCE
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
^3
2.44 BANKERS AND PASHAS
dragging itself out beyond reason and is much more intense than
^
usual/
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
DOUBLE-CROSS REDOUBLED 245
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
anomalies.
^ 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
packages):
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.
DOUBLE-CROSS REDOUBLED H7
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 forwârd 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 wâs dangerously long. It was bad

enough to abandon the first place in Egyptian finance (although Andr4
was probably pleased by that development), but it wâs 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
this
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
already
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
still
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
far.
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 êddans (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
Foulds.^
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-
at
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
18-
cent. These were excellent terms. The Viceroy was readj^ Pastre was
19-
^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
Pastre.
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
slightest
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.
finance;
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.
DOUBLE-CROSS REDOUBLED
M3
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
point.^
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 oriâlly 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
DOUBLE-CROSS REDOUBLED ^55
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 êntre
affair
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.
2i5<5 BANKERS AND PASHAS
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
Ît 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
comparable.
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
it
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
loans.^
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.
DOUBLE-CROSS REDOUBLED ^59
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
railroad
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.
Â.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 questionable, however, whether day-to-day fluctuations in Liverpool
had any effect on i3a& fellahin^ most of whom had sold their crops in the months
immediatdy following the hwest or had turned them over to moneylenders in
payment of earlier advances. By April 1866, many of them were already borrow-
ing against the next harvest. But cotton prices did affect the cost of credit, and
their general tenorwas improved, though turning downwards.
Dervieu-Andr^ 18-2-1886. Even earlier, on 2-2-1866, the Viceroy imposed
4
a tax of fifty para per ardeb (forty para equal one piastre; one ardeb equals
26o BANKERS AND PASHAS
loan a fiasco, the figure mentioned was ten piastres per feddan?- And in
July,when the Anglo-Egyptian Bank was awarded an indemnity and
the Overend-Gumey crisis of May had closed all channels of credit,
when the merchants and bankers of Alexandria were dunning the
treasury fiantically and the harvest of 1865 had long been sold and the
proceeds spent, ihe proposed increase was up to twenty piastres,
to which was joined an immediate forced loan of £i million.®
This last was too much even for Ismail. Afraid to impose his will by
he decided to endow Egypt with a representative body to vote, on
fiat,
behalf of the people, the measures dictated by the government.* (As in

the West, Egypt’s first concession to democracy was a concession to
the taxpayer.) The sheikhs - for this pioneer legislature was made up
only of notables — gathered in Cairo, clothed in their best garments,
puzzled but honoured, full of good will. At the first meeting of the
Assembly, they filed in self-consciously and seated themselves around
the room, left, right, and in-between, as inclination or friendship
dictated. ‘Oh nol* exclaimed an official experienced in matters of parlia-
mentary procedure. ‘The left is only for rebels and malcontents,
opponents of Viceroy and country. The centre is the place for respect-
able, right-thinking citizens.’ Whereupon there was a frantic rush for
the middle, deputies jostling and elbowing in an energetically physical
display of recdtude and fidelity. One misfit held glumly to his place on
the left.® Needless to say, he was outvoted and the taxes passed.
bushels) on all Mahmoudieh Canal, the only water-

crops transported via the
way with access to the Alexandria harbour. Hamza, Pitbllc DebUy p, 103,
Â,E., C.P., Alex., XXXVIII, Outrey-Drouyn, 19-4-186(5, f. 154, The new
taxwas expected to yield forty million piastres, or ten million francs — hardly
enough to keep Ismail and the government going more than a few weeks.
® On this crisis, see below, p. 286 et seq.
ÂE,y C.P., Alex., XXX'Î, Outrey-Drouyn, 9-7-1866, ff. 254-5.
* Douin, Histoircy p. The correspondence of Outrey contains consider-
294 f. •
able material on the new assembly. A»E,y C.P., Alex., XXXVIII, passim^
® A. Mayrargues, Quelqu&s mots sur VEgypte contemporedne; U yice^roi et U
fellah (Paris, 1869). Mayrargues* pictureof the scene seems almost too good to be
better than apocryphal.
CHAPTER 12
NO EXIT
Dervieu’s failure to replace Oppenheim as loan contractor to the

Viceroy was unquestionably a disappointment, but it was by no means
a disaster. Dervieu’s main concern at the time was to reconstitute his
firm on a new basis and restore it to the eminence of 1863-4; the abor-
tive venture into international finance, however promising, had never

been more than a diversion.
The plan called for a merger of Edouard Dervieu et Cie uith the
Soddtd Agricole et Industrielle d’Egypte, a joint-stock company whose
title belied its activity, which was neither agricultural nor industrial.
The Agricole, as it was called, was a monstrous corporate creation

of the cotton boom, a hapless, rudderless firm that had been so dili-
gently exploited by its founders and promoters that by 1866, two years
dter its foundation, nothing but a hulk remained. Dervieu was chair-
man of the board.
The company, as organized in 1864, was the dream-come-true of
Antoine Lucovich, an engineer of Austrian nationali^ who had been
in Egypt smce the reign of Mohammed Ali and whom we find in 1859
working a quarry that furnished stone for the Suez Canal.^ Lucovich’s
idea v'as that what Egj-pt needed most was water, that the greatest
obstacle to the economic development of the country was the inade-
quacy of the irrigation, which 'W'as still effected by human and animal
power using techniques older than the Pharaohs. The tv’o devices
commonly employed were the shadouf, an arrangement of pulle3is and
baskets operated by hand, and the sakkk, an ox-powered chain of day
vessels; over 50,000 saBeh were in use in the delta alone.* So long as
Egypt was essentially a food producer, growing grain and lentils for
^ A Lucovich, Zo SodM Agiicole et InJustrieSe ffEgypte (Paris, 1865), p. 8;
Lesseps, Leans et documents, m, 79.

* Eyth, LeietuEge Krafte, p. 2 i 4i Sacr6 and Outrebon, VEgyfU, pp. 251-3.
z6i
localconsumption and some export, the insufficiency of these methods
was not too keenly felt. The coming of the cotton boom, however,
with its one cash crop and its opportunities for profit, provided the
incentive for change.
Egyptian cotton is a thirsty plant. Three floodings of the field are
the very minimum required for a decent yield; seven or eight floodings
are desirable. A well-watered field in the mid-nineteenth century
would yield up to i,ooo kilograms per hectare; poorly watered, the
same ground might grow less than 200. At a time when cotton was sell-
ing in Alexandria for over two francs per kilogram, a good supply of
water could thus add about 2,000 francs per hectare to annual income.^
It would also make possible an increase in the area under cultivation;
Lucovich, for example, maintained he could double the 440,000
hectares under crops out of 1,470,000 available in Lower Egypt.®
Lucovich’s plan was simple enough: substitute steam for man and
animal power. His company would rent pumps to proprietors, install
and maintain them, and collect a fee proportional to the amount of
water provided. Early in 1863 he presented his project to Ismail and
asked for official authorization. Ismail, seeing in this request an attempt
to engage his government and lay the basis for future claims, refused.
Lucovich insisted. He wanted neither monopoly, subsidy, nor con-
cession. But he was going to found a joint-stock company under
Egyptian jurisdiction and needed the sort of permission required in all
European countries for business firms of this type.® There was no

question, he maintained, of any obligation or responsibility on the part
of the government. Ismail, forced into a comer by the precedent of his
approval of the Egyptian Commercial and Trading Company, gave in.^
At the same time, Lucovich was looking around for financial sup-
^ Eyth, Lehen^ge Krdfte^ p. 212.

Sacr6 and Outrebon, JJEgypte^ pp, 251-3. This seems an unduly hopefiil
®
estimate of the potential increase. A

government survey of 1843 showed 3,826,340
acres cultivated out of about seven million available in all Egypt. U.S., Dept, of
State, Egypt, Thayer-Seward, 5-3-1863, Other surveys of ^s earlier period
indicated an even higher proportion of the arable under cultivation (cf. Iffivlin,
‘Agricultural Policy*, ch. ii, pp. 63, 66, and passim)^ and the percentage must have
been even higher in 1863. On the other hand, a number of observers thought the
potentially cultivable area to be much larger than that officially defined as such.
See the report of Thayer cited above.
® With the exception of England. See above, n. i,
p, 54.
^ Cf. jF.O. 142-27, Colquhoun-Russell, no.
109: 1-7-1863.
NO EXIT 263
port- The obvious source was Dervieu, then at the height of his career.
On 10 July 1863, the t^ô men came to an understanding; on the 19th,
Lucovich made a formal request for official authorization; two days
later the request was granted.^
Meanwhile, a company was organized- Dervieu gathered the cream
of Egyptian business society - Ruyssenaers, Oppenheim, Ross of
Briggs and Co., Antoniadis,^ et aL - drew up statutes, and turned them
over to the Viceroy for approval. At this point, the axe fell. Ismail
wanted no part of the Agricole.
He summoned his favourite to him for his meddling,
Cairo, railed at
and ordered him to get out of the new company. At the same time,
he gave orders to his officials to consider the Agricole’s authorization
as null and void and to prevent Lucovich and his agents from publicizing
their activities or operating in the interior. Cowled by the Viceroj^’s
wrath, the promoters withdrew and the company died stillborn.®

Why had Ismail turned against the Agricole.^ In the presence of
conflicting testimony, the best explanation would seem to be that he
feared the trespassing of the company on what for six thousand years
had been the most valuable prerogative of the ruler of Egj’pt: die con-
trol of water. In the tradition of his predecessors, Ismail had built up
his fabulous fortune in large part by judicious rationing of irrigation.
He could not afford now to let Lucovich set up his machines along the
canals and of Egypt, establishing with each one a right enforce-
rivers
able by all the power and influence of the Western nations.^ Further-
more - although this was certainly less important - Ismail had his ovm
plans for importing steam pumps and selling them to the cotton
growers. When the French consul alluded to this as a possible explana-
tion of the Viceroy’s hostility to Lucovich, Ismail vigorously denied
any such intention. Perhaps the idea had, in truth, not yet ripened in
his mind. The fact remains that after the murrain Ismail became the
1 Lucovich, Soctite^ pp. 16-17.

* On John AntoniacHs, see Politis, Hellinismey 11 , 203, 262.
® C.P., Alex., XXXn, Tastu-Drouyn, 4-8-1863, ff. 6-8; n-8-1863, ff.
14-15; 19-8-1863, ff. 28-9.

* Tile French consul Tastu admitted that Lucovich had, in his prospectus and
publicity, arrogated to the company privileges that Ismail had never accorded,
and that he had gone so he had been conceded the right of
as to claim that
irrigation in Egypt. This, the consul allowed, was wrong, but why should the
whole project be repudiated and innocent Dervieu be made to suffer for Luco-
vich’s mistakes? On irrigation as an instrument of state, see above, p. 189.
biggest importer of steam engines in Egypt, most of which he sold to
the big landholders and wealthier
In the meantime, however, Lucovich had his idea and his authori-
zation. Abandoned by Egyptian business, the engineer turned to
Europe, where he succeeded in arousing the interest of several capital-
ists impressed either by the chances of profit or the possibility of an
eventual indemnity. He accepted the offer of a certain Colonel Comte

de Kiss, who deposited 500,000 francs as a gage of his intentions. At
this point, according to Lucovich, Dervieu and Oppenheim decided
that they wereinterested, and Kiss, though reluctant, felt that the
still
influence of thetwo bankers of Alexandria was too great to ignore or

flout. A new company was organized, therefore, combining the original
Dervieu group and the Kiss syndicate, with Lucovich as inspector-

general in charge of operations. The firm was to be called the Sodete
Agricole M4canique Egyptienne.®
From here on it is hard to reconstruct the history of the firm because
the various documents, most of them prepared for litigious or polemical
purposes, differ so sharply. Lucovich, who was eventually shunted
aside by his more wealthy assodates, pictures Dervieu, Oppenheim,
and the rest of the Alexandrian group as tools of the Viceroy who were
interested in the company only because they could not prevent its
formation, in other words, as spies and saboteurs. The French consular
correspondence of the period and later documents will not quite support
this extreme view. Yet the evidence indicates that Dervieu particu-
larly, if not the pawn of Ismail, was his submissive courtier whose
primary concern was to suit the activities of the Agricole to His High-
ness’ wishes. And if there was one thing that Ismail was insistent about,
it was company abandon all interest in irrigation.
that the
The change was not accomplished in a day. At the request of Ismail,
the name was altered to the Sodet^ Agricole et Industrielle d’Egypte.
Months of further negotiation and adjustment followed. The pro-
spectus was not presented to the public until July of 1864, a full year
after Lucovich had made his first overtures to ihe Egyptian govern-
ment.® The capital was set at two million pounds, in £20 shares of
which £4 to be paid in. The floatation was most unimpressive. The
^ Cf.,among others, Les emprunts igypnens^ pp, lo-ii.
* Lucovich, SocUtd, pp, 22-5.
® The prospectus is summarized in the City article of The Times^
5-7-1864,
p. X2,
NO EXIT 265
London market hardly took notice of the company, and all the pro-
moters and founders found themselves burdened with large blocks of
stock that they never succeeded in unloading. In October the Stock
Exchange decided that the Agricole wôuld not be quoted for the
moment.^
From the beginning the company wâs a split personalit}’: Lucovich
scurr5dng around Europe looking for pumps and machiner}^ and con-
tracting for agents in the Egj^ptian interior; Dervieu and the other
Alexandrian directors busily importing competing machines on their
own account while clearing the vray for a reorganization. When, in
October 1864, Lucovich returned proudly to Egypt to tell of his success
in ordering equipment, he found the board of directors singularly
uninterested. Der\deu made a little speech in Ti*hich he reminded the
meeting how close he was to the Viceroy and \s-amed all present
against the dangers of offending either Ismail or local business. Since
Der\deu had good reason to be troubled about tlie position of his ow'n
bank in both respects, ^ he must have offered these admonitions, which
he would have scorned in 1863, with a sincerity that carried conviction.
The management of the Agricole was purged: Lucovich was kicked
upstairs to the innocuous post of comptroller-general; Richard-Koenig,
Dervieu’s brother-in-law, was appointed manager at 37,500 francs a
year; and T.N. Anslyn, an employee of the Dutch consulate and protege
of Ruyssenaers, was made commercial director at 25,000 francs. If
we are to believe Lucovich, Dervieu and Ruyssenaers were lauded by
all present for their delicacy in refusing to vote for their own proteges,
while at the same time each supported the candidate of the other.®
During of operations, therefore, the company
this first semester
stumbled along trying to go two ways at once. The difficulties due to
the division of the direction were aggravated by the incompetence of
the Alexandria management. If the records of Marcuard, Andre et Cie
are typical, the Agricole was careless in meeting its obligations and
hasty in its requests for credit. In their verj^ first letter, the company
asked Marcuards how much money itwas prepared to place at their

disposal. The bank replied with the usual lecture on the role of credit
as accessory to regular business relations and stated that it preferred to
^ Mon. Mar. Rev.^ IX (1864), 425, Later evidence indicates that the capital
was eventually set at one rather than two milKon pounds.

* Cf. Dervieu-Andr^ 12-10-18(54, discussed above, pp. 222-3,
* Lucovich, SocUtij pp. 36-46.
wait and see before committing itself. Marcuards waited four months
before it saw anything, and then the two isolated transactions that
passed through its hands were so trivial that Andr6 felt impelled to ask
Alexandria were likely to develop into anything.^
if these
The new, purged management took over the Agricole at the start
of 1865. Partly as a result of IsmaiFs insistence, partly because of the
pliancy of the directors, the company had lost its raison d*itre and was
vegetating.
Fortunately, if the master taketh away, he also giveth; Ismail
wanted to help the Agricole, to make it his instrument for all the
magnificent public works he had in project: the embellishment of Cairo
and Alexandria, the modernization of the port of Alexandria, and so
on. He was even prepared, he said, to give the Agricole a monopoly
of this field.
Dervieu and his colleagues were delighted with this turn of events.
They envisioned a series of contracts stretching into the distant future,
each bringing its own gratifying profit, each an opportunity for the
and friends of the company to do business with it on ffieir own
officers
behalf.At a meeting in Mardi 1865, therefore, Dervieu happily an-
nounced the new programme to the board. As a start, the Agricole
would buy up the business of F. Bas^vi, ‘contractor and timber
merchant’, who, the directors were assured, already held commissions
from the Viceroy worth more than the £60^000 to be paid.* Bas^vi
would enter the Agricole as general manager in charge of operations.®
With ;C48 o,ooo in orders in hand and £600,000 in prospect, the com-
pany’s future was guaranteed.^ Most of the directors, with the promi-
nent exception of Lucovich, agreed with Dervieu; the stockholders
also.®
A. Neuf,, L.B. 520, 8-8-1864 to Society Agricole, f. 326; L.B. 522, 10-9-1864,
^
425-6; L.B. 532, 15-2-1865, f. 736.

ff.
* Lucovich, Societi^
pp. 52-6. Dervieu, with his usual simple good faith,
reminded tbe directors that Basevi was certain the company would earn 20 per
cent, on the contracts purchased. Lucovich asks indignantly: ‘Has any seller ever
depreciated his goods.^*
* That is, the position once held by Lucovich.
^ In his Andre of 18-2-1865, Dervieu declared that he was counting on
letter to
nothing less than thirty million francs’ (£1,200,000) worth of work.
® A stockholders’ meeting was held in
Alexandria on 27-4-1865, followed
by one in London on 14-7—1865. The minutes of the latter are to be found in
H&rapatK 5^ 22-7-1865, p. 789.
NO EXIT 267
The merger with Basevi implied and imposed a definitive break with
Lucovich. Three months earlier, at the time of Richard-Koenig’s
appointment as manager, the Austrian had tried to witlidraw from the

company but could not find anyone to take his shares at par. No\^*,
however, Richard himself was ready to buy him out. He gave Lucovich
par for his shares, plus the nominal sum of 1,000 francs for both his
6 per cent, interest in the profits of the company and a number of
contracts that had been awarded him personally previous to tlie forma-
tion of the Agricole and that the government had thus far refused to
honour. According to Lucovich, Richard was acting here as the repre-
sentative of Dervieu et Cie, which proceeded to resell the contracts in
question to the Agricole at 30 per cent, profit.^
Lucovich is a w^riter whose bitter humour - the banter, as he puts it,
of a Figaro who would rather laugh than cry - tends to confuse the
reader. It is not clear, for example, w’hat ‘30 per cent profit’ refers to -
certainly not to the purchase price of 1,000 francs. Nor does the
polemical character of his little historj-’’ of the Agricole lend his accu-
sation authority. Nevertheless, we know- that Dervieu et Cie did cede
contracts to the Agricole at a profit of 500,000 francs. Dervieu had no
consciousness of anjdiing unethical in such a transaction. As he WTOte
Andr^, the Agricole would in turn be making almost one million
francs on the work.^
But in order to make money, the Agricole had to have customers
and - hardly worth stipulating anywhere else but in Eg5rpt - paying
customers at that. Unfortunately, the company’s principal client was
hard up for cash. Owing to lade of funds, Ismail had been forced in
spite of himself to postpone some of his most cherished projects; even
works for which contracts had already been aw'arded were suspended.
Thus, both the contracts that Lucovich sold to Richard-Koenig and
those Basevi had held were abeyant. In the latter case, the refusal of the
government to authorize the work agreed upon had already led to
threats of legal action, and it wâs Ismail w’ho had conceived the idea of
merging Basevi and the Agricole as a wây of buying off his tormentor
1 Lucovich, Societe, pp. 50-2. Lucovich is almost surely right about Richard’s
role. The shares in question - as well as those of Kiss - found their vviy into the
portfolio of Dervieu et Cie. See below, n. i, p. 283.
® Dervieu-Andr^j 2-6-1865. It is not clear whether Dervieu expected the
Agricole to earn one million francs net of the 500,000 paid Dervieu et Cie, or
with Other people’s money. ^ The directors neglected at the time to
mention this aspect of the transaction to the stockholders. They did not
neglect it later on, when they wanted to establish Ismail’s responsi-
bility for thewoes of the company.^
In the Agricole was spending large sums for con-
effect, therefore,
tracts that could be lucrative, but which had thus far been unenforce-
able and whose value depended entirely on the solvability, generosity,
and whim of the Viceroy. At the same time, the company’s finances
were sick to prostration. Much of the capital had already gone to
finance Lucovich’s irrigation projects, since abandoned. Another large
sum had gone to pay for some real estate in Cairo that had been lying
on Ismail’s hands for too long and that the company planned to resell
in small lots at a handsome profit.® Some of these lots were, in fact,
sold at good prices, with payments spread over a period of years;
whereupon the Agricole proceeded to include this income-to-come in
the profits of the first eight months and distribute it in what would
have otherwise been a disastrous dividend.^ With the capital thus eaten
away, it is no wonder that the company was forced to pay for Bas6vi’s
business in bonds rather than cash.®
Like every other firm doing business with Ismail, the Agricole had
to learn to live by discounting the paper of the Egyptian government.
In May 1865 it began to receive as advances on its work short-term
bonds of the Ministry of Public Works. Within a month, the first block
of these securities, received from the Egyptian government via Dervieu
et Cie, was quickly disposed of through Marcuards, which was ex-
tremely anxious to encourage relations with the Agricole and had in
^ It was also later hinted that one of the reasons why Ismail authorized the
Agricole in the first by Lucovich
place was his desire to forestall possible claims
for breach of contract. jF.O. 78-216(5, Egyptian Commercial and Trading Co. to
Lord Stanley, Memoir of 30-6-1868.
^ Ibid., among other petitions and protests addressed to
the French and British
foreign offices. A
French version of the above-cited memoir was submitted at
about the same time to the Ministry of Foreign Affairs in Paris.
Îbid. The land had been sold by Ismail, then heir apparent, to his unde
Halim Pasha, who in turn sold the property in 1864 to a syndicate composed of
the Agricole (50 per cent.), E. Dervieu et Cie (20 per cent), Oppenheim, Neveu
et Cie (20 per cent), and Briggs and Co. (10 per cent). Since Halim had thus fiir
given Ismail only notes, the effective seller was Ismail, who collected directly
from the buyers.
® Lucovich, Societe, pp. 46-8; Herapatlis^ 22-7-1865, p. 789.
8
Ibid.
NO EXIT 269
Demeu’s endorsement a supplementary' guarantee.^ Besides, îth the
Bank of France at 3 per cent, and the Bank of England at or
3
Egy^ptian bonds at 8 per cent, made a good investment.® The second
package, however, gave rise to difficulties; rarely has a business firm
accumulated so many blunders in a single transaction. The Agricole
took bonds that had not been duly signed and authorized bv the
Minister of Public Works and the French consulate; they sent them to
Marcuards in late June and drew against them without ascertaining in
advance whether the bank cared to undertake another operation of this
kind; they overdrew on the bonds remitted by some 60,000 francs; and
worst of all, they endorsed the bonds to the order of Marcuards and
thus made it impossible for the bank to sell them: It w'ould certainly
not suit us,’ scolded Paris, ‘to peddle our name on the market to obtain
the negotiation of these securities.’
This wâs almost frightening incompetence, far w’orse than the
precipitate request for credit in 1864. Andre laid the law’ down to
the company in the severest terms. There would be no more opera-
tions in Egyptian securities; all bonds received from the Agricole
would be acceptable only as cover for
commercial transactions, and
then only if guaranteed by Dervieu et Cie; and all drafts made
against such security would be covered by short paper before
maturity.®
From this point on, the credit of the Soci6te Agricole w'as identical
with that of Edouard Dervieu et Cie. The rest of 1865 passed without
difficulty thanks to further remittances of Egyptian bonds, which
enabled the company to pursue the sort of w'ork that unfortunately
does not yield quick profits. There was the port of Alexandria to be
modernized, the citadel of Cairo to be repaired, irrigation canals to

dig, new palaces to build.
The summer was in large measure wasted. The cholera brought
everything to a and although the yards and shops wêre
standstill,
kept open at government request to minimize unemploymient and
^ Neuf., L.B. 540, 10-6-186$ and 26-6-186$ to Agricole; Andr^Dervieu,

10-6-1865,
® Dervieu had already disposed of some millions of francs’ worth of these
bonds. Dervieu-Andre, 2-6-186$; A, Neuf,^ L.B. 540, 17-6-1865 to Dervieu,

f. 645.
® Ibid., L.B. 542, telegram 6-7-1865 to Agricole, f. 300; letters 8-7-1865, ff.
468-71; 28-7-1865, f. 1421; to Dervieu et Cie, 8-7-1865, f. 412.

unrest, little was accomplished. At the end of September, a stock-
holders’ meeting in Alexandria voted to call up another £4 per share.
The call was announced in England and France in October.^ Many of
the shareholders never responded.
By the end of the year, the Agricole was moribund once again, and
it not surprising that Dervieu, himself declining, should have
is
imagined a combination whereby this ailing but submissive company

would become the instrument of his regeneration. In December of
1865 he returned from his long stay in Europe with plans all set for the
merger of his bank and the Agricole into a new Societe Egyptienne de
Credit et Industrie.
The new firm was to combine the best of several worlds- Like
Dervieu et Cie it would be a bank, treating with both the Egjptian
government and the merchants of Alexandria and Cairo. Like the
Societe Agricole it would be a contractor of public works. Finally -
returning somewhat to the dreams of Lucovich - it would be a trading
corporation, specializing in the importation of materials and equipment
for construction and agriculture.
For Dervieu, the new company would also have important
non-economic advantages. Among the memoranda he had prepared
with a view to justifying the merger was one entitled ‘Apergu
politique’,2 This pointed out that England and France had always
competed for influence and position in Egypt, with England doing
far better economically. Why.'^ Because of differences of national
character:
Our its drive to diffuse progress and

chevalric spirit, our character with
civilization, and the noble ambition of introducing the peoples of the
world to the intellectual and moral improvements that we pride ourselves
on seeking for - all these have led us since the reign of Mohammed Ali
to constitute ourselves the protectors of Egypt. Less concerned with our
material interests than with the regeneration of a country to which we are
attached by so many glorious memories, we have furnished it for more than
forty years with teachers from our army and navy, with engineers, doctors,
professors and artists who have contributed enormously to breathing new
life into this old Egypt, moribund for so many centuries.
^ Mon, Mar, Rev,^ XI (1865),

This and other memoranda cited here are to be found in A, Neuf,^ carton 11.
^
They are written in a clerk’s hand, but were undoubtedly prepared with Dervieu’s
consent^ probably at his dictation.
NO EXIT 271
England has sought an utterly different goal. Little concerned with
contributing to the moral regeneration of a people whom slaverv and poverty
had reduced to the extremes of degradation, England has seen in the
awakening of Egypt, in her new aspirations, in the needs she is beginning
to feel, only the material and business side. England has flooded the
Egyptian market with her cotton fabrics, her machines, and her coal.
With the practical intelligence that no one can deny her, she has antici-
pated the great industrial and agricultural movement that the policy of
Mohammed Ali was bound to bring, and the better to further it, she has
not feared to discount the rich future that was opening for Egypt and to
furnish her the capital so necessary to her transformation.
We must not conceal from ourselves the fact that England’s conduct has
won her more sympathy than ours from a people that is still ignorant and
still bears the marks of a long servitude. Our great ideas, our generous
sentiments could not, in effect, win out over a system that gave satisfaction
to the material interests created by an unhoped-for prosperity following on
wretched poverty.
The theme was already an old one in 1865 and wakes echoes of
Napoleon’s scorn for the ‘nation of shopkeepers’. One wonders what
effect this old refrain was expected to have on someone like Alfred
Andr^.
In any event, Dervieu was still the great patriot w^ho felt his
country’s commercial failures as his own. The memorandum went on
to point out that the British accounted for three quarters of Egyptian
exports and imports; the French, for only one eighth. The English sent
goods of poor quality, but they were more ready to adapt their prod-
ucts to the tastes of the local population; French exporters were
notoriously inflexible.^ The British lent money generously - 185 mil-
lion francs subscribed in the space of a few years; the French had yet
to admit an Egyptian loan to quotation.
Dervieu felt that the time had come for a large floatation of Egj^ptian
securities in Paris. The new company could present itself to the public
with over 20 million francs in government contracts in hand and
35 millions expected - contracts that would yield 25 to 30 per cent,*
To be sure, the Egyptian government was in no position to pay for
this work in cash; but it was ready to remit bonds, which could be
1 Cf. S. Mayer, Emjiidischer Kaufmanriy 1831 his i (Leipzig, 1911), pp. 196,
214 f.
^ The material in this paragraph is based on a second memorandum, summariz-
ing the activities and possibilities of the Soci4 t^ Agricole.

negotiated in tuminEurope. The govemmentwanted to pay-and Der-
vieu felt the company should accept - a low rate of interest on these
securities, say, 7 per cent- This would be more than compensated, he
felt, by remunerative contracts and indirect advantages- Tn this way’,
he wrote, ‘we shall succeed in pushing [the Viceroy] into the path that
he would like nothing better than to take and shall monopolize all his
work-’ And the memorandum went on to note Ismail’s ambition for
fame and glory (‘[z7] doit tenir . - afaire parler de lui^surtout en Fr(mcd\
.
his wish to place Alexandria and Cairo on a plane with the cities of
Europe, his desire to draw Westerners to his country. It also pointed
out that the company stood to make a formne with private clients
as well -in particular, in the improvement and sale of urban real
estate.
The new Sodete de Credit was to be Edouard

director of the
Dervieu- Capital was set at one million pounds. Of this sum, 400,000
would come from die shareholders of Edouard Dervieu et Cie, many
of whom saw in the merger a welcome chance to convert their invest-
ment into marketable bearer stocL Similarly many of the owners of
the Agricole could be expected to favour the merger because it would
free them from their liîlity for the still to be paid on each
share.^
Nevertheless, was assumed that 40 per cent, of the ownership of
it
the Agricole would refuse the opportunity to convert; Dervieu could

count therefore on only £240,000 from this source.® Ismail, always
ready to encourage the creation of credit corporations in Egypt,
promised £80,000 more. The total, including the £400,000 from Ae
shareholders of the Dervieu bank, came to £720,000, far short of the
announced capital and even of the figure of £800,000 which would
supposedly suffice to begin operations. Dervieu was confident, how-
ever, that the money could be had without too much trouble. Friihling
and Goschen, Cavan, Lubbock and Co., the Egyptian Commercial and
Trading Company, and Oppenheim-Neveu were all ready, he told
Andr6, to add important amounts to the sums already tied up in the
Agricole; and there were other houses in Egypt and Europe whose
^ This -was predseiy the reasoning of Alfred Andre, as stated in an undated
note prepared toward the end of 1865 for the information of his partners.
® At one time Dervieu contemplated forming a syndicate to buy up three
quarters of the shares of the Agricole; a call of 150 francs a share to drive the price
down would set the stage.
NO EXIT 273
interests in the fading concern were important enough to warrant an

outlay for its resuscitation.^
Dervieu arrived in Alexandria, therefore, brimming with assurance:
the lean years were over. In a letterof 12 December, he happily an-
nounced that the affairs of his own firm were in order, and that even
on the most conservative estimate, Dervieu et Cie would give 10 per
cent, for the year ending June 1865, plus 15 per cent, on liquidation the
following 31 March. In addition — apart from his own interests and
those of his bank - he had the satisfaction of carrying in his baggage
the salvation of many other people.
To the directors of the Agricole,* he wrote, 1 come like the
Messiah. Their af&ir was limping for lack of management and capital;
I bring them both.*
As was disappointed by
usual, Dervieu’s sanguinary enthusiasm
reality. Although he had assured Andr4 there would be no trouble
raising ;î20,ooo of new capital for the projected company in Egypt,
he found investors wary; the letter of 12 December admitted that any
contributions from France would be most welcome. In the meantime,
the financial position of the Agricole deteriorated alarmingly. The
weaknesses of the company had been more or less successfully ignored
during the long months of quiescence; the effort to start the wheels
turning again exposed the corrosion of the machine.
At the same time, the situation of Dervieu et Cie was not much
better. Thebalance sheet for the year ending 30 June 1865, as drawn
up at the end of December, showed net profits of 1,669,248 francs,
which made possible the payment of 6 per cent, interest on the capital
and a dividend of 6 per cent. more. This was in itself a sharp decline
from earlier years. Far more serious, however, the same balance sheet
showed that of total assets of 22,436,560 francs, only one quarter per-
haps was reasonably liquid. The rest was composed of stocks of
merchandise and machines, steamboats, land, shares in other enter-
prises, outlays for the Egyptian government, dubious accounts re-
ceivable, and overdrafts on current account; under the last heading, the
biggest delinquent was Ismail.*
^ Most of the above is based on a second note prepared at the same time for the
same purpose.
® Neuf^ carton ii, report of Dervieu et Cie to stock-holders dated 31-12-
1S65. The fact that the report was six months late was in itself a bad sign. Also the
ratio of assets to capital would seem disturbingly low; that same year, Marcuard,
The heart of the difficulty was the unwillingness of the Egyptian
government and the Viceroy’s D^ra to pay their debts: the one was
momentarily embarrassed as a result of Oppenheim’s withholding of
the proceeds of the railway loan; the other was still waiting hopefully
for something from the Pastre operation. But the Agricole could not
wait. Dervieu tried to tide it over its immediate difficulties by means of
a large credit from Marcuards. In his letter of 2 January 1866, he asked
for 500,000 francs, which he got on his personal guarantee - Andre had
no faith in the Agricole.^ The credit was exhausted before it was con-
firmed.
Only in fairy stories do people stop dikes with their fingers. Within
the week, Dervieu, who was stretched to the limit, decided that the
Agricole was too far gone to be repaired: better to junk it entirely and
reclaim whatever parts were still us^le.^ Instead of liquidating his bank
and merging it with the Agricole, therefore, he would liquidate both
and create a new successor firm. This arrangement had the merit,
among others, of presenting the operation to the public as a transaction
Andr6 et Cie had assets of 40 million francs on a capital of 4 millions.

A summary of Dervieu’s balance sheet follows (values in francs converted
from piastres at the rate of i franc = 3*8575 piastres):
Credit Dehit
Cash 474,930 Capital 10,000,000
Furnishings 2 M 56 Reserves 212,080
Accounts receivable 7,151,270 Accounts payable 5, 1^45
Merchandise and machines
(in stock) 736,632
Steamboats 402,754
Land 1,006,157
Money in various co/n-
mandites »,<S 87,270
Egyptian Government 4,651,735 Current accounts:

Current accounts; foreign 1,706,962
foreign 413,746 local 3,656,039
local 5,890,612 Profit and loss 1,669,246
22,436,562 22,436,572 (ftc)
^The credit was opened on Dervieu’s personal guarantee. A. Neuf,^ L.B.

554, 18-1-1866 to Dervieu et Cie, f. 959. The account of the Agricole with
Marcuard, Andre et Cie showed a deficit as of 31-12-1865 of 289,546 francs.
Ibid., 26-1-1866 to Agricole.
® Dervieu-Andrd, 8-i-i866.
NO EXIT 275
between equals; Dervieu was no longer pleased at the prospect of being

absorbed by the Agricole.
The key problem remained the collection of the claims of both
companies on the Egyptian treasury. Here Dervieu’s plans had a
serious setback: Nubar Pasha was transferred from the Ministry' of
Public Works to that of Foreign Affairs. The new assignment was not
unexpected; Nubar’s appointment as Foreign Minister was a reward for
hiswork in the negotiations over Suez; the promotion had been planned
sinceNovember if not before.^ But where Nubar had counted at first
on retaining his place as Minister of Public Works - he had important
business interests that he wanted to keep in touch with® ~ his bungling
of the Oppenheim loan now cost him the post.®
Dervieu cabled the sad news to Andre; the he
latter replied that
hoped Dervieu had ‘profited from the last days of N. at the T.P.
[Travaux Publics, or Public Works] to obtain a few advantageous
contracts’.^ The hope was disappointed. As Dervieu admitted in a
letter of 3 February, the transfer was ‘a rude blow’.
It was all the more serious because it had been motivated by all the calumnies
and of myself. People were
that have been uttered at the expense of this friend
saying nothing less than that we had got together to blow up the
bills and
that we were sharing with Nubar. These slanders were quickly exploded, and
Nubar has regained all his influence with the Viceroy.
Dervieu’s optimism was irrepressible. There is no society in which

mud of this kind does not stick, and slander can be literally fatal in the
intrigue of an Oriental court. The Nubar and he
reassurances that
received, the cordial smiles, the friendly handshakes,meant little more
than that Ismail had filed his suspicions away for the moment. In the
meantime, Nubar was cut off from all ofBcial money matters, and
Dervieu found the treasury unapproachable.
C.P., XXXVII, Outrey-Drouyn, 28-11-1865, fF. 205-10; XXXVIIT,

Outrey-Drouyn, 18-1-1866.
® This is the way Outrey expressed it in his letter of 28-11-1865,
® Ismail made Nubar’s life miserable during the months that followed the loan
scandal. Cf. the letter of Nubar to Eram Bey, private secretary to Ismail, 18-7-
1866, cited in Hamza, Puhlic Deht^ p. 90. Nubar*s successor was Murad Pasha,
governor of Alexandria. A,E,^ C.P., Alex., XXXVIII, Outrey-Drouyn,
18-1-1866, f. 43.
* Andte-Dervieu, i8-i-i866.
I have been in Cairo with my family for a fortnight. I am eating myself out
from morning to night in the face of the difficulties I am encountering, and I
assure you that I need a heavy dose of patience not to pull the house down,
I have on my side the benevolence, the good will of the Viceroy, and I am not
getting there. What would it be, then, if the Viceroy were hostile to me!!
There is in the administration an ineptness, a laziness, an unbelievable ill will,
and all that is aggravated by the general^r niente whidi the Moslems practise
during the holy time of Ramadan.
And while Dervieu pleaded for his six million francs and the five
million owing he argued with officials who had
to the Agricole, while
orders to give him all the courtesy in the world but not a piastre, while
he coaxed Ismail, whose heart was armed with the brass of imminent
bankruptcy - in short, while he consumed himself trying to draw
water from a stone - Bravay, suddenly available in Egypt’s hour of
need, founded a new bank with the viceroyal blessing.
Dervieu was annoyed, even jealous.^ He wrote Andre that Bravay
had been clever to get Ismail to invest in his firm, but that he would
learn to regret the honour - the Viceroy had placed his agent in the
bank as one of the active partners.^ In the meantime, however, this
further proof of the fickleness of royal favour only prodded our friend
to redouble his efforts to find Ismail money in Paris, so that Ismail
might give some of it back to him and the Agricole.
Dervieu need not have felt so envious. Bravay’s bank failed before
a year was up.
The comedy was drawing to a close. Despite Ismail’s readiness to

furnish verbal encouragement- he even wrote a laudatory endorse-
ment of Dervieu’s projected company - subscriptions were not coming
in. The ;£ 120,000 that Dervieu expected to fed so easily in Egypt
proved a will-o’-the-wisp; his name had lost its magic, and other
businessmen were also waiting to collect from Ismail. The Mallets and
Periers in Paris were not interested.® Even shareholders in Dervieu et
^ Theretofore, Dervieu’s was the only private firm that Ismail had deigned to
invest in.
®Hector Defoer Bey. On this personage, see Hamza, Puhlic Debt, pp. 88-91.
®On the P6rier bank, which went back to the early nineteenth century and
was one of the most esteemed in Paris, see GiQe, *Banque et credit sous la mon-
NO EXIT 277
Cie, whose unanimous support had been taken for granted, were taking
the opportunity to get out. On the 17th of Mardi, two weeks before the
expiration of Ae period allotted for the formation of the new con-
cern, some stockholders of the agonizing Agticole, acting through the
bookkeeper of the company, hailed their chairman into court for
malfeasance.
It was the coup de grdce. In a letter of 19 March to Andr6, Dervieu
wrote of his ‘hard trials’.
‘Imagine that the day before yesterday I had to appear before the
bench of the police court of the French consulate, accused of em-
bezzlement and misuse of confidence! It seems to me that I have had a
dream, a horrible nightmare.’
To be sure, he won the case.^ But the trial seems to have forced a
showdown in which friends and pretended friends separated out A
number of illusions died in the process. ‘This ordeal,’ he wrote, ‘which
I have accepted with perfect resignation, has nevertheless disgusted
me with people and things in this country, and, adding to that the small
gratimde that the Viceroy shows for sincere devotion, I have com-
pletely given up the idea of creating a new company.’ He would
liquidate the Agricole, throw the ‘debris’ and the promised contracts to
Oppenheim, and serve out the rest of the term of Dervieu et Cie.
‘Tell Du Pin’, he concluded, ‘that I shall not be sorry to see [this
affair] come to the attention of M. BAic.’

Dervieu, who had returned to Egypt only three months before ‘like
the Messiah’, had begun his calvary.
archie censitaire’, pp. 56-7 and passim-, Vermale, Ia pire ie Casitmr Finer,
Claude Finer, 1^43-1801 (Paris, 1935); E. Choulet^ Lafamille Casimir-Firiers
etude genialogique, btographique, et historique (Grenoble, 1894); P. lion, La
ncassance de la grande Industrie en Dauphini (2 vols.; cont. pagin.; Paris, 1954),
p. 533 ff.
^ There is a copy of the decision of the consular court in A. Neuf., carton 1 1.
The record would indicate that the charges, however true or untrue, never
received anything but a nniost cursory hearing. The tribunal refused to ask to see
the records of the Agricole, declared its readiness to take Dervieu’s word on his
innocence, and reprimanded the bookkeeper for trying to blemish the reputation
of an honourable businessman.
CHAPTER 13
PANIC
And was much grieved at the plight of his friend. Fortunately, fate
has its little was not such a bad idea after all
compensations: perhaps it
- for everyone concerned - to abandon the project for incorporation

and let the existing partnership run out quietly. On 27 March 1866, he
wrote: ‘The few details we have learned of this filthy intrigue suffice,
and more, for us to understand the disgust you have felt and the desire
that has seized you to shake the dust from your feet on the envy and
calumnies that have not succeeded, thank God, in reaching you, but
which it is odious to feel oneself surrounded by.*
Andr^ was worried, however, about the Agricole. He had good
reason to be. With almost eight hundred shares on which only £8 had
been thus far paid in, Andr4 could see Marcuards losing not only the
£6,400 already invested, but an additional £9,600 on its liability of £12
a share. For a bank whose total net for the year might be expected to
run to about one million francs, a loss of 400,000 francs, while not a
disaster, would be a hard blow.^ Furthermore, the Agricole owed
Marcuards on current account and acceptances some 200,000 francs,
which, although covered by Dervieu’s personal guarantee, were a
source of anxiety.^ Dervieu was not immune to trouble; he himself held
some 17,000 shares in the Agricole, an investment equal to 85 per cent,
of the capital of his bank.®
^ Net profits of Marcuards for 1864, 1865, and i8(56 were 1,176,235 francs,
1,029,499 francs, and 978,919 francs respectively.

* A. Neuf.y L.B.
560, 7-4-X866 to Societe Agricole, f. 286.
*Some 2,000 bought at the creation of the company and 15,000 purchased
later from Kiss and Lucovich. Dervieu was the largest stockholder in the com-
pany. His 17,000 shares represented £136,000 paid in and £204,000 of liability.
It is not clear where these are entered in the balance sheet of Dervieu et Cie;
the rubric ‘Money in various commandites* is not large enough to include them.
278
PANIC 279
Andre wanted to get out, as quickly and painlessly as possible.

In the same letter of 27 March he pointed out that the Agricole could
not possibly carry out its commitments at a profit, that the only hope
was to sell out to ‘a third party’, to ‘cede baci the orders, agreements,
privileges,and other advantages’ in such a way as to break even at
least.There was no mystery who the ‘third party’ would have to be.
‘Let us hope’, Andre wrote, ‘that the Viceroy will take action so that
you can pull your unfortunate stockholders out of difficulty without
their getting skinned.’
By ordinary standards, much of this advice was already unnecessary.
The Agricole had ceased operations in February, and it was not long
after die letter of 27 March that the company was forced to suspend
payments. Oppenheim was quick enough to get the point: while the
other stockholders fretted and squirmed, he made a private deal with
the Viceroy, selling him his entire block of nine thousand shares at a
discount.^ Yet all this was not enough to repress Dervieu’s ebullience.
To Andre’s dismay, Dervieu’s letters to his brother in Paris indi-
cated that he was contemplating some even more grandiose project
to absorb the Agricole, and by absorbing, save it. He had been talking
to Ismail, with die usual results: there was talk of a reorganization, a
big loan, new schemes for the greater glory of this nineteenth-century
Pharaoh.
This was no time to mince words. On 17 April Andr6 wrote Dervieu
one of his sharpest letters. He began quietly by reiterating his sympathy
Then he got down to business. He
for his friend’s personal difficulties.
pounded out one by one: The Agricole was through, and
his points,
the prestige of Egyptian business had thereby received a hard blow. For
the outside world, Dervieu and Oppenheim, but particularly Dervieu,
were responsible for the conduct -or rather misconduct - of the
company and its ultimate fate. The Agricole was not an isolated case -
it was one of many such projects, all of them created, or claiming to be
created, with the blessing and patronage of the Viceroy; every one
of them had failed. The Viceroy was an old hand at seducing those
around him with empty promises; it was high time to see these for the
mirages they were and to halt this mad, hopeless chase after gold that
would always be just out of reach. In short, Dervieu should, had to,
liquidate honourably, while he could still do so. As for Ismail, he
^ Andr^Dervieu, ly—4—1866. Andr6 learned the news from Dervieu’s brother
Gustave, who had just received it in a letter of 6 April from Alexandria.
28o bankers and pashas
should be made to understand that his pastcommitted him to save the
Agricole, and that his fiiture finances would depend on his conduct at
this point. Let him forget the idea of a loan: ‘You really have to be
Turkish to the core to dream of asking the public for the fourth time in
eighteen months, in the wake of two loans that have been a complete
bust and when the debtor is for meeting his obligations only with a
knife at his throat and for playing with his creditors as a cat with a
mouse,*
At the same time, the letter pointed out, Dervieu would have to give
some thought to his own firm:
Your firm has suffered in its credit and in its clientele. Your best shareholders
are seeking to withdraw. . . . Your name
being discussed, and since the
is
Oppenheims have withdrawn from the field, you are just about alone and
without support, face to face with everything. How to restore everything to
a good footing? By bus3dng yourself with the business of your firm, by
devoting to your shop the time that it has too long been deprived of by
and the dreams of great public creations, by reducing your engage-

politics
ments, by rejecting any distant and hazardous operation, by showing the

government that it must change its own pace and that that is a sine qua non
of your co-operation. You must get along for some time to come with
commonplace things. You will not be long in congratulating yourself
on doing so.
In the meanwhile, Andr^ was taking his own measures. He asked for
further details of Dervieu*s balance sheet: the notes, bills, and accept-
ances outstanding, and their origin; the composition of the portfolio
of accounts receivable. He called attention to the inflated advances to
the Egyptian government, which amounted to over one half of
Dervieu's liquid capital. He reminded Dervieu that for some time his
account with Marcuards had been inactive, and that his persistent over-
draft in the sum of 700,000-800,000 francs was taking on the character
of a permanent credit.^ This would have to stop: T am assuming . •
thatyou will take the necessary steps not to leave us in advance any
more except accidentally and for more moderate sums.* Also, he warned,
he would extend no more credit on ‘Turkish funds. Isthmus of Suez, or
other drugs of that nature.* If Dervieu wanted to handle further deals
of that kind for Ismail, he had better get cash from his royal client;
Andre would insist on cash in Paris.
^ As of 31 March, Dervieu et Cie owed Marcuards 400,000 francs on current
account and acceptances. A, Neuf., L.B., 560, 7-4-186^ to Dervieu et Cie, f. 262.
PANIC 281
Andre was serving his friend fair warning that he could not count on
the same support in adversity as he had received in prosperity. The
essence of good, conservative banking is to help most those who need
it least. It is all right to lend money, on good security, to wealthy
clients who need more money to make more money. It is not a good
idea to lend to clients who need money to keep from losing money.
Dervieu had now moved from the first group to the second.
There was a long and kindly afterthought, in which Andr6 assured
Dervieu that he continued to have faith in him, indeed, that he would
not make so much of these matters if he were not convinced that
Dervieu would have no difficulty regaining his influence and prosperity
by concentrating on regular commercial banking and eschewing the
‘feverish path’ of royal finance. These somewhat sweeter words did
little to soften the impact of the letter.
That same day, an official note went out from Marcuards to Dervieu
et Cie reminding them that remittances to reduce their deficit, which
would hardly have aroused Andre’s attention two years before, were
expected at any moment.^ The next day, 18 April, Marcuards asked
Dervieu et Cie to cover the balance of the Agricole, now reduced to
75,983 francs. Since Dervieu had guaranteed the company’s credit, the
Paris bank felt that he could remit for it and settle with the Agricole at
his leisure.®
In reply to Andre’s reproaches and admonitions, Dervieu could only

point out that things were not quite so bad as they seemed. In a letter
of 26 April 1866 he thanked his friend for the ‘affectionate sentiments*
of his letters of 27 March and 17 April. ‘One is happy in difficult and
painful circumstances to have evidence of a friendship as sincere and
devoted as yours.’ He emphasized the diminution of his overdraft,
which would be just about wiped out by remittances already on
the way. In spite of himself, however, his letter was a confession of
weakness.
He admitted that his account had been inactive; but that was only
because his ‘dear partner’ Gallo had systematically refused all credit,
even to shareholders of the bank. That was why he had had to buy out
^ A. Neuf.^ L.B. 560, 17-4-1866 to Dervieu et Cie, f. 713.

* Ibid., 18-4-1866 to Dervieu et Cie, f. 714.
one Stockholder;^ Ismail had lent him the 325,000 francs required.
Another stockholder, with 150,000 francs invested, had wanted to
withdraw half when Gallo refused an advance of 100,000 francs.^
Fortunately, Dervieu had succeeded in persuading Gallo to reconsider.
That was all. No one else had asked to withdraw, although several had
indicated they were not interested in maintaining their investment in the
event of an extension or reorganization.
In the meantime, wrote Dervieu, his situation was much improved.
Only about a third of the capital was immobilized in things like shares
in the Agricole and the Trading, ginning mills in the interior, real
estate in Alexandria. The rest was liquid: cash, some stocks, and
accounts receivable, which included only 2J millions owed by the
Egyptian government. By May, he would not owe anything to
anybody.
The Agricole, however, was something else again. Dervieu ad-
mitted that the company had been mismanaged. But that had not been
his fault; he had been away six months, and die men in charge - Bas6vi,
Anslyn, Richard-Koenig ~ had let the business go to the devil*. Their
incapacity, plus the cholera epidemic and the failure of the government
to pay for work performed, had brought about the collapse.
On his return Dervieu had done his best to save the situation. At the
last minute he had asked the Viceroy for a loan to facilitate the liquida-
tion. Ismail had agreed, and then reneged. On the other hand, the
government had already paid half of the £200,000 it owed the com-
pany, Unfortunately, the rest was held up pending the preparation of
exact accounts, and the debts of the Agricole would not wait. *The
Turks do not understand that.* As Dervieu put it, Ismail felt he was
‘doing a lot* by telling the world that he would see to it that the stock-
holders of the Agricole lost nothing.
Yet, dissatisfied though he was with Ismail’s position, Dervieu
could not bring himself to take the firm, uncompromising position
advocated by Paris. He thought it better to take up the negotiations in
detail rather dian press for a radical solution; and he felt it advisable
to liquidate the position of the Agricole before asking Ismail to come
in and protect the interests of the stockholders. He had no doubt that
^ Gebruder Dumreicher. These were old fnends of the Koenig family, and
Dervieu felt he could not refuse their request.

* G. de G, Popolani. He was the father-in-law of the journalist and writer on
Egypt, Ninet.
PANIC 283
everyone would be taken care of in the end; in this regard, he pointed

to what had happened to Oppenheim. This was not the bad sign that
Andre, reacting here like the passenger on a sinking ship who fearfully
waits his turn while some of his fellows depart in lifeboats, thought it
to be- On the contrary: Dervieu, who knew Egypt better, considered
it an admission of responsibility, ‘the only material proof of the Vice-

roy’s participation in the affair.*
The letter closed on a hesitant, wistful note:
sum up by sa3dng that I am certain that we shall get out of this sad
I shall
affair,which has been made too personal for me. How.^ I can’t say yet. It will
probably be the repurchase of all the assets by the Viceroy, or by a reorgan-
ization with large work concessions, payment for which would be insured
in a definite way. In this latter case, a loan would be necessary, and what you
tell me is certainly not calculated to make me think it feasible at the moment.
One can almost hear Dervieu sigh with regret,

Dervieu’s letter was obviously intended to answer Andre’s criticisms
and allay his fears. Yet when one reads it, one wonders how Dervieu
could possibly have expected it to serve this purpose; the danger of his
position was exceeded only by his incredible insensitivity thereto- His
evaluation of his assets, for example, in which he designated the 2J
million francs owed by Ismail as a liquid resource, must have made the
Paris banker shudder. And the 15,000 shares in the Agricole that
Dervieu admitted to accounted alone for one third of his capital
leaving aside the implications of £12 liability per share. ^ As for port-
folio, current accounts, unnamed merchandise, and other ‘liquidities’,
the fact that Dervieu could not spare 325,000 francs in cash to buy out
Dumreicher spoke for itself. Finally, and perhaps most disturbing, the
last lines showed that Dervieu was still not rid of his illusions; Andr6
was beginning to think that his friend was incurable.
Such as it was, Dervieu’s feeble attempt at optimism rested on the

precarious assumption that the firms that his bank was involved with
^ In the Dervieu speaks of 10,000 shares acquired subsecjuently to the
letter,
initial buy out Lucovich and Kiss. Yet other documents

subscription in order to
would seem to indicate that Dervieu had 2,000 originally, plus 15,000 purchased
later, as given in n. 3, p. 278. Either sum was excessive in proportion to the
resources of the Dervieu bank.
would somehow solve their own difficulties and come through the
crisis intact. The Society Agricole was only one of his problems.
There was G. Dervieu et Cie, which
also his brother’s house, Didier,
owed unconscionable sums and suppliers of equip-
to manufacturers
ment already shipped to Egypt for the Agricole and the Egyptian
government. Since neither of these could pay its bills, Didier-Dervieu
would have to find money elsewhere or suspend.
In normal times, these debts would not have been too serious; for
Didier-Dervieu, there had always been a delay between outlays in
Europe and realization in Egypt. Theretofore they had met the
problem by means of credits from Marcuard-Andre in Paris, Arlfes-
Dufour in Lyons, Cavan-Lubbock in London, similar houses in
Liverpool, Zurich, Mulhouse, and other centres, and above all,
Edouard Dervieu et Cie in Alexandria. It was Edouard Dervieu et
Cie who, by their prestige and relations with Marcuards, made it pos-
sible for a new firm with the modest capital of 225,000 francs to obtain
credits totalling over a million francs from some of the best merchant
and banking houses in Europe.^ And it was Edouard Dervieu et Cie
who acted as agents and protectors of Didier-Dervieu in its slow
and difficult Egyptian transactions, finding customers and obtaining
orders, collecting bills, advancing fimds repeatedly and generously
against anticipated sales and remittances, negotiating and dunning on
its behalf.2
Now, however, all the sources of credit had dried up. The merchant
houses in England and on the Continent were unable or unwilling to
help. Andre, who had long permitted Gustave Dervieu to draw simply
on his own say-so against his brother’s account, was beginning to
worry more about the guarantor than the borrower. And Dervieu et
Cie themselves had their hands full fighting to remain solvent. More-
over, this time it was not simply a question for Didier-Dervieu of delay
in reimbursement; there might not even be any reimbursement.
In spite of his own difficulties, Edouard Dervieu had no intention
^ There is a letter from P. Bakkers, representative of Didier-Dervieu, to
Marcuard, Andr4 et Cie in 1863 thanking them for their recommendation and
support, which had enabled the new firm to obtain generous credits throughout
Europe. A. Neuf.^ Inventaire, Letter no. 190.
* The official correspondence between Marcuard-Andr4 and Dervieu et Cie is
filled with deductions from the latter’s account to cover drafts of Didier-Dervieu
deductions presumablv compensated bv collections in Eevot.

PANIC 285
of abandoning his brother. For all his self-interest and egoism - Der-
vieu was only human - he was sincere in his loyalties and devoted
to his family. Whatever credit he still possessed was at Gustave’s dis-
posal. Even more, Dervieu was ready to throw into the struggle his
personal fortune, as distinguished from his resources as a banker. ‘I
ask of you, therefore,’ he wrote Andre

of 26 April, ‘on
in his letter
behalf of my brother, the continuation of the credit that you have
extended to him. It will be on my personal guarantee, and if, because of
your partners, this guarantee be not sufficient, offer them for me a
mortgage on the land that I own at Marseilles, which is easily worth
350,000 francs.’ Dervieu was being especially tactful. There was every
reason to believe that Andre would be just as quick as his partners to
take advantage of any security Dervieu could offer.
The situation worsened during the following fortnight. Once again,
the troubles of Europe were rebounding to plague Egypt. The money
market, which had been tight most of the winter but had recovered
somewhat in March, was uneasy once again. This time the prognosis
was definitely unfavourable; after eighteen months of creeping de-
pression punctuated by irregular crises, the bull market had little
strength in reserve; all that was needed was a push - an unexpected
liquidation, a bad rumour ~ to bring the once mighty animal down for
keeps.
On the 26th April, Marcuard-Andr^ sent out letters to all its
Egyptian correspondents asking them not to send any more paper of

the Imperial Mercantile and Credit Association, the Egyptian Com-
mercial and Trading Company, any English joint-stock
or, in general,
company; all the infant prodigies of the boom were now on the
index.^ In Alexandria, the private merchant houses that depended on
^ A. Neuf,^ L.B. 560, 26-4-1866 to Dervieu et Cie and Oppenheim, Neveu et

Cie, ff. 1008, 103 1-2. On
the Imperial and Mercantile, see above, n. 2, p. 66,
and n. 2, p. 68. This corporation, a typical product of boom finance, was closely
tied to Sir Samuel Peto, the famous railway promoter, who stood in April
1866 on the brink of bankruptcy. Its manager was Henry J. Barker, who, if we
was one of the architects of the new Overend-
are to believe Xenos, Depredations^
Gumey: finance company and accommodation house. Its clients in the Orient were
largely speculative enterprises like the Soci6t6 Agricole. All in all, although the
Imperial and Mercantile was able to announce a healthy 20 per cent, dividend at
its meeting of 23-1-1866, its profits were iUusory, its fimds were tied up in risky
ventures, and its prosperity, could last only so long as the boom continued.
Cf, Bankers^ Mcâs^ne^ XXVI (1866), 167-71.
them for credit could only hold tight and hope that the storm in Europe
would subside. In the meantime they turned to Ismail for help: there
was scarcely a firm of any size in Egypt that did not have a good part
of its capital tied up in advances to the Viceroy and his government;
Ismail’s bani. overdrafts alone totalled twenty to thirty million francs.^
Unfortunately for the merchants and bankers trying to realize such
‘liquid’ assets, both privy purse and treasury were empty, and Ismail
preferred to leave rather than face the pleading and importuning of his
creditors. Scraping up every last piastre he could find, he turned the
country over to a regency council and set sail for Constantinople to
buy from his suzerain the privilege of passing his throne to his direct
descendants.* After all, the funds at his disposal hardly permitted him
to do much for the business community in Egypt; they would have
been lost in a sea of claims. Moreover a little help reserved for a few
favoured firms could only hurt the feelings of the others and give rise
to further difficulties. Far better, then, to let all the creditors suffer to-
gether democratically and use the little money available for a cause
closer to his heart.
Alexandria was fuming. If the Viceroy’s loans in Europe had not
was his misfortune. His creditors wanted their money.
succeeded, that
Even Dervieu had screwed up his courage to the sticking point. ‘We
are all waiting with impatience for die return of the Viceroy,’ he wrote
on 9 May. ‘Our consuls are determined to push him to a settlement of
all his debts to the European merchants. It’s no longer paper that he’s
going to have to give, but money, and he’ll be able to find it in the
pockets fellahs^ who’ve been burying it away for so many years.’
The I idi of May 1866 was long remembered on the London market as
Black Friday. On that day the great ‘comer house’ collapsed, and with
it the bull market of the i86o’s. The chickens had come home to roost.
A general liquidation ensued. The Bank had gone to 7 per cent, on
the third, to 8 per cent, on the eighth. On the suspension of Overend-
Gumey, the rate went to 10 per cent, widiin forty-eight hours, there to
remain for three months. It was not to reach this level again until the
World War.
^ C.P., Alex., XXXVin, Outrey-Drouyn, 8-5-1 8<S6, f. 171.
* Douin, Histoire^ I, 214 et seq.
PANIC 287
On 17 May, after an exhausting week in London looking after the

interests of his firm, Alfred Andre returned to Paris and sat down to
write Dervieu the unpleasant news. The first half of his letter described
the debacle: billions of francs lost on securities and commodities;
general discredit; the finance companies ruined; business paralysed in
and Russia, with France momentarily - but
Italy, Prussia, Austria,
only momentarily - standing up

pretty well. The rest was devoted to
matters of more immediate concern; die relations of Dervieu and his
brother with Marcuards. Andre was ready to help Gustave Dervieu -
‘within reasonable limits, with due regard to circumstances, and taking
things from day to day* - so long as Edouard co-operated. This meant
that Edouard must remit no risky paper, no more drafts on Suez, no
Egyptian bonds. This ruled out just about every piece of commercial
paper in Dervieu’s portfolio and 95 per cent, of what 3S available on W
the Alexandria market. As usual, Andrd tried to soften the blow with a
few apologetic words:
I am not an alarmist ordinarily, as you know. I am rather of the opposite

disposition, and I know of nothing more unpleasant than to excite vain and
unjustified fears in others. But that is not the case at this moment; there are
too many serious things to be feared not to arm oneself with everything
availableand against every eventuality. If things turn out better tl^ we
up quickly and there will be no occasion to regret
think, business will pick
our prudence, even though it may have imposed some sacrifices.
O wad some Power the giftie gi’e us . . . Andrd was no alarmist -

just a Cassandra. And if, unlike Cassandra, he was not always right in
his premonitions, he was unfailingly energetic in his precautions- The
letter of 17 May was accompanied by a cable proscribing Suez notes
and Egyptian treasury bonds and -even more serious - asking
Dervieu et Cie not to draw at all for the moment.^ Cut off from his
main support, Dervieu was forced to unload large blocks of securities
at a heavy loss and ship specie to Europe. There is no more expensive
way to remit funds.
In the meantime, Didier-Dervieu floundered. Each month was
bringing its harvest of maturities, its barrier to cross. The end of May
promised to be especially difiicult; Andre asked Dervieu to draw up all
^ A. Neuf.y L.B. 562, telegram 17-5-1866 to Dervieu et Cie, f. 765; also tele-
gram 18-5-1866, f. 817. Suez paper had become absolutely unacceptable. Cf.
ibid., 9-5-1866, f. 368.
the papers needed for the mortgage he had offered on his property in
Marseilles - nothing like being prepared.^ Edouard Dervieu in return
could only beg his friend to continue to support his brother.®
Dervieu et Cie were not alone in their misery; the whole of Egyptian
business was in utter confusion. Everyone no one
tried to collect;
wanted to pay. The native houses, less tender of reputation than the
European, simply turned to the haven of bankruptcy.® The Europeans
struggled, and like non-swimmers tossed together into stormy seas,
dragged each other down in the effort to save themselves. The Agricole,
its cup brimming over, was caught up in the suspension on 12 May of
the Imperial and Mercantile Credit. It had remitted over 100,000 francs
in draftson the latter firm to Marcuards; the bills were protested of
course; Andre covered ‘to protect the signature* of the Agricole, then
asked Dervieu to cover him in accordance with his guarantee.^ The
Anglo-Egyptian found itself compelled to dump a large block of Daira
bonds to meet immediate obligations, but another such sacrifice was
unthinkable; the firm was on the brink of suspending.® On
19 May, the
European Bank failed, taking with it, at least for the moment, over
100,000 francs of Dervieu*s limited resources. Andr^ covered as usual
and asked for immediate reimbursement.®
Next to the Agricole and the Anglo-Egyptian (leaving aside such
firms as the Socidtd Finandere d’Egypte, which had been moribund for
so long that we hardly know of its existence at this point), the Egyptian
Commerdal and Trading Company was probably the hardest hit by
the crisis. Its future looked black even through rose-coloured glasses:
almost £2 ,000^000 in liabilities was covered by £1,000,000 ‘owing*
from the Egyptian government, and another million tied up in specula-
^ Andre-Dervieu, 17-5-1866.
® Dervieu-Andre, 19-5-1866,
C.C., Alex., XXXVUE, Outrey-Moustier, 8-11-1866, fF. 357-64.
^
A, Neuf,y L.B. 562, 18-5-1866, 26-5-1866 to Sodet6 Agricole, ff. 866, 1226;
26-5-1866 to Dervieu et Cie, f. 1186; L.B. 564, 6-6-1866 to Sodet6 Agricole,
f. H39; 25-6-1866 to Dervieu et Cie^ f. 1077 his.
® On 17 May, Andre wrote Dervieu; ‘You are right to keep your eye on the
Anglo-Egyplian Bank. If the Viceroy doesn't come to their hdp, it is impossible

for them to pull themselves out of trouble without losses that would be equivalent
to ruin, since there can be no question of renewal of the drafts presently in
drculation.'
• Ths Ecomrmst^ 26-5-1866, p. 655; A. Neuf,, L.B. 562, telegram of 19-5-1866
to Dervieu et Cie, f. 887; L.B. 564, i8-6-i866 to Dervieu et Cie, f. 789.
PANIC 289
tive operations that were in large part guaranteed by cotton and similar
illiquid security.^ Much of its capital was engaged with the Agricole,
whose collapse had only complicated an already desperate situation.^
Faced with maturities that would not wait and armed with un-
realizable assets, the company was forced in May to make of
a call
a share. It could not have chosen a worse time; the shares, which had
been languishing at some 70 per cent, discount, were now unsaleable
at any price. When they fin^y found their level again, they were
barely acceptable at less than 5 per cent, of paid-in value.®
There were many reasons for the Trading's predicament, the most
important being mismanagement by executives whose eyes were too
big for their pocketbook. In the words of H. C. Kay, one of the
directors in London, ‘The evil from which we are suffering comes
down to this, that our manager in Alexandria has taken on too many
affairs, af&irs that are far from bad in themselves, but have tied up too
much money, especially since the help that we have had to give the
Agricole, both directly and indirectly’.^ By comparison, the difficulties
of the company with the Egyptian treasury were simply salt in a
mortal wound.®
At least the wound would have been mortal almost any place but
Egypt. There, however, the company was only too quick to make the
accessory the principal and lay all its hardships at Ismail’s door. A
formal notice was filed at the British consulate to this effect, citing (i)
the failure of the Treasury to pay monies owed on verbal contracts
- the Regency Council was apparently reluctant to reimburse the
company of its own assertion in the absence of the other party to the
‘contracts'; and (2) the responsibility of the Viceroy for the ‘failure’ of
a £joofiQO loan to his unde Halim Pasha, a loan that could hardly
H. C. Kay to Dervieu, 24-5-1866.

^
®Cf. A, Neuf.y L.B. 560, 28-4-1866 to Dervieu et Cie, f. iioi; L.B. 564,
26-6-1866 to Dervieu et Cie, S. 1114— 15.
* The shares, which were £6 paid in, were selling at 3 J at the end of April.
On the i2th of May, after the failure of Overends and just before the call, they
were at if. At the end of May, after a period when no price could be quoted
at all, they were as low as -J.
These prices are taken from The Economist,
*
Letter to Dervieu of 24-5-1866.
^ The French consul, discussing the financial dd>ê in Alexandria, judicdously
remarked tiiat if the European crisis continued, even prompt payment by the
Egyptian government of all its dd>ts would not save its creditors. A,E., C.C.,
Alex., XXXVin, Outrey-Drouyn, 19-5-1866, ff. 206-7.
U
have failed since it was never intended to be marketed.^ At the same
time, the French agent was roused to action by those French business-
men who stood to suffer by the fall of the Trading.^ They made a
powerful group; if the Trading went, half the private houses in

Alexandria went with it.
Everybody was lying in wait for Ismail. The Viceroy had left
Egypt at the end of April, in the nick of time. Within the next two
weeks, the business houses of Alexandria set up their clamour for
immediate reimbursement, and from about 5 May, the consuls of the
major powers added their voices to those of their nationals. The
regents were at a loss. The treasury was empty; many of the claims
rested on alleged oral commitments of the absent ruler; and in the
despotisms of the Orient, ministers do not usually act on their own
initiative. Moreover, Ismail had unquestionably given orders to dis-
burse as little as possible.

Yet the pressure was irresistible. On 19 May, die consuls of England,
France, Italy, and Prussia submitted a joint demand to die Council
that the government pay its outstanding notes and overdrafts, and that
it do without issuing any more paper that might hurt
this if possible
the value of the notes already in circulation. If the treasury did not
pay promptly, the consuls warned, the government would be held
any and all losses incurred because of the delay.®
responsible for
This threat shocked the ministers into action. They decided to
collect two months’ advance and turn the proceeds over to the
taxes in
impatient creditors; although the last harvest had long been sold and
^ These are the arguments cited by the French consul. Ibid., 9-6-1 86<S, f. 229.
The reference is to the second of two loans to Halim Pasha on the security of his
estates. The first, for £310,000, was made by Oppenheim, Neveu et Cie, Dervieu
et Cie, and Briggs and Co. The second was for £700,000, almost half of it
intended to cover debts already contracted with the Trading. As best as can be
made out from contradictory sources, this second loan was taken partly by the
Trading, which was renewing in effect its earlier advances, partly (one third
according to one document) by
bank directed by M. Bravay’, that is, the
‘the
London and Mediterranean Bank, of which Bravay was a director. Apparently
the Trading had tried to sell Halim’s notes without success. Ismail took over the
ddsts of Halim in April 1866, just before leaving for Constantinople. Hamza,
Puilic Debty p. loo; Dervieu, Emprunu, p- 19; Douin, Histoirey I, 288; A.E,^
C.P., Alex., XXXVI, Outrey-Drouyn, 19-9-1865, f. 335; C.C., Alex., XXXVHI,
Outrey-Drouyn, 31-7-1866, f. 325. ® Cf. ibid., 28-6-1866, ff. 264-6.
®Ibid., 19-5-1866, ff. 203-7; C.P., Alex., XXXVIII, Outrey-Ragheb Pasha,

19-5-1866, ff. 205-6; Dervieu-Andr6, 19-5-1866.
PANIC 291
farm revenues were at their low point for the year, the Council hoped
to raise in this way some twenty million francs.^
But even today taxes are not collected overnight - much less in
the Egypt of i86(S — and twenty millions were hardly enough to cover
even the Viceroy’s overdrafts. Where was Ismail.?* On 8 May he won
the agreement of the Porte to succession by direct descent and primo-
geniture.2 On the nineteenth, word reached Eg^pt that he would
return in a few days,® He did not come. Instead, he kept sending
requests for money to pay for gifts to the Sultan, bribes to his ministers,
and the general expenses of a viceroyal vacation, while the exaspera-
tion of the hard-pressed businessmen of Alexandria rose with every
shipment of bullion that left the harbour,^ On the twenty-seventh, the
firman proclaiming the new order of succession was issued in Con-
stantinople,® Ismail was now expected any day, but he was too busy
enjoying his new' honours to leave the Bosphorus. Besides, the news
from Egypt was hardly the sort to hasten his return; the letters and
wires of his bankers, purveyors, courtiers, and toadies barely offered
a sentence of congratulation before laimching into entreaties and
solicitations.
The indignation of his creditors boiled o\êr. The Viceroy had his
firman; why was he staying in Constantinople.^ If he thought he w'as
going to dodge his by so childish a ruse, he was
responsibilities
mistaken. Ismail had had his playing bank against bank until he
fiin
had them all at his mercy; he had exploited the business community
long enough — there was a limit to despotism and arbitrariness. Ismail
could do what he wanted to his owm docile subjects, but he would soon
find out thatEuropean merchants and bankers were not the gulls and
sheep they seemed.® Ismail could not stay away forever, and when he
got back ... he was assured of a warm w'elcome.
^ Ibid. * Douin, Histoire^ I, 218. * Dervieu-Andr^ 19-5-186(5.
C.P., Alex., XXXVin, Outrey-Drouyn, 27-5-1866, f. 218.

* Dotdn, Histoire^ I, 218-21. *ITie firm^ is given in extenso,
® Cf. A.E., C.C., Alex., XXXVHI, Outrey-Drouyn, 9-6-1866, ff. 228-31.
CHAPTER 14
4c
LIQUIDATION
Ismail Constantinople 18 June on his luxurious new yacht, the

left
Mahroussai he arrived in Alexandria on the twentieth.^ His pleasure at

his success in Constantinople was tempered by annoyance: he felt that
his friends among the foreign colony had not shown the proper
enthusiasm for the accomplishments of so productive a voyage; and he
was not at all convinced of his duty to save the banks and trading com-
panies of Alexandria from failure. A few heart-to-heart conversations
with the representatives of the Western powers helped him change his
mind. He gave the Trading ^{^40,000 in cash and ;;(^28o,ooo in notes at
four to six months ~ far more than the company had expected.® He
reimbursed the London and Mediterranean Bank for all their advances
to Halim Pasha, plus ‘the profits they might have hoped for/ ® He took
the unsold portion of the Daira loan off the hands of Pastr6 and the
Anglo-Egyptian and indemnified them for their good intentions.^ He
arranged to reduce his overdrafts to the other banks of Alexandria.®
Nevertheless, many of the European firms in Egypt were already
too far gone to be saved even by the liquidation of their biggest account.
There had been such flagrant over-trading, so much had been under-
^ Douin, Histoire^ L 231.

^ A,E,^ C.C., Alex., Outrey-Drouyn, 28-6-1866, fF. 264-7. In his letter to
Andxi of 19-5-1866, Dervieu mentions £70,000 in 90-day treasury bonds. It is
not clear whether the £320,000 of June was given in addition to this sum or in
place of it.
® C.C., Alex., XXXVin, Outrey-Drouyn, 31-7-1866, f. 325,
^ See above, n- 2, p. 259.
5, the Viceroy had already managed

® According to The Times^ 29-6-1866, p.
to find some £1,300,000 to meet the claims of his creditors and the interest on the
debt. Though the sources are silent on the point, we are probably justified in
assuming that most of these payments took the form of promissory notes and
other negotiable paper.
292
LIQUIDATION ^93
taken on verbal orders, or suggestion, or vaguest intimation, that when

the time came to realize profits, it was almost impossible to determine
the amounts involved. Day after day, week after week, through one of
the hottest summers in memory, the merchants and bankers of Alex-
andria sweated over their perfunctory, makeshift records and the ciy-ptic
accounts of the Egyptian treasury, their impatience exasperated bj’
And even when some figure had been agreed
thoughts of cooler climes.
upon, there remained the struggle to collect, for Ismail’s pockets were
as empty as ever, treasury notes had fallen to the lowest point since the
reign of Said, and whatever was available had to be apportioned among
the clamouring claimants according to the urgency, force, and oppor-
tuneness of their demands. In the meantime, the credit of these firms
was broken like Humpty-Dumpty; all the money in Africa could not
restore it; Europe was convinced, and \vith reason, that most of the
business in Egypt was rotten.
Among the firms for whom Ismail’s return was simply a reprieve
was Dervieu et Cie, still struggling under the dead weight of Didier-
Dervieu and the Agricole.^ For the moment, Dervieu’s concern for the
fate of his brother overrode all other considerations. In an effort to
persuade Andr^ to continue his support, he prepared a report on Didier-
Dervieu stressing the contribution the firm was making to the develop-
ment of French industry: ‘[their business] has made it known in Egypt
that the great industry of France can compete with those of England
and Germany/* Why Dervieu persisted in these appeals to chauvinism
with a rational financier like Andre is an intriguing question. One must
conclude that, whatever Andre really thought of the injection of these
emotional irrelevandes into business matters, he had always been too
tactful and prudent to disillusion his friend — with the one exception of
the rebuke of 1865 (‘You write too much’).® Dervieu clearly thought
he was addressing himself to a sjmipathetic ear.
At the same time, however, he was compelled to take his own
measures. To prevent a suspension of payments, he ‘advanced’ Gustave
the amount represented by the latter’s claims against the Egyptian
government and the Agricole — almost 700,000 francs — and took them
over in the name of his own firm.^ In effect, he thereby transferred the
risk to his own shoulders. Even this, however, was at best a stop-gap.
1 Cf. C.P., Alex., XXXVm, Outrey-Drouyn, 9-7-1866, fF. 255-6.

® A, Neufi, carton ii. Undated note (c. June zS66).
* Dervieu-Andr6, 8-7-1866.
® See above, p. 228.
In another month - by the end of July - new monies would have to be
found to meet the continuing maturities of Didier-Dervieu’s paper.
In the meantime, there was still the Agricole. In a letter of 8 July,
Dervieu wrote Andre to try and get the Minister of Foreign Affairs to
write the French consul in Alexandria to press the claims of the French
Lubbock, the London merchant, had just brought a
shareholders. Mr.
note from Lord Clarendon to the English representative;^ a similiar
reminder to M. Outrey would never hurt. Perhaps, wrote Dervieu,
Andre’s friends, the Heines, might use their influence with Achille
Fould, Minister of Finance - the Heines had just entered the banking
firm of Fould and Fould-Oppenheim.®
Dervieu preferred to see the pressure on behalf of the Agricole come
from Europe; he Tvas busy enough pushing his own case. On 19 August
he was able to announce to Andre in sober, tired tones tiiat contrasted
with the exuberance of other years that Ismail had agreed to take over
his shares in, and credits on, the Agricole. Dervieu was to receive three
million francs: ‘you can understand how much relieved I now feel.’ ®
Andr6 could also feel comforted; these shares, plus the block already
purchased from Oppenhdm, gave Ismail an interest of five million
francs in the Agricole.^ ‘This is an assurance for the other interested
parties of arriving at a complete solution, of getting their money
back . . .
’
Dervieu promised to work toward this end.®
Yet such a solution was still a long way oflF, and Dervieu had not yet
settled his immediate problems. He "was looking forward to winding
up his own firm, which had almost stopped doing business since Andre
cut off all credit in May. The year 1865-6 had been a miserable one,
with losses that had not only destroyed all accumulated reserves, but
eaten 10 or 12 per cent, of the capital. Dervieu hoped to make this up
by the end of 1866-7 so as to be able to reimburse all shareholders for
^ Cavan, Lubbock and Co. had over 3,000 shares in the Agricole.
* Achille Fould, the Minister of Finance, was brother of the senior partner of
the bank.
* The contract was signed on 1 6-8-1866.
*
This is the figure given by Dervieu in his
letter of 19-8-1866. Presumably
this was the total, rounded
of Oppenheim*s 9,000 shares (1,800,000 francs)
off,
and Dervieu's 1 5,000 (3,000,000 francs). It is not clear how much Dervieu was to
receve by the August contract for his credits on the Agricole.
® In subsequent letters, Andre did not allow his friend to forget how much he
was interested in getting his money out intact. Every dispatch contained a sentence
like, T recommend to you again our interests as stockholders of the Agricole.'
LIQUIDATION 295
the foil amount of their investment. He had a few affairs under way
that would pay nicely:^
Among others, there is the concession of the construction of the quays of

Alexandria, which my firm more than two years ago and
was awarded to
which I am going to cancel with the Viceroy. This operation alone give
us 250,000 francs. I am also counting on a few new affairs from the Viceroy,
because he won’t want a firm that he has patronized and helped finance to
liquidate at a loss.
Dervieu had always prided himself on his correctness and fair dealing
in a society and economy where virtue - even the negati\'e virtue of
honesty - was the rare exception- He had always held himself apart
from the harpies like Bravay whose abuses and machinations had made
the court of Said - and, to a lesser extent, that of Ismail - a symbol of
corruption- Now, in his fall, he was unconsciously joining their ranks. ^
He had never done anything toward building the quays of Alexandria,
indeed, he might have been liable to damages for failure to fulfil the
contract, yet he wanted a of 250,000 francs. As for ‘new affairs’,
profit
there was no reason in the world why Ismail should save the bank at
his own expense from winding up with a loss; no reason, that is, except
that European firms were not expected to lose money in Egj’pt, and if
the government had already helped so many houses, it could certainly
help Dervieu’s.
Dervieu needed Ismail’s help. He could no longer count on much
assistance from Paris. On
August i866 he wrote to ask Andre to
19
extend him credit once again: ‘I thank you in advance for whatever
figure you decide on. You know our situation, our way of working .
Andre knew only too well. He allowed Dervieu 300,000-400,000
francs, told him that business would be good if only peace continued
(‘God grant to spare us the horrors of war and to give to him whom he
has charged to rule us down here [Napoleon] the wisdom that he
needs not to throw us into adventures’), and reminded him that
diligent application to traditional ‘pure banking’ wôuld help make up
for earlier losses and ‘the probable disappointments’ of liquidation. He
^Dervieu-Andr6, 19-8-1866.
*In this connexion, note Dervieu et Cie’s remittance, perhaps merely fortui-
tous, of a bill of 57,500 francs, on Bravay et Cie of Paris. Marcuard-Andre
immediatdiy advised Al^candria that it would collect on maturity, but reminded
Dervieu that the signature of the drawee was not the kind to make his acceptances
digible as cover. A, Neuf.y L.B. 566, 10-7-1866 to Dervieu et Cie, f. 474.
also told him to lay down the law to his brother’s firm: ‘We consider
them For a few months yet, and until
as being virtually in liquidation.
they are more advanced in this task and back in possession of their
resources, they should not do any new business or undertake any new
^
engagements.’
Within a few days, on 17 September, Andre had occasion to write
again. He refused a proposition of Dervieu to sell, either on com-
mission or a fifty-fifty basis, some 500,000 francs in Eg3rptian bonds
that Dervieu had picked up at 16 per cent. Andrd noted that the
Suez Company had beaten Dervieu to the punch and ‘its faucet [was]
far from closed’.® The same letter asked Dervieu to send no more
Egyptian bonds as cover for his drafts -a crippling restriction on a
man who expected most of his future resources to come from the
Egyptian government.®
Ismail proved a disappointment, however. Whatever the Viceroy’s

intentions may have fulfil his August
been, he could not possibly
commitments to Dervieu with his treasury empty and his revenues
shrunk. Moreover, the little money available had to go farther than
ever: the tribute to Constantinople had been almost doubled to
persuade the Sultan to grant the recent firman; the instalments to Suez
were bigger and more frequent since the conventions of January and
February; and Ismail’s fondness for yachts, palaces, and similar toys
had in no way diminished with his pecuniary resources. The man was
a true prince: he never let business interfere with the important things
in life. No wonder that as the year wore on, as summer changed to
autumn, most of the claims arising out of the spring crisis were still
pending; Dervieu was only one of a crowd of solicitors.
^
Andre-Dervieu, 13-9-1866.
®Suez was selling the treasury bonds it was receiving from the Egyptian
government at 15 per cent, discount.
® Marcuards had already warned Dervieu against paper on Marseilles, which
had suffered severdiy in the crisis. A. Neuf,^ L.B. 566, 28-7-1866, f. 1300. Later
warnings were issued against various cotton houses of Liverpool and Le Havre,
the Eastern Exchange Bank of Liverpool, and drafts of Greek houses on their own
branches or vice-versa. Ibid., L.B, 574, 17-11-1866, ff. 679-80 (personal from
A. Andr6).
LIQUIDATION 297
Like the other claimants on the Viceroy’s purse, therefore, Der%*ieu

was forced to contract or no contract; and like most of the other
claimants, he wâs in no position to wait. Nor did the reassurances of
the Egyptian government help; if anything, they only serried to
exasperate his impatience. It must be admitted that, even under the best
of circumstances, creditors are not easy people to put off vith words.
But there was something maladroit in Ismail’s accuses, something
suspicious in his procrastination, something evasive in his promises.
There was - and his creditors sensed it - a vague hope on his part that
somehow, by dragging things out, by weaiydng his pursuers, by burj'-
ing both issues and claims in a hazy past, he could make eveiy’thing -
debts, claims, and people - disappear. There was also a touch of spite;
Ismail obviously enjoyed tormenting his tormentors. All this was
ridiculous, of course. Delay merely increased the rapacity of the
creditors lent to even ihe most questionable demands the plausi-
and
bility of long-standing. But it was the inevitable reaction of a man who,
pardy right and partly wrong, had no means of defending even his
right against more powerful adversaries.
Early in September 1866 Dervieu began legal proceedings against
the Agricole; by having the company declared en faillite^ instead of
simply in liquidation, he hoped to precipitate the realization of its
assets and force the hand of the Viceroy. Almost immediately, he
agreed to give the corporation a delay until 16 September in the
The sixteenth came
expectation of setding with Ismail in the interval.^
and went with more reassurances but no money. Dervieu resumed
legal proceedings; Ismail dissuaded him again; and so on into autumn.
Towards the end of October, Ismail left Cairo for Upper Egypt, leaving
no instructions for the execution of the August contract. Dervieu, his
patience exhausted, broke off negotiations and shifted his attack from
the Agricole to Ismail himself.
The break had finally come. Dervieu et Cie brought suit through
the French consulate. Gallo wrote Andre that Dervieu was ‘tired of
seeing thatno engagement was kept, that no promise was carried out,
that no was recompensed, that a sincere devotion that does not
sacrifice
date from yesterday was ignored.’ ^

The two partners were sure of victory. As Gallo put it, they had
worked too long for Ismail, knew too much about him:
1 A, Neufi^ L.B. 570, 8-9-1866 to Edouard Dervieu (personal), E 294-5-
• Gallo-Andr^, 19-11-1866.
Everything leads us to believe, therefore, that an arrangement will inter-
vene and that it will be favourable to our interests; were it to lead only to our
realizing our assets and covering our losses, we would consider ourselves
very satisfied- We are going therefore to pursue with care and perseverance
the solution of our disagreement with the Viceroy and we hope to succeed in
giving our shareholders a liquidation that will not make any inroads into
die capital that they have been kind enough to entrust to us.
Dervieu possessed some embarrassing, perhaps even damaging,

sell Ismml his silence - a most dubious
information, and he was ready to
procedure. It is quite unlikely that Edouard Dervieu would ever have
knowingly perpetrated blackmail - the usual kind of blackmail, that is,
the ugly kind that exploits the passions and sins of ordinary mortals.
But this was obviously different: a Viceroy is not an ordinary mortal,
and the iniquities of politics and international finance are infinitely more
respectable - and hence more exploitable - than violations of the Ten
Commandments. Thus is the boundary tenuous between infamy and
respectability.
Furthermore, although Dervieu was unquestionably a sincere man
who lived with his conscience, his was not one of these rigid, tyrannical
consciences that coldly keep their distance and impose on their osten-
sible mastersan absolute code of right and wrong, Dervieu was on
good terms with his conscience; they were old friends who understood
each other and realized that life is not always so simple as it seems. In
such an atmosphere of mutual comprehension, the justification of
extortion in dealing with Ismail would not have posed too difiicult a
problem.
Finally, it must be remembered that Dervieu was only human; and
he would have had to be something more than human to resist the
temptation to make use of the weapons at his disposal, if only to

brandish them. The difficulty is that diose who are weak enou^ to
brandish are rarely strong enough to withhold the blow. Dervieu’s
original demands, justified or not, were fairly modest: we would be
very satisfied, Gallo had written, to finish without loss. That was in
November. A month later, Dervieu was asking for 10 per cent, a year,
and patting himself on the back for his self-restraint:
Our claims come down to this; to be able to cover the loss we had on our
capital to 30 June lastand further to give to our shareholders 10 per cent,
interest for last year and for the present one. I didn’t want an extortionary
lawsuit against the Viceroy; I have rested my case on nothing but questions
LiqUIDATION 299
of right and equity. If I had wanted to make use of the weapons my intimate
relations with him have placed in my hands, I could have asked for millions.
He knows it very well, and you can understand diat it is an incentive for him
to give me full and entire satisfaction, since I am asking him only for things
that are just and indisputable.
It would thus seem that abnegation was part of Dervieu’s rational-
ization: so long as he asked Ismail for less than he could, so long as he

limited himself to what he felt he really deser\'ed, Denieu could pretend
that he was not really practising extortion. To be sure, only a master
of casuistry could fed a between pajment for
significant difference
fear of and
disagreeable revelations payment out of gratitude for the
suppression of revelations, and Dervieu was no casuist. Yet it is re-
markable how the requirements of conscience quicken the eye and
sharpen the mind, so Aat even the smallest shred of extenuation will
leap to view and serve to weave a cloth of justification.
The following months were spent negotiating, alternately cajoling and

threatening Ismail.^ From the 27th of December when Dervieu
and the French consul Outrey came to Cairo to get Ismairs answer,
through January and well into Februarj’ of 1867, the banker did not
leave the capital. On the i6th of January, Ragheb Pasha, Minister of
Foreign Afi^rs, agreed on behalf of the Viceroy to reinstate the
contract of August 1866 and pay Dervieu et Cie an additional in-
demnity of £100,000. By a coincidence, this was exactly the amount of
Ismail’s share in Ae company. When, therefore, Der\’ieu liquidated his
firm on 30 June and reimbursed his partners, Ismail would in effect get
nothing.
This agreement ‘in principle’ still left all the details to be settled and
a multitude of minor differences to be ironed out; after w’hich there

was
always the problem of collecting. In the meantime, Dervieu was
actively preparing the organization of a successor bank.
The con-
will
tinuation of our business’, he wrote Andre on 18 February 1867,
de
be taken over by M. Amic, nephew of Gallo, our present JbnJe
1 Much of the story of the struggle is based on a letter from

Dervieu to Andre
shareholders in Dervieu
of i8_5-i8<57, which was intended for the different Paris
et Cie and gave a recapitulation of negotiations
with the Egyptian government.
pouvoirs^^ and by M. Monchicourt, the present partner of my brother.
We hope to be able to furnish them a commandite of 1,500,000 to
2,000,000 francs; they will positively engage only in banking, broker-
age, and mercantile transactions on commission. I hope you will be
willing to grant them the confidence and help you have accorded us;
they deserve it in every respect.*
Dervieu had similar plans for Didier-Dervieu. His brother*s firm
would close down its Alexandria branch and reorganize the Paris
office. In the meantime, Dervieu was helping it wind up by opening
successive credits for it with Marcuards with each reimbursement
received from the Egyptian treasury.
As for himself, Dervieu planned to retire: 1 am not ambitious and I
shall be sufficiently occupied by the assistance I can give the two firms
in Alexandria and Paris.’ He still hoped, however, to dip occasionally
into the honey-pot of viceroyal finance: 1 shall come fairly often to
spend the winter in Egypt, and I have every reason to hope that my
personal relations with ihe Viceroy will soon be re-established in a way
that will yield some more profit, not only for me, but especially for the
firms I shall organize.’
February became March; March, April; April, May. On 7 May 18(57,
the Eg3^tian government finally executed its promise of January,
paying Dervieu et Cie 2,500,000 francs for shares in the Agricole,
some 1,400,000 francs for credits on the same firm, and 2,500,000
francs as an additional indemnity for sundry damages. In return for
which Dervieu et Cie released the government from commitments to
award contracts for public works totalling forty million francs to the
joint-stock company that Dervieu had not succeded in creating. This
was what was called in the Egypt of the period a quidpro quo,
On 18 May 1867, Dervieu wrote Andr4, and through him all his
partners in Paris, to announce that the government had finally paid up

and to call a meeting of the commanditaires in Alexandria for the 17th
of June to discuss the coming liquidation. Among the questions to be
placed before the meeting were ihe following:
^ An official who, though not a partner, is given the right to sign for the firm
in certain kinds of transactions. He may or may not receive a share of the profits.
LIQUIDATION 301
(1) . . . whether some of them (among those who live in Egypt) would
not take over part of the assets in reimbursement of their interest. The esti-
mates that will be made may offer some opportunities for speculation.
(2) ... whether
it would be opportune to constitute a new firm, either a
joint-stock company or a partnership, to make the most of the balance of the

liquidation and to profit from the clientele of the firm.
We do not have the response of the Aleicandria shareholders to the

first of these propositions. It is most unlikely that any of them cared
to indulge in ^s kind of speculation; in whidi they were only too wise.
As things turned out, the liquidation of the company w'as not nearly so
easy as Dervieu expected, in spite of Ismail’s gift of <$,400,000 francs,
or almost two thirds of the total capital. An inexcusably large pro-
portion of the bank’s assets was tied up in land, fectories, and every-
thing but commercial paper. Instead of finishing before the expiration
of the partnership in June 1867, Dervieu was still winding up his
afftirs two years later. As for the 10 per cent interest he had promised
- he raised his estimate to 16 per cent in a letter of 19 May

his partners
-
1867 nothing was ever seen of it The conmancRtaires eventually got
their money out and could thank their stars for that
In making Andrd the second proposition, Derv'ieu ivas wasting his

breath. On 28 May - Dervieu’s letter of the eighteenth had probably
-Andrd wrote hastily to T. N. Anslyn, chancellor of the
just arrived
Dutch Consulate-General in Alexandria and protdgd of Ruyssenaers,
to ask him to represent Marcuards in the litpidation.^ This was the
same Anslyn who had been comptroller of the Agricole and w’hose
alleged incompetence Dervieu had already had occasion to denounce
in a letter to Paris; Andrd apparendy no longer took mucdi account of
his friend’s opinions. ‘We want’, he emphasized to Anslyn, ‘to see the
liquidation effected as quickly as possible;we do not want to keep any
interest in the new firm that may be organized to continue the business
of E. Dervieu et Cie. You will, therefore, in so frr as we are concerned,

have to make use of your voice and your influence to see that w'e
are reimbursed in the most prompt, the most simple, and the most
advantsêous manner.’
t A. Neuf^ L.B. 586, 28-5-1867 to T. N. Anslyn (personal firom A. AndrA),
ff. 969-70.
CHAPTER 15
IN GUISE OF EPILOGUE
An era had ended in the history of Western business enterprise in

Egypt. The collapse of the cotton boom in i8<55 and the bursting of the
company bubble a year later had swept away a whole crop of banks and
merchant houses, most of them founded only a few years before. In
their places, a new group of players occupied the Egyptian stage.
For Egypt was not bankrupt yet - there was still money to be made.
Trade, though less prosperous than in the early i86o’s, continued to
be important^ the volume of exports and imports never went down
again to pre-cotton-boom levels.^ Moreover, as large as the debt was
in 1866, as extensive and chaotic as was the unknown mass of treasury
notes, Daira bills, and other paper of official provenance, the govern-
ment still had some credit on the European market. New banks like the
Credit Fonder, the Soddte G^nerale, and Rothschilds sent repre-
sentatives to Cairo to offer their services to Ismail; alongside the
Anglo-Egyptian Bank and the Trading rose the Sodet4 G4n^rale
d’Egypte, the Banque Austro-Egyptienne, the Banque Franco-
Egyptienne, and similar firms, created to satisfy the needs of European
commerce and the viceroyal treasury; where once Bravay and the neo^
dkvorcmts strutted and puffed, new adventurers like the Lavisons now
enlivened the Egyptian comedy - or tragedy, as the reader will have it;
a new minister, Ismail Saddik Muffetish, succeeded Nubar as unoffidal
grand vizier. 2
In the meantime, the older companies went about the painful
business of commercial death. Some, the bigger ones espedally, went
out noisily; most, however, disappeared with perfect discretion — they
^ See Appendix, p. 329.

On this period, which falls outside the scope of this history, see especially
Douin, Histoirey Vol. H; Hamza, Public Dehty pp. 130 et seq.; Sabry, Empirey
pp. r34'-8o; and Jenks, Migradtmy pp. 316-20.
302
IN GUISE OF EPILOGUE 303
have left no trace on the historical record. A few managed to sundve

but never recovered their old prestige and prosperity. Of the old-
timers, only Oppenheims managed to retain its importance among the
new concerns that came in to take the places of the fallen.
The Agricole made the most spectacular exit. For three years it was
something of a came celebre^ as French and British stockholders used
all their commercial and political influence to force Ismail to indemnify
them- Neither group had an easy job. Ismail was determined to hold out
as long as possible: first, in order to discourage some of the stockholders
and get them to sell out in advance at a discount; and second, just to
spite his afflicters.

Yet spite is the weapon of the man who has already lost his fight, and
Ismail’s readiness to pick up shares at a ‘bargain’ showed that he was
reconciled to the inevitability of defeat Dervieu had called the turn: in
the crazy business world of Eg3rpt, the moment Ismail bought Oppen-
heim’s stock he admitted his responsibility for the entire paid-in
capital of the Agricole. The foreign offices of France and Great
Britain hammered at this point. The French, long experienced in this
kind of bullying, led the way; as a result, the French shareholders
collected first The British Foreign Office leaned over back^’ards in an
effort to be fair to But they could not allow their nationals
all parties.
to be disadvantaged, and insisted in the end that British stockholders

be indemnified on die same terms as the French. Imperialism makes
short shrift of good intentions.^

The Egyptian Commercial and Trading Company was mortally
wounded by the crisis of 1866, but took a long time to realize it. For
the moment, it was saved by the call of £3 per share and some timely
assistance from But the bulk of its assets remained frozen, and
Ismail.
its credit was ruined. A
few indignant stockholders wanted to look
into the situation; they had every reason to believe, they asserted, that
the managers in Alexandria were guilty of incompetence if not wôrse.
They were out-manoeuvred by the board of directors in a stormy
1 The records of the Agricole affair are unusually abundant. The British
Foreign Office has preserved two entire volumes of correspondence and docu-
fat dosrier on
ments (F. . 78-2166 and 2167), and the Neuffize bank has its own
0
Unfortunately,
the negotiations conducted by some of the French stockholders.
it would have be^
the Quai d’Orsay has apparently lost its records of the affair;
British in thdr
of the greatest historical interest to compare the French and the
handling of this kind of matter.
meeting that could go down in history as a classic of company manip-
ulation. A committee was appointed to investigate the situation under
the presidency of Heath of the International Financial Society, the firm
that had promoted the Trading and probably still held a large block
of its shares. Since Mr Heath, who admitted that the company was in
a ‘horrible mess’, ‘felt disposed to pity rather than to blame* the
directors, the conclusions of the committee were foregone. As for the
dissident shareholders, they were neatly classed as troublemakers and
put in their place. Unity and harmony, Heath pointed out, were essential
was to pull through; in the ‘difficult and delicate negotiations*
if the firm
to come, he had to know the people he would be working with - a

divided committee would get nowhere. The stockholders were offered
a choice between mighty Heath and the rebels; they took Heath.^
Heath was not enough. Within a year, the Trading was informally
liquidating,and every report to the stockholders brought new dis-
appointments in the realization of assets. The capital was reduced by
reimbursement of the £3 called up in 1866 and redemption of the
13,000 shares paid for the business of Briggs and Company in 1864.*
Not until October 1868 did the company pay up all its liabilities and
begin to reimburse the original capital. At that time, some of its assets
were still frozen in bonds that had five years to run. The shareholders
could look forward to a long wait and the probability of heavy
losses.®
The demise of the Soci^t6 Finand^re d’Egypte was, if anything, even
more hapless. The company had never got started. It had vegetated
even at fhe height of the boom and in January 1865, well before the
other banks in Egypt had felt the pressure of the crisis, had been
forced to make a call of £4 a share. No one paid. By 1866, the
Finandfere was almost forgotten; at the end of the year, advertisements
were placed warning the delinquent stockholders that unless they met
the call, their shares would be sold. It was an empty threat: no stock-
holder in his right mind would pay a farthing, and no investor in his
^ The details of the meeting are given in the Mon, Mar. i2ev., XIII (1866),
54-5 •
® How the holders of these shares managed to obtain this favotir and thereby
avoid the losses of the other stockholders, we shall probably never know. It is,
of course, possible that the terms of sale gave the owners of Briggs and Co, the
xi^t to redeem their shares at par.
*Ibid., p. 504; XIV (1867), 24 f-, 484, 595 f-i XV (1867), 682; XVI (1868),
18, 3(58.
right mind would touch the shares. In the summer of 1867, m^ngs
of stockholders in Paris and London voted to wind up the firmH^
first dividend to capital was distributed in November of the following
year: 90 francs on 250 paid in. The rest of the capital V’as harder to
realize. In October 1869, the British stockholders, inspired perhaps
by the Agricole affair, asked the British consul to support their claims
against the Egyptian government; they did not know that Stanton was
sick of claims. In any case, the liquidation, like that of the Trading,
promised to be slow and disappointing. The company died as it had
lived, in almost disreputable oblivion.^
The Anglo-Egyptian Bank was more fortunate than most of the
other boom-bom firms. Ismail’s generous assistance after the failure
of the Daira loan gave it a new lease on life, but at the same time the
collapse of the Agra and Masterman’s Bank in the crisis of 1866 and the
decline of the General Credit and Finance Company cut the bank
loose, as it were, from its moorings.^ It found a new ally and protector
in the Credit Fonder of Paris, which was beginning
to take an active
Egyptian finance and needed a competent but subordinate
interest in
correspondent in Alexandria.* In the period following die near-disaster
of 1866, the Anglo-Egyptian did spectacularly well: within welve
months, £153,000 in net profits were available to meet earlier losses;
the next year the Bank dedared 12J per cent. By 1872, there was
£100,000 in the reserve and a dividend of 20 per cent. The company
climaxed these happy years of lucrative floatations and speculations in
wildly fluctuating government paper with a short-term loan to Ismail
of £8,000,000 in 1875. It "was the wrong time; in 1876 the bankruptcy
of the Egyptian government wiped out the bank’s entire reserve.
Once again, however, the Anglo-Egyptian made a spectacular recovery,
this time thanks to the reorganization of Egyptian finances by Britain
1 Ibid., xm (i86<5), 560, 570; XIV (i8(57), 760; XV

(1867), 94; XVH
(1868),
45 <5; F.O. 142-32, Stanton-Clarendon, no. 95: 27-10-1869 . have not been able
to locate minutes of the apparently irregular meetings of the stockholders.
® These were the sponsors of the Anglo-Egyptian on the London market; see
above, p. 205. On the failure of the Agra bank and the reorganization of the
Genei^ Credit and Finance Company, see King, History of the London Discount
Market^ pp. 244, 257 f.
The Credit Fonder had long strayed from its original objective, which was to
®
provide cheap credit for French agriculturist. Cf., among others. Guard,
Travaux publics^ pp. 261-3, ^“‘d D. Pinkney, ‘Money and Politics in the Rebuild-
ing of Paris, 1860-1870’, Journal of Economic History, XVII (1957)? 45
X
and France. By 1878 reserves were back to £100,000. Eventually the
stockholders, who liked the fat years but never learned to tolerate the
lean, began to call for run-of-Ae-mill stability rather than get-rich-
quick uncertainty. In 1885, the annual report of the directors reflected
die demand for a new policy: the bank ‘was gradually but surely
emancipating itself from anything like a system of hanging on or being
dependent on the doings of the Egyptian government. We are laying
the foundations of a hona fide commercial business.’ This after more
than twenty years’ existence as a commercial bank.^
The Bank of Egypt was almost the only firm in the country that was
not hurt badly by Ae crash of 1866. The El-Hami mess had left the
company which marked the
crippled during precisely those years
boom. Like a convalescent boy forced to sit by a window
height of the
and watch his playmates slide on the ice, die Bank of Egypt had had
to content itself with safe and sane commercial transactions while its
competitors had made fortunes in speculation and royal finance. Like

the convalescent boy, however, the Bank of Egypt could not fall and
break its neck. At the very depth of the crisis, its shares held firm.^ In
subsequent years, the firm sank into a sort of effacement that was at
once the reward and measure of its prudence and respectability. Un-
fortunately, a later generation was not ready or able to maintain the
traditions established during the critical early period; the Bank of
Egypt failed just before the first World War in one of the worst
financial crashes in Egyptian history.®
The true wizards of Eg3q)tian finance were the Oppenheims. No other

firm held so important a place for so long a time through such extreme
vicissitudes. They seemed to have a magic touch.
In 1865 they doubly offended Ismail by walking out on one loan at
the last minute after duping' him on another. The Viceroy railed,
stormed, and swore by everything sacred that he would free himself
^Most of the above is taken from Baster, ‘Origins*, pp. 80-1. Cf. also the
sottrces dted in n. 2, p. 302.
* The shares of the Bank of Egypt, on which £25 had been paid in, were
selling for £32 at the end of April, just before the crisis began. They reached a low
of 25 towards the end of May and hovered there for about a month, though never
dropping below par. By the end of July they were up over 30 again. These quota-
tions are taken from Th& Economisu ® Politis, Hellinismey II, 267.
from their treacherous clutches, whatever the cost Whereat the
Oppenheims poured salt in the wound by accepting a new contract,
then reneging on it and impounding the fiinds of the Egyptian govern-
ment to force it to consent to more favourable terms. Could human
flesh and spirit stand more?
They could. In 1867 Ismail needed a couple of million pounds and
arranged with the Oppenheims and the Imperial Ottoman for a loan
at 9 per cent.^ And in 1868, when the floating debt was on the point of
sinking and taking the treasury with it, it was the Oppenheims who
contracted for a huge ^ 12,000,000 issue that was floated simultaneously

in London, Paris, Amsterdam, Frankfurt, Berlin, and Alexandria and
yielded Ismail a little over seven millions. The margin bet\^*een the
61.25 or so paid by the promoters and the 75 paid by tlie public came
to more than ;£i,6oo,ooo.^
This did not satisfy Ismail, who was, as usual, borrowing to pay
debts already incurred; toward the end of 1868, he wâs again making
small loans to cover his more urgent expenses. Nor did it satisfy the
Oppenheims, who naturally felt that one good profit should not pre-
clude another. So that when Ismail turned at this time to other sources
for minor, momentary assistance, the Oppenheims were deeply
offended to see even these picayunes of ro}^ finance fall into oAer
hands. In retaliation, they began pressing dieir long dormant claims
against the Agricole; a bill of £50,000 would teach Ismail that the
banker who offers the lowest interest is not always the cheapest.® And
while this behaviour hurt the Viceroy grievously, it did not prevent
His Highness from resorting to the Oppenheims again in 1873, when
a last, tremendous effort was made to consolidate the Egyptian debt*
Hamza, Public Deh% pp. 119-20; see also below. Appendix D. This w'as the
1
firstappearance of the once-dreaded Constantinople firm in Egyptian royal

finance. Ismail's need for money and his achievement of hereditary succession
had overcome his fears of Turkish interference.
®Ibid., pp. 148-50; Sabry, Empire igypden^ pp, 136-47; Douin, Histoire II
37-78 (a detailed account),
® jF.O. 78-2167, Qarendon to Stanton, no. 5: 20-1—1870. The Oppenheims also
threatened to demand a call on the shares (it will be remembered that they had
sold their shares to Ismail).
* Hamza, PuhUc Debt, p. 249 f.; Sabry, Empire^ pp. 156-7. In March 1872,
Oppenheims contracted still another loan of approximately six million pounds in

association with the Imperial Ottoman, the Franco-Egyptian, the Anglo-
Egyptian, Marcuard, Andre et Cie, and others. Ibid., p. 153*
3o8 bankers and pashas
Yet there was nothing magic about the Oppenheims* touch. For
one thing, they had in their early years the advantage of contacts
with important and active European firms that stood ready to support
their operations on the only market that really counted: London. At the
same time, they knew their customer. They talked the only language
Ismail could understand: money; not friendship, or loyalty, or loving-
kindness - just money. When Ae Viceroy wanted to spend, they stood
ready to execute his orders - for a fee. WTien he wanted to borrow,
they were ready to lend - for interest, commissions, and sundry other
charges. But when he was difficult or troublesome, when he was slow

in paying or slow in borrowing, when he was ungrateful enough to
look elsewhere for money, then the Oppenheims would apply pressure
by cutting off his funds or threatening an extortionary lawsuit or under-
mining his credit in Europe. Of course, they never squeezed the
Viceroy too hard; their purpose was simply to bring the prodigal back
to his senses and into the fold. But they realized that with an incurable
spendthrift like Ismail, a kick in the pants was worth a million words
and a good loan could cover a multitude of insults.
On the other hand, the Oppenheims were not the only ones to
use strong-arm methods in dealing with Ismail; Egypt was full of
businessmen who could think in no other terms. Unquestionably, die
continued predominance of the Oppenheims in the face of keen and
powerful competition owed as much to skill and tact as to rigour and
impudence. In short, they knew how to alternate the carrot and the
stick. If Ismail wanted to spend more dian was wise, for them rather
than for him, they did not impose economy upon him; they knew per-
fectly well that if they did not help, someone else would, and that
‘with a debtor like the Viceroy, cleverness consists in leaving a little
slack in the reins and not letting him feel the bit, the better to hold
him*.^ And when Ism^l was in one of his real viceregal rages, as in
the affair of the railway loan, they knew how to make concessions; time
enough to return to the charge when tempers cooled- Dervieu’s letters
speak on several occasions of hasty visits by Hermann Oppenheim to
Cairo, of sharp conflicts healed by timely and conciliatory conversa-
tions. It is no accident that powerful joint-stock companies like the
Soci6t6 Gdnerale of Paris and the Imperial Ottoman worked in Egypt
through this small private firm, which, dwarfed by their resources, far
surpassed them in experience and adroitness.

^ Haxnza, PulVic Debt^ p. 245, citing Le Progrks^ 14-8-1869, p. 3.
For all and energy as bankers, the Oppenheims did not
their skill
make business the be-all and end-all of their existence. In 1 866 or there-
abouts, Hermann settled in Paris, T^here he rapidly became one of the
social lions of the declining Second Empire. He bought the Hotel
Scribe for 400,000 francs, acquired a chateau in the country", and filled
his mansions with old masters and costly objets d'aru He did eveiything
that a social lion should do: had a box at the Italiens, rode in the Bois
de Boulogne at the fashionable hours, gave parties that -^'ere alwaj s
good for a few paragraphs in the newspapers. His greatest reception
was given for Ismail in 1869: a ‘magnificent’, ‘sybaritic’, ‘sardana-
palesque’ affair where, between a play and a t\^’0-o’clock banquet, the
imperial court orchestra played to a ballroom full of titled dancers.^
Within a few years of this triumph, Hermann died; in the language of
sports, he went out on top.
Henry had other ambitions. In 1868 he married Isabelle Georgina
Butler, daughter of the Honourable James Butler and granddaughter
of the thirteenth Lord Danboyne. AlAough active in Eg\*ptian finance
until the bankruptcy of 1876, he was already settled in London by then,
and it was he who informed the journalist Greenwood, and through
him Disraeli, of Ismail’s intention to sell the canal shares.® In later years,
Henry Oppenheim became interested in politics, bought a share of the
Daily News, and established himself as a strong supporter of the
Liberal Party. He almost became a Peer. When, in 1911, it began to
look as though the constitutional crisis could be resohêd only by
packing the House of Lords, Oppenheim was one of the candidates
on Asquith’s list. He died a year later, lea\dng the sizeable but far from
spectacular fortune of £500,000.®
The Oppenheims must have been especially galling to

success of the
Dervieu, not only because he had preceded them in Alexandria and
even helped them get a foothold in Egyptian finance, but also because,
by all that was logical, it was he who should have remained in die
Viceroy’s graces and not they. He did not renege on contracts and then
impound the Viceroy’s money; he did not denigrate the credit of
Egypt; almost to the very end, he did not threaten Ismail with
1 Auriant, Bravayy pp. 114-17* * Sabry, Empirey p. 162.
* I am indebted for most of the above to Mr Paul H. Emden.
diplomatic action or assail him with concocted legal briefs. Rather he
showed for several years a humbleness and servility that would have
melted the heart of Pharaoh. But Ismail could not spend Dervieu’s
complaisance whereas he could spend Oppenheim’s money. The day
thatDervieu could no longer even contemplate an important financial
operation for the government, he was through in Egypt.
He was through by 1868. Nothing illustrates better his exclusion
from the field of international finance than the following passage from
a letter to Andre of 13 June concerning the loan of that year: ‘Are you
in the Oppenheims’ syndicate? And in that case, would I be indiscreet
to ask you what are the conditions of participation? Oppenheim has
promised me a share, which he has not yet stipulated, and that*s why
I’m asking you for this information.’ Dervieu had lost his place at the
banquet table and could only wait at the door and hope for leftovers;
Oppenheim threw him a scrap of £75,000.^
At this point, Ismail was venomous in his execration of a man who he
felt had deceived and exploited him. The violence of his wrath seems
so disproportional to the crime - there were dozens of Europeans in
Egypt who had made their fortunes by deceiving and exploiting the
government - that one is almost forced to conclude either that Dervieu,
who knew better how to wheedle Ismail than to bully him, was
particularly tactless in his last-minute resort to diplomatic pressure,®
or that the Viceroy was making him the scapegoat for all his resent-
ment against the European community, or lhat there was more to the
break than met the eye.® Or perhaps, as is often the case when a worm
turns, Ismail was more irritated by Dervieu’s change of tactics than by
the tactics themselves.
In any event, Ismail’s wrath eventually subsided, and in later years
Dervieu was able to renew relations and offer once again his financial
services. In 1871 he proposed in vain a ^([lo,000, 000 issue of municipal
bonds secured by existing and projected public works in Alexandria and
Suez.^ And in 1875, it was he who for over two weeks held the option
^
Dervieu-Andr6, 9-7-1868,
*
There is evidence that, although Dervieu tended to be extremely easy-going,
even too easy-going for his partner Gallo, he could be over-rigorous in moments
of difficulty. Cf. his prosecution of the claims of Marcuard, Andr6 et Cie against
the bankrupt firm of Issaverdens in Constantinople. A. Neuf.^ L.B. 568, 8-8-1866
to E. Dervieu et Cie, f. 327; 18-18-1866 to Oppenheim, Neveu et Cie, f. 757;
L.B. 570, 8-9-1866 to E. Dervieu (personal), ff. 294-5.
* See above, pp. 297-9. ^ Hamza, Puhlk Deht^ p. 187.
IN GUISE OF EPILOGUE
3 ”
for the Suez Canal shares that were eventually secured by Disraeli;
in spite of frantic negotiations,
Dervieu could not persuade the pri\'ate
and joint-stock banks of Paris to join forces and offer Ismail reasonable
terms.^ On a smaller scale, Andre Dervieu et Cie, successor firm of the
original bank in Alexandria, made several short-term advances to
Ismail during these years -the Viceroy was always short of petty
cash between major floatations. The last of these loans was made in
1876, on the eve of Egypt’s bankruptcy: £700,000 for five months at
24 per cent, per annum plus 6 per cent- commission.^
Needless to say, however, Der\-ieu and Ismail ne\'er resumed the
friendship and intimacy of the past. The two books written by Der\ieu,
published in Alexandria in 1870 and 1871, were both attacks on
Egyptian finances and financial policy; the historj^ of the Daira loans,
particularly, showed that the Viceroy had long employed treasury’
funds to enhance his personal fortune.® Subsequent relations bett^-een
the two men were strictly exceptional and strictly business.
In 1869 Der\'ieu began construction of a magnificent home in
Paris facing the rotunda of the Parc Monceau. In spite of losses on the
Agricole and Didier-Dervieu - 400,000 francs had gone to save his
^ It is possible thatthe French houses were more concerned over the effect
that the sale might have on the value of Eg>^tian securities already outstanding
than on the potential profits of the transaction itself. Cf. Jenks, Migrattoriy p. 322.
Dervieu, in a personal memorandum on the circumstances of the sale, estimates
that the banks of Paris were interested in Egyptian securities - in direct holdings
or in loan collateral - to the amount of four to five htmdred million francs. The
Credit Fonder alone held 170 millions in Egyptian paper, on a paid-in capital of
45 millions. Jenks, Migrathn, p, 321. The story of the sale as given in C, Lesage,
U achat des acnons de Suei (Paris, 1906), should be completed by Sabiy^, Empire^
pp. 159-66. Lesage does not mê
clear the responsibility of the French banks
for this blunder, which is too often attributed by French writers either to the
machinations of Anglo-Jewish plotters, or to a tricky manoeuvre of the British
government. For the former -less respectable but persistent - tradition, cf.
A. Chirac, Les Brigandages historiques; Vantage sous la Troisieme Ripuhlique^
iSyo-iBSy (2 vols.; Paris, n.d.), I, 136-9. For the latter, cf. Jules Bertaut in
Le monde des affaires en France de Loids-Philippe a nosjours (Paris, 1952), p- 601 f.
In Paul Dervieu^s typewritten history of the ‘Famille Dervieu*, there is a verbatim

copy of Edouard Dervieu's account, which served as the basis for Lesage’s
study.
Hamza, PuhRc Deht^ p. 248. At this time, Max Ladson, one of Ismail’s
®
intimatesand a latter-day Bravay, held a procuration for the firm.

«E. Dervieu, Emprwits^ pp. 47-51. The other book wos Ce qtia couti a
VEgypte le Canal de Sue^ (Alexandria, 1871).
brother from bankruptcy - he had managed to salvage about five
million francs from his Egyptian ventures. In 1872 he opened a
banking house in Paris, which in the following years helped found
numerous industrial enterprises, among them mining firms in Greece
and South Wales and the Sod&e G^nerale des Allumettes Chimiques
in Paris. In some of these enterprises, Dervieu was associated with
men whom he had already known in Egypt, Sabatier and Outrey for
example, once consuls in Alexandria and now flourishing as promoters
and capitalists. In the match company, his colleagues were Mallet,
Hottinguer, Pillet-Will, Vernes, et some of the brightest names in
the Haute Banque,
In 1878 Dervieu was one of the promoters of the Union Gen^rale,
in 1880 of the Anglo-Universal Bank, in 1881 of the Banque Com-
merciale et Industrielle, destined to become, under the name of Credit
Industriel et Commercial, one of the most important banks in France.
This was the high point of his Paris career. The Union Generale
crashed in 1882, and although Dervieu had resigned from the board as
early as 1879 over differences in policy, he had made the mistake of
leaving his money in the firm. At the same
time, he lost 400,000 francs
in another concern and 900,000 francs embezzled by a trusted friend.
There were further losses in the following years, and in 1887 Dervieu
had to suspend. Within a year he had paid all his debts in full, con-
suming his fortune in the process.
He never went back into business. In 1905 he died in modestly com-
fortable circumstances, a kindly, white-bearded man of over eighty. He
had always been extremely devout, and his generous donations to the
Catholic Church had led Pope Leo XIH in 1880 to make him a Roman
count. His family remember him to this day for his lo5^1ty and affection,
which made him sacrifice large sums to the prosperity of his less com-
petent relatives. Inmany respects, Dervieu was by far the most capable
and imaginative in a bicentennial dynasty of merchants and bankers.
Twice in his career he came close to winning a place in the inner circle
of international finance. In his case, however, a miss was as good - or
worse “ than a mile. Dervieu reached too far and lost everything.^
Alfred Andr^, like Dervieu, never attained his goal in Eg3q)tian finance.
^ The above paragraphs are based on P. Dervieu, ‘Famille Dervieu'.
He never got his national bank, for example, nor did he succeed in play-
ing in Paris the promotional role that Friihling and Goschen had filled
in London. For one thing, Andr4 was too prudent to expose himself
to the risks of floatation in all but the most favourable circumstances;
he was the kind of seaman who wants perfect weather before raising
anchor and puts for shore the moment the barometer drops. Further-
more, Andre could not possibly place an important issue in Paris
without the co-operation of some of his colleagues; the demand was too
limited, and only by combining the clienteles of several private houses
could the promoters hope to create a wide market. Yet Andre’s friends
of the Haute Banque were even more cautious regarding Egyptian
securities than he was. He had solicited the collaboration of Messrs.
Mallet, Hottinguer, Pillet-Will, and company on several occasions;

they were always polite and sympathetic, but could never quite see
their way clear . .
Nevertheless, even after Dervieu’s departure, Marcuards continued

to lend to the Egyptian government on a modest scale. In 1868 they
subcontracted for a share of the big Oppenheim issue of that year, and
in 1872 they participated in a syndicate with Oppenheim, the Imperial
Ottoman, and others to lend Ismail some six million pounds at medium
term.^ Their most important Egyptian venture of these years, however,
was one that never panned out. In 1868, Andr4 tried to persuade Ismail
to sell his shares in Suez. The Viceroy was interested, and plans were
devised so that the large block of stock could be unloaded without
driving the price down. In the fece of intimations of British dis-
satisfaction, however, Ismail felt compelled to drop the project. In
diplomacy a hint is often as good as a command. ^
Alfred Andr6 himself began in his later years to combine politics
^ Sabry, Empire^ p. 153.

2 Andre-Dervieu, ^5-1868; Dervieu-Andre, 19-5-18(58, 27-5-1868, 21-6-
1868; Andre-Tigrane Abro, Secretary of Nubar Pasha, 23-6-1868. Andre’s
proposition was passed on by the French consul Roustan to Ismail (Dervieu
being in disgrace), who showed it in turn to Stanton. The British consul char-
acterized it of some stock jobber to make a certain sum
as probably ‘the attempt
of money’. A later letter of Lord Stanley warned that the Viceroy could not be too
careful in a speculation of this kind and expressed doubt that die people making
the proposition had Egypt’s interests at heart. F.O. 142-30, Stanton-Stanley,
no. 56; 27-5-1868; 142-32, same, no. 78: 25-6-1868. Andr4 would have been
hurt to hear himsdtf' described as ‘some stock jobber’. But the operation did in fact
call for some difficult and highly speculative market manceuvres.
with banking. In 1870 he was named maire-adjoint of the ninth Paris
district; the following year he was elected to the Chamber, where he
sat until 1876, voting generally with the so-called ‘conservative
republicans*. At the same time, he was one of the negotiators with Leon
Say of the war indemnity of 1871, and in 1874 was appointed to the
Conseil Sup^rieur du Commerce et de l*Industrie.^ All these political
interests took a lot of his time, but this was more than compensated
by the new relations and new business acquired thereby. ^ The 1870*3
for example, saw Marcuard, Andre et Cie more active than ever in the
promotion of both French and foreign government issues.® In the
years from 1871 to 1880, the bank netted 14,694,000 francs as against
10,610,000 in the preceding decade.^
By this time Alfred Andre was receiving all the honours to which a
French banker could ordinarily aspire. He was a regent of the Bank of
France; no other post had so much prestige and
in French business
importance. He was a of the Paris-Lyon-Mediterran6e Rail-
director
way, the Messageries Maritimes, the Societe Suisse pour Tlndustrie,
the Banque Nouvelle des Chemins de Fer Suisses, ike Nationale in-
surance company and the Imperial Ottoman Bank. When he finally
retired in 1887, he was truly a grand old man, one of the elder states-
men of French finance.
Yet he was only sixty and still had years of active and profitable
business before him. He felt, however, that God had given him a little
extra ‘time of grace’ that he could not afford to waste on making
money.® His last years were devoted entirely to the charities and
philanthropies that had always been an important part of his life. He left
no children, and his only brother Georges, though nineteen years
^ These and other facts of Andre’s political career are taken from a rough
biographical note prepared by Andr^ himself for some unknown purpose. A,
Neuf.y ‘Notes personnelles’. See also Andre’s biographies in A. Robert and G.
Cougny, DlcuonncoTe des parlemmtaires (5 vols.; Paris, 1889-90), I, 64-y, and
the Dictionnaire de hiographxe frangaise^ II, 898-9.
® Cf. A, Neuf,^ Actes de and relevant correspondence, A. Andre to Jules
societe
Marcuard, 13-8-1875; Jules Marcuard to Andre, 15-8-1875.
* Aside from Marcuard’s share in the payment of the war indemnity, the firm
participated in loans to the City of Paris (1871 and 1875), the Department of the
Oise (1871), Egypt (1872 and 1873), Haiti (1875), Spain (1876), and Portugal
(1877) -among others. Ibid., inventaires and selected dossiers; also De Neuflh(e
et Cie,
* A, Neuf,y inventmresy x86i-8o.
® Ibid., Actes de sociiti and relevant papers, A. Andr6 to G. Girod, 13-9-1887.
younger, preceded him to the grave. When he died in 1896, his line
died with him, a line of bankers for over two hundred years.
Of all the actors in our drama, the one who came off worst (excepting
the people of Egypt, of course) was Ismail. It was no doubt largely
his own fault. All his failings persisted: the inordinate ambition, the
vainglorious improvidence, the deviousness and duplicity in money
matters. When the cotton boom ended with the re-entry of the
finally
United States on the world market, he turned to sugar and spent a

fortune building refineries to process his crop; in the absence of the
kind of critical shortage that had favoured cotton production, however,
the results were slow to come and disappointing. He never abandoned
hisdreams of African empire and threw large sums into exploratory
and military expeditions in the regions of the Upper Nile; but the area
remained rebellious, and the railroad to Khartum was never built. He
continued the diversified programme of public works: quays in
Alexandria, railway spur lines, irrigation canals; but he poured another
fortune into urban embellishments, palaces, wedding feasts, and similar
luxuries.
Finally, untold amounts went for indemnities, fraudulent and semi-
fraudulent claims, exorbitant prices to purveyors and contractors, and
all manner of bribes designed to buy cheap honours or simply respite
from harassment. Suez in particular returned to the charge again and

again. In 1868-9 the company, forced to scrape the dregs of the
extortionary barrel, tried to compel Ismail to pay for the right to
collect customs on goods imported into the canal area; it argued that
the original concessions, whidi gave it the right to import its ‘machines
and supplies* free of duty, had meant thereby anything and everything
brought in by any resident of the area. Even the French consul balked
and the claim was eventually abandoned. Lesseps was forced to settle
for duty-free importation of all goods consumed by his own employees
- itself an unjustified privilege that reflected the desire to Egypt to
appease him and, behind him, the Emperor of France. The unco-
operative consul paid for his conscience with his post.^
^ On this incident, see especially the discussion by Sabry, Empire^ pp. 299-304.
Sabry apparently used only the correspondance politique - not the correspondance
3i6 bankers and pashas
This partial defeat, the only one Lesseps ever suffered in his dealings
with the Egyptian government, only forced the ingenious entrepreneur
to find other pretexts for an assault on the treasury. He found them
without delay (the company cashbox did not admit of procrastination)
in a catch-all of rubbish that was either no longer of use to the company
or never belonged to it By agreement of July 1869,
in the first place.
the canal sold to the Egyptian government those barracks, hospitals,
and other structures built to serve during construction and no longer
required; a stone quarry that the company had been allowed to exploit
for purposes of building and maintaining the waterway; the above-
mentioned right to import duty-free goods consumed by its own
employees, a right that Lesseps himself described as a burden, since the
company ‘would have to maintain an ad hoc labour force in order to
profit by it’; tlie exclusive privilege of fishing in the canal and the lakes
it traverses, which Lesseps admitted had never been granted the com-
pany; divers other imaginary ‘rights’; and, most important for Egypt,
a renunciation by the company of any further claims. With the canal
about completed, Lesseps felt that he could afford to call a halt to his
forays.
The Egyptian government paid 30 million francs for this package.
Since it had no cash, it abandoned its rights to interest and dividends
on its shares in the company for a period of twenty-five years. Lesseps
in turn issued at 260 francs 120,000 assignment bonds covering the
detached coupons; the gross yield to the company on the transaction
was therefore almost 60 millions, while the purchasers of the assign-
ments could hope for a total of about no million francs in interest
alone during the period in question. As though this were insufficient,
the Eg5q)tian government also agreed to share with the company the
proceeds of future sales of improved land along the canal, in spite of
the fact that the Emperor’s arbitration had specifically enjoined the
company from seeking any profit firom this source. To be sure, Lesseps
was ready to argue that if the canal was prevented from profiting from
the land left it by the arbitration (which had presumably stripped it of
all land not absolutely necessary to its operation), it was not stopped
from conceding such ‘rights’ to a third party! In view of the nature of
comnurciale (Alexandria, Vol. XXXIX)-but he has most of the evidence.

Douin, Histoirey 11, 138-47, has used the correspondance commerciale^ though he
does not provide exact citations. His version is, as usual, extremely sympathetic
to the canal and the French Foreign Office.
1869
November
17
Canal,
Riou)
Suez
by
the
watercolour
up
Ships
contemporary
of
a
(after
Procession
First
The
VIII.
IN GUISE OF EPILOGUE 31?
consular justice, Ismail may well have felt that half a loaf was better
than none.^
In any event, Suez was only one of the claimants on the Khedive’s
prodigality; every year he spent far more than he took in. He never
lacked for moneylenders; if anything, the pack of suitors increased,
for the profits of Egyptian finance grew as the position of the treasury
deteriorated. Not only was Ism^l ready to pay more for money, but
the rise of a vast floating debt - such as had existed in the closing years
of Said’s reign - opened the door to the most lucrative speculations. In
particular, the contractors of the public loans floated from time to time
to clear the market of the choking flood of short-term obligations were
able to remit the proceeds of their issues in the government’s own
depreciated paper, thereby doubling their margin and more. The
rewards of such a compound operation were so great that by the end of
Ismail’s reign the alternation of private short loans and public bond
issues to pass these debts on
to the investors of Europe had been
worked up to a system.^ The heretical doctrine of Dervieu - that the
way to make money in royal finance was to cater to Ismail’s money
hunger and lead him on to the point where only a public loan could
save him - became the credo of his successors.
In the end, the paper mountain collapsed. A huge loan of £ 1 2 million
in 1873-4 was a great success for the contractors tlianks to Ismail’s
generosity in pulling their irons out of the fire; it was a disaster for the
Egyptian treasury. Subsequent operations were even more costly, and
by the end of 1875 Egypt was faced with a suspension of payments. In a
desperate effort to stave off disaster, Ismail consented to sell his shares
in the canal. He got some £4 million, a pitifully small transfusion for
the bloodless hulk of his country’s finances. He was fortunate to get
that much.
In the early months of 1876, Ismail was borrowing at
30 per cent,
and the first of several European commissions was investigating the
state of Egyptian finances. As a result of its report, a Caisse dc la
Dette was instituted in May. Another inquiry, in November of that

year, led to the establishment of Dual Control, with an English rep-
resentative supervising the revenue and a French agent overseeing
^ On all the above, Sabry is once again the best source, for all his indignation.
The citations from the diplomatic archives speak for themselves.
* Cf. T. Faucon, Uemprunt igyptien et les capitalist's franpais (Paris, i B 73 ),
pp. 39-41.
expenditure; at the same time, the railroads and the port of Alexandria
were internationalized. In 1878, finally, the Daira "was placed in
European hands.
This -was the last straw. In an effort to rid himself of these foreign
rulers, Ismail accepted the formation of a constitutional ministry,
which included two European members with veto powers. Within
seven months, however, he found this arrangement no less un-
palatable than the other. At the same time, the more vocal and educated
of the native population were increasingly resentful of these infidnge-
ments on Egyptian sovereignty. There were riots in Cairo, and it was
soon apparent that the Khedive was in danger of being by-passed not
only by his European overseers but by his nationalistic subjects as well.
At this point, in April 1879, Ismail dissolved the cabinet and formed
one composed entirdy of Egyptians. It "was his last effort at defiance.
England and France now decided to get rid of him for good, and when
hints that he abdicate were ignored, asked the Sultan to depose him.
Constantinople was only too happy to oblige and, by obliging, give

reality to its suzerain power. On 26th June Ismail received the famous
cablegram, addressed to the ‘ex-Khedive*, which summoned him to
leave the government to his son Tewfik. He made no resistance. Like
a later Egyptian monarch, he sailed for Italy; eventually, however, he

obtained permission to settle in his palace on the Bosphorus, where he
died in 1895.
He lived to see his country ruled by an English protectorate, its
finances efficiently administered for the benefit of foreign bondholders.

He saw the Suez Canal prosper beyond all expectation and the shares
that he had once buy at 470 selling at 3,275. The one thing
tried to
that had changed litde was Egypt itself and its people. There was still
the land and the river and the sweating_/eflaA, li'ving in filth and poverty
unmatched even in India and China. To be sure, the oppressive tax
burden of the last years of Ismail’s reign was now removed; the whistle
of the kurbash was rarely heard. Yet if the momentary pangs had sub-
sided, there still remained the day-in, day-out monotony of misery
and disease, scarcely relieved by animal pleasures, that has been the
lot of ^tfeSah since history began.
CHAPTER I 6
CONCLUSION
The reasons for Dervieu’s comparative failure in Egypt -a man

who could retire to France with a fortune of five million francs was
hardly a failure in the absolute sense of the word - are obviously divers
and complicated. The fall of his bank was implicit in the character of
its rapid On the one hand, Dervieu et Cie had built much of its
rise.
prosperity on the cotton boom, and was bound to suffer from the
collapse of prices; on the other, Dervieu's personal hegemony in
Alexandria derived from his ties to the Viceroy, ties that imposed a
tremendous strain on his resources. His firm could barely support the
effort in time of unprecedented prosperity; when the crisis came, it
collapsed of exhaustion. Its task was not made easier by its narrow
dependence on the co-operation and assistance of European finance,
whose ability or readiness to help was often determined by factors
extraneous to the commercial situation of Egypt. For Dervieu, this
dependence was especially oppressive in that his principal tie with
Europe was to Paris rather than to London, and that his correspondents
in Paris were among the most conservative in a conservative market.
These are, in a sense, the objective, impersonal causes of the failure
of Dervieu et Cie. Seen from another point, however, this failure was
as much the work of a man as the result of an unfavourable combination
of circumstances, as much the product of unskilful enterprise as the
ineluctable effect of adverse business conditions. In this sense, Dervieu
was his own worst enemy.
It would be a mistake to present this personal factor as more im-
portant - or, for that matter, less important - than the objective con-
siderations summed up above. The historian who proposes to compare
and weigh variables of different nature, who tries to add and subtract
apples and pears, is often braver than he is wise. Let us say simply that
Dervieu’s own mishandling of his firm and his position was a major
319
element in his eventual discomfiture. By mishandling is not meant,
of course, the tactical blunders he committed on occasion - every
businessman makes mistakes - but the long-run strategic errors: the
misplaced ambition that led him to choose the wrong path and the
illusions that kept him there almost to the end of his career in Egypt.
The ambition hardly needs explanation: like many people, Dervieu
aimed too high. He was, like almost all businessmen in Egypt, some-
thing of an opportunist for whom the patient accumulation of small
commercial gains was overshadowed by the irregular and speculative
profits of large and hazardous operations. Moreover, for Dervieu the
end was always more important than the means -from a business
point of view, that is. Unlike his friend Andr^, he did not look on
banking as a way of life, as a means become goal, with its own rules
and own justification. He saw it as a ladder to bigger and better things,
and felt free to amend and nullify the rules as he went along. Eventually
he discovered how dangerous it is to climb on a patchwork ladder.
But the illusions.?^ How is one to explain Dervieu's persistent con-
fidence in Ismal in the feice of Andre’s exhortations and the sad facts
of experience? A certain naivet^ of temperament? Unquestionably; yet
not sufBice. On the contrary, Dervieu’s illusions - or
this alone will
-
delusions have for wider implications; and these are worth considering
in some detail.
An honest man at heart, Dervieu had reconciled within himself the
contradiction between selfish and even guileful motives of profit and a
sincere desire to help Ismail make Egypt prosperous. The former were
always paramount in fact; the latter was always paramount in principle.
Dervieu did not go so far as to believe that his liberal advances of 1863
in an effort to fk the Viceroy’s allegiance and lead him into a loan
constituted an act of disinterested benevolence; or that his numerous
services to Ismail - as personal secretary, confidant^ private emissary,
and so on - were offered in aspirit of selfless generosity. On the whole,
however, Dervieu was more impressed with what he was doing for
Ismail dian what Ismail was doing for him. In the balance sheet that he
unconsciously drew up of his relationship with the Viceroy, his
services far outweighed his rewards; whence the frequent references to
the gratitude due him and, as time wore on and the affection of the two
men shown him.
cooled, the ingratitude
There can be litde doubt that Dervieu was sincere in this attitude.
He really believed that in advancing the Viceroy money at high rates of
CONCLUSION 321
interest, he was giving more than he received; that the commissions of

10 per cent, and up and the exorbitant prices charged for goods supplied
to the palace and government were not excessive; that the misfortunes
he had invited by knowingly and purposefully placing his assets at the
disposal of Ismail were all He was disappointed and hurt
Ismail’s fault.
by him down in his hour of need;
his royal client’s readiness to let
he was righteously indignant in pushing his claims by means of political
and other pressures he had once denounced; most remarkable of all,
even after his bitter break with his master, he still hoped, indeed
expected, that Ismail would favour and help him.
In sum, Dervieu was an optimist in the true sense of the word: he
believed in his own honourableness; he also believed in that of others.
He felt that he had been good to Ismail; he expected Ismail to be good
to him. But this brings us to the real question: how was Dervieu able to
reconcile the facts of his behaviour towards Ismail and his conception
of that behaviour, to justify in Egypt actions that would have drawn
the deprecation if not the reprobation of the community in France.
The question would not be worth answering if Dervieu were alone
in this regard, if this reconciliation between behaviour and conscience
were simply the result of individual rationalization through arguments
of a personal character. Everyone has to live with himself, and most
people succeed. But Dervieu was not alone. If anything - and the point
cannot be stressed too strongly - he was more scrupulous and honour-
able than his fellows in Alexandria, most of whom accomplished far
more acrobatic feats of self-justification. One has only to read the
consular archives to be struck with the sincerity of most of the claims
against the Viceroy’s government, with die re^ moral indignation of
the most patent scoundrels in the face of Egypt’s efforts to protect
herself against spoliation. There were, needless to say, a certain
number of businessmen who simulated the righteous wrath of honesty
betrayed and appealed to morality to lend force to their claims; it is
hard, for example, to credit Bravay with even sincerity, that cheapest
of virtues. The historian is nevertheless compelled to recognize that
most of the business community in Egypt was honestly upright in its
own eyes; and it is this combination of matter-of-fact and apparently
unprincipled exploitation with clear, untroubled consciences diat is
perhaps the most striking aspect of the relationship between the foreign
colony and its diplomatic representatives on die one hand, and the
native population and the government on the other.
Y
The answer is that, while most Europeans in Eg3q)t lived according
to principles, they had two sets of principles: the same rules did not
apply in dealing with the in-group of Westerners and the out-group of
natives. Some Europeans drew the line between the two societies more
sharply than others. There were those for whom the Turk was of his
nature treacherous, Moslem justice hopelessly corrupt, the native
population mean and despicable. There were others who found the
Turk not deliberately false, but lazy and neglectful; who recognized
the validity of Moslem law within the framework of Egyptian society,
but felt that it offered little protection to foreigners habituated to other
codes and that the native tribunals were excessively submissive to
government pressure;^ who had more sympathy than scorn for the
Arab, and deplored his inadaptability to the discipline and precision
implicit inmodem industry and trade. Some saw in every Egyptian a
potentialenemy whose ill faith required constant vigilance and strong
remedies; others looked upon the natives as children whose fumblings
and misconduct were best handled by the paternal chastisement of their
European friends and protectors. All, however, were agreed that
Eg3q>tian society was badkward and Egyptian civilization inferior; that
the European could not afford to submit to the customs of the country,
but that the Egjq)tian would have to learn the ways and accept the
justice of the European; that the standards of behaviour accepted in
Europe, the values of honesty, fair play, reasonableness, and so on that
shaped - at least in principle - the social and business relations of the
West, had to be modified to fit the circumstances of a strange environ-
ment.
It is not the object of this essay to judge the merits of this position;
for the historian as distinguished from the moralist, the important thing
is to describe the phenomenon and study its implications.
Some of its aspects have already been discussed in the course of the
narrative. In litigation, for example, justice as dispensed in the consular
courts of Alexandria or as extorted in negotiations with the Egyptian
^ See especially the resistance aroused by Egypt’s efforts to modify the capitula-
tions and the judicial structure derived therefrom. Mem. et Doc., Egypte,
Vols. ni-Vin (1863-84), and the political correspondence of these years,
passim^ Also Douin, Histoire^ IT, chs. v-ix and xviii (as usual, the most detailed
treatment), and Sabry, Empire, igypneriy pp. 224-55. There was a considerable
out-pouring of pamphlet literature, most of it indignantly opposed to reform.
Many of these publications are to be found in the Bibliotheque Nationale in Paris;
cf. the Africa catalogue.
CONCLUSION 323
government was a caricature of the Western ideal. The forms were

generally observed in that the European was expected to prove his case;
but the double standard was reflected in the different weights accorded
European and native testimony and interests: one man’s word was
worth more than another’s, were more precious, his property
his limbs
more valuable. Only too of the Westerner was

often, the assertion
equivalent to proof, the presence of the Egyptian was evidence of
responsibility. It was as though all the meticulous safeguards, all the
precautions, caveats, and complicated defences of modem law had been

swept away, and only the shell remained to cloak the sham of pre-
determined justice.
Yet litigationwas only one aspect of relations between Westerner

and native in Egypt; the double standard, with its corollary sentiment
of superiority, shaped every action and reaction of the European colony.
It could be seen in the forms of address, in the courtesies extended and
withheld, in the pride and arrogance the Westerner offered and the
humility and deference he expected. The diplomatic archives and
pamphlet literature of the period are full of stories and statements that
reflect this relationship; a book could be written around them.
From our point of view, the consequences of this double standard are
particularly interesting, partly because of their significance for the
situation of the European colony in general, even more for their role
in the success and failure of Edouard Dervieu.
More than anything, more even than the enormous material costs
of imperialism, it was the imposition of inferior social and moral status
that shaped the reaction of the Egyptian to the European. Actually,
the one implies the other: material exploitation is difficult if not im-
possible without the sanction of a double set of values and a cor-
responding double code of behaviour; if they were not there to begin
wiffi, the exploiter would have to create them. The fact remains,
however, that in the many-sided impact of imperialism, it is the
injury to self-respect that hurts most. It is the resentment aroused by
spiritual humiliation that gives rise to an irrational response to rational
exploitation. The apparently unreasonable, and certainly unprofitable,
resistance of many of the world’s underdeveloped countries today to
Western business enterprise makes sense only in this context.
It is true, of course, that in Egypt the natural resentment of differ-
ential treatment and inferior status was compensated to a certain extent
by a real admiration and respect for the achievements of Western

civilization. From the start, many of those who were in contact with
the foreigner, beginning with the Viceroy himself, attempted to

imitate him and, by imitation, to gain the approval of a group whose
cultural and social superiority was tacitly recognized. There is some-
thing pathetic in the efforts of Said and Ismail to present themselves
to the world as aristocrats in the Western tradition - or rather what
passed in Cairo for the Western tradition. Said, particularly, went to
extremes to prove the nobility of his breeding by the prodigality of his
purse, but Ismail, despite his many resolutions to the contrary, was not
far behind. The uncle had his Duke Maximilian; the nephew his
Emperor Napoleon. Both received distinguished and not so dis-
tinguished visitors from Europe with a lavishness matched only by
their generosity on their vojrages to Europe.^ Both allowed themselves
to be mulcted for fear of losing face before the outside world. There
was more to all this than weakness and the utilization of money as an
instrument of policy: nothing illustrates better the strength of the
craving for Western approval than Ismaifs inauguration of the Suez
Canal, this sybaritic celebration of an achievement whose cost in
money had been surpassed only by its cost in heartache.
There is a limit, however, to the effectiveness of prestige. In any
underdog eventually learns to resent
superior-inferior relationship, the
his position; in Egypt, where the native population had a highly de-
veloped and proud culture and a double standard of their own for
members of the Moslem community and the giaour, an unfavourable
reaction was inevitable.* Consider in this connexion a fascinating letter
1 Not only visiting dignitaries and pretended dignitaries but even European
troops passing through Egypt were accustomed to sleep in the palaces of the
Viceroy, All of which did not save Ism^ from being offered a hotel suite by the
British government for his visit to England in 1867. Thanks to public protest,
however, and the kindness of a private citizen, he was ultimately spared this
discourtesy. The Times, 1867, 27-6, p. 9; 28-6, p. 5; 29-6, p. 7; 3-7, p. 9; 4-7,
p. 9; 6-7, p. 14; 8-7, p. 9.
* There was a venerable tradition of superiority to, and
even contempt for,
the infidel, which had long given rise to discriminatory treatment and was,
indeed, one of the reasons for the system of capitulations. These prejudices did
not die out in the nineteenth century. They were necessarily mudi suppressed,
except perhaps under Abbas, and modified by the powerful impact of Western
CONCLUSION 325
from Colonel Mircher, the tutor of Ismail’s son Prince Tewfik, warning
his superiors in Parisof the pernicious influence of the Prince’s Turkish
and Arab teachers; they had filled the boy’s head, Mircher wrote, with
‘the most hateful calumnies respecting Europeans, although it is thanks
to these that this unhappy country has not returned of since the death
Mohammed Ali to chaos and Barbarism’. As
Tewfik was a result,
running around bragging of what he would do when he became ruler
of Egypt, and announcing to all who cared to listen that the alleged
technical contributions of Western civilization to Egypt were a hoax
- everything in Western science came from the Arabs in the first place.
‘He is convinced’, Mircher reported aghast, that the Arab writers
. .
described long ago the steam engine, railroad, etc., etc. 1* ^ Pre-shades
of Soviet propaganda!
In a contest, however, between two adversaries of unequal strength,
the reaction of the inferior is always conditioned by the disparity of
forces. Where the underdogconsiderably weaker, he can at best
is
annoy the enemy; where the sides are more equal, he can resort to open
force, though still avoiding pitched battles; and if circumstances are
particularly favourable, the weaker party can simply order the stronger
out of his house - witness Abadan and Suez.
In the i86o’s, Egypt was in the annoyance stage. The native police,
frustrated by their lack of authority over the Europeans, could take
out their vexation by enforcing parking regulations for the carriages
of the and letting the coachmen of the faithful do what they
infidel
pleased.® The customs officials could harass the foreign business com-
munity by bottlenecks and errors; the treasury clerks could exasperate
Dervieu by the slowness of their verifications and calculations; and
Ismail could get back at his moneylenders, purveyors, and other
tormentors by tortuous delays, misleading promises, captious quibbling,
and similar devices. True, these tactics almost always cost Ismail
money - foreign observers were repeatedly astonished by the Viceroy’s
persistence in such unprofitable ways. Yet they apparently provided
him with more than compensatory psychic satisfaction.
It was this that Dervieu failed to realize until too late: ihat along with
material achievements; but they were still there to provide an effective focus for
resentment bom of humiliation.
XLIV, Mircher to Marshal Niel, 18-10-1868, ff. 103-4,
C.P., Alex.,
®Ibid., XL, Roustan-Moustier, 9-10-1867, annex no. 3, Memorandum of
Edouard Dervieu, 20-9-1867.
the all-too-real pecuniary embarrassment that forced Ismail to renege
on many of his obligations and commitments, there was an element of
malice aforethought. In Andre was quick to sense, was
effect, Ismail, as
just as intent on using his bankers as they were on using him, and while
it is hard to say how much these intentions preceded his unhappy ex-
periences as ruler of Egypt - even before mounting the throne, he had

some decided opinions about Western exploitation of his predecessor -
they were unquestionably reinforced and embittered during the period
after 1863. Indeed, Ismail the Viceroy spent much of his reign learning,
at the price of numerous and costly blunders like the appeal to Napoleon
over Suez, how to defend himself against the rapacity of the foreigner
and, even better, how to utilize this rapacity to his own ends. And if, in
this process of defence and counter attack, he often resorted to indirect
and even imderhand methods, it was not only because the direct ap-
proach was so ineffective in the face of superior and self-righteously
naked power. The fact was that Ismail not only wanted to exploit
the foreigner; he also wanted to hurt him.
In the spring of 1868, Dervieu wrote Andre to express his ‘great
sadness at seeing the Viceroy manoeuvre so wickedly, continuing to be
so faithless, so felse*. He could hardly believe it: ‘I was almost certain’,
he went on, ‘that the telegraph would give the lie to the facts I would
have written you.’ Two years after the suspension of the Agricole,
Dervieu was still not totally disabused.
He was a victim of his own morality. His double standard was based,
not on contempt and mistrust, but on benevolent paternalism. As a
result, he was not armed with the scepticism and severity of his less
generous colleagues. Offering one brand of kindness, he expected

another and never realized the double-edged implications of such a
relationship. In dollars and cents, it was all right to milk Ismail for all
he was worth; it was unthinkable that Ismail might want to return the
favour.
There is a final irony in all this. Said and Ismail spent millions to hold
the good will of the West, to gain its respect, to appease its demands,
to forestall its wradi. The West, its indignation aroused by the
chauvinistic excesses of today, remembers only the annoyance and
prevarication and spite of yesterday: who paid for the Suez Canal.^
CONCLUSION 327
France; who built it? Lesseps, ‘the greatest entrepreneur in the world
in the second half of the nineteenth century’.^
Yet Said and Ismail spent all these millions for another reason - to
renew the glory of Eg3^t and leave monuments behind them: Suez was
to be the Great Pyramid of modem times; the Medjidieh, the nucleus
of an Egyptian merchant marine. Today the Egyptian people remember
only the waste, the weakness in the face of Western demands, the sale
of die Canal shares to England, the bankruptcy of 1876. There was a
ship of the government-owned Khedivial Mail Line, the successor to
the Medjidieh, named the Khedive IsmaiL In August 1956, at the
height of the exaltation over the seizure of the Suez Canal, the name
of the ship was changed to Cleopatra.^ Names like Port Said and
Ismaila are not immutable either.
Then there would be nothing; only bitter memories.
^ Professor Emile James of the University of Paris in Lôn
H. Dupricz, ed.,
Economic Progress (Louvain, 1955), p. 525.
® New York Timesy
9-8-1956, p. 3.
APPENDIX A
EGYPTIAN EXPORTS AND IMPORTS

1849-75
(in pounds sterling)
Western Moslem Export

Year Year Imports Exports Balance
1849-50 1266 1,621,369 2,043,579 422,210
1850-51 1267 1,681,630 2,155,420 473,790
1851-52 1268 i, 57 y >374 2,270,333 <594,959
1852-53 1269 2,001,913 *,848,779 — 153,134
1853-54 1270 2,141,964 2,087,938 — 54,026
1854-55 1271 2 . 537 »i 33 3,286,496 759 , 3<53
1855-56 1272 2,568,692 4,029,543 1,460,851
1856-57 1273 3,149,230 3,104,948 — 44 2 S 2
1857-58 1274 2,715,215 2,533,907 — ,
181,303
1858-59 1275 2 j 494 ,i 43 2,565,825 71,862
i859-<So 1276 2,604,933 2,535,65* — 69,282
1860-61 1277 a, 5 <S 8,539 3,422,959 854,420
1861-62 1278 1,991,020 4,454,425 2,463,405
1862-63 1279 3,063,487 9,014,277 5,950,790
1863 —64 1280 5,291,297 14,416,661 9,125,364
1864-65 1281 5,753,184 13,045,661 7,292,477
1865-66 1282 4,662,210 5,061,354
1866-67 1283 4,399,097 8,623,497 4,224,400
1867—68 1284 3,582,969 8,094,974 4,512,005
1868—69 1285 4,021,601 9,089,866 5,068,265
1869-70 1286 4,502,969 6,680,702 2,177,733
1870-71 1287 4,512,143 10,192,021 5 , <579,878
1871-72 1288 5,005,995 137317,825 8,311,830
1872-^3 1289 6,127,564 14,208,882 8,081,318
1873-74 1290 5,322,400 14,801,148 9,478,748
1874-75 1291 5,698,820 12,730,195 7,035,375
Tote: Egyptian statistics of this period raise all sorts of difficulties. The
329
330 APPENDIX A
trade figures cited here are apparendy derived from the Abdin Palace ar-
chives, and were prepared for Ae Cave Commission, which was sent to Egypt
in 1876 to investigate the state of the finances. (See J. C. McCoan, Egypt As
It /«, p. 405; McCoan dtes the entire Cave Report, pp. 384-406.) They have
since been used by authorities Crouchley, Economic Development,
like
pp. 266-7, attd Hamza, Public Debt, p. 285. Their value suffers considerably,
however, from faults of both preparation and citation. To begin with, the
merchants of Aleicandria often tried to by-pass the customs officials in order
to avoid delay or, in the case of imports, to evade the duty. Secondly, the
Egyptian customs tabulated shipments in a most irregular manner, some-
timesby weight, sometimes by number or size of parcels, with no in Hir?ition
of value. Finally, there was no fixed rule concerning the calendar period to be
employed in recording entries, and the scribes sometimes used Ae Moham-

medan year, sometimes the Western. This initial difficulty has been sinro
aggravated by inaccurate copying. Thus Cave, followed by Hamza, has

printed the Mohammedan years on which the original calculations were pre-
sumably based, with the corresponding Gregorian years placed alongside.
But a check of the two calendars shows that the Mohammedan years 1265-72
and Cave’s accompanying Western years do not correspond (Hegira 1265 is
equivalent to A.D. 1848-9 and so on), and that while Cave corrects the dis-
placement by skipping 1273, Hamza down to the end.

carries the error
Crouchley avoids the difficulty by omitting the Mohammedan years, but he
compounds the error by using only the second of the two Western years set
up by Cave as correspondences to the Mohammedan years (i.e., Hegira 1266,
A.D. 1850-1 of Cave becomes simply a.d. 185 i in Crouchley) and thus allows
the reader to assume that the statistics were calculated on the basis of the
ordinary Western year. This displacement is not too serious toward the
be^nning of the series (Hegira 1266 began 17 November 1849) or the end
(Hegira 1290 began i March
1873), h is quite misleading for the critical
period of the i86o’s, when the Mohammedan years began in June and July.
As to which years are correct, the best solution would seem to be to take
Cave’s figures subsequent to 1857 and to assume that the displacement
previous to that date is a mistake (the omission of Hegira 1273 may have been
an awkward effort to correct that mistake). Although this means giving the
preference to the Gregorian years rather than the Mohammedan years on

which the Cave figures were presumably based, such a series corresponds
best to what we know from other sources of the fluctuations of Egyptian

trade.
APPENDIX B
EGYPTIAN COTTON OUTPUT

AND EXPORT
STATISTICS of Egyptian cotton exports vary greatly from one source to
another. The tables below are given for what they may be worth. During
the
reign of Mohammed Ali, Egyptian industry absorbed a certain portion of the
cotton crop - according to Rivlin, ‘Agricultural Policy’, ch. vii, p. 14,
805000 cwt. at most. Under Abbas, home consumption was already much
diminished, and by the late 1850*3 cotton output and exports were to all
intents and purposes equal. On the other hand, the conversion from output
to exports is complicated by the lag between harvest and shipment, which
makes it difficult to allocate a given crop to the relevant export years.
TABLE i: Output in
1821 944 1834 143,892 1847 257,492

1822 35,108 1835 213,064 1848 119,965
1823 X 59 , 42 <S 1836 243,230 1849 257,510
1824 228,078 1837 315,470 1850 364,8X6
1825 212,318 1838 238,833 1851 3843439
1826 216,181 1839 134,097 1852 670,129
1827 159,642 1840 159,301 1853 477,397
1828 59.255 1841 193.507 1854 477,905
1829 104,920 1842 211,030 1855 520,886
1830 213,585 1843 261,064 1856 539.885
1831 186,675 1844 i 53 . 3 'S3 1857 490.960
1832 136,127 1845 344,955 1858 529,537
1833 56,067 1846 202,040 1859 502,645
Source: Fowler’s report on the cotton in Eg5q)t published in i860 by the

Manchester Cotton Supply Association. J. Rabino, ‘Some Statistics of
Egypt*, Journal of the Statistical Society, (1884), 426.
331
332 APPENDIX B
TABLE 2: Exports in cwts,s value in pounds sterling - i 86o-yo
i860 439>837 £1,107,887

i86i 522,982 1,430,880
1862 719.395 4,920,660
1863 814,950 6,503,308
1864 1,187,993 10,157,370
1865 1,593,738 11,809,603
1866 1,011,540 6,918,936
1867 934,978 3,997,584
1868 1,185,164 5,270,409
1869 1,054,544 5,814,387
1870 1,078,873 5,075,291
Source: These statistics are based on manuscript tables of private persons and
data furnished by customs clerks. Ibid., p. 427.
TABLE 3: Exports in ^quintals 184^/50-18^4/5; value in uncertain monetary

^
iinit^ i862/3-i8y4/5
Year ‘Quintals' Year ‘QuintaU Value

1849-50 309,495 1862-63 1,181,707 30,848,429
1850-51 350,376 1863-64 1,717, 3<S9 51,474,913
1851-52 194,247 1864-65 2,001,157 41,421,802
1852-53 684,689 1865-66 1,288,797 27,716,065
1853-54 545,232 1866-67 1,260,946 18,134,579
1854-55 387,780 1867-68 1,253,593 15,544,432
1855-56 510,452 1868-69 1,391,495 19,450,977
1856-57 385,517 1869-70 1,351,853 16,080,507
1857-58 501,070 1870-71 1,966,154 18,763,040
1858-59 386,347 1871-72 2,108,509 20,589,592
1859-60 588,478 1872-73 2,418,484 21,789,034
1860-61 <554,493 1873-74 2,599,685 19,946,083
1861-62 722,797 1874-75 2,615,120 21,280,539
Source: Hamza, Public Debt^ p. 287, based on the Abdin Palace Archives.
Hamza’s figures are ostensibly in quintals, but this is simply a translation of
the Egyptian cantor, (The Egyptian quintal or cantar -ho^ words are
derived from the same Latin root ~ was fixed in 1836 at 100 rotls, or approxi-
mately 99 lb. Gliddon, Memoir^ p. 38; see also p. 75, n. i, above.) Hamza’s
figures also raise once again the question of the correspondence between
Western and Mohammedan years. As in the statistics on total imports and
APPENDIX B 333
exports, we have taken the Western years as correct; in this case, however,
we have omitted the Mohammedan year entirely.
It is not clear what the values in the right-hand column for the years from
1862—3 on signify. They do not correspond with Hamza’s figures on total
exports if taken as representing pounds, and they hardly make better sense
as francs or piastres.
APPENDIX C
EUROPEAN COTTON PRICES

TABLE i: Liverpool Cotton Prices^ i86i—6 (price per lb. in pence at end of
month)
Middling Orleans
2861 286z i8Si 2862

January U July 8| i8f
February 7i 13 August 9 ^4
March 7l X2f September 10 26^
April 7^ X3I October 12 23I
May 7l x4 November Ilf 2l|
June 8 15 December 12 25I
1863 1864
Middling Middling
Orleans Egyptian Orleans Egyptian
January 23
February 20 ^7i 26|
March 22 21 26|
April 22 22 27I 29
May 23 2 xi 28^ 29i
June 30 29i
Jxdy 22i 21 3xi 3oi
August 23i 30 3o|
September 27 27 24
October 29f 22 22J
November 28 i 29 ^9 !
December 28| 29 27 27I
334
APPENDIX C 335
1865 i 866
January Mi Mi i8| 22J
February 19I i8| i9 22
i
March i5
i I4I 9i
>'
^3i
April i4i Mi I9J
May I6| i6i M I Si
June 20J iSj M
July i7
| Mi
August i8| 17J M 20
September 21| 20| Mi 19
October zzi M Mi ^7i
November 21 M Mi
December Mi Mi 17
Source: W. O. Henderson, Lancashire Cotton Famine^ pp. 122-3, compiled

from Williams* Circulars.
TABLE 2: Index of cotton prices at Le Havre for selected months^ i 86i -~5
(average ofJanuary-June i 86o = 100):
Georgia
Long-staple Egyptian
January i 8 <5 i 100 no
July 105 115
December 122 140
February 1862 130 150

May 150 160
July 190 215
August 200 270
September 245 335
November 160 270
February 1863 145 250

April 155 270
July 150 265
October 175 325
December 190 330
336 APPENDIX C
Georgia
Long’-staple Egyptian
February 1864 181 310
April 185 310
June 179 330
September 185 310
November 180 285
February 1865 160 230

March 120 200
April 105 160
June 195
Source: C. Fohlen, Uindustrie textile au temps du Second Empire^ pp. 294,

2965 298. Index numbers calculated as an average of the weekly quotations in
each month, as given in the ‘Bulletin des cotons* of the Courrier du Havre.
APPENDIX D
EGYPTIAN STATE FINANCES
TABLE V. Revenue and Expm£ture, iSii-ys

(in Egyptian pounds)
Revenue Expenditure Revenue Expenditure
1821 1,199,700 1,022,000 1863 6,094,000 14,395,000

1833 2,525,725 2,102,525 1864 6,972,000 13,551,000
1836 3,064,300 2,878,755 1865 5,356,000 10,785,000
1842 2,926,635 2,176,860 i8ti6 5,058,000 10,278,000
1846 4,200,800 2,045,000 1867 4,129,000 10,854,000
1847 3,950,000 — 1S68 5,01 1,000 16,637,000
1852 2,143,000 1,963,000 1869 5,255,000 10,530,000
00
2,192,000 1,915,000 1870 5,389,000 12,309,000
00
2,200,000 2,817,000 1871 5,711,000 15,084,000
1855 2,078,000 2,383,000 1872 6,419,145
1856 2,474,000 2,637,000 1873 9,911,968 8,815,639
1857 2,214,000 2,127,000 1874 9,911,968 8,815,639 (sic)
i8j8 2,025,000 2,205,000 1875 10,542,468 10,026,476
1859 2,121,000 2,171,000 1876 7,648,778 7,840,957
i860 2,154,000 2,984,000 1877 9,526,242 8,552,530
1861 2,154,000 5,184,000 1878 7,518,478 7,778,503
1862 3,707,000 8,868,000 1879 8,467,838 8,299,964
Source: Crouchley, Econontic Development,

pp. 274-(5. Tlicse figures are
clearly approximations, especially for the earlier years. There is also pre-
sumably an error in the repetition of the statistics for 1873 and 1874.
Crouchley gives his own sources as follows:
1821. F. Mengin, Histoire de F Egypte sous le gouvemement de Mohamtd Alt
(Paris, 1823).
1833. Bowring, Report on E^t and Candia. (Several other sources are
available, diverging by a few per cent.)
1836. Duhamel, Tableau de P Egypte (1837); R. Cattaui, ed., Le rkgM de
Mohamed AH Tapris les archives russes en Egypte (Cairo, 193 *)
Z
337
338 APPENDIX D
1842. Amin Sami, Taqwtm an-Ntl [Almanac of the Nile] (3 vols.; Cairo,
1916, 1928, 1936), Vol. IL
1846. M. Sabry, V empire egyptim sous Mohamed Alt et la question
d*Orient (Paris, 1930), p. 283. The author notes that the revenue was
especially high in this year.
1847. Prince Omar Toussoun, Mimoire sur les finances de VEgypte depuh
les pharaons jusqud nos jours [‘Memoires present6s i. Tlnstitut
d’Egypte’] (Cairo, 1924).
1852-79. Girgis Hanayn, al-Atydn wad Dora ihfVl-Qutr al-Misri [Lands
and Taxes in Eevpt] (Cairo, 1904).
M o
00 00 o.
“ 1903
Q eg
to
^ o
*r? a ON 84.J® 70
s a v».
00
§
OS
718
18^3
I
^ " ?•
s
-
£} **
1862
Loans
0
8 8
N 0
1
00 §
i
Public
I i ^
to
On ?
f::
00 i
0^
o"
00
0
o
ON
00
32,000,000^
Egyptian
to 0
to
:
•§
O g- 1S al
2
S
-S
2 o -W
P« Cfl
Is rt
g floating
-Se"J'i«^s"2 debt
TABLE
Pm
I
o ^ § bS ^-o S ^
PQ CO Pay
^ <u
'S t. *5 •n S with
§ o 3 ^ o authority
Porte
5 3 tw ’S
’lo 3 « 0 of
Ismail,
’c3
n
GO
Vl N
VO VO
VO
VO
1 ;3 00 00
VO
00 00
VO
00 1 *873-74
Q
c a
C8
c o
0
s:
0 S § §3 R!
JO HH 1 s 03 § loan
(A 0 B
1 1 1*4
73J
cJQ
c
03
Pm
I Last
M < ’I I Q
C5
CO )-H I 8.
n3 Otto-
E
12 and
I
Bank 2
§>’8 Anglo-Egyptii
Goschen Oppenheim
o
3 8 Bank Imperial
man
s a
aO Friihling
(0
Dh
U 4
S 0
14 V' 0 S H
0\
®2 VO
“^ Ov Q rl
1 1 P 0^ ON
Sij 'f 8“ oo' 0 00 ©o’
'8 ^ M U-N
N
v\
0^
VO
VO
VO cn
VO
go a vp 0 s
H
VO
f<^
S sP
w«
“8 !•§ ^ w
{continued')
^ ir* o
00 00
fpl
•slii'
h4
PO
VO
-< 00
H
u *xi fo
'8 § § §
1
^8 i
o'
Vs 0\
H
'f
N 1 1 r*'
1
I M
s
•is
J-g
I
to
^•§1
a
Q
nil
Q Q
BIBLIOGRAPHICAL NOTE
MANUSCRIPT SOURCES
The body of the narrative rests on the archives of De Neuflize, Schlumberger
et Cie, Paris. Tliese consist primarily of the account books of the firm from
i860 on, the letter books from the early nineteenth century on, the various
actes de societe and relevant correspondence, and a large number of special
dossiers dealing with particular operations or affairs. Since the letter books
contain copies of outstanding dispatches only, incoming mail is not available.
The special dossiers, however, like the one entitled ‘Vieilles Affaires Otto-
manes* which contains the correspondence between Alfred Andre and

Edouard Dervieu, generally include both incoming and outgoing letters.
The Neuflize archives were recently deposited with the Archives Nation-
ales and have been catalogued under the series 44 AQ. At the time I used the
documents, these catalogue numbers did not yet exist. The footnote refer-
ences given in the course of the narrative, however, will enable the reader
who consults the sources to find the pieces desired without difficulty.
Indispensable for the context of Dervieu*s financial operations are the
diplomatic records of France and Great Britain; the American archives are
less important.
France
Ministbe des Affaires EtrangSres, Correspondance Politique des Consuls,

Alexandria, Vols. XXIX-XLIV (1860-9).
, Correspondance Consulaire, Alexandria, Vols. XXXV-XLI (1856-
71)-
, M^moires et Documents, Egypte; Vols. I and II, miscellaneous; Vols.
in-Vm, R6fonne judidaire; Vols. XIII-XV, Canal de Suez.

(The volumes from No. Ill on are not listed in the printed
catalogue.)
Great Britain
Foreign Office, series nos. 78 (Turkey - Correspondence), 141 (Egypt

Correspondence), 142 (Egypt -Letter Books).
United States
Department of State, Egypt, 1849-70 (copies of letters from Egypt to

Washington).
On the whole, the archives of the Foreign Office in the Public Record Office,
London, are mudi richer than those of the Ministry of Fote^ Afeirs in
341
342 BIBLIOGRAPHICAL NOTE
Paris. thing, the British have catalogued and made available papers
For one
that theFrench are not yet ready to communicate, on litigation for example.
For another, the older records of the British embassies and consulates have
been assembled in London, whereas the French have left most of these
records in place. Finally, in Egypt at least the British consuls were more
systematic in their correspondence than their French counterparts.
Both the British and American consular records are inventoried letter by
letter.
The study has also made use of various dossiers of the French National
Archives and of certain French, German, and English business records,
primarily for incidental background information:
Archives of the Societe des Batignolles, Paris.
Archives of the Seilliere family, Seilli^re-Demachy correspondence.
Records of Friihling and Goschen, London. (In effect, only summary
balance sheets remain.)
Archives of the Bleichroder Bank, Berlin.
Archives ofSal. Oppenheim Jr. and Co., Koln.
The family of Edouard Dervieu was unfortunately unable to furnish any

manuscript records. They did possess, however, a t5êwritten manuscript
by Paul Dervieu, ‘Famille Dervieu de Condrieu, 1 547-1939*, with enclosures
and hand-written insertions and corrections. I am indebted to Mme Paul
Dervieu, widow of the author, for communication of this document.
PRINTED SOURCES
Among the printed materials used - all of them fully cited on their first
mention in the footnotes - contemporary newspapers and periodicals were
particularly valuable.
Newspapers
The Timesy London.
Le Moniteur umvirsel^ Paris
Die Frankfurter Zeitung (only 1859-62 was available)
Of these,
The Times was by far the most useful, not only for the financial
its City Article, but also for its regular correspond-
information contained in
ence from Alexandria, which provides the best journalistic record of the
Egypt of the period. Unfortunately, this correspondence stopped in 1864
(at the height of the booml), and
later reports took the form of small and
scattered news There were a certain number of European-language
items.
newspapers published in Egypt at this time, but none of these lasted very
BIBLIOGRAPHICAL NOTE 34 }
long and all of those that came out before 1866 seem to have disappeared.
According to Rend Maunier, Bibliographie iconomique^juridiqite et sociale de
VEgypte moderne^ <5

* (Cairo, 1916), files of one or two of those pub-
lished during the following years are available in Egyptian libraries. There
is nothing, so far as I can tell, in Europe, either in the major depositories or
in those specializing in Oriental materials.
An extremely valuable source for the business history of the period is the
financial press.Among the most important journals in western Europe were:
Bankers Magaiine^ London

The Economist
Herapatiis Railway and Commercial Journal
Journal des Chemins de Per
Journal des Economistes
The Moruey Market Review
Moniteur des Intirets Matiriels^ Brussels
La Semaine Einanciire^ Industrielle^ Commerciale et Politique
Of these, the most informative is The Economist^ with The Mon^ Market
Review close behind because of its interest in the company boom of the
i86o’s. Continental reviews are not so meaty, are more parochial in

The
scope, and offer little on the actual activity of business concerns. The best is
probably the Moniteur des Interits Materiels^ which reflected the catholic
interests of the Belgian and Dutch money and capital markets.
Of official publications, the most important is the French Bulletin des Lois,
which gives volumes the statutes and subscribers of
in its supplementary
almost every joint-stock corporation founded in France up to 1867.
It is
indispensable for the history of French investment banking.

parliamentary papers are not so immediately helpful. They do
The British
contain, however, materials on conditions in Egypt, notably in 1840, Vol.
pages]); 1849, XXIV;
XXI (John Bowring, Report on Egypt and Candia [236
and 1867, LXVn.
scattered secondary
There are no bibliographical guides to the widely
material on the history of international finance. On E^pt, however, we^
fortunate to have the superb bibliography
of Maunier, cited above. The
in Paris also useful.
Africa catalogue of the Bibliotheque Nationale
is
used, a nuêr of works are

Of the large selection of secondary sources
Many of these contain bibliographies of their
deserving of special mention.
own that should prove helpful to the interested reader.
344 BIBLIOGRAPHICAL NOTE
On the history of banking
Dupont-Femer, Pierre, Le marchi financier de Paris sous le Second Empire

(Paris, 1925).
Emden, Paul H., Money Powers of Europe in the Nineteenth and Twentieth
Centuries (London, n.d. [c. 1945]).
Gille, Bertrand, *Banque et credit sous la monarchie censitaire’ (^these de
Doctorat-is-Lettres, Univ. of Paris, 1957)*
Hidy, Ralph, The House of Baring in American Trade and Finance : English
Merchant Bankers at Work, iySs-i86i (Cambridge, Mass., 1949).
Jenks, Leland H., The Migration of British Capital to i8y5 (New York,
1927).
King, W. T. C., History of the London Discount Market (London, 1936).
On the cotton famine and the conjuncture of the i86o*^

Earle, Edward M., ‘Egyptian Cotton and the American Civil War*, Political
Science Quarterly, XLI (1926), 520--45-
Fohlen, Claude, Uindustrie textile au temps du Second Empire (Paris, 1956),
Henderson, W. O., The Lancashire Cotton Famine, i86i-i8S5 (Manchester,
1934).
Rosenberg, Hans, Die Weltwirtschaftskrisis von iSSy—iSS^ (Stuttgart,
1934).
On Egypt in the nineteenth century
Charles-Roux, Frangois, La production du coton en Egypte (Paris, 1908).

Crouchley, Arthur E., The Economic Development of Modern Egypt (Lon-
don, 1938).
Douin, Georges, Histoire du regne du Khedive Ismail (4 volumes; Rome,
1933-8.
Hamza, Abdel-Maksud, The Public Debt ofEgypt, z8S4-’Z8Sy(Ctdro, 1944).
Rivlin, Helen A., ‘The Agricultural Policy of Muhammad Ali in Egypt*
(Ph.D. thesis. Lady Margaret Hall, Oxford University, 1953).
Sabry, M., Episode de la question dlAfrique: V empire igyptien sous Ismail et
Vingirence anglofranpaise (Paris, 1933)-
INDEX^
Abadan, 325 Astrakhan, 24

Abbas Pasha, 77-8, 87, 97 (n. 1), 99-100, Audibert, Henri, 246 8c n. a
109 (n, 3), 1 12, 128-9, 158 Audibert, Scht^':âcher et Cie, 246 & n. 2
(n. i), 226, 248, 324 (n. 2), 331 Audouari Olympe, 89 (n. 2)
Abdin Palace archives, 330, 332 Auriant, 78 (n. 4)
Accommodation paper, 6-8, 52 Austrian loan of 1865, 254 (n. 4)
Adolphe Marcuard et Cie, see Marcuard,
Andr6 et Cie Bakkbrs, P., 284 (n. 1)
Agra and Masterman’s Bank, 205, 305 Balli, Xenophon, 66 (n. 2)
(n.2) Baltazzi,64
Agricole, see Society Agricole Bambergers (family and bank, Mainz), 17
Alberti, Pinto, Oppenheim & Co., in Bank of Egypt, 61 f., 138
Alexandria, 85 f., 88-9 Bank of England, 3 (n. 2), 8, 33 (n. 1), 169,
Alliance Bank, 217 &
n. i, 219 193, 214, 215, 269, 286
Alsace, Protestants in, 23 &
n. 4 Bank of France, 143, 169, 170, 269, 314
Amable, Didier et Cie, 126 (n. 2) Bank of Holland, 21 (n. i), 2x5 (n. 2)
Amic, 299 Bank of Turkey, 62 &
n. 4, 64
Amsterdam, 7 Bankers' Maga(tne^ 8 (n. i)
Andr6, Alfred, business ethics, 198 (n. i), Banking, Egypt, see Egypt, banking; Near
240, 2585 entrepreneurial attitudes, 127, East, 57-8; Turkey, see Ottoman
i66^, 170-1, 192-3, 218 f., 227-9, 233, Empire, banking
236, 280-1, 295-6, 313; family, 121-2; Banque Austro-Egyptienne, 302
later career, 312-15; opinion of Suez Banque Commerdale et Industrielle, 312
Company, 183, 258, 280, 287 Banque de Credit Genevois, 66 (n. 3)
Andr6, C. E., 22 (n. 4) Banque Franco-Egyptienne, 302, 307 (n. 4)
Andr6, Cottier et Cie (Paris), 22 (n. 4), Banque Nouvelle des Chemins de Fer
121 Suisses, 314
Andr6, David, X2i Bardi, 9
Andr6, Ernest, 142 (n, 3) Baring Bros. (London), 10, 14 & n. 3, 17
Andre, Georges, 314 4). 3 *> 33 (»• 0 , 35 » 39 (“• 3)> 4<5, 4^
Andr6, Major Jolm, 121 (n. 2) &n.i, 43&nin&3
Andr^, Mê-Jean, 122 Barker, Henry]., 285 (n. i)
Andr6, Neveu et Cie (Genoa), 22 (n. 3) Barry, Dervieu et Cie, 102
Anglo-Egyptian Bank, 205, 208, 210, 239, Bas6vi, F., 266-8
241, 250-1, 260, 288 &

n. 5, 292, 302, Bassano, Marquis de, 132 n. z &
305 & n. 2, 207 (n. 4) Baster, A., Imperial Bemks^ 55 (n. 1); ‘Ori-
Anglo-French rivalry, 95, 226-7 gins of British Banking', 62 (n. i)
^
Anglo-Universal Bank, 312 BatignoUes, Sodet6 des, see Sodete des

Annonay, 21 (n. 1), 22 BatignoUes
Anslyn, T. N., 265, 282, 301 Bazin steamship line, 103 xi. 2 &
^
Anti-capitalism (antimammonist tradition), Beauval (French Consul in Alexandria),
48-9 99(11.4), 132 &n. 1, 133, 164
Antoniadis, John, 263 & n. 2 B6hic, Amand, 226-7
Antwerp, 18 M., 128 (n. 2)
Bell,
^rguSf 221 BerôdFer, C. W., 12 (n. 3)
Aifes-Dufour, 284 Berliner DiscontogesellschaSt, 52 (n. x)
Amstein &
Eskeles (Vienna), 43 Bertrand, A., and Ferrier, E., 174 (»• 0
Asquith, Herbert H., 309 Besson, Jean ‘Victor^, 81
and complete, citations of all works

1 The index provides references to lh first,
dted more than once.

*
Z 345
346 INDEX
Bethmann, Gebriider (Frankfurt), lo, 43, Cavan, Lubbock &

Co. (London), 139
1 16 (n. 2) (n. 3), 196, 272, 284, 294 (n. i)
Beyfus (family), 20 (n. i) Cave Commission of 1876, 117 (n. 3), 330
Bias of sources, 78 (n. 4), 130 (n. 1), 251-2, Cave, Stephen, 97 (n. i)
252 (n. 1) Cavour, 46, 47
Bibliothfeque Nationale (Paris), 322 (n. i) Central Banks, 50 f., 51 (n. i)
Biesta, Hippolyte, 254 (n. 2) Cerisy, 81
Billof Exchange, 3-4 Charies-Roux, F., ‘Le capital frangais’, 96
Bischoffsheim &
Goldschmidt (Brussels), (n. i); Les engines de l*expedmon
59, 65, 168 (n. 2), 249

d'Egypte^ 87 (n. i); La producUon du
Bismardc, 19 (n. 2) coton, 74 (n. 5)
Bleichroder, S., &
Co. (Berlin), 19 (n. 2), Charles-Roux, J., 173
31 &
n. 2 Cholera, 241-2, 269
Blonay, 124 n. 4& Civil War (American), 14 (n. 3), 55, 68,
69,
Blount, Sir Edward, 29 &
n. 2, 31, 107 214, 234
(n. 5); bank, 50 (n. i), 168 (n. 2) Clapham, J. H., 53 (n. i)
Boghos Bey, 158 (n. 1) Clarendon, Lord, 294
Bordeaux, 18 n. 2, 22& Claudy, Jean, 106 (n. 2)
Bouchary, J., 21 (n. i) Clavi^re, 22
Bowring, J., 76 (n. 2) Clay, Sir William, 65
Brassey, Thomas, 29 (n. 2) Cleopatra (ship), 327
Bravay, M., 99 & n. 4, 132, 210, 212, 221, Clot, Antoine B., 81
238, 252 (n. i), 276, 290 (n. i), 295 Cobden, 176
& n. 2, 302, 321 Coeur, Jacques, 9
Br^hier, L., 80 (n. 2) Colquhoun (British Consul, Alexandria),
Briggs &
Co. (Alexandria), 94 (n. i), 141, ii4-J<S, 130, 132, 14a, 133 (n- 3), IS5
152 (n. 3), 157, 235> (n- 3)> 263, 268 (n. i), 158
(n. 3), 290 (n. i), 304 & n. 2 Compagnie Universelle de Navigation,
Brown, Alexander, & Sons (Baltimore), x88 (n. 2)
17 & n.
28 I, Compagnie Universelle du Canal Mari-
Brown Brothers (N.Y.), 28 time de Suez, see Suez Canal
Brunner, F. H., 31 (n. 2) Company Acts of 1855 and 1856, Britain,
Buddicom, W., 29 (n. 2) 54
Bullion movements, 105 f., 245 f., 247 Company mergers, see Mergers
Bulwer, 131, 184 Company promotion, Europe, 13-14, 29-
Buigui^res, Dr., 112 30> 60-1, 199 &
n. 2, 243-4, 244 (n. i);
Butler, Isabelle Georgina, 309 technique, 202, 205 (n. 4)
Butler, James, 309 Comptoir d'Escompte (Paris), 39, 107-9,
1 16-18, 123, 147, 168, 231, 249, 230 oc
Caisse de la Dette, 317 n. I, 234 &

nn. 2 4 &
Caisse G^rale du Commerce et de Tln- ConseU, 132
dustrie (Paris), 50 (n. 2) Conseil Sup^rieur du Commerce et de
Cazssssf 49 (n. i), 50 (n. 2) rindustrie (France), 314
Calvinist bankers, 20-4, 27 (n. 4), 28, 3d, Consular representatives and pressures on
121-2, 165, 171 Egypt, 94 &
nn. I 3, 93 & n. 2, 99 &
Cameron, R., ‘Credit Mobilier’, 51 (n. 2); (n. 4), xoo &
n. 1, 13X-3, 237 (n. i), 263
'Founding the Bank of Darmstadt’, xi (n. 4), 286, 289-90, 292, 303, 305, 315;
(n. 5); 'Some French Contributions’, ii see also Europeans in Egypt
Continental Be^ Coiporation, 66, 244
Camondo, 64
Canal, Cairo-Wadi, 231; see also Suez Cordier, 96
Canal Cord, £., Rd^
of the House ofRothschUd,
Capefigue, J., 23 (n. 2) 42 (n. i); &se ofdie House ofRothschUd,
Capitulations, 90-x 4(0.
Cass, Lewis, 93 (n. x) Cotder, F., 22 (n. 4), X2i
Castâni, 92, 109 (n. x), 132 (n. 1), 224 Cotton boom, Egypt, 123 (n. 3), 136 f.,
Cater, John, 152 (n. 3) 161, 189-90, 214, 234-8
Catholic Chux^ 312 Cour de Contentieux (Paris), xoo (n. 2)
INDEX 347
Credit-Anstalt (Vienna), 29 (n. i), 56 with Andre, X05, xxof., 119-20, X23-
(n. 2), 66
(n. 3), 299 n. i & 127, 142, 155 £, 170-2, 191-3, 198-207,
Credit Fonder (Paris), 302, 305 & n. 3, 278-83, 285, 287, 293-6; relations with
311 (n. 0 European finance, X52-3, 162-3, *^4;
Credit Industriel et Commerdal (Paris), relations with Ismail, 135, 141, 159-60,
2^4 &nn. 3 &4,
312 19X &n. 3, 195-9, 220-4, 238-40, 253-
Cre£t mohilur, see Finance Company 255> 257, 259, 264-6, 271-2, 274-6, 279,
Cr6dit Mobilier (Paris), 46 (n. i), 50-1, 282-3, 294-300, 309-10^ 3X9-2X; status
53-4, 5<5 (»• y 9> <53 (n. 4), i<S8 n. 2, & hi Egypi 158, 220-1, 277; support of
198, 254 & n. 4 221 (m 4), 246
relatives, &
n, 2, 284-5,
Crimean "War, 55, 62 287-8, 293-4, 300, 3XX-I2
Crisis of 1857, 8, 55-6, 104 n. X & Dervieu, Gustave, 126 &
n. 2, 219 (n. 2),
Crisis of 1865, Egypt, 234-41 284-5, 287, 293
Crisis of x866, Europe, 28^ Dervieu, Paul, X03 (n. x)
Crouchley, A. E., Ecomrmc Development^ Dervieu, Mme Paul, X03 (n. x)
80 (n. z); Investment of Foreign Capital^ Dervieu, Robert, 102 f.
96 (n, 2) Des Michels, 134 (n. x)
Devaux, Charles, & Co. (London), 63,
Daily News (London), 309 202 (n. i), 205
Daira, 239, 248 (n. 3), 249“y 9> 274j 288 Dtcmruuure kistoriqm & hiograpMque de la
292, 302, 305, 311, 318 Suissey II (n. i)
Danboyne, Lord, 309 Didier, 126 (n. 2)
Darmstadter Bank, 29 (n. i), 116 (n. 2) Didier, G., Dervieu et Cie, 126 (n. a), 219
Dassier, August, 23 &
xl 2, 40 (n. 2) (n. i), 246, 284 nn. X & &
2, 287, 293,
Daudet, Alphonse, 99 (n. 4) 300,3x1
Ddahante, G., 227 n. 2 & Dietz, A., FrankfurUT Burgerbvchy 31
De Leon, Edwin (U,S. Consul, Alex- (n. 3); Frankfurter Handebgeschichtey
andria), 72 (n. x), 82 (n, 2), 93 (n. i), 7 (n. x); Stammhuchy 20 (n. x)
94 (n* i) Dieulefit, 22
Ddessert (funily and bank), 50 (n. x) 310
Disraeli, 309,
Demachy, 46 (n. 2) Douin, Georges, 231 (n. 2), 256; Histmrey
Danish War, i8<S4, 20X 128 (n. 2)
Deeg, P., X4 (n. 2) Dual Control, Egypt, 3x7
De Neuflize, Schlumbeiger et Cie (Paris), Dumreicher, Gdbriider (Alexandria), 142,
ix,xiii, 37, 303 (n-i), 34 ^ 157, 282 (n, i), 283
Deposit banking, 9 (n. x), (5 i n. 2 & Duncan-Sherman (merchant bankers, New
Dermigny, L., 21 (n. x) York), 17 (n. 4)
Dervieu, Andr^, 197 (n, x) du Pin, Denion, 142, 201, 203, 226, 254
Dervieu, Claudine Jenny, 246 (n. 2) ^(n.3),i77.
Dupont-Femer,
^ ^
Dervieu, Commandant, 103 (n. x) P., 14 (n. 2)
Dervieu, Edouard, bank, capital and struc- Durfort-Civrac, Comtesse de, 20 (n, x)
ture, 105, 136 &
n. 2, X41J bank, iSnan- du Velay, A., 29 (n. i)
dal position, 157, X70, 19X-2, 198, 2<^,
2X(S-X9, 246-7, 273-6, 28X-2, 287-8, Earle, E. M., 74 (n* 3)
319; bank, profits of, XX9 &

n. i, 123, East India Company, 80, 151 (n- 1)
136, 204, 273 (n. 2), 274, 294^ business Eastern Exchange Bank, Liverpool, 241
interests,156 f., 246, 295, 301, 3x2; char- (n. 2), 296 (n. 3)
acter, 285, 295, 298^, 3x2, 320-1, 326; Edgar-Bonnet^ G., Fer£nand de Lessepsy
early career, 102-6, 254 (n. 3); £m- 78 (n. 4); ‘Ferdinand de Lesseps*, 174
prunts^ 248 (n. 2); entrepreneinial atti- (IL i)
tudes, 144-^, 171, 197, 3 i^*j Edict of Nantes, 20

ethics, 265; family backôund, 102-3; E©[pt, agriculture^ 84, 262 {tu 2), see also
hostility European colony, 142, X53 £, Egypt, cotton; army, riy 7 banking, ^
220-2, 252 (n. x); liquidation, 294-5, 67-8, 138-42, 302; budget and expendi-
tures, i47-5i» i<>o-x, 191 Sen. 2, 230-x,
300-1; patriotisn^ 158, 164-5, *73 j
also
227, 270-x; political rol^ 157, 191; pro- 248, 266, 269, 289-90, 292-3, see
jected bank, 195-207; projected merger Egypt, loans and debt; buraucracy, 93,
& n. X, 98; cotton cultivation, 74“9>
with Agricole, 247, 261-77; relations 97
348 INDEX
135, 261-2; Council of Ministers, 130, Export of capital, Britain, 55 (n. 1), 57-58,
161; currency, 109 (n. 4); Deliberative 258 (n. i); France, 56 (n. 2)
Council, see Egypt, Council of Minis- Eyth, M., 84 (n. 2)
ters; foreign corporations, 67 f., 83 &
n. 4, 96, 107, 138-40, 143, 151-3, 194, Fahmy, Moustafa, 81 (n. 2)
288-90; French influence, 81 &
n. 3, 82, Farley, Lewis, 66, 139, 141
J. n. 2 &
224-^; government monopolies, 78 & February Revolution, see Revolution of
n. 3, 79; Ministry of Public Works, 268- 1848
269, 275; native entrepreneurship, 96 & Finance company, 47, 50-61, 64-6, 214-15
n. 3; population, 85 (n. 2); public works, Flood, Nile, 148, 160 f.
81, 83 f., 97 (n. i), 266-8; Regency Fohlen, Claude, 69 (n. 2)
Council, 289-91; succession to throne, Foreign Office, see Great Britain, Foreign
78 (n. i), 386, 291, 307 (n. i); taxes, OiSce
75-6, 77 (n. i), 79, 230, i59-<5o, 290-1; Foreign trade. Great Britain, see Great
trade, 81-6, 104 (n, i), 125, 302, 329-30; Britain
transport, 80-6, 227 (n. 2); xenophobia, Forges et Chantiers de la Mediterran6e,
86, 92-3, 224-6, 376, 318, 324-7 Societe des, 142 &
n. 3, 156, 201, 227
Egypt, loans and debt, 64, io6-io, 116-17, Fould, Achille, ii, 294 n. 2 &
119, 125, 128 & n. 1, 131, 161-2, 207, Fould (family), 1
311, 313-18, 337-405 Daira loan, 249- Fould, Fould-Oppenheim et Cie (Paris),
252, 257 (n. 1), 292; Loan of 1864, 208- II (“• 3)j 39 (“• 2)> 50 &
“• i> 143 (“• 4
220, 229; railway loan, 248-55, 259 206, 249, 294 &
n. 2
(n. 2) Frankfurt, 7 (n. 1), 30, 31 (n. 3)
Egyptian Commercial and Trading Com- France, Conseil d’Etat, 49 (n. i); consu-
pany, 58, 60, 151-4, 157, 163, 167-9, late in Alexandria, 269, 277, 289 (n, 5),
i88 (n. 2), 191 (n. 3), 194, 195, i9^, ^05 290 Foreign Office,
(n. 1), 294, 297, 315;
(n. 4), 208, 221, 235-6, 237 (n, a), 241 see France, Nfinistiyof Foreign Affairs;
(n. 3), 244 (n, 3), 246, 262, 268 (n. i), Ministry of Finance, 257 (n. i); Ministry
272, 282, 285, 288-90, 292, 302-5 of Foreign Affairs, 87 (n. 4), 162 (n. 1),
Egyptian Steam Navigation Company, 257 (n. i), 268 (n. 2), 294, 303 (n. 1),
149-50, 154, 208 315 (n. 1)
Ehrenberg, R., Grosse Vermogen^ 12 (n. 3); French Revolution, 10
Das Haus Parish^ 7 (n. i) Fries & Co. (Vienna), 43 n. 4 &
d'Eichthal et Cie (Paris), 50 (n. 1), 155 Frtihling &
Goschen (London), 36 (n. 3),
Eleutheroudake, 1 1 (n. 4) 64 & n. 2, 117 nn. 2 & &
4, 152, 162,
El-Hakim, Sidi Lokman, see Ninet, John 163, 169, 204, 218-20, 236, 248, 272, 313
El-Hami Pasha, 97 (n. i), in-15, 119, 122
(n. 1), 306 Galiffe, J. a., 23 (n. 2)
Ellissen (family, Frankfurt), 20 (n. i) Gallo, Edouard Amic, 105, 119 (n. 1), 126
Emden, P., Jews of Britcdn,
17 (n. 3)5 (n. 2), 136 (n. 2), 185, 196-7, 222-3,
Mon^ Powers of Europe, 10 (n. 1)5 281-2, 297-9, 210 (n. 2)
Quakers in Commerce, 27 (n. 4) General Credit &
Finance Co. (London),
Encyclope£c Lexicon, 11 (n. 4) 54 (n. 2), 58, 59 (n. 2), 65-6, 168, 202
Enfantin, Prosper, 176 (n. 1), 205, 305 n. 2 &
Entrepreneurship, Western, 155 (n. 4) General Limited Liability Act of 1862,
Eram Bey, 275 (n. 3) 54 (n. 2)
Erlanger (bank and family), 17, 66 (n. 3), Geneva, 21-4
1 16 (n. 2), 1 17 (n. 2) Genoa, 22
Escalon, Mme, 132 German-American trade, 18
Europe and Orient, contacts and con- Germany, banking, 13; railways, 31 (n. 2)
flicts, 89 f., 145 (n. 1), 276, 321-7 GeymuUer &
Co. (Vienna), 43 & n. 4
Europe^ Bank (London), 288 GiUe, Bertrand, 12 (n. 3)
Europeans in Egypt, 86-ioi, 103 f.; entre- Giraud, Jean, 48 (n. 2)
preneurship, 95-6, 155 (n. 4), 156, 289, Gisborne, 227 (n. 2)
302-13, 321-3; immigration, 87 f.; in- Giza, 232
demnities, 91-2, 96, 104 (n. 2), 115, 117, GUddon, G. R., An Appeal, 78 (n. 3);
131-3. 2î» ip-3 . 300, 315 Memoir, 75 (n. i)
r,
Evans, D. M., 13 (n. i) Glyn, George Carr, 13
INDEX 349
Glyn, Mills, Hallifax &

Co. (London), 32, Hentsch (family and banks, Switzerland
63 and France), 17 &
n- a, 22, 40 (n. 3)
Goldschmidt (family, Frankfurt), 17, 20 Hentsch, Gustave, 17 (n. 2)
(n. i) Hentsch, Lutscher et Cie (Paris), 40 (n. 2),
Goldsmids (bankers, London), 43 (n. 5) 168 (n. 2)
Goll, Johann, und Sohne (Frankfurt), 31 HerapatKs Railway and Commercial Jour-
(n. 3) na/,343
Goschen, George Joachim, 64 (n. 2) Hidy, M. E., 17 (n. 4)
Goschen, Viscount George Joachim, 64 Hidy, R. W., House of Barings 4 (n. 4)
(n. 2); ‘Seven Per Cent’, 61 (n. i) Hirsoi, Baron Maurice de, 29 n. i &
Gouin et Cie, sea BatignoUes, Soci^te des Holland, 7 (n. i), 10, 21 (n. i), 215 (n. 2)
Gouin, Henri, 155 (n. 3) Homke, J. G., 66 (n. 2)
Great Britain, Foreign Office, 162 (n. i), Hope &Co. (Amsterdam), 10, 17 (n. 4),
303 &n. i; foreign trade, y4-f, 245 32, 42 (n. i)
(n.2) Horn, J. E., 201
Greece, loans, 12 Hotel Scribe, 309
Greek and Oriental Steam Navâdon Co., Hottinguer et Cie (Paris), 10, ii (n. i), 17
26 (n. 3) (n. 4), 32, 46 (n. 2), 50 (n. i), 121, 155,
Greek merchants and bankers, 24-7; 206, 312, 313
houses, 139 & n. 4, 237, 296 (n. 3) Hudson’s Bay Company (London), 15
Greenwood, 309 (n. 0
Gregorian êndar, 330 Huguenots, see Calvinist bankers
Gruiûs & Co. (Frankfurt), 31 (n. 3)
Guatemala, 13 Imperial Bank (London), 66
Gujrati caste (India), 57 Imperial Financial Company (London), 66
Giinzburg, J. E., & Co. (St. Petersburg), (n. 2)
39 (“• i)
Imperil & Mercantile Credit Association
(London), 66 (n. 2), 139 (n. 4), 285 &
Haber, von (femily), 17, 29, n<S (n. 2), n. I, 28S
1 17 (n. 2) Imperial Ottoman Bank, 60, 62-7, 136-7,
Haber, Ludwig von, 29 (n, i) 142, 143, 152 (n. 3), 313, 314
Haber, Moritz von, 29 (n. i) India, 2Z (n. i), 205; cotton, 71-4; exports
Haiti (Loan of 1875), 314 (n. 3) to France, 72 (n. 2); exports to U.K., 72
Hale (U.S. Consul, Alejcandria), 88 (n. 2), (n. 2); speculation, 68, 238 & n. i; ryot^
242 (n. 4)
HaUm Pasha, 1 52 (n. 3), 2<58 (n, 3), 289-90, Insurance, 50 (n. i)
International Financial Society (London),
(n. 169,
Hallbetg, C.W., 174 (n. i) 59 (n. 2), 63 (n. 4), 65, 153
Hambro, C. J., & Son (London), 46-7 304
Hamburg, 7 & n. i Investment Banking, 9-1^ 16, 29-32, 42-
45 , 48-509 Finance company;
Hamon, A., and X.Y.Z., ii (n. i)
ethics, 258 (n. i), 259 (n. 2)
Hamza, A. M., 78 (n. 4)
Hansen, J., Gustay von Mevtssen, 29 (n. i); Islam, economic ediic, 96 (n. 3)
Die lAemprovinz, 4 (n. i) Ismail, 83, 126, 315-18; ambitions and pro-
Hashagen, J., 23 (n. 3) jects, 149-5 i54-5> ^09, 231-3, 248,

Haute Bangue, 13, 32^-3, 39, 4^^ 42 (n. 2), 279, 296, 315; character, 128-34, 230,
308; deposition, 317-18; fear of assas-
43 , 59 , ^ ^ sination, 223; income, 128 (n. 2), 147-
Hava (banker, Constantmople), 67 189-
Heath, R. A., 304 148; personal fortune, 155 (n. i),
leia-
Hector Defoer Bey, 276 (n. 2) 190, 239, 248, 263, 268, 311, 315;
Heine, Armand &
Michel, 141--3, 294 & tions wim European bsmkers, 160, 163,
166 f., i93-;4> 208-9, 238-41, 248, 259
n.2
Heine et Cie (Paris), 143 (n* a) & n. 2, 281-3, 286, 289-91, 297, 207-8
Ismaila, 327
Heine (family and baii, Hamburg), 12 , v
Issaverdens & Co. (Constantinople), loy
.
8e n. 2, 17 (n. 4) , ,
(n. 4), 310 (n. 2)
Henderson, W. O., 69 (n. 2)
Egyptian Con-
Henry, A. S., & Co. &(Manchester), 15a Italy, 21 (n. i), 29 (n. a);
smate, 290
(n-3)
350 INDEX
Jager, W. F., ii 6 (n. 2) Leuilliot, P., 23 (n. 4)

James, Professor Emile, 327 (n. i) Levant, 18, 25, 26 (n. 3), 57 & n. i, 66-7
Jenks, L- H., 13 (n. i) 78 (n. 3), 86-9, 1 XX, X39
Jewish bankers and banking families, li- Linant Bey, 81
ra, 17, 19-20, 22, 24, 27 &
n. 4, 28, 57, Loan contracting, see Export of capital
61 Loans, foreign, 12-13, 29 (n. x), 55, 258
Jidda, massacre of, 93 (n. i) (n. x); see also Export of capital
Joint Stock Discount Co. (London), 215 London & Bombay Bank (London), 66
Joyce, C., &Co. (London), 237-8 244 (n. 3)
(n. i),
Joyce, Thurbum &
Co. (Alexandria), 237 London & Mediterranean Bank (London),
(n. 5) 66 (n. i), 68 (n. 2), 244 (n. 3), 290 (n. i),
July Monarchy, 10 292

Jumel cotton, 75-7, 87, 98, 189 London Financial Association, 59 (n. 2)
249 & n. I
Kahler, W., 4 (n. i) London Stock Exchange, see Money Mar-

Kay, H. C., 289 ket, Europe
Kelson, Trutton & Co. (London), 237 London Times, 338
(n. 2) Lubbock, Sir John William, 139 (n. 3)
Khedive Ismaii^ 327 Lubbock, Neville, 139 (n. 3), 196-7, 200,
Khedivial Mail Line, 327 294
King,W.T. C.,8(n.2) Lucovich, Antoine, 261-8, 278 (n. 3), 283
Kiss, Colonel Comte de, 264, 267 (n. x), (n. i); Sociite, 261 (n, i)
278 (n. 3), 283 (n. i) Lyons, 2X (n. x), 22
Knights of Malta, 44 & n. 1
Koenig, Amalie, 221 (n. 4) Macaire, Robert, 48 (n. 2)
Koenig Bey, 104, 221 (n. 4) Mahmoudieh Canal, 81, S3 & n. 4, 259
Koenig (family), 282 (n. i) (n. 4)
Koenigswarter, M., xi6 (n. 2) Mallet (family and bank, Paris), 40, 46
Koenigswarter, S. (HambuigJj (n. 2) (n. 2), yo, 121, 206, 276, 312, 313
Korach, E., 31 (n. 3) Mallet, Charles, 202 (n. 1)
Koran, 96 (n. 3) Malortie, Baron de, 99 (n. x)
Kruger, A., ix (n. 5) Manchester Cotton Supply Association,
Krupp, 30 (n. 1) 75 (n. 1), 331
Kuoiuk Kainarji, Treaty of, 24 Mansvelt, 7 (n. x)
Marcuard, Adolphe, 142 (n, 3), 156
Labovch^re, Pierre-Cdsar, 46 (n. i) Marcuard, Andn§ et Cie, loy, xi8 n. 4, &
Laffitte, Charles, 29 (n. 2), 31, 50 (n. x), X20, X2X (n. i), X22 nn. x &
2; banking
107, 108 (n. 3) policy, loy&n. 3, 120, 123-4, 172, 235-
LafHtte, Charles et Cie (Paris), 107 & n. 5, 236, 265-6, 268-9, 295 f.; policy in crisis,
109 lyo, X70, X92, 2x6, 2x8-19, i 3 5-7> ^ 39 , ‘
LafHtte, Charles, Blount et Cie (Paris), 31, 280-1, 285, 287-8, 288 (n. y), 301
<0 (n. i), X07 (n, 5) Marseilles, 18, 22, 25, 27 xm. 2 3, 296 &
Lamtte, Jacques, 29 (n. 2), ô (n. 2) (n. 3); Chamber of Commerce, 173
Laing, Samuel, 31 &
n. x, 54 (n. 2), 205 Masson, P., x8 (n. i)
Landau, E., & Co. (Alexandria), 244 (n. 3) Maunier, R,, 80 (n. x)
Landes, D., ‘Frendi entrepreneurîp*, Maximilian, Archduke, 92 (n. x), 324
x66 (n. x); ‘Vieille banque’, 4 (n. 2) Mayer, E. J., n6 (n. 2)
Larking, J. W., 94 (n. x), 152 (n. 3) Mazamet, 22
Latune, Charles, 18 (n. x) McCoan, J. C., 97 (n. x)
Lavison, Max, 302, 311 (n. 2) McHenry, G., 69 (n. 2)
Law mania, 21 (n. i) Medici, 9
Le Creusot, 30 (n. x), x68 (n. 2) Medjidieh, 84, 103-4, 149, 154, xyS (n. i),
Legion of Honour, 139, 158, 164 163, 165, 188 (n. 2), 194, 327
Leiskow, H., 48 (n. 2) Mendelssohn (bank and family), xx f., 17
Lesseps, Ferdinand de, 78 (n. 4), 84, lod, (n. 4)
X33, 142 (n. 1), 173-88, 22y, 23X (n. 2)^ Mendelssohn, Felix, X2 and n. x
^5 S-8, 3 1 5-id, 327^ Lettres et documents, Mercantile Credit Association, 66 Sc n. 2,

174 (n. i) 68 (n. 2)
INDEX 351
Merchant banking, competition, 41-7, 63- Nile barrage,^ 81, 84, 161
(Sj, 123 £; functions and technique, 4-8, Nile Navigation Company, 107 (n.
3), 149
14-16, 28, 41-7, 105, 123 history, & n. 3
3-4; teams, 16-28, 202, 220 (n. 3); Nimes, 22
values, 32-40, 121-22, 127 Ninet, John, 93 (n. 3), 282 (n. 2); ‘La Cul-
Mergers, 194, 235, 244 (n. 3), 266-7 ture*, Les mUle
58 (n. 1); pertuis^ 26
Merruau, P., ‘L’Egypte sous le gouveme- (n.2)
ment*, 78 (n. 3) Nolte, V., 10 (n. i)
Messageries Imperiales, see Messageries Nord Railroad (France), 30
Maritimes Nordbahn (Austria), 30
Messageries Maritimes, 102-4, 142, 201, North British and Mercantile Insurance
227 & n. I, 254 (n. 3), 314 Co., 3 (n. 2)
Mevissen, Gustave, 53 (n. 2) Nubar Pasha, X57-8, 162 &
n. i, 184, 191,
Mexican War Loan, 170 229, 249-50, 252-4, 275-6, 302, 313
Milner, Viscount A., 91 (n. 2) (n. 2)
Mirabaud (family and banks, Milan and Nucingen, 48 (n. z)
Paris), 22 f.
Mircher, Colonel, 325 Odier (family and banks, Geneva and
Mir^, Jules, 46 (n. i) Paris), 17 & n. 2
Missiroglou (family and bank, Constanti- Oise, D^partement de T, 314 (n. 3)
nople), 64 Oppenheim-Alberti (Constantinople), 64,
Mitteldeutsdie Creditbank (Meiningen), 67, III, 219 (n. 2)
64 (n. 2), 1 16& n. 2, z 17 (n. 2), 1 52, 162 Oppenheim, Chabert et Cie (Alexandria),
Mohammed Ali, 75-9, 81-3, 87, 93, 96 111-15, 1 18 (n. 4)
(n. 3), 98-100, 106 & n. 2, 1 31, 158 Oppenheim, Henry, in, 119, 143-4, 149,
(n. i), 175, 196 (n. i), 20J (n. i), 212, 152, 191 (m 210-12, 279> 309;
3), 196,
232, 253 (n. 2), 261, 270-1, 325, 331 conflict wim Dervieu, 152, 164, 167 f.,
Mohammedan calendar, 329-30, 332 202-3, 204, 21 1, 253-5, 310
Monchicourt, M., 300 Oppenheim, Hermann, in-15, 142, 165,
Money market and conjuncture, Europe, 185, X95, 197, 199, 208-9
169-70, 193, 199, 201, 206, 21 1, 213-14, Oppenheim, Neveu et Cie, xix-20, 170
^43 - 5 , 258, 285 (n. 6), 197, 219 (n. 2), 236 f., 238, 249-
Monqjellier, 22 254, 290 (n. i), 306-8
Morea, 24 Oran, X03
Momy, Due de, 184, 186^, 227 n. 2 & Oriental Banking Corp. (Bombay and
Mougei, 81 London), 61 (n, 2)
Muffetish, Ismail Saddik, 302 Orloflf expedition, 24
Murad Pasha, 275 (n. 3) Ottoman Bank, 62, 63 &
n. 4, 98 (n. i),
Murrain, 147 f., 160 136-8, 145, 195, 207
Mustapha Pasha, 106 (n. 4), 212 & n. i, Ottoman Empire, 24-6, 60, 75, 78 (n. 3),
221, 225 90, 177, 179-82, 184, 2x2 (n. i), 286,
290-1, 307 (n. 1), 325; banking, 61-7;
Nahab, 99 (n. 4) loazis, 62-3
Napoleon 1, 10-12, 22, 70, 79-81, 86, 121, Ottoman Financial Association (London
175, i?! and Constantinople), 66 & n. i, 68
Napoleon III, 160, 187-8, 255, 295, 315,
i x, (n. 2),X07 (n. 5), 244 (n. 3)
324, 326; see also Suez Canal, Imperial Outrey (French Consul, Alexandria), 257
arbitration (n. 2), 275 (n. 2), 294, 299, 312
Napoleon, Prince, 158 Ouvrard, G.-J., 44 & n. i, 46 (n. i)
Nationale (insurance company, Paris), 314 Overend-Gumey (London), 260^ 285
Necker, 22 (n. x), 286, 289 (n. 3)
Nederlandsche Crediet- en Deposito-
Bank, 66 (n. 3) Paccard, Banh6lemy, 23 n. i &
NeuchStelois, 22 Palmerston, Lord, 173, 176, 179
Neuflize, Baron de, 150, 155-6 Parent, B., z68 (n. 2)
Neufville (family and bank, Frankfurt and Pareti (bank, Genoa), izx (n. 3)
Amsterdam), 40 Paris-Lyon-M^diterranee Railway, 314
Nicaragua, loans, 13 Parsees, 57
352 INDEX
Pasquali, 67, 1 13-14, 138-40, i9<5, 236 Rothschild (family and bank), X2, 14, 17,
Pastr^ Fr^res, 195, 196 (n. i), 205 and 19 (n. 2), 20 (n. 1), 30-3, 35, 42-7, 49-
nn. I & 2 52, 5<$ (n. 2), 155, 168, 176, 210, 212, 302
Pastil Jean-Baptiste, 196 (n. x) Rothschild, Amschel Mayer, 2x 8c n. 2
Pasted, Jules, 160, 191 (n. 3), 195-6, 198, Rougemont de Loewenberg et Cie (Paris),
200-1, 202 (n. i), 204-^, 208, 2X0, 139 8c n. 2
2x2 (n. 3), 250-1, 274, 292 Roulaud (banker, Paris), X24
Peabody, George, 17 (n. 4), 40 (n. 3) Roustan (French Consul, Alexandria), 313
Peninsular & Oriental, 106, X65, 8 o, 226 i (n.2)
Pereiie, Eugê, 30 & n. 3, (n. 3
5^ 53 ),
Roux, J. C., 173 (n. x)
(n. 3), (n. 2)
5<5 Ruhr, 13
Pdrier (family), 276 & n. 3 Russell, Earl, 179
Pertegaux, 22 Russia, 24-5; loans, xi-X2
Peruzzi, 9 Ruyssenaers, M. (merchant, Alexandria),
Peto, Sir Samuel, 285 (n. x) 142 8c n. X, X52 (n. 3), 263, 265, 301
Piedmont, se^ Sardinian loan
Pillet-WiU (bank, Paris), 312, 3x3 Sabatier, R. G. B. (French Consul,
Pinard, Alphonse, 254 &
n. 2 Alexandria), 94 8c n. x, X40, 2x0 8c n. 2,
Plants (merchant house, Alexandria), X57 2x2, 3x2
Plenge, J., 29 (n. x) Sabry, M., 78 (n. i)
Politis, A. G., 25 (n. 2) Sacr^, A. and L. Outrebon, 84 (n. 2)
Pope Leo XIII, 312 Said Pasha, 78 Sc n. 4, 82-4, 87, 92 8c im. i
Popolani, G. de G., 282 (n. 2) 8c 2, 97 (n. x), 99-100, X04, 106-9, X13-
Port Said, 173, 327 119, 126, 128-3X, 135, 138, 149, X54,
Portugal, 21 (n. i), 314 (a 3) 156 (n. i), 158 (n. x), 160 8c n. i, X75-8,
Poyais, 13 &
n. i 180 (n. 1), X91, 2X0 (n. 2), 22X, 224
Pressn^, L. S., 9 (n. i) (n. 2),227 (n* 2), 230, 231 (n. i), 25 x,
Prime, Ward, King &
Co. (New York), 32 255, 293, 295, 3x7, 326-7
Private bankinig, 9 (n. i) Saint-Hiiaire, Barth6lemy, 78 (n. 4)
Prussia, coxisul in Alexandria, 1x3, 290; Saint-Simonians, 176
loans, 12; war with Denmark, 20X Sakakini Frês (Cairo), X49 (n. 4), 1 52 (0,3)
Sakakini, Maximos, X49 &
n. 4, 152 (n. 3)
Quai d’Orsay, see France, Ministry of Sal. Oppenheim Jr, 8c Co. (Koln), 3 1 (n. 2)
Foreign Affairs Saxnmarco, A., 80 (n. 2)
Quakers, 27-8, 37 Sardinian loan, 46 f.
Sassoons (family), 20 8c n. i
Rabino, J., 75 (n. i) Sassoon, Sir Edward, 20 (n. 1)
Rachel, H., and Wallich, P,, 12 (n. i) Saxe-Meiningen, Bank of, see Mittel-
Ragheb Pasha, 299 deutsche Creditbank
Railroad, Assuan-Khartoum, 233 (n. 5); Say, Lôn, 314
Berber-Suakin, 233; Cairo-Aiexandria, Schleswig-Holstein, X99
97 (n. i); Cairo-Hiartum, 233, 315; Schmidt, Philipp N. (Frankfurt) 31 8c n. 3
Isna-Khsutum, 232-3 Schnapper (fairdly), 2X (n. 1)
Railway promotion, i3-i4> 29 (n. 2), 30-2, Schneider et Cie Creusot), 30 (n. 1)
44-5, 49 (n. a), so (n. z), 52 (n. 2) Schneider, Charles, 3X (n. 1)
RaUi (femily), 27, 64 Schneider, Eugene, 168 (n. 2)
Reid, Irving &
Co. (London), 43 (n. i) Scholfield, W. F., X52 (n. 3)
Revolution, French, 22-3, 12x3 of X848, Schuster (family), 17
47, 50 (n. i), 168 Schwabacher, Antoine, 2x3, 25 x
Bbindand industry, ii, 13 Schwartz, P., 31 (n. 3)
Richard-Koenig, 221 &
n. 4, 265, 267 & Second Empire, 38 (n. x), 186 (n. x), 309
n. 1, 282 Seilli^ (fîly and bank, Paris), 30 8c
Rivlin, Helen, 74 (n. 5) n. I, 46 (n. 2)
Robaiis, Lubbock 8c Co. (London), 139 Seligman (&mily and bank), 17, 20 8c n. 1
(n*3) Senior, N., Conversations^ 83 (n. 2); /owr-
Rodocanachi (family), 27 no/, 97 (n, i)
Ross, H., 152 (n. 3), 263 Sês, Colonel, 81
Rostand, Albert, 254 8c n. 3 Shanghai, X45 (n. x)
INDEX 355
Shannon, H. A., 54 (n. i) later success, 318; payments of Eg^-ptian

Sinadino, E., &
Co. (Alexandria), 205, 217 government, io6, lyS (n. i), 160 (n. i),
(n. 2) i6i, 171-2, 177-8, 192-3, 224-5, 230-1,
Sinadino, Jean, 205 nn. i& 2, 208 & n. 3 & 231 (n- 2), 248, 255-8, 296, 315-6; sale
Sina (family and bank, Vienna), ii, 27 of Viceroy’s shares, 310-11, 313, 317;
^
(n-3), 43 stockholders, 183 &
n. i
Societe Agricole et Industrielle d’Egypte, Sulzbach, Gebriider (Frankfurt), 64 &
206 261-77, 278 & n. 2, 279,
(n. 4), 247, n. 2, 116 (n. 2), 117 (n. 2), 152 (n. 3), 169
280, 281, 282, 283, 284, 285 (n. 288, i), Swiss merchants and bankers, 17-8, 21
289, 293, 294 & nn. 4 & 5 297, 300,
I, > (n. 1), 40 (n. 2), 168
301, 303 & n. I,
305, 307, 31 326 1, Switzerliid, 22, 29 (n- 2)
Societe Agricole Mecanique Egyptienne, Syrian merchants and bankers, 57, 61,
264; see also Societe Agricole et Indus- 237
trielle
Societe des Batignolles (Gouin et Cie,
Tagher, J., ‘La vie au Caire’, 80 (n. 1)
Paris), 155 &
n. 3, 156 Talabot, Paulin, 30 &
n. 3, 168 (n. 2)
Societe Commanditaire de I’lndustrie, 47, Tastu (French Consul, Alexandria), 158
49 (n. I)
Societe Financi^re d’Egypte, 68 (n. 2),
& n. 4, 164, 183, 231 (n. 2), 263 n. 4 &
Taylor shipyards (La Seyne), 142 (n. 3)
138-41, 196, 200, 210, 236, 288, 304 Terenchon, Mr., 191 (n. 2)
Society G^nirie des Allumettes Chimiques Tewfik Pasha, 318, 325
(Paris), 321
Thayer (American Consul, Alexandria),
Society G^nerale (Brussels), 50 (n. 2) 18 1 (n. 1)
Societe G6n6rale (Paris), 2, 168 n. 2, & Tliiers, Adolphe, 186 (n. 1)
302, 308 Thirty Years War, 20
Society G£n6rale d’Egypte (Alexandria), Tod, Alexander, 94 (n. 1), 152 (n. 3)
Tod, Rathbone & Co, (Alexandria), 94
Soci(5t6 G6n6rale de I’Empire Ottoman, (n. i),
152 (n. 3)
64-6, 137, 195, 206 (n. 4) Tourton (banker, Amsterdam and Paris),
Societe Suisse pour I’lndustrie, 314 21 (n. i)
Solyman the Magnificent, 90 Toussoun Pasha, 97 (n. i)
Spain, 12, 21 (n. i), 29 (n. 2), 258 & n. i, Treaty of 1840, 78 (n. 2)
314(11,3) Tronchin, Jean-Robert, 122
Speculation, cotton, 70, 125, 245 Tunisian loan of 1864, 250 (n. 1)
Speyer (family and bank), 17, 20 (n. 1) Turcaret, 48 (n, 2)
Stanley, Lord, 313 (n. 2) Turkey, see Ottoman Empire
Stanton (British Consul, Alexandria), 305, Turks (in Egypt), 253 & n. 2, 282, 322
313 (n- »)
Statistical Abstract for the United Kingdom,
Union Gen4rale (Paris), 221 (n. 4), 312
56 (n. 1)
Stavrianos, L. S., 25 (n. 1)
Stephen Kennard &
Co. (London), 152 Van Dillen, 7 (n. i)
(n.3) Vemes (banker, Paris), 312

Stephenson, Robert, 82 Village debts, 240-1
Stern (family and banks), 17, 20 (n. i), Vlasto (family), 27
<55
Stock Exchange, see Money Market Wadi estate, 255-6
Sudan, see Ismail, ambitions Wadi-Ismalla Canal, 231 (n. 2)
Sudan Company, 151 Wadi-Suez Canal, 255

Suez Canal, 78 (n. 4), 96, 157, 160, 233, Walheim &
Co. (Alexandria), 238
attitude Alexandrian business Wallace, D. hi, 78 (n. 4)
community, 164, 173 f.5 attitude Euro- Warburg (family), 17

pean banking, 280, 287 & n. i; corvee, Waterloo, 10, 13 (n. 1), 51
178, 179-81, 184, 188 (n. 2); creation of Wellington, Duke of, 12
canal company, 84, 174-7; Imperial Wendel firm, 30 (n. i)
arbitration, 187-8, 210, 220 n. 2; & Wendel, Maurice de, 30 (n. i)
Ismail and canal company, 177-8, 181-8; West and East, Europe and Orient
land grants, 179-81, 184, 188 (n. 2); West Indian loan, 43 («- 0
354 INDEX
Wiener, L., 8i (n. i) Xenos, S. T., 26 (n. 3)
Wildes, George, & Co. (London), 39

Zafiropoulo (family), 27, 64
Wifion^ Thomas, & Co, (London), 39 Zagazig (canal), 231 (n. 2)
Zographos (family), 64
Zarifi, Kostia 27 (n. 3)
World War, a86, 306
textile mills in, 13 Zarifi (family), 27, 64, 66 (n. 2)
Wiirttemberg,

Bankers and Pashas - Text PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Bankers and Pashas - Text PDF

Uploaded by

Copyright:

Available Formats

By courtesy of Mme M. Dervieu

Edouard Dervieu 1824-1905

® by David S. Landes 1958

I The Gentle Calling of High Finance 1

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

Frontispiece: Edouard Dervieu

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

hunting for materials he might otherwise have ignored or neglected.

and variegated nework of international finance; to appreciate their

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

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

It is these requirements which determined the organization of this

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

chapters of all material not immediately relevant to the story that

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

first explicit insights into the methods and motivations of international

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

hand evidence on the role, hitherto only guessedof European

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

THE GENTLE CALLING OF

ThevisitortoParis whose steps take him away from the bustling

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

difficult specialty of a The calculations required

of financial functions did not mean the abandonment of mercan-

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

converted into tax farmers and bankers,^ the fathers of

attained to considerable sophistication. The staples of the trade were

functions necessary to keep international commerce running smoothly.®

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

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

credit would be automatically renewed as drafts outstanding were

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

The combination of open credits and accommodation paper was an

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

aspect of accommodation and overtrading was that those very houses

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

paper as making it.

Accommodation was probably almost as old as merchant banking.

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

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

International exchange and commercial credit, whether prudent or

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

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

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

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

their Huguenot ancestors had fled in the seventeenth century,

grants to France who went bankrupt under Napoleon I,

merchandise into a central Europe starved by Napoleon’s Continental

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

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

At same time, the development and diffusion of new techniques

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

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

than everyday fare.